Professional Documents
Culture Documents
The nature of our Mixed Use Building colony includes facilities for Business Units, Residential Apartments,
Recreational area and other Public Service facilities. The project is unique in that it implements the Green building
approach in its design, construction and operation: promoting the use of solar energy; enabling of re-use and
recycling of natural resources as well as creating good indoor/outdoor air quality.
February 2024
Project Proposal for the Development of a G+10 Mixed Use Building Dire Dawa, 2024
Contents
1. BACKGROUND ................................................................................ 6
7.10. OVERHEADS............................................................................. 31
0. EXECUTIVE SUMMARY
This project proposal is prepared with the objective of developing a new G+7
Shopping Mall and Mixed Use Building to be owned and operated by Mr.
Abdurashid Sheikh Arreh, who is originally from Dire Dawa City. The project
idea is conceived by this individual in response to the special invitation
promoted by the Government, as part of the new structural plan of City
Administration that focuses on Old City Redevelopment. Generally, the plan
for this project is to construct a G+7 Mixed Use Building on a 12,000 msq
land to be situated at a convenient location of Dire Dawa City, preferably
around kezira area, as per the new structural plan of the Administration.
The proposed Building project will have a unique design incorporating a total
of 8 Floors including one underground Floor. Likewise the first three floors
are dedicated for Business operations while the seven upper floors (from 4th
to 7th) shall be used as apartments. Accordingly, the project shall deliver a
total of 277 service rooms ready for public use, from which 90 rooms will be
Business units (each units holding 90 msq area on average) while 187 rooms
will be apartments (each apartment holding 80 msq area on average).
The project is financially viable with an internal rate of return (IRR) of 72%
and a net present value (NPV) of ETB 1,571,902,984.91 discounted at 10%.
The investment cost and income statement projection are used to project
the pay-back period, the project will fully recover the initial investment and
working capital within three years.
1. BACKGROUND
In this context, the promoter that has undergone to invest in a mixed use
building project that incorporate compartments of rooms (for Business and
residential units) in order to improve business and family lives with a socially
responsible business approach.
1.1. RATIONALE
Development of a region and/or any country can be achieved not only by the
effort and investment of Government but also through the collaborative
efforts of both the Government private investors. As such, the role of private
investors is recognized as a corner stone or pillar of development in case of
Ethiopia.
With this notion, the Government has given room to the private investors to
play their role in the country’s economic development by creating and
rendering adequate policies and infrastructure. Thus the major objectives of
the promoter to engage in this project are:
No longer can private capital be relied on to pay the high price of assembling
and preparing appropriate sites for development. No longer can local
governments bear the full burden of paying the costs of requisite public
infrastructure and facilities. This is when the Public–Private Partnerships
(PPP) approach comes to the rescue.
Supporting the PPP strategy, the Second Growth and Transformation Plan
indicate that coordinated and organized efforts should be exerted by the
public and private sectors to boost infrastructure, promote investment,
create jobs and spur growth in the Country. Accordingly, Ethiopia has
2. THE PROJECT
The proposed project intends to construct all-purpose ground plus ten (G+7)
building with compartments of rooms (for Business and residential units) on
a 6,000 meter squared land located at one of the major city corners of Dire
Dawa City, preferably around Kezira area.
The proposed mixed use building will have its own standard design, based
on the structural plan of the City Administration. Likewise, it is intended to
serve for different business activities to satisfy the prevailing shortage of
business premises in the town, which is currently, felt the needs of various
government, non-government and private institutions. Further our luxurious
apartments shall provide comfort for our customers.
The Building will have a total of 8 Floors including one underground Floor.
Likewise, the project shall deliver a total of 277 service rooms ready for
public use, from which 90 rooms will be Business units (each units holding
90 msq area on average) while 187 rooms will be apartments (each
apartment holding 80 msq area on average).
The Project has its own Organizational Structure with the Company
Shareholders at the apex, having different functionally related departments.
Detailed descriptions are found in the following section.
3. MARKET ANALYSIS
Currently, a lot of businesses move from one place to another for several
purposes: need accommodation facilities, food and drink service,
entertainment, etc.
Likewise, efforts targeted at solving the housing problem in Dire Dawa have
fallen short of the accumulated demand. Shortage is especially acute for the
low income and lower middle income households that account for the bulk of
the city’s population.
The shortage as well as the condition of residential units in Dire Dawa city
has been deteriorating from period to period. The other problem in the city
is the expansion of informally built houses.
One of the solutions for the existing sever housing shortage is to improve
the existing housing stock by encouraging private investors to participate in
real estate/housing development for rental or direct sale.
Based on the construction plan, the first three floors of the envisaged mixed
use building will have rooms that cater for:
Banks,
Supermarkets
Office rooms
Café
Restaurant and
Other service rooms
Therefore, the homebuyers that the Company will be serving can be declined
into these 3 groups in line with the below assumed proportions:
Local Businesses and residents: 85%
Diaspora: 10%
Foreign Businesses and Visitors: 5%
The project area is located in the Eastern part of the country. It is situated about 505 km
east of the national capital city- Addis Ababa along the main Addis Ababa – Dire Dawa
asphalt road. It is particularly located in the North Western part of Dire Dawa city within
the industrial zone- demarcated to integrate industrial activities of the area. The existing
holding of the project is obtained from the local administration through lease agreement.
The total land area of the project is about 4,000m2.
Housing Quality: It is clear that the number of housing unity by any means does not
show the quality of a housing unit, which is the most appropriate measure weather the
existing housing conditions are regarded as socially acceptable or not in terms of
structural qualities as well as rates of occupancy. The structural quality aspect condoles
the construction materials of wall, roof, and floor. In addition, the rates of occupancy
dolala with how many persons live per room. To estimate the quality of the existing
housing units by considering the above variable it is intimated that the structural as well
as the rates of occupancy proportion are hold to be constant.
It is true that the issue of population is very critical to the overall socio-economic
development as well as environment of any country. In addition there are many different
views concerning the impact of rapid population growth on the extent of poverty that
many third world countries faced. The dominant one is that population is the major, if
not the only, factor behind the under development of many countries. There are others,
however, who argue that other socio-economic, environmental, and political problems
are to be blamed for rather that population size as such. Whatever the argument is, the
population of Dire Dawa is increasing at an alarming rate since its date of establishment
and expected to increase in the future, through the rate of population growth declines
slightly from period to period.
Dire Dawa is the second largest city in its population size in the country next from Addis
Ababa. According to the projected population size by CSA, the city has a total
population of 700,000 at present. The population in the surrounding rural parts of the
administration is estimated to be 150,000.
Of the entire population of the administration, 49.7 % are female and 50.3 % are male in
sex. The corresponding percentage share of the female and male population of the city
is about and % consecutively. The annual growth rate of the population in the city
exceeds 4.1 %. In migration is significant in its contribution to the population growth of
the city, which according to CSA accounts about 60 % share in the average annual
growth rate of the city’s population.
In 1950’s and 60’s, the flow of migrants to the city was attributed to the increasing
demand for industrial labor. The rate of migration of people to the city was also
moderate and absorbable by the economy and within the carrying capacity of the
available urban infrastructural facilities and services. However, the trend has totally
been changed to a distressful situation starting from mid 70’s up to the late 80’s. The
migration rate to the city during this period has grown in a multifold manner and
recorded to exceed 7 % per annum. The pull factor for migration was totally contraband
activities that overwhelmingly had controlled the entire business activities carried out in
the city. Recently, the city has exhibited faster population growth both through natural
increase and migration.
Regarding the settlement pattern there is high concentration in the inner city. However,
recently there is high influx of people in different expansion directions including Sabina
where the expansion project is located adjacent. There is no well-established residential
area around the project side, as it is located within the relative center of the industrial
zone of the city.
Regarding the social characteristic of the city, Dire Dawa serves as resident place for
many national groups having different origins of residence across the country.
According to CSA population census report in 1994, the population of the city is a
mixture of numerous ethnic groups. Of these groups, the Amara, Oromo, Southern
nations and nationalities and Somali constitute the larger composition in their population
size.
Despite deferring in cultural set-ups, the people of the city are well-known of peaceful
coexistence. Keeping all its identity (customs, traditions, culture, and multi-lingual
assets) assimilation in the sense that understanding and respecting other’s compatriots
identities are the mysterious source for the development of collaborative/cooperative
culture with social intimacy and mutual assistance among themselves.
Dire Dawa’s strategic geographic location between Addis Ababa and the port of Djibouti
has accorded it various economic and commercial advantages. It serves as transit and
terminal for import and export of commodities and services. Import export trade thus
characterizes the town’s economic structure.
Micro and small scale enterprises are important in forming the livelihood of more than
55 % of the population in the city. MSEs Development is part of government poverty
and unemployment reduction strategy in urban centers. Hence, government sector and
NGOs commenced financial, technical, institutional and infrastructural supports to MSEs
operators reflected maintained in the five years plan of the administration.
As observed from the field assessment and information obtained from the concerned
institutions, the project area is accessible to local and international market outlets. Dire
Dawa town is the major market place for local market and export outlet to foreign
markets. There is the Ethio-Djibouti railway and Dire Dawa to Djibouti asphalt road that
opens good opportunity to export the produce to foreign markets. As the information
obtained from Ethiopian customs and revenue authority, Dire Dawa branch office,
indicates the following commodities are exported through Dire Dawa in the last one year
(July 01, 2010 to June 30, 2011 E.C.)
Table: Exported Commodities through Dire Dawa (July 01, 2007 to June 30, 2008 E.C.)
Source: Ethiopian customs and revenue authority Dire Dawa branch office 2011
As it can be observed from the above table, coffee stands first followed by chat in export
amount and in generating foreign currency. Even though more research and extension
is not carried out for the production and marketing of chat in the country, it holds great
share in export commodity and foreign currency earnings and plays a great role in the
country’s economy. Therefore, it could be considered as one of the potential crops to be
developed by this project provided that adaptation trials are performed for some period
before large scale production.
Generally, the following major agricultural problems are identified in and around the
project area.
The Building will have a total of 8 Floors including one underground Floor.
Likewise, the project shall deliver a total of 277 service rooms ready for
public use, from which 90 rooms will be Business units (each units holding
90 msq area on average) while 187 rooms will be apartments (each
apartment holding 80 msq area on average).
Designation Plot area (m2) Built up area (m2) No. of floors Built-up Area Total m2
11 (10 floors +1
G+7 6,000 4,400 underground) 36,000
277
TOTAL
The establishment of this project will have a number of positive impacts both
at national regional and local levels. Some of the major positive impacts
include technological capacity building, economic development and creation
Thus, the project will be an opportunity for the town by lightening the brunt
of unemployment in the town to some extent.
for the people residing near by the project site to provide them with job as
priority for those positions not requiring especial skill.
As there will be high demand for daily laborers during construction phase of
the project, it will be twofold advantages to hire laborers from local people.
First, the project promoter will reduce time of searching for laborers and
save his money that is needed for transportation of laborers to project site.
Second, fairly distributing the benefits of the project will enhance project
social acceptability in general.
7. FINANCIAL ANALYSIS
The Production cost is the overall direct cost for completing the building. It
takes into account the costs implied by the following processes:
They include costs of land lease payments and expenses for land leveling
and foundations works. They will be executed by specialized subcontractors.
The principal raw materials required for the construction of the building are
cement, sand, hollow blocks selected material, gravel, bricks, reinforced
structural steels, PVC pipes, timber, gypsum, play wood, corrugated sheet
metal, EGA sheets, nail, window glass, sheet metal, door and window frames
(profiles), paints, galvanized pipe, angle iron, pipes and fitting for kitchen
batch room and toilet, kitchen wares, bath room wares and toilet wares, etc.
It includes the shipping cost of imported equipment, their port charges and
the in-land transportation cost up to the delivery on site of all building
materials, including handling charges (for loading and unloading).
A concrete making machine and a crane will be rent during at the final step
of construction. Cement machine is needed for the construction of the party
walls whereas the crane is made necessary to lift up and erect structures.
House Materials
27,000,000
Transportation
Infrastructure Works 75,000,000
Site Machinery Rental 36,000,000
Labor 5,016,000
TOTAL 1,301,000,000
Vehicles 3,812,209
Office Furniture &
1,000,000
equipment
Information System 500,000
TOTAL 5,312,209
Fuel 40,000.00
Recruiting & Consulting 60,000.00
Overhead @ 5% 20,900.00
Total Pre-Operating Costs 538,900.00
7.10. OVERHEADS
Overhead expenses during the first year are mainly affected by the cost of
selling expenses which include lobbying, sales commissions and advertising
expenses. It is assumed that they will represent up to 1% of the sales. The
other major costs are the professional fees entitled to the team of experts in
charge of the project management.
Salary 2,966,400.00
Travel & Invitations 72,000.00
Rent, Office 252,000.00
Marketing/Promotion 200,000.00
Fuel 90,000.00
Miscellaneous 5% 456,220.00
TOTAL 9,580,620.00
Development
1.0 1,201,000,000.00
464,652,300.00
30% 984,188,700.00 70%
Expenses
Pre-operating
3.0 538,900.00
161,670.00
30% 377,230.00 70%
Costs
SG&A Expenses
4.0 2,395,155.00
718,546.50
30% 1,676,608.50 70%
for 3 months
Grand Total
500,000,000.00.17 150,000,000.25 30% 350,000,000.92 70%
(1+2+3+4)
Table: Loan repayment schedule
0 350,000,000.92
3 129,987,028 14,948,508 0
Sales
554,400,000 302,400,000 151,200,000
costs of sales
301,862,550 164,652,300 82,326,150
Gross Profit
252,537,450 137,747,700 68,873,850
Gross margin(%)
45.55% 45.55% 45.55%
Operational expense
9,580,620 10,538,682 11,592,550
Depreciation
1,770,559 1,770,559 1,770,559
Net profit
198,111,305 97,312,001 42,332,792
NPM
36% 32% 28%
Current Assets
Fixed Asset
LIABILITIES
CAPITAL
Investor 0 0 0 0
8. ENVIRONMENTAL IMPACTS
The proposed project has some associated environmental aspects that might cause
adverse impacts. However most of these environmental effects can be reduced to
acceptable levels with implementation of pollution prevention and control techniques,
and integration of restoration and other mitigation measures proposed in this EIA report.
205,700.00
Total Recurring Expenditure
418,880.00
Total COST FOR EMP
9. FINANCIAL EVALUATION
9.1. PROFITABILITY
The break-even point of the project including cost of finance when it starts
to operate at full capacity (year 3) is estimated by using income statement
projection.
Fixed Cost
BE = = 41 %
Sales – Variable
Cost
The investment cost and income statement projection are used to project
the pay-back period. The project’s initial investment will be fully recovered
within 3 years.
Based on the cash flow statement, the calculated IRR of the project is 72 %
and the net present value at 10% discount rate is ETB 2,571,902,984.91.