TABLE OF CONTENTS

Contents Page

1. Executive Summary ..............................................................................................................

1.1 Background Of Gedeb Woreda .......................................................................................

1.2 Location Of The Project ..................................................................................................

1.3 Project Title .....................................................................................................................

1.4 Beneficiaries Of The Project ...........................................................................................

1.5 Estimated Cost Of The Project .......................................................................................

1.6 Project Goal And Objective ............................................................................................

1.7 Expected Beneficiaries ....................................................................................................

1.8 Duration Of The Project ..................................................................................................

2. Study Of The Project Area ....................................................................................................

2.1 Land Ownership ..............................................................................................................

2.2 Climate, Temperature And Rainfall ................................................................................

2.3 Coffee Annual Production ..............................................................................................

2.4 Area Of Land For Investment .........................................................................................

2.5 Infrastructure ...................................................................................................................

3. Socio-Economic Study ..........................................................................................................

3.1 Socio Economic Benefit For The Society .......................................................................

3.2 Poverty Reduction ...........................................................................................................

3.3 Economic Benefit For The Country ................................................................................

4. Supply And Market Study ....................................................................................................

 4.1 Material Supply ...............................................................................................................

4.2 Project Market Prospect ..................................................................................................

5. Machinery And Equipment....................................................................................................

5.1 Machinery .......................................................................................................................

5.2 Equipment .......................................................................................................................

5.3 Raw Material ...................................................................................................................

5.4 Production Capacity ........................................................................................................

6. Organization And Manpower ...............................................................................................

6.1 Manpower Requirement and Annual Salary Estimate ....................................................

7. Civil Works ...........................................................................................................................

8. Risk And Uncertainty ...........................................................................................................

9. Financial Plan ........................................................................................................................

9.1 The Financial Conditions And Assumptions Used .........................................................

9.2 The Planned Production And Expected Revenue ...........................................................

9.3 Investment/Fixed Costs/ ..................................................................................................

9.3.1 Cost Of Machinery And Equipment ...................................................................

9.3.2 Cost Of Construction ..........................................................................................

9.3.3 Office Furniture And Equipment ........................................................................

9.4 Operating Cost ................................................................................................................

9.5 Depreciation Schedule ....................................................................................................

9.6 Profit Loss Statement ......................................................................................................

10. Budget Summary ..................................................................................................................

11. Assumption Used In The Preparation Of The Project ..........................................................

 1. Executive Summary

Alemayehu Alako coffee hulling industry is a new business that will provide dry coffee hulling

service for coffee supplies in Gedeb woreda. Currently there is increase in quantity of coffee

production in Gedeb woreda in response to increased demand for Gedeb coffee which is known

for its full coffee production coverage. There is the good market opportunity for Alemayehu

Alako dry coffee hulling industry since the present coffee supply is beyond the hulling capacity

of existing 7 industries. Accordingly there is new a trend to transport to neighboring woredas for

hulling purpose. Totally there are 34 dry coffee suppliers in Gedeb woreda. They prefer to

process their dry coffee at production area to eliminate wastage of time and incurring cost.

Having these opportunities the owner planned to establish the dry coffee hulling industry in the

center of production site. Furthermore it is projected to return a profit in its very short period of

operation i.e. RIO of 62.3% or 6 years and the relatively moderate amount of investment

required for commencing the project. It will start in the next harvest season and the industry

differentiate itself from competitors by nearness to production site as well as through offering

relatively lower service charge using technologically advanced machinery and by hiring trained

man power; so that the industry will expected to delivery higher quality service.
1.1Background of Gedeb Woreda

Gedeb woreda is located in the SNNP regional state, Gede’o administrative zone, 443 km from

Addis Ababa the capital of federal republic of Ethiopia, 168 km from Hawassa, the capital of

SNNPRS and 74km from Dilla, the capital of Gede’o zone. It is situated between 38 o 15’ and 0o0

east longitude; and 6o0 and 0o0 north latitude. The woreda comprises 16 rural kebele

administration and cover a total area of 30,909 hectar. As projected from the recent national

census of the country which also estimated a 3.0% annual population growth rate of the region

for 2001-2007: the current population of Gedeb woreda is 155, 39. Gedeb woreda is one of the

six woredas in Gede’o zone and surrounded by Kochorere woreda from the west Bule and

Y/Cheffee woredas in the north and Oromia from east and north.

Geographically Gedeb woreda is located at 1900m-2600m above sea level on average its

climatic zone characterized by highland and middle highland and of its 50% is characterized by

middle highland that in favorable for coffee plantation. Hence, it is characterized by moderate

temperature throughout the year and its mean annual temperature is 24-25 degree centigrade;

mean annual rain fall is 1800-1800mm. The woreda covers a total area of 300.9 square kilo

meters out which majority about 90% per cent of total land is cultivated land.

Economic activities of Gedeb woreda, is predominately agrarian characterized by persistent

production like coffee and Enset. In addition high land crop like barely wheat and horse beans

corn etc……… are cultivated animal husbandry in the area are cattle, horse, mules, donkey,

sheep, goat, bee keeping and other commercial activities highly concentrated along the high

ways and major stream roads. There are independent local markets in each local kebele where

the aforementioned products and factory products are exchanged at Chorso, Gedeb worka and
Gotiti markets. Most know market places are found around the project site regarding service

facilities; there are hotels, bank and governmental institutions in the capital of Gedeb woreda,

Gedeb town. As far as infrastructural distribution in concerned Gedeb woreda, has electric

power, water supply, and road transport and health centers. Other social service providers like

kindergarten, elementary and secondary school/up to preparatory level, and so on are indicates

ongoing development of the woreda. Commercial bank of Ethiopia is found at Gedeb and other

banks such as Dashen bank, Abysinia bank, Awash bank Wogagen bank and development banks

accessibility at Y/Cheffe, Dilla and Bule Hora towns.

Regarding dry coffee hulling industry in Gedeb woreda; there are six industries around Gedeb

town which is 10-12km away from coffee growing areas. Additional opportunity is the all

weather road constructed by regional government. This road begins from Dilla Moyale asphalt

road at Gedeb and coordinates more than 80 percent of coffee growing kebeles. This road

facilitates the trading function of coffee in this woreda.

1.2Location of the Project

The anticipated project is located in the south-eastern zone of SNNPRS, within Gede’o zone

Gedeb woreda Chelchele town. In trems of geographic coordinates, Gedeb woreda is suited

between 38o 15 and 0o0 east longitude; and 6o0 and 0o0 north latitude.

1.3Project Title: Alemayehu Alako Dry Coffee Hulling Industry

1.4Beneficiaries of the Project

The creation of substantial direct and indirect employment opportunities with potential for out

growers will have the impact for increasing incomes and skill of the rural community. There will
also be good opportunities for out-growers linkages with the surrounding farmer and the use of

the projects facilities, knowledge and experiences, they by increasing the economic activities of

the inhabitants of the area.

1.5Estimated Cost of the Project

At the beginning of the production year the project will have the following costs:

 Cost of Construction .................................................................................1,446,500.00

 Machinery and related equipment ................................................................351,450.00

 Office Furniture and equipment ......................................................................32,560.00

 Total ...........................................................................................................1.830.051.00

1.6 Project Objective and Goal

 To establish and develop financially viable dry coffee hulling plant

 To address the continuous increasing demand for coffee with better quality

 To create employment opportunities to render dry coffee hulling service for coffee

farmers, coffee merchants and coffee co-operatives at the production site

 It will also contribute to the woreda revenue, in the form of sales and profit tax.

Generally, this project contributes towards the economic transformation of Ethiopians economy

(GTP 2) though using the existing investment opportunities in the country and taking advantage

of the expressed policy incentives that emphasize on transformation from agricultural economy

to industry led economy.

The main objective is to implement an agricultural investment project using modern dry coffee

processing for the production of quality green coffee: which used a modern processing machine
with high standards and quality of processing while ensuring optimal economic returns as well as

socially and environmentally acceptable production level within one year starting from the 2008

E.C production season.

1.7 Expected Beneficiaries

 Permanent 7

 Temporary 80 laborers/day from 8 months through a year

1.8 Duration of the Project

 25 year

 Due to ever changing technology and corporate world, the reformation of this project

may become necessary after 25 years.

2. Study of the project area

The reasons for selection of the investment include:-

 Availability of suitable coffee production with good combinations of topography, climate

and soil characteristics that allow optimal production of these crops.

 Minimal requirement for infrastructure development because of the topography and

visible prospects of on-going development initiatives in the area including power supply,

telecommunication and other basic infrastructures.

 No visible adverse effects on the community and settlement patterns in the project area.

 Accessibility of the area by international road and ease of between marketing (e.g.

transporting to the major terminal markets in Dilla ECX);

 Profitability of the business

2.1 Land Ownership

The land ownership is though a private ownership of the promoters of this business.

2.2 Climate: Temperature and Rainfall

The climatic condition of the project area could be broadly categorized as sub tropical, wet

medium highland according to the climatic data obtained from the Ethiopian metrology; the

average minimum and maximum temperatures of the project area 22 and 27 oC respectively. The

project area has average rainfall of 1500mm

2.3 Coffee Annual Production

According to Gedeb woreda agriculture development office; 5542 ha land were covered by

coffee plantation and the productivity of coffee is 12qt/ha and 53,646qt/year is expected as a

yield.

2.4 Area Land for Investment

The selected land for the investment is 1.0 ha which is approved by ………………….. be

appropriate for establishment of dry coffee hulling plant.

2.5 Infrastructure

The project is accessed by international road for joining national market and all weather roads

which are constructed by the regional state to each most of the production sites…. Chelchele

town has access to hydro-electric power and all woreda kebeles are accessible to mobile and

wireless telephone services.

 3. Socio-Economic Study

3.1Socio-Economic Benefit for the Society

The socio-economic impact of the project is expected to be positive, as the operation area is

devoid of major settlements, precluding any potential displacement or conflicts. The positive

impact is more pronounced in view of the development of an abandoned and uninhabited rural

area, bringing large employment opportunities to the surrounding of industry. As the project

required labor for undertaking its operational activities, a number of people will create new

employment opportunity for about 7 individuals on permanent basis and for up to 80 casual

laborers per day for 8 months though a year.

3.2 Poverty Reduction

The project will undoubtedly play its role in alleviating the existing poverty level through the

creation of employment opportunity, provision of husk for compost preparation and other social

benefits for the community around the project.

3.3Economic benefit for the Community

The creation of substantial direct and indirect employment opportunities with potential for out-

growers will have impact for increasing incomes and skill of the rural community. There will

also be good opportunities for out-growers’ linkages with the surrounding farmers and the use of

the projects facilities, knowledge and experience, thereby increasing the economic activities of

the inhabitants of the area.

3.4 Economic Benefit for the Country

This project will have significant socio-economic benefits, both to the national economy of the

country at large, as well as the zone in particular in which the project is to be established. The

direct benefits will include;

 Supply of the agricultural commodities to the national and export market.

 Substantial increase in zonal government revenue, through taxation.

4. Supply and Market Study

4.1 Material Supplies

The hulling expected to operate intensively 8 months though a year during its peak season;

January to September. The customers are 34 Traders 4 cooperatives registered in Gedeb woreda

Marketing and cooperative office as dry processed coffee suppliers for central market at Ethiopia

commodity exchange (EXC).

These dry coffee suppliers opt to use this processing industry for its advanced technology and

operating system. On the other hand the accessories and spare parts will be supplied from Bule

Hora or Dilla town.

4.2 Project Market Prospect

The Ethiopian government in collaboration with regional state let the coffee market to be

governed by free market and international price. This boosts coffee farmer’s real income which

in turn stimulates increased production and quality. According to trade minister 2011 annual

report Arabica coffee is the largest leading crop by production, coverage and trade in the world.
The Area under production in the woreda is still inconstant growth where as the demand of the

crop for coffee beverage consumption is also increasing. In Ethiopia, the production supply of

coffee was reached 3.73% (160000 tons) in 2012 in volume in the world market and 2% export

from world export share; which rank 5th and 12th respectively.

5. Machinery and Equipment

5.1 Machinery

The machine proposed for this dry coffee processing industry is from Girja enterprise and it has a

capacity of processing 10-15 quintals per hour of clean coffee depending up on the moisture

content of dry cherry. The engine has about 63hp and operates by both electric power and diesel

oil.

5.2 Equipment

Major equipment proposed for this operation are weighing scale, moisture tester and other small

hand tools and working materials. Furthermore, office furniture and equipment are also proposed

for the smooth and efficient operation of the project. The detailed cost estimates are attached

with the proposal.

5.3 Raw Material

The major input required for this dry coffee processing industry is brought by coffee supplies in

the woreda. Additional the owners of this plant are among such suppliers. As this organization is

service oriented business organization, one quintal of clean coffee is hulled for 70/seventy/

Ethiopian Birr. This is current service charge at every hulling industry.

5.4 Production Capacity

The theoretical capacity of the machine is told to be 1000-1500kg of clean coffee per hour,

however, taking in to account other factors that could impede its efficiencies the attainable

capacity at start-up is assumed to be 70% and can reach at full capacity at the fifth year of

operation, considering the existing potential and the surrounding it is expected to produce 1024

tons of clean coffee per annum.

6. Organization and Manpower

This project is a sole proprietorship which the owner has an absolute power for the

implementation and smooth operation of the project. The project will be staffed with a manager

and other supporting staffs to lead the operation smooth and efficiently. The manager of the plant

will be involved in planning, supervising and controlling as well as participating in the

production with the close help and cooperation with machine operator and loading and unloading

workers. The load/unloading workers are hired in permanent basis but their wage in paid by

customers as per the amount of coffee processed. Daily laborers are mostly women from the

surrounding which pick out coffee defects and prepare the hulled coffee for the market standards.

The loading/unloading workers unload the coming truck, group the coffee bag according to the

customer tags, collect hulled coffee from the receiving tank, and re-group the hulled coffee

according the customer tag, fetch to hand picking area, finally pack for market and load when

transporting to the central market.

 6.1Manpower Requirement and Annual Salary Estimates (Ethiopian Birr)

No Job Title Required Monthly Salary (Eth Annual Remark

No Br) Salary (Eth
Br)
Unit Total
Payment Payment

1. Manager 1 2000 2000 24000

2. Machine Operator 1 1500 1500 18000

3. Store Keeper 1 1000 1000 12000

4. Time Keeper 1 1000 1000 12000

5. Accountant & Cashier 1 1500 1500 18000

6. Secretary 1 1000 1000 12000

7. Guards 2 600 1200 14400

8. Laborers load/unload workers 10 - - - Customer Paid

Hand Pickers 80 - - - Customer Paid

Total 98 8600.00 9200.00 110400.00

7. Civil Works

The production process layout is designed in such a way that it makes easy of the processing

activities and safest way of production system, transporting of inputs, outputs and favorable for

maintenance programs. The space other than the building floor and coffee drying floor is to be

used for parking, garden and future expansion programs, it should be noted that the parking
space should be enough to entertain different heavy trucks to load and unload. The animal

transport should be considered during preparation of parking.

8. Risk and Uncertainty

Since the business is established based on situation analysis and market research that reveled

favorable result, internal strengths exceeding its weakness as well its opportunities exceeds

threats, the business will continue for indefinite period of time in a profitable operation. As every

business operating in real world, the global economic crises and inflation is prolonged and

infested, it will affect the project cost benefit analysis. Additionally unforeseen natural calamity

such as crop failure due to draught or long period of rain which causes physiological disorder on

coffee plant growth might be affect the business operation but this in seldom happening.

9. Financial Plans

9.1The Financial Conditions and Assumptions

During the study of the coffee hulling plant financial evaluation of the following assumptions are

taken in to account.

 The construction and installation of the plant is estimated to take 60 days

 The cost of the investment has been taken based on current prices.

 All service rendered have been assumed to be sold within the same year

 Income tax rate has been considered to be 35% since then income tax of each year is to

be settled on that fiscal year.

 The machine is assumed to operate 200 days per annum and to work for 8 hrs each day,

20 days per a month, with a capacity of 8 quintals per hour.

  The proportion of debt and equity are forecasted to be 70/30 respectively for the initial

investment cost.

 The medium-term loan requirement of the project is estimated at Br 1,189,100.00. The

development bank will provide 70% of the initial investment at an annual interest rate of

9% to be repaid of 5 years.

 The cost of capital is assumed to be 15% for total investment and 20% for equity. The

equity share has a time horizon of 5 year short NPV calculation.

 The planning horizon comprises one year development and 10 year of operation. Actual

production is scheduled to begin in Jan.2016

9.2 The Planned Production and Expected Revenues

The planned industry has assumed to process (1000Kg x 8hrs) 8000kg. Regarding monthly basis

with consideration of 20 working days (20x6400Kg) 128000kg of clean coffee will be an

expected to be available for 8 months a year so that yearly output will be (1280 quintal x 8)

10240 quintal. Assuming 70 Br/quintal of service charge, yearly revenue will be (10240x70) =

716,800.00
Revenue forecast for hulling service sales

Project year Dry cherry processing Service charge per Total revenue from Remark
by charge (quintal) quintal (Br) hulling service (Br)

Year 1 10240 70.00 716800.00

Year 2 11264 72.00 811008.00

Year 3 12391 74.00 916934.00

Year 4 13631 76.00 1035956.00

Year 5 14995 78.00 1169610.00

Year 6 16495 80.00 1319600.00

Year 7 18145 82.00 1487890.00

Year 8 19960 84.00 1476640.00

Year 9 21956 86.00 1888216.00

Year 10 24152 88.00 2125376.00

9.3 Investments/Fixed Costs/

No Descriptio

n
9.4

10.