Debre Markos University

College of Post Graduate Studies

Department of Economics
Project Implementation Monitoring & Evaluation (PPM-532

Project Proposal / Individual Assignment 1.

BY, Endayilalu Bassie Mekonnen

2nd degree exn. Year 1, semester III

ID NO,

Submitted to: Bantayehu T. (Ph.D.C)

July, 2021

Bichena , Ethiopia

i
 Project Title:
SUPPORTING TO MAHEBR BIRHAN MILK
PROCESSING ASSOCIATION PROJECT AT
ENEMAY WORDA MAHEBR BIREHAN KBELE.

ii
Acknowledgment
Primarily I want to thank our GOD for his blessing in all our movements of life. Then we want to
provide great thanks to our instructor Bantayehu T. (Ph.D.C) for his positive willingness to support us
in every aspect of our project planning and management course.

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 Table of Contents Pages
III. Executive summary.........................................................................................................................................1
1. Introduction..................................................................................................................................................2
1.1 Project Rationality......................................................................................................................................3
1.2 The objective of the project........................................................................................................................4
1.2.1 General objective.................................................................................................................................4
1.2.2 Specific objective..................................................................................................................................4
2. Description of the project and its capital structure.......................................................................................4
2.1 Project beneficiaries and key stakeholders................................................................................................5
2.1.1 Direct beneficiaries of the project........................................................................................................5
2.1.2 Indirect beneficiaries of the project.....................................................................................................5
2.1.3 Project key stakeholders......................................................................................................................5
2.1.4 Factory location and layout......................................................................................................................7
2.1.5 Landholding and capital structure of the Mahebere Birhan milk processing association.......................9
2.1.6 Facilities to the project area.....................................................................................................................1
2.1.7 Project duration...................................................................................................................................1
3. Situational Analysis

3.1 Strength and weakness of the project----------------------------------------------------------------------------- 7

4. Opportunity and threats ---------------------------------------------------------------------------------------------------

5. . Risks assessed, and mitigation measures identified....................................................................................3
6. Demand and Market analysis...........................................................................................................................3
6.1 Competition landscape...............................................................................................................................3
6.2 Market Area................................................................................................................................................4
6.3 Total Demand..............................................................................................................................................4
6.4 Market Share...............................................................................................................................................4
6.5 Selling Price.................................................................................................................................................4
6.6 Promotional Measures................................................................................................................................5
6.7 Marketing Strategy......................................................................................................................................5
7 . Production and sales plan................................................................................................................................5
7.1 Description of the Product..........................................................................................................................5
7.2 Production Process and activities................................................................................................................5
7.3 Production Capacity....................................................................................................................................6

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 7.4 Plant Capacity..............................................................................................................................................6
7.5Types of fixed capital....................................................................................................................................7
7.6 Life of Fixed Capital.....................................................................................................................................7
7.7 Amount and Sources of Equipment.............................................................................................................7
7.8 Terms and Conditions of Purchase of Equipment.......................................................................................8
7.9 Raw Materials Needed/inputs/...................................................................................................................8
7.10 human resource.......................................................................................................................................8
7.11 production plan/project outputs /............................................................................................................9
7.12 Production Cost.........................................................................................................................................9
7.13 Sale plan..................................................................................................................................................10
7.14 Training requirement..............................................................................................................................10
8. Financial analysi8........................................................................................................................................10
8.1 Investment cost.........................................................................................................................................10
8.2 Source of finance......................................................................................................................................11
8.3 Sales revenue............................................................................................................................................11
9. Socio-Economic Benefits of the project.......................................................................................................12
9.1 Social Benefit for the Community.............................................................................................................12
9.2 Economic Benefit for the Community.....................................................................................................12
10. The environmental aspect of the project................................................................................................13
11. The project organization and management............................................................................................13
10.1 structure of project management and personnel...................................................................................13
10.2 Organization structure............................................................................................................................13
12. Implementation plan...............................................................................................................................14
13. Project monitoring and evaluation............................................................................................................2
14. Appendix...................................................................................................................................................3

List of table

TABLE 1 TYPES OF FIXED ASSETS................................................................................................................................ 7

TABLE 2 AMOUNT AND SOURCES OF EQUIPMENT.................................................................................................. 7
TABLE 3 THE NECESSARY RAW MATERIALS FOR THE PROJECT INCLUDE...................................................... 8
TABLE 4 HUMAN RESOURCE......................................................................................................................................... 8
TABLE 5 PRODUCTION PLAN......................................................................................................................................... 9

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TABLE 6 ANNUAL PRODUCTION COST FOR MILK AND MILK PRODUCTS......................................................... 9
TABLE 7 INVESTMENT COST....................................................................................................................................... 11
TABLE 8 COLLECTED MILK VOLUME AND SALE................................................................................................... 11

ANNEX

ANNEX 1 INCOME STATEMENT................................................................................................................................. 3

ANNEX 2 BALANCE SHEET......................................................................................................................................... 3
ANNEX 3 PROJECT CASH FLOW STATEMENT....................................................................................................... 4
ANNEX 4 FINANCIAL ASSUMPTION......................................................................................................................... 5
ANNEX 5 EXISTING INCOME PERFORMANCE OF THE MAHEBERE BIRHAN MILK PROCESSING ASSOCIATION
................................................................................................................................................. 5

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 I. ACRONOMEY

ANRS Amhara Natural Regional State

AGP Agricultural Growth Program

Ha Hectare

CSA Central Static Agency

KG Kilogram

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 II. Project profile

Name of project Mahebere Birhan milk processing association

Nationality: Ethiopian
Owner(s): Mahebere Birhan Milk producer farmers association
Type of business: Milk Processing
Full Address : Address: ANRS, East Gojjam Zone, Enemay woreda in
Mahebere Birhan kebele Administration.
Po.box:
Mobile:0931500932
E-mail:
Project Name: Mahebere Birhan milk processing association
Status of the Project: Existing
Proposed Site: East Gojjam zone, Enemay woreda Mahebere Birhan kebele
administration,
Specific location: Mahebere Birhan kebele
Size of proposed land: 0.25 Ha.
Total estimated Investment 124,092,276 Birr
Source of fund AGP/Agricultural growth program/ and the association .
Legal Form of organization Association
Registering Agency: Enemay Woreda cooperatives Office
Project life span Three years

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 III. Executive summary
 Project Title: SUPPORTING MILK PROCESSING ASSOCIATION PROJECT
 General objective
The main objective of the project is supporting and strengthen Mahebere Brihen milk association at
Enemay worda, and milk products to consumers at a reasonable price.

 Project duration
Starting date: septembere.2021
End date: September. 2024
 Owner :Mahebere Birhan kebele milk farming farmers association
 Location of the Project
The proposed project can be setup in AMHARA Regional State East Gojjam Zone in Enemay woreda
Administration.

 Project site:
Total production area: 2,500 Square meter and processing site with building
Types of investment milk processing
 Estimated production:
The processing capacity of the facility is assumed to be 1000 liters per day of raw milk into three
product categories; pasteurized milk, cheese, and butter. Therefore, the estimated amount of processed
milk product is 6,041,905 liters, butter 78,450kg, and cheese 39,750kg are produced in the first year
of production

 Expected Beneficiaries:
The direct beneficiaries of the project are the 51 members of the association and their families
Permanent employee: 5
Temporary employee: 6
 Estimated Cost of the Project
At the beginning of the production year the project will have the following costs
 Cost of fixed assets/ Capital budget 2,248,000
 Working Capital budget 122,186,700
The total investment requirement is estimated at approximately Birr 124,434,700 The plant will create
employment opportunities for 11 individuals and provide steady and secure income for dairy
producers (out-growers). The project is financially viable.

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 1. Introduction
Ethiopia is one of Sub-Saharan Africa's developing countries with a large potential in livestock, being
first among African countries and 9th in the world. According to CSA (2015) Amhara regional state
the production of milk covers 19% of the country production. But the product is not utilized
productively. Most of the produced milk is used as raw milk and some level of the product is
processed to yield butter at local processing systems. In the modern world, Milk processing is now in
the hand of the private sector but is struggling against unfair competition from the informal sector and
imported similar dairy commodities. This investment in milk processing makes good investment
sense. At present, the major sources of milk to Enemay woreda are the private farms around it, and the
smallholder urban dairy farmers within the town using grade and cross-bred cows.

There are various problems with milk processing and distribution in Enemay woreda. The raw milk is
collected at collection points and later it was transported to the selling places.The collected milk is not
processed and packed before delivered to consumers, simply the bulked milk is distributed throughout
the city by individuals. Also, the collected unprocessed milk is supplied to customers at a high price
relative to the quality of the product. The cumulative effect of these problems will result in the supply
of poor quality milk products. Therefore, Improvements in processing and quality assurance of milk
and milk products are necessary for sustaining in the increasingly advanced regional market. The trend
of consumption of processed dairy products (milk, butter, and cheese) is increasing and there are no
milk processing individuals or cooperatives.

To be effective in the milk processing market there are some golden opportunities; there is an increase
in milk consumption demand, capacities for improvement, new product development to increase
customer selection, distribution into multiple market channels to reach more consumers, institutional
market segments (schools, hospitals), and there is conducive investment climate, government policy
reforms, absence of competitors, the market orientation that is favorable for dairy investment.

The project wishes to establish a milk processing plant in Enemay woreda at Mahebere Birehan
kebele. Members of the association are 51 (48 male and 3 female).Currently, the association is already
established and started to supply raw milk collecting from members and other volunteer private milk
producers. The association was established in 2003 EC with a starting capital of 889,600birrs
collected from the contribution of the founder members.

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1.1 Project Rationality
Mahebere Birehan kebele is one among the 26 kebeles belong to Enemay woreda and located at 6kms
far from the woreda town. It has a high potential for milk production. There are 3385 improved and
22151 local breeds of cows and 1343 heifers in the project owner’s kebele. Among these 80% of
exotic breed cows, and 45% of the local breed cows are milking currently. On average 42,339 liters of
milk produced per day. To utilize this ample resource Mahebere Birehan kebele milk production
association was established. The association simply collect the raw milk and bulk store the milk with
tankers and distribute to the consumers dwelling around the association and the woreda town
customers. Also, the association does not add any value to the milk and not benefited from the
products of the milk. Besides, the quality of milk is reduced due to different contaminations during
storage and transportation which intern causes human health problems for consumers. Indirectly, the
revenue of the association is reduced. Because it does not benefit from milk processed products like
butter and cheese. Our rationality is to improve the awareness of milk farming farmers about the
significance of milk processing to the community and to solve these problems of milk and milk
products quality, to benefit more economically the members of the association, to maintain health
benefits of consumers through the supply of quality milk and milk products, the association needs to
be supported by supplying milk processing plant at the destination of the association.

1.2 Mission ,Vision and Values of the project

1.2.1 Mission

Increase the association's revenue by producing quality milk, dairy products that are
competitive in quality, price, quantity, domestic and international market, and strive to
make our association a major player.

1.2.2 Vision

Seeing our association as a major investor in 2022 E.C .

1.2.3 Values

 We make a culture of sustainable change to ensure economic growth.

 We firmly believe that the sector is the basis of growth.
 Providing quality, quantity and type of products and services is our hallmark

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  We work hard to satisfy the customer,
 We believe in effective measurement
 Devotion, respect and good manners

1.3 The objective of the project

1.3.1 General objective
The main objective of the project is supporting and strengthen Mahebere Brihen milk association at
Enemay worda.

1.3.2 Specific objective

 To support the milk processing association to add value of milk product through cleaning,
pasteurizing, and packaging.
 To support the milk processing association to supply quality milk and milk products at an
affordable price for consumers.
 To help the milk processing association to maximize the revenue of the founders of the
association.
 To improve the awareness of milk farming farmers about the significance of milk
processing to the community.

2. Description of the project and its capital structure

Mahebere Birhan milk processing association has 51 (male 48 and female 3) founder members with
different technical, production, theoretical experiences. These sample amount of human resource help
the association to cover different labor works and simple work divisions like cashiering on shops,
driving after licensed and guard on shops and processing sites.

Milk is a traditional constituent of the Ethiopian diet, especially in areas where the livelihood is based
on cattle production. Liquid milk handled traditionally has a very limited shelf-life. In modern dairy
production, exotic crossbreeds or pure breed castles are used and the milk is processed to have a
longer shelf-life.

The project will support the Mahebere Birhan milk producers association at Mahebere Birehan kebele.
The project will cover 70% of the total cost of milk processing and the fund will be given to the
association in kind. The fund will be sourced from the Agricultural Growth Program (AGP) and
delivered to the association after they fulfill their obligations of 30% cost of processing and checked
by the project committees. Also, the project will provide different pieces of training to the project

4
members about milk handling, machine operation, milk processing, issues of marketing, and dairy
farm management lessons. The project has a life of three years and supports only initial fixed assets
and providing different pieces of training for the association members and other milk producer
farmers. Finally, the association will run solely without any support from the project and sustain itself
to process milk and milk products for the benefit of itself and the community.

2.1 Project beneficiaries and key stakeholders

2.1.1 Direct beneficiaries of the project
The direct beneficiaries of the project are the members of the association and their families.

2.1.2 Indirect beneficiaries of the project

 Consumers of milk and milk products
 Profit oriented customers (hotels, cafe)
 Government through tax
 Dairy farmers who supply milk to the association

2.1.3 Project key Stakeholders and Method of Analysis

The primary stakeholders are Members of the association , General assembly, Management bodies
and employees and the secondary stakeholders are the community milk farming farmers, consumers
of the product (hotels, cafe) the sponsor of the project (AGP), the founder members of the association,
woreda and kebele administration offices, , animal and fishery development office, Woreda cooperatives
Office and Dejen milk processing union

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 A. Method 1, Stakeholders Analysis Matrix
NO. Stakeholders and their Interest Likely priority
basic characteristics impact
Primary stakeholders
1 Members of the To have quality and quantity product high + 1
association production to become investor
2 General assembly, To have quality and quantity product high + 1
production to become investor
3 Management bodies and High production increase of income + 1
employees improved living standard
Secondary stakeholders
4 The sponsor of the To avoid poverty from the country and + 2
project (AGP)/donor spread new technology to the farmers
5 The community milk Improved species of milk cattle , high milk + 2
farming farmers production and income
/suppliers/
6 Consumers of the Quality and quantity milk production + 2
product (hotels, café,
traders ),
7 woreda and kebele High production of milk and high economic + 4
administration offices growth and rural transformation
8 Animal and fishery High production of milk and high economic + 4
development office growth and rural transformation
9 Woreda cooperatives Strong cooperation of milk processor high + 3
Office production, high linkage of market to
domestic and foreign markets ,
10 Dejen milk processing Strong cooperation of milk processor high + 3
production, high linkage of market to
union.
domestic and foreign markets

11 Potential opponents Seek to improve their life rather than the - 4

project /oppose the project

 NB = The symbols that show in the above column 3 is likely impact of

the project so
+potential positive impact on interest,
- Potential negative impact on interest
+/-possible positive and negative impact on interest
? Uncertain

 The fourth column ,indicate the priority that the project should give to each
stakeholder in meeting their interests. Use the scale 1to5,where 1 is the highest
priority.

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 B. Method 2 Showing influence and importance of stakeholders
 Directions,
 Go through the list of stakeholders on the stakeholder in below table.
 Think about the amount of influence they have and the extent to which the project is
important to them
 Give each stakeholder number and put the number in the place on the table below where
the stakeholder falls
 If they have high influence, place them towards the right of the table
 If the project is important for them, move the number upwards towards the top of the
table

A. Primary stakeholders
1 Member of the association
2. General assembly
3. managment buddies and employee
B. Secondary stakeholders
4. Donor
5. Supplier
6. Customer
7. woreda and kebel admin . office
8. woreda animal office
9 woreda cooperative office
10. union
11. opponent

high 1 4
C 2 5
3 6
keep satisfied Most important
(managed closely
Key player
D

10
minimal effort 7
low
8
A 11 9
keep informed

Low Influence high

2.1.4 Factory location and layout

Mahebere Birhan milk processing association was established in Eest Gojjam zone, Enemay woreda,
Mahebere Birhan kebele which is located 6kms far from the capital town of Bechena. The central milk
processing plant is planted at the location of the association in Enemay woreda Bechena town.

7
Because the location is established earlier and a center for different milk farming farmers to supply
their products and the site is easily accessed to the road for transportation.

The location of the raw milk collection and processing site is well-drained, easily accessed to
infrastructures like electricity, road, water, and effluent mains. Also, the product selling shops will be
arranged at Bechena town located at intermediate sites to consumers. Parallel to this, the milk processing
machine and cooler are planted on the milk processing site together with the milk quality tester at Enemay
woreda. The shops will also contain refrigerators to store processed milk and milk products for a short
period

Map of Enemay worda and M/birehan kebele

D
ebre Yekebhana Wendasa
Ked
usan
e

Keshekesh Aseketa

Telema

Menegisto

Dima

Debre Tsemona

Adise A leme

Kidisge
Mahibere Selam Sekela Debire

Indashgnte Akababiwe
Mahib

Sir Iyesus

Felege Selam

8
1000LPH Dairy Fresh Milk Processing Machinery Equipment Processing Plant
for sale – Milk

Milk and Milk Products Technology: Dairy Plant Layout

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2.1.5 Landholding and capital structure of the Mahebere Birhan milk
processing association
The association has 0.25 ha of land given by the Mahebere Birhan kebele administration and the site has a
local house. Also, it has one house which can hold the processing machine and office at Bechena town
with 250m2 area of land.

Mahebere Birhan milk processing association has 30,000 cash on hand, seven different sized milk storage
cans, and milk animals that currently give milk are 159 exotic cows.

2.1.6 Facilities to the project area

The project site has accessed to the road with the woreda town, there is the availability of electric power,
no water problem to the area, and nearness to the main market opportunities are satisfied.

2.1.7 Project duration

The project has a life span of three consecutive years. It will start in February 2021 and will be ended in
September 2024. Finally, the project will give all responsibilities to the association to manage and sustain
themselves.

3. Situational Analysis
3.1 Strength and weakness of the project
3.1.1 Strength
 The association is legally recognized
 The establishment of a legal framework
 Better management of resources
 The motivation of the members of the association to work together or Job
motivation .
3.1.2 Weakness
 Has a no strong structural organization
 problems of milk and milk products quality,

 Less stakeholder monitoring and support

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  Low production of the firm
 Weak distribution of the product
 Low customer handling system
4. Opportunity and Threats

Opportunities Threats

• The commitment of the worda administration and • Inadequate supply of resources (cattle
all other stakeholders to closely monitor and fodder, vaccination, etc.)
support • Disease Outbreaks to cattle
• The location of the project is fully accessible or • Feed Shortage in quality and quantity of cattle
equipped, for example, roads, electricity, water, • Increase inputs market price
medical, for transportation convenience • Failure to provide comprehensive extension /
• There is a huge demand for milk and its counseling services
processing high market in our area • political instability may occur
• Our local climate is conducive for cattle ranching
and milk production
• Good social and cultural values for work

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 5. . Risks assessed, and mitigation measures identified

Identified potential Causes of risk Indicator to Mitigation measurement

risk identify risk
The beneficiaries may not fully Lack of commitment, incapable of Improper Continuous monitoring, follow up,
apply their knowledge gained the beneficiaries and lack of proper entrepreneurship skill regular review meeting with
from training and commitment follow up practice (not stakeholders and a strong partnership
problem implementing with Local Government and the
knowledge) community, peer groups discussion
and experience sharing for inclusion
of incapable
Outbreaks of disease Spread of disease Patient cattle and Regular vaccination
and high cattle cooks
mortality Death of cattles
High inflation of market Instability of Ethiopia Market and Escalation of Efficient project management and in
Ethiopian money devaluation construction materials time implementation of the project
and other electric and
water materials
Decrease in product Excess production from decrease the price Promote and distribute the
price competitors and decrease of products in the products to the better
the demand of customers market markets
Worda and kebele Election and 2013 National Election in Ethiopia, Continuous Being neutral to any group and
political instability and the change in Ethiopian political demonstration by the independent from any political
process public, unrest especially interest as a humanitarian
after elections organization or adhere to all the
principles and core humanitarian
standards. Not to plan mobilization
and trainings in the election month
(likely in 2022).
supplementary office may not Lack of commitment, Inactive participation of Give more attention to the project &
effectively apply their offices, delay in the strengthen follow up by AGP
knowledge facilitation of inputs
/land ---

6. Demand and Market analysis

6.1 Competition landscape

In and around the town, there are no different dairy farming cooperatives, and associations but there are
private farmers that compete with the association. Even though there are milk product providers around
Mahebere Birehan town none of them have a milk sales shop and milk processing plant. Also, they have a
small volume of milk and milk products, they are not well organized in human resources, and most of
these suppliers have not acquired milk quality testing tools compared with the Mahebere Birhan milk
processing association.

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From the product point of view, the project will supply quality tested milk and milk products, pack
products with safety packages to avoid contamination, supply with reasonable price, center shops will be
opened around the residents of key customers, and only collects quality tested raw milk from producers.
This makes the project unique from the existing private competitive suppliers.

6.2 Market Area

Mahebere Birhan milk processing association project will supply its milk and milk products at shop
located in highly demanded areas (Hotels and cafe), and to some customers who has a demand of 10 and
more liters per day, the enterprise will serve as a home to home service.

6.3 Total Demand

The demand for milk and milk products in and around Enemay woreda is high. According to the woreda
animal and fishery office report (2012 EC), the average consumption level of milk and milk products is
7850 liters of milk 261.5 kg of butter, and 126.5 kg cheese per day in Bechena town.

6.4 Market Share

There are no dairy cooperatives and associations which are selling milk and milk products to the target
market area. The advancement of this new project in its supply of quality tested milk and milk products,
packed products with safety packages to avoid contamination, the supply of products with affordable
price, and only collecting quality tested raw milk from producer’s increases the enterprise acceptance. But
because of the innovation of new milk processing system to the area and custom effects the Mahebere
Birhan milk processing association will expect to have a 50% market share over the town.

6.5 Selling Price

The selling price of the products will be determined by using the ‟cost-plus revenue method‟ of price
determination. This milk processing association will plan to get 26.7% of profit over the total product
processing cost.

The unit product cost will be the cost of the product plus profit. Therefore, Mahebere Birhan milk
processing association will collect the raw milk from its members and other private dairy farmers at the
price of 20 birrs per liter. But after processing and package the selling price of processed milk is 30 birrs
per liter, raw milk 28 birrs, cheese 80 birr/kg, and butter 270 birrs/kg.

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6.6 Promotional Measures
To secure the goodwill of the consumer, 30 days a credit will be facilitated to those who regularly buy in
bulk and those who buy in small amount by contract against the competing suppliers, and home to home
supply for those customers who will consume ten and more liters per day.

6.7 Marketing Strategy

The project's marketing system will use regularly the following strategies:
a) Product strategy-
 Pack the products with neat and attractive packages.
 Test the quality of processed milk products before packaging and ready for sale.
 Test the quality of raw milk when buying from producers.
b) Pricing strategy-
 The price of the products will be decided by using the cot- plus-revenue method.
 Less profit is added to the product according to the quality of the product.
d) Distribution strategy -
 Free delivery for the bulk buyer and delivery for our 5 existing shops
 Home to home supply for high demand customers.

7 . Production and sales plan

7.1 Description of the Product

The project will supply processed milk, cheese, butter, and yogurt. These products are processed in high
quality through the use of different packaging materials and quality measurement tools. Processed milk is
packed with plastic bottles and other products with white plastic sheets. The selling size and weight of
milk vary slightly according to customers’ needs and what they can afford, but the minimum amount for
processed milk is 0.5 liter, and other processed products are in 0.5 k/g for customers.

7.2 Production Process and activities

This milk processing project will produce pasteurized milk and milk products through accomplishment of
the following production processes.

Fundraising from donors.

Announcing the project to stakeholders.

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 Provide training for milk farming farmers, consumers, employee experts, and members of the
association.
The necessary equipment, materials, tools, and processing machines will be bought and planted at
the site.
Collect raw milk from producers by testing its quality and store it in its temporary
store. Clear the milk from floating, some deposited, and weak bacterial through
spinning.
Pasteurize the milk with the thermalization method of heat the milk between 57-68℃ for
15 minutes to minimize the level of harmful bacteria and keep the taste of the milk.
Cool the pasteurized milk and milk products at 4℃ to prevent the reproduction of
bacteria. Pack the milk and milk products with the required amounts.
Transport the product to the retailing shops and ready for
sale. Monitoring and controlling the work progress of the
project. Evaluation of the project.
Closing the project.

7.3 Production Capacity

The nearby kebeles of the association have 3385 improved milking cows, and 22151 local breed milking
cows. The average milk yield per cow is estimated to be 3.3liters per day and the cows will give milk for
at least 9 months for improved breeds and 6 months for local breeds. Overall annual raw milk production
is about 12,719,800liters in the first year of production that is 42,399 liters per day.

7.4 Plant Capacity

From the process of processing of raw milk several products are produced. Such as pasteurized milk,
cheese, and butter, and investment could be on pasteurizing plants with a capacity of processing 1,000
liters per hour. The processing plant will start production at 75% of its installed capacity in the first year,
thereby increasing the capacity by 5% until it reaches 85% in the third year.

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7.5 Types of fixed capital
Table 1 types of fixed assets
Type Amount Unit price Total cost
Processing house 1 600,000 600,000
Pasteurizing machine 1 800,000 800,000
Cooler 1 120,000 120,000
Fridge 2 40,000 80,000
Office furniture 5 20,000 100,000
Fridge mounted vehicle 1 400,000 400,000
Milk quality tester 1 88,000 88,000
Generator 1 60,000 60,000
Total 2,248,000

7.6 Life of Fixed Capital

The expected life of fixed assets of the car is 20 years, processing machine 15 years, cooler 10 years, milk
quality tester 10 years, refrigerator 10 years, and furniture for 5 years. The depreciation charge for all
fixed assets is considered to be 10%.
The annual depreciation cost, assuming no scrap value, will therefore be: Depreciation cost 10%of X
2,248,000 = birr 224,800 per year or birr 7493 per month

7.7 Amount and Sources of Equipment

Table 2 amount and sources of equipment
Fixed assets Amount Source Specification

Processing site House 1 Project owners Cemented wall &floor with

ventilation
Pasteurizing machine 1 Importers china
Cooler 2 Importers china
Office furniture 5 local Self-chair
Fridge mounted vehicle 1 Importers Small sized ISUZU
Quality tester 1 Importers china
Fridge 1 Importers 150 liter capacity
Generator 1 Importers ACMe

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 7.8 Terms and Conditions of Purchase of Equipment
This project will support milk processing machine, Generator, milk quality tester, Fridge mounted vehicle,
cooler, and fridgein kind to Mahebere Birhan milk processing association when they will cover 30% of
the total milk processing cost.

7.9 Raw Materials Needed/inputs/

Table 3 the necessary raw materials for the project include:
Raw materials Functions Source
Electric power Source of power for the processing machine Woreda electric power office
Water For Hygiene and processing process Society
Steam For sterilizing milk and milk products Processing machine
Fuel For generator ignition Retailers in the woreda
Generator The alternative source of power during off current Ambassel trading
Vehicle Transportation of milk and milk products only Addis Ababa
Packaging plastics Handling milk and milk products neat Local shops from the town
Members of the association and private
Raw milk Processed to different milk products farmers
Bottles Packaging of pasteurized liquid milk Bahirdar plastic factory
Refrigerator Preservation of processed milk and milk products From general trading
Processing machine Processing, sterilizing, and packaging of the products Importers in Addis Ababa
Cooler Storing of the collected raw milk Importers in Addis Ababa
Quality tester Testing the quality of raw milk and processed products Importers in Addis Ababa

7.10 human resource

Table 4 human resource
No. Particulars amount Qualification Source Salary/month Total/year
1 Project manager 1 Management Vacancy 10,000 120,000
2 Plant operator 1 Machinery Vacancy 4000 48,000
3 Dairy labor 2 Owners 4200 50,400
4 Shop keeper 1 Owners 2100 25,200
5 Driver 1 Owners 3,000 36,000
6 Accountant 1 Accounting Vacancy 4,000 48,000
7 Laboratory man 1 Vacancy 4,500 54,000
8 Supervisor 1 Dairy farming Vacancy 6,000 72,000
9 Guards 2 4,000 48,000
Sub-Total 11 501,600
Pension expense (11%) 55,176
Total 556,776

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7.11 Production plan/project outputs /
For processing facility, the financial projection will assume the total raw milk available for value addition
will be divided into pasteurized milk and other milk products (cheese, butter). Of the total production,
38.9% will be pasteurized milk, 35% percent will be supplied to Dejen milk processing factory as a raw
product, and 26.1% for butter and cheese production. During milk processing, schemed milk is left over.
To use schemed milk, the butter will be produced. It is assumed that 100 percent of schemed milk will be
processed into butter and cheese.

The actual raw milk production will therefore begin at 6,041,905 litters raw milk in the first year of
production and the milk production will increase with the growth in herd size of the owners and interest of
supplying other milk farming farmers in subsequent years. The production plan of milk, butter, and cheese
for the project years will be depicted in the following table.

Table 5 production plan

Year Raw milk OUTPUT
available for
production in Raw milk to pasteurized cheese in butter in liter butter in
the liter be sold in liter milk in liter k/g kg
1st 6,041,905 2,117,905 2,355,000 39,750 1,569,000 78,450

2nd 6,704,000 2,223,800 2,472,750 41,737 1,647,450 82,325

3rd 7,039,200 2,334,990 2,596,388 43,824 1,729,823 86,491

7.12 Production Cost

The annual production cost for milk and milk products will be summarized in the following table.

Table 6annual production cost for milk and milk products

No Raw materials The annual cost of products/ birr
Year 1 Year 2 Year 3
1 Purchase of raw milk 120,838,100 134,080,000 140,784,000
2 Operational cost
3 Electric & water 7,200 7,560 7,938
4 Fuel and oil(generator) 6,480 6,804 7,144
5 Packaging plastics 12,000 12,600 1,3230
6 Bottles 1,177,500 1,236,375 1,298,193
7 Promotion & training cost 50,000 50,000 50,000
8 Transport cost(vehicle) 80,420 84,441 88,663
9 Cleaning supplies 15,000 15,000 15,000
10 Sub Total 1,348,600 1,412,780 1,480,168
12 Total 122,186,700 135,492,780 142,264,168

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7.13 Sale plan
The major source of revenue for the farm would be the sale of pasteurized milk and milk products made
from raw milk. Processing of milk into finished products will add value to each amount of milk produced.

Revenue will be generated by selling 38.9% of the milk as pasteurized fluid milk, 26.1% of the milk
processed into butter and cheese, and the rest 35.05% of raw milk will be sold to Dejen milk processing
factory. The diversification of products will help the association to buffer from volatility in the product
markets. Prices may vary depending on the market outlet that a producer is selling through.
The selling price of pasteurized milk, raw milk per liter, cheese and butter per k/g is Birr 30, 28,80& 270
respectively.

7.14 Training requirement

In each year a five days training will be provided for the executive management, Procurement and
Marketing, finance and accounting, resource management and administration, and technical supervisor
teams. Moreover, training for the community and private milk suppliers will also provide in each year.
The project will plan to provide the community trainings through supporting 200,000 birr to Enemay
woreda animal and fishery organization to address 7 woreda experts and heads, 52 kebele animal
production experts and coordinators, 26 kebele administration heads a total of 100 trainers.

8. Financial analysis

8.1 Investment cost

Investment costs are categorized as fixed and working capital. Fixed investment costs are costs incurred
for the construction of fixed assets. Working capitals are to supply inputs required to produce the
proposed product items in the production year and pre-operational. The overall investment cost includes
fixed cost, pre-operating cost & working capital estimated at Birr 124,766,676birr for details see below.

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Table 7investment cost
No. Types of costs Cost Description Total cost in ETB
1 Fixed assets 2,248,000 224,800 2,023,200
2 production costs 122,186,700 122,186,700
3 Human resource costs
556,776 556,776
Total 124,766,676

8.2 Source of finance

The total investment cost of the project is 124,766,676 and will be financed from two sources. The first
source is the owner’s equity which covers 5.5 % of the total cost of fixed assets of the project that is
674,400 birr. The remaining 70% of the total cost will be financed from the fund support of the
agricultural growth program (AGP).

8.3 Sales revenue

Processing of milk is more advantageous than selling raw milk. The Mahibere Birhan milk processing
association project was collected raw milk from its members and sold the raw milk to consumers. The
total milk production of the association is 515, 580 liters per year. But only 50%of the total product is
supplied to the market. Based on this the total annual revenue is 3,863,700birr.The total cost of production
is 3,296,349birr. Indeed, the association was earned 550,687birr net profit within the year. But after they
are supported and advanced to the milk processing system, the project will earn 28,080,501 birrs/year
sales revenue.The details are annexed in annex 1 and 5.

Table 8 collected milk volume and sale

Particulars Year 1 Year 2 Year 3
Sales volume
Pasteurized milk 2,355,000 2472750 2596388
Butter 78,450 82,325 86,491
Cheese 37950 41,737 43,824
Sales in birr
Pasteurized milk 70,650,000 74,182,500 77,891,640
Butter 21,181,500 22,227,750 23,352,570
Cheese 3,036,000 3,338,960 3,505,920
raw milk 59,301,340 62,266,407 65,379,727.35
Total 154,168,840 162,015,617 170,129,857.35

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 9. Socio-Economic Benefits of the project
The socio-economic impact of the project is expected to be positive because the operational area is free
from major conflicts, less displacement, high milk production potential, and owners of the association
have emerged from that society. The major positive impacts of the project include the following points.

9.1 Social Benefit for the Community

The creation of substantial direct or indirect awareness creation opportunities with potential for out-
growers will have an impact on increasing skill milk handling of the rural community.

 There will be good opportunities for out-growers linkages with the surrounding farmers and the
use of the project's facilities, knowledge, and experience, thereby increasing the economic
activities of the inhabitants of the area.
 Promotion and transfer of new agricultural technology that could be adaptable to the surrounding
farming community and improve their skills through training and sharing of the project
experiences will also be another benefit for the community.
 The supply of processed milk and milk products will primarily improve the health of consumers. If
women are more nourished these products, the future generation will be in reduced malnutrition
problems.

9.2 Economic Benefit for the Community

This project will have significant economic benefits, both to the national economy of the country at large,
and the region in particular in which the project is established.

The specific direct benefits will include;

 The founder members of the milk processing project's income level will be maximized. This
pushes them to invest in their children to get a better education.

 The project will activate the economy of the surrounding especially in the continuous production
and supply of processed milk & milk products. Being efficient in terms of business returns and
thus considered as a role model that will encourage other entrepreneurs in the country to engage in
the milk processing industry.
 Provision of physical and social benefits, thereby creating a conducive and suitable environment
for the development of private dairy farms.
 Substantial increase in regional government revenue, through direct & indirect taxation.

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 10. The environmental aspect of the project
This project is designed to produce of quality milk and milk products by maintaining the existing varied
environmental. It also intends to protect the environment from possible risks. The project will have a
negligible negative environmental impact in the areas as discussed below:

In the absence of electric power, the project may use the generator. Therefore, there may be sound
disturbance and very little smoke problems. But these can be alleviated by using silenced generators and
managing the smoke through proper use of engine oil respectively.

On the other hand, there may be the disposal of pollution of product packaging materials. Those under
grade packaging materials of the processing site are burnt using burners. Waste of packaging materials
from customers will not be controlled by the project but awareness creation will be arranged to the
customers in different ways. Also, the wasted water removed from the milk processing process will be
disposed of through infiltration holes.

11. The project organization and management

11.1 structure of project management and personnel

The highest executive body of the Mahebere Birhan milk processing association project is the general
assembly of members. There is an executive management body composed of five elected members who
are responsible to the general assembly. Under the executive management team, there are four teams.
Procurement and Marketing, finance and accounting, resource management and administration, and
technical supervisor teams. The details are on the association indenture.

11.2 Organization structure

The project will have its organizational structure to run the production, finance & Administration, and
Marketing. The organizational chart shall serve as a fundamental guide to the reporting responsibilities of
the senior officers and the workforce. The proposed organizational structure for the startup of the project
is as shown below.

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 11.3 Organization
A. General Assembly
The general manager of the association is the general assembly, which is represented by member
farmers. The council, which has 4766 members, convenes once a year to review the performance
of the past year, and examines and approves the plan for the coming year. Delegates members of
the Board of Directors to carry out the day-to-day work of the Association through the sub-boards.
It has a 3-member oversight committee, which is accountable to the General Assembly.
B. Executive Committee
The members of the Executive Committee are the class leaders, including the members of the
Standing Committee of the Board. Included in the committee Chairman of the Board, Secretary of
the Board, General Manager, Deputy General Manager, Finance Department Head, Head of the
Department of Agricultural Input Supply and Distribution, Head of Agricultural Products
Marketing Department, Head of Flour and Feed Factory , Head of a fertilizer factory.
C. Sub committees
The oversight committee is accountable to the general assembly and has a total of three members.
Submits quarterly and emergency financial, asset and management activities quarterly.
Recommends corrective action to the Executive Committee, the Board and the General Assembly.

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 12. Implementation plan
The Mahebere Birhan milk processing association project already exists in Mahibere Birhan kebele. The required budget will be expected to
gain from AGP within a short period. This advanced milk processing process will start in september 2021. The details are as follows.

No Activities Time of implementation facilitator Performed by

Fe Ma Apr Ma Jun Jul Au Sep Oct Nov Dec Jan.
b r y e . g. . . .
1 Provision of training AGP Animal and
Cooperative office
2 Facilitation of proposed project site Worda and Worda and kebele
/land / kebele admin admin office
office
3 Procuremen of processing Association Association
t management bodies
equipment
4 Collect raw milk Association Employees and
members
5 Clearing the raw milk Association Employees and
members
6 Pasteurize the milk and milk Association Employees and
products members
7 Cool the pasteurized milk and milk Association Employees and
products members
8 Package the milk and milk products Association Employees and
members
9 Transport of the products and ready Association Employees and
for sale. members
10 Monitoring and controlling AGP/cooperative All stakeholders
office
11 Evaluation of the project. AGP/cooperative General assembly.
office Management bodies ,
AGP
12 Closing the project. AGP Association

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 13. Project worthiness
Measures of project worth basically involve aggregating and comparing the costs and the benefits of
a project to determine the values of the project as a whole. ...

1. Non-Discounted measures of project worth

Use the cash flow as obtained through the project period without taking into account the present value
of future cash flow.

A. Pay back period of the project is dealing with the question of how long will it take into
earn as amount of proceeds equal to initial cost of investment ? Then our project pay back
period is calculated as dividing the total initial outlay by the amount of annual cash
proceeded. Or
 Given initial cost = 122,968,283 birr
 Annual cash flow /net amount proceeds for 3 years is birr 28,080,501 +57,727,627 +
88,907,317 = 174,715,445 2.5 years
 The PPP Is would be the implication is the investment cost would be covered in 2.5
years

B. The benefit-cost ratio= BCR=PVB/PVC

(174,715,445 ) ÷ (122,968,283)= 1.467 What does it mean?????
Decision rule:
 Accept the project if the B/C ratio is greater than one, which implies that NPV is
positive.
 B/Cratioequalto1impliesthatNPVisequaltozero,whichismarginal

2. Discounted measures of project work take into consideration the time value of
money while undiscounted measures do not.
. The term “discount rate” refers to the factor used to discount the future cash flows back to the present
day. In other words, it is used in the computation of time value of money which is instrumental in NPV
(Net Present Value) and IRR (Internal Rate of Return) calculation.

 NPV (Net Present Value) of the sum of the project values of all the cash flows positive as as
well as negative
𝑛 that are expected to occur over the life of the project. So
 NPV (c1/1 + r)t − I ) . If interst rate is 10%
=∑
𝑡=0

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  NPV= X0/(1+r)0+x1/(1+r)1+x2/(1+r)2+x3/(1+r)3= Investment cost
NPV= 0+25,527,728 +47,708,782+66=797=383=140,033,893
NPV =.140,033,893 ~122,968,283=17,065,610 So, the NPV is positive and accepted

14. Project close out and Plan for Sustainability

The project has planned the above activities to ensure the sustainability of the interventions.
Provision of Basic activities or results will not be problem on sustainability. Enough capacity of all stakeholders
to sustain the project
AGP and all others stakeholders together with Woreda and Kebele administration (KA) level partners will establish
and train on management of the schemes. All the members of stakes are the users of the scheme and hence they are
sensitive to the functionality of the scheme..
Awareness increasing: The project will engage in several awareness raising activities on milk processing practices.
Woreda and KA level partners and other stakeholders will participate in the awareness raising sessions. Such
awareness raising activities are expected to contribute towards sustainability of the project Partnership with
Government: the milk process practice that are planned for the project are expansion from the existing schemes
which also have its own benefit for sustainability because the schemes are already in the hands of the
stakeholders and the beneficiaries . The organization will work with an array of partners and stakeholders namely
Woreda Offices ,uions ). It will also work with KA offices and the target community. All the stakeholders that will
be handed over to government and the /beneficiaries/ when completed. All the necessary capacity building
trainings and support will be given to the stakeholders for sustainability and proper close-out of the project And
also the milk association members have beg responsibility to sustain the project effectiveness.

15. Project monitoring and evaluation

Monitoring of the project will be carried out as a continuous process to provide qualitative and
quantitative information & data on the management and technical aspects. The monitoring system will not
only focus on providing data on inputs, outputs, and effects but also considers the processes involved in
project implementation. The information so generated in the process will be used to improve management
through guiding management decisions to ensure effective implementation of the project. The monitoring
tools for work performance and financial performance reports will be prepared monthly and delivered to
the sponsors and higher management bodies of the project.

The Mahebere Birhan milk processing association of formative project evaluation will be done quarterly
and the summative project evaluation also will be done at the end of each year. The project management
shall establish indicators for monitoring and evaluation to verify the success of the investment. Some of
the indicators are sales progress, amount of inventory and income generated within the month. Finally, the

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result of evaluation report issues will be incorporated into the next project planning and lessons learned
from experience.

16. Appendix
ANNEX 1Income statement
Particulars year 1 year 2 year 3

sales 154,168,840 162,015,617 170,129,857

operational cost 1,348,600 1,412,780 1,480,168
purchase raw milk 120,838,107 126,880,012 133,224,013
cost for human resource 501,600 501,600 501,600
Depreciation 224,800 224,800 224,800
Pension 55,176 55,176 55,176
total cost and expense 122,968,283 129,074,368 135,485,757
gross profit 31,200,557 32,941,249 34,644,100
tax expense 3,120,056 3,294,125 3,464,410
net income after tax 28,080,501 29,647,124 31,179,690
ANNEX 2Balance sheet
Assets Year 1 Year 2 Year 3

Purchase of raw milk 120,838,100 134,080,000 140,784,000

Processing house 600,000 600,000 600,000
Pasteurizing machine 800,000 800,000 800,000
Cooler 120,000 120,000 120,000
Fridge 80,000 80,000 80,000
Office furniture 100,000 100,000 100,000
Fridge mounted vehicle 400,000 400,000 400,000
Quality tester 88,000 88,000 88,000
Generator 60,000 60,000 60,000
Cash 30,000 30,000 30,000
Total asset 123,116,100 136,358,000 143,062,000
Liabilities
Tax expense 3,120,056 3,294,125 3,464,410
Total liability 3,120,056 3,294,125 3,464,410
Equity
Total equity 119,996,044 133,063,875 139,597590
Total equity and liability 123,116,100 136,358,000 143,062,000

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ANNEX 3 Project cash flow statement

No Title Years
1 2 3

1 Balance from last 28,080,501 57,727,627

year/A/
2 Cash in cash (B) 0 0
From sales 154,168,840 162,015,617 170,129,857
From the loan 0 0
Contributions from 30,000 0 0
Total inflow 190,096,120 227,857,484
3 Cash out flow (C)
Operational cost 1,348,600 1,412,780 1,480,168
purchase raw milk 120,838,107 126,880,012 133,224,013

cost for human 501,600 501,600 501,600

resource
Depreciation 224,800 224,800 224,800
Pension 55,176 55,176 55,176
tax expense 3,120,056 3,294,125 3,464,410

total cost and 126,088,339 132,368,493 138,950,167

expense with tax

4 net income after 28,080,501 57,727,627 88,907,317

tax(D)= B_C

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ANNEX 4Financial assumption
No Assumptions of the project plan Description %

1 Market share from market size 50

2 Pasteurized milk market share 38.9
3 Butter and cheese 26.1
4 Raw milk 35.05
5 Amount of product supplies to the market 95
6 Depreciation 10
7 Marketable days within the year 300
8 Milking days for exotic breeds 270
9 Milking days for local breeds 180
10 The average amount of milk for exotic 12Ltr
breeds/day
11 The average amount of milk for local 2.5Ltr
breeds/day
12 Estimated Production capacity of milk 1st year 75% &
processing plant exceeds by 5% each
year

Annex 5 Existing income performance of the Mahebere Birhan milk processing

association
Particulars Amount 2021
Sales 515,160 3,863,700

Operational cost
Purchase raw milk 257,580 3,090,960

Cost for human resource 4 60,000

Milk lose (0.7% per liter) 23,439

Animal feed 114,000
Animal health care 7950
Total cost and expense 3,296,349

Gross profit 567,351

Tax expense 16,664

Total income after tax 550,687

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