Crop Production at Jimma Zone

PROJECT PROPOSAL
FOR

CROP PRODUCTION

PROJECT TO BE IMPLEMENTED IN OROMIA REGIONAL STATE,

JIMMA ZONE, LIMU KOSA DISTRICT

PROMOTER’S: LULA KEMAL

JUNE, 2021
ADDIS ABABA, ETHIPIA

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Contents
1 Executive Summary...........................................................................................................4
PART ONE................................................................................................................................5
1. INTRODUCTION.............................................................................................................5
1.1 Background......................................................................................................................5
1.2 Promoter’s profile............................................................................................................8
1.3. Objectives of The Project...............................................................................................8
1.4. Basic Features of Project Area.......................................................................................9
1.4.1. Location...................................................................................................................9
1.4.2. Geology.........................................................................................................................10
1.4.3. Relief......................................................................................................................11
1.4.4. Drainage system.....................................................................................................11
1.4.5. Climate...................................................................................................................12
1.4.6. Soils......................................................................................................................13
1.5 Socio Economic Activities Of The Population:.............................................................14
PART TWO.............................................................................................................................15
THE MARKET DEMAND POTENTIAL..............................................................................15
2.1. Market Situation...........................................................................................................15
2.2. Competition..................................................................................................................16
2.3. The Production of Crops...............................................................................................16
2.3.1 Production Hygiene....................................................................................................17
2.3.2 Agricultural input requirements..................................................................................17
2.2.2.1 Water for primary production..............................................................................18
2.2.2.2 Manure, biosolids and other natural fertilizers....................................................18
2.2.2.3. Soil......................................................................................................................18
2.2.2.4. Bio diversity........................................................................................................19
2.2.2.5. Natural Plant Nutrition.......................................................................................19
2.2.2.6. Natural Pest Management...................................................................................21
2.2.2. 7. Manuring and Composting................................................................................21
2.2.2.8. Biological Pest Control.......................................................................................22

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2.2.2.9. Sanitation............................................................................................................22
2.2.2.10. Tillage and Cultivation.....................................................................................22
2.2.2.11. Conservation Tillage and Organic Farming.....................................................22
2.2.2.12. Supplemental Fertilization................................................................................23
2.3. Schedule of production plan.........................................................................................23
2.3. Sales Plan......................................................................................................................23
PART THREE.........................................................................................................................24
ORGANIZATIONAL STRUCTURE.....................................................................................25
PART FOUR...........................................................................................................................26
FINANCIAL REQUIREMENT..............................................................................................27
1.1 Fixed Investment.......................................................................................................27
4.1.1 Building & Construction.........................................................................................27
4.1.2. Farm Tools and Equipments..............................................................................28
4.1.3. Vehicles.............................................................................................................29
4.1.4. Office Equipments.............................................................................................29
4.2 Expenses........................................................................................................................29
4.2.1 Raw Material Purchase...............................................................................................30
4.2.2 Salary Expense........................................................................................................30
4.2.3 Other Operating Expenses......................................................................................31
4.2.4 Pre -Service Expense..............................................................................................31
4.4. Loan Repayment Schedule........................................................................................32
4.5. Financial Statement......................................................................................................33
4.6. Assumptions.................................................................................................................34
4.7. Summary.......................................................................................................................34
Environmental Impact of the Project.......................................................................................34
Future Development& Exit Strategies...................................................................................364

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Executive Summary

1.Project Name Crop Production

2.Project Owners Lula Kemal

3.Nationality Ethiopian

4.Project location Jimma Zone, Limu Kosa

5.Project Composition Crop Production
 Wheat,
 barley sesame ,
 Maize and different related production)
6.Primeses Required 500 hectar

7. Startup Capital For implementing this project a total of 38,000,000.00Eth

birr is required. From this 30% or 11,400,000.00birr will be
owner’s contribution while the rest 70% or, 26,600,000.00 Eth
birr will be covered by bank loan.

8.Total Capital Working Capital = Br. 18,575,000

Fixed Capital = Br. 15,625,000
Contingency (10%) = Br. 3,800,000
Total = Br. 38,000,000
9.Employment Opportunity This project fully employees the local individuals. Except the
general manager all other employees are used from the local
area. Hence, this project will create employment opportunities
for 2,000 individuals from this 100 are Permanents and
1900are Temporary.
10. For The region/ country Source of foreign currency and sustainability of food in the
country.

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PART ONE

1. INTRODUCTION

1.1 Background
Our country Ethiopia is one of the East African countries with the diversified climatic
conditions, natural scenery and resource bases. Currently the country has a total population
of about 100 million of which more than 40million is found in Oromia regional state. Oromia
is one of the regional states of Ethiopia with very fertile land, very conducive weather
condition both for crop production and animal husbandry. The country’s Gross Domestic
Product or GDP (was 19.39 billion US$ in 2007 with per capita income of 245 US$. In the
same year, agriculture accounted for almost 47 percent of GDP and about 85 percent of
exports. Ethiopia is the third largest populated country in Africa with a total population
number of 77.4 million (2005), out of which 84% of the populations reside in the rural area.
About 80 percent of the economically active population is engaged in agriculture. The
cultivated area covered in 2005/06 was about 11.3 million ha, of which 10.5 million ha and
0.77 million ha covered with annual and permanent crops respectively.
Agriculture in Ethiopia has a major influence on all development processes in the country, as
some 85% of the total employment and 90% of the country’s export are based on agriculture
(Environmental Policy, 1997). It also contributes about 50% of the country’s gross domestic
product (GDP) and supports around 70% of the raw material requirements of agro-industries.
This high proportion of the country’s economic gains made from agriculture depends mainly
on the existing diversity of indigenous crops/plants and livestock. Crop production is
estimated to contribute on average about 60%, livestock 27% and forestry and other
subsectors around 13% of the total agricultural value (Ministry of Water Resource, 2001).
As a result of shifts in rain patterns, crop production in the highlands and in most areas of
low elevation can be affected by drought, leading to food shortages. The response is often
food aid supply, which may involve grain distribution, especially of maize and wheat.
As a measure to mitigate the negative impacts of grain aid on the market of prices of local
crops, strategic arrangements have been made between donors and the government, whereby

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grain aid supply is based on local sources as much as possible. This strategy has proven
useful in keeping the local grain prices at reasonable levels.
Agricultural practices and farming systems in Ethiopia are based on diverse agro-ecological
conditions that in turn require varying approaches in crop production. In general terms, the
agro-climatic zones of the country can be grouped into three types: Kolla (warm semi-arid, at
500–1500m above sea level), Woinadega (cool semi-arid, at 1500–2400m) and Dega (cool
and humid, higher than 2400m). More recent discipline oriented studies further distinguish
and define this agro-ecological classification by linking related a-biotic factors such as
annual rainfall, altitude and temperature (Negash et al, 1989).

The following five main agricultural production systems can be distinguished in the country:
• Frequently varying agro-climatic conditions with diverse cultural and farming practices
remain characteristics of agriculture in Ethiopia. These can be grouped into three major
systems (Feyissa, 1999):
The highland mixed-farming system practiced in areas of higher elevation, usually above
2000m as a crop-livestock complex involving the cultivation of diverse crops. Continuous
cropping is exercised through crop rotation, where cereal production alternates with the
production of legume and oil crops as a means of maintaining soil fertility. Barley, oats and
highland legume crops dominate.
The low plateau and valley mixed-farming system practiced in the intermediate or low
highlands, mountain foothills and upper valleys, at elevations ranging from 1500 to 2000m.
Both crop and livestock productions are economically essential; crop production is
dominated by sorghum and maize followed by wheat, teff and some legume and oil crops.
The pastoral and agro-pastoral farming system is practiced in the arid and semi-arid zones
mainly at elevations below 1500m and with annual rainfall less than 450mm.
In the arid zone, nomadic and semi-nomadic pastoral livestock production dominates, with
camels and goats as important components. In the semi-arid zone, semi-nomadic or semi
sedentary agro-pastoral production is practiced with sorghum and maize as main crops.
Livestock production in the semi-arid zone focuses on cattle and sheep. Water and range

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evelopments are important elements for improving both crop and livestock production under
this system.

Major staple crops in Ethiopia vary according to the cultural and agroecological conditions.
The indigenous Ethiopian tetraploid wheat (Triticum durum) and the introduced bread wheat
(Triticum aestivum) have a wider coverage in the northern, central and south eastern parts of
the country. Other important staples are barley in the highlands; teff (Eragrostis tef) with its
wide adaptation to various agro-ecologies; sorghum, maize and millets in the lowlands; and
different root crops such as enset (Enset ventricosum) and yam (Dioscorea spp.). Major
legume crops are horse bean (Vicia faba), pea (Pisum sativum), lentil (Lens culinaris)
and vetch (Lathyrus satives); these are all essential dietary components along with the other
staples. Major oil crops are gomenzer (BrassicaCarinata), noog or niger seed (Guizotia
abyssinica), linseed (Linumusitatissimun) and sesame (Sesamum indicum) dominant in the
lowlands.
Coffee is an economically important crop in the east, southwest, and the western parts of the
country. Various types of spices, including Aframomuncorarima and Capsicum spp. and
Piper longum are widely distributed in humid areas. Cotton (Gossypium spp.), which has
three wild species in Ethiopia, and kenaf (Hibiscus spp.) are important cash crops particularly
for lowland farmers. There are also many wild plant species which are used as food,
particularly during food shortage in the interval between planting and harvest. Some
domesticated types of these plant species still occur with their wild relatives in some parts of
the country.
The government of the country has been excreting its maximum effort to expand investment
opportunities in the country by designing different policies and strategies that will facilitate
investment through attracting both domestic and foreign investors. Likewise, the Oromia
regional state government has been working day and night to make poverty history by
making its door open to investors both (domestic country and foreign) to come and invest in
the region. Therefore, it is this ample opportunity that attracts the new investors to come to
Oromia for investing in crop production. Hence, being one of the crop producers has its own

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contribution to satisfy the demand of the current market. The crop production project is
planned to supply: different crops types.

The present economic policy of the country is highly inviting the private sectors to invest
their capitals to. As a result, the investors respond to the government’s invitation, by
contributing their share to the development process. The project is needed because of the
highly growing population of the country and its need of more crops supply.

1.2 Promoter’s profile

The promoter of this project Lula Kemal has been undertaking different businesses for the
last 10 years in business activities, Among the different businesses that they have been
running, production of different business like cereal crops, animal husbandry and trade are
some of them.

1.3. Objectives of the Project

Major Ethiopian export products include: coffee, livestock products (skins and hides, leather,
live animals and meat), oil seeds and pulses, fruits, vegetables and flowers, textiles, natural
gum, spices and mineral products. In addition to the current efforts underway to increase the
supply and improve the quality of these export Crop products, Ethiopia is highly encouraging
investments in other currently unexploited, higher value-added export sectors. Ethiopia has
tremendous potential for investment in agro processing. Many of its agricultural products can
be exported without being processed, while others can be processed before they are brought
to domestic and foreign markets. While the government encourages the export of
unprocessed agricultural products, it has placed a priority on the export of processed
products, which involves and stimulates the growth of the agro-processing sector. Through
the development of agro-processing, Ethiopia's agricultural sector can achieve swift and
sustained long-term economic development. For that reason, the (the owners of this project)
motivated to engage in the production of different cereal crops which primarily have and
export oriented objectives. Therefore, since the project owner has a Sami Ijara experience in
the field, the objectives of this project are:

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 To initiate the production of organic crops though scientific methods and modern
technology.
 To serve as the source of government revenue through business income tax.
 To introduce modern technology that related to crop production by using different
new varieties crops of high yield through modern irrigation schemes
 To serve as a role model for other investors who wants to invest in similar business
undertakings in Ethiopia in general and Oromia in particular.
 To contribute somewhat to the governments objectives of reducing the problem of un-
employment through creating employment opportunities to the citizens.
 To generate foreign exchange earning for the country since the product is exported to
abroad.
 To provide selected seeds for farmers that are produced through irrigation in the area.
 To contribute some to the area of self food sufficiency in crop production if gaps are
created.

1.4. Basic Features of Project Area

1.4.1. Location: the envisaged crop production project is planned to be located in Limu Kosa
worda, Jimma Zone of Oromia Regional State Government in free land area in the Wereda.
The area is very conducive for establishing such project for its good weather condition and
very fertile soil.
Jimma (Oromo: Jimma also spelled Jimmaa, is the largest city in south-western Oromia in
Ethiopia. It is a special zone of the Oromia Region and is surrounded by Jimma Zone. It has a
latitude and longitude of 7°40′N 36°50′E. The town was the capital of Kaffa Province until
the province was dissolved. Prior to the 2007 census, Jimma was reorganized
administratively as a special Zone.

Jimma zone has 16 districts, 2 Urban Administrative Centers, which is the lowest
administrative unit of the zone. Physically, Jimma zone is bounded by Gojab River to the
west and south and Wabe Shabele River on the east and north. These two rivers and their
tributaries restrict surface transport communication with others zones and region.

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Table 1: Map of Oromia National Regional State Jimma Zone Limu Kosa District

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1.4.2. Geology
Based on the 2007 Census conducted by the Central Statistical Agency of Ethiopia (CSA),
this Zone has a total population of 120,960, of whom 60,824 are men and 60,136 women.
With an area of 50.52 square kilometers, Jimma has a population density of 2,394.30 all are
urban inhabitants. A total of 32,191 households were counted in this Zone, which results in
an average of 3.76 persons to a household, and 30,016 housing units. The three largest ethnic
groups reported in Jimma were the Oromo (36.71%), the Amhara (27.14%) and the Dawro
(10.05%); all other ethnic groups made up 26.1% of the population. Amharic was spoken as a
first language by 41.58% and 39.96% spoke Afan Oromo; the remaining 18.46% spoke all
other primary languages reported. The majority of the inhabitants said they practiced
Ethiopian Orthodox Christianity, with 46.84% of the population reporting they observed this
belief, while 39.03% of the population were Muslim, and 13.06% were Protestant.

1.4.4. Drainage system

Jimma has numerous rivers, which endowed in nature. It is estimated that there are about 55
perennial rivers, 18 seasonal rivers and 70 springs, in the zone. Generally, Jimma Rivers are
grouped into two major river basins namely; gojeb river basin and Wabi Shabele river basin.
The others river basin is the largest basin whose catchment covers about 64.5% of the total
area of the zone. This basin touches all the districts of the zone except .

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Main article: Languages of Ethiopia

Languages spoken in Jimma as of 2007

Amharic (41.58%)

Oromo (39.96%)

Other (18.46%)

The national 1994 census reported this town had a total population of 88,867, of whom
43,874 were men and 44,993 were women.

A few buildings have survived from the time of the Jimma Kingdom, including the Palace of
Abba Jifar. The city is home to a museum, Jimma University, several markets, and an airport
(ICAO code HAJM, IATA JIM). Also of note is the Jimma Research Center, founded in
1968, which is run by the Ethiopian Institute of Agricultural Research. The Center
specializes in agricultural research, including serving as the national center for research to
improve the yield of coffee and spices.

Football is the most popular sport in Jimma. The 50,000-capacity Jimma University Stadium
is the largest venue by capacity in Jimma. It is used mostly for football matches.

Jimma is served by Jimma Aba Jifar Airport. The airport completed a renovation in 2015 in
order to accommodate larger aircraft and more passengers.

Within the city limits people take bajajs (similar to “tuktuks”) or “line taxis” that are
converted mini vans.

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The project requires about 500 hectares of land and it is allocated as follows.

No Description Plot in hectare

1 Wheat Production 200
2 Barley sesame 200
3 Maize production 25
4 Chickpea 15
5 Pea 10
6 Sorghum 10
7 Beans 10
8 Selected Seeds Production 30
Total 500

1.4.5. Soils
In Jimma zone, about 30 types of soil (according to Atlas of Jimma zone, July 2004) have
been identified. The major are as follow;
1. Chromic and Pellic Vertisols: These are clay Black Basaltic soil which mostly develop
from tertiary volcanic rocks this soil are very fertile they fairly good Agricultural
potential .However, they have a limited agricultural use. The Soil shrink, develop deep
cracks and become very hard in dry season. They swell and become sticky during the wet
(rainy) Seasons. Besides, because of their low permeability, they are more prone to water
logging during the rainy season.

2. Dystric, Chromic, Eutric, Calcic and Vertic Cambisols: They develop from recent
lava and linked with sedimentary rocks .Their Agricultural value is limited as they are mostly
found on rugged and steep terrain. For this reason this type of soil left under natural plant
cover. It is found in the lowland of the woreda.

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3. Chromic, Orthic and Vertic Luvisols(associated with alluvial accumulation of high

clay continent): Soils are usually dark brown or reddish and suitable for agricultural
activities. Found on plateau of the central and northwestern highland of korse.

4. Dystric and Eutric Nitosols (deep with high clay continent): Soils have good
agricultural potential (good physical and chemical properties, stable structure and high
moisture storage capacity). Located around flat or gentle slope terrains of the northwestern .

1.5. Socio Economic Activities of the Population:

In Jimma zone, high number of population is found in young age economic status. According
to 2000 estimation, in the urban areas of Jimma zone, about 113,423 (59%) populations are
economically active and about 78861 populations are economically inactive. The dependency
ratio of urban of the zone is 69.5%; this means every 30.5% of active population in urban
area is responsible to feed itself and the remaining 69.5% of economically inactive
population. In rural areas of the zone about 588,861 populations are economically active and
about 567089 populations are economically inactive. Therefore, the dependency ratio of the
rural area of the zone is about 96.3%; it means every 3.7% of active population is responsible
to feed itself and the remaining 96.3% of economically inactive population.

It is surrounding 630 km form Addis and it has a very attractive climate for the growth of
different kinds of cereals such as wheat, barely, teff and etc. In addition, it is very conducive
for the production of different fruits and vegetables. Moreover, the investment office of the
zone has been exerting its maximum effort to boost the investment opportunities of the zone
through different promotional strategies. The present favorable economic situation put the
Zone at the advantage of attracting the private sector investment. The establishment of new
Hotels and other infrastructural development are among others very crucial for attracting
investors in the Zone. Hence, the establishment of such project is very important in creating
employment opportunity in the area both for skilled and unskilled labors. Other than being

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employed in government and private organization, most of the population of the town is
engaged in trade, be it formal or informal. Unlike the urban people, the rural population is
engaged in farming. Therefore aside with all other projects which are undertaken so far by
private and government, this project is deemed to provide employment opportunities for
about 123 individuals at the initial period and will continue employing every year. From this
total employment opportunity generated by the project 23 are skilled labors 90 are unskilled
labors.

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PART TWO

THE MARKET DEMAND POTENTIAL

2.1. Market Situation

Since the adoption of the new economic policy in 1991, agricultural markets have been
reformed and prices of commodities are determined through market mechanisms. However,
due to the weak bargaining power of producers and harvest fluctuations, the “price free”
notion of markets have been found to affect producers (EEA, 2004). Agricultural product
markets in Ethiopia are characterized by seasonal gluts and shortages which in turn affect the
marketing behavior of producers, traders, and consumers. A year of bumper harvest might be
followed by a year of severe drought, for example in the years 2002 and 2003 (EEA, 2004).
Only 40 years ago, Ethiopia exported an average of 90,000 tons of grains and legumes to its
East African and Arabian Peninsula neighbors annually (Hailu 1991). Cereals production has
remained flat since the early 1970s, however. With more than a doubling of population
between 1970-90, available food per capita has declined. Ethiopia is endowed with a wealth
of natural resources: diverse agro ecological systems, many with adequate rainfall and soils
fertile enough to sustain a wide variety of crops. Only 40% of potential arable land, and less
than 5% of irrigable land, is currently being used (Faught 1988, cited in Stroud and
Mulugetta 1992).

Policies affecting agricultural development and in particular agricultural exports in

developing countries have undergone two major changes in the 1980s and 1990s. Initially
during the 1980s, the structural adjustments programme (SAP) of the World Bank (WB) and
International Monetary fund (IMF) focused on stimulating an increase in foreign exchange
earnings through reduction in structural constraints in developing countries. These included
policy reforms in monetary, fiscal, trade and domestic policies. The measures included
devaluation of currencies to create incentives for reallocation of resources towards
international trade and/or tradable commodities, removal of export taxes on agricultural
commodities, domestic market liberalization and reduction of the government’s role in

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production and marketing of agricultural commodities. During the 1990s, the policy reforms
on trade were enhanced with the conclusion of the Uruguay Round of the general agreement
on tariffs and trade (GATT) negotiations which culminated with the establishment of the new
World Trade Organization (WTO) and subsequent signing of agreements by member
countries in 1995. For agriculture, the negotiations led to the establishment of the agreement
on agriculture (AOA), which for the first time introduced a set of rules that emphasized
liberalization in international agricultural trade. The main elements of the AOA were to
improve market access, reduce domestic support and export subsidies.
As clearly indicated from the above export data, Ethiopia has not yet producing for export
and thus, this project is primarily deemed to export to different countries of the world.
Therefore, the envisaged project will export 20% of its products to different countries and
sells 80% of its products to the domestic market.
Hence to reach customers, different marketing vehicles will be used. Among the different
marketing strategies and tools for promotion and controlling the market the center will use:
 Both printed and non printed forms of advertising,
 Effective and customer centric marketing strategies that are the marketing
strategies that focuses on effectively handling customers.
 Electronic advertising through internet, faxes and other technologies.

2.2. Competition
There are different forms of competition that may face this project. These are price and non
price based competition. Moreover, there are different competitors that will compete with the
project under discussion either directly or indirectly both in the domestic and foreign market.
But the project under discussion has diversified marketing strategies that could enable it
come up with the different competitors in the market. Moreover the Project will frequently
conduct competitors research which focuses on, the strength and the weaknesses, the
different competitor’s strategies, the techniques they use in rendering the service, their
customer handling methods, their product quality and others.

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2.3. The Production of Crops

2.3.1 Production Hygiene

Crop mean that which is cropped, cut ,or gathered from a single field,
orofasinglekindofgrainorfruit,orinasingleseason;especially,theproductofwhatisplantedintheear
th;fruit;harvest. In production, farmers are faced with many challenges. They must be
efficient in order to remain in business and their production systems must be sensitive to
environmental concerns. These requirements are in addition to the usual challenges of
weather, pests and uncertain markets. A "Sustainable Crop Production System" is a term
often used to describe a management philosophy that will be adopted by those farmers who
are going to remain as the future producers of our food, feed and fiber.

It is this combination of productivity and responsibility that most accurately describes the
term "Sustainable Crop Production Systems." The production process of this project is
environmentally benign as it produces organic crops. Different types of cereal crops are
grown and harvested under a wide range of climatic and diverse geographical conditions,
using various agricultural inputs and technologies, and on farms of varying sizes. Biological,
chemical and physical hazards may therefore vary significantly from one type of production
to another. In each primary production area, it is necessary to consider the particular
agricultural practices that promote the production of cereal crops, taking into account the
conditions specific to the primary production area, type of products, and methods used.

2.3.2 Agricultural input requirements

Agricultural inputs should not contain microbial or chemical contaminants (as defined under
the Recommended International Code of Practice – General Principles of Food Hygiene
(CAC/RCP 1-1969, Rev 3 (1997) at levels that may adversely affect the safety of cereal
crops and taking into consideration the WHO guidelines on the safe use of waste water and
excreta in agriculture and aquaculture as appropriate.

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2.2.2.1 Water for primary production

• Growers should identify the sources of water used on the farm (municipality, re-used
irrigation water, well, open canal, reservoir, rivers, lakes, farm ponds etc.).
They should assess its microbial and chemical quality, and its suitability for intended use,
and identify corrective actions to prevent or minimize contamination (e.g. from livestock,
sewage treatment, human habitation).
• Where necessary, growers should have the water they use tested for microbial and chemical
Contaminants. The frequency of testing will depend on the water source and the risks of
environmental contamination including intermittent or temporary contamination (e.g. heavy
rain, flooding, etc.). If the water source is found to be contaminated corrective actions should
be taken to ensure that the water is suitable for its intended use. Therefore this project is take
in to account all this.
 Water for irrigation and harvesting
The envisaged plc will use both sprinkler and drip irrigation. Water used for agricultural
purposes should be of suitable quality for its intended use. Special attention to water quality
should be considered for the following situations:
• Irrigation by water delivery techniques that expose the fruits of the crops directly to water
(e.g. sprayers) especially close to harvest time.
• Irrigation of crops that have physical characteristics such as leaves and rough surfaces
which can trap water.
• Irrigation of crops that will receive little or no post-harvest wash treatments prior to
packing, such as field-packed produce.
 Water for fertilizers, pest control and other agricultural chemicals
Water used for the application of water-soluble fertilizers and agricultural chemicals in the
field and indoors should not contain microbial contaminants at levels that may adversely
affect the safety of fresh fruits and vegetables. Special attention to the water quality should
be considered when using fertilizer and agricultural chemical delivery techniques (e.g.
sprayers) that expose the edible portion of fresh fruits and vegetables directly to water
especially close to harvest time.

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 Hydroponic water
Plants grown in hydroponic systems absorb nutrients and water at varying rates, constantly
changing the composition of the re-circulated nutrient solution.
Because of this:
• Water used in hydroponic culture should be changed frequently, or if recycled, should be
treated to minimize microbial and chemical contamination.
• Water delivery systems should be maintained and cleaned, as appropriate, to prevent
microbial contamination of water. Therefore, the owner has Sami Ijara experience in this
area.

2.2.2.2 Manure, bios lids and other natural fertilizers

The use of manure, bios lids and other natural fertilizers in the production of crops should be
managed to limit the potential for microbial, chemical and physical contamination. Manure,
bios lids and other natural fertilizers contaminated with heavy metals or other chemicals at
levels that may affect the safety of crops should not be used. Where necessary, in order to
minimize microbial contamination the following practices should be considered:

2.2.2.4. Bio diversity

As a general rule, diverse ecosystems in nature have a higher degree of stability than those
with only a few species. The same is essentially true for agro ecosystems. Farms with a
diverse mix of crops have a better chance of supporting beneficial organisms that assist in
pollination and pest management. Diversity above ground also suggests diversity in the soil,
providing better nutrient cycling, disease suppression, tilt, and nitrogen fixation. Good
organic farmers mimic the biodiversity of nature through practices like intercropping,
Companion planting, establishment of beneficial habitats, and crop rotation (sometimes
referred to as companion planting across time).
The effort to increase biodiversity works hand-in-hand with enterprise diversity, which is
often (but not necessarily) an objective on organic farms.

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2.2.2.5. Natural Plant Nutrition

Even though we require the same basic “stuff” to live, it is somewhat challenging to draw
simple comparisons between the nutritional needs and processes of plants and those of
animals. Plants are able to photosynthesize to make sugars, which are ultimately synthesized
into proteins and other plant constituents. Humans and other animals, by contrast, can obtain
energy foods, proteins, and vitamins only by consuming plants or other animals. Both plants
and animals also require minerals.

Humans and other animals extract minerals, along with sugars and proteins, from the food
they eat. Plants, too, obtain minerals — and a wide range of vitamins, antibiotics, and other
useful compounds— through digestion. However, plant digestive systems are not internalized
as they are in animals. Plants must rely on the external digestive processes of the soil system
within reach of their roots — a zone called the rhizosphere.

2.2.2.6. Natural Pest Management

Whether conventional or organic, all farmers are concerned with pests. They spend a lot of
time and resources controlling them. However, in the organic “world view,” pests — whether
weeds, insects or diseases — are not simply scourges. They are indicators of how far a
production system has strayed from the natural ecosystems it should imitate. Certain weeds,
for example, tend to predominate when soils are too acidic or too basic; some become a
problem when soil structure is poor and conditions become anaerobic; others may be
stimulated by excessive fertilizer or manure salts. Organic proponents also believe that insect
pests are attracted to inferior or weak plants — the result of poor crop nutrition. Their logic
continues by asserting that pests are naturally repelled by vigorous, well-nourished plants.
This belief is often challenged, and significant research remains to be done. As scientific
understanding has grown, insect pest outbreaks are also being understood as imbalances in
the whole agro ecosystem and how it is managed. In nature, massive pest outbreaks are
relatively rare and short-lived, due to the presence of natural predators, parasites, and disease
agents that quickly knock the pest numbers back down to a moderate level. In farming

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2.2.2. 7. Manuring and Composting

Livestock manures are the most traditional and widely recognized organic fertilizers. Under
ideal circumstances, livestock enterprises are integrated into the whole farm operation, and
manuring becomes part of a closed system of nutrient recycling. This is still strongly
encouraged in organic operations. In reality, however, crops and livestock production are
often divorced from each other, and manures must be imported. This has created some
concerns in the organic community, since much manure is now generated by large, industrial
agriculture feeding operations called CAFOs (Confined Animal Feeding Operations). Not
only are there concerns about contaminants (heavy metals, antibiotics, pesticides, hormones)
but many in the organic community also object to any “partnering” with this segment of
conventional agriculture, which is considered at odds with the environmental and social
values represented by organic farming. Nonetheless, the National Organic Program does not
differentiate between CAFO and other livestock manure sources. However, the NOP
regulations do require that livestock manure not contain any synthetic substances not
included on the National List of synthetic substances allowed for use in organic crop
production.

2.2.2.8. Biological Pest Control

Organic farming relies heavily on populations of beneficial insect predators and parasites,
pest disease agents, insect-eating birds and bats, and other creatures, to help manage pest
problems. These biological controls help keep pest numbers at levels where further cultural
activities or relatively mild pesticides are (usually) adequate to assure a crop. In some
instances, biological control can be so effective that no additional action is even needed by
the farmer. Some see biological control as a default benefit of the soil fertility practices of
organic farming. The diversity of crops in a soil-building rotation, the use of cover crops, and
other practices build a diverse soil biology that works to keep soil pests in check. They also
provide substantial aboveground habitat for beneficials.

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2.2.2.9. Sanitation
Sanitation can take on many forms:
• Removal, burning, or deep plowing of crop residues that could carry plant disease or insect
pest agents
• Destruction of nearby weedy habitats that shelter pests
• cleaning accumulated weed seeds from farm equipment before entering a new, “clean” field
• sterilizing pruning tools
As in human and animal health, sanitation practices can go a long way in preventing crop
pest problems. However, many practices— such as clean cultivation, deep plowing, and
burning crop residues — can increase erosion and reduce biodiversity. Thus, they may
conflict with sustainability. Good organic growers recognize this and treat those practices as
transitional or rescue options, rather than relying on them on an annual basis.

2.2.2.10. Tillage and Cultivation

Tillage and cultivation are tools that can accomplish a variety of objectives in farming
systems: weed control, crop residue management, soil aeration, conservation of manures and
other fertilizers, hardpan reduction, sanitation to destroy pest and disease habitat, etc. While
conventional farmers rely on chemicals to accomplish many of these objectives, organic
growers focus more on improving tillage and maximizing its benefits. Guidelines for primary
tillage, for example, are intent on conserving crop residues and added manures in the upper,
biologically active zones of the soil, rather than burying them deeply where decomposition is
anaerobic (oxygen-starved). Leaving soils completely bare and vulnerable to erosion is
discouraged; fall moldboard plowing is certainly frowned upon. Cultivation in organic
systems often rises to the level of art. Row-crop farmers frequently use blindcultivation —
shallow tillage, which largely ignores the crop rows—beginning shortly after seeding until
the plants are but a few inches high. Rotary hoes, wire-tooth harrows, and similar equipment
can be used for blind cultivation, delaying the first flush of weeds and giving the crop a head
start.

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2.2.2.11. Conservation Tillage and Organic Farming

Organic agriculture is often characterized as addicted to maximum tillage — with growers
using every opportunity to lay the land bare with shovel, plow, or rototiller. This image has
been magnified through the popularity of small-scale organic systems like the French
Intensive and Biointensive Mini Farming models that espouse double- and triple-digging to
create deep rooting beds. While appropriate to such intensive systems, this degree of
cultivation is not characteristic of organic agriculture in general. It may surprise some to
learn that a large number of organic producers are not only interested in conservation tillage,
they have adopted it. This will be a surprise because many believe that conservation tillage
always requires herbicides. Mulching is a practice often used by organic growers.
Traditionally, it entails the spreading of large amounts of organic materials — straw, old hay,
wood chips, etc. — over otherwise bare soil between and among crop plants. Organic
mulches regulate soil moisture and temperature, suppress weeds, and provide organic matter
to the soil.

2.2.2.12. Supplemental Fertilization

In many organic systems, crop rotation, manuring, green manuring, along with enhanced
biological activity in the soil, provide an abundant supply of plant-essential minerals
annually. This is especially true on naturally deep and rich prairie soils. It is less true on
poorer soils and on those that have been heavily exploited through non-sustainable farming
practices.
To correct mineral deficiencies in organically managed soils, organic growers often apply
ground or powdered rock minerals. The most commonly used rock mineral is highcalcium
aglime. Dolomitic limestone, various rock phosphates, gypsum, sulfate of potash-magnesia,
and mined potassium sulfate are also common. These are all significant sources of primary
(P, K) and/or secondary (Ca, Mg, S) plant nutrients. The savvy organic grower applies
significant amounts of these materials only with the guidance of regular soil testing. Less
common are other rock powders and fines that are limited sources for the major nutrients but
are rich in micronutrients or have some other soil improving characteristic.

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2.3. Schedule of production plan

The production scheme of the company is twice a year.
No Description Plot in hectare Unit Qty per Yearly
Hectare production
1 Maize production 200 quintal 40
8000
2 Wheat Production 200 “ 30
6000
3 Chickpea 20 “ 25
500
4 Soya been 25 “ 25
625
5 Sorghum 20 “ 30
600
6 Beans 20 “ 30
600
7 Selected Seeds Manufacturing 15 “ 40
600
Total 0 220

As clearly indicated in the production plan of the project the crops are produced within three
months period, which is it deemed to be produced twice a year.

2.3. Sales Plan

The Revenue of the Project is assumed to be generated from the sales of the different crops.
Thus in this project,
No Description Plot in hek Unit Yearly product Unit price Total Price

1 Maize production 200 tonn 700

e 8000 5,600,000
2 Wheat Production 200 “ 6000 850 5,100,000
3 Chickpea 20 “ 500 1200 600,000
4 soya been 25 “ 625 1200 750,000
5 Sorghum 20 “ 600 900 540,000
6 Beans 20 “ 600 1000 600,000
7 Selected Seeds 15 “ 600 900 540,000

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Total 500 16925 13,730,000

PART THREE

ORGANIZATIONAL STRUCTURE
The organizational structure of the project is designed by including all the necessary
personnel under the right division. At the top of the organizational structure, there will be a
CEO with the responsibility of supervising the over all activity of the plant. Depending up on
the nature of the center and the amount of work to be performs; there will be auxiliary units
under the general manager. Employees under each unit will be supervised by the unit head
that is accountable for the general manager.

CEO

Legal Advisor Internal Auditing &

General Manager Inspection

Production
Department Marketing Department
General Administration Department

As clearly shown in the organizational structure, the crop production project has CEO, three
Departments under the general manager, Advisor and the internal Auditing and Inspection.
These departments are the Production Department, The Marketing Department, and the

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General Service Department. Under each Department there are different sections which are
undertaking different activities.
Hence the following section deals with the duties and responsibilities of each division.
3.1. The General Manager’s Duties and Responsibilities
 He will plan, organize, direct and control the overall activities of the production center.
 He will devise policies and strategies that will enable the project to be profitable and etc
3.2. General Administration and Finance Department
Is responsible for undertaking the following activities
 To plan, organize direct and control the financial transaction of the project by using
necessary document.
 To develop sound financial control system by developing modern financial control
systems.
 To prepare the annual financial statements and prepare condensed reports for both the
General Manager and other concerned government body.
 To control the human and non human resources of the project, which include:
effective handling of the different inventories of the project, and devise strategies of
controlling against fraud and damage and etc
3.3 . The Marketing Department
 Will handle the overall marketing activities of the organization which include
planning, organizing, directing, and controlling.
 Will develop the marketing strategies for future Integrated Agro Processing center’s
development.
 Conduct both foreign and domestic market research for expanding the sales of the
company
 Will develop effective customer handling strategies and etc
3.4. The production Department
It is the core department of the project as it handles and administer over all the production
scheme of the company and it encompasses sections like: cleaning of the production area,
preparation of selected seeds, planting, harvesting and other post harvest activities.
Thus it undertakesthe following activities:

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 producing produces with less prices so as to make the company more competent
 Produce products in different types so that customers have diversified choices.

PART FOUR

4. FINANCIAL REQUIREMENT
The financial resource is a prime resource for undertaking any activities. Hence for
implementing this project a total of 38,000,000.00Eth birr is required. From this 30% or
11,400,000birr will be owner’s contribution while the rest 70% or, 26,600,000 Eth birr will
be covered by bank loan. Therefore the said amount of finance is needed for undertaking the
following:

4.1. Fixed Investment

4.1.1. Summary of Financial Requirement
No Description Cost in birr
1 Fixed Investment
1.1 Land, Building and Construction 5,000,000
1.2 Machines and Equipments 8,000,000
1.3 Vehicles and Motors 2,500,000
1.4 Office Equipment 125,000
Total Fixed Investment Cost 15,625,000
2 Operating Expense
2.1 Raw Materials Purchase 12,810,554
2.2 Salary Expense 5,676,000
2.3 Other Operating Expense 77,846
2.4 Pre-operating Expense 10,600
Total operating cost 18,575,000
Contingency (10%) 3,800,000.00
Total Investment cost 38,000,000.00
The contingent costs will used for covering all other costs which are not stated in the
financial summary. For example all the costs related indirectly tot the irrigation scheme of
the company.

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Sources of Fund: source of fund to finance the project is planned to be from two sources,
owner’s equity and bank loan. The production site will produce 2 times a year and the costs
for working capital per annum is and others will be covered by the owner of the project,
while the rest of funds to run the project will be financed by the bank.

4.1.1 Building & Construction

No Description Plot in m2 unit cost in birr Total cost

1 Office and Residences 1,000 1,000
1,000,000
2 Stores and warehouses 500 800
400,000
3 Green area and green belt Dev’t 1,000 1,200
1,200,000
4 Clear site 2,400,000
Total 5000000

4.1.2. Farm Tools and Equipments

N0 Description Unit Qty Unit cost Total cost

1 Hoes no 200 30 6000
2 Spades “ 100 100 10,000
3 Axles “ 100 45 4500
4 Water pump “ 5 12,000 60,000
5 Different tools and equipments “ 7,919,500
Total 12175
Vehicles
No Description Qty Unit Price Total Price
1 Tractor 1 1000,000 1,000,000
2 Pick up 1 700,000 1000,000
3 Grain and Fertilizer Drills 1 130,000 130,000
4 Weeding Comb 3 10,000 30,000
5 Harvester and Combiner 1 300,000 300,000
6 Jimma collector 2 10,000 20,000

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7 Tractor pulled trolley 1 10,000 10,000

8 Motorcycles 1 10,000 10,000
Total 2170000

The company requires the above vehicles and farm machines. Currently, the company is
using a hired tractor for undertaking its harvesting schemes.

4.1.3. Office Equipments

No Description Qty Unit cost Total cost

1 Managerial Tables 4 6,000 24,000
2 Managerial chairs 4 1,500 6,000
3 Computer Tables 3 700 2,100
4 Secretarial chairs 2 450 900
5 Computer with its accessories 4 5000 20,000
6 Shelf 4 4000 16,000
7 Filing Cabinets 4 1,500 6,000
8 Guest chairs 16 500 8,000
9 Cash register 2 6,000 12,000
10 TV set 3 5000 15,000
11 Photo copy Machine 1 15,000 15,000
Total 47 125,000

4.2 Expenses

4.2.1 Raw Material Purchase

Since the production of crops is divided in phases, the estimated and the production yield per
year will be 2 time a year since it is through irrigation. Labor cost, selected seeds, chemical
fertilizers and pesticides and any other costs related to the irrigation scheme of the company.

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However the land under consideration is very fertile and as such does not consume excessive
chemical fertilizers. Moreover, the company itself will produces its own selected seeds and
thus reduce the cost of selected seeds used in the production. Therefore, the unit cost of
production is as follows.

No Description Hectare Unit cost/ Total cost

hectare (in birr)

1 Selected Seeds, Chemical fertilizers 500 24,000 12,000,000

,Direct Labors , pesticides and
others irrigation schemes
2 Miscellaneous costs 810,554

Total 500 810554

Moreover, all the crops are not equally consuming the inputs. Therefore the company will
work on reducing costs by designing tightened cost reduction strategies. Additionally the
crop does not consume excessive fertilizer and thus it only need different pesticides at the
time of blooming. Again, the owners will implement the project after three months of taking
the land, and he will do the project phase by phase so as to use the working capital from the
project.

4.2.2 Salary Expense

No Position no Qualification Monthly salary Annual

in Birr Salary
A Skilled labor
1 General manager 1 BA in 5000 60,000
agriculture
2 Farm Head 2 BA in 4000 96,000
agriculture
3 Purchase and store 1 Dip in 3000 36,000
workers purchasing

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4 Production workers 40 Basic 800 384,000

5 Marketing Head 1 BA in 4000 48,000

management
6 Sales workers 35 8th grade 1500 630,000
8 Guards 10 Basic 1200 144,000
9 Administration 1 BA in 4000 48,000
&Finance Head Accounting
10 Public relation worker 1 Dip in 3500 42,000
marketing
11 Accountants 3 Dip in 3000 108,000
Accounting
12 Cashers 2 10+1 1500 36,000
13 Drivers 3 8th grade 1500 54,000
B Unskilled 1900 Unskilled 700 3,990,000
labor( irrigation
workers)
Total 2000 5,676,000

N.B. The above salary expense includes the salary of both skilled and unskilled labors.

4.2.3 Other Operating Expenses

No List of Items Qty Unit of Unit cost Total cost

Measure Per annum
1 Computer paper 10 Pack 75 750
2 Staples 10 “ 15 150
3 Pens, pencils, and others 20 pack 75 1,500
4 detergents 100 pcs 40 4000
5 uniforms 20 pcs 200 4,000
6 Water - - - 2,000
7 Electricity - - - 1000
8 * Fuel Expense - - - 39,046
9 Telephone - - - 12,000

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10 Repair expense - - - 2,000

11 **Lubricants 6400
11 Miscellaneous Costs - - - 5000

4.2.4 Pre -Service Expense

No Description Cost
1 Project proposal 8,000
2 Licensing fee and others 600
3 0thers 2,000
Total 10,600

4.2. Loan Repayment Schedule 70% Bank Loan (2020-2030 G.C)

Principal Interest Total Annual

Year Remaining Balance
Payment (10%) Payment
0 0 0 0 26,600,000
1 2,660,000 2,660,000 5,320,000 23,940,000

2 2,660,000 2,394,000 5,054,000 21,280,000

3 2,660,000 2,128,000 4,788,000 18,620,000

4 2,660,000 1,862,000 4,522,000 15,960,000

5 2,660,000 1,596,000 4,256,000 13,300,000

6 2,660,000 1,330,000 3,990,000 10,640,000

7 2,660,000 1,064,000 3,724,000 7,980,000

8 2,660,000 798,000 3,458,000 5,320,000

9 2,660,000 532,000 3,192,000 2,660,000

10 2,660,000 266,000 2,926,000 0

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4.5. Financial Statement

1. Income Loss Statement
Sami Ijara Crop production
Profit /loss statement, projected
For year ended Jun 30, 2020-30
Revenue 2020 2021 2022-2030

Sales 31,417,500 34,559,250 38,015,175

Expenses
Salary Expense 5,676,000 8,514,000 8,939,700.00
Raw material Purchase 12,810,554 13,451,082 14,123,636
Operating Expenses 77,846 77,846 85,630.60
Pre-operating Expense 10,600 0 0
Deprecation Building 250,000 250,000 250,000
Deprecation Vehicles 500,000 500,000 500,000
Deprecation office Equip 12,500 12,500 12,500

Deprecation Farm equip 1,600,000 1,600,000 1,600,000

Interest Expense 2,660,000 2,394,000 266,000
Total Expense 23,597,500 26,799,428 25,777,467
Profit Before Tax 7,820,000 7,759,822 12,237,708
Tax(30% ) 2,346,000 2,327,947 3,671,313
Net Profit 5,474,000 5,431,875 8,566,396

4.6. Assumptions

 Salary expense increased by 5% after 2013 onwards, raw material purchase assumed to
be increase by 5% starting from 2013,
 Sales by 20% starting from 2012,
 Operating expense is increased by 10% starting from 2013

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 Raw material purchase increased by 10%

Moreover, the owner will sign the contract with different buyers and will receive money
from the buyers as a down payment for supplying the crops.
Therefore, the money received from the buyers will be used for transportation, insurance
and all other relevant costs.

Depreciation expense is assumed on straight line method

 For Office equipment the life time is assumed to be 5 years and rate of dep.20%
 For Farm equipments life time is 5 years. at 20% dep. rate
 For Building the life time of 20 years with dep. rate of 5%
 For Vehicles life 5 years dep. Rate of 20%.
The Cash flow statement
 Year Year 0 Year 1 Year 2 Year 3-10

Equity Capital 7,600,000

Loan principal 30,400,000
Sale 34,559,250 38,015,175
31,417,500
Total cash in flow 38,000,000
cash payment
Purchase 0 13,451,082 14,123,636
12,810,554
Salary expense 0 8,514,000 8,939,700.00
5,676,000
Investment 38,000,000 0 0 0

Operating cost 0 77,846 77,846 85,630.60

loan repayment 0
6,080,000 5,776,000 3,880,000
Tax payment 0 0 109189.887 216249.522
Total payment 38,000,000 0 109189.89 216249.52

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4.7. Summary
As clearly the income statement shows, the promoter of the project will return her initial
investment costs within the first three month of operation because she will export to different
Middle East country. In general, the financial statement of the project shows that this project
under discussion will cover its entire investment costs with in short period of time. Hence
the promoter of the project has along term plan of engaging in other agro processing business
enterprises. Additionally, in the coming future the project owner has a plan to engage in other
businesses in near future.

Environmental Impact of the Project

This project deemed to be environmentally benign as it doesn’t use chemicals that will
exacerbate the problem of the eco system pollution. As clearly indicated in the project, the
prime manufacturing of the project is organic crops, thus there is no chemical fertilization
utilization except some pesticides which has very minimal impact on the environment. Thus,
it has no impact on the environment.

Future Development& Exit Strategies

Every business undertakings be it large or small should have to have future development
plan. It is a plain fact that business activities are undertook in a dynamic and turbulent
environment. Hence, to overcome or minimize the risks of uncertain future, businesses
should devise effective strategies that enable them to be successful in their operation.
Likewise, the project center has devised strategies to overcome the future risk of operation.
The first strategy is diversification of its activities to different other business forms. The
second future development plan of the project is expanding its branches in many other parts
of the region. The third strategy of the center is making a joint venture with other similar
business undertakings either in the domestic country or from abroad. The final strategy of the
center is selling to other organization or individuals.

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