project proposal

on the establishment
of
Cattle Fattening
At
Tigray regional state,
H/Wajirat woreda

PROMOTER: - Ayte Munir Usman

DATE: -December, 2019

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TABLES ............................................................................................................................................................3

1. EXECUTIVE SUMMARY ...............................................................................................................................4

1.1. DESCRIPTION OF PROJECT................................................................................................................................ 4

1.2. AMOUNT OF FINANCING REQUIRED ................................................................................................................... 4
1.3. PROFILE OF THE PROMOTER ............................................................................................................................. 4
1.4. MARKET PROSPECT ........................................................................................................................................ 5
1.5. TECHNICAL FEASIBILITY ................................................................................................................................... 5
1.6. ORGANIZATION AND MANAGEMENT.................................................................................................................. 5
1.7. FINANCIAL VIABILITY ...................................................................................................................................... 5
1.8. ECONOMIC AND SOCIAL BENEFITS .................................................................................................................... 6
1.9. CONCLUSIONS .............................................................................................................................................. 6

2. INTRODUCTION ..........................................................................................................................................7

2.1. PROFILE OF THE PROMOTER ............................................................................................................................. 7

2.2. BACKGROUND AND JUSTIFICATION ................................................................................................................... 7
2.3. OBJECTIVE OF THE PROJECT ............................................................................................................................. 9

3. MARKET STUDY AND PLANT CAPACITY .................................................................................................... 10

3.1. MARKET STUDY ........................................................................................................................................... 10

3.2. PRODUCTION CAPACITY AND PROGRAM ........................................................................................................... 15

4. TECHNICAL STUDY .................................................................................................................................... 17

4.1. LOCATION AND SITE ..................................................................................................................................... 17

4.2. LAND, BUILDING AND CIVIL WORKS ................................................................................................................ 17
4.3. MACHINERY, EQUIPMENT AND OFFICE FURNITURE ............................................................................................. 17
4.4. MATERIALS AND UTILITIES ............................................................................................................................. 18
4.5. PRODUCTION PROCESS ................................................................................................................................. 20

5. ORGANIZATION, MANAGEMENT AND MAN POWER ................................................................................ 21

5.1. ORGANIZATION AND MANAGEMENT ............................................................................................................... 21

5.2. MANPOWER .............................................................................................................................................. 22

6. ENVIRONMENTAL IMPACT ....................................................................................................................... 24

7. FINANCIAL PLAN....................................................................................................................................... 25

7.1. INITIAL INVESTMENT COST ............................................................................................................................. 25

7.2. FINANCIAL VIABILITY AND ECONOMIC BENEFITS.................................................................................................. 26

8. ECONOMIC AND SOCIAL BENEFITS ............................................................................................... 28

8.1. PROFIT GENERATION.................................................................................................................................... 28

8.2. TAX REMITTANCE ........................................................................................................................................ 28
8.3. INCREASE LIVESTOCK PRODUCTION AND EARNING FOREIGN EXCHANGE ................................................................... 28
8.4. EMPLOYMENT AND INCOME GENERATION........................................................................................................ 28
8.5. CONCLUSIONS ............................................................................................................................................ 29
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9. ANNEXES ............................................................................................................................................... 30
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 TABLES
Table 1: Summary of initial investment cost ............................................................................... 4
Table 2: Annual beef consumption (published in 1998 by CSA) .............................................. 10
Table 3: Annual Beef Consumption (2018) ............................................................................... 11
Table 4: Presents export of meat and meat products ................................................................ 12
Table 5 Demand projection in tons ............................................................................................ 13
Table 6: Local market price of meat .......................................................................................... 14
Table 7: Export market price of meat and live weight............................................................... 15
Table 8: The Selling capacity of the farm per annum ................................................................ 16
Table 9: Building and civil work ............................................................................................... 17
Table 10: List of machinery and equipment for fattening farm. ................................................ 18
Table 11 Cost of beef cattle per year ......................................................................................... 18
Table 12: Feed cost .................................................................................................................... 19
Table 13: Annual utilities (supplies) requirement at full capacity operation............................. 20
Table 14: Man-power and cost .................................................................................................. 23
Table 15: Initial investment ....................................................................................................... 26
Table 16 IRR .............................................................................................................................. 27
Table 17 payback ....................................................................................................................... 27

Annex
Annex 1: Bank repayment Schedule .......................................................................................... 30
Annex 2: Present value and internal rate of return .................................................................... 31
Annex 3: Depreciation and Amortization ‘birr’......................................................................... 32
Annex 4: Schedules cost of production ..................................................................................... 33
Annex 5:- Profit/loss statement .................................................................................................. 34
Annex 6:- Balance sheet statement ............................................................................................ 34
Annex 7: Cash flow statement ................................................................................................... 35
Annex 8: Action Plan for the First year (Farming) .................................................................... 36
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1. EXECUTIVE SUMMARY

1.1. DESCRIPTION OF PROJECT

The project is an agricultural production project which is mainly engaged in cattle
fattening for local and international market. The fattening project will have a capacity of
740 heads of cattle on the first year (165 cattle per batch, 4 rounds per year). The
proposed location is Tigray Regional state, South eastern Zone, H/Wajirat Woreda. The
land required for this project is 5 hectares.

1.2. AMOUNT OF FINANCING REQUIRED

The initial investment cost of the project is estimated birr 10.04 million. From this birr
5.4 million is for fixed investment cost and birr 4.64 million for working capital. The
cost is shown in the following Table.

Table 1: Summary of initial investment cost

S/No Description Total

1 Constrution & electric installation 1,621,000
2 Land lease 1,115,625
3 Machinery and equipment & 283,400
4 Vehicle 1,200,000
5 Office furniture and fixture 78,108
6 pre production expense 1,103,047
7 Working capital 4,642,345
Total initial investment 10,043,525

1.3. PROFILE OF THE PROMOTER

The promoter of this project is Ayte Munir Usman who has lived in Mekelle city. He
involved in many businesses and has got more than 10 years of experience in various
business activities. His close experience on different business coupled with the
motivation of the government to investment has kindled the idea of establishing cattle
fattening at H/wajirat woreda where there is a few such an establishment.
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1.4. MARKET PROSPECT
The current demand for products (beef cattle) in local and international market is very
attractive.

1.5. TECHNICAL FEASIBILITY

The necessary equipment’s – for cattle production etc, listed on table-10 will be
purchased by the project.

The necessary constructions such as cattle barn, workers house, office, store, toilet &
shower, and other necessary structures will be constructed. (See table -9).

1.6. ORGANIZATION AND MANAGEMENT

The beef cattle farm will employ a total of 36 workers (26 permanent and 10 temporary
workers) at various levels of project activities. The labour force is available in the local
market. The women will benefit from the project. The overall supervision of the farm
will be undertaken by Ayte Munir Usman who has got many years’ experience in
managing various businesses of his own. The company shall put in place a proper
organizational set up.

1.7. FINANCIAL VIABILITY

The financial viability of a project has been tested by applying all the relevant measures
and was found to be very satisfactory and viable. The following results have been found
in the projections made.

The project will generate a profit throughout its operation life. Annual net profit after tax
will be Birr 2.33 million in the first year and Birr 1.5 million during the life of the project.
Moreover, at the end of the project life the accumulated net cash flow amounts to Birr
15.23 million. Based on the projected cash flow it is estimated that the project's initial
investment will be fully recovered within 3.68 years. The IRR of this project is computed
to be 20.01%. the project will have also a profitable index of PI= 1.18.
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1.8. ECONOMIC AND SOCIAL BENEFITS
The economic impact of the project can be viewed in a number of ways. It can be viewed
through its specific impact such as employment generation, transfer technology,
contribute to food self-sufficiency, increasing government revenue. It’s a production of
exportable items that contribute in earning foreign exchange. Moreover, other benefits
such as the creation of conducive environment for the development of the country should
also be taken into consideration.

1.9. CONCLUSIONS
The project is worth undertaking from the following viewpoints:

The benefits are greater than the costs.

• Payback period: Only three years and four months are required to recover the
original investment cost.
• The Net Present Value (NPV) is positive.
• The Internal Rate of Return (IRR) is greater than the bank interest.
• The project has positive impact on the national economy.

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2. INTRODUCTION

2.1. PROFILE OF THE PROMOTER

The promoter of this project is Ayte Munir Usman that will be established under the rule
and regulation of Ethiopian government. The owner has vast experience and expertise
in agricultural production.

The present project for Modern commercial farm at H/wajrat woreda is one of the
important components envisaged by the investors toward selecting its long-term vision
of playing active role in the Livestock sector.

Project Name Munir Cattle fattening

Project Location H/wajrat, Tigray Regional
state. Ethiopia
Requested Land 5 hectares
Project owner Ayte Munir Usman
Address Mekelle city, Ethiopia
Tel.
Project status New
Purpose cattle fattening
Legal Form of Organization Privet
Establishment Program New
3 month building permit phase
12-month establishment period
9-month finishing works &
operation
Total Estimated Capital Birr 10.04 Million

2.2. BACKGROUND AND JUSTIFICATION

2.2.1. BACKGROUND OF THE PROJECT

Livestock are an integral component of agriculture in Tigray Region and make

multifaceted contributions to the growth and development of the agricultural sector. As

Sansoucyet al, (1995) aptly put it; livestock are closely linked to the social and cultural

lives of millions of resource-poor farmers for whom animal ownership ensures varying
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degrees of sustainable farming and economic stability. Livestock help improve food and
 nutritional security by providing nutrient-rich food products, generate income and

employment and act as a cushion against crop failure, provide drought power and manure

inputs to the crop sub-sector, and contribute to foreign exchange through exports.

A first, rough approach to assess the economic significance of the livestock sector is to

estimate its contribution to the Gross Domestic Product (GDP). As in most developing

countries, the share of agriculture from the national GDP is important in Ethiopia, whose

average for most years is 50 -55% (Befekadu and Berhanu 2000). Livestock wealth

provides food through milk, meat and eggs and industrial raw materials such as fibre,

skin, hides and farmyard manure. Accordingly, the value of output from livestock in

Ethiopia was estimated at around Birr 12 billion in 2000 and accounted for about 45% of

the value of all agricultural output excluding the contribution of animal draft power

(FAO, 2003). The samesources note that, at constant prices (1995 US$) the value of

output from livestock grew nearlyby22%, in the two decades between 1980 and 2000,

the increase (1.1% pa) compares well with the growth of the value of agricultural output.

2.2.2. JUSTIFICATION OF THE PROJECT

Fattening means controlling what cattle eat by using high quality feed so that to generate
faster weight gains. It is a strategic feeding option which produces a quick result (3-4
months), technically quite simple. Agro-industrial by products can be used as feed
sources. By-product fattening system is mainly based on industrial by-product such as
molasses, cereal milling product and oilseed meals. Intensive feeding of the available
feed supply to young oxen is the characteristic of this fattening system.

Once cattle have eaten to their appetite and remain full, the chances of negative upsets
are reduced considerably. In this regard, additional libitum feeding would result in
increased daily weight gains of up to 700 gm per day.
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2.3. OBJECTIVE OF THE PROJECT

2.3.1. OVERALL OBJECTIVES OF THE PROJECT

The goal of the Project is to have a competitive Cattle fatting farm built on private
investment that generates employment and income for owners and provides affordable,
high quality, nutritious beef consumers in and out of the country.

2.3.2. SPECIFIC OBJECTIVES OF THE PROJECT : -

 Production and supply of good quality beef cattle for local and international
market.
 Create job opportunities
 additional revenue to the government
 Increase beef cattle production within the region thereby increase exportable item

2.4. POLICY SUPPORTING THE PROJECT

The agriculture sector in turn is giving special attention to private investors as these
actors are the nucleus of the development of the agriculture sector in the country. The
government aims at promoting commercialization of agriculture and encouraging for
the investors to get involved in the various agricultural development activities. The
policies and strategies of the federal and regional governments encourage investors to
fully participate in owning all large and medium scale business in the agriculture sector.

2.5. STRATEGIES
To achieve any objective, different strategies should be designed. Therefore, to
effectively deliver its intended purpose by efficiently competing in the market, it aims to
have the following strategies.

 Follow relatively optimum production methods by introducing possible techniques and

technology in the production process.
 Produce quality Products
 Continually upgrade the skills of its staff through training
 Identify its strength, weakness, opportunities and threats through effective monitoring
and evaluation methods so that it designs all necessary measures that can minimize risks.
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3. MARKET STUDY AND PLANT CAPACITY

3.1. MARKET STUDY

3.1.1. PAST SUPPLY AND PRESENT DEMAND

Meat produced in the country has two outlets; the local and export market. The greatest
portion of the annual production is consumed locally while small portion of it is exported.

To establish the present local demand for beef meat an end-user’s approach is used. For
this estimation " The 1995/1996 Revised Report on Household Income, Consumption
and Expenditure Survey", published in 1998 by CSA is used as a base. The per capita
consumption is thus estimated to be 2.14kg, given the total Ethiopian population of
52,689,067 at the time the survey carried out, which total consumption of meat was
112,789tons.

Table 2: Annual beef consumption (published in 1998 by CSA)

Number of Average Total
Income Individuals in Quantity consumption
Group the Annually (Tons)
(Annual) Group consumed
(Gm)
<600 37,628 148 5.57
600-999 184,605 237 43.75
1000-1399 474,769 332 158
1400-1999 1,777,526 695 1,235
2000-2599 2,841,045 1,011 2,872
2600-3399 5,109,691 1,175 6,004
3400-4199 6,559,456 1,138 7,465
4200-5399 9,181,298 1,405 12,900
5400-6599 7,741,988 1,553 12,023
6600-8999 9,288,388 2,234 20,750
9000-12599 6,088,183 3,549 21,607
12,600- 1,611,863 6,089 9,815
16199
16,200- 799,619 7,303 5,840
10

19999
>20,000 993,008 12,156 12,071
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Total 52,689,067 - 112,789

 Using the population growth rate of 2.9% per annum, the present (2018) effective

national demand estimated based on the above indicated survey is given in Table 3.

Table 3: Annual Beef Consumption (2018)

Income Group Number of Average Quantity Total
(Annual) Individuals in the annually consumed consumption
Group (Gm) (Tons)
<600 68,586 148 10
600-999 336,485 237 80
1000-1399 865,377 332 287
1400-1999 3,239,954 695 2252
2000-2599 5,178,464 1,011 5235
2600-3399 9,313,598 1,175 10943
3400-4199 11,956,132 1,138 13606
4200-5399 16,735,048 1,405 23513
5400-6599 14,111,571 1,553 21915
6600-8999 16,930,244 2,234 37822
9000-12599 11,097,127 3,549 39384
12,600-16199 2,937,995 6,089 17889
16,200-19999 1,457,491 7,303 10644
>20,000 1,809,988 12,156 22002
Total 96,038,060 - 205,584

As can be seen from Table 3, the total national annual beef meat consumption in the year

2019 estimated at 205,584tons.

According to the External Trade Statistics, Customs Authority Meat export has

tremendously increased in the past years. Accordingly, from the year 1993 to 1998,
export grew from 40 tons to 2,508 tons (i.e-40, 209, 580, 1268, 1823, 2508). The notable

reason for this substantial growth in these five years is the devaluation of the local

currency (Birr) which stimulated export, thus the average export of meat and meat

products in this period i.e., 1,286 tons. This value is assumed to indicate the current

foreign market demand for the product.

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On the other hand, according to Economic Commission for Africa’s (ECA) "Economic
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Report on Africa (2002)", the average growth rate of Ethiopian export over the period
 1991-2000 were 4.8% per annum. Accordingly, the future export market demand for the

product is assumed to grow by 4.8% per annum.

Table 4: Presents export of meat and meat products

Year Export (tons)
2008 2,055
2009 2,154
2010 2,257
2011 2,366
2012 2,479
2013 2,598
2014 2,723
2015 2,854
2016 2,991
2017 3,134
2018 3,284

3.1.2. DEMAND PROJECTION

The increase in household meat consumption is mainly a function of three demand

determining variables i.e population, income and consumption habit.

The total population growth rate in Ethiopia is 2.9% per annum, while that of the urban

population growth rate is 4% per annum. The consumption of meat by the rural
population is expected to increase as a result of higher income. Hence, in order to

estimate the probable level of future demand, present demand is assumed to increase by

a slightly higher rate than the urban population growth rate, i.e.5% per annum.

According to Economic Commission for Africa’s (ECA) "Economic Report on Africa

(2002)", the average growth rate of Ethiopian export over the period 1991-2000 were

4.8% per annum. Accordingly, the future export market demand for the product is
12

assumed to grow by 5% per annum. The demand projected on the basis of the above
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assumptions is shown in Table 5

Table 5 Demand projection in tons

Projected Domestic Projected Export

Year Total
Demand Demand
2018 211,545 3,284 214,830
2019 222,123 3,449 225,571
2020 233,229 3,621 236,850
2021 244,890 3,802 248,693
2022 257,135 3,992 261,127
2023 269,992 4,192 274,184
2024 283,491 4,402 287,893
2025 297,666 4,622 302,287
2026 312,549 4,853 317,402
2027 328,176 5,095 333,272

Figure 1 Average per capita milk and meat consumption in Ethiopia, Sub-Saharan Africa and developed countries, 1997-
1999 (Source: FAO, 2001).

3.1.3. PRICING AND DISTRIBUTION

The domestic market price is determined by the market force of demand and supply.
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Whenever more cattle are driven to the market places the price would decline and vice
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 versa. Generally, the domestic market price for meat has shown a continuous increase

over the past five years. The domestic market prices are indicated in : 7below.

Table 6: Local market price of meat

Years Local Birr/kg
2009 65
2010 75
2011 80
2012 90
2013 95
2014 110
2015 120
2016 120
2017 140
2018 180
Source: BoARD, 2018

Farmers bring their cattle to their nearby cattle market, where they are bought by small

cattle traders. The small cattle traders drive the cattle to the terminal market from which

they are taken finally either to slaughter house after they are sold to meat shops

(lukandas) or to other big towns for resale to meat shops in big towns. Dansha, Humera,

Alamata Mehoni and Yechila towns are the terminal markets. These cattle markets are

the major sources of stock to the cattle fattening farms as well.

Foreign market prices are determined by either through negotiation with the importers

abroad or by the international market prices. The former approach is mostly commonly

applicable in setting prices at the export market. There was in general price increase in

the export market which contributed to the increase in the quantity of meat export. The

annual average export price is indicated in Table 7

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Table 7: Export market price of meat and live weight
Years Annual Average Prices Live cattle
of meat (Birr/kg) (Birr/kg)
2010 130 60
2011 145 75
2012 180 100
2013 200 120
2014 220 150
2015 225 155
2016 250 170

The sharp increase in the export prices of meat during the early 2000s’ was attributed to

Birr devaluation. The live weight price of cattle in the year 2018 is assumed to be the

finished product price of cattle for the envisaged fattening farm i.e Birr 120 per kg of

meat and 140 per live weight. The envisaged farm is recommended to directly export its

product and for the local market use commissioned agents at strategic locations.

3.2. PRODUCTION CAPACITY AND PROGRAM

3.2.1. PRODUCTION CAPACITY

The fattening project will have a capacity of 165 heads of cattle per batch in the first year

and the objective is to produce four batches per year with 90 days feeding period per

batch. Stock mobilization can be arranged on yearly basis with 740 cattle in the first year
and to continue by 5.5% increase in each year up to the third year which is 822 cattle

(full capacity of the project). This level of production is considered to be more realistic

as it will enable proper management and efficient utilization of resources and assets. An

average weight of each animal after fattening is assumed to be about 350 kg.

3.2.2. SELLING CAPACITY

The selling capacity of the farm will be 740 beef cattle for local and export market in the
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first year.
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Table 8: The Selling capacity of the farm per annum
Product Qty Sales @85% Qty @ Sales @95% Qty @ Sales @
S/N description unit price @85% Birr 95% Birr 100% 100% Birr
1 Cattle No 32,000 740 23,679,744 781 24,991,602 822 26,308,196
Total 23,679,744 24,991,602 26,308,196
Vat
Net sales 23,679,744 24,991,602 26,308,196

2.5.1. PRODUCTION PROGRAM

Since the proposed farm is very new venture for the investor, it needs some period of

time to get work experiences, establishment of the farm and penetrate market for pure

local breeds before getting full capacity utilization. Based on this fact, the under-study
project will begin its operation at 85% capacity in its first year of operation, 95% in the

second year and reaches full capacity in 3rd year and then after.

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4. TECHNICAL STUDY

4.1. LOCATION AND SITE

Location of the farm is determined on the proximity of raw materials (animal and feed),
availability of infrastructure, availability of skilled man power and distance to potential
market outlet.

In view of this, the envisaged plant will be established in Tigray regional state, South
eastern zone, H/wajrat Woreda. The proposed site has the following advantages

- It has high livestock potential

- Availability of land for the purpose/farming
- Availability of water
- Availability of infrastructure:
- Proximity to market

4.2. LAND, BUILDING AND CIVIL WORKS

The total required area for fattening farm is about 5 hectares. The total cost buildings and
civil works is estimated at Birr 1,621,000.

Table 9: Building and civil work

S/N Description Unit Total cost

1 Building
1.1 Cattle barn birr 1,100,000
1.2 Isolation room birr 25,000
1.3 Material & feed store birr 150,000
1.4 Office birr 80,000
1.5 Showers and toilets birr 60,000
1.6 Guard house birr 40,000
2 Water & feed trough birr 66,000
3 Crush m2 100,000
Total 1,621,000

4.3. MACHINERY, EQUIPMENT AND OFFICE FURNITURE

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The required equipment and tools are listed in Table 10. Total cost is estimated at Birr
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283400.
Table 10: List of machinery and equipment for fattening farm.

S/ NoDescription Unit Quantity Unit price Total price

1 Water & feed containers No 2 8,200 16,400
2 Feed mixer No 1 102,000 102,000
3 Hoof teamer No 5 2,500 12,500
4 Burdizzo crusher No 5 3,500 17,500
5 Knapsack sprayer No 10 5,000 50,000
6 Trailer No 5 6,000 30,000
7 Cart 1 25,000 25,000
8 Others 30,000
Total 283,400

4.4. MATERIALS AND UTILITIES

i. Animal cost

The number of fattening cycles carried out will be 4 cycles per year. For the 1st year 740

cattle’s (four cycles) will be purchased mostly from southern part of the region: Alamata,

Mekoni, Chercher etc. and surroundings. A total of about Birr 23,679,744 investments

is required for the first year. The beef cattle would be sold and replaced every four

months. The cattle with its corresponding estimated cost at full capacity is indicated in

Table 11.

Table 11 Cost of beef cattle per year

Beef cattle year 1 year 2 year 3

Cattle 740 781 822
Unit price 32,000 32,000 32,000
Total price 23,679,744 24,991,602 26,308,196

ii. Feed Cost

Beef cattle will feed on protein sources (concentrate) along with plenty of roughage. The

feed is given for body maintenance and for production. 60% maintenance feed contain

roughages and 40% contain concentrate feed. Whereas production feed contains 40%
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roughages and 60% concentrate feed. The feed is determined according to body weight
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 of the cattle (by converting cattle to TLU value) and the feed type available in the

country. Feed cost for proposed project at full capacity is given in Table 12.

Table 12: Feed cost

year 1 year 2 year 3

No
Description Unit Amount
1 Total TLU TLU 740 781 822
2 Maintenance feed per day ton 4 5 5
3 Production feed per day ton 9 11 12
total feed per day ton 13 16 17
total feed per year ton 1,203 1,415 1,572
Total feed cost per year birr 6,014,146 7,075,466 7,861,629

iii. Inputs

On farm activities’ taking health care for fattening animals is very important. There are

a number of activities, which are under taken to keep animals’ health. The best for the

prevention of diseases is good hygiene and disinfection. Besides vaccination and using

antibiotic is crucial. The cost of vet drag will be birr 100 per Tropical Livestock unit and

this will be birr 74,000 per annum at full capacity operation.

iv. Utilities and other cost

Utilities such as water supply, electricity/Generator, communication facilities etc. are

indispensable for the smooth operation of the proposed project activities. Electricity is
used for lightening and for feed processing. Continuous supply of clean fresh water for
beef cattle farming activities is very helpful to have health animals in the farm. The
annual utilities cost at full capacity operation of the proposed plant is estimated about
birr 100,000. The required amount of utilities with its respective price is shown here
below in detail.

Other additional costs are listed below

 Advertisement & Travelling Birr 1,000/month - Birr 131,541 p.a,

19

 Stationary & postage Birr 200/month - Birr 12,000 p.a.

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  Repair and maintenance-Allowance will be made for repair and maintenance expenses
of vehicles, farm building and office equipment. The cost of repair and maintenance for
the purchases of materials and services would reach birr 104,280 annually, which is 1.5%
of the total initial fixed investment.
 Uniform of employees Birr 21,600 per annum
 Marketing costs-Birr 750/month - Birr 9000.00 per annum.

Table 13: Annual utilities (supplies) requirement at full capacity operation

S/N Description Unit of Required Total Annual

Unit price/birr
meas. Qty Cost (Birr)
A Utility
1 Electricity/Generator kwh 2,000 5 10,000
2 water m3 9,000 10 90,000
Total 100,000
B Miscellanous -
1 Fuel, (20 liter per day) Liter 4,200 21 88,200
2 Lubricants (5% of fuel) Kg/Liter 4,410
3 Stationary tel L/S 12,000
4 Managerial and acct consultation 50,000
Vet drugs, chemicals, AI Birr
5 100per TLU 73,999
Total 228,609

4.5. PRODUCTION PROCESS

Generally, the fattening farm will have the following process. Cattles purchased from
purchasing centers – holding areas – feed lots - marketing. The holding areas are used as
quarantine and treatment. Treatment include: weighing, vaccination, Deeping, etc. It is
important that animals in the fattening programme receive adequate disease protection.
Unhealthy and unproductive animals do not make good use of high-quality fed, which is
scares therefore, animals poorly performing after 2 weeks, needs to be culled and sold in
the local market. Well performing animals kept for 3-4 months are expected to gain an
average weight of 80kg.
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5. ORGANIZATION, MANAGEMENT AND MAN POWER

5.1. ORGANIZATION AND MANAGEMENT

The farm will have a manager (B.sc Degree in agriculture), Animal production technician
(diploma in Animal production), administration and finance and other workers.

An organization is dependent on its environment which provides resources inputs and

utilize its outputs. In order to achieve an effective operation of the firm, it is necessary to
make a realistic arrangement between sections as well as the employees.

Accordingly, the organizational structure of the envisaged project shall have two sections
and all report to the farm manager. The sections are

❖ fattening
❖ Commercial and finance section
The manager of the farm will be a responsible for all the activities which undertaken by
the firm such as planning, organizing, controlling etc. The animal production technician is
responsible for all technical and production operations including management of herd,
breeding, feeding, and etc of the project.

The commercial and finance section head will be in charge of sales and distribution,
purchases and stocks, accounting records etc.

The proposed organizational structure is shown here below.

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 PROPOSED ORGANIZATIONAL STRUCTURED

Farm
manager

Commercial
fattening &
Section Finance
Section

animal
Feeders & Casher/acco
production
cleaners untant
technician

Figure 1: - Organizational structure of the farm

5.2. MANPOWER
The estimation of manpower requirement for the under-consideration project, particularly
for the productive workers is mainly depends upon the selected technology of the project.
Accordingly, the project under study is expected to create job opportunities about 36
workers (26 permanent and 10 daily laborer’s) All the required manpower of the project
will be recruited from the local market.

The total annual labor cost of the project would thus reach about birr 945,750. The required
number, job description and total annual labor cost of the proposed project is indicated here
on table.
22
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Table 14: Man-power and cost

No. of Required Salary/employ Total Salary

Sr.No. Description
Persons Number ee/ Month per year(birr)
1 Farm Manger No 1 5,000 60,000
2 Secretary No 1 1,500 18,000
3 Accountant No 1 3,500 42,000
4 Sales person No 2 4,500 108,000
5 Animal production expert No 1 5,000 60,000
6 Cattle Attendant No 8 2,000 192,000
7 Ass. Feed specialist No 1 3,500 42,000
8 Forage processing workers No 2 2,200 52,800
9 Record keeper No 1 3,000 36,000
10 Drivers No 1 5,000 60,000
12 Guards No 2 1,200 28,800
13 Labour No 5 950 57,000
Total 37,350 756,600
Employees benefit (25% of basic
9,338 189,150
salary)
Grand Total 26 46,688 945,750

23
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6. ENVIRONMENTAL IMPACT
The Environmental Impact Assessment (EIA) study is intended to ensure that the
project will be economically feasible, socially acceptable and environmentally
sustainable. It primarily includes the description of the baseline condition of the
project area, identification of the Potential impacts of the proposed project and
development of feasible measures that will help to avoid or minimize the existing
and/or potential negative impacts associated with implementation of the proposed
project. Or else, it is also intended to enhance the positive impacts those could
develop. The ultimate objective of this environmental study is to obviate any
deterioration in the ecological stability and achieve improvement in it along with
environmental quality. Hence the EIA is an integral part of the business plan of
this proposed project.

With this background as an integral part of the project the environmental study is
aimed at assessment of major environmental issues of proposed project and
recommendation for mitigation measures and thereby minimizes risk of un sustain
ability.

The EIA study of the Project is performed immediate after acquisition of the
project. Because its site specific. However, this project is environmentally
friendly project.

24
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7. FINANCIAL PLAN
The financial analysis of the under-study project has been worked out under the following Basic
assumption.

 The cost and benefits of the project is evaluated/ estimated for ten years. But the project’s
life span could be more than 10years. A pre-production or implementation period of 1 year
is considered.

 Replacement of fixed assets is not assumed during the estimated 10 years’ life span of the
project. Therefore, at the end of the 10th year of operation the scrap value of fixed assets
would be their book-value.

 Working capital is assumed to be fully recovered at the end of 10 years.

 The number of beef cattle’s increase up to 3th year.

 The project is assumed to start operation at 85%

 Source of finance 30% equity70 % loan
 Tax holidays 3 years / According to the rule of Ethiopian investment bureau
 Bank interest 12%

7.1. INITIAL INVESTMENT COST

7.1.1. INITIAL FIXED INVESTMENT

The total initial investment requirement cost of the project is estimated to be birr

10.04 million of which birr 5.4 million will be allocated for fixed investment. The

summary of the cost breaks down of the initial fixed investment cost including

pre-production expenses is given here below table-15

7.1.2. WORKING CAPITAL

The working capital consists of the cost of feed, salary and wage and sundry

expense. In this case, the working capital requirement is taken for three months.
25

Accordingly, the total working capital requirement for the smooth run of the
Page
 project is estimated at birr 4.64 million. The working capital break- down of the

plant is given here below.

Table 15: Initial investment

Contribution %
Total
investment
S/N Description cost Owner Bank loan
A Fixed capita
1 Constrution & electric installation 1,621,000 486,300 1,134,700
2 Land lease 1,115,625 334,688 780,938
3 Machinery and equipment & 283,400 85,020 198,380
4 Vehicle 1,200,000 360,000 840,000
5 Office furniture and fixture 78,108 23,432 54,676
6 pre production expense 1,103,047 330,914 772,133
Sub total 5,401,180 1,620,354 3,780,826
B Working capital
1 Raw material 1,965,407 589,622 1,375,785
2 Animal for fattening 2,515,973 754,792 1,761,181
3 Salary and wage (one month) 78,813 23,644 55,169
4 Utility (one month) 25,000 7,500 17,500
5 Miscellanous 57,152 17,146 40,007
Sub total 4,642,345 1,392,703 3,249,641
Total initial investment 10,043,525 3,013,057 7,030,467

7.1.3. SOURCE OF FINANCE

The total initial cost of the project is estimated birr 10,043,525. This required

capital of the proposed project will be financed both by bank lone (70%) = birr

7,030,467 and personal equity (30%) =birr 3,013,057.

7.2. FINANCIAL VIABILITY AND ECONOMIC BENEFITS

7.2.1. INTERNAL RATE OF RETURN (IRR)

The financial evaluation of cash flow is a very important factor to determine the
ability of the project to meet liabilities including service of debt. The envisaged
project is therefore financially viable having IRR after tax of 20.01%.
26
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Table 16 IRR
Data Description
Data Initial cost of a business
- 10,043,525 Net cash inflow for the first year
7,144,678 Net cash inflow for the second year
1,555,275 Net cash inflow for the third year
1,736,130 Net cash inflow for the fourth year
1,184,695 Net cash inflow for the fifth year
1,125,304 Net cash inflow for the sixth year
955,236 Net cash inflow for the seventh year
877,172 Net cash inflow for the eighth year
793,678 Net cash inflow for the ninth year
704,367 Net cash inflow for the tenth year
Formula Description (Result)
Investment's internal rate of
=IRR (A1:A11)
return after ten years is 20.01%

7.2.2. PAYBACK PERIOD

Computations of payback period determine the duration on which the lapse of the
project to cover the overall investment cost through the return assumed to be
achieved. The investment cost and profit and loss statement are used to project the
payback period. The payback period for the under consideration is 3.68 years.
Given see table-17.

Table 17 payback
Cummulative
Year Investment out lays Net cash inflows cash inflows
0 10,043,525 - -
1 - 6,379,177 6,379,177
2 - 1,239,856 7,619,033
3 - 1,235,743 8,854,776
4 - 752,895 9,607,670
5 - 638,527 10,246,198
6 - 483,952 10,730,150
7 - 396,788 11,126,938
8 - 320,553 11,447,492
9 - 254,002 11,701,493
10 - 196,025 11,897,518
Total - 11,897,518 -
PBP (payback period) Year 3.68
27
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8. ECONOMIC AND SOCIAL BENEFITS
The economic impact of the project can be viewed in a number of ways. It can be viewed
through its specific impact such as employment generation, transfer technology, contribute
to food self-sufficiency, increasing government revenue. It’s a production of exportable
items that contribute in earning foreign exchange. Moreover, other benefits such as the
creation of conducive environment for the development of the country should also be taken
into consideration.

8.1. PROFIT GENERATION

The project is found to be financially viable and earns on average a profit of birr 2.33 million
in the 1st year and birr 1.5 million in the 10th year. Such result induces the project promoters
to reinvest the profit which, therefore, increases the investment magnitude in the country.

8.2. TAX REMITTANCE

In the project life under consideration, the project is expected to enable the government to
collect about birr 4.2 million from tax payment alone. Such result creates an additional
source of income for the government that will be used in the socio-economic development
of the country.

8.3. INCREASE LIVESTOCK PRODUCTION AND EARNING FOREIGN EXCHANGE

Fattening of 740 (on the first year) beef cattle would increase livestock production
significantly in the area. This would contribute to get foreign exchange through exporting
the product and also will contribute its share in tackling foreign exchange deficit of the
country.

8.4. EMPLOYMENT AND INCOME GENERATION

The proposed project is expected to create employment opportunity for many citizens of the
country. That is, it will provide 26 permanent employment and 10 temporary workers. This
would be one of the commendable accomplishments of the project.
28
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 Beyond this specific impact the project will also create conducive environment for the rapid
growth of service and trade sectors around the project site which in turn create employment
opportunity for a substantial number of persons.

Therefore, from the above discussion it can be concluded that the project creates significant
socio-economic benefits directly or indirectly and will substantially contribute to the
development of the country

8.5. CONCLUSIONS
The project is worth undertaking from the following viewpoints:

The benefits are greater than the costs.

• Payback period: Only three years and five months are required to recover the original
investment cost.
• The Net Present Value (NPV) is positive.
• The Internal Rate of Return (IRR) is greater than the bank interest.
• The project has positive impact on the national economy.

29
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9. ANNEXES
Annex 1: Bank repayment Schedule

Principal loan 7,030,467

Interest loan 10%
Payment period 10
Annual installment 1,144,176
Year Beginning Ending
balance Principal Interest balance
1 7,030,467 441,129 703,047 6,589,338
2 6,589,338 485,242 658,934 6,104,096
3 6,104,096 533,767 610,410 5,570,329
4 5,570,329 587,143 557,033 4,983,186
5 4,983,186 645,858 498,319 4,337,328
6 4,337,328 710,443 433,733 3,626,885
7 3,626,885 781,488 362,688 2,845,397
8 2,845,397 859,637 284,540 1,985,760
9 1,985,760 945,600 198,576 1,040,160
10 1,040,160 1,040,160 104,016 0
Total - 7,030,467 4,411,295 -

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Annex 2: Present value and internal rate of return

Year Cash inflows PVIF(21%,10) Pv PVIF(22%,10) Pv PVIF(12%,10) PV

1 7,144,678 0.83333 5,953,898 1 5,904,693 0.8929 6,379,177
2 1,555,275 0.69444 1,080,052 1 1,062,274 0.7972 1,239,856
3 1,736,130 0.57870 1,004,705 1 980,000 0.7118 1,235,743
4 1,184,695 0.48225 571,323 0 552,669 0.6355 752,895
5 1,125,304 0.40188 452,234 0 433,853 0.5674 638,527
6 955,236 0.33490 319,907 0 304,368 0.5066 483,952
7 877,172 0.27908 244,803 0 230,987 0.4523 396,788
8 793,678 0.23257 184,584 0 172,727 0.4039 320,553
9 704,367 0.19381 136,511 0 126,687 0.3606 254,002
10 608,823 0.16151 98,328 0 90,498 0.3220 196,025
Cash inflows 16,685,357 - 10,046,345 - 9,858,755 - 11,897,518
IRR 20.01% - - - - - -
Intial investment 10,043,525 - 10,043,525 - 10,043,525 - 10,043,525
NPV - - 2,820 - - 184,770 - 1,853,993
Profitabiity index - - - - - - 1.18

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 Annex 3: Depreciation and Amortization ‘birr’
Depr.Expense
Projected years
Description 1st 2nd 3rd 4th 5th 6th 7th 8th 9th 10th
Cnstruction & installation
Initial cost 1,621,000 1,621,000 1,621,000 1,621,000 1,621,000 1,621,000 1,621,000 1,621,000 1,621,000 1,621,000
Depr.Expense 81,050 81,050 81,050 81,050 81,050 81,050 81,050 81,050 81,050 81,050
Acc.depr.Expense 81,050 162,100 243,150 324,200 405,250 486,300 567,350 648,400 729,450 810,500
Book value 1,539,950 1,458,900 1,377,850 1,296,800 1,215,750 1,134,700 1,053,650 972,600 891,550 810,500
Machinery, equipment and furniture
Initial cost 361,508 361,508 361,508 361,508 361,508 361,508 361,508 361,508 361,508 361,508
Depr.Expense 36,151 36,151 36,151 36,151 36,151 36,151 36,151 36,151 36,151 36,151
Acc.depr.Expense 36,151 72,302 108,452 144,603 180,754 216,905 253,056 289,206 325,357 361,508
Book value 325,357 289,206 253,056 216,905 180,754 144,603 108,452 72,302 36,151 -
Vehicles
Initial cost 1,200,000 1,200,000 1,200,000 1,200,000 1,200,000
Depr.Expense 240,000 240,000 240,000 240,000 240,000
Acc.depr.Expense 240,000 480,000 720,000 960,000 1,200,000
Book value 960,000 720,000 480,000 240,000 -
Pre-production expense
Initial cost 1,103,047 1,103,047 1,103,047 1,103,047 1,103,047
Depr.Expense 220,609 220,609 220,609 220,609 220,609
Acc.depr.Expense 220,609 441,219 661,828 882,438 1,103,047
Book value 882,438 661,828 441,219 220,609 -
Land lease
Initial cost 1,115,625 1,115,625 1,115,625 1,115,625 1,115,625 1,115,625 1,115,625 1,115,625 1,115,625 1,115,625
Depr.Expense 37,188 37,188 37,188 37,188 37,188 37,188 37,188 37,188 37,188 37,188
Acc.depr.Expense 37,188 74,375 111,563 148,750 185,938 223,125 260,313 297,500 334,688 371,875
Book value 1,078,438 1,041,250 1,004,063 966,875 929,688 892,500 855,313 818,125 780,938 743,750
Total FA initial cost 5,401,180 5,401,180 5,401,180 5,401,180 5,401,180 3,098,133 3,098,133 3,098,133 3,098,133 3,098,133
Total Depr.Expense 614,998 614,998 614,998 614,998 614,998 154,388 154,388 154,388 154,388 154,388
Total Acc.depr.Expense 614,998 1,229,995 1,844,993 2,459,991 3,074,989 926,330 1,080,718 1,235,106 1,389,495 1,543,883
Total Book value 4,786,182 4,171,185 3,556,187 2,941,189 2,326,192 2,171,803 2,017,415 1,863,027 1,708,638 1,554,250

32 Page
 Annex 4: Schedules cost of production
Projected Years
Description 1st 2nd 3rd 4th 5th 6th 7th 8th 9th 10th
Raw material/feed 6,682,384 7,468,547 7,861,629 7,861,629 7,861,629 7,861,629 7,861,629 7,861,629 7,861,629 7,861,629
Fattening Animal cost 10,063,891 11,247,878 11,839,872 11,839,872 11,839,872 11,839,872 11,839,872 11,839,872 11,839,872 11,839,872
Salary and wage 803,888 898,463 945,750 1,002,495 1,062,645 1,126,403 1,193,988 1,265,627 1,341,564 1,422,058
Vet drug and chemicals 62,899 70,299 73,999 78,439 83,146 88,134 93,422 99,028 104,969 111,267
Utility 85,000 95,000 100,000 105,000 110,250 115,763 121,551 127,628 134,010 140,710
Repaire and M aintenance 135,030 119,655 104,280 88,905 73,530 58,155 54,295 50,435 46,576 42,716
Stationery and Safety 12,000 12,000 12,000 12,000 12,000 12,000 12,000 12,000 12,000 12,000
Sales and promotion 118,399 124,958 131,541 131,541 131,541 131,541 131,541 131,541 131,541 131,541
Fuel and lubricant 78,719 87,980 92,610 97,241 102,103 107,208 112,568 118,196 124,106 130,312
Depreciation 614,998 614,998 614,998 614,998 614,998 154,388 154,388 154,388 154,388 154,388
Insurance - - - - - - - - - -
M anagerial and acct
consultation 50,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000
Bank interest 703,047 658,934 610,410 557,033 498,319 433,733 362,688 284,540 198,576 104,016
Total production cost 19,410,254 21,423,711 22,412,088 22,414,152 22,415,030 21,953,825 21,962,942 21,969,884 21,974,231 21,975,509
Other (10%) 1,941,025 2,142,371 2,241,209 2,241,415 2,241,503 2,195,383 2,196,294 2,196,988 2,197,423 2,197,551
Grand total 21,351,279 23,566,082 24,653,297 24,655,567 24,656,533 24,149,208 24,159,236 24,166,873 24,171,654 24,173,060

33
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 Annex 5:- Profit/loss statement

Description 1st 2nd 3rd 4th 5th 6th 7th 8th 9th 10th
Gross sales 23,679,744 24,991,602 26,308,196 26,308,196 26,308,196 26,308,196 26,308,196 26,308,196 26,308,196 26,308,196
Total cost of
production 21,351,279 23,566,082 24,653,297 24,655,567 24,656,533 24,149,208 24,159,236 24,166,873 24,171,654 24,173,060
profit before tax 2,328,465 1,425,520 1,654,899 1,652,629 1,651,662 2,158,988 2,148,959 2,141,323 2,136,541 2,135,135
profit tax - - - 495,789 495,499 647,696 644,688 642,397 640,962 640,541
Net profit 2,328,465 1,425,520 1,654,899 1,156,840 1,156,163 1,511,291 1,504,271 1,498,926 1,495,579 1,494,595

Annex 6:- Balance sheet statement

Description 1st year 2nd year 3rd year 4th year 5th year 6th year 7th year 8th year 9th year 10th year
Asset
Cash 7,144,678 8,699,953 10,436,083 11,620,778 12,746,081 13,701,317 14,578,490 15,372,167 16,076,534 16,685,357
Building 1,539,950 1,458,900 1,377,850 1,296,800 1,215,750 1,134,700 1,053,650 972,600 891,550 810,500
Machinery,
equipment &
fixture 325,357 289,206 253,056 216,905 180,754 144,603 108,452 72,302 36,151 -
Vehicles 960,000 720,000 480,000 240,000 - - - - - -
Land lease 1,078,438 1,041,250 1,004,063 966,875 929,688 892,500 855,313 818,125 780,938 743,750
Pre-operating
expence 882,438 661,828 441,219 220,609 - - - - - -
Total asset 11,930,860 12,871,138 13,992,270 14,561,967 15,072,273 15,873,121 16,595,904 17,235,194 17,785,173 18,239,607

Liablity and
capital
Bank loan
payment 6,589,338 6,104,096 5,570,329 4,983,186 4,337,328 3,626,885 2,845,397 1,985,760 1,040,160 -
Owner's capital 3,013,057 5,341,522 6,767,042 8,421,941 9,578,781 10,734,945 12,246,236 13,750,508 15,249,434 16,745,013
Net increase/
decrease 2,328,465 1,425,520 1,654,899 1,156,840 1,156,163 1,511,291 1,504,271 1,498,926 1,495,579 1,494,595
Total Liablity

34
and capital 11,930,860 12,871,138 13,992,270 14,561,967 15,072,273 15,873,121 16,595,904 17,235,194 17,785,173 18,239,607

Page
 Annex 7: Cash flow statement

Description 1st 2nd 3rd 4th 5th 6th 7th 8th 9th 10th
Cash In flows
Equity contribution - - - - - - - - - -
Bank loan 9,933,072 - - - - - - - - -
Gross sales 23,177,167 - - - - - - - - -
Total cash inflows 27,704,348 33,245,217 36,939,130 36,939,130 36,939,130 36,939,130 36,939,130 36,939,130 36,939,130 36,939,130
Cash out flows 60,814,587 33,245,217 36,939,130 36,939,130 36,939,130 36,939,130 36,939,130 36,939,130 36,939,130 36,939,130
Fixed capital - - - - - - - - - -
Working capital 27,525,565 - - - - - - - - -
production cost 5,584,674 - - - - - - - - -
Loan repayment 12,574,479 20,808,597 22,468,735 22,401,901 22,327,387 22,075,197 22,017,836 21,948,588 21,865,700 21,767,207
Profit tax 1,454,261 1,599,687 1,759,655 1,935,621 2,129,183 2,342,101 2,576,311 2,833,942 3,117,337 3,429,070
Total cash out flows - - - 3,587,541 3,609,896 4,082,616 4,099,824 4,120,598 4,145,465 4,175,013
Net increase/decrease47,138,978 22,408,284 24,228,391 27,925,063 28,066,465 28,499,914 28,693,971 28,903,129 29,128,501 29,371,290
Cumulative Net cash
Increase/decrease 13,675,608 10,836,933 12,710,740 9,014,067 8,872,665 8,439,217 8,245,159 8,036,002 7,810,629 7,567,841

35Page
Annex 8: Action Plan for the First year (Farming)

2019 2020 2021

september

september
november

november
december

december
february

february
january

january
Activities

october

october
march

march
august

august
april

april
may

may
june

june
july

july
Land acquisition & excavation
Purchasing Construction material
Construction

Purchasing of machinery & equipment

Installation
Commissioning and others
Start giving service

36
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