ORIT SOAP AND DETERGENT

MANUFACTURING PLANT

PROMOTOR: ORIT SANITARY AND COSMETICS

MANUFACTURING PLC

DEBRE BIRHAN CITY ADMINISTRATION

NORTH SHOA ZONE ADMINISTRATION, ANRS, ETHIOPIA

2023 ETHIOPIA

1
 TABLE OF CONTENTS
TABLE OF CONTENTS .................................................................................... 2

LIST OF TABLES AND FIGURES ................................................................... 4

LIST OF TABLES ....................................................................................................................... 4
LIST OF FIGURES...................................................................................................................... 4
LIST OF ABBREVIATIONS ............................................................................. 5

SUMMARY .......................................................................................................... 7

1. BACKGROUND INFORMATION................................................................ 9
1.1. INTRODUCTION ................................................................................................................. 9
1.2. THE CITY BENEFIT FROM THE INVESTMENT...................................................................... 9
1.3. OBJECTIVES OF THE STUDY ............................................................................................. 10
1.4. METHODOLOGY AND APPROACH .................................................................................... 10
1. 4. 1. Preliminary Assessment and Study Design ........................................................... 10
1. 5. PRACTICAL DATA REVIEW OF SOAP AND DETERGENT .................................................... 10
1. 5. 1. Practical Data Review of Chemical Industry at Global Level .............................. 11
1. 5. 2. Practical Data Review Soap And Detergents At Global Level ............................. 11
2. PRODUCT DESCRIPTION AND APPLICATION .................................. 13
2.1. SOAP ...............................................................................................................................................................13
2.2. LIQUID DETERGENT ........................................................................................................ 13
3. MARKET STUDY AND PLANT CAPACITY ........................................... 15
3.1. MARKET STUDY ........................................................................................................ 15
3. 1. 1. Past Supply and Present Demand ......................................................................... 15
3.1. 2. Soap And Detergent Demand Projection .............................................................. 18
3. 1. 3. Pricing and Distribution ....................................................................................... 20
3. 2. PLANT CAPACITY AND PRODUCTION PROGRAM ............................................. 28
3. 2. 1. Plant Capacity ....................................................................................................... 28
3. 2. 2. Production Program ............................................................................................. 28
4. MATERIALS AND INPTUS ........................................................................ 29
4.1. MATERIALS ................................................................................................................ 29
4.2. UTILITIES .................................................................................................................... 31
4.3. QUALITY OF THE PRODUCT ................................................................................... 31

2
5. TECHNOLOGY AND ENGINEERING ..................................................... 33
5.1. TECHNOLOGY ............................................................................................................ 33
5. 1. 1. Soap Production Process of Soap ......................................................................... 33
5.1. 2. Production Process Of Liquid Detergent .............................................................. 36
5. 1. 3. Source of Technology ............................................................................................ 37
5. 2. ENVIRONMENTAL AND SOCIAL IMPACT ASSESSMENT, ESIA........................................... 37
5. 3. ENGINEERING ............................................................................................................ 38
5. 3. 1. Machinery and Equipment .................................................................................... 38
5. 3. 2. Land, Buildings and Civil Works .......................................................................... 39
6. HUMAN RESOURCE AND TRAINING REQUIREMENT .................... 41
6.1. HUMAN RESOURCE REQUIREMENT ..................................................................... 41
6.2. TRAINING REQUIREMENT ...................................................................................... 43
7. IMPLEMENTATION ................................................................................... 44
7.1 PROJECT ORGANIZATION AND MANAGEMENT ................................................. 44
7. 1. 1. Project Organization ............................................................................................. 44
7. 2 IMPLEMENTATION SCHEDULE............................................................................... 46
7. 3. IMPLEMENTATION COST ........................................................................................ 49
8. FINANCIAL ANALYSIS .............................................................................. 51
8.1. TOTAL INITIAL INVESTMENT COST ..................................................................... 51
8.2. PRODUCTION COST .................................................................................................. 53
8.3. FINANCIAL EVALUATION ....................................................................................... 53
8. 3. 1. Profitability ........................................................................................................... 53
8. 3. 2. Ratios..................................................................................................................... 54
8. 3. 3. Break-even Analysis .............................................................................................. 54
8. 3. 4. Pay-back Period .................................................................................................... 54
8. 3. 5. Internal Rate of Return, IRR ................................................................................. 55
8. 3. 6. Net Present Value, NPV ........................................................................................ 55
8. 4. ECONOMIC AND SOCIAL BENEFITS...................................................................... 55
APPENDIX: FINANCIAL ANALYSIS OF THE SOAP AND
DETERGENT MANUFACTURING PLANT BASED ON CMFAR ........... 56

REFERENCES ................................................................................................... 63

3
 LIST OF TABLES AND FIGURES
List Of Tables
TABLE 3. 1: SOAP AND DETERGENT PRODUCED PER YEAR IN ETHIOPIA, IN KG..... 16
TABLE 3. 2 :VOLUME OF IMPORTED SOAP AND DETERGENT FROM 2012 TO 2021 IN
KG............................................................................................................................................. 16
TABLE 3. 3: FUTURE FORECAST OF IMPORT OF SOAP AND DETERGENT BY TREND
ADJUSTED EXPONENTIAL SMOOTHING METHOD.......................................................... 17
TABLE 3. 4: PROJECTED DEMAND FOR SOAP AND DETERGENT SOAP AND
DETERGENT IN ETHIOPIA.................................................................................................... 18
TABLE 3. 5 : DEMAND SUPPLY GAP ANALYSIS ................................................................. 19
TABLE 3. 6 : DISTRIBUTION OF THE SOAP AND DETERGENT PRODUCTS .................. 24
TABLE 3. 7 : PRODUCTION PROGRAMME OF THE ENVISAGED SOAP AND
DETERGENT MANUFACTURING PLANT ............................................................................ 28

TABLE 4. 1 : ANNUAL REQUIREMENT FOR RAW AND AUXILIARY MATEIRALS AND

THEIR COST ............................................................................................................................ 29
TABLE 4. 2 : ANNUAL UTILITY REQUIREMENT AND COST ............................................. 31

TABLE 5. 1 : LIST OF MACHINERY AND EQUIPMENT ...................................................... 39

TABLE 6. 1 : HUMAN RESOURCE REQUIREMENT AND ESTIMATED LABOR COST

(ETB) ........................................................................................................................................ 41

TABLE 7. 1 : PROJECT IMPLEMENTATION SCHEDULE ................................................... 47

TABLE 7. 2 : IMPLEMENTATION COST ............................................................................... 49

TABLE 8. 1 : ASSUMPTIONS RELATED TO THE PROJECT ............................................... 51

TABLE 8. 2 : INITIAL INVESTMENT COST (‘000 ETB) ........................................................ 52
TABLE 8. 3 : ANNUAL PRODUCTION COST AT FULL CAPACITY .................................... 53

List Of Figures
FIGURE 5. 1: FLOWSHEET DIAGRAM OF PRODUCTION OF SOAP ............................... 35

4
 LIST OF ABBREVIATIONS
ABIQUIM : The Brazilian Chemical Industry Association
ADLI : Agricultural Development Led Industrialization
AGOA : African Growth and Opportunity Act
BCI : Brazilian Chemical Industry
CAGR : Compound Annual Growth Rate
CMFAR : Computer Module for Financial Analyses and Reporting
COMESA : Common Market for Eastern and Southern Africa
CRGE : Climate Resilient Green Economy
CSA : Central Statistical Authority
DFQF : Duty Free and Quota Free
EBA : Everything But Arms
EEU : Ethiopian Electric Utility
EIC : Ethiopian Investment Commission
ERC : Ethiopian Railways Corporation
ERCA : Ethiopian Revenues and Customs Authority
ESA : Ethiopian Standard Authority
ESC : Ethiopian Sugar Corporation
EU : European Union
FDI : Foreign Direct Investment
GDP : Gross Domestic Product
GHG : greenhouse gas
GOE : Government of Ethiopia
GTP : Growth and Transformation Plan
IDS : Industrial Development Strategy
IMF : International Monetary Fund
IRR : Internal rate of return
Kg : Kilogram

5
Km : Kilo meter
LDC : Least Developed Countries
Li : liter
LS : Lump sum
Ml : milliliter
m2 : Square meter
M3 : Cubic meter
NBE : National Bank of Ethiopia
NPV : Net present value
PASDEP : Plan for Accelerated and Sustained Development to End Poverty
SNNPRS : Southern Nations, Nationalities and Peoples Regional State
SSA : Sub-saharan Africa
UN : United Nation
UNIDO : United Nation Industrial Development Organization
USD : United States Dollar
WB : World Bank
WEF : World Economic Forum
WTC : World Trade Center
WTO : World Trade Organization

6
 SUMMARY
Orit Sanitary And Cosmetics Manufacturing PLC envisages the establishment of a plant for
the production of soap and detergent with a capacity of 1,000. 15 tons of soap and 1,000. 00
m3 of detergent per annum. Soap and detergent is extensive used in households, guest houses,
hotels, canteens, hospitals, schools, higher institutions, offices, etc, as a general cleaning
agent.

The country`s requirement of soap and detergent is met through local production and
import. The present (2023) demand for soap and detergent is estimated at 492,830. 98 tons.
The demand for soap and detergent is projected reach 505,151. 76 tons and 615,478. 37
tons by the years 2024 and 2032, respectively.
As the raw materials required for the manufacturing of laundry soap are palm fatty acid,
caustic soda and additives, the principal raw materials for detergent production are LABSA
(Linear Alkyl Benzene Sulfonic Acid), sodium hydroxide, urea, perfume, caustic soda
(NaOH), sodium silicate, sodium CMC (Carboxymethyl Cellulose), SLES (Sodium Lauryl
Ether Sulphate), optical brightener and colorant. All raw materials have to be locally
available.
The total investment cost of the project including working capital is estimated at ETB 102. 00
million (see TABLE 7. 1). From the total investment, the highest share of cost is accounted by
fixed investment (ETB 58. 89 million or 57. 73%) followed by initial working capital cost
(ETB 40. 65 million or 39. 85%) and pre-operating cost (ETB 2. 47 million or 2. 42%). The
total foreign currency for this project is around 27. 99% of total investment i. e. ETB 28. 55
million related to purchase of machinery and equipment.
The project is financially viable with an internal rate of return (IRR) of 19. 98% and a net
present value (NPV) of ETB 34. 49 million, discounted at 12%. The industry payback the
initial investment within 3 years.
The break-even point for sales and capacity utilization are computed at ETB 0. 83 million and
36. 11% respectively, which are very attractive and has less risk for loss making due to
breaking even at low level of capacity utilization and sales.
The project can create employment for 148 persons. The establishment of such factory will

7
have a foreign exchange saving effect to the country by substituting the current imports. The
project will also create forward linkage with the service sector such as hotels, restaurants and
hospitals and backward linkage with the chemical manufacturing and agricultural sector such
as plantation of palm. The industry generates income for the Government in terms of tax
revenue and payroll tax. The industry will participate in income generating activities of the
societies.

8
 1. BACKGROUND INFORMATION
1. 1. Introduction
This document was undertaken to show Soap and Detergent Production Investment profile
in Debre Birha City. In compiling the report, information from Ethiopian Investment
Commission (EIC), trade and industry development, Ethiopian Revenue and Customs
Authority (ERCA), and published sources have been augmented.
The production of soap and detergent in Ethiopia is minimal compared to its raw materials
availability in the country. One of the main causes of this disparity is absence of potential
investor involved in the area.
Soap and detergent production is an industry of prime importance to developing countries
because, by upgrading generally available local resources, it can satisfy existing demand for
soap and unsophisticated detergents. It also complements oleaginous product lines where a
soap and detergent factory is upstream of an existing oil mill. In Ethiopia, the demand for
soap and detergent product is expected to increase considerably in the next few decades as a
result of increased population growth, urbanization and increasing income levels.

1. 2. The City Benefit From the Investment

The city will be benefited from investment. These are discussed below.

 Employment opportunity
Investment is expected to provide direct and indirect employment. These range from unskilled
causal workers, semi-skilled and skilled employees.
 Improving growth of the economy
Through the use of locally available materials and exporting products, the investment
contributes towards growth of the economy by contributing to the growth of domestic
product. These eventually attract taxes including VAT which will be payable to the
government hence increasing government revenue while the cost of local materials will
payable directly to the producers. In addition, domestic products save foreign exchange and

9
exports also bring money to the country.

1. 3. Objectives of the Study

The main objective of the study is to conduct a feasibility study to determine the viability of
Orbit Sanitary and Cosmetics Manufacturing PLC that constitute assessment of the market
study, production capacity selection, raw materials and input analysis, technology selection,
organizational structure and human resource, project implementation, financial (cost-benefit)
analysis and to prepare an investment plan acceptable by various shareholders such as the
owners, financial institutions, equity investors, international organizations etc.

The objective of the industry is in line with the national health policies and strategies. The
Ethiopian government has introduced multi-sectoral health policies and strategies as part of its
commitment to promote healthy life, and achieve the country’s development goals.

1. 4. Methodology and Approach

In general to attain the above stated objectives, the study has developed the suitable
methodology which utilizes both quantitative and qualitative data / information from both
primary and secondary sources. Accordingly, the methodology and approach used to conduct
the feasibility study is discussed hereafter.

1. 4. 1. Preliminary Assessment and Study Design

This stage has involved preparatory works necessary for undertaking the study. The major
focus at this stage includes identification of overall information requirement, collection and
review of related documents and literature and designing suitable data collection instruments
i. e. international data, national data, etc.

1. 5. Practical Data Review of Soap and Detergent

10
The soap and detergent production are dependent on organic and inorganic chemical
availability. The challenges and prospects of the chemical industry in general and the soap
and detergent manufacturing in particular all around the world have been accessed.

1. 5. 1. Practical Data Review of Chemical Industry at Global Level

More emphasis is given for the largest manufacturers and exporters of chemicals related to
soap and detergents both in the developed and emerging economies. According to data from
ABIQUIM cited in Uniliver Research (2006) report on Uniliver in Brazil explains, North
America, Asia and the Pacific, and Western Europe accounted for more than 50% of the
installed capacity of the chemical sector, while Latin America, accounts for only 5% of
installed world capacity.
Even if the contribution and the opportunity of the sector is huge and wide, the combination
of strong dependence on imports and the low value of exports, the small size of its companies
and insufficient availability of raw materials are the major bottlenecks of the industry.
The value of both imports and exports of chemicals has grown over the past seven years. In
2012, 85% of imports originated in European countries and almost 83% of exports were sold
to countries in the same region. Increase in labor cost, demographic development, high energy
cost, high administrative and regulatory burden are the main challenges of the sector in most
developed nations.
The main challenges of the industry are, high energy cost, and in particular, increasing
additional cost through inadequate eco-energy strategy of government, high labor cost and
ageing workforce and insufficient new talent.

1. 5. 2. Practical Data Review Soap And Detergents At Global Level

The chemical industry sector also constitutes soap and detergents as manufacturers. Heavy
dependency on raw material imports, high energy and logistics prices, lack of investment in
new and innovative products, insufficient investment in marketing, high cost of taxes,
contribution and utility charges and pressure to increase taxes and fees, due to public sector
financial deficits.
For several decades now, the chemical industries have been a profitable. The country has an

11
attractive business climate for the chemical industry because the proper preconditions are
present. In addition, there are direct lines among the most important chemical centers in the
Netherlands, Belgium, Germany and northern France. Together, they form a strong cluster in
Northwest Europe. Even if they have strong base in the sector, loss of technical personnel due
to ageing workforce is the major challenge of the industry. )
The industrial sector of Ethiopia is small and highly import dependent (African Development
Bank Group, 2010). In turn, this means that Ethiopia’s high growth is still vulnerable to
foreign exchange shortages. Diversification towards the industrial sector is thus key to
sustaining high growth in the long run.
The prospect of the sector is wider for the developing and emerging economies due to
exponential growth of the population and the new consumption habit that has been raised by
the hygiene focused healthcare principal of the governments. The challenges are also different
both in the western developed world and the developing and underdeveloped countries.
Basically, the ageing workforce and dependence of import for most Europeans, demographic
structure for some northern hemisphere nations are the major challenges of the chemical
industry, particularly the soap and detergent market. In developing countries, poor
administration and government concern, lack of skilled man power and innovation are the
biggest threats of the chemical industry sector in general, the soap and detergent sector in
particular.

12
 2. PRODUCT DESCRIPTION AND
APPLICATION
2. 1. Soap
Soaps are compounds formed by the reaction of bases with fats, chemically known as fatty
acid esters. The three most important fatty acid esters: Palmitin, Stearin and Olein. They are
found in lard, tallow, olive oil, cotton seed oil, and other animal and vegetable fats or oils.
Soap is usually made by the reaction of animal fat or vegetable oil with sodium hydroxide.
The process of treating fats with bases or alkalies is called ‘Saponification’. Vegetable oils,
with unsaturated carbon chains, produce soft soaps. Animal fats yield hard soaps. Coconut oils
with shorter carbon chains yield soaps that are more soluble in water. Soaps are salts
particularly sodium or potassium of long chain fatty acids. These carboxylic acids are derived
from fatty oils. The principal active cleaning agent is sodium carboxylate.

Soap use in households, guest houses, hotels, canteens, hospitals, schools and higher
institutions, offices, etc. as a general cleaning agent. It is produced in bar form for use in hand
washing. It is used to wash hands, dishes, cooking and other household utensils, tiles, walls,
kitchens, motor vehicles, furniture, clothes etc.

2. 2. Liquid Detergent
A liquid detergent is a surfactant or a mixture of surfactants with "cleaning properties in
dilute solutions”. These substances are usually alkyl benzene sulfonates, a family of
compounds that are similar to soap but are more soluble in hard water, because the polar
sulfonate (of detergents) is less likely than the polar carboxyl (of soap) to bind to calcium
and other ions found in hard water.

Liquid detergent finds extensive use in households, guest houses, hotels, canteens, hospitals,
schools and higher institutions, offices, etc, as a general cleaning agent. It is used to wash
hands, dishes, cooking and other household utensils, tiles, walls, kitchens, motor vehicles,
furniture, clothes etc. Industrially, liquid detergent is used in large quantities in

13
manufacturing industries where conveyor belts are employed in their production lines in
order to lubricate the rolling sections of the chains so as to allow easy and effective
movement of the belts on these bearings. Such industries include but are not limited to
breweries, food processing, pharmaceutical, beverage, chemical and allied industries, glass,
etc.

14
3. MARKET STUDY AND
PLANT CAPACITY

63