Table of Contents Page No

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

2. Personal Profile of the Investor...........................................................................................5

2.1. Project Address.............................................................................................................5

2.2. Objective of the project:...............................................................................................6

3. Business Environment Scanning.........................................................................................6

3.1 Macro Level Potential for Cotton Production...............................................................6

3.2. Constraints and Risk, Major Problems Factors of the Industry....................................8

3.3. Major Risks and Constraints.....................................................................................8

3.4. Major Problems in Cotton Production Industry............................................................9

3.5. THE MAIN ACTORS OF THE INDUSTRY..............................................................9

4. Market Analysis...................................................................................................................9

4.1. General Overview.........................................................................................................9

4.2. Demand analysis.........................................................................................................11

4.2.1. Local demand...........................................................................................................11

4.2.2. International market demand........................................................................................12

4.3. Supply analysis...........................................................................................................12

4.3.1 Local production............................................................................................................12

4.3.2 International supply.......................................................................................................13

4.4. Domestic demand and supply gap analysis................................................................13

4.5. Marketing Strategy and Pricing..................................................................................14

5. Technical Study.................................................................................................................15

5.1. Cotton production agronomic practices......................................................................15

5.2. Natural enemies of the cotton plant............................................................................16

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 5.3. Yield and quality.........................................................................................................17

5.5. Farm inputs.................................................................................................................17

5.6. Technology.................................................................................................................17

5.7. Labor...........................................................................................................................18

6. Environmental Impact Assessment............................................................................................18

7. Organizational Structure and Man Power Requirement...............................................20

7.1 Organogram of the project...................................................................................................20

7.2 Manpower requirement........................................................................................................21

7.2.1 Manpower list with salary.................................................................................................21

8. Financial feasibility...................................................................................................................22

8.1. Project costs........................................................................................................................22

8.2. Planned source of project finance....................................................................22

9. Project Management, Monitoring and Evaluation.....................................................................23

10. Conclusions and Recommendations........................................................................................24

10.1 Conclusions........................................................................................................................24

10.2 Recommendation...............................................................................................................25

11. Appendices..............................................................................................................................26

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 List of Tables
Table 1………………………………………………………………………………………17

Table 2…………………………………………………………………………………………23

Table 3…………………………………………………………………………………………25

Table 4…………………………………………………………………………………………...29

Table 5…………………………………………………………………………………………...31

Table 6…………………………………………………………………………………………...33

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 1. EXECUTIVE SUMMARY
This is a Business Plan for Jilcha Ketema Agricultural Farm established in 2013 E.C. to engage
in production and marketing of Agricultural products mostly raw Cotton. The farm is found in
Gambella Nation Region State Agnuwa Zone Itang Special Woreda Wanke kebele. The purpose
of this feasibility study is to assess the viability of rain fed cotton farming and other crops to be
undertaken on 200 ha of land out of 300 ha of total land holding.
Cotton provides significant opportunities for export and domestic market. A portion of existing
textile industry demand of line cotton is met from domestic production, the remaining being met
through imports. In addition, there are good prospects for exporting lint. Opportunities for
production and processing of cotton in Ethiopia are significant. Ethiopia has a comparative
advantage in producing textiles and apparel. The country has a large labor pool given its
population of above 100 million, which is growing at above 2.5 percent each year. Its labor force
is skilled and demands low wages. The country’s climatic condition and land resources favor
cotton growing.

Financial viability:

The financial analysis of the envisaged project was carried out for the following ten years. Based
on the 10 years financial projection using the income statement, cash flow statement and
financial internal rate of return (FIRR) and the following results are obtained.

Regarding investment cost;

For capital investment: - the farm required fixed machinery, vehicle and equipment. The total
cost required for fixed investment items will be birr 8,390,000.00 at full capacity.

For operating cost: - total cost of operational expenses will be 5,320,292 ETB at full capacity.
Since project planning is a continuous activity there will be adjustments on it whenever
necessary.

Budget contribution: The promoter covers 20% of the investment costs and borrows the
remaining amount from Development Bank of Ethiopia.

Socio economic benefits

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The socio economic benefit of the project is also very high. The project will provide permanent
employment for about 17 workers, it produce industrial crop and supply the market at
competitive price, generate revenue for the government in form of taxes, facilitate the transfer of
modern agricultural technology and also contribute towards promoting the linkage between
agriculture and various sectors of the economy.

The project is found to be operationally profitable & has significant socio- economic benefits
according to the projected income statement the envisaged project starts earning profit the first
year of production. The income statement and other profitability show that the project is viable.
The project is believed to have significant social and economic benefits that accrue to the society
beyond those financial returns to its owner. The most remarkable social benefits can be
expressed in term of job creation that leads to reduction in the level of unemployment.

Therefore, considering the attractive financial and economic benefits the project is to yield, I
request approval of bank loan amounting Birr 8,390,000.00 with lease financing modality.

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 2. PERSONAL PROFILE
The project owner Ato Jilcha Ketema has been engaged in doing business majorly in mining
Industry. He has crusher machine in gambella woreda Eliya kebele. This business has been
successful and profitable having the management of the business has ample experience in the
sector.

His exposures his own business gave him the opportunity to envision for establishing modern
commercial farm and extend his efforts to materialize his personal business ambitions. He has
established agricultural farm on total land of 300 ha out of which he has been cleared 150 ha of
land and he has been producing various crops starting from 2007 E.C.

2.1. Objective
The major objective of the project is to establish and operate a high tech modern rain fed
commercial cotton farm on 200 ha of land out of 300 ha of total land holding and supplies its
product to local consumer. Beside this, it intends to produce crops like Masho, Maize and
Sesame.

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 3. BUSINESS ENVIRONMENT SCANNING (SWOT ANALYSIS)

3.1 Macro Level Potential for Cotton Production

Optimum Climate and Availability of Land

Ethiopia is known to have diversified agro climatic zones which range from a temperate type
climate to tropical climatic zones, which helps to produce different kinds of crops. The sizable
part of the country is low land i.e. it is abundantly found. The low land areas in Ethiopia are
fertile and suitable for most agricultural crops production.

Government Investment Policy

In a country, investment is boosted when the government policy and strategies initiates the
business persons to invest capital. Among these favorable conditions, low cost of lease land, low
bank rate and cheap labor can be taken as indicative. Beyond these it has also established
agricultural research institutions that directly involved in providing extension services and
research outputs for investors engaged in cotton production.

Cheap and Abundant Man Power

The country has easily trainable, cheap and abundant skilled and unskilled man power. The wage
rate paid is very low, which is not more than a dollar per day for daily laborer. Different
universities and TVET colleges have been training students on agricultural and other related
disciplines which fill the gap on trained man power requirement.

The Establishment of Textile and Garment Factories

Inspired by the government investment policy and well performing macroeconomic condition in
Ethiopia sizable amount of domestic and foreign investors have been entering the textile and
garment manufacturing industries. This would create forward linkages for the cotton production
sector.

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Professional Management
The cotton production currently related to the issue of protecting the environment and the health
and safety of workers; and growing quality and standard requirement of the cotton product. So
that it needs prudent management.

Selection of Good Variety

The selection of a given variety depends on its yield per hectare, staple length, fiber strength and
etc. Because of these selecting good variety is critical.

Selection of Suitable area for Production

Cotton production is amongst the crops that are highly sensitive to climatic variation. Hence,
before making an investment decision on cotton production, a thorough analysis of climatic
conditions, soil and water taste in the area where investment is planned to be made is very
important.

Availability of Casual Workers

In Ethiopian commercialized cotton farming Industry some activities in production process are
undertaken using man power. A cotton production investor has to be bear in mind before making
an investment decision the availability of casual laborers and the wages to be paid.

Regarding this, having the region is known by producing the cotton in the past above five years,
there will be ample laborers in the project area.

The Industry Experience of the Promoters

Before deciding to allocate money on cotton production business the owners are required to have
the knowledge of when does the project start paying them, the specific feature of cotton
production and marketing activities, the qualification and experience of the management they
would deploy, the willingness to accept a reasonable amount of risk and the importance of
working closely with the local residents.

3.2. Constraints and Risk, Major Problems Factors of the Sub Sector

3.2.1. Major Risks and Constraints

 Environmental risks
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  If rainfall became erratic it is problematic
 Sudden pest out break should be given due attention Note that cotton pest can
eradicate the whole field within a night.

 Socio-economic risks

 Price Volatility due to changes in demand and ban of raw cotton export
 Poor Market Arrangements
The modern markets arrangements like futures markets, options and swamps are not there.
Furthermore; there are no modern commodity exchange mechanisms, auction systems, where
commodities would be fairly traded in transparent and accountable ways. The poor market
arrangements, in general, are becoming the source grievance for cotton farmers as they are
receiving much lower price for their produce in the face consistently rising input prices.

 Input Price Escalation

In the production of cotton, the prices of inputs like that of pesticides and cotton seed,
agricultural machineries spare part, and other overhead cost has been increasing magnificently.

3.2.2. Major Problems in Cotton Production Industry

 Flooding Problem
Since the major cotton farming areas are located in the lowland areas where the climate and the
terrain is found to be optimum for cotton production. These areas are situated in the lower
courses of rivers flowing to the lowlands. These rivers usually result in flooding in there lower
courses when unusually high rainfall is occurred in their upper courses.

 Labor Problem

The other very important problem faced by cotton producing firms is employee’s turnover. Most
skilled and unskilled workers are discouraged by the very low wage they are paid. This situation
has increased administrative costs of the farms in addition to quality loss and increase harvest
loss.

 Working Capital Shortage

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The other major problem observed in cotton production sector is lack sufficient finance in the
cotton value chain. Working capital shortage is the common problem for cotton producers,
ginneries, textile factories and garment manufacturing sub sectors. All the way each stake holder
is facing the problem that each of them sells their produce at low price; both at the domestic and
international markets.

3.3. Strength and Weakness to Project specific

Strengths
 The general manager and project owner is educated and experienced that in turn
helps him to lead the project successfully;
 The project location i.e. it will established on the main road to DembiDollo and
also near to regional capital city and Mahly Ginnery factory, that will helps the
project to transport output and input easily;
 It will have advantage of hiring experienced employees in cotton production
regard;
Weaknesses
 The project owner has no enough experience in cotton production practice;
 Has no ample experience regarding Mechanized agricultural practices;

3.4. Mitigation Mechanisms

 Having that erratic rain fall, sudden pest outbreak and flood problem is beyond the project
capacity the promoter has planned to transfer the risks to third party so that to minimize the
risks the project will purchase Insurance policy from either of Ethiopia Insurance
Corporation or Nyala Insurance Corporation.
 In Gambella town there is newly established Ginnery factory with enough store house to
serve cotton farms here in the region. Fortunately our project site is near to this factory and as
a result it will easily sell its produces to the Ginnery with competitive price. Furthermore, in
recently years the region is becoming famous in cotton production and following this ample
experience has been created in price and marketing of raw cotton. established its own market
arrangement. Therefore, the market arrangement will not head ache for caption project.

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 Critical pesticides and herbicides are supplied by Adami Tulu Agrochemical producer
located in Batu town of Oromia Region at reasonable price. Additionally, improved cotton
seed variety is provided by Ethiopian Research Institutes. So, there won’t be farm input
problems.
 Regarding working capital shortage problem, the project has seeking working capital and
fixed investment loan from development financers to cater the problem.
 The project plans to hire experienced employees with attractive payment.

3.5. The Main Actors of the Sub-Sector

 Ministry of Agriculture and Rural Development
 Development Bank of Ethiopia: provide investment loan;
 Agricultural Research Institutions: Supplies different research out puts and improved
varieties of seeds.
 Regional Local Government Institutions
These institutions provide security services to the investors and their workers, as the farms would
be established in the place where pastoralist society dominating and social unrest is a common
feature.

Generally, cotton production is one of major government priority and focuses area to save
FOREX and substitute imports. So, the sub sector has a full support of government policy.

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 4. MARKET ANALYSIS

4.1. General Overview

Cotton being the major source of the basic human need, it is among the most important non- food
crop that occupies a significant position both from agricultural sector and manufacturing sector
of the world. About one billion people’s livelihood depends on cotton production throughout the
world. Cotton is one of the world’s most important cash crops that play a vital role in the
economies of many development countries. It has a strong forward linkages and high value
adding attributes. In its forward linkages with textile industries works as a raw material supplier
and provides cotton seed for the production of edible oil 7 animal feed % bi-products for other
uses.

Ethiopian has best state of environment for diversified natural resources, plants & animals. The
country is generally known to have enormous cultivable land resource suitable for cotton
production extending from the low to mild altitude areas. Given such considerable potential in
cotton production and processing, the limited number of farms and backward farming
technologies is causing a sluggish in the sector. Line cotton is a major input for the textile
industry. The demand for the production is therefore derived from the demand for textile
products. According to a textile sector survey conducted in 2012 by chamois international inc.,
the annual cotton consumption capacity of spinning plants in Ethiopia when they operate at full
capacity is 59,876 tones. Currently, cotton is produced by state farms, private commercial farm
and peasant farms. Cotton produced on the state farms and private commercial farms is ginned
and used in commercial textile manufacturing, while that produced by peasant farms is for the
larger part used by the hand industry.

Ethiopia’s textiles and clothing industry is undergoing major development, aided by the presence
of a cheap, skilled and highly-motivated workforce. This surge has been helped by the country’s
impressive economic growth over the past years. Ethiopia’s enormous export potential is made
possible by the wide availability of cheap labor and natural fibers and Ethiopia’s access to
domestic, regional and international markets. The export structure of many developing courtiers
has been dominated by few primary commodities for decades however, this trend of
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development on thee commodity types couldn’t fulfill their export earning requirements. Rather,
it makes them to depend on the vagaries of nature, and loss added value that could have been
created had they been processed further.

Available within Ethiopia are all essential ingredients for a competitive textile industry: raw
materials, low wages and low energy costs. This gives the country a comparative advantage over
other countries and regions. In recent years, the global market has become increasingly
accessible to countries such as Ethiopia. New export opportunities were created through
initiatives such as AGOA (the African growth and opportunity act), COMESA (the common
market of eastern and southern Africa) and the many bilateral trade agreements concluded with
western countries, including the Netherlands, Belgium and Luxembourg.

Ethiopia is also part of the ‘’everything but arms’’ program that has been set up on provide
access to the E.U. market for lesser development beneficiary countries, free of duty and without
quota restrictions, for all export products except arms.

4.2. Demand analysis

4.2.1. Local demand

Cotton is an important raw material for the textile industry, considered as the major raw material.
Ethiopia has a comparative advantage in producing textiles and apparel. The country has a large
labor pool given population of around 81 million, which is growing at 3% each year. It has
trainable labor force and relatively low cost than other competing countries in the sector and the
country’s climatic conditions and land resources favors cotton growing

The Ethiopian textile industry is the largest manufacturing industry, only second to the food
processing, beverage and leather industry, in the fiscal year 2011/12, with a total output value of
699.91 million birr(IUSD=8.6birr), the contribution of textile industry. Textile and apparel is the
largest sector in term of employment creation in the manufacturing sector of the country. The
majority of these factories were owned by the state and set-up primary for the intention of import
substitution strategy purpose .since recently, however, the government, in view of their
importance is creating conductive atmosphere to privatize these industries and rehabilitate them
both technically and managerially to be competitive in the export market. export for 8

13
government companies, there were currently about 32 private enterprises under different
investment stage in the same year.

The existing weaving and kitting factories consume both cotton and manmade fibers either
locally produced or imported. There are seventeen integrated large-scale textile mills, yarns and
thread factories. The aggregate capacity of these factories is 54,735 tons of fabric, 79,853 tons of
yarn and 91,831line cotton per year i.e. around 262,374tons raw cotton. The current consumption
capacity of yarn by weaving and knitting factories is presented in the table here below using the
production relation that assumes 1.5gk of yarn is required to produce 1kg of fabrics and around
85% of lint cotton converted to yarn. In addition to the current textile factories under operation,
there are four factories, which are expected to join the market with total capacity of 53,000 tons
of fabrics (equivalent 91,425 tons of lint cotton) until the year 2014.

4.2.2 International market demand

The export market is believed to be the major target marked of the company products. In this
instance, trades which have an impact on the demand for cotton mainly matters the consumption
behavior global market.

The world demand for cotton has increased tremendously during the past few years thus creating
a wide gap between production and factory use. The world cotton consumption has increasing at
an average of annual growth of about 5% since 1940. According to international cotton advisory
committee (ICAC) the main cotton importing economies i.e. china, turkey, Bangladesh,
Indonesia, the Vietnam, Italy, Korea, Germany, Mexico, and USA account for a large part of
consumption during 180-2010.

World cotton import has grown by 7 percent on average for the period covering year 2011 to
2014. As table during the period under consideration china has imported the highest amount of
cotton followed by turkey and Bangladesh.

These countries have been improved in manufacturing of textile article.

The high wage rate particularly in development countries has shifted such manufacturing to
development countries.

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Ethiopia not only export cotton, but also important it whenever the need arises. Though cotton
production is more than the demand of the nation, due to various marketing imbalances certain
amount of cotton is usually imported; in this instance the amount of cotton imported reached 4.3
million USD in 2014.

4.3. Supply Analysis

4.3.1. Local production

Ethiopia has enormous potential for production of cotton. Studies undertaken by the ministry of
agriculture indicate that there is some 2.6 million hectare of land suitable for cotton production.
The area suitable for cotton production is said to be equivalent with Pakistan, which is among the
five largest producers in the world. Out of the total 2.6 million ha of land suitable for cotton
production, 1.7 million ha or 65% is found in 38 high potential cotton production areas and the
remaining 0.9 million ha or 35% is in 75 medium potential districts. Despite this immense
potential, Ethiopia currently produces only about 77,000 -84,000 MT of raw/ seed cotton
annually from a total cotton area of 42,371 ha. Annual area cultivated with cotton in Ethiopia
accounts for about 3.6% of the total cotton area of eastern and southern Africa. Cotton is
presently produced under both rain- fed and irrigated conditions by farms, private commercial
farms and smallholders.

The total production of raw cotton and area covered by cotton production has reached 227,731
tons and 118, 012 hectares of land respectively. The ministry of agriculture and development
estimate is 47,694 tons for 2014/15 in case of Ethiopia; the yield of 263 kg is kg is about 1/3 rd of
the global average of 725kg and lowest among the reference countries where (except Bangladesh
) the average yields are over 2 to 4 times higher. This is attributed such as irrigation, availability
of good quality seeds and use of fertilizers and bio technology. The cotton production and yield
in Ethiopia (2009/10) compared to the major cotton producing is shown in table below.

4.3.2. International supply

Cotton is also a heavily traded agricultural commodity, with over 150 countries involved in
exports or imports of cotton. More than 100 million family units are engaged directly in cotton
production. When family labor, hired- on farm labor and workers in ancillary services such as
transportation, ginning, baling and storage are considered, total interment in the cotton sector

15
reaches about 350 million people. In this instance, the value of world export of cotton over the
period 2007 to 2010 has increased from 58.1 million USD to 58.1billion USD implying the
product impact on the world economic activity. Cotton export over the stated period of time
grows on the average by 10 percent and the major exporting countries are china, USA, India,
Pakistan, Italy, turkey, Germany, Uzbekistan and brazil in their order of significance. These
countries have been involved in manufacturing of textile articles.

The high wage rate particularly in developed countries has shifted such manufacturing to
development countries. The exports market is beloved to be the major target market of the
company products. In this instance, trades which have an impacts on the demands for cotton and
maize matters the consumption behavior global market. The world demands for cotton have
increased tremendously during the past few years thus creating a wide gap between production
and factory use. The world cotton consumption has increased at an average of annual growth of
about 5% since 1940.

4.4. Domestic Demand and Supply Gap Analysis

Including the supply of the project under consideration there will be unsatisfied gap or excess
demand for the coming five years. As discussed in the preceding in the preceding passages, the
demand for cotton is going to be growing at an increasing more than the supply of cotton in the
local market. Hence, excess demand is assumed to be satisfied by import.

As depicted in the below the actual annual demand for raw cotton increased from 56,672 tons in
2007 to 198514 tons in 2019. Meanwhile, the annual total production didn’t exceed 55,728 tons
in the year 2019 leaving 142,786 tons of raw cotton demand unsatisfied.

Table: 1. Domestic Demand and Supply Gap Analysis

Year Domestic Export Total Total Unsatisfied

Demand Demand Demand Domestic Demand
Production
2007 33982 22690 56672 37716 33982
2008 37380 24958 62338 38718 24620
2009 41118 27454 68572 39182 29390
2010 45230 30200 75430 40152 35278

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 2011 49753 33220 82973 40251 42722
2012 54728 36542 91270 41152 50118
2013 60200 40196 100,397 45158 55239
2014 66221 44216 110,437 46818 63619
2015 71450 51265 122,715 48478 74237
2016 78569 57891 136460 50197 86263
2017 85699 68568 154267 51977 102290
2018 94789 79654 174443 53820 120623
2019 107256 91258 198514 55728 142786

4.5. Marketing Strategy and Pricing

Product pricing survey conducted, the average selling price for cotton currently is birr 2,700 per
quintal. For financial projection purpose an average selling price used.

Currently, due to the existence of excess demand following the growing manufacturing sector,
the company has planned to deliver its products within shorter period maintain the right quality
and price.

The project has also a plan to distribute the product to ginners using own transport. The quality
and selling price of the product is also exported to attract both quality sensitive and price
sensitive customers.

Marketing strategy is a system by which the firm sales its products to consumers. Such system is
a system that require periodic assessment of behavior of customers their sensitivity to price,
quality and operation of competitors. In this instance, the company has planned to utilize the
following marketing strategies.

 Producing quality product beyond the expectation of the local demand and charge
reasonable price in order to break the market and build its own reputation.
 Advertise its product to the local market by using varies media instruments and
participating on local trade fairs.

17
  Distribute the product directly to consumers in order to avoid unnecessary margins by
middle agents.

5. TECHNICAL STUDY

5.1. Cotton Production Agronomic Practices

Cotton is grown for fiber and seeds. The origin of cotton is still uncertain. The development of
the crop is sensitive to temperature. Cool nights and low daytime temperature result vegetables
growth few fruiting branches. The crop I very sensitive to frost and a minimum of 200 frost free
days is required. The length of the total growing period is about 150 to 180 days. Depending on
temperature and variety, 50 to 85 days are required from planting to first formation, 25 to 30
days for flower formation and 50 to 60 days from flower opening to mature boll. No clear
distinction can be made in crop growth period since vegetative growth is continued during
flowering and boll formation and flowering is continued during boll formation.

In Africa, the cotton plant behaves like a perennial, i.e. growth may continue for a number of
years, but it is always advisable to grow it as an annual crop, mainly to curtail the development
of diseases and pests. The growth cycle is broken down in to a number of stages. Cotton is a
short- day plant but day- neutral varieties exist. However, the effect of day length on flowering is
influenced by temperature. Germination is optimum at temperature of 18 to 30oc, with minimum
of 14oc and maximum of 40oc. Delayed germination exposes seeds to fungus infection in the
soil. Early vegetative growth, temperature must exceed 20oc with 30oc as desirable. For proper
bud formation and flowering, daytime temperature should be higher than 20oc and night
temperature higher than 12oc, but should not exceed 40 and 27oc respectively. Temperatures
between 27 and 32oc are optimum for boll development and maturation but above 38oc yields'
are reduced.

Cotton is grown on a wide range of soil but medium and heavy textured, deep with good water
holding characteristics are preferred. Acid or dense subsoil’s limit root penetration. The PH
range is 5.5 to 8 with 7 to 8 regarded asd optimum. The fertilizer requirements of cotton under
irrigation are 100 to 180 kg/ha nitrogen, 20 to 60 kg/ phosphorous, and 50 to 80 kg/ ha
18
potassium. Two- thirds of the nutrients are taken up during the first 60 days of the growing
period. Nitrogen should be readily available at the start of the growing season; normally two
applications are given with one after sowing and the other prior to flowering. Phosphate is
applied before sowing plant spacing normally varies between 50/100 x 30/50 cm. the crop is
tolerant to soil salinity.

5.2. Cotton production practices and Agro-ecological situation in the Region

In Ethiopia the potential cotton growing regions identified by Ministry of Agriculture are
Gambella, Southern Nations, Affar and Tigray. It is obvious that the Gambella region has been
known by producing cotton and sesame crops since early 2014 to now. According to Regional
Investment Agency data during these periods above 600 developmental Investors has
participating in producing majorly cotton and Sesame crops and supporting country’s Economy.
Besides, currently the regional government is focusing on Agriculture sector and providing
additional undeveloped lands for this purpose.

Furthermore, during these periods the Altitude, Temperature, Rain Fall and Soil characteristics
of the region confirmed to be suitable for cotton production in rain fed modality.

5.2.1. Rain Fall

Having water is very critical for cotton seed germination and maturity, the region has been
experiencing ample rain fall starting from May to November. According to field survey
undertaken by study team we confirmed that the cotton farms found in the region are rain fed
farms. Besides, they confirmed us that there is no rain fall problem in history their Agricultural
experience in the region.

5.2.2. Altitude

Cotton is basically a crop of warmer climates. In Ethiopia, a good cotton yield is obtainable from
areas varying in altitude from sea level to about 1000m. According to regional respective organ
source Wanke Kebele is found on 455m above sea level, so that; selected area found to be
suitable for cotton production.

5.2.3. Temperature

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According to MoA data the optimum Temperature required for cotton production starting for
Germination to boll development and maturity is between 19 oC to 32 oC.The Average
Temperature registered in the region during cropping season (i.e. May to December) is 22 oC to
30 oC.

5.2.4. Soil

Typical cotton soils are heavy, dark, often cracking soils. Cotton crop also performs well on a
variety of lighter soils such as loams. Since cotton is a fairly deep-rooted crop, deep soils of 180
cm or more are preferred. So that, the location selected by this project soil characteristics is
heavy and dark. Besides, the project will provide Soil test for financing Institution.

Generally, by taking all narrated Agro ecological aspects of Gambella region is technically
feasible for rain fed cotton production.

5.3. Natural Enemies of the Cotton Plant

Weeds: weeds are the natural vegetation occupying cultivated soil and grow from fragments of
stocks, rhizomes, bulbs or cuttings and above all, seeds. They grow alongside crops and compete
with them for light, water and the nutrients in the soil.

Animal pests of cotton plant: In tropical Africa some 480 species of insects, mites and
nematodes have been recorded which live off cotton plants and a large number of these are
harmful to the crop. They attack the different organs of the plant, either by eating them sucking
the sap or introduction into them toxic saliva or germs of diseases or rot.

Diseases: cotton plants are attacked by numerous micro-organisms that are responsible for
diseases which weaken them and in some cases, destroy them or render them sterile. The
diseases include bacterial blight, damping off, root and collar rotes and virus or mycoplasma
diseases.

Water requirements: depending on climate and length of the total growing period, cotton needs
some 700 to 1,300 mm to meet its water requirements. Adequate water supply is needed for
vigorous growth, good budding and fruiting and for formation of healthy bolls. Excess water
early in the growing period will restrict root and crop development. Cotton requires adequate

20
water supply particularly just prior and during bud formation. Continued water supply during
flower opening and yield formation periods results in prolonged and excessive growth and yield.
Water stress on cotton can be observed by discoloring of the stem and appearance of a bluish
green color on the leaves.

5.3. Yield and Quality

The yield of raw cotton per hectare is different from place to place which depends on agro
climatic and fertility of soil. In our case the project will harvest quality raw cotton of 19.5qt per
hectare.

Ethiopian quality standard agency has not set quality standard for raw cotton so far.A good yield
of a 160 to 180 day cotton crop under rain fed is 2 to 3 ton/ha seed cotton of which 35 percent is
lint.

5.5. Farm Inputs

Majority of farm inputs including improved variety of Cotton seed, chemicals, fertilizers and
Packaging materials are available in the local market. According to Ethiopian institute of
agricultural research improved varieties of cotton seed such as; bulk-202, arba and deltapine-90
are releasing from Ethiopian research institutes. Critical pesticides and herbicides are supplied by
Adami Tulu Agrochemical producer located in Batu town of Oromia Region at reasonable price.

5.6. Technology and Production Process

Commercial cotton production has become familiar agriculture practice in Gambella region
recently. It involves both machine operation and labor operation to plant and maintain the crop.
Harvesting of cotton relies on manpower and machine operation is not yet used to collect cotton
yield in Gambella particularly and in Ethiopia generally.

Tractors, disc ploughs, disc harrows, ditchers, riggers, planters, sprayers and simple hand tools
are the widely used farm equipment in cotton production process. Sophisticated machinery is not
needed to cultivate and harvest cotton to attain the national average productivity. And all
machinery and production technology can be acquired within the proposed investment budget of
the project.

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Table 2: Machinery required and Budget

I Machinery and pick up

Sr.N
Quantity
o Description Unit Price Total Price
1 Tractor 1 3,700,000.00 3,700,000.00
2 Trailer 1 320,000.00 320,000.00
3 Disc Harrow 1 650,000.00 650,000.00
4 Planter 1 550,000.00 550,000.00
5 Sprayer 1 300,000.00 300,000.00
6 Compressor 1 50,000 50,000
7 Pick Up Vehicle 1 2,500,00.00 2,500,00.00
8 Generator 1 320,000.00 320,000.00
8 8,390,000.00 8,390,000.00
Sub Total

There are plenty of skilled operators in Gambella those manage to maneuver and repair the
machinery without difficulties. Therefore, the project won’t suffer from such a treat to acquire
and utilize prevailing agricultural technology.

According to Ministry of Agriculture in the Gambella Region there is 316,450 ha of land

identified for Agricultural activity.

The production process of cotton majorly encompasses Land development, crop growing,
harvesting and ginning.

Land development entails those activities which come before any other tillage systems. Land
development of cotton comprises the activities including clearing the vegetation of a virgin land,
ploughing, leveling, terracing, farmland organization, construction of farm road and first
plowing. Tree felling, uprooting and trash removal & disposal are the major activities which

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have to be considered during land clearing so as to make suitable the land for leveling operation
in the area covered with jungle.

Plowing the land for two or three times across the field will produce a fairly good tilled land.
Ridging of land and sowing cotton on ridges use for good yield and the furrows act as drainage
channels whenever heavy rains are received particularly in heavy clays. After clearing a virgin
land, large holes may result following the tree felling and uprooting operations, so that uneven
land should be leveled by Dozer and man power. Next farm road will be constructed within the
farm can have 7 m width in order to face big machineries.

After land clearing activity completed, planting of cotton seed continues. Sowing period of
cotton varies from region to region; but for rainfall farms, sowing time is almost the same or
similar. Having the project will be rain fed cotton farm the sowing time in Gambella is between
the months of June 15 up to June 30.

After the cotton seed sowed crop maintenance and management activities such likes thinning,
weeding, application of chemicals and Fertilizers follows.

Harvesting is one of the final steps in the production of cotton crops, it is one of the most
important. The harvesting time of raw cotton for those based on rain feed agriculture in
Gambella region falls between December-January.

Once harvested, seed cotton must be removed from the harvester and stored before it is delivered
to the ginnery. Seed cotton is removed from the harvester and placed in modules in the fields
until they are ready to be ginned.

Generally, after all above discussed production processes completed, the project will sell its
produces to nearby ginnery factories and oil processing companies.

5.7. Labor
Experienced labor familiar with the prevailing cotton farm technology are obtainable from
Gambella town and the neighboring region of Oromia at fair wage rate both on permanent and
temporary contractual basis.

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Farm managers with ample and specific experience in cotton production can be recruited and
hired from Gambella region since substantial number of farms projects are laying off employees
due working capital shortage and other financial problems.

5.8. Land Development

The project has fully developed the total 100 hectares of farm land with own source of finance
before applying for Loan..

5.9. Utilities

Having the captioned project is Agricultural project there are no major utilities required of
production of the cotton. However, electric, phone, and water will required for smooth operation
of the project.

 Electricity: The project location has no electricity service up to yet. For office purposes
and other things the project plans to procure power generator by birr 85,000.00.
 Water: water is one fundamental resource for human beings. So that, the project will
plans construct borehole by birr 40,000.00.
 Phone and Internet: for smooth operation and communication the promoter plans to
install Internet service and cell phone service for the camp project with the help of Ethio
Telecom.

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 6. ENVIRONMENTAL IMPACT ASSESSMENT

The promoter gives due attention for environmental protection issues. The following are major
remedies to be taken so as to insure the project is environment friendly.

Develop organizational policies and structure for the farm consisting institutional
structure for environmental management that show roles and responsibilities and
implementing the recommendation set in EMP.
Construct standardized base camp and provide the necessary facilities for employees, set
up separate storage compartment for products, chemicals and other toxic inputs
Apply integrated land use plan, business plan and design of farm outlay. Conduct regular
discussion with employees to conserve the bio diversities of the farm and to solve the
problem occur during operation.
Set up pond to collect and bury the chemical and other thorn materials to prevent
pollution of water and environment.
Follow appropriate site selection procedures to construct residential, office and storage
facilities.
Controlling pest with the method of integrated pest management control, proper and
expertise applications
Proper disposal of chemicals containers.
Training on the safe application of pesticides and fertilizers.
Avoid girdling giant trees.
Establish firebreaks around sensitive areas to impede fire damage.
Leaving forest game reserves as habitat in areas not suitable for agriculture and banning
illegal hunting

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 Awareness creation to combat STDs which may occur due to mass emigration of labor
force to project area
Leave undisturbed buffer zone between farm area and nearby water bodies
Monitoring the pollution caused by fertilizer and chemical applications

Conservation and land management measures

7. ORGANIZATIONAL STRUCTURE AND MAN POWER REQUIREMENT

The project will have three main unites, namely, production & technical unit, admin and finance
units under the office of the project manager. The main responsibility of production and
technical unit is for operational and technical aspects of production and maintenance. The
marketing unit is responsible for procurement of inputs and sales activities. The admin and
finance unit is responsible for controlling and guiding personnel and for controlling and
maintaining all financial accounts.

As to the management of the project is concerned the owners will be responsible for the overall
project planning co-ordination and implementation. After implementation the owners serves as a
top management body and frequently visits and supervises the farm site.

The company will hire qualified and experienced farm manager whose main responsibility
company manager. Likewise, each main unit will have their own supervisors that are company
manager. Likewise, each main unit will have their own managers that are accountable for the
farm manager. For the day –to-day activities the project will hire professional and non-
professional employees. Normal operation of production is possible with the existence of
competent management staff. For smooth and efficient operation of the farm it has been
anticipated that each units will have adequate number of qualified and experienced manpower.
The manpower component of the farm will include farm manager, unit managers, agricultural
experts, tractor operators and assistants, mechanic, and admin stuffs.

7.1 Organ Gram of the Project

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 General Manager

Secretary

Farm Manager

Technical operational
Administrative manger/Chief
4.
manager agronomist Store and
5. procurement

Accounting section Operational staff and Input section

laborers

Diagram 1: organizational structure

7.2. Manpower requirement

The crop production sub sector is said to be the most labor intensive agricultural activity in the
country, naturally most of the operations are undertaken using labor. Almost all operations,
specially, sesame maintenance activities, cultivation and harvesting of the product are the major
operations that need labor. The agronomist, mechanical and technical workers are expected to be
skilled in their respective profession.

The availability of skilled and experienced man power in this sector may not be taken as a
problem, more than five decades different pioneer institutions like Ambo, Jimma & Hawasa
Colleges of Agriculture and Haromaya University train students on different agricultural fields.

The problem as far as skilled man power is very high employment turn over, due to
unwillingness of the skilled workers to work at the areas where the infrastructure are not fulfilled
with very little incentive and accommodation. In Ethiopia there is poor culture of working at
field; individuals usually prefer to work at offices.

Seasonal labor: Major farm activities such as planting, weeding and harvesting of proposed crop
consume more labor. Therefore the availability of required laborite during critical period is the

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 key to the success of the farm business. It is therefore, of utmost importance that the farm
management takes aggressive and effective measure to attract adequate labor through
competitive payment of wages and provision of shelter, food ration, health and transported
services.

8. FINANCIAL FEASIBILITY
The main components of the project activities consist of land development, construction of
workers residents, stores, offices and sheds, purchase of farm machineries and equipment,
procurement of vehicles etc. all these activities constitute fixed investment. Other components
including machine operations, labor operations and material inputs, utilities and other costs of
recurrent activities constitute production cost of the projects.

8.1. Project Costs

For capital investment: - the farm required fixed machinery, vehicle and equipment. The total
cost required for fixed investment items will be birr 8,390,000.00 at full capacity.

For operating cost: - total cost of operational expenses will be 5,320,292 ETB at full capacity.
Since project planning is a continuous activity there will be adjustments on it whenever
necessary.

8.2. Planned Source of Project Finance

Budget contribution: The promoter covers 20% of the investment costs and borrows the
remaining amount from Development Bank of Ethiopia.

Table.6: Planned Source of Project Finance

Source of Financing Amount in ETB %age share from total Remarks

project cost
Owner’s Capital 1,678,000.00 20%
Loan 6,712,000.00 80%

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Grand Total 8,390,000.00 100 %

9. PROJECT MANAGEMENT, MONITORING AND EVALUATION

The overall management of project is to be executed by the investor himself.
Monitoring: - is a follow-up activity according to the schedule for accomplishment

 Keep recording
 Continuous collection of data and converting into information
 Provide data to improve management
 Guide management decision
 Insure implementation

This strategy proposes the need for setting up an effective monitoring and evaluation system for
the success of the envisaged food security interventions in the region. The following will be
considered:
 A monitoring and evaluation unit with adequate and qualified staff and logistics will be in
place in the proposed food security organizational structure
 Moreover, the appropriateness of fund utilization and the extent of use will be monitored
regularly.
 A regular reporting of activities accomplished and loan utilization will be made through
reporting formats. The basic unit of reporting will normally start from the farm operation
units where actual implementation of projects will take place.
Evaluation: - the project evaluation is done at threestage

 Project commissioning
 Midterm evaluation: to revise objectives and methods of the project in progress

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  Project completion/project graduation: - which may do at the end of investment to
estimate return.

10. SOCIO ECONOMIC BENEFIT

 Employment Creation

Cotton farming is one of labor intensive agricultural production activity. The importance cotton
farming practice in creating employment is not only limited to the farming practice but also to
textile and garment industries too. Indalkachew Tamiru Agriculture Development plans to create
employment opportunity for 17 permanent employees and 300 causal laborers at peak seasons.

 GDP Contribution

The production of Cotton contributes to the GDP, increases the income of the workers employed
in and the owners too i.e. the entirely national GDP. Additionally, throughout project life birr
11,056,107.58 will be paid for government in the form Income Tax.

 Forward Linkage Effects

Generally, cotton production will have a magnificent linkage effects in textile value chain. The
flourishing of textile and hence garment industries in the country directly related with the growth
of cotton farming sub sector. On the other hand, the cotton seed which is one of the produce of
raw cotton can be used as an input. Cotton seeds are particularly important in the production of
edible oil, animal feed, and etc.

 Save foreign currency indirectly; the existence and expansion of cotton producing farm in
the country will save foreign currency by substituting import.

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 The project will transfer and provide technology service for small holder farmers across the
region.

11. CONCLUSIONS AND RECOMMENDATIONS

11.1. Conclusions
Cotton production is one type of agricultural activities that is currently undertaken in Ethiopia
and the sector is becoming a promising and gradually growing sector in recent years since the
sector is a base for the development of textile industry. It encompasses a chain of industries,
ginning, spinning, waving, and garment businesses which could absorb thousands of workers.
Most developed nations passed this stage and now the sector moved to developing nation due to
relatively lower labor charge. As the result the sector currently fits well to the development
strategy of the country. The total cultivated land of 32% is attributed to the deficiency of finance
though the country is largely endowed with enormous potential for production of cotton; the
country has not utilized its potential yet.

The proposed project is located in Gambella National People’s Regional State where the
environment is appropriate for multifarious cotton kinds’ development. This project under
consideration is one of the commercial agricultural farming which is concerned specifically on
cotton production. The major objective of the project was modern commercial cotton farming to
produce high quality cotton on 200 hectares of land to supply to domestic market.

Government’s main area of focus is provision of funds to investment projects that comply with
Agriculture Led Industrialization strategy (ADLI) of the country. Agricultural development
project is, therefore, one of the priority area projects that fall within the ambit of the Bank. The

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result of feasibly study shows that the project is found to be viable, profitable, and its liquidity
position is reliable. It is a source for government income, enhance foreign exchange earnings of
the country, promote exports, and increase employment opportunities. The project also has
implicit advantage in ensuring the profitability and sustainability of the Bank.

The socio–economic benefit of the project shows that the project can creates permanent
employment opportunity and a number of daily laborers, increasing the supply of raw cottons,
contributes to GDP, generates revenue for government in the form of tax and brings technology
transfer and supports the development plan of the government in general.

11.2. Recommendation
In the view of the above assessment, the project is found to be viable with all aspects of financial
viability testing and thus, we recommend allocation of bank loan amounting Birr 8,390,000.00
provided that the project will be implemented according to the proposed business plan derived
from the feasibility study.

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