Project Proposal on Mixed Farming

for the Production of Rice, Sesame, Cereals

(Sorghum & Maize) and Fruits

This project proposal envisages the development of a Mixed Farming Complex for the production of
Rice, Sesame, Cereals (Sorghum & Maize) and different kinds of Fruits, based on suitability of the local
agro-ecological requiremnts.

By: Gacalo Mixed Farminig Cooperative

Presented to: Somali Regional State

Irrigation Development Bureau

June 2024, Gode

Project Proposal on Mixed Farming for the Production of Rice, Sesame, Cereals June 2024,
(Sorghum & Maize) and Fruits Gode

Contents
0. Executive Summary ......................................................................... 6

1. Background .................................................................................... 7

2. Company Summary ......................................................................... 7

3. Description of the Project Area .......................................................... 8

3.1. Location .................................................................................... 8

3.2. Demographics .............................................................................. 9

3.3. Economy ..................................................................................... 9

4. Description of the Project ............................................................... 10

5. Objective of the Study and Methodology ........................................... 10

5.1 Objectives of the Study ................................................................ 10

5.2 Methodology ............................................................................... 11

5.2.1. Deskwork ............................................................................... 11

5.2.2 Primary Data Collection ............................................................. 11

6. Purpose of the Project .................................................................... 12

6.1 Land Plot Area .......................................................................... 12

6.2. Access to resources .................................................................. 12

6.3. Availability of infrastructure ....................................................... 13

6.4. Capability and Competence ....................................................... 13

6.5. Socio-economic Benefits .............................................................. 13

6.6. Capability and Competence ....................................................... 13

7. Product Description........................................................................ 13

8. Market Analysis ............................................................................. 14

8.1. Demand Consideration ................................................................ 14

2 | Page By: Gacalo Mixed Farminig Cooperative

Project Proposal on Mixed Farming for the Production of Rice, Sesame, Cereals June 2024,
(Sorghum & Maize) and Fruits Gode

8.1.1. Population size and its growth ................................................. 14

8.1.2. Economic growth and rise in disposable Income ......................... 14

8.1.3. Urbanization Trend ................................................................ 15

8.1.4. Awareness in Nutrition and Health ........................................... 15

8.2. Marketing Strategy ..................................................................... 16

8.3. Sales strategy ............................................................................ 17

9. SWOT Analysis .............................................................................. 17

10. Organization, Management and Manpower ...................................... 18

10.1. Organization ............................................................................ 18

11. Technical Study ........................................................................... 19

11.1. Land Use Plan ........................................................................ 19

11.2. Farm Machinery and Equipment .................................................. 20

11.3. Raw Materials Consumption ........................................................ 21

Table: Raw Material Required for the Farm ........................................... 21

12. Description of Production Processes ................................................ 21

12.1. Agricultural Operation ................................................................ 21

13. Production Capacity & Production Programme .................................. 23

13.1. Farm Size & Plant Capacity ......................................................... 23

13.2. Production Programme .............................................................. 23

Table: Farm production programme ..................................................... 23

14. Implementation Schedule ............................................................. 24

15. Environmental Impact ................................................................. 24

15.1. Beneficial Impacts ..................................................................... 26

15.1.1. Economic Benefit .............................................................. 26

3 | Page By: Gacalo Mixed Farminig Cooperative

Project Proposal on Mixed Farming for the Production of Rice, Sesame, Cereals June 2024,
(Sorghum & Maize) and Fruits Gode

15.1.2. Employment ..................................................................... 28

15.1.3. Investment ...................................................................... 28

15.2. Social Benefits ..................................................................... 29

15.2.1. Local Livelihood Improvement ............................................. 29

15.2.2. Gender Equity and Employment Opportunities ....................... 29

15.3. Adverse Impacts ....................................................................... 29

15.4. Conclusion ............................................................................... 29

16. Financial Analysis ........................................................................ 30

Table: Machineries requirement .......................................................... 30

Table: Vehicles ................................................................................. 30

Table: Fixed Assets ........................................................................... 31

Table: Depreciation ........................................................................... 31

Table: Repair and maintenance costs based on the standard rate............. 31

Table: personnel plan ........................................................................ 31

Table: Sales Forecast......................................................................... 32

Table: Cost of sales (per year) ......................................................... 32

Table: Costs of sales forecast.............................................................. 32

Table: operating expenses.................................................................. 33

Table: Annual Operating Costs ............................................................ 33

Table: Working Capital Determination .................................................. 33

Table: Planned Investment for the whole project ................................... 33

17. Financial Evaluation ..................................................................... 36

17.1. Profitability ............................................................................ 36

17.2. Break-Even Analysis ............................................................... 37

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Project Proposal on Mixed Farming for the Production of Rice, Sesame, Cereals June 2024,
(Sorghum & Maize) and Fruits Gode

17.3. Payback period ...................................................................... 37

17.4. Internal rate of return and net present value .............................. 37

5 | Page By: Gacalo Mixed Farminig Cooperative

Project Proposal on Mixed Farming for the Production of Rice, Sesame, Cereals June 2024,
(Sorghum & Maize) and Fruits Gode

0. Executive Summary
This project proposal is prepared with the objective of establishing a Mixed
Farming project for the efficient production of Rice, Sesame, Cereals
(Sorghum & Maize) and different kinds of Fruits on a total land area of
1,000 Hectare to be implemented at Gode Wereda of Shabelle Zone,
Somali Region.

The project is owned and operated by Gacalo Mixed Farminig

Cooperative, a Company formed by the alliance of senior entrepreneurs to
primarily engage in the agricultural activities. Our market study suggested
that there is a huge demand for the company’s products both domestically
and on the international market.

At full capacity operation, the project intends to produce 40,000 tons of

Rice, Sesame, Cereals and fruits per annum. As such, the operation of the
project will create direct employment opportunities for more than 71 persons
to be employed in the Farm facilities.

The total initial investment required starting up the project estimated at Birr
300,000,000.00 and 100 percent of the costs shall be covered by the
owner’s equity. The project is financially viable with an internal rate of return
(IRR) of 46% and a net present value (NPV) of Birr 441.94 million
discounted at 8.5 %.

6 | Page By: Gacalo Mixed Farminig Cooperative

Project Proposal on Mixed Farming for the Production of Rice, Sesame, Cereals June 2024,
(Sorghum & Maize) and Fruits Gode

1. Background
Ethiopia is predominantly an agriculture country. About 40% of the Gross
Domestic Product and 90% of the Crop sector predominates the agricultural
sector. Besides, nearly 86% of the active rural labor force is engaged in
agriculture.

The agriculture sector is stagnant sector in Ethiopia, although the sector is

very important in the rural economy because of its contribution to the value
addition and diversification of income generation and foreign exchange
inflows to the country.

Ethiopia has a fairly well distributed rainfall and moderate temperature that
allows Production of a variety of tropical and sub-tropical crops and
livestock. This is complimented by fairly fertile soils which support the
production of very high quality and nutritious crops.

2. Company Summary

Name: Gacalo Mixed Farminig Cooperative

Business Type: Agriculture

The Association is established by the alliance of Senior Diaspora Ethiopian

Businessmen from Somali Region with the objective of operating a mixed
farming enterprise.

Members of the Cooperative Association believe that participating in this

business is not only about making profits but also contributes to respond to
scarce foreign currency in the country by primarily focusing on delivering the
products to the export market.
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Project Proposal on Mixed Farming for the Production of Rice, Sesame, Cereals June 2024,
(Sorghum & Maize) and Fruits Gode

Hence, there is a strong self-interest by the owners of the project in

fostering prosperity to this country in general and in Somali Region in
particular through operating in production of oil seeds.

3. Description of the Project Area

The project is proposed to be located at Gode Wereda of Shabelle Zone,
Somali Region. The space required for establishing the Farm is estimated to
be around 1,000 hectares.

3.1. Location
Region --- Somali Regional State
Zone --- Shabelle
Wereda --- Gode

Gode (Godey) is a woreda in the Somali Region of Ethiopia, named after its
major town, Gode. Part of the Gode Zone, Gode is bordered on the south by
the Shebelle River which separates it from Adadle, on the northwest by
Imiberi, on the north by Danan, on the northeast by the Korahe Zone, and
on the southeast by Kelafo.

The average elevation in this woreda is 358 meters above sea level. As of
2008, Gode has 125 kilometers of all-weather gravel road and 630
kilometers of community roads; about 3.53% of the total population has
access to drinking water.

Reports of the parts of the Somali Region affected by flash floods in 2006
use the DPPA's description of the Gode woreda. Gode was very severely

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Project Proposal on Mixed Farming for the Production of Rice, Sesame, Cereals June 2024,
(Sorghum & Maize) and Fruits Gode

affected, and losses reported for this woreda include 10 deaths 333 hectares
of cropland ruined.

3.2. Demographics
Based on the 2007 Census conducted by the Central Statistical Agency of
Ethiopia (CSA), this woreda has a total population of 109,718, of whom
62,102 are men and 47,616 women. While 43,234 or 39.41% are urban
inhabitants, a further 30,431 or 27.74% are pastoralists. 97.85% of the
population said they were Muslim. This woreda is primarily inhabited by the
Ogaden clan of the Somali people,

The 1997 national census reported a total population for this woreda of
127,920, of whom 71,322 were men and 56,598 were women; 45,755 or
35.77% of its population were urban dwellers. (This total also includes an
estimate for the inhabitants of 21 rural kebeles, which were not counted;
they were estimated to have 31,059 inhabitants, of whom 16,772 were men
and 14,287 women.) The largest ethnic group reported in Erer was the
Somali (99.9%) and all the other ethnic groups made up 0.08% of the
population.

3.3. Economy
Although Gode is mainly arid, the crops grown in this woreda include maize,
vegetables such as peppers, tomatoes, carrots, and fruits such as mango,
papaw, guava, banana and lemon along the Shebelle. Further back from the
river, sorghum and maize are cultivated using the seasonal river flooding or
by digging small channels from the streams to the crop production areas; a
limited amount of vegetables are produced in this area.

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Project Proposal on Mixed Farming for the Production of Rice, Sesame, Cereals June 2024,
(Sorghum & Maize) and Fruits Gode

Shortly after its founding, the Regional government established a farm of

752 ha in west Gode, located 60 kilometres from the town of Gode, in a
different locality than the old Godey State Farm (now in Adadle). In the
irrigation scheme the crops grown by the Regional Irrigation Bureau include
maize and beans; vegetables such as onions, beetroot, carrot, cabbage and
tomato; and fruits such as papaya, mango and guava.

Gode is estimated to have a cattle population of 352,000, 244,350 sheep,

135,000 goats, and 45,000 camels and horses combined. The ecosystem of
the woreda is fragile and has been subjected to intensive grazing, intensive
destruction of trees for fuel wood and construction material. The area is
highly denuded and exposed to soil and wind erosion. This phenomenon of
environmental deterioration has been observed even during the early 1990s.

4. Description of the Project

The capacity of the envisaged Farm is proposed to be as follows by taking
into consideration the market study and minimum economics of scale.

 Component one: Rice and Sesame Plantation on 500 Hectares of Land

 Component Two: Cereals and Fruits Plantation on 500 Hectares of land

Our market study suggested that there is a huge demand for the Farm’s
products both domestically and on the international market.

5. Objective of the Study and Methodology

5.1 Objectives of the Study
The main objective of the study is to conduct a full-fledged feasibility study
for the Mixed Farm Project that constitutes technical factors affecting the

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Project Proposal on Mixed Farming for the Production of Rice, Sesame, Cereals June 2024,
(Sorghum & Maize) and Fruits Gode

project implementation such as analysis of the physical environment, market

analysis, capacity, implementation, financial analysis and cost-benefit
(economic) as well as environmental impact analysis

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

5.2.1. Deskwork
Deskwork was the principal data-gathering instrument employed in the
study. The collected secondary data was analyzed objectively to identify
major marketing variables such as the supply and demand trends etc.

The deskwork involves review of documents and publications collected from

different sources.

5.2.2 Primary Data Collection

The activities performed at this stage have served as the basis for an in-
depth understanding of the market for the Project’s products.

The data collected has served as a basis for preparation of marketing

strategy. The primary data was collected through a rapid assessment.

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Project Proposal on Mixed Farming for the Production of Rice, Sesame, Cereals June 2024,
(Sorghum & Maize) and Fruits Gode

6. Purpose of the Project

The primary objective of this project is to make good profit from farming
investment opportunity and also play vital role on the eradication of poverty.
The project has the following specific objectives:
 To produce and supply Rice, Sesame, Cereals and Fruits to local and
export market
 To create additional job opportunities in the administration,
 To transfer knowledge to the surrounding farmers
 To generate additional foreign currency to the country
 To contribute to the development of the region.

6.1 Land Plot Area

The size of land plot for the farm is 1,000 ha, which is requested from the
local government.

The plot area is sufficient to accommodate all the operations of the Rice,
Sesame, Cereals and Fruits plantations.

6.2. Access to resources

Agricultural Production in Ethiopia is highly dominated by small scale farm
holder producers covering many parts of the Central, Eastern and Western
parts of the country.

The raw materials for use in the production of Rice, Sesame, Cereals and Fruits
are readily available, locally. Production can be stimulated easily for scaling up,
once sufficient demand and capacity is established.

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Project Proposal on Mixed Farming for the Production of Rice, Sesame, Cereals June 2024,
(Sorghum & Maize) and Fruits Gode

6.3. Availability of infrastructure

Gode Wereda, Somali Region is endowed with huge amount of ground water
resources. Taking advantage of the ground water potential of the area, the
promoter plans to effectively utilize a total of 1,000 hectares in order to fully
engage in the operation of Rice, Sesame, Cereals and Fruits Farms projects.

6.4. Capability and Competence

Ethiopia has a pool of competent and well educated labour force that will
provide a base for recruiting appropriate staff for the project.

6.5. Socio-economic Benefits

In addition to making profits for the Company’s shareholders, socio-
economic benefits of the project include:
 Creates additional job opportunities in the region,
 Transfers knowledge to the surrounding farmers
 Generates additional foreign currency to the country and
 Contributes to the development of the region.

6.6. Capability and Competence

Ethiopia has a pool of competent and well educated labour force that will
provide a base for recruiting appropriate staff for the project.

7. Product Description
The Rice, Sesame, Cereals and Fruits products are produced to be delivered
to consumers directly and also supplied to industrial processing centers (in
the country and in importing countries) where they will be further
manufactured in consumer oriented finished products.

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Project Proposal on Mixed Farming for the Production of Rice, Sesame, Cereals June 2024,
(Sorghum & Maize) and Fruits Gode

8. Market Analysis
This section examines the market prospect focusing on aspects of domestic
demand situations for Oil Seeds & Cereals and assesses existing market
prospects in light of the demand-supply gap as well as marketing and
promotion strategies.

8.1. Demand Consideration

The demand for Rice, Sesame, Cereals and Fruits in the country is mainly
influenced by the following factors:

8.1.1. Population size and its growth

With respect to demographics, Ethiopia stands out favorably from the
consumer goods demand perspective. The country’s population size currently
reads about 100 (+) million growing at 2.60% annually, standing 2nd
populous country in Africa and 14th in the world. This connotes a wide
potential market opportunities for consumer goods.

8.1.2. Economic growth and rise in disposable

Income
Consumption of food items, being the primary consumer goods, are highly
responsive to income levels, making demand extremely elastic for a short
run change in income. This makes agricultural products like Rice, Sesame,
Cereals and Fruits to be consumed relatively higher in low income countries
like Ethiopia.

Ethiopia during the past decade has steadily registered a double-digit GDP
growth rate in real terms of 10.3% on average, which placed the country
among the top performing economies in Africa. This commendable economic

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Project Proposal on Mixed Farming for the Production of Rice, Sesame, Cereals June 2024,
(Sorghum & Maize) and Fruits Gode

progress is attributed mainly to the policy measures and commitment of the

Government in creating conducive business environment for wider
participation of private investors in areas of top priority that include
investment in commercial farming and agro-processing industry products.

The remarkable economic growth has resulted in notable rise in disposable

income levels. In low income economics like Ethiopia, the demand for
agriculturally produced food items is highly elastic to small changes in
income, i.e. demand for such products has sharply increased over the past
decade in response to, inter alia, marked rise in disposable income of the
people.

8.1.3. Urbanization Trend

The increasing urbanization and emerging living pattern is evident across the
country. Ethiopia's urban population has, for instance, recently crossed the
l7 million thresholds according to national statistics.

Available survey findings indicate that the collective buying power of

Ethiopia's urban consumers in 2012/l3 amounted to about $6 billion (or Birr
95 billion), a figure set to expand by about Birr 18 billion per year. Further,
increasing concentration of people in urban centers usually leads to
increased demand for food items.

8.1.4. Awareness in Nutrition and Health

The nutrition and health awareness of the general public immensely
increased in recent time due mainly to the efforts underway by the Ministry
of Health and other stakeholders. These days, emerging living patterns
together with increasing self-perception concerns are becoming more
evident in Ethiopia.

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Project Proposal on Mixed Farming for the Production of Rice, Sesame, Cereals June 2024,
(Sorghum & Maize) and Fruits Gode

Hence, as the result of the above factors, i.e trends during the past decade
in growing population size, rapid economic growth and ensuing rise in per
capita income, urbanization rate and changes in life style apparent demand
for agricultural products increased markedly, presenting immense
opportunities to the existing local Farm Operators as well as new entrants.

Ethiopia has shown strong performance and progress in economic growth,

per capita income and overall human development in recent years with
strong momentum for further growth in the years to come.

It is thus expected that the demand for varieties in food items will continue
to grow and this in turn will induce expansion of the agro industry justifying
the establishment of the proposed mixed farm project in Gode Wereda,
Somali Region.

8.2. Marketing Strategy

The Company’s marketing strategy will include the use of targeted print
media advertising and direct selling to hotels, restaurants and wholesalers.
We have positioned ourselves as a differentiated provider of the highest
quality product. The primary goal of our marketing efforts will be to
communicate this to potential customers.

Further, the company's marketing policy embraces a strategy focusing on

high product quality and efficient delivery to customers, placement/
outreach, proper advertising and promotion, and competitive prices for its
end-products.

The physical distribution channel of the products shall be designed to be

very simple and does not involve many intermediaries. For most of the large

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Project Proposal on Mixed Farming for the Production of Rice, Sesame, Cereals June 2024,
(Sorghum & Maize) and Fruits Gode

and medium stores the Farm employees themselves distribute using

medium-sized trucks and vans. In addition, the company will use agents to
distribute its products to small retailers, kiosks and individual users from its
distribution stores.

The proposed Farm can use a similar distribution approach to its local
customers. Medium trucks shall mainly be used to distribute the products to
relatively remote markets, regional distribution agents and delivery for
shipment to the regional markets.

Smaller vehicles shall be used to distribute products in the inner cities,

especially within the capital. In addition to direct sales, the company shall
use regional distributors as well as agents, to reduce capital investment
requirements and get access to an already established marketing channel.

8.3. Sales strategy

Our strategy focuses first on directly distributing our products to
supermarkets in major Cities. We will use wholesalers in other cities of
Southern and central regions of the country.

9. SWOT Analysis
The SWOT analysis provides us with an opportunity to examine the internal
strengths and weaknesses that the Company must address. It also allows us
to examine the opportunities presented to our company as well as potential
threats.

Strength
 Knowledgeable and friendly team with multi-disciplinary profession

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Project Proposal on Mixed Farming for the Production of Rice, Sesame, Cereals June 2024,
(Sorghum & Maize) and Fruits Gode

 State-of-the art Farming Technology

 Established partnership with potential customers who are willing to
buy our products
 Well researched business plan and marketing plan

Weakness
 Time and cost factors associated with import of farm machineries and
equipment

Opportunities
 Population growth in Ethiopia is increasing the demand for agricultural
products
 Very HUGE Government incentives for the farming sector
 Availability of adequate work force in the market to supply our project
 Plenty of room to expand & grow in reasonably short time

Threat
• Emergence of other similar enterprises in our target market areas

10. Organization, Management and Manpower

10.1. Organization
Good organization and management structure is the major factor success for
any project. The promoter is the General Manager of this project. The
General Manager is responsible in planning, organizing and monitoring the
overall operation of the project. The Farm will be organized having three
main units responsible for administration & finance division, Production and
Technical Division, and Marketing and Research Division that are
accountable to the general manager.

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Project Proposal on Mixed Farming for the Production of Rice, Sesame, Cereals June 2024,
(Sorghum & Maize) and Fruits Gode

The head of administrative and finance will do all administrative tasks like
customer relations, financial account, budgeting and other similar activities.
Technical works and production, machinery maintenance will be under close
supervision of technical & production head and the marketing &sales division
head follows the overall market situation such as sales promotion, purchase
of inputs and sales of output as well as distribution.

Having assisted by three division heads with her experience and educational
background, the general manager will lead the project smoothly. The
organizational set up of the project will be as follows:

Fig: Organizational set up of the project

General Manager

Adminstyartive
Production and Techinical Marketing and Sales
and Finance
Department Department
Department

Techinical Production Finance Market and

HRM section Sales section
section section section Research section

11. Technical Study

11.1. Land Use Plan
Table: Land Use Plan
No Description UoM Land utilized (ha)
1 Component one: Rice and Sesame Ha 500

Plantation on 500 Hectares of Land

2 Component Two: Cereals and Fruits Ha 500

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Project Proposal on Mixed Farming for the Production of Rice, Sesame, Cereals June 2024,
(Sorghum & Maize) and Fruits Gode

Plantation on 500 Hectares of land

Total 1,000

11.2. Farm Machinery and Equipment

The machinery and equipment required by the farm can be obtained from
local suppliers, whereas planting raw materials like fertilizers, chemicals &
seedlings, etc. could be obtained from a number of governmental and non-
governmental organizations such as horticulture development required
enterprises.

The machinery and equipment required by the envisaged Rice, Sesame,

Cereals and Fruits plantations are listed in the Table below.
Table: List of farm & plant machinery and equipment
No. Description Qty. Value, Birr

1 Tractors with full set of accessories 4

2 Disk plough 2

3 Disk Harrow of set type 2

4 Trailers 2

5 Sprayers 2

6 Generator 2

7 Workshop equipment ( set) 2

149,863,464.60
8 Tools (set) 2

9 Hand tools / farm implements 2

10 Tanks 4

11 Conveyor 0 2

12 Balances 4

13 Seamer 4

14 Dryer 2

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Project Proposal on Mixed Farming for the Production of Rice, Sesame, Cereals June 2024,
(Sorghum & Maize) and Fruits Gode

15 Washing machine 2

16 Vacuum pump 2

17 Boiler 2

Total Value LS 149,863,464.60

11.3. Raw Materials Consumption

The main raw materials and inputs required for the farm are seeds,
fertilizers, chemicals, preservatives, seedlings and packing materials. Most
of the raw materials can be obtained from the local agents.

Table: Raw Material Required for the Farm

No. Description year1 year2 year3 year4
1
Seeds 1,748,800.00 1,836,240.00 1,928,052.00 2,024,454.60
2
Fertilizers 860,000.00 903,000.00 948,150.00 995,557.50
3
Chemicals (lt) 90,000.00 94,500.00 99,225.00 104,186.25
4
Preservatives 120,000.00 126,000.00 132,300.00 138,915.00
5 Crates &
packaging
materials 840,000.00 882,000.00 926,100.00 972,405.00
6
misc @5% 182,940.00 192,087.00 201,691.35 211,775.92
Grand total 3,658,800.00 3,841,740.00 4,033,827.00 4,235,518.35

12. Description of Production Processes

12.1. Agricultural Operation
The Company plans to implement a Rice, Sesame, Cereals and Fruits
plantation project a 1,000 Hectare of self-production leased government
land. Land-clearing and cultivation procedures on these lands are operated
by local workers which are employed by the Company. This kind of operation
provides employment possibilities for the residents and develops the entire
area.

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Project Proposal on Mixed Farming for the Production of Rice, Sesame, Cereals June 2024,
(Sorghum & Maize) and Fruits Gode

a) Land Development
Land development is the first operation of the Production process in Rice,
Sesame, Cereals and Fruits production. It includes land surveying and
design, planting site clearing and cleaning, levelling and irrigation land,
access and farm roads construction.

b) Land Preparation
Land preparation activities like ploughing, disking, harrowing and basin
formation follow the land development. Ploughing, disking and harrowing
would be carried out by tractor mounted machineries while basin formation
by casual labours.

c) Nursery Establishment and Propagation of Seedlings

Nursery establishment is the most important operation and initial stage in
planting. Appropriate site selection, fencing clearing and ploughing are
among the important activities of nursery establishment. It is followed by
seed bed Preparation. Raising of seedlings, grafting and handling of
seedlings are some of the routine activities which are expected to be
undertaken in the nursery.

d) Pre-Harvest Management
Pre- Harvest management starts with transplanting of sexually or asexually
propagated seedlings of the plants from nursery to the main planting site.
Cultivation for weed control and soil fertility improvement, training and
pruning seedlings, irrigation water application, fertilization and insect pest
and disease control are among the major pre - harvest management in Rice,
Sesame, Cereals and Fruits production.

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Project Proposal on Mixed Farming for the Production of Rice, Sesame, Cereals June 2024,
(Sorghum & Maize) and Fruits Gode

e) Post - Harvest Management

In Rice, Sesame, Cereals and Fruits production, Post-harvest management
includes picking, cleaning, grading, transporting and marketing. Transporting
will be handled with trucks equipped with refrigerator.

13. Production Capacity & Production Programme

13.1. Farm Size & Plant Capacity

The total area to be cultivated under this project will be 1,000 Hectares. At
full capacity operation, the project intends to produce 10,050 tons of Cereals
and 3,000 tons of Oil Seeds per annum.

Table: Farm Capacity

Items land, ha Yeild/ha, ton prod/year, tons

Rice and Sesame 500 10 10,000

Cereals and Fruits 500 30 30,000

Total 1,000

13.2. Production Programme

The farm reaches fruition after three years from plantation. Considering the
problem in skill development and market penetration, the farm starts
operation at 70% of the rated capacity in the first year (on the same year of
fruition) and shall progressively grow to 85% in the second year, reaching
full (100%) capacity in the third year and thereafter.

Table: Farm production programme

year1 year2 year3

Rice and Sesame

7,000.00 8,500.00 10,000.00

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Project Proposal on Mixed Farming for the Production of Rice, Sesame, Cereals June 2024,
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Cereals and Fruits

21,000.00 25,500.00 30,000.00
Total
28,000.00 34,000.00 40,000.00

14. Implementation Schedule

All the implementation activities of the proposed farm will be accomplished
within the next 12 months duration. The main tasks include recruitment of
workers, procurement of machinery and equipment, trial-run and training of
technical staff and product promotion and advertisement activities. The Farm
is thus presumed to commence initial investment by the plantation season of
2024/25.

The major implementation activities to be executed in the next 12 months

are pinpointed as under:
 Land Acquisition for the planned investment from concerned
government officials
 Bank loan approval process for partial financing of the investment
costs;
 L/c opening, shipment and delivery at site of machinery, equipment,
motor vehicles and forklift required for smooth functioning of the
plant;
 Procurement of raw materials and ingredients
 Recruitment of the required manpower;
 Planting of Oil Seeds & Cereals,

15. Environmental Impact

The basic purpose of the Environmental and Social Impact Assessment
(ESIA) study is to identify, predict and analyze the magnitude of
environmental and social impacts and propose enhancement and/or
mitigation measures for significant environmental and social effects that are
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Project Proposal on Mixed Farming for the Production of Rice, Sesame, Cereals June 2024,
(Sorghum & Maize) and Fruits Gode

likely to arise from the various activities of the project during construction
and operation phases.

It is also to ensure that the proposed project is environmentally sound and

socially acceptable, and hence contributes to the development of
environmental and social functions of local communities. It is also expected
to provide a means whereby the overall environmental performance and
social benefits of the project can be enhanced through defining positive
social and economic benefits local communities can derive from the
proposed project implementation and designing subsequent operation, and
preparation of plans and recommendations regarding measures that will
minimize adverse impacts and enhance beneficial impacts.

The methodology adopted for conducting the environmental impact

assessment study of the project follows the conventional methods that meet
the requirements of the Federal and Regional Environmental Protection
Organs’ Environmental Impact Assessment Guidelines.

The Government is constantly looking out to identify constraints to the

development of the Agriculture sector and advise on the best course of
action to facilitate investment in the sector. The private sector involvement
in investment activities has contributed to the above objectives in the
following ways:

 Generation and saving of foreign exchange

 Creating employment

 Provision of new opportunities for professionals and experts to develop

technical skills and careers in modern industry,
 Contribution to the government's objective of widening the tax base

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 Contribution to social stability through provision of jobs, incomes,

public services and amenities to villages surrounding modern
industries

 Contribution to the development of other commercial activities in areas

adjacent to the industries

 Development of local expertise through on-the-job training of

personnel,

 Contribution to absorbing rural-urban migration.

 The investment will have multiplier effect.

15.1. Beneficial Impacts

Establishment of the AGRIBAT Mixed Farming Project will have a number of
positive impacts both at the regional and local community levels. Some of
the major positive impacts include technological capacity building, economic
development and creation of employment opportunities. These potential
positive impacts, their origin and characteristics are presented below.

15.1.1. Economic Benefit

The implementation of the project has a range of economic benefits. It
provides consumer goods for domestic markets, generates employment
directly and indirectly, promotes skill development and disseminates new
technologies.

One of the main aims of the project is to provide additional volume of

consumer good for the community and the export market. Hence, the socio-
economic impact of the proposed project is mainly positive. The project will

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Project Proposal on Mixed Farming for the Production of Rice, Sesame, Cereals June 2024,
(Sorghum & Maize) and Fruits Gode

solve the problem of shortage of the supply of Rice, Sesame, Cereals and
Fruits in the Ethiopian market.

The project introduces advanced technology for the Agri-Processing. Hence,

the supply of the products to the local market increases and reduces import
from other Countries. Moreover, as a result of the project, more market
actors will involve in the process of supplying the product. The project will
also serve as import substitution from abroad. In this regard, the project can
serve as a mechanism of saving the counties meager foreign currency, which
otherwise be used for importing these commodity.

In addition, as a result of extended volume of production the project will

generate enormous profit in the future as clearly indicated on the project
document and hence the Somali Region and the Federal Government shall
benefit through various forms of tax revenue.

The government not only benefits from tax revenue collected from the
project, but also volume of tax revenue also increases as a result of more
number of workers employed. Moreover, there is ultimate potential of
mobilizing saving from increased number of employees.

Beside the financial and economic development contributions, the new

project will be an opportunity for the introduction of new technologies to the
Country. Since the project uses a more technology intensive mode of
production, it is an opportunity for local experts to benefit from transfer of
new technological knowledge and skill.

Further, the enhanced waste water treating techniques can be used as a

lesson by other similar industries that release waste water from their

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factories. Generally, impacts on the socio-economic conditions are mainly

positive, including a rise in employment opportunities to the host
communities and indirect stimulation of local development.

15.1.2. Employment
The direct and indirect employment opportunities to be created for citizens
are other economic benefits of the project beyond those economic outputs
discussed above. The project will be an opportunity for reducing
unemployment in the Wereda to a large extent.

An indirect employment is also expected as the project start to operate with

its full capacity. As the volume of production increases the number of local
dealers and service-providers increases and this is also an indispensable
indirect employment opportunity.

15.1.3. Investment
The establishment of Mixed Farming practices like the proposed project
requires high level of investment, particularly for purchasing of farm
machineries, erection of the project production units and installing of utility
systems.

This will have a significant inducing power for establishment of other similar
projects as backward and forward linkages. It will also play great roll in
strengthening the investment capacity, most importantly at local level.

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Project Proposal on Mixed Farming for the Production of Rice, Sesame, Cereals June 2024,
(Sorghum & Maize) and Fruits Gode

15.2. Social Benefits

15.2.1. Local Livelihood Improvement
The employment opportunity to be created by the project will have social
benefit beside the expected economic benefit. The employment income from
the project will have a substantial role for social livelihood improvement in
the project area. This local income generation related social benefit will have
short term as well as long term cumulative benefits.

15.2.2. Gender Equity and Employment

Opportunities
Women efficiency in carrying out some of the production processes (e.g.
product packaging, process control and sorting of product defects) make
them preferable for the AGRIBAT Mixed Farming Project. This gender specific
opportunity will address the historical disproportionate burden of
unemployment on woman.

15.3. Adverse Impacts

It is at the utmost priority for the planned investment to ensure safety and
security for workers of the farm, improve/ enhance labor conditions and
occupational health. The Company strictly complies with the country's Labor
law and regulations currently in force as regards occupational health and
safety of farm workers.

15.4. Conclusion
To summarize this, the proposed project can be said to have some
associated environmental aspects that might cause adverse impacts.

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(Sorghum & Maize) and Fruits Gode

However most of these environmental effects can be reduced to acceptable

levels with implementation of pollution prevention and control techniques.
Therefore, it can be concluded that there will be no severe or irreversible
adverse impacts that will prevent the implementation of the proposed
project.

To have minimal and acceptable residual environmental impacts, it is

recommended that a full EIA Study should be conducted on areas
surrounding the project site. In general, the Consultant perceived that there
are no insurmountable environmental difficulties for the implementation of
the proposed Agri-Business development Project.

16. Financial Analysis

Table: Machineries requirement

No. Description Value, Birr
1 Farm Machineries and Equipment 149,863,464.60

Total 149,863,464.60

Table: Vehicles
No Description Value (Birr)
1 ISUZU-FSR 1,875,000.00
2 Vehicles for management and service for workers 812,500.00
Total 40,312,500.00

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 Project Proposal on Mixed Farming for the Production of Rice, Sesame, Cereals June 2024,
(Sorghum & Maize) and Fruits Gode

Table: Fixed Assets

No. items value (Birr)
1 Machinery and Equipment 149,863,464.60
2 Vehicles 40,312,500.00
Total 265,175,964.64

Table: Depreciation
Description Dep. rate Original value Annual Dep.
Machineries 0.10 149,863,464.60 314,714.76
Vehicles 0.10 40,312,500.00 268,750.00
Total Fixed Asset 265,175,964.64 1,767,839.76

Table: Repair and maintenance costs based on the standard rate

Repair &
maintenance
Description Percentage Total investment costs

Machineries 0.03 149,863,464.60 94,414.43

Vehicles 0.10 40,312,500.00 268,750.00
Total Fixed Asset 265,175,964.64 955,351.93

Table: personnel plan

Salary
S.N Description No. Qualification Experience (Birr)
I Administrative staffs Monthly Annual
1 Manager 1 Economist 3years 10,000.00 120,000.00
2 Executive secretary 3 Secretary 2years 2,000.00 72,000.00
Finance &
3 administration head 3 Accounting 2years 4,000.00 144,000.00
4 Accountant 6 Accounting 2years 1,500.00 108,000.00
5 Cashier 8 High school Graduate 2years 800.00 76,800.00

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6 Clerk 12 High school Graduate 0 years 700.00 100,800.00

9 Quality control head 9 Food science 2years 1,500.00 162,000.00
12 Commercial head 3 Marketing 3years 1,800.00 64,800.00
Personnel of direct
13 labor 3 Management 2years 1,500.00 54,000.00
14 Store keeper 9 12 graduate 2years 850.00 91,800.00
15 Purchaser 9 Procurement 2years 800.00 86,400.00
16 Salesperson 24 High school Graduate 2years 800.00 230,400.00
19 Laborer 132 - 0years 600.00 950,400.00
20 Janitors 26 - 0years 700.00 218,400.00
25 Grease & oil man 6 TVT Graduate 2years 500.00 36,000.00
Drivers 6 TVT Graduate 0 year 1,000.00 72,000.00
Guard 9 - 0 year 500.00 54,000.00
Total 269 2,641,800.00
Employees benefit - 660,450.00
Grand Total 3,302,250.00

Table: Sales Forecast

1st year 2nd year 3rd year 4th year
Capacity utilization 0.70 0.80 0.90 100.00
Sales 25,060,000.00 28,640,000.00 32,220,000.00 35,800,000.00

Table: Cost of sales (per year)

Description Value (Birr)
Raw material 885,500.00
Packing materials 100,000.00
Total Costs of products sold 985,500.00

Table: Costs of sales forecast

Costs of sales forecast Year 1 Year 2 Year 3 Year 4
Capacity utilization 0.70 0.80 0.90 100.00
Total costs of sales 689,850.00 788,400.00 985,500.00 1,034,775.00

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Table: operating expenses

Items Value (Birr)
Distribution Expenses 2,382,355.98
Fuel Expenses 1,120,263.59
Depreciation 1,753,125.00
Maintenance and Repair 950,937.50
Salary Expense 3,302,250.00
Total Operating Costs 9,508,932.07

Table: Annual Operating Costs

Description Year 1 Year 2 Year 3 Year 4
Capacity utilization 0.70 0.80 0.90 1.00
Total Operating 6,656,252.45 7,607,145.66 8,558,038.86 8,814,780.03
Costs

Table: Working Capital Determination

Days of Required working
Direct costs coverage capital
Raw material 120 6,295,166.67
Packing materials 120 933,333.33
Wage and Salaries 120 6,825,562.50
Distribution Expenses 120 8,794,118.66

Fuel Expenses 120 5,373,421.20

Total working capital required 34,824,035.36

Table: Planned Investment for the whole project

Description Costs (Birr)
Machineries 149,863,464.60
Vehicles 40,312,500.00

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Total Fixed Asset 265,175,964.64

Total working capital
required 34,824,035.36
Total Investment
Costs 300,000,000.00

Table: Profit and Loss Statement

Description Project Years
1 2 3 4 5
Sales 25,060,000 28,640,000 32,220,000 35,800,000 39,380,000
Direct cost of
689,850 788,400 985,500 1,034,775 1,086,514
sales
Gross Profit 24,370,150 27,851,600 31,234,500 34,765,225 38,293,486
Operational
6,669,643 7,622,449 8,575,255 8,832,513 9,097,488
expense
Profit before tax
17,700,507 20,229,151 22,659,245 25,932,712 29,195,998
and interest
Depreciation 1,767,840 1,767,840 1,767,840 1,767,840 1,767,840
EBITDA (Earning
before tax,
19,468,347 21,996,991 24,427,085 27,700,552 30,963,838
interest and
depreciation)
Interest expense 1,530,000 2,000,000 2,000,000 2,000,000 2,000,000
Profit tax (35%) 0 0 7,230,736 8,376,449 9,518,599
Net profit 16,170,507 18,229,151 13,428,509 15,556,263 17,677,399
net profit margin
ratio 65 64 42 43 45

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 Project Proposal on Mixed Farming for the Production of Rice, Sesame, Cereals June 2024,
(Sorghum & Maize) and Fruits Gode

Table: Cash Flow Statement

Production Year
Cash in flow 0 1 2 3 4 5
Owners' equity 6,000,000
Existing Bank
Loan
Additional Bank
14,000,000
Loan
Net Profit 0 16,170,507 18,229,151 13,428,509 15,556,263 17,677,399
Depreciation 0 1,767,840 1,767,840 1,767,840 1,767,840
Total Cash in
20,000,000 16,170,507 19,996,991 15,196,349 17,324,103 19,445,239
flow
Cash out flow
Replacement 0 0 0 0 0
loan repayment 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000
Capital
17,678,398 - - -
Expenditure - -
Working capital 34,824,035 - - - - -
Existing Working
capital
Pre-operating
expenses and 0
interest
Total Cash out
20,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000
flow
Net Cash Flow 0 14,170,507 17,996,991 13,196,349 15,324,103 17,445,239
Cash balance 16,492,109 34,489,100 47,685,449 63,009,552 80,454,790

Table: Balance Sheet Statement

Description Investment Production
Year

ASSETS 0 1 2 3 4 5
Current Assets

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Cash 34,824,035 16,492,109 34,489,100 47,685,449 63,009,552 80,454,790

Other Current
0 0 0 0 0
Assets
Total Current
34,824,035 16,492,109 34,489,100 47,685,449 63,009,552 80,454,790
Assets
Fixed Asset
Machineries 149,863,464.
2,832,433 2,517,718 2,203,003 1,888,289 1,573,574
60
Vehicles 40,312,500.0
2,418,750 2,150,000 1,881,250 1,612,500 1,343,750
0
Total Fixed Asset 17,678,398 17,678,398 15,910,558 14,142,718 12,374,878 10,607,039
Pre-operating Costs 0 0 0 0 0 0
Total Asset 20,000,000 34,170,507 50,399,658 61,828,167 75,384,430 91,061,829
LIABILITIES
Short term liability - - - - - -
Long term liability
14,000,000 12,600,000 11,200,000 9,800,000 8,400,000 7,000,000
(Bank Loan)
Sub Total 14,000,000 12,600,000 11,200,000 9,800,000 8,400,000 7,000,000
CAPITAL
Owner's Equity 6,000,000 6,000,000 6,000,000 6,000,000 6,000,000 6,000,000
Retained Earnings 0 16,170,507 34,399,658 47,828,167 63,384,430 81,061,829
Earnings 16,170,507 18,229,151 13,428,509 15,556,263 17,677,399
Sub Total 6,000,000 22,170,507 40,399,658 53,828,167 69,384,430 87,061,829
Total Liability &
20,000,000 34,770,507 51,599,658 63,628,167 77,784,430 94,061,829
Capital
Net Worth 6,000,000 21,570,507 39,199,658 52,028,167 66,984,430 84,061,829

17. Financial Evaluation

17.1. Profitability
According to the projected income statement, the project will start
generating profit in the first year of operation.

Important ratios such as profit to total sales, net profit to equity (Return on
equity) and net profit plus interest on total investment (return on total

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investment) show an increasing trend during the life of the project. Further,
the income statement and other indicators of profitability show that the
project is viable.

17.2. Break-Even Analysis

The break-even point of the project including cost of finance when it starts
to operate at full capacity (year 3) is estimated by using income statement
projection.
Fixed Cost
BE = = 55 %
Sales – Variable Cost

17.3. Payback period

The investment cost and income statement projection are used to project
the pay-back period. The project’s initial investment will be fully recovered
within 3 years.

17.4. Internal rate of return and net present value

Based on the cash flow statement, the calculated IRR of the project is
46.08% and the net present value at 9% discount rate is Birr 441,943,011.

37 | Page By: Gacalo Mixed Farminig Cooperative