Business Plan
Xhariep Fish Factory
May 2012
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Table of Contents
Page Content
4 Executive Summary
4 Production Methodology
5 Market Research and Analysis
6 Business Details
7 Industry Overview
8 Marketing
11 Financials
12 Risks Analysis
Annexure 1 Cash Flow Projections
Annexure 2 Drawings
Annexure 3 Production Sheet
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1. EXECUTIVE SUMMARY
1.1. Ownership of the Project
Xhariep Fish Factory was established in 2012 and is owned by Xhariep Fish Farmers
Association (40%), Management Company (40%) and Econofish/Government (20%). The
company was established to beneficiate the fish harvest produced by fish farmers in the
Province of the Free State. This is the initiative of the Department of Agriculture and
Rural Development to fast track food security, poverty alleviation, rural development and
job creation.
1.2. Other participating Associates
Kopanong Local Municipality in conjunction with Xhariep District Municipality donated two
hectares of land for the development of the fish processing factory. The Department of
Agriculture and Rural Development in the Free State Province, funded the establishment
while been assisted by Econofish Industries and their associates in operationalizing the
initiative.
1.3. Developmental costs
The funding of the plant is broken down as follows:
Development of property
Equipment and Machinery
Initial working and operating capital
Administration and marketing
Training, supervision and monitoring
1.4. Purpose of the initiative
Food security is increasingly a much debated subject all over the world. The world is looking at
innovations that will make this mammoth task achievable. While we acknowledge inequalities that
exist in the entire globe, we should also acknowledge that food costs are reaching rocket heights.
These trends leave underdeveloped and developing nation with little options regarding food
security.
South Africa is no different from this world phenomenon. Elements such as global warming,
poverty, unemployment and sky rocketing inflation are contributory factors to this problem. We
have noted in recent years that government is launching strategies for rural development. In not so
long period, the president of the country is edging the business sector to participate in the job
creation drive. It is off course a well known fact that agriculture is the corner stone of our
economy. According to Statistics SA’ data released on the 22 February 2011 the economy of the
country is growing by 4.4%.The major drivers for the growth being mining and agriculture. The
report indicates growth in agriculture of 12.5%.
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1.5. The Aquaculture development
The Department in partnership with Econofish Industries and other associates conducted a
study in the Xhariep District after which a Xhariep District Aquaculture Master Plan was
developed. The master plan covers the following areas:
- The results of the research
- Breeding of fish
- Establishment of Grow-out fish plants
- Establishment of fish processing plant
- Capacity Building
- Marketing and Distribution
Reference is also given to a document that provides for identified aquaculture zones in the Free
State that will form part of the roll-out of this project.
2. Supply Chain of Production for the purpose of this project
2.1. Stage One: Breeding and Supply of fingerlings
The supply of fingerlings for catfish and tilapia will be obtained from the following sources:
- Gariep Dam Chinese/ SA hatchery
- Gariep Old hatchery – Operated by Econofish
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- Bothaville Breeding Station – Operated by NAMPO Secondary School
- University of Limpopo Breeding Station
- Any other private breeder
2.2. Stage Two: Supply of fish for Slaughtering
Different spices will be supplied by the following dependencies:
- Existing fish plants in Zastron, Koffiefontein, Bethulie, Petrusburg, Fauriesmith and
Koffiefontein
- Existing facility at NAMPO
- Existing fish farms in and around South Africa
- Informal fish harvesters
2.3. Stage Three: Processing of fish products
Fish products will then be processed at Xhariep Fish Factories and such products will include
but not limited to:
- Canned fish
- Fish Fillets
- Fish Cakes
- Smoked fish
- Fish Patties
- Fish nuggets
- Fish fingers
Other by-products such as heads, intestines and tails will be beneficiated to produce fish meals.
Catfish skins will be exported for the production of hand bags and other stuff.
All products will be packaged at the processing plant
2.4. Stage Four: Marketing and Distribution of finished goods
Finished products will be distributed form the plant by own staff and others by logistics
companies. Targeted markets include amongst others; chain stores, government institutions,
community project, etc.
Pre operation contracts will be concluded on behalf of Xhariep Fish Factory by the appointed
implementing agent.
3. Market Research and Analysis
3.1. Local usage of catfish
Catfish is an indigenous spice in the province and is found in all rivers running through the
province. As a result of its presence, catfish is generally harvested by formal and informal
harvesters. According to the study conducted by Gels Legacy Academy, it was found that locals
in Xhariep district use to a greater extend catfish meals. There are however skeptical locals who
associate the spices to superstitious believes.
Several catfish tasting sessions were held in Qwaqwa, Botshabelo, Sp and Gariep Dam. The
catfish products were acceptable to persons in all classes. Catfish products such as fried fillets,
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fish cakes and fish mince were appreciated by the majority.
3.2. Tilapia
Tilapia is generally a red listed spices in the Free State. This is very popular fish in the northern
provinces and is accepted in general as a fish meal. Even thought tilapia is listed in the province,
its products are found in all retail stores. Therefore, tilapia is not foreign to the South African
consumers.
3.3. Trout
Trout is a very prestigious meal and is used in major restaurants and sold in all chain stores. The
product is also exported to the European Union on a large scale. Trout will be harvested from
the eastern part of the Free State in conjunction with existing fish farmers.
3.4. Other Spices
All other consumable spices farmed and harvested in the province will be processed at the plant
and be distributed as per demand.
4. Market Readiness
The market has already been identified at the following institutions and companies:
- Department of Correctional Services
- Department of Health
- Massmart Chain Stores
- Durban Fisheries
A marketing official is tasked with the duty to conclude pre- production contract and such
will be concluded before the end of June 2013.
5. The Plant drawings
5.1. Area summary in meters
Processing Plant 20 x 30 meters
Processing area 15 x 15 meters
Cold Storage 15 x 6 meters
Store Room 10 x 3,7 meters
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5.2. Features in detail: See attached drawing
- 5x Offices
- 1x Store Rooms
- 3x Cold Storage
- 1x Processing Area
- 1x Packaging Room
- 1x Staff Room
- 2x Ablution Facilities
- 2x Packing Bays
6. BUSINESS DETAILS
Full Name Xhariep Fisheries
Company Registration
Postal address
Street address
Web address
CEO & Contact person
Contact details
Cell
Tel:
Fax:
e-mail
Ownership Xhariep Fish Fisheries
Management
Establishment funding requirement R 15 000 000.00
Purpose of funding
Industry Sector Agriculture
Geographic location Xhariep District – Free State Province
Employment potential 17 permanent and 30 seasonal
Bank details
Bank
Branch
Branch code
Account No
List of beneficiaries
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7. Company Structure
Xhariep Fisheries will be configured as follows:
- Secondary Cooperatives 40%
- Management Company 40%
- DoARD? Econofish 40%
The entire administration and production will be assigned to the Management Company. The company
structure to be established before 30 June 2013. Such requires top management decision
8. Management Company Responsibilities
1.1. The Management Company
Government will appoint a management company that will run the affairs of the
main company. The responsibilities of the management company shall include but
not limited to the following:
- Provide expertise to process a variety of fish products in the factory
- Run day to day business of the company
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- Market and distribute fish products to the markets.
- Manage financial affairs of the company
- Report to board of directors in accordance with company laws of the land.
- Development of human capital
The management company shall bring all necessary expertise to run this type of
enterprise to ensure profitability and mass employment creation.
The management company should be in the position to hand over management to a
local entity after five years; after which they can provide guidance for the period
they will agree with government. They will hold 40% which will be funded by
government in exchange of expertise
9. Financial Management.
Kufanele Financial Services to be appointed to set up all company structures, governance and financial
management systems
10. Employment Opportunities
Permanent staff compliment is as follows:
Personnel Number
Manager 1
Administration clerk 1
Operator 2
Security 1
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11. SWOT ANALYSIS
Description Notes
14.1. Strengths
14.1.1. Location One plant per municipal area This gives an advantage in
marketing.
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14.1.2. Contacts In business and government It gives an entry into government
support and references.
14.1.3. BEE Ownership and management This can provide preferential
are 100% black, giving the treatment from both government
business a high BEE status. and corporates.
14.1.4. Enthusiasm The owner is enthusiastic and With track record this creates
will everything in power to a large positive driving force
make this venture successful. towards success.
14.2. Weaknesses
14.2.1. Financial The member had had financial Will go for further training
acumen management training but and appoint a reputable financial
inadequate implementation consultant. This will improve her
opportunities and therefore has skills.
limited financial management
skills.
14.2.2. Small Both the business and the plant This gives the pitfalls of smaller
are relatively small. businesses but can also act as a
positive influence by giving
exclusivity.
14.2.3. Limited The member has limited A relatively large debt will have
financial financial resources. to provide funding. However,
resources budgets show that this debt can be
serviced without problems
14.3. Opportunities
14.3.1. Food security Population needs to be fed Government support
14.3.2. Fish and chips Spread in all towns and villages This will be used as a focus in
outlets marketing.
14.3.3. Proximity to Built next to towns/cities This will also be a focus point in
markets marketing.
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14.4. Threats
14.4.1. Crime Facility need tight security The provision of good 24 hour
security is a high priority.
114.4.2. Economy The downturn in the economy It would seem that the economy
has necessarily had an impact has bottomed out and that makes
on businesses it an ideal time to enter the
economy.
7.4.3. Foreign currency Export opportunities to be By quoting rates in Rand the
explored. correct income is assured. A
lower value for the Rand can have
a positive affect as it would make
our prices more affordable for
foreign consumers.
12. Financials
15.1. Assumptions
In the financial analysis the following were assumed
That feed supply will be consistent and that growth ratios will remain in tact
All transactions will be made on cash and delivery basis
Fish sales will go up by 14% every year
That dividends will accrue from year three
15.2 Viability
Key figures:
Years yr 1 yr 2 yr 3 yr 4 yr 5
Turn over 699, 996 990,000 1,170,000 1,350,000 1,530,000
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Cost of sales 521,750 570,000 612,200 912,200 1,086,900
Contributions - - - - -
Gross Profit 178,246 420,000 557,800 437,800 443,100
Profit before tax 178,246 420,000 420,000 437,800 443,100
Total assets 1,244, 000 1,141,750 1,065,062 1,007,547 964,4106
Excl. cash
13. . Risks in the business
16.1. Water suitability
The fish farming model introduced by Econofish Industries is an indoor reticulation system,
where water circulate to avoid algae and pneumonia. The filters keep the water clean
throughout the production process.
Solar panels are installed to keep water at an appropriate temperature throughout the year. This
enables constant growth of fish. As production takes place in an enclosed environment, foreign
elements are kept out of the plant.
16.2. Stock Control
The plant is secured by a security fence and therefore theft and shrinkage is minimized. The
plant will also be physically manned by a security guard for 24 hours every day. Predators like
birds and snakes will not have access to the inside of the plant.
16.3. Cannibalization Threat
Catfish is cannibalistic by nature, however the Econofish Industries solution provides for the
keeping of the same size of fish in the same tank. At no given point will bigger fish be kept in
the same tank with the smaller fish.
16.4. Markets and capacity building
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Catfish, due to its content of protein is the way to go for food security in the world. Due to
modern healthy living style, catfish is forever going to be the answer in providing high 3
omega and 6 omega fatty acids. The process of canning the fish is also underway.
Econofish will provide training and after care for the period of 24 months to assist the grower
with management and marketing. Econofish will buy back 40% of fish for the first 24 months
so that the grower can learn the ropes while producing
14. Annexures
14.1. Cash Flow Projections
14.2. Drawings
14.3. Production table
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