DEVELOPMENT BANK OF ETHIOPIA

APPRAISAL SUBPROCESS

NEW LOAN APPRAISAL REPORT

FOR YIGARSEHADUTA AGRO PROCESSING PLC
(BEEKEEPING, HONEY & WAX PROCESSING PROJECT)

April 2015

1
TABLE OF CONTENTS PAGES
I. EXECUTIVE SUMMARY......................................................................................................................4
II. BACKGROUND INFORMATION..........................................................................................................7
2.1. The Project....................................................................................................................................................7
2.2. The Applicant (Head office)...........................................................................................................................7
2.3. Legal Documents of the Project.....................................................................................................................8
2.4. Brief history of the Project..............................................................................................................................8
2.5. Capital Structure of the Project......................................................................................................................9
2.6. Credit Information..........................................................................................................................................9
2.4.1 Credit Information with Banks...............................................................................................................9
2.7. Business Track Record................................................................................................................................10
2.8. The Loan......................................................................................................................................................11
III. MAJOR SUCCESS AND RISK FACTORS........................................................................................12
3.1 Key Success Factors...................................................................................................................................12
3.1.1 Macro Level Success Factors.............................................................................................................12
3.1.2 Sector Level Success Factors............................................................................................................12
3.1.3 Firm Level Success Factors................................................................................................................13
3.2 Major Risk Factors and Mitigation Measures...............................................................................................14
3.2.1 Major Risks.........................................................................................................................................14
3.2.2 Risk mitigating measures....................................................................................................................14
3.3 SWOT Analysis............................................................................................................................................15
IV. MARKET STUDY..................................................................................................................................16
4.1 Commodity Description................................................................................................................................16
4.2 World Market for Honey and Bee wax.........................................................................................................17
4.2.1 Production...........................................................................................................................................17
4.2.2 Consumption.......................................................................................................................................19
4.2.3 Honey and Bee wax Trade: Export and Import...................................................................................20
4.3 Regional Important markets for Honey........................................................................................................24
4.3.1 European Union..................................................................................................................................24
4.3.2 United States of America....................................................................................................................24
4.3.3 Middle East.........................................................................................................................................25
4.4 Domestic Market..........................................................................................................................................26
4.4.1 Demand..............................................................................................................................................26
4.4.2 Apparent Domestic Consumption Refined Honey..............................................................................27
4.5 Total Existing Foreign and Domestic Demand............................................................................................29
4.6 Total Estimated Domestic Demand and Projection.....................................................................................30
4.7 Supply..........................................................................................................................................................32
4.7.1 Refined Honey Production..................................................................................................................32
4.7.2 Estimation of Domestic Supply of Honey and Forecasting.................................................................33
4.8 Demand – Supply Gap................................................................................................................................34
4.9 Price and Price Trend of the Product...........................................................................................................34
4.10 Target Market..........................................................................................................................................35
4.11 Marketing Strategy of the Project............................................................................................................36

2
V. TECHNICAL STUDY.....................................................................................................................................37
5.1 Location.......................................................................................................................................................37
5.2 Land Size and Terms of Ownership............................................................................................................37
5.3 Agro-Ecological Suitability of the Project.....................................................................................................37
5.4 Availability of Raw Material..........................................................................................................................37
5.5 Processing, Packaging, and Storage of Refined Honey and Bee Wax.......................................................38
5.5.1 Honey Processing Process.................................................................................................................38
5.5.2 Bee-wax Processing Process.............................................................................................................40
5.6 Honeybee diseases, enemies (pests and predators)..................................................................................41
5.7 Utilities.........................................................................................................................................................43
5.7.1 Water..................................................................................................................................................43
5.7.2 Electricity.............................................................................................................................................43
5.8 Planned Investment Items...........................................................................................................................43
5.8.1 Planned Investment on Land Development........................................................................................43
5.8.2 Planned Investment on Civil Works....................................................................................................43
5.8.3 Planned Investment on Machineries...................................................................................................44
5.8.4 Planned Investment on Tools, Implements, Furniture, and Equipments............................................45
5.8.5 Planned Investment on Vehicles.........................................................................................................45
5.9 Environmental impact assessment..............................................................................................................45
5.10 Implementation Schedule........................................................................................................................46
VI. ORGANIZATION, MANAGEMENT AND MANPOWER............................................................................47
6.1 Organization................................................................................................................................................47
6.2 Management................................................................................................................................................48
6.3 Manpower Requirement..............................................................................................................................48
VII. FINANCIAL ANALYSIS..........................................................................................................................49
7.1 Summary of Investment...............................................................................................................................49
7.2 Local and Foreign Component of the Investment........................................................................................50
7.3 Expected Financial Results.........................................................................................................................50
7.4 Socioeconomic Benefits..............................................................................................................................51
VIII. CONCLUSION AND RECOMMENDATION.............................................................................................52
8.1 Conclusion...................................................................................................................................................52
8.2 Recommendation.........................................................................................................................................52
8.2.1 Terms and Conditions.........................................................................................................................53

3
1 EXECUTIVE SUMMARY

Yigarsehaduta Agro Processing Plc is a new project established according to the Ethiopian law
and regulation with the objective of engaging in bee keeping, honey and wax processing for both
local and foreign market. The company is owned by two shareholders namely Ato Markos
Altaye and his spouse W/ro Eskedar Abebe Lelebo with a total paid up capital of Birr 1,050,000.
The company owns a 15,000 m2 private land for honey and wax processing. Moreover, the
company secured 500 hectare of land for the beekeeping farm from Gambella National Regional
State with a lease agreement of 50 years and lease rate of Birr 111/ha /year.

The General Manager of the project is Dr Desalegn Begna who has been awarded Doctor of the
Rearing of Special type Economic Animals from Chinese Academy of Agricultural Science. He
has the necessary qualification, expertise and courage to discharge his responsibilities and
authority for success of the project. Moreover, the project manager, Ato Alemayehu Gela, is well
qualified to successfully run the project.

Based on the National Bank of Ethiopia’s Credit Information Center, T-24 Application Team and
letter from DBE, Jimma Branch, the four companies, whereby one of the shareholders of the
applicant (Ato Markos Altaye) has shares from these companies, have credit relation with DBE
which are under pass loan repayment performance. However, individually, none of the
shareholders of the applicant have credit relation with DBE and other local banks in Ethiopia.

The project is located in Gambella regional state, at Godere-Mangashi woreda. The processing
plant of the project is planned to be located in the woreda town, Meti; about 624 km from Addis
Ababa. Out of this, Addis Abab-Mizan, which is 561 km, is asphalted road; while Mizan-Tepi,
63 km, is graveled road. The distance of the apiary from the processing unit is about 29 km; out
of which 17 km is public road (graveled) connecting Meti town with other woredas, while the
remaining 12 km (also graveled) is the project road built by the company itself. This indicates
that the area has sufficient road facilities. Other infrastructures like electricity, water, and
telephone are also available in the area justifying appropriateness of the project location.

Market analysis shows that processed honey’s both domestic demand and Supply are increasing.
The study has also shown that demand-supply gap of the product is also widening. If honey is

4
processed as per the standard needed by the EU importers, it will have decent market though
there is extensive competition from established developing country exporters.

Moreover, financial analysis of the project shows that it is expected to be profitable and viable so
that it can repay its loan as per the schedule. The projected profit and loss statement shows net
profit of Birr 12,600,872 and Birr 15,284,225 during the first and tenth projection years
respectively (with an annual average of Birr 14,368,895).

The project’s cumulative cash flow shows a balance of Birr 9,819,398 in the first year which will
increase up to Birr 92,494,615 at the end of projection period. This indicates that the project will
not face liquidity constraint in financing its operational cost and debt obligation.

Balance Sheet of the project shows that the project’s net-worth will grow from Birr 21,002,314
during the initial investment year to Birr 141,622,305 at the end of the projection period (year 10).

Before and after tax financial internal rate of return are computed based on 10 years projection
period and are found to be 32% and 27% respectively. Both rates of returns are above the DBE’s
lending rate witnessing viability of the project. The project's sensitivity to adverse circumstances
is viewed from three different scenarios: decreasing sales revenue; increasing operating cost and
investment cost all by 10%. The result indicates that FIRR after tax decreases to 15% with
decrease in sales revenue, decreases to 18% with increase in operating cost and decreases to 24%
with an increase in investment cost. These indicate that the project is sensitive to decreases in
sales revenue while it is not as such sensitive to increases in operating and investment cost. To
mitigate the sensitivity of the project to decreases in sales revenue, the company should work on
quality production of refined honey and beeswax.

Based on the above analysis, the Appraisal Sub-Process recommends a loan of Birr 49,005,000
to Yigarsehaduta Agro Processing Plc provided all the terms and conditions stated in the study
under-consideration are fulfilled.

5
Table 1.1: Summary of Investments and Source of Funding
Description Total Cost DBE Loan Equity
Birr Proportion Birr Proportion Birr Proportion
Fixed Investment 37,743,283 53.91% 27,005,000 38.57% 10,738,283 15.34%
Working capital 29,955,328 42.79% 22,000,000 31.43% 7,955,328 11.36%
Pre operating Costs 676,986 0.97% - 0.00% 676,986 0.97%
Pre operating interest 1,631,717 2.33% - 0.00% 1,631,717 2.33%
Total 70,007,314 100% 49,005,000 70% 21,002,314 30%

Table 1.2: Expected Financial Results

Projection Year
Description
Year 0 Year 1 Year 10
Revenue   82,668,000 106,068,000
Profit (Loss) Statement   12,600,872 15,284,225
Cumulative Cash Flow   9,819,398 92,494,615
Net Worth 21,002,314 33,603,186 141,622,305
Total Assets 70,007,314 76,482,561 141,622,305
FIRR Before Tax 32%
FIRR After Tax 27%

Table 1.3: Sensitivity Analysis

Description Revenue Decrease by 10% Operating Cost Increase by 10% Investment Increase by 10%
FIRR Before Tax 18% 21% 29%
FIRR After Tax 15% 18% 24%

6
2 BACKGROUND INFORMATION
2.1 The Project
 Name፡ Yigarsehaduta Agro Processing Plc
 Address:
 Processing plant
 Country: Ethiopia
 Region: Gambella People’s National Regional State
 Zone: Majang
 Woreda: Gudere
 Town: Meiti
 Kebele: Meiti House No.: New
 Tel. Office: +251 118 59 27 34
 Tel. (mobile): +251 911 21 86 66/+251 917 55 13 03
 E-mail: [email protected]
 Fax: +251 113 72 44 32
 Beekeeping Farm
 Region: Gambella National Regional State
 Zone: Majang
 Woreda: Mengeshi
 Kebele: Ashine and Baya Kebele House No.: New
 Tel. Office: +251 118 59 27 34
 Mobile: +251 911 21 86 66/+251 917 55 13 03
 E-mail: [email protected]
 Fax: +251 113 72 44 32

2.2 The Applicant (Head office)

 Region: Addis Ababa
 Sub City: Nifas Silk Lafto
 Woreda: 03
 Tel. Office: +251 118 59 27 34
 Mobile: +251 911 21 86 66/+251 917 55 13 03
 E-mail: [email protected]
 Fax: +251 113 72 44 32

7
2.3 Legal Documents of the Project
 Legal form of the company: Private limited company
 Principal/Commercial Registration Certificate
 Registration Agency:- Ministry of Trade
 Principal Registration Number: MT/AA/2/0025995/2006
 Date issued: 3/10/2014 G.C
 Investment Certificate
 Licensing Organ: Gambella People’s National Regional State Investment Agency
 License Number: ኢንቨ/1030/2005
 Date Issued: 1/12/2005 E.C
 TIN(Tax Identification Number) – 0041217874
 VAT(Value Added Tax) No: _________________
 Type of Project: Agro processing
 Project Objective: To conduct commercial bee keeping farm, honey and wax production
with processing and packaging for local as well as export market.
 Size of land holding:
 Private (personal):  Total area (m2): 15,000.00m2 (for Honey and wax Processing
project)
 Lease (for Beekeeping farm):  Total area (Ha): 500 Hectare Lease period: 50 years
Lease Amount: Birr 111 per ha /year.
 Status of the Project: New

2.4 Brief history of the Project

Yigarsehaduta Agro Processing Plc is a new project established according to the Ethiopian law
and regulation with the objective of engaging in bee keeping, honey and wax processing for both
local and foreign market. One of the shareholders of the applicant, Ato Markos Altaye, had other
businesses which are engaged on commercial agricultural production of sesame, maize, cotton
and sorghum. The company owns a 15,000 m 2 private land for honey and wax processing.
Moreover, the company secured 500 hectare of land for the beekeeping farm from Gambella
National Regional State with a lease agreement of 50 years.

8
Table 2.1: Name of Shareholders and Address
Marital
S.N. Name Nationality Status Address
A.A, K/keraniyo, Woreda 4, Alem
1 Ato Markos Altaye Ethiopian Married Bank, Pass port No. EP 1920622
A.A, K/keraniyo, Woreda 4, Alem
2 W/ro Eskedar Abebe Lelebo Ethiopian Married Bank
Source: Due Diligence Report of the Credit Process

2.5 Capital Structure of the Project

The company is owned by two shareholders namely Ato Markos Altaye and his spouse W/ro
Eskedar Abebe Lelebo with a total paid up capital of Birr 1,050,000. Since the paid up capital is
below the equity contribution of the company, the project should raise the paid up capital to the
level of equity contribution. The detail of capital information is shown hereunder:

Table 2.2: Details of Capital Information

Name of No. of Share Share capital

S.N. Shareholder Share Value paid up Subscribed Total

1 Ato Markos Altaye 525 1,000 525,000 - 525,000

W/ro Eskedar Abebe
2 Lelebo 525 1,000 525,000 - 525,000

Total 1,050 2,000 1,050,000 - 1,050,000

Source: Due Diligence Report of the Credit Process

2.6 Credit Information

2.6.1 Credit Information with Banks
The applicant has no credit relation with DBE and other local banks as per NBE Credit
Information Center report dated January 13, 2015. Based on the National Bank of Ethiopia’s
Credit Information Center, T-24 Application Team and letter from DBE, Jimma Branch, the four
companies, whereby one of the shareholders of the applicant (Ato Markos Altaye) has shares
from these companies, have credit relation with DBE which are under pass loan repayment
performance as depicted in the table below. However, individually, none of the shareholders of
the applicant have credit relation with DBE and other local banks in Ethiopia.

9
Table 2.3: Other Business Credit Status of a Shareholder with DBE
Loan Status as of January 27,2015
S. Name of the
Name of the Project Not Due Arrears Status
N Shareholder
Principal Interest Principal Interest
Ato Markos Tagy Rose Integrated
1 Altaye Farm Plc 36,592,923.52 1,362,885.06 - - Pass
Ato Markos Tericordia Integrated
2 Altaye Farm Plc 25,182,691.45 2,079,526.68 - - Pass
Ato Markos Majang Agro Industry
3 Altaye Plc 18,814,785.48 660,404.24 - - Pass
Ato Markos
4 Altaye Walga Agro Industry Plc 11,959,161.39 205,455.03 - - Pass
Source: Due Diligence Report of the Credit Process

2.7 Business Track Record

Yigarsehaduta Agro Processing Plc is a newly established company. However, one of the
shareholders of the company, Ato Markos Altaye, is the shareholder of two agricultural projects,
Tagy Rose Integrated Farm Plc and Tericordia Integrated farm Plc which have good production
performance with a profitable business status. On the other hand, the other two companies which
have share contribution of Ato Markos Altaye, namely; Majang Agro Industry Plc and Walga
Agro Industry Plc are newly established projects on commercial agricultural production and they
are under implementation phase. All of these four projects which have share contribution of Ato
Markos Altaye have credit relation with DBE.

10
2.8 The Loan
Table 2.2: Details of Loan Requested, Proposed, Variation, and Reason for Variation
Description Loan Requested Loan Proposed Variation Reason for Variation*
Land Development 0 2,000,000 2,000,000 *
Building and Construction 9,292,965 5,000,000 (4,292,965) *
Honey and Wax Processing Machines 1,570,585 3,200,000 1,629,415 *
Generator 0 275,000 275,000 *
Beehives and Other Beekeeping Tools
*
and Equipments 5,234,333 12,000,000 6,765,667
Office Equipments and Furniture 0 250,000 250,000 *
Vehicles 3,300,000 3,680,000 380,000 *
Bee-Colonies 0 600,000 600,000 *
Working Capital 29,186,922 22,000,000 (7,186,922) *
Total* 48,584,805 49,005,000 420,195 *
*NB: Comparison of the loan requested against the amount of loan proposed is based on the data mentioned in the
feasibility study of the project.

Reason for Variation: Difference in the use of parameters and assumptions between the Bank
and that of the promoter. Comparison of the requested against the proposed amount of loan is
made based on the amount mentioned in the feasibility study the project.

11
3 MAJOR SUCCESS AND RISK FACTORS

3.1 Key Success Factors

3.1.1 Macro Level Success Factors
 In the past consecutive years, the country has shown a continuous growth which may boost
the demand for goods and services.
 Improvement in infrastructure especially upgrading road transport service is taking place in
the country and transportation of goods to and from market and production site is becoming
better-off.
 Ethiopia has location advantage to export goods particularly to EU countries, Middle East,
North Africa and neighboring East Africa Countries.
 There is relatively lower labor cost in the country and thus production cost for labor intensive
industries is low.
 Government gives different incentives for investors such as low interest rate, long grace
period and attractive policies.
 In terms of the availability of factors of production, the country has huge capacity for
investment in the availability of land, raw materials and human resources for many
agricultural, industrial and service sectors. The prices of these factors of production are
relatively less than that of developed and other developing countries.

3.1.2 Sector Level Success Factors

 Agro processing industries that process agricultural products are among the industries that
the government has given priority.
 The establishment of honey and wax processing factories in the country creates market for
those engaged in bee keeping.
 The existence of different regional markets for honey such as the EU, USA, and Middle East.
 Conducive climate and natural resources for commercial bee keeping farm.

12
3.1.3 Firm Level Success Factors
 Character: The risk measurement matrix of the due diligence report shows that the character
of the applicant is rated 225 on a 300 rating scale.
 Capacity: The General Manager of the project, Dr Desalegn Begna, has acquired MSc in
Tropical Bees and Beekeeping in Tropical Climates of the Faculty of Biology from Utrecht
University. Moreover, he has been awarded Doctor of the Rearing of Special type Economic
Animals from Chinese Academy of Agricultural Science. He has experience in engaging as
expert in animal breeding and forage resource development and beekeeping. Moreover, he
acted as team leader of animal and fishery resource development department, and he is
currently working as Secretary of Ethiopian Beekeepers Association and Center Director of
Holeta Bee Research Center. In general, the General Manager has a carrier span of more than
25 years, has a wide range of experience as researcher, expert of animal breeding and
beekeeping, head of districts of Agricultural Development office and director of Bee
Research center at Holeta. Thus, the General Manager has the necessary qualification,
expertise and courage to discharge his responsibilities and authority for success of the
project. On the other hand, the project manager, Ato Alemayehu Gela, has acquired MSc
Degree in the Rearing of Special type economic animals implying that he is well qualified to
successfully run the project. Moreover, the promoter could use the income that would be
generated from other business to cover unforeseen costs of the project.
 Capital: As stated in the due diligence report, the source of equity is expected to come from
contribution of the shareholders.
 Competence: In order to achieve the objectives of the project, the organizational structure of
the project has been arranged comprising of qualified and experienced management
personnel. The general manager is well qualified who has a wide range of experience and is
supported by qualified and experienced management team. So, the project will be run by
experienced management team and it is expected to be competitive and profitable.
 Collateral: The project is categorized under the priority areas of investment which are given
due attention by the government. Therefore, all of its fixed assets will be held as collateral.

13
3.2 Major Risk Factors and Mitigation Measures
3.2.1 Major Risks
 The product of crude honey may have large amount of impurities during extraction;

 Improper handling and harvesting of crude honey;

 The use of pesticides to mitigate pest attack on crop production has a negative effect on bee
keeping farms;

 Major source of production risks are unpredictable weather condition, the quantity and
quality of honey produced depend on natural condition and disease occurrences;

 Deforestation and environmental degradation that have been over years could lead to
declining number of bee colonies which in turn contributes for the decrease in the production
of crude honey.

3.2.2 Risk mitigating measures

 Providing an organized training for bee keeping farmers on how to handle and harvest crude
honey and assisting them to transform from traditional to transitional bee keeping farming
practice so that impurities during extraction are minimized.

 Sustaining support from the regional government for the prohibition of the use of pesticides
for crop production around the surrounding areas of the bee keeping farm;

 Training to beekeeping farmers on hive management, scientific identification of disease

occurrences and prevention methods.

 Participating in afforestation programs in collaboration with the regional government as part

of an initiative for long term benefit in terms of environmental protection and for improving
the quality and quantity of honey.

14
 3.3 SWOT Analysis
Strengths Opportunities

 Commitment of the promoter for the  There is a social, political and economic condition which
implementation of the project. is conducive in the country that will encourage
 Qualified and experienced management investment.
team.  The existence of different regional markets for honey
 The general manager is well experienced in such as the EU, USA, and Middle East.
this sector which is an added advantage to  The country has abundant labor with relatively lower cost
the successful implementation of the project. than other competing countries in the industry.
 A national economy exhibits a continuous growth that
leads to increase in the purchasing power of consumers.
 Financial support by the government/banks
 The various investment incentives extended by regional
and federal governments.
 The natural and physical condition of the region where
the project is located provides opportunity for bee
keeping farming practices.
Weaknesses Threats
 Low quality of honey as a result of poor harvest by
traditional bee keeping farmers.
 Marketing and collecting gap between honey producing
 Low paid up capital in relation to the farmers and processors due to problems of
required equity contribution. infrastructure.
 The practice of adulteration whereby honey mixed with
sugar can be sold to honey and beeswax processors.
 Input price escalation.
 Unpredicted weather condition could lead to low harvest
of honey.
 The project is far from markets around cities that
increases transportation cost.
 Possibility of deforestation that could minimize honey
production by reducing the bee flora population.

15
4 MARKET STUDY

4.1 Commodity Description

Processed Honey is a honey in which the natural sweet substance, produced by bees passes
through some processing steps to improve the quality of the naturally produced honey by
separating from the comb, removing particulate material (pieces of wax, propolis, and other
defects) and regulating minerals and enzymes. There are different types of honey which can be
categorized according to the way in which it has been processed.

 Crystallized honey is honey in which some of the glucose content has spontaneously crystallized
from solution as the monohydrate. Also called "granulated honey." Honey that has crystallized
over time (or commercially purchased crystallized) in the home can be returned to a liquid state if
stirred in a container sitting in warm water at 120 °F (approx 49 °C).
 Pasteurized honey is honey that has been heated in a pasteurization process. Pasteurization
destroys yeast cells. It also liquefies any micro-crystals in the honey which delays the onset of
visible crystallization. However, excessive heat-exposure also results in product deterioration as
it increases the level of hydroxyl methyl furfural (HMF) and reduces enzyme (e.g. diastase)
activity. Heat also affects appearance, taste, and fragrance, darkening the natural honey color
(browning).
 Strained honey is honey that passed through a mesh material to remove particulate material such
as wax, propolis, and other defects without removing pollen, minerals, or valuable enzymes.
 Ultra filtered honey is honey processed by very fine filtration under high pressure to remove all
extraneous solids and pollen grains. The process typically heats honey to 150–170 °F (approx 65-
77 °C) to more easily pass through the fine filter. Ultra filtered honey is very clear and has a
longer shelf life, because it crystallizes more slowly because of the high temperatures breaking
down any sugar seed crystals, making it preferred by the supermarket trade.
 Ultrasonicated honey is honey that has been processed by ultrasonication, a non-thermal
processing alternative for honey. When honey is exposed to ultrasonication, most of the yeast
cells are destroyed. Yeast cells that survive sonication generally lose their ability to grow. This
reduces the rate of honey fermentation substantially. Ultrasonication also eliminates existing
crystals and inhibits further crystallization in honey. Ultrasonically aided liquefaction can work at
substantially lower temperatures of approximately 35°C (95°F) and can reduce liquefaction time
to less than 30 seconds.

16
 Whipped honey, also called creamed honey, spun honey, churned honey, candied honey, and
honey fondant, is honey that has been processed to control crystallization. Whipped honey
contains a large number of small crystals in the honey. The small crystals prevent the formation
of larger crystals that can occur in unprocessed honey. The processing also produces a honey
with a smooth spreadable consistency.
 Dried honey: has the moisture extracted from liquid honey to create a completely solid, non-
sticky honey. This process may or may not include the use of drying and anti-binding agents.
Dried honey is commonly used to garnish desserts.
 Bee wax: the byproduct of honey is the creamy colored substance used by bees to build the comb
that forms the structure of their nest. Very pure Bee wax is white, but the presence of pollen and
other substances cause it to become yellow.

4.2 World Market for Honey and Bee wax

4.2.1 Production
According to FAO report, China is the biggest producer of honey followed distantly by Turkey
and Ukraine. About 44% of world honey is produced in China and annual production is
increasing by 7% in the years between 2005 and 2011. Among the top ten producers, production
has slowed for Argentina and USA, and unaffected for Ukraine. Ethiopia is amongst the top ten
producers of honey in the world and the biggest in Africa. It accounts for about 5% of world
production and rate of production is also among the highest, 7% (see table 4.1 and figure 1).

Table 4.1: World Major Producers (Tones)

Sr. Countries Years CAGR
No 2005 2007 2009 2011 (%)
1 China 299,527 357,220 407,367 446,089 7
2 Turkey 82,336 73,935 82,003 94,245 2
3 Ukraine 71,462 67,700 74,100 70,300 0
4 USA 72,927 67,286 66,413 67,000 -1
5 Russia 52,123 53,655 53,598 60,010 2
6 India 52,000 51,000 55,000 60,000 2
7 Argentina 110,000 81,000 62,000 59,000 -10
8 Mexico 50,631 55,459 56,071 57,783 2
9 Ethiopia 36,000 42,180 39,661 53,675 7
10 Iran 34,790 47,000 46,000 47,000 5
  Total Top Ten 863,801 898,442 944,222 1,017,113 3
Source: Honey Processing Commodity Study, Research Process, DBE, 2013

17
Source: Honey Processing Commodity Study, Research Process, DBE, 2013

Bee wax is the product of developing countries. There is not a single country among the top
world economies that produce the product. India is the biggest producer, and production is
increasing by 4% per year. It also produces more than 46% of the world output. Argentina and
Ethiopia are the second and the third biggest producers in the world, respectively, having about
9% of the world share each. But, production is not growing for both Argentina and Ethiopia.

Production for bee wax is not improving for most top ten producing countries; it is only in India
where the modest growth has been registered. Over all, production has increased by 2%, for the
period between 2007 and 2011 (see table 4.2 and figure two).

Table 4.2: World Major Bee wax Producers (in thousands and metric tons)
Rank Country Years CAGR
2007 2009 2011 (%)
(Int $1000) (MT) (Int $1000) (MT) (Int $1000) (MT)
1 India 183,530 19,600 198,512 21,200 215,367 23,000 4
2 Argentina 44,009 4,700 44,009 4,700 44,009 4,700 0
3 Ethiopia 42,137 4,500 42,137 4,500 42,137 4,500 0
4 Turkey 35,928 3,837 41,060 4,385 39,655 4,235 2
5 Korea 35,386 3,779 37,230 3,976 31,796 3,395 -3
6 Kenya 23,409 2,500 23,503 2,510 23,409 2,500 0
7 Angola 21,536 2,300 21,536 2,300 21,536 2,300 0
8 Mexico 19,167 2,047 20,768 2,218 18,409 1,966 -1
9 Tanzania 17,135 1,830 17,135 1,830 17,135 1,830 0
10 Brazil 15,450 1,650 16,386 1,750 15,918 1,700 1
437,687 46,743 462,276 49,369 469,371 50,126 2
Total
Source: Honey Processing Commodity Study, Research Process, DBE, 2013

18
Source: Honey Processing Commodity Study, Research Process, DBE, 2013

4.2.2 Consumption

Data on consumption of honey is hard to find. Available data show USA and EU are among the
highest consumers of honey in the world. But, data are available only for EU. According to CBI
market fact sheet and market data base on honey, EU accounts for approximately 20-25% of the
world’s honey consumption. EU satisfies more than 40% of its domestic consumption through
import.

Country wise Germany is the biggest consumer followed by France and UK. Germany accounts
for about 24% of total EU apparent consumption and for about 45% of imports of honey from
developing countries. France is the second largest consumer of honey but domestic consumption
is largely covered by imports from other EU countries and domestic production. UK is the third
largest consumer of honey and the second biggest importer of honey from developing countries.
Belgium is small to have large impact on consumption of honey in EU. But, it is important inlet
for honey import from developing countries to other major EU countries.

The Market for honey is almost saturated in major honey consuming countries of EU. Extra
capacity will be gained if there is a decrease in domestic production. A decrease in domestic
production is being apparent in EU countries. Greek is the highest per capita consumer of honey
followed by Sweden and Austria.

19
According to the available data, apparent consumption of bee wax in the EU amounted to
approximately 10 thousand tons in 2005. Actual consumption is estimated to be considerably
higher, as bee wax production in many EU countries is not included in the amount mentioned
above. According to CBI, consumption of bee wax is relatively stable. The product is used in
various mature niche markets, such as cosmetics, pharmaceuticals, candles, food coatings and
polishes.

In the cosmetics market, demand fluctuates according to short campaigns for new products
containing bee wax. Future consumption of bee wax is expected to remain relatively stable.
Major consumers of bee wax in the EU are Spain, Greece, Germany, France and Italy. Due to the
incomplete data for the calculation of apparent consumption, it is not possible to provide exact
market shares.

4.2.3 Honey and Bee wax Trade: Export and Import

The world export value of natural honey is amounted at 1.7 billion and with a volume of about
half a billion tones. Both export value and volume are increasing by 7% and 3%, respectively.
China is the biggest exporter by volume and the second by value while Argentina is the biggest
by value and the second by volume that is because the Chinese honey fetched lower price than its
Argentines counterpart. Mexico, India and Germany are amongst the top league in export of the
product. In all exporting countries, except Germany, the value of the export is increasing.
Germany is known to re-export the honey it imports (see tables 4.3 and 4.4).

Ethiopia is not exporting well as the data of its production shows. It is the 45 th exporter by
volume and the 50th by value. This shows that the country is not well reaping its potential on the
product. It also shows that the price of Ethiopian honey is lower compared to other exporting
nations. But, the amount of export both by value and volume are increasing, 30%.

20
Table 4.3: World Major Exporters of Natural Honey (US Dollar thousand)
Sr. Exporters Years CAGR
No 2008 2009 2010 2011 2012 (%)
1 Argentina 181,311 160,291 173,426 223,448 215,147 4
2 China 147,139 125,697 182,513 201,375 215,056 10
3 Germany 120,640 110,016 109,864 120,716 127,246 1
4 N. Zealand 50,551 59,312 69,970 87,089 103,265 20
5 Mexico 83,789 81,239 84,743 90,359 101,497 5
- - - - - - - -
50 Ethiopia 535 900 2,176 2,440 2,761 51
World 1,295,960 1,252,454 1,495,025 1,705,307 1,730,156 7
Source: Honey Processing Commodity Study, Research Process, DBE, 2013

Table 4.4: World Natural Honey Exported quantity, Tons

Sr. No Exporters Years CAGR
2008 2009 2010 2011 2012 (%)
1 China 84,865 71,831 101,138 99,988 110,158 7
2 Argentina 69,228 57,969 57,317 72,356 75,135 2
3 Mexico 29,646 26,984 26,512 26,888 32,040 2
4 India 18,893 10,055 18,706 28,940 24,515 7
5 Germany 27,597 22,033 20,529 20,093 22,262 -5
- - - - - - - -
45 Ethiopia 196 274 615 729 742 39
World 470,701 411,667 472,951 491,896 525,715 3
Source: Honey Processing Commodity Study, Research Process, DBE, 2013

The import of honey is dominated by developed industrial countries. USA is the leading honey
importer followed by Germany and Japan. UK, France and Spain are also among the top
importers of the product. Top five countries’ import is decreasing, except for UK. The data from
the international trade centre also shows, except USA and Japan, the major importing countries
are European, which shows the market that Ethiopia need to focus on. Honey import of Poland
and the Netherlands is increasing. Saudi Arabia, the most nearest country to Ethiopia than all
other major importers, comes 10th in import value of the product. The country has paid about 42
million USD for the import of the product.

Over all, the world import of honey by volume is increasing by 3%, while the value of import is
increasing by 8%. The world imported about half a million ton of honey that have a market
value of about 1.7 billion USD. Imports in value and volume are increasing. According to CBI,
the major importing countries market is already saturated, but the extra export gap is only from
the decrease in the production of the countries.

21
Table 4.5: World natural honey imported quantity, tons
Rank Importers Years CAGR
2008 2009 2010 2011 2012 (%)
1 USA 104,962 95,473 114,128 130,495 141,017 8
2 Germany 91,920 82,588 89,550 78,554 84,129 -2
3 Japan 41,682 36,919 39,950 40,584 36,823 -3
4 UK 30,361 30,429 31,937 35,812 33,231 2
5 France 28,144 23,513 25,308 26,964 25,481 -2
6 Spain 16,553 15,269 17,718 17,961 21,081 6
7 Belgium 16,382 18,582 21,964 21,047 20,810 6
8 Italy 13,584 15,261 14,560 15,152 15,221 3
9 Poland 5,551 7,342 11,551 13,708 14,118 26
10 Netherlands 8,217 10,244 9,580 13,526 12,942 12
World 454,837 436,732 497,098 499,009 518,818 3
Source: Honey Processing Commodity Study, Research Process, DBE, 2013

Table 4.6: World Natural honey Import; US Dollar thousand

Years CAGR
Rank Importers
2008 2009 2010 2011 2012 (%)
1 USA 232,101 230,907 304,927 401,186 429,962 17
2 Germany 247,517 256,093 289,073 277,955 279,468 3
3 UK 105,481 102,782 106,132 126,749 107,575 0
4 Japan 85,182 87,234 100,248 117,662 105,382 5
5 France 94,591 85,314 95,540 107,695 92,810 0
6 Italy 44,957 52,003 53,461 58,003 56,112 6
7 Belgium 42,589 45,813 50,457 56,074 55,841 7
8 Spain 41,035 36,928 38,042 43,559 48,292 4
9 Netherlands 29,212 34,898 33,053 52,203 44,855 11
10 Saudi Arabia 27,344 29,482 48,332 52,443 42,176 11
World 1,246,203 1,274,635 1,500,671 1,701,597 1,716,054 8
Source: Honey Processing Commodity Study, Research Process, DBE, 2013

Data on bee wax import and export is incomplete. ITC compiles data on vegetable waxes, bee
wax and other insect waxes. Brazil is the biggest exporter while Indonesia and China distantly
follow second and third, respectively. Both countries are growing fast to catch up with the
biggest exporter. The world exported about 132,675 tons of bee wax valued at USD 387,620.00,
at the end the period under consideration. The value of export has been increasing by double
digit (see table 4.7and 4.8). Ethiopia is the 18th largest exporter by value earning about 2million
USD, at the end of the period under consideration. Considering its position in production of the
product, the country is not using its potential well.

22
Table 4.7: Vegetable waxes, bee wax and other insect waxes export (US Dollar thousand)
Rank Exporters Years CAGR
2008 2009 2010 2011 2012 (%)
1 Brazil 89,762 65,617 104,043 113,061 125,094 9
2 Indonesia 20,915 15,193 25,812 48,088 70,254 35
3 China 27,496 29,168 38,185 50,541 44,603 13
4 Germany 16,684 13,558 16,274 19,378 25,715 11
5 USA 16,303 11,788 16,235 20,393 22,698 9
18 Ethiopia 1630 1695 1568 1910 2378 10
World 241,495 195,433 267,422 333,810 387,620 13
Source: Honey Processing Commodity Study, Research Process, DBE, 2013

Table 4.8: Export Quantity Vegetable waxes, bee wax and other insect waxes tones)
Rank Exporters Years CAGR
2008 2009 2010 2011 2012 (%)
1 Indonesia 20,090 19,754 25,831 43,820 67,557 35
2 Brazil 16,079 12,306 17,706 15,871 15,332 -1
3 Malaysia 6,246 1,631 4,697 3,727 15,026 25
4 China 7,445 8,081 10,249 11,347 9,574 6
5 USA 4,324 2,929 3,551 4,198 5,327 5
18 Ethiopia 355 360 311 358 365 1
World NA NA* 78,470 99,781 132,675 -
Source: Honey Processing Commodity Study, Research Process, DBE, 2013: (* Not available)

The major importing countries of Bee wax include China, USA and Poland. The export from
China is significantly increasing (50%) while it has been decreasing for the US, 4%. The world
import of bee wax and other types of waxes is increasing, by 12% (see table 4.9).

Table 4.9: Vegetable waxes, bee wax and other insect waxes, imported quantity, Tons
Sr. Importers Years CAGR
No 2008 2009 2010 2011 2012 (%)
1 China 5,528 2,866 2,746 10,142 31,596 55
2 USA 15,176 9,315 13,449 11,651 12,987 -4
3 Poland 848 803 2,495 3,619 10,348 87
4 Philippines 2,664 3,620 4,019 3,824 7,004 27
5 Estonia 4,520 6,048 5,697 5,859 5,798 6
World 76,889 65,169 77,449 80,338 122,231 12
Source: Honey Processing Commodity Study, Research Process, DBE, 2013

23
4.3 Regional Important markets for Honey
4.3.1 European Union

EU is the biggest market for honey. Import by major EU countries is increasing or stays the
same. It is in UK and France that import is constant while it is expanding for all top ten countries
(see table 4.10). Germany is the biggest importer by value among EU countries. The highest
growth in value of import is recorded for Poland. The Netherlands and Austria are among the
emerging importers of honey in the EU. Over all, EU import is increasing by 4% per year.
Colony Collapse disorder, the sudden loss of worker bees from hives are decreasing the
production of honey in EU where the balance has to be imported.

Table 4.10: EU countries that Import Natural Honey (US Dollar Thousand)
Sr. Importers Years CAGR
No. 2008 2009 2010 2011 2012
1 Germany 247,517 256,093 289,073 277,953 279,469 3
2 UK 105,482 102,781 106,129 126,749 107,573 0
3 France 94,591 85,313 95,538 107,693 92,813 0
4 Italy 44,957 52,005 53,462 58,000 56,112 6
5 Belgium 42,590 45,813 50,459 56,073 55,844 7
6 Spain 41,037 36,930 38,042 43,559 48,294 4
7 Netherlands 29,215 34,896 33,052 52,201 44,853 11
8 Poland 15,311 20,673 30,613 38,390 34,613 23
9 Austria 20,244 24,929 26,237 25,930 32,918 13
10 Sweden 12,085 16,727 18,259 20,604 19,051 12
Total Top ten (EU) 653,029 676,160 740,864 807,152 771,540 4
Others 81,506 62,773 71,463 83,228 86,385 1
Total EU 734,535 738,933 812,327 890,380 857,925 4
Source: Honey Processing Commodity Study, Research Process, DBE, 2013

4.3.2 United States of America

USA is among top importer of honey in the world. Import of honey is increasing by 4% per year.
Argentina is the biggest exporter of honey to the country followed by India. Vietnam, Canada
and Brazil are the other biggest exporters to USA in the top five lists, respectively. Among
thirteen major importers to US, six of them are Asians, which implies distance does not matter
for honey export (see table 4.11). USA covers more than 70% of its natural honey requirement
through import. Colony Collapse Disorder is affecting the USA honey industry badly prompting
the country to rely largely on imports.

24
Due to that honey production is decreasing (not increasing) in the country where the balance is
being substituted through import. But, Ethiopia is not exporting both honey and bee wax to this
market in the last couple of years.

Table 4.11: Major Countries Exporting to the US (tones)

Sr. Country Years CAGR
No 2007 2008 2009 2010 2011 2012 (%)
1 Argentina 20,379 10,043 10,899 17,414 33,502 42,482 11
2 India 7,671 13,648 13,137 18,462 26,912 21,454 16
3 Vietnam 15,707 19,378 17,430 20,738 27,826 20,700 4
4 Canada 13,961 17,305 8,302 11,053 7,148 15,957 2
5 Brazil 12,103 13,598 17,709 10,036 14,981 11,303 -1
6 Uruguay 1,893 227 19 852 7,083 10,877 28
7 Mexico 3,192 1,411 1,625 3,325 2,846 6,179 10
8 Malaysia 1,891 4,150 9,068 15,396 2,326 2,067 1
9 Chile 453 5 15 79 21 1,706 21
10 Taiwan 753 3,983 5,576 1,755 903 1,324 8
11 Ukraine 502 84 635 440 453 1,302 15
12 Turkey 167 54 73 37 183 1,075 30
13 All others 27,006 21,097 10,986 14,342 6,581 4,591 -22
WORLD 105,676 104,984 95,475 113,929 130,764 141,016 4
Source: Honey Processing Commodity Study, Research Process, DBE, 2013

4.3.3 Middle East

Middle East is the nearest market to Ethiopia and among the fastest oil powered growing
economy in the world. The region is known to import honey though the amount is small. The
biggest importer of honey is Saudi Arabia and the amount of import is increasing from the year
2008 to 2012. UAE and Yemen, respectively, are the second the third biggest importers of the
product, where the rate of import is increasing for Yemen and it is decreasing for UAE. Middle
East imported honey valued at 82 million USD with volume of 19 thousand tons, at the end of
2012. Its share of the world market is small and not growing (table 4.12), which implies there is
no lucrative potential to tap.

25
Table 4.12: Middle East Producers (in thousands and metric tons)

Sr. Importers Years CAGR

No 2008 2009 2010 2011 2012 (%)
1 Saudi 7,918 8,220 12,809 14,007 9,913 6
Arabia
2 UAE 2,980 1,889 1,887 2,390 1,949 -10
3 Yemen 630 926 851 727 1,524 25
4 Israel 2,013 298 1,022 1,213 1,398 -9
5 Oman 1,264 1,624 923 1,074 1,250 0
Middle East 18,709 15,635 21,521 22,781 18,587 0
Aggregation, qty
World, qty 454,837 436,732 497,098 499,009 518,818 3
Share 4% 4% 4% 5% 4% -3
World Value 1,246,20 1,274,635 1,500,671 1,701,597 1,716,054 8
3
Middle East 63,171 55,434 81,926 89,590 82,543 7
Aggregation- Value
Share 5% 4% 5% 5% 5% -1
Source: Honey Processing Commodity Study, Research Process, DBE, 2013

4.4 Domestic Market

4.4.1 Demand

Refined honey is all for export market though there is sizable domestic market for the product.
Honey that is consumed domestically is processed and packed as it is in developed countries.
Processed honey consumption in the domestic market is not well developed so does honey for
industrial use.

Bee wax is used domestically for bee keeping purpose. There is no industrial use of the product
except a small use in candle making in the Ethiopian Orthodox Tewahido Church. This makes
the market for Bee wax also to focus more on export market.

Domestic market analysis majorly focuses on production of refined honey in the country and
domestic consumption and export of the same from the country; especially, by established
domestic investors that process honey in modern way.

26
4.4.2 Apparent Domestic Consumption Refined Honey

Domestic Production of Refined Honey

Honey has long traditional and cultural values in Ethiopia, like as article of trade in old days, as a
gift largely in dowries during marriage, as an important ingredient for honey mead (honey-wine),
locally called tej, and bee wax used to produce light particularly in the Ethiopian Orthodox
Church. Most of the honey which is consumed domestically does not enter to processing plants.

Studies show households consume less than 10% of their total harvest (mainly for medicinal,
ritual or cultural ceremonies), and the remaining is available for sale. The large portion (70%) of
the marketed honey goes to the production of local beverage called “tej” and around 30% is used
as a table honey.

All table honey that is consumed in the urban areas may or may not be processed. Urbanites
consume honey in its crude form or as a processed one. There is also a loss of trust by the
urbanities due to adulteration of honey.

Data on the share of honey that is consumed before entering to processors is found by
interviewing experts and stakeholders in the sector. According to Holeta Bee Research Center, it
is found that the volume of honey that goes to process differ from area to area. The greatest
variation is observed between Tigray Region and the rest of the country. In the Tigray region
where extra white high valued honey is produced, about 80% of the marketable honey goes to
processors. In all other parts of the country where small scale honey processing is common only
20% of the production goes to modern commercial scale process.

Import
According to the data from International Trade Centre, import of honey is insignificant. It is
about 1 to 4 tons per year in the period between 2007 and 2011; which makes import data not to
be considered in estimation of effective demand.

Export
Ethiopia exports honey to the international market and neighboring African countries. Sudan
imported about 305 tons of honey in the year 2012 though it is lower than the preceding year.
Taking CAGR for the period between 2008 and 2012, Ethiopia’s export to Sudan has been

27
increasing by 21% a year. Norway is another biggest and emerging importer of honey from the
country where exports of honey to this country increased to 278 tons from just zero four years
ago. UK, Yemen, Saudi Arabia and Germany are among the top seven. Export of honey is
increasing to all countries. In the year between 2008 and 2012, honey export has been expanding
by 39% per year (see table 4.13).

Although the country has immense potential of producing honey, it is exporting far less than 5%
of its annual production. An importer in Europe wants a large quantity of honey from a single
exporter, which is not the case for Ethiopian honey processors. To well penetrate the
international market, firms need to form Export Corporation.

Table 4.13: Ethiopia’s Honey export quantity, tones

Sr. Years CAGR
Importers
No. 2008 2009 2010 2011 2012 (%)
1 Sudan 141 146 492 531 305 21
2 Norway 0 40 60 121 278 -
3 UK 30 44 17 31 63 20
4 Yemen 17 16 8 6 28 13
5 Somalia 0 0 0 3 25 -
6 Saudi Arabia 6 24 13 22 21 37
7 Germany 0 0 20 0 20 -
World 196 274 615 729 742 39
Source: Honey Processing Commodity Study, Research Process, DBE, 2013

The export of bee wax has a slightly different picture than honey. Most importers of the product
are western developed EU countries and Japan. That is because the product is mostly used for the
industrial purpose. The product does not require strict quality and standard, as the product is not
directly consumed by human beings.

Germany is the biggest importer of the product, from Ethiopia, followed by UK and USA.
Export of product to the first two countries is increasing by a significant amount (see table 4.14).
For all other countries, export is decreasing. Overall, export has increased by 10% between 2008
and 2012. The country has earned about 2.4 million USD from the export of 365 tons of the
product at the end of the period under consideration, 2012.
Ethiopia has done better in export of bee wax compared to other countries. It is becoming one of
the foreign currency generators to the country. But, the data during the field survey has shown

28
that there is no well developed bee wax exporter in the country. And the technology of bee wax
processing is at its primitive stage.
Table 4.14: Vegetable waxes, bee wax and other insect waxes export by Ethiopia, US ‘000’
Years
Sr. No Importers
2008 2009 2010 2011 2012 CAGR
1 Germany 334 920 906 865 1,222 38%
2 UK 89 78 24 105 446 50%
3 USA 480 178 184 353 323 -9%
4 Japan 652 437 342 458 316 -17%
5 Netherlands 74 0 0 0 71 -1%
6 Italy 0 82 112 130 0 0%
World- Value 1,630 1,695 1,568 1,910 2,378 10%
World- Qty 355 360 311 358 365 1%

Source: Honey Processing Commodity Study, Research Process, DBE, 2013

4.5 Total Existing Foreign and Domestic Demand

Estimation of domestic demand for the processed honey is based on national crude honey
production (see table 4.15). The major assumption made in the estimation of national processed
honey consumption and hence effective demand is through making some assumptions.

The major assumption made is refining honey reduces about 25% of the weight of crude honey.
About 10% of national honey production is consumed by the producers themselves. From the
honey that is sold to the market about 70% goes to Tej production. The assumption that about
20% of crude honey goes to modern refineries in most parts of the country and 80% in Tigray
Region is to be employed in estimating the demand for refined honey in the country.

To reach at the processed honey that would be supplied to the market crude is reduced by 25%
impurity reduction percentage. And then total refined honey is subtracted from the amount of
honey that is being exported from the country to reach at refined honey that is supplied to the
domestic market.

It is presented above that there is no import of honey to the country in the form that it is
exported. It is also shown above that there is the export of the product, which is increasing year
by year.

29
This gives us from refined honey that is supplied to the market, by the producers; about 24%
goes to export market. This is about 1% of national production of honey.

Accordingly, the domestic market for processed honey has been estimated and has reached about
11 thousand tons as of the year 2011. But the share of domestic market is decreasing though
marginally it is, 1%.

Table 4.15: Estimation of Domestic Demand for the Product (tons)

Years
Description 2007 2008 2009 2010 2011
Honey production (crude) (a) 42,180 42,000 39,661 41,525 53,675
Household consumption (10%) (b) 4,218 4,200.00 3,966.10 4,152.50 5,367.50
Marketable crude honey (c)=(a-b) 37,962 37,325 35,695 37,373 48,308
Honey for Tej (70%) (d)= 70% of (c) 26,573 26,128 24,986 26,161 33,815
Table honey in crude form (d-c)=(e) 11,389 11,197.50 10,708.47 11,211.75 14,492.25
Share of Tigray Region (6% of (e)) = (f) 683.32 671.85 642.51 672.71 869.54
Share of the part of the country (g)= (f)-(e) 10,705 10,525.65 10,065.96 10,539.05 13,622.72
Amount that reaches the processors (20% 2,688 2,642.61 2,527.20 2,645.97 3,420.17
of other part of the country + 80% of Tigray
Region )
Processed honey in modern processors 2,150 2,114.09 2,021.76 2,116.78 2,736.14
(reducing 25% impurity)
Processed honey exported 140 196.00 274.00 615.00 729.00
Table honey for domestic market 2,010 1,918.09 1,747.76 1,501.78 2,007.14
% Share 93.49 90.73 86.45 70.95 73.36
Source: Honey Processing Commodity Study, Research Process, DBE, 2013

4.6 Total Estimated Domestic Demand and Projection

Demand forecasting is to be done by taking the major determinants, which include population,
GDP, and per capita income, income elasticity of demand and per capita consumption of the
product.

Population growth is the major determinant of honey demand. As the number population grows,
so does the demand for honey. Processed honey is assumed to be consumed by urban educated
middle segment of the population. It is difficult to estimate the number and the growth rate of
this segment of the population. But, it is easy to conclude that the number of this segment of the
population is increasing in the last couple of years which is due to the increase in economic
growth in the country.

30
According to the CSA, the growth rate of population of the country is 2.63%. And as of the end
of the year 2011, the urban population is estimated to be a little above 16 million. In forecasting
demand for the product under consideration it would be good to forecast by the urban population
middle income population but such data is not available. But, conservatively we can use the
growth in overall population.

The Ethiopian GDP is growing by 10% in the last two GTP years. Per capita income is
calculated as a difference between population growth and GDP growth and it is calculated to be
7.37%. Income elasticity of honey, according to the study conducted by the Ethiopian Food
Policy Research Institute is, 1.22 which shows the product is income elastic.

Per capita consumption for honey is calculated by dividing table honey consumption in the year
2011 by the number of urban population in the same year. Urban population in the country is
about 16.3 million in the year 2011. The per capita consumption of honey per person per year is
0.67kg.

Finally, the relationship between determinants of demand and the demand for the product is
defined by:

Dt= d0*Nt (1+y*e) t

Where:

Dt =the demand of the commodity in year t,

d0=the per capita demand/consumption of the commodity in the base year,

Nt =the projected number of population in year t,

y=the per capita income growth rate, and

e= income elasticity of demand for the commodity.

The demand for the product is forecasted by substituting the variables by the values and the demand
projection is shown in table 4.16.

Table 4.16: Demand Projection for Processed Table Honey (tones)

Years Forecasted Demand
2012 2,187.61
2013 2,447.96

31
 2014 2,739.31
2015 3,065.33
2016 3,430.14
Source: Honey Processing Commodity Study, Research Process, DBE, 2013

4.7 Supply
4.7.1 Refined Honey Production

In Ethiopia honey is consumed mostly in its crude form and used to make traditional drink called
Tej, which does not require processed honey. Honey processing facilities are not well
developed. The country is the 9th world producer; but, the 50th in earning foreign currency from
the product, which is partially due to underdeveloped processing facility.

There are more than 11 firms that are engaged in the processed honey production in the country.
The technology of processing differs from firm to firm according to the sector’s Association. A
number of small firms are also supplying honey to well-known super markets processing it in
underdeveloped way.

Processed honey is one of the export products of the country and it is also being supplied to the
domestic market. Honey supplied to the domestic market, East Africa and Middle East is packed
with small containers while the honey that is supplied to the EU is packed with 300kg jars.

Among the major processors, according to sector’s Association, only three of them are active
exporters: Apinec, Tutu and Beza Mar. Dima and Comel supply honey to Middle East and
Sudan (see table 4.17).

Data on theoretical and actual capacity of the firms are not well documented. The highest
operational installed capacity is for Beza Mar Agro Industry Agro Industry, 600 tons per year.
Ambrosia, DBE financed honey processing giant, has a capacity of 2,330 tons per year. The firm
has not commenced operation as of August 2013 for various reasons. According to the data
collected from some interviewed individual producers and the sector’s association, most of the
firms are operating at below 50% (which is presented based on the interview made with the
refiners) of their installed capacity, which is due to poor raw material (crude honey) supply
chain, artificially high price and market competition.

32
The major problems facing the producers are the lack of reliable supply of raw honey and poor
quality of the same. Economies of scale are also cited as one of impeding factor for firms not to
exploit their capacity. Domestic refiners are not big enough to satisfy the demand of the
producers. More importantly the domestic price of honey is higher than the export price in some
circumstances. And, in Ethiopia honey does not need to be processed to be consumed though
there is a growing trend that consumed honey is being preferred by burgeoning middle income
group in the urban part of the country to the traditionally supplied honey.

Most honey exporters have also beeswax processing and exporting facility, and experience of
exporting bee wax. Export of refined bee wax is not well developed due to poor processing
facility and poor supply chain of raw bee wax.

Table 4.17: Major honey processors in the country

Sr. No Name of the Processor Theoretical Capacity Capacity
Utilizations
1 Beza Mar Agro industry 600 100%
2 Tutu and her Family 360 50%
3 Alem Honey 300 50%
4 Apinec Agro Industry 350 33%
5 Dima Honey Processing 400 50%
6 Yirgu Food Packer 400 50%
7 Comel 360 50%
8 Rahi Honey Processing 360 -
9 Ambrosiya 2,330 -
10 Century PLC 250 -
11 Harmony Agro Industry PLC 300 -
Grand Total
Source: Honey Processing Commodity Study, Research Process, DBE, 2013

4.7.2 Estimation of Domestic Supply of Honey and Forecasting

According to the analysis made in the demand section for the estimation of demand, more than
70% (63% of the country’s honey production) of the crude is destined to the production of local
beverage (Tej) while the remaining 30% (27% of the country’s honey production) goes to market
as table honey.

In projecting supply it is assumed that the current actual supply of refined honey will continue in
the future as the data collected from the Sector’s Association and Ethiopian investment agency

33
has confirmed. The current actual supply of refined honey is assumed to be about 3005 tons per
year assuming domestic firms will continue operating with 50% capacity.

4.8 Demand – Supply Gap

If honey is processed as per the standard needed by the EU importer, it will have decent market
though there is extensive competition from established developing country exporters. The
product has also a growing domestic market as the analysis made in the previous sections show.

Processed honey’s both domestic demand and Supply are increasing. The study has shown also
that the gap between demand and supply of the product is also increasing (see table 4.18).

Table 4.18: Table Refined Honey Domestic Supply Gap

Particulars 2012 2013 2014 2015 2016
Export Demand 1101 1662 2510 3790 5723
Domestic Refined Honey Demand 2,188 2,448 2,739 3,065 3,430
Total 3288 4110 5249 6855 9153
Supply 3000 3000 3000 3000 3000
Gap 288 1110 2249 3855 6153
Source: Honey Processing Commodity Study, Research Process, DBE, 2013

4.9 Price and Price Trend of the Product

According to the data from CBI, the price of honey is dependent on and influenced by weather
conditions, import bans and large scale bee diseases. A price in the EU and other major markets
is set on global market. The main honey suppliers in the world are Argentina, China and Mexico.
Developments in the production of those countries have high impact on the price paid by the
major importers. Embargo on Chinese honey, for example increased the price of honey in the
years between 2002 and 2004. Colony Collapse Disorder and low weather condition in Southern
Europe and America reduced the production of honey since 2007 and increased the price of
honey in the years afterwards.

Next to general quality determinations, color is the single most important factor determining
import and wholesale prices. On the whole, lighter grade honeys garner a higher price on the
international market due to lower supply volumes when compared to darker grades.

The price of refined honey is increasing in the international market especially the honey from the
developing countries. Price per ton of Chinese white honey was Euro 980.00 in 2005 which grew
34
to Euro 1740.00 in the year 2010; it has increased by more than 90%. On the other hand, extra
light/ amber of Australian origin fetched Euro 2950.00 in the year 2005 but Euro 2660.00 in the
year 2010; it has decreased by modest percentage.

Data from International Trade Centre show that the import unit value of natural honey (roughly
price per unit of honey) is increasing for most countries in the top ten importing list. It is only in
the UK, the Netherlands and Spain that the price of honey has decreased.

According to the information collected during the field visit, the export price of honey is constant
in the last four years. The price of refined honey and bee wax is shown hereunder:

Table 4.19: Average price of refined honey

Description Unit Price (USD) per kg
Refined honey 3.8
Bee wax 6.5
Source: Honey Processing Commodity Study, Research Process, DBE, 2013

But, the domestic price of honey is increasing just in line with the inflationary process that was
the norm in the country in the last few years.

Table 4.20: Natural Honey on the Unit Values in US Dollar (Thousand)/Quantity Unit (2011 Base Year)
Sr. Importers Years CAGR (%)
No 2008 2009 2010 2011 2012
1 USA 72 79 87 100 99 8
2 Germany 76 88 91 100 94 5
3 UK 98 95 94 100 91 -2
4 Japan 70 81 87 100 99 9
5 France 84 91 95 100 91 2
6 Italy 86 89 96 100 96 3
7 Belgium 98 93 86 100 101 1
8 Spain 102 100 89 100 94 -2
9 Netherlands 92 88 89 100 90 -1
10 Saudi Arabia 92 96 101 100 NA 2
Source: Honey Processing Commodity Study, Research Process, DBE, 2013

4.10 Target Market

Regarding the target market of the product, the company has planned to export 80% of total
production to foreign market while the balance will be availed to local market.

35
4.11 Marketing Strategy of the Project
As per the feasibility study of the applicant, the promoter has planned to utilize the following
marketing strategies:
 Investing on project producing high quality honey and wax which is aimed at substituting
the high import of honey and wax;
 Processing honey and wax with proper packaging and thereby generating foreign
currency through export;
 Conducting various promotional activities mainly focusing on advertisements through
bill boards, posters, various media outlets and internet among others.

36
V. TECHNICAL STUDY

4.12 Location
The project is located in Gambella regional state, at Godere-Mangashi woreda. The processing
plant of the project is planned to be located in the woreda town, Meti; about 624 km from Addis
Ababa. Out of this, Addis Abab-Mizan, which is 561 km, is asphalted road; while Mizan-Tepi,
63 km, is graveled road. The distance of the apiary from the processing unit is about 29 km; out
of which 17 km is public road (graveled) connecting Meti town with other woredas, while the
remaining 12 km (also graveled) is the project road built by the company itself. This indicates
that the area has sufficient road facilities. Other infrastructures like electricity, water, and
telephone are also available in the area justifying appropriateness of the project location.

4.13 Land Size and Terms of Ownership

The company acquired 500 ha of land from Gambella regional state for a period of 50 years with
a lease agreement of Birr 111 per hectare per year for beekeeping activity. In addition to this, the
company also acquired 1.5 hectares of land from Gambella regional state, urban development
and construction bureau of Metti free of lease payment for the purpose of machine installation
and crude honey processing.

4.14 Agro-Ecological Suitability of the Project

The Gambella vision indicates that Godere and Mangashi is among the ideal potential areas for
beekeeping, as it is blessed with a diversity of intact natural vegetation of typical tropical rain
forest. Besides, crops such as cereals (Maize, Sorghum), horticultural crops (Citrus, Mango,
Papaya, Avocado, Banana, Coffee …etc) grow well in the area. Also, biophysical environments
of the area are rich and conducive for beekeeping and other agricultural activities in terms of
water availability, ideal weather condition, rain fall, and altitude (Gambella vision revised 2014).

4.15 Availability of Raw Material

According to a local NGO named Gambella vision research (2014), honey production is the
major livelihood of the inhabitants of Godere and Mangashi people. They collect crude honey
from forest of the area; and also keep their traditional beehives in the forest. It is obvious that
the forest provides a good deal of food for the bees. The surrounding extension workers and
researchers in the area are encouraging the traditional beekeepers to transform from traditional to

37
transitional beehives for the latter yields more honey in terms of quantity and quality than the
former. In general, the area is well known in the country for its honey production; and hence, the
project will not face shortage of input (crude honey and crude wax) for its honey and bee-wax
processing machineries.

About 12% of the crude honey is obtainable from apiary of the project itself and the rest 88%
will be collected from farmers in the local market for honey processing. Of course, a small
number of firms compete for crude honey as raw material for their underdeveloped machineries
of honey processing. Among the processors, according to The Sector’s Association, 3 are active
exporters; namely: Apinec, Tutu and Beza Mar. Dima and Comel supplies honey to Middle East
and Sudan.

4.16 Processing, Packaging, and Storage of Refined Honey and Bee Wax
4.16.1 Honey Processing Process
Honey has a property where bacteria will not live in it, which tempts some to forget it is a food
product and do not treat it in a proper fashion. The hygiene of honey processing should be of the
highest standard throughout the whole process. The bottle or package should be clean, stainless
steel equipment, leak proof, and airtight so as to safely contain the product. It should also
present the product in an attractive form, enticing the consumer to buy it.

Honey should not be packed in used containers unless they have been sterilized. In the
processing to prevent fermentation and destroy yeasts, honey is heated to temperature of 65 o c-
70o c for specified time. Excessive heating increases the quality of Hydroxyl-Methyl-furfural
(HMF) which is desirable. High temperature also has negative effect on color and flavor of
honey.

Honey processing is divided in to three steps. These are:

Filtration to remove wax, foreign particles after heating honey to 45 o c. Heating up to
45oc (below the melting point of Bees-wax) is required to decrease the viscosity of honey.
Honey is then heated to 60oc - 65oc for 10 to 15 min and passed through evaporator.
Vacuum is simultaneously applied to boil the water in honey at a lower temperature so

38
 that moisture is separated which can be collected separately. This procedure helps to
destroy yeasts.
Cooling the honey to atmospheric temperature and storing in closed vessel for 24 - 48 hrs
is the next step. Storing honey for period of 24 - 28 hrs is necessary to allow air bubbles
to go out. Then, honey is packed and sealed immediately. Generally steps of the honey
processing process is shown in the figure below:

Honey Production Process Flow Chart

The project has the capacity of processing 600,000 kgs of honey and 240,000 kgs of bee-wax
annually.

Storage
Storage conditions should be:
 The honey has to be kept in air tightened containers
 In dry places
 In cool places
 The honey has to be with fewer amounts of yeast spores.
 Low moisture content

Containers for liquid or crystallized honey should be made either of glass or stainless steel or
coated with food approved plastic, paint or beeswax. Nothing should be allowed to impart any

39
odor to the honey. Particularly if used containers are recycled, care must be taken that they are
absolutely clean and have not the slightest residual odor. Honey readily absorbs odors of all
kinds and these can be for example, readily absorbed by a beeswax coating and then passed into
honey. Containers that previously used for toxic chemicals, oils or petroleum products should
never be used for storing any bee products, even after coating with paint, plastic or beeswax.

4.16.2 Bee-wax Processing Process

Bee-wax should be purified so as to remove non-wax components like honey, pollen, dust….etc.
There are several different methods that can be used to clean (render) raw bee-wax. The project
has planned to collect wax from producer groups, cooperatives, and unions. Hot water will be
used for rendering (cleaning) bee-wax. Impurities must be removed by a suitable rendering
process, in which only non-fragile lipid-inert materials are used (stainless steel, glass, wood, and
synthetic substances that will not break down and leave residues in the wax). Directly (stove) or
indirectly (solar wax melter) heating the impure wax, and straining the molten wax to remove
solid impurities (bee parts, propolis) are necessary. The use of synthetic mesh for straining, as
long as the synthetic material is stable at a temperature of 250 °F (the melting temperature of bee
wax is 145 °F).

During bees wax processing, dark honeycombs should first be soaked in water to remove non-
wax components. While melting the wax emulsion is formed in the water reducing wax quality.
Soft water is required for this purpose as hard water contains cations of some metals contributing
to the emulsion formation. As wax contains uncombined fatty acids that react the metals of
which the equipment is made and change the wax colouring (eg: iron colours wax in brown,
zink-in dark-blue, copper - in green), that facilitates emulsion formation and deteriorates wax
quality. So it is necessary to use technological equipment produced from non-corrosive
materials, enameled metals, aluminium, wood or ceramics.

Most methods of rendering wax use hot water to melt it. They are based on the fact that beeswax
floats in water. A few words of caution are in order, however. Cautions include:

- Never use iron, zinc, brass, or copper containers for beeswax, as they discolor the wax.
Use enameled or aluminum containers.

40
 - Be careful with melted beeswax, since it is highly flammable. Do not allow the beeswax-
water mixture to boil vigorously. Boiling beeswax lowers its quality by making it more
brittle.
- Blocks of rendered beeswax can be stored in cool, dry places for long periods without
harm. They should be wrapped in paper or plastic.
- Never store beeswax near pesticides. Beeswax absorbs many such chemicals, and they
can kill bees if this wax is used to make comb foundation.

Wax will slowly crystallize over time and as a consequence become harder, but this process is
reversible without any damage, just as with crystallized honey. Wax can be stored for very long
periods of time without losing its major characteristics.

4.17 Honeybee diseases, enemies (pests and predators)

According to the Gambella vision, the beekeeping activities in the project area are not without
problems among which the following can be mentioned. Bee diseases, pests, and predators are
the major problems reported by the producers/beekeepers. The project is being deemed give
benefits to the surrounding beekeepers for it transfers technology regarding beekeeping, honey
and wax production and processing. In addition, since the project plan to collect crude honey and
wax from the surrounding farmers, it will train them on proper harvesting, improved manner of
handling bees, honey, bee-wax, and other beekeeping products.

According to (Hepburn HR, Radloff SE.1998), disease and enemies of honeybees should not be
visible around an area used for apiary site selection. There are very many enemies of honeybees
in tropical countries, which cause great damage both to bees and their products. Ants and honey
badgers are becoming serious enemies of honeybees causing great loss both to bees and honey.
Therefore, prior to establishing apiary site selection and study of various diseases (chalk brood,
nosema and amoeba), enemies of honeybees, and seeking means for their control measures is an
important. In general the project should use the following control measures:

Precautionary Measures Against honeybee disease

1. Keep the apiary clean and tidy. Never throw propolis and combs on the ground,
where it may be robbed. Place it in a suitable container and remove from the apiary.
1. Never buy old combs
41
 2. Never buy colonies of bees unless it is known that they come from disease free
apiaries, and never accept stray swarms of unknown origin.
3. Always disinfect hives before use.
4. If a colony dies during the winter and the trouble is not due to starvation, close the
hive, pending the examination of a sample comb, to prevent the remaining stores
being robbed out.
5. Never exchange brood or super combs between one colony and another unless it is
known that all colonies in the apiary are free from disease. Where possible, supers
should be marked and always used on the same colonies.
6. Care should be taken to prevent robbing at all times.
7. The hives should be arranged in such a way that drifting is reduced to the minimum.
8. Always keep a careful watch on the brood for signs of disease.

Control of Ants
1. Keep apiaries clean, i.e, free of debris
2. Control overgrowths of grasses
3. Keep the ground dry under hive stands
4. Destroy ant nests

It is possible to improve the quality through improving the way of handling which are
responsible for inferior quality of traditional hive honeys. The project should give training for
farmers on:

1) Pre- harvest handling methods

Beekeepers in the project area should remove old combs before commencing of brood rearing
which is useful:
 In reducing swarming
 Gives ample space for brood rearing
 New comb honey has good quality compare old comb honey

2) During harvesting
 Harvest ripened honey only

42
 Avoid excessive smoking
 Keep pure new comb honey separately from old comb honey, brood, pollen and empty combs.

3) Straining of traditional hive honey

Strain the honey as soon as harvested. Whenever necessary, use water bath or double jacketed
containers to melt the honey. Use different sieve sizes and nylon clothes to remove any
impurities.

4.18 Utilities
4.18.1 Water
The water source of the Project for beekeeping farm is from nearby river which flows across the
apiary. Water is important during processing of honey and bee-wax too for cleaning its
processing-equipment and others. The project anticipates obtaining of water from district town
water supply for its processing plant.

4.18.2 Electricity
Ethiopian Electric Light and Power Corporation confirm that it will make available for the
project the electric power supply of 350 KVA/262.5 KW for the project’s production,
processing, and other purposes.

4.19 Planned Investment Items

4.19.1 Planned Investment on Land Development
The project is expected to develop sub-apiary cites by clearing and removal of bushes and trees,
leveling, and in-apiary road construction. These will account for investment cost of Birr
3,191,498. The detail is portrayed in the excel file annexed.

4.19.2 Planned Investment on Civil Works

Civil works of the project is anticipated to include Building and construction of store and
workshop, production rooms, culvert, canteen, shower, greenhouse, toilet, staff residence,
manager house, and site works. Planned investment on these civil works is estimated at Birr
13,655,842 . The detail is indicated in the following table.

43
Table 5.1: Building and Construction

Cost Per Block No. of

Descriptions Area (m2) Total Cost (Birr)
(Birr) Blocks
Store and Workshop 354.61 1,662,691.96 1 1,662,691.96
Processing Houses 482.90 2,944,877.44 1 2,944,877.44
Culvert   801,077.65 1 801,077.65
Canteen 174.96 961,636.47 1 961,636.47
Shower 42.75 416,951.17 1 416,951.17
Guard house 11.02 75,263.05 1 75,263.05
Toilet 39.33 511,061.39 1 511,061.39
Staff Residence 166.38 808,637.93 1 808,637.93
Manager House 28.80 838,358.40 1 838,358.40
Electric Installation 600,000.00 1 600,000.00
Site Elevation Difference (Site Work) 20% 1,979,475.00 1,979,475.00
Retaining Wall (Site Work) 3.5m 900,571.63 900,571.63
Compound Pavement (Site Work) 2397.76m2 1,155,240.09 1,155,240.09
Total Cost of Building and Construction       13,655,842.18

Remark: (1) EEPCO cost estimation is taken from other projects requiring similar KW electric power. (2) The
presented Architectural, structural, sanitary and electrical blue print, and BOQ is not approved by concerned
government body; and hence, need to be approved before loan contract agreement.

4.19.3 Planned Investment on Machineries

Machineries of the project are planned to comprise sets of honey and bee-wax processing
machineries, and one generator. Pro forma invoices presented for the purchase of these
machineries estimate their purchase price at Birr 3,562,421.54. The detail is indicated in the table
below.

Table 5.2: Planned Investment on Machineries

Descriptions Unit Quantity Price Per Unit (Birr) Total Cost (Birr)
Honey Processing Machineries Lump-sum 1 2,921,572.27 2,921,572.27
Bee-wax Processing Machineries Lump-sum 1 341,119.20 341,119.20
Generator # 1 299,730.07 299,730.07
Total 3,562,421.54

44
4.19.4 Planned Investment on Tools, Implements, Furniture, and Equipments
These comprise sets of beekeeping tools, implements, office equipments, and office furniture.
Pro forma invoices presented for the purchase of these items estimate their purchase price at Birr
12,322,455.23. The detail is indicated in the following table.

Table 5.3: Planned Investment on Equipments and Furniture

Descriptions Unit Quantity Price Per Unit (Birr) Total Cost (Birr)
Office Furniture Lump-sum 1 174,950.00 174,950.00
Office Equipments Lump-sum 1 93,665.23 93,665.23
Beekeeping Tools and Implements Lump-sum 1 12,053,840.00 12,053,840.00
Total 12,322,455.23

4.19.5 Planned Investment on Vehicles

The project is anticipated to acquire Isuzu FSR for input-output transport, Toyota land cruiser
(single cabin) and Toyota hi-luix pick-up (double cabin) for management staffs, Toyota minibus
for other project employees, and 3 motor cycles for supervisors and proper beekeeping officers.
Proforma invoices presented for the purchase of these items estimate their purchase price at Birr
3,811,065.49. The detail is indicated in the table below.

Table 5.4: Planned Investment on Vehicles

Descriptions Qty (#) Unit Price (Birr) Total Cost (Birr)

Isuzu FSR (6.5 Ton) 1 1,480,000.00 1,480,000.00
Toyota Land Cruiser (Single Cabin) 1 830,000.00 830,000.00
Toyota Hiace Minibus 1 788,000 788,000
Toyota Hi-Luix Pick_up, Double Cabin 1 608,717.69 608,717.69
Motor Vehicles 3 34,782.60 104,347.80
Total 7 3,811,065.49

4.20 Environmental impact assessment

The honey production and processing has no pollutant that harm environment. But in the
processing of wax sulfuric and hydrochloric acid will be used that do have negative effect on the
environment. Accordingly, the company should seek appropriate means of neutralizing residues
of these chemicals prior to their disposal into the environment.

45
4.21 Implementation Schedule
Implementation of the project is estimated based on the time taken to complete civil works, to
import and install the processing machines, recruitment and training of the planned employees of
the project. Completion of all these implementation work is estimated to take at least 6-8 months.
Detail schedule of the project implementation is portrayed in the following table.

Table 5.5: Implementation Schedule of the Project

2015 2016
Activities
M A M J J A S O N D J F M A M J J
Loan Processing and Registration                          
Land Development Works                          
Building and Construction Works                          
Processing Machineries Purchase and Installation                          
Vehicles Purchase
Office Equipments and Furniture Purchase                          
Beekeeping Tools, Implements, and Supplies Purchase                          
Recruitment and Training of Workers
Apiary Establishment and Placement of Beehives                          
Apiary Management                          
Honey Production Commencement of Own Apiary
Commencement of Honey and Bee-wax Processing                          
Marketing

46
5 ORGANIZATION, MANAGEMENT AND MANPOWER
5.1 Organization
The organizational setup of the project is structured based on the Bank’s commodity study and
the feasibility study of the company in which there is a general manager at the top assisted by an
auditor, secretary and project manager. There are four departments under the auspices of the
general manager; namely, processing and technical department, finance and administration
department, marketing and sales department, and apiary department. The detail structure of the
organization of the project is depicted in the diagram below:

Diagram 1: Organizational Structure

47
5.2 Management
The general manager of the company is Dr. Desalegn Begna who is well qualified and has long
years of experience in different capacities including animal breeding, beekeeping and
engagement in various research activities. Moreover, the project manager, Ato Alemayehu Gela,
is qualified and has experience in agricultural research activities. Therefore, along with new
recruits who have necessary qualification and experience, the project management is expected to
be capable for smooth operation of its activities.

5.3 Manpower Requirement

The project is expected to hire staffs with related educational background and work experience
who meet the research process commodity study requirements for the processing of honey and
beeswax. After successful implementation of the project, the company is expected to hire 100
employees.

48
6 FINANCIAL ANALYSIS

6.1 Summary of Investment

The total value of the investment is estimated at Birr 70,007,314. This includes Birr 37,743,283
(53.9%) invested on fixed investment such as land development, building and construction, honey
and bee-wax processing machines, generator, beekeeping tools and equipments, office
equipments & furniture, vehicles and bee-colonies. The working capital is estimated at Birr
29,955,328 (42.8%) and Birr 2,308,703 (3.3%) covering pre-operating cost including pre-operating
interest. DBE financing is envisaged to cover Birr 49,005,000 (70%) of the total investment while
the remaining Birr 21,002,314 (30%) is expected to come from own source (equity).

Table 7.1: Investment Summary and Source of Financing

Land Development 3,191,498 1,191,498 2,000,000
Building and Construction 13,655,842 8,655,842 5,000,000
Honey Processing Machine 2,921,572 21,572 2,900,000
Bee-wax Processing Machine 341,119 41,119 300,000
Generator 299,730 24,730 275,000
Beekeeping Tools and Equipments 12,053,840 53,840 12,000,000
Office Equipments and Furniture 268,615 18,615 250,000
Vehicles 3,811,065 131,065 3,680,000
Bee-Colonies 1,200,000 600,000 600,000
Sub Total 37,743,283 10,738,283 27,005,000
Working Capital 29,955,328 7,955,328 22,000,000
Pre Operating Costs 676,986 676,986 -
Pre Operating Interest 1,631,717 1,631,717 -
Sub Total 32,264,031 10,264,031 22,000,000
Total 70,007,314 21,002,314 49,005,000
Debt/Equity Ratio 100% 30% 70%

49
6.2 Local and Foreign Component of the Investment
Out of the total financial requirement of the project, 94.91% (Birr 66,444,891) is to be incurred in
local currency, while the remaining 5.09% (Birr 3,562,421) is in foreign currency.

Table 7.2: Foreign and Local Component of the Investment

Description Foreign Component Domestic Component Total (Birr)
(Birr) (Birr)
Land Development 0 3,191,498 3,191,498
Building and Construction 0 13,655,842 13,655,842
Honey Processing Machine 2,921,572 0 2,921,572
Bee-wax Processing Machine 341,119 0 341,119
Generator 299,730 0 299,730
Beekeeping Tools and Equipments 0 12,053,840 12,053,840
Office Equipments and Furniture 0 268,615 268,615
Vehicles 0 3,811,065 3,811,065
Bee-Colonies 0 1,200,000 1,200,000
Sub Total 3,562,421 34,180,860 37,743,281
Working Capital 0 29,955,328 29,955,328
Pre Operating Costs 0 676,986 676,986
Pre Operating Interest 0 1,631,717 1,631,717
Sub Total 0 32,264,031 32,264,031
Total 3,562,421 66,444,891 70,007,312
Debt/Equity Ratio 5.09% 94.91% 100.00%

6.3 Expected Financial Results

Profitability: The projected profit and loss statement for 10 years shows that the project will
realize a net profit of Birr 12,600,872 and Birr 15,284,225 during the first and tenth
projection years respectively. This shows an average annual net profit of Birr 14,368,895
implying that the project will be profitable throughout the 10 projection years.
Liquidity: The project’s cumulative cash flow shows a balance of Birr 9,819,398 in the first
year which will grow to Birr 92,494,615 at the end of projection period. This indicates that
the project will not face liquidity constraint in financing its costs and debt obligation.
Net-worth: Balance-sheet of the project shows that the project’s net-worth will grow from Birr
21,002,314 during the investment year to Birr 141,622,305 at the end of the projection
period.
Financial Internal Rate of Return: Before and after tax financial internal rate of return are
computed based on 10 years projection period and found to be 32% and 27% respectively.
Both rates of returns are far above banks lending rate witnessing viability of the project.

50
Sensitivity Analysis: The project's sensitivity to adverse circumstances is viewed from three
different scenarios: decreasing sales revenue; increasing operating cost and investment cost all
by 10%. The result indicates that FIRR after tax decreases to 15% with decrease in sales revenue,
decreases to 18% with increase in operating cost, and decreases to 24% with an increase in the
investment cost. These indicate that the project is sensitive to decreases in sales revenue while it
is not as such sensitive to increases in operating and investment cost. To mitigate the sensitivity
of the project to decreases in sales revenue, the company should work on quality production of
refined honey and beeswax. For detail, see the table below:

Table 7.2: Sensitivity Analysis

Scenario Tax FIRR
Before Tax 18%
Revenue Decreased By 10%
After Tax 15%
Before Tax 21%
Operating Cost Increased By 10%
After Tax 18%
Before Tax 29%
Investment Increased By 10%
After Tax 24%

6.4 Socioeconomic Benefits

a) Economic

 In-total, the project will generate annual average revenue of Birr 6,179,185 to the
government in the form income tax during its projection years.
 Increasing the economic status of the labourers in the area.
 Create opportunities for business activities in the area where the project is located.
 The project will create market for local bee farmers and hence the standard of
living of the farms will be improved owing to the newly created market demand
in the locality.

b) Social

 The project will create job opportunities for 100 skilled and semi-skilled labours.

51
  The training given to the work force will improve the quality of honey and beeswax
to be produced and hence strengthens the social and economic security of the
employed.

7 CONCLUSION AND RECOMMENDATION

7.1 Conclusion
Yigarsehaduta Agro Processing plc is a new project established according to the Ethiopian law
and regulation with the objective of engaging in beekeeping, honey and wax processing for both
local and foreign market. The project location is confirmed appropriate in terms of proximity to
market, labour, raw materials, utilities, and accessibility to other infrastructures like
transportation and communication.

The General Manager of the project has the necessary qualification, expertise and courage to
discharge his responsibilities and authority for success of the project and the project employs a
qualified project manager implying the project will not face management problem. Moreover, the
market study shows that the project will not face marketing problem for its products- refined
honey and beeswax.

There are also various socio-economic benefits expected from the project. First and foremost, the
employment generating capacity of the project can absorb about 100 skilled and semi-skilled
labors from the labor market. Secondly, it could generate an annual average tax revenue of Birr
6,179,185 to the government treasury in the form of tax starting from its third year of operation.
Thirdly, the project will create market for local bee farmers and hence the standard of living of
the farms will be improved owing to the newly created market demand in the locality. Last but
not least, the training given to the work force will improve the quality of honey and beeswax to
be produced and hence strengthens the social and economic security of the employed.

Financially, the project is found to be profitable, liquid and viable. Consequently, after verifying
the viability of the project, it is concluded that the project can be a profitable venture and able to
meet its debt obligations.

52
7.2 Recommendation
Based on the market, technical and financial assessment undertaken, the appraisal team
recommends a loan of Birr 49,005,000 for Yigarsehaduta Agro Processing Plc under the
following terms and conditions:

7.2.1 Terms and Conditions

A. Terms

Equity utilization

The promoter has to raise and utilize equity contribution of Birr 21,002,314 for the coverage of
investment costs and pre-operating interest and present the documents for pre-operating costs of
Birr 676,986. The detail is depicted in the table below:

Table 7.3: Details of Equity Utilization Schedule

  Equity (Birr) To be disbursed to
Land Development 1,191,498 Promoter
Building and Construction 8,655,842 Contractor
Honey Processing Machine 21,572 Supplier
Bee-wax Processing Machine 41,119 Supplier
Generator 24,730 Supplier
Beekeeping Tools and Equipments 53,840 Supplier
Office Equipments and Furniture 18,615 Supplier
Vehicles 131,065 Supplier
Bee-Colonies 600,000 Promoter
Sub Total 10,738,283
Working Capital 7,955,328 Promoter
Pre Operating Costs 676,986 NA* but Payment voucher checking
Pre Operating Interest 1,631,717 DBE from equity blocked
Sub Total 10,264,031
Total 21,002,314
*NA = Not Applicable

53
Loan Disbursement Schedule

First Disbursement: Birr 10,475,000

After verification by the Credit Process that the client has raised and utilized his equity
contribution as specified in the table above, the following disbursements shall be made:

 Birr 2,000,000 to the promoter for financing the cost of land development;
 Birr 5,000,000 to the contractor for financing the cost of building and construction;
 Birr 2,900,000 to the Supplier for financing the cost of honey processing machine;
 Birr 300,000 to the Supplier for financing the cost of bee-wax processing machine;
 Birr 275,000 to the Supplier for financing the cost of generator.

Second Disbursement: Birr 16,530,000

After verification by the Credit Process that the client has effectively utilized the first
disbursement, the following disbursements shall be made:

 Birr 12,000,000 to the supplier for financing the cost of beekeeping tools and
equipments;
 Birr 250,000 to the supplier for financing the cost of office equipments and furniture;
 Birr 3,680,000 to the supplier for financing the cost of vehicles.
 Birr 600,000 to the promoter for financing the cost of bee colonies;

Third Disbursement: Birr 11,000,000

After verification by the Credit Process that the client has effectively utilized the second
disbursement, Birr 11,000,000 will be disbursed to the promoter for financing partial cost of the
working capital requirement of the project.

Fourth Disbursement: Birr 11,000,000

After verification by the Credit Process that the client has effectively utilized the third
disbursement, (the remaining balance of the proposed loan) Birr 11,000,000 will be disbursed to
the promoter for financing partial cost of the working capital requirement of the project.
54
 Repayment Schedule

1 Interest Rates and Other Charges

 Interest Payment: 8.5% per annum on the outstanding loan balance, to be paid every
four months, starting on 31 October, 2015.
 Commitment Charge Payment: 0.5% per annum on the balance in commitment.

.2 Principal Repayment
The principal loan is scheduled to be fully repaid within 8 years, by four monthly consecutive
equal installments of Birr 2,041,875. The first installment is scheduled to be paid on 30 th June
2016. The last repayment will be made on 28th February 2024.

B. Conditions

a) Collateral: First degree mortgage on all fixed assets of the project.

b) Insurance: Purchase of proper insurance policy for the entire assets of the project with
DBE a co-beneficiary.
c) Current Account: The promoter should open current account with DBE.
d) Record Keeping: The project should maintain proper record keeping system.
e) L/C Opening: The project should open letter of credit in DBE.
f) The promoter has to block the equity contribution of Birr 20,325,328 in the form of cash at
DBE within 6 months and use it as per the specified equity utilization schedule (given in
the table above) for partial coverage of the investment costs. The promoter should also
present the documents for pre-operating costs of Birr 676,986.
g) The presented Architectural, structural, sanitary and electrical blue print, and BOQ is not
approved by concerned government body; and hence, need to be approved before loan
contract agreement.
h) The promoter has to raise its paid up capital at least to the level of equity contribution.
i) The promoter should cover any cost overruns arising during the implementation period of
the project.

55