_______ AND _____ PARTNERSHIP

Place of Investment: Modjo, Oromia

June 2023
Mojo, Oromia
 Table of Contents
Executive summery........................................................................................................................ iv
1. Introduction.............................................................................................................................. 1
2. Background of Kulanii and Diriba partnership ....................................................................... 2
3. Product description...................................................................................................................3
4. Industry player..........................................................................................................................3
4.1. Producers...........................................................................................................................3
4.2. Collectors.......................................................................................................................... 4
4.3. Fattening operations..........................................................................................................4
4.4. Traders.............................................................................................................................. 4
4.5. Cooperatives......................................................................................................................5
4.6. Brokers/Middlemen.......................................................................................................... 5
5. Market analysis.........................................................................................................................5
5.1. Demand and supply analysis.............................................................................................7
5.2. Sales Forecast....................................................................................................................8
5.3. Target Market....................................................................................................................8
5.4. Competition.......................................................................................................................9
5.5. Pricing............................................................................................................................... 9
5.6. Promotion........................................................................................................................10
5.7. Distribution..................................................................................................................... 10
6. Farm capacity......................................................................................................................... 10
7. Production plan.......................................................................................................................10
8. Raw material, labor and utilities.............................................................................................11
8.1. Raw Material Plan...........................................................................................................11
8.2. Direct labor plan..............................................................................................................12
8.3. Production overhead plan................................................................................................12
9. Location and site.....................................................................................................................13
10. Machinery and equipment.................................................................................................. 14
11. Human resource plan.......................................................................................................... 14

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 11.1. Employee Plan.............................................................................................................14
11.2. Manpower requirement............................................................................................... 15
11.3. Training Requirement..................................................................................................16
12. Financial plan......................................................................................................................16
12.1. Financial analysis........................................................................................................ 16
12.2. Underlying Assumption...............................................................................................16
12.3. Total Initial Investment Cost.......................................................................................16
12.4. Source of finance.........................................................................................................17
12.5. Production cost............................................................................................................17
12.6. Projected financial statements.....................................................................................17
12.6.1. Projected income statement..................................................................................... 18
12.6.2. Projected balance sheet............................................................................................19
12.6.3. Projected Cash flow statement.................................................................................20
13. Financial evaluation............................................................................................................21
13.1. Profitability..................................................................................................................21
13.2. Breakeven Analysis.....................................................................................................21
13.3. Margin of safety.......................................................................................................... 21
13.4. Pay Back Period.......................................................................................................... 22
13.5. Net present value.........................................................................................................22
14. Economic and social benefit and justification.................................................................... 22

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LIST OF TABLES

Table 1: MEAT CONSUMPTION TRENDS IN ETHIOPIA BY TYPE IN TONS.....................................7

Table 2: PROJECTED SALES...................................................................................................................... 8
Table 3: PRODUCTION PLAN.................................................................................................................. 11
Table 4: RAW MATERIALS REQUIREMENT AND COST.................................................................... 12
Table 5: DIRECT LABOR REQUIREMENT............................................................................................. 12
Table 6: MANUFACTURING OVERHEAD COSTS................................................................................ 13
Table 7: REQUIRED MACHINERY AND EQUIPMENT........................................................................ 14
Table 8: MANPOWER REQUIREMENT.................................................................................................. 15
Table 9: INITIAL INVESTMENT COST................................................................................................... 16
Table 10: SOURCE OF FINANCE............................................................................................................. 17
Table 11: ANNUAL PRODUCTION COST.............................................................................................. 17
Table 12: PROJECTED INCOME STATEMENT 2020TO 2024.............................................................. 18
Table 13: PROJECTED BALANCE SHEET.............................................................................................. 19
Table 14: PROJECTED CASH FLOW STATEMENT.............................................................................. 20
 Executive summery
This project profile deals with the establishment of goat and cattle fattening farm in Oromia
Regional State, East Showa Zone, and Mojo. The project proposal presents to show the viability,
profitability, and socio-economic justification of the project.

Accordingly, the demand for fattened goat and cattle is increasing as the result of increasing of
population, income, and consumption habits of customers. Based on demand, supply of input,
and capacity available the project planned to start production at 40% of total capacity and to
increase production by 20% for the next 4 years and attain full capacity on the 5 th year and then
after.

The initial investment cost of the project including working capital is estimated to birr
10,512,150. The project also plans to create permanent employment opportunity to more than 40
workers at full production capacity.

From proposed financial result of the project the net present value (NPV) of the project for the
first five years operation is 998,290 at discount rate of 10%, break even at 60% of initial capacity
utilization and it will payback fully the initial investment within four years and two months. The
margin of safety of the project is 40% which indicates the level of safety in condition of decline
in level of sales.

The social and economic benefit of the project is also identified as increase in investment,
income, create employment opportunity, and improve livelihood of livestock producers through
providing them reasonable price for their produce. Generally, the project is viable technically,
financially, socially, and economically.
 1. Introduction
In Ethiopia, livestock had a great role in the economic development for farmers or producers,
food-insecure areas and one of the main sources of meat production. Cattle and small ruminants
are important components of the livestock subsector and are sources of cash income and play a
vital role as sources of meat, milk, and wool for smallholder keepers in different farming systems
and agro ecological zones of the country. They are also sources of foreign currency. Cattle,
Sheep, and goat in Ethiopia and most developing regions are kept under traditional extensive
systems. They are largely produced in mixed crop livestock, specialized pastoral and agro-
pastoral systems. Livestock production is of subsistence nature. Market-oriented or commercial
production is almost nonexistent.

According to the report of the total annual meat production comes from cattle (63%), sheep
(25%) and goats (12%). At the national level, sheep and goat account for about 90% of the live
animal/meat and 92% of skin and hide export trade value. In the lowlands, goat with other
livestock is the mainstay of the pastoral livelihoods.

In traditional production systems, small ruminants provide both tangible benefits such as cash
income from animal sales, meat for home consumption, manure, fiber and skins and intangible
benefits such as savings and insurance against emergencies, employment, cultural and
ceremonial purposes. Thus, livestock contribute their share in fundamental issues related to
reducing under-nutrition, enhancing food security, combating rural poverty, and achieving rates
and patterns of agricultural growth that would contribute to the overall economic development
and environmental protection.

Ethiopia has some important comparative advantages in the Middle Eastern livestock and meat
markets. Live animal exports are high, as an estimated 1.6 million livestock. However, feed
shortages are often highlighted as a constraint to Ethiopia’s livestock and meat industry.

Live animal exports contributed 70% of the earnings, while 30% was obtained from meat
exports. However, the lack of exporting routes and ports, illegal live animal trade, the shortage of
live animals and the lack of appropriate breeding programs are some of the main challenges

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faced by the sector. The presence of large livestock population with diverse and adaptable
genotypes, and diverse agro ecologies for production of different types of livestock; the
expansion of agro-industries and the increase of by-product feedstuffs allowing for enhanced
productivity; proximity to Middle East countries; high demand for meat and live animals in the
market including the domestic market are some of the opportunities that the sectors have.

The livestock production system in East shoa is market oriented. Fattening is commonly
practiced by all farmers in all places. Farmers keep a small number of animals which are mainly
purchased from market, fattened and sold for beef/meat after a few years of work.

East showa farmers grow crops targeting animal feed. During the main rainy season, even in the
highlands farmers grow maize and sorghum as a sole crop or intercropped with haricot bean,
ground nut or other perennial cash crops. This system of cropping is targeting animal feed since
the fattening package of east Shoa farmers is based on sorghum and maize leaves, seedlings,
tassels and defoliated leaves.

In East farmers practice certain feeding systems. Most farmers give priority to their animals.
The major feed resources are sorghum and maize Stover, straw, maize and sorghum leaves,
thinned maize and sorghum seedlings and sterile plants, maize tasels, sweet potato leaves, haricot
bean leaves and weeds grown in crop fields.

2. Background of Kulani and Diriba Farmers’ partnership

Kulani and Diriba Farmers’ partnership established in 2012 with initial capital of Birr 200 and it
have 2 individual members of which 1 male and 1are female. The partnership is established to
solve socio economic problem of members and societies. Accordingly the partnership currently
is highly involving in solving member’s socio-economic problem.

The coverage area of the partnership is east showa Zone. The current capital of the partnership
increased to birr 1,200,000. As the response to the growth of the partnership capital, it plans to
expand its operation through involving in different investment opportunities to meet

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members need and contribute to the GTP plan. Accordingly the partnership proposed the
project to establish goat and cattle fattening farm in Modjo town, of east Shoa Zone.

Objective of the union

 To enhance self-reliance of members

 To increase production and productivity of agriculture
 To access and promote agricultural technologies so as to increase production and income of
members

3. Product description
Fattening means controlling what cattle and small ruminants eat by using high quality feed so
that to generate faster weight gains. It is a strategic feeding option which produces a quick result
(2-3 months), technically quite simple. Agro-industrial by-products can be used as feed sources.
Once cattle have eaten to their appetite and remain full, the chance of negative upsets is reduced
considerably. In this regard additional labium feeding would result in increased daily weight
gains of up to 700 gm. per day for cattle.
Goat fattening is intensive feeding of goats in feedlots to slaughter weight with adequate fat
deposit (finish)”. The goats (preferably males, however, females may also be used in case of
unavailability of males) of 2-3 years of age are fed on nutritionally balanced concentrate ration
or Total Mixed Ration (TMR) as major source of energy and protein in addition to green fodder
for a period of 90 days to get higher body weight gain. Initial live body weight of goats is around
20-25 kg. The daily weight gain varies between 125 to 140 grams depending on the quality of
feed given to them and attains maximum 140kg at fattened stage.

4. Industry player

4.1.Producers
The largest share of meat and live animals for export are produced by lowland pastoralists. They
account for 90% of all such production in Ethiopia; however, there is a growing share of
highland animals entering the export supply chain. Producers’ rear cattle, shoats, and camel, in
order of importance. They are often located in rural areas where access to market and

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infrastructure is insufficient. Market and pricing information is difficult and often impossible to
come by.

4.2. Collectors
These important market agents collect animals, usually from remote locations and gather animals
to the producer areas where watering points are founds. They are mostly independent operators
who use their local knowledge and social relationships, family, and friends to collect animals. In
turn, they become an important source for big and small-scale traders and livestock trading
cooperatives. They are usually constrained by a financial capacity that limits their operations and
keeps them within a narrow geographic range. The collectors are not always good sources of
market information however, and they may take advantage of producers‟ limited knowledge of
the markets.

4.3. Fattening operations

The feedlot/fattening operations include small scale private feedlots and those that operate larger
facilities aimed at animal exporting. Fattening operations generally purchase livestock, either
through their own purchasing agents or from traders; they will also purchase from cooperatives
on occasion. Feedlots generally purchase cattle; both young and older animals, fattening young
animals primarily for sale to export abattoirs and older animals for the domestic market.

4.4. Traders
There are both animal traders buying on average 50 animals per week and small traders usually
buying on average 10 animals per week in the market. Large traders, who are few in number, are
those who are permanently operating in the live animal and meat value chain business and are
known for purchasing large numbers of animals from a variety of sources in order to supply their
key buyers.

Usually just one or two big traders will operate in a certain area, and they will often divide the
markets among themselves, thereby reducing competition and increasing prices. The larger
traders will use their own capital and act as a source of funding to their collectors. Most big
traders are indigenous to the area in which they operate, and they have extensive experience in
the market in these areas.

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Smaller traders, on the other hand, are large in number relative to big traders. At times, they are
the only outlet to markets that many smaller collectors have. Unlike the larger traders, small
traders have little working capital which results in their collecting limited numbers of animals on
a weekly or even biweekly basis. They often use rented vehicles to transport the animals to
abattoirs. Some small traders have relations with the larger traders and will often feed animals
into the larger trader networks, especially for the export market.
Partnerships
Livestock partnership are located throughout the livestock production areas in Ethiopia;
however, few exist in highland areas. Most of the livestock partnerships operate in the shoats
market because of the low financial requirement of shoats compared with cattle and camel.
Livestock trading partnerships have been established primarily to operate as a marketing arm for
their members; they rarely work as a backward link for input suppliers to producers, although it
was observed that some cooperatives have begun attempting to work on input supplies.

4.5. Brokers/Middlemen
An important feature of the livestock marketing system in most of the livestock markets in
Ethiopia is the involvement of brokers/middlemen in many segments of the marketing chain.
They match buyers and sellers and facilitate transaction, and in some cases they provide a
valuable service. In some market areas, particularly in remote rural locations, brokers not only
provide an important service but are critical links to the markets for small holders. On the
contrary in most urban settings, brokers do not play as important of a role, however, they are still
often involved in many transactions.

5. Market analysis
To stimulate production and productivity, reliable markets are important. Interventions aimed at
enhancing the productivity of goats needs to also consider market aspects. A high periodic
fluctuation in market supply and demand related to periods of religious and public festivals as
well as poor access to markets have been identified as the major marketing bottlenecks.

These challenges extend beyond farmers to the national level. The goat value chain has four
main tiers (farm gate, local/primary market, secondary market and terminal market) with varying
actors from one stage to the other. Such a system reduces the benefits the primary producers

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earn. The growing demand for livestock in local and international markets, improving
transportation infrastructure, and the experience of farmers in small ruminant keeping and the
potential to grow to market oriented production. It creates practical opportunities to enhance the
contribution of the sector for economic development. In addition, the increasing number of
abattoirs supplying export and domestic markets are expected to play a significant role in
improving the market situation.

Generally, the present system of goat production and marketing in Ethiopia is characterized by
substantial variations in animal availability, body weights and condition at slaughter, and carcass
characteristics. Working towards more market-oriented systems and addressing issues along the
whole value chain are receiving attention at both the research and development end.

The average price of live animals on the formal markets has been continuously rising for the last
five years. The continuous increase in the prices paid for live animal is attributed to various
factors including illegal trade across borders leading to a shortage of supply to domestic markets,
increasing price of inputs to feedlots including rapid increases in the price of feed and overall
inflationary pressures.

Buyers in export markets require consistent quantity and delivery of live animals. Animals are
required in large numbers for religious holidays with peak demand between October and
December which corresponds to the end of Ramadan and preparations for the Hajj. Supply peaks
after the rainy season ends slightly different from north and south of Ethiopia and drops
dramatically shortly after. Buyers, both domestically and in export markets, complain about the
lack of reliability in the quantity of animals available for purchase.

The costs to produce the animals must remain low or at least steady since this will affect the beef
prices that consumers will be seeing. There are many substitutes for beef and having higher
retail beef prices would decrease consumer demand and consumption. Consumers are leading
rushed lives and need quick meal options. If the beef industry does not keep pace with this type
of demand, retail sales will suffer drastically.

Increased domestic demand due to population growth, and increased income of household lead to
major decrease in exports. It was predicted that because of a 2.9% population growth rate,
official exports were absorbed by domestic consumption, and an increase in productivity can

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prevent the decline in export levels. This is based on the premise that increased population
growth coupled with increased urbanization and income would significantly increase demand for
meat while, in the absence of productivity growth, increased domestic demand would be met by
reducing export.

5.1. Demand and supply analysis

Growing populations, urbanization and economic growth in developing countries are
contributing to growing demand for livestock and livestock products (Hall et al. 2004). The
government recognizes the importance of livestock in poverty alleviation, and it has increased its
emphasis on modernizing and commercializing the livestock sub-sector in recent years (SPS-
LMM 2009). Estimates of the numbers of cattle and other livestock species in Ethiopia vary
substantially

According to Economic Commission for Africa's (ECA) "Economic Report on Africa (2002)",
the average growth rate of Ethiopian export over the period 1991-2000 were 4.8% per annum.
Accordingly, the future export market demand for the product is assumed to grow by 4.8% per
annum.

The increase in household meat consumption is mainly a function of three demand determining
variables i.e., population, income, and consumption habit. The total population growth rate in
Ethiopia is 2.9% per annum, while that of the urban population growth rate is 4% per annum.
The consumption of meat by the rural population is expected to increase because of higher
income. Hence, to estimate the probable level of future demand, present demand is assumed to
increase by a slightly higher rate than the urban population growth rate, i.e.,5% per annum.

Table 1: MEAT CONSUMPTION TRENDS IN ETHIOPIA BY TYPE IN TONS

Meat types 2024 2025 2026 2027 2028

Beef 405,780 426,069 447,372 469,741 493,228
Sheep meat 103,200 108,360 113,778 119,467 125,440
Goat meat 81,600 85,680 89,964 94,462 99,185
Pig meat 2,250 2,363 2,481 2,605 2,735
Chicken meat 72,576 76,205 80,015 84,016 88,217
Camel meat 23,760 24,948 26,195 27,505 28,880
Total 689,166 723,624 759,806 797,796 837,686

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 5.2. Sales Forecast
The main source of revenue of the project is sale of fattened goat. Based on demand for the
product, supply of raw material and capacity available for the production; the annual sale of the
project estimated according to the following assumptions. The level of sale will increase by 20%
each year with the assumption that selling price will increase at 8% inflation rate of the country.

Table 2: PROJECTED SALES

Year
Description 2024 2025 2026 2027 2028
Sale of Goat
Number of Goat sale 600 720 870 1,100 1,500
Unit selling price 4,500 4,860 5,249 5,669 6,122
Total sale (goat) 2,700,000 3,499,200 4,566,456 6,235,574 9,183,300
Sale of cattle
Number of cattle
sales 150 180 216 259 311
Unit selling price 30,000 32,400 34,992 37,791 40,815
Total sale (cattle) 4,500,000 5,832,000 7,558,272 9,795,521 12,694,995
Total sales revenue 7,200,000 9,331,200 12,124,728 16,031,095 21,878,295

5.3. Target Market

The identified target markets as venders (suppliers) for the produces are farmers, animal feed
producers, veterinary service centers. The union plans to buy live goat directly from farmer
producers or through their primary cooperative by paying reasonable price to their produce. This
practice will motivate farmers for market-oriented production which increase productivity and
income of small household farmers.

To provide high quality with enough to customer the union will create linkage with animal feed
producer and veterinary service centers. This linkage enables the union to provide healthy and
high yield goat within short period of time in consistent manner. Fattening goat within short
period of time reduces production costs through minimizing feed consumption and labor cost.

The identified potential target market as customers are, local hotels and restaurants, Universities
and foreign importers of live animal. To satisfy customers the union will provide frequently
healthy and high yielding goat consistently at right quality, right quantity, at right time, and right
price. These will enable the union to retain high market, generate high revenue and recognize
maximum possible profit.

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 5.4. Competition
Fattening operations, local traders, and livestock exporters are potential competitors those could
affect in marketing. In fattening and marketing of goat in the area, the union has better advantage
in the supply of quality meat goat at required quantity and quality due to potential long period
experience of farmer members in provision of high yielding goat to the union. A target market
and distribution channels planed by the union to increase availability and access of fattened cattle
to customers are livestock by product processors, universities, exporters and in long run foreign
market and another opportunity what make the union strong competent in market.

The partnership has strong linkage with primary producers due to those farmers are members,
owners, and users of the operation result of the union. The partnership has also location
advantage which enables it to collect animal directly from farmers or through primary
cooperative at low transportation cost, low cost of distribution, at required quality, quantity and
required time with consistent manner based on customers and market preference. Thus, the
partnership will utilize cost minimization strategy to stand out from the competition.

However, large traders and live animal exporters are strong competent with the partnership in
many aspects. Large traders and live animal exporters have good experience in collecting and
marketing live animals in large volume, transportation facilities to collect from different areas,
better financial capacity, look for distant market, temporary price adjustment based on volume of
supply, and have full market information and strong communication power.

5.5. Pricing
The partnership is closer to farmers to produce the goat and supply to market with low cost of
transportation and cost of market dealers. Due to this fact the partnership can sells the produce at
affordable price to the customers compared to other suppliers like traders, and private
companies. The partnership fixes selling price of the product based on production cost and
considering selling and administrative expenses incurred for operation. It is highly working to
stabilize price fluctuation and to reduce unfair revenue generation. The union will optimize its
production through minimizing production cost and wastage to give demanded meat goat to
customers at reasonable price.

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 5.6. Promotion
As part of this plan the partnership promotes its product in the market using a preferred mode of
brochures, social Medias, and word-of-mouth advertising. The partnership will distribute and
post brochures to target markets such as universities, local hotels and restaurants, foreign
importers, and meet processing companies.

5.7. Distribution
To access the product to customer at their near location the partnership will transport and
distribute the product at different potential markets. These distribution centers will be established
at Addis Ababa, and Adama and other cities through continues assessment of potential market
for the product. This is to save transportation cost and time of customers to purchase the produce
and to satisfy them and retain more market to generate more revenue.

6. Farm capacity
This fattening farm project will have a capacity of 1500 heads of goat and 320 head of cattle
per year and the objective is to process four batches per year with 90 days feeding period. The
project will operate at 40% of its capacity in its first year of operations; increase capacity
utilization by 20% per year for four years and attain full capacity in fifth year. Hence, the farm
will start its operations with fattening of 600 goats and 150 cattle. The proposed project is based
on raising 1500 goats and 320 cattle per year at full capacity in three production batches, each
having 375 goats and 80 cattle.

7. Production plan
The primary production objectives of the kulani and Diriba Farmers’ partnership will be to
maintain a maximum high size of high-quality meat goat and cattle that signify a high capital
asset to the project, highest production, with minimum cost of production. This must be in
consideration of sufficient input will be supplied by vendors and other maintenance resources
available at the partnership. In this line kulani and Diriba Farmers’ partnership will produce a
maximum amount of fattened goat and cattle possible from its operation.

The annual production plan is formulated based on the proposed available capacity, forecasted
sale and availability of inputs. Considering the problem of market penetration, financial
limitation and skill development of production at the initial stage of the production period, it is

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planned that the union will start production at 40 % of the total capacity and it will increase its
production capacity to 48% in the second 58% in the third year 73% in fourth year. Full
production capacity shall be attained in the fifth year and then after. The basis for this
production plan is market demand (sales forecast) for the product, available capacity, and supply
of inputs.

Table 3: PRODUCTION PLAN

Year
Description 2024 2025 2026 2027 2028
Number of goats 600 720 870 1,100 1,500
Number of cattle 150 180 216 259 311

The project will generate highest possible revenue from sales of fattened cattle and goat by
implementing the plan. For the sales revenue, structured production points can be organized that
take advantage of highest possible prices. The result of this plan will improve livelihood of
smallholder members through motivating them to produce for market, generate income from
their sales revenue and dividend payment of the cooperative.

8. Raw material, labor and utilities

8.1.Raw Material Plan

The main raw material for fattening farm is, cattle, goat and animal feed that will be used for
production of meat and distribute to customers through different sales channel of the partnership.
The sources of raw material are farmers, traders, and animal feed producers. In addition to
provision of fair price and access market to suppliers; the union will form backward
integration and forward integration with input suppliers, and customers. The raw material
requirement is forecasted based on the production plan and the list and costs of these materials
are indicated in Table 4 bellow. The raw material purchase price assumed to be increased by 8%.

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Table 4: RAW MATERIALS REQUIREMENT AND COST
Year
Description 2024 2025 2026 2027 2028
Raw material goat
Purchase of Goat 720,000 933,120 1,217,722 1,662,820 2,448,880
Ground corn, oats, sorghum, and
wheat 328,500 425,736 555,585 758,662 1,117,302
Oilseed cake 87,600 113,530 148,156 202,310 297,947
Dried legume meal 113,333 146,879 191,677 261,738 385,469
Liquid molasses 16,425 21,287 27,779 37,933 55,865
Dicalcium phosphate 1,643 2,129 2,778 3,793 5,587
Trace mineral salt 1,314 1,703 2,222 3,035 4,469
Total RM (goat) 1,268,814 1,644,383 2,145,920 2,930,290 4,315,519
Raw material cattle
Purchase of animal 1,275,000 1,652,400 2,141,510 2,775,397 3,596,915
Oil cake 64,800 83,981 108,839 141,055 182,808
Bran of cereals 105,300 136,469 176,864 229,215 297,063
Molasses 85,100 110,290 142,935 185,244 240,076
Grain (Maize, wheat, barley) 113,400 146,966 190,468 246,847 319,914
Salt 4,688 6,076 7,875 10,205 13,226
Limestone (ground) 15,147 19,631 25,441 32,972 42,731
Meal (bone or flesh or blood) 10,000 12,960 16,796 21,768 28,211
Total RM (Cattle) 1,673,435 2,168,772 2,810,729 3,642,704 4,720,945
Total RM 2,942,249 3,813,155 4,956,649 6,572,995 9,036,464

8.2. Direct labor plan

Direct labors are labors those directly involved in production activity and costs related to this
labor is the amount which traceable to each unit of production. Therefore, direct labor for the
project includes farm manager, field assistant, goat attendant, veterinarian, guards, and driver.
The number and cost of direct labors are indicated in table 5.
Table 5: DIRECT LABOR REQUIREMENT

Description
2024 2025 2026 2027 2028
Number of workers 21 21 24 24 25
Total cost 684,120 752,532 827,785 910,564 1,001,620

8.3. Production overhead plan

Production overhead requirement for productions are indirect costs which will be incurred for
production purpose such as indirect labor, power, water, telephone, interest, depreciation, fuel
and maintenance costs. These production overhead costs are classified in to fixed overhead and
variable overheads. Since they are indirect, they cannot easily be traced to individual products.

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Therefore, the allocation base for manufacturing overhead cost will be based on
actual direct labor costs. The production overhead cost plan is indicated in
Table 6 below.

Table 6: MANUFACTURING OVERHEAD COSTS

Year
Description 2024 2025 2026 2027 2028
Variable overhead
Utilities (Electric power, Water,
and telephone) 60,000 72,000 86,400 95,040 104,544
Fuel oil (Birr) 104,000 124,800 137,280 151,008 166,109
Total variable OH 164,000 196,800 223,680 246,048 270,653
Fixed overhead
Indirect labor 67,000 67,000 67,000 67,000 67,000
Interest on lease of land 181,800 178,770 175,740 172,710 169,680
Depreciation Farm Equipment 63,820 63,820 63,820 63,820 63,820
Depreciation (shade + store) 200,000 200,000 200,000 200,000 200,000
Repairs and Maintenance 17,013 17,013 17,013 17,013 17,013
Total fixed OH 529,633 526,603 523,573 520,543 517,513
Ground total 693,633 723,403 747,253 766,591 788,166

9. Location and site

The project is planned to operate in Oromia regional state, East showa Zone,
Lume woreda which located on 70km to South east from Addis Ababa. Mojo
is a woreda in the Oromia Region of Ethiopia. Part of the East Shawa Zone,

Lume is center of East showa . Modjo (Oromo: Modjo, Amharic: ሞጆ) is a

town in central Ethiopia, named after the nearby Modjo River. Located in the
East Shewa Zone of the Oromia Region, it has a latitude and longitude of
8°39′N 39°5′E with an elevation between 1788 and 1825 meters above sea
level. It is the administrative center of Lume district.
Mojo is not only accessible by road (a road connecting the town to Adama
was built before the Italian conquest) but has been the location of a train
station of the Addis Ababa - Djibouti Railway since the line was extended
from Dire Dawa to Akaki in 1915. With the railroad, Mojo also gained
telegraph (later telephone) service and a restaurant to serve travelers.
Based on figures from the Central Statistical Agency in 2005, Mojo had an
estimated total population of 39,316 of which 20,038 were females. [3] The
1994 national census reported this town had a total population of 21,997 of

13
whom 10,455 were males and 11,542 were females.

In 8 of the 37 kebeles, the predominant agricultural practice is pastoralism;

some pastoralists are sedentary and other migrate with their herds in search of
forage and water. Cattle and goats are the most common livestock, and the
vegetation is primarily acacia with grass cover beneath. Mojo reportedly has
become, since 2003, one of the major markets of goats supplying the

14
slaughterhouses in Modjo and Adama which export mutton. In 2005 there were 5 goat
meatpacking companies based in this town, which included ELFORA Agro-Industries.

10. Machinery and equipment

The list of required machinery and equipment is indicated in Table 7. The total cost of machinery
and equipment is estimated at Birr 1,276,400.

Table 7: REQUIRED MACHINERY AND EQUIPMENT

No. Description Qty Unit cost Total cost
1 Deeping vat 5 52000 260,000
2 Cruch 3 5000 15,000
3 Knapsak sprayer 5 1500 7,500
4 Weigh bridge/scale 1 78000 78,000
5 Feeder and water trought 3 6800 20,400
6 Water tank 5 72000 360,000
7 Molasses tank 5 36700 183,500
8 Urea mixer tank 2 72000 144,000
9 Silage Graps 4 52000 208,000
Total Cost - 1,276,400

11. Human resource plan

11.1. Employee Plan

Human resource plan is critical components of this project proposal. Because manpower is a
component which realize the plan through converting all plan in to action and move the
organization in line with its objectives. To facilitate assignment of manpower and
implementation of the plan, effective organisational structure which can create effective line of
communication, assignment of authority at different level of management, and assignment of
responsibility to each individual employees of the organisation is mandatory. In addition, this

15
organisational structure will be used to assign right person to right position based on the position
requirement.

General assembly, control committee, and board of directors are owner’s existing management
structure. Considering the size of the operation, complexity of work and capacity of the project,
now the plan will start with one manager, one accountant, one casher, two stock keeper, two
seller, one purchaser, and others as indicated in table 8. The general manager plan, manage and
supervises over all daily operation of the organization and all employees expect to report to
manager.

11.2. Manpower requirement

Total number of manpower required for operation is 35 permanent employees. Details of the
permanent manpower requirement and the corresponding annual salary are shown in Table 8 and
total annual cost of manpower is estimated at Birr 1,042,800 per year. However, the salary of the
manpower will be best determined by negotiation.
Table 8: MANPOWER REQUIREMENT
Sr. No. of Minimum Salary, Birr
No. Description Persons qualification Monthly Annually
Administrative and selling
1 General Manager 1 BSc./BA 10,000 120,000
3 Secretary 1 Diploma 3,000 36,000
4 Accountant 1 BA 3,500 42,000
5 Cashier 1 Diploma 3,000 36,000
6 Storekeeper 2 Diploma 3,000 72,000
7 Salesperson 2 Diploma 3,000 72,000
8 Purchaser 1 Diploma 3,000 36,000
9 Driver 1 8th Grade 2,200 26,400
10 Cleaner and Messenger 2 8th Grade 1,500 36,000
11 Guards 2 4th Grade 1,500 36,000
Total administrative
salary 14 512,400
Production
12 Head farm manager 1 BSc. 8,000 96,000
13 Field assistant 2 Diploma 3,000 72,000
14 Attendant 14 4th Grade 1,500 252,000
15 Veterinarian 1 Certificate 4,000 48,000
16 Guards 2 4th Grade 1,500 36,000
17 Driver 1 8th Grade 2,200 26,400
Total production salary 21 530,400
Grand Total 35 1,042,800

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 11.3. Training Requirement
To improve efficiency and effectiveness of employees the project will provide training to
employees on business leadership and governance, accounting, financial management, product
processing and handling other related areas as required.

12. Financial plan

12.1. Financial analysis

The financial analysis of the project is based on the data presented in the previous parts and the
following assumptions: -

12.2. Underlying Assumption

 The debt and lease interest rate are 9%for lease and 13% for debt.
 Straight line method utilised to calculate depreciation
 Estimated inventory of animal feed on hand at the end of fiscal year is 8% of total annual feed
consumption animal in stock is 33% of annual animal sale.
 Selling price and cost of raw material increase by 8% of national inflation rate.
 Production increase by 20% of annual production.
 Debt will repay within 10 equal installments and lease within 60 equal installments for each year.

12.3. Total Initial Investment Cost

The total investment cost of the project including working capital is estimated at Birr 8,492,150
The major breakdown of the total initial investment cost is shown in Table 9.

Table 9: INITIAL INVESTMENT COST

No. Description
1 Building and Civil Work (Shade + store) 4,000,000
2 Farm Equipment 1,276,400
3 Office Furniture and Equipment 100,000
4 Vehicle 2,000,000
5 Working Capital 1,115,750
Total 8,492,150

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 12.4. Source of finance
To run the proposed business three main sources of finance are identified by analyzing their
maturity, access, cost, and risks. These sources of finance enable the union to have sufficient
finance for investment on capital assets and working capital. Accordingly, the source and
amount of finance estimated for the project is indicated on table 10 below.
Table 10: SOURCE OF FINANCE
Source of finance Amount
Own capital 2,153,645
Long term debt 6,338,505
Total 8,492,150

12.5. Production cost

The production cost estimated for production grouped in to three categories. These production
costs are costs will be incur for production which includes direct materials, direct labors and
indirect costs or manufacturing overheads. The summary of annual production cost at different
operation capacity is indicated in table 11 below
Table 11: ANNUAL PRODUCTION COST
Type of cost 2024 2025 2026 2027 2028
Direct material 3,347,249 4,338,035 5,638,993 7,478,476 10,283,433
Direct labor 684,120 752,532 827,785 910,564 1,001,620
MOH 693,633 723,403 747,253 766,591 788,166
Total 4,725,003 5,813,970 7,214,031 9,155,631 12,073,220

12.6. Projected financial statements

Projected financial statements include projected income statement which measures the profit or
loss of the project annually. As indicated on table 12 the project is profitable consistently for five
years and no loss recognized for the first five year of the life of the project. Another financial
statement projected for the business is balance sheet. The proposed balance sheet indicates the
asset composition, owner's capital and liability associated to the project. Accordingly, the highest
proportion of an asset is investment in capital asset. Regarding liability and capital, the capital
portion increase for five-year as the result of retaining of profit to capital and liability portion
decline for five years as the result of repayment on time. The projected balance sheet is shown on
table 13. The third financial statement projected is cash flow statement which presents the
projects annual cash inflow and cash outflows as indicated on table 14.

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 12.6.1. Projected income statement
kulani and Diriba Farmers’ partnerships
Table 12: PROJECTED INCOME STATEMENT 2020TO 2024
Description 2024 2025 2026 2027 2028
Sales:
Sales of goat 2,700,000 3,499,200 4,566,456 6,235,574 9,183,300
Sale of cattle 4,500,000 5,832,000 7,558,272 9,795,521 12,694,995
Total sales revenue 7,200,000 9,331,200 12,124,728 16,031,095 21,878,295
Production cost 4,725,003 5,813,970 7,214,031 9,155,631 12,073,220
Cost of goods sold 4,725,003 5,813,970 7,214,031 9,155,631 12,073,220
Gross profit 2,474,997 3,517,230 4,910,697 6,875,464 9,805,075
Operating expenses:
Administrative salary
expense 358,680 358,680 358,680 358,680 358,680
Insurance expense 147,528 147,528 147,528 147,528 147,528
Supplies expense 15,000 15,000 15,000 15,000 15,000
Interest expense 694,006 624,605 555,205 485,804 416,403
Utility expense 12,000 12,000 12,000 12,000 12,000
Depreciation expense 205,000 205,000 205,000 205,000 205,000
Advertising and
promotion expense 20,000 20,000 20,000 20,000 20,000
Transportation
expense 560,000 672,000 806,400 967,680 1,161,216
Miscellanies expense 10,000 10,000 10,000 10,000 10,000
Total operating
expense 2,022,214 2,064,813 2,129,813 2,221,692 2,345,827
Net income 452,784 1,452,416 2,780,884 4,653,772 7,459,248

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 12.6.2. Projected balance sheet
Kulani and Diriba partnerships
Table 13: PROJECTED BALANCE SHEET

Years 2024 2025 2026 2027 2028

Description Debit. Credit Debit. Credit Debit. Credit Debit. Credit Debit. Credit
Asset
Current asset:
Cash 408,950 597,191 1,154,214 2,237,394 4,119,367
Animal in stock 665,000 798,000 957,600 1,149,120 1,378,944
Animal feed in stock 78,937 94,725 113,670 136,404 163,685
Total current asset 1,152,888 1,489,916 2,225,484 3,522,918 5,661,995
Fixed assets:
Office equipment 100,000 100,000 100,000 100,000 100,000
Acctd depreciation
office equipment 5,000 10,000 15,000 20,000 25,000
Farm Equipment 1,276,400 1,276,400 1,276,400 1,276,400 1,276,400
Acctd depreciation
Farm equip. 63,820 127,640 191,460 255,280 319,100
Building (Shade + store) 4,000,000 4,000,000 4,000,000 4,000,000 4,000,000
Accumulated
depreciation building 200,000 400,000 600,000 800,000 1,000,000
Vehicle 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000
Accumulated
depreciation vehicle 200,000 400,000 600,000 800,000 1,000,000
Land 2,020,000 2,020,000 2,020,000 2,020,000 2,020,000
Total fixed asset 9,396,400 468,820 9,396,400 937,640 9,396,400 1,406,460 9,396,400 1,875,280 9,396,400 2,344,100
Total asset 10,549,288 10,886,316 11,621,884 12,919,318 15,058,395
Net asset value 10,080,468 9,948,676 10,215,424 11,044,038 12,714,295
Liability and capital
Total current liability
Long term liability 4,804,654 4,270,804 3,736,953 3,203,103 2,669,252
lease payable 1,986,333 1,952,667 1,919,000 1,885,333 1,851,667
Total liability 6,790,988 6,223,471 5,655,953 5,088,436 4,520,919
Owners’ equity:
Owners’ capital 3,153,645 3,153,645 3,153,645 3,153,645 3,153,645
Retained earning 135,835 571,560 1,405,825 2,801,957 5,039,731
Total owners’ equity 3,289,480 3,725,205 4,559,470 5,955,602 8,193,376
Total Liab. & capital 10,080,468 - 9,948,676 - 10,215,424 - 1,044,038 - 12,714,295

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 12.6.3. Projected Cash flow statement
Kulani and Diriba Farmers’ partnerships
Table 14: PROJECTED CASH FLOW STATEMENT
Year 2024 2025 2026 2027 2028
Description Debit. Credit Debit. Credit Debit. Credit Debit. Credit Debit. Credit
Beginning cash balance 8,492,150 408,950 597,191 1,154,214 2,237,394
Sale 7,200,000 9,331,200 12,124,728 16,031,095 21,878,295
Purchase of raw material 4,091,187 4,486,823 5,817,537 7,692,730 10,540,538
Payment for labor cost 684,120 752,532 827,785 910,564 1,001,620
Payment for over head 429,813 459,583 483,433 502,771 524,346
Building (Shade + store) 4,000,000
Repayment of debt and lease 567,517 567,517 567,517 567,517 567,517
Purchase of farm equipment 1,276,400
Purchase of Vehicle 2,000,000
Purchase of office equipment 100,000
Operating expenses 1,817,214 - 1,859,813 - 1,924,813 - 2,016,692 - 2,140,827
Dividend payments 316,949 - 1,016,692 - 1,946,619 - 3,257,640 - 5,221,474
Ending cash balance 408,950 597,191 1,154,214 2,237,394 4,119,367

Total 15,692,150 15,692,150 9,740,150 9,740,150 12,721,919 12,721,919 17,185,309 17,185,309 24,115,689 24,115,689

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 13. Financial evaluation

13.1. Profitability
According to the projected income statement, the partnerships will start generating profit in the
first year of operation. Profitability of the project evaluated based on proposed financial
statements using breakeven analysis, margin of safety, pay-back period and net present value.
The income statement and the other indicators of profitability show that the business is viable.

13.2. Breakeven Analysis

Breakeven point indicates the level of production unit at which the project can cover all
production and operating costs. The break-even point of the business including cost of finance
when it starts to operate at full capacity is estimated by using income statement projection.

Type of product BEP unit %

Goat 360 60%
Cattle 90 60%

To cover total production and operation cost it needs to fatten and sale 360 goats and 90 cattle
per year at initial capacity utilization. But the planed total production and sales of the project at
initial capacity estimated to 600 heads of goat and 150 heads of cattle which are greater than
breakeven point. This result indicates that the project can achieve break-even point at 60% of
planed production and sale both for goat and cattle. This break-even unit is less than planned sale
and the project can achieve this point and then make profit.

13.3. Margin of safety

Margin of safety measures the safety range of production and sale in situation when the level of
sale or production decline. Accordingly, the margin of safety of the project shown as follows:

Margin of safety = Planed sales – breakeven sale

Type of product MOS (UNIT) MOS %

Goat 240 40%
Cattle 60 40%

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This result indicates that the project is safe even if the planed sales Mojo reduced by 40% both
for boat and cattle. Therefore, the margin of safety of the project is satisfactorily high and hence
the project can achieve breakeven point and make profit then after. Therefore, the risk associated
to uncertainty of decline in sales Mojo is low.

13.4. Pay Back Period

Payback period indicates that the time period it could take the project to cover initial investment.
The investment cost and income statement projection are used to project the pay-back period.

𝑈ncovered amount
Payback period = 𝑌ear before total coverage +
The following yeear net profit
1,172,293
Pay Back Period = 4 + = 4.16 years
7,459,248

This result indicates that the project can cover initial investment within about 4 years and 2
months. This shows that the project can recover its initial investment cost within short period of
time.

13.5. Net present value

The net present value of the project measures the present value of the future net profit within 5
years life i.e., discounted future cash flow. The projected net present value of five years of the
project is 998,290.22. Since the net present value of the project is positive, the business is
feasible in terms of profitability.

14. Economic and social benefit and justification

The proposed project provides wide range of benefits that promotes the socio-economic goals
and objectives in the strategic plan and Agricultural and Growth and Transformation Plan (GTP)
of the region.

The project is found to be financially viable and earns on average a profit of Birr 3,359,820 per
the year more than Birr 16,799,105 within five years. Such result induces the union to reinvest
the profit which, therefore, increases the investment magnitude in the region.

23
Moreover, in the project will generate tax revenue for the regional government from the dividend
distributed to the individual members of the union. Such result creates additional fund for the
regional government that will be used in expanding social and other basic services in the region.

The proposed project is expected to create employment opportunity to several citizens of

the region. That is, it will provide permanent employment opportunity to 35 professionals as well
as support staff. The proposed fattened cattle production project implemented friendly with
environment.