Fish Processing Plant

(Feasibility study)

GILAD TRADING PLC

March, 2009
Addis Ababa

Table of Contents

IEXECUTIVE SUMMARY
IIMARKET STUDY
IIIRAW MATERIALS AND UTILITIES STUDY
IVPLANT LOCATION AND ENVIRONMENTAL
CONSIDERATION
VENGINEERING AND TECHNOLOGY
VIORGANIZATION, MANAGEMENT AND MAN POWER
VIIPROJECT IMPLEMENTATION SCHEDULE
VIIIFINANCIAL STUDY
IXCONCLUSION AND RECOMMENDATION
ANNEXES:

I.

Page
1
3
19
25
26
32
34
37
41

i.

Projected Sales Forecast

43

ii.

Projected Income Statement

44

iii.

Projected Cash Flow Statement

45

iv.

Projected Balance Sheet Statement

46

v.

Internal Rate of Return Calculation

47

vi.

Projected Financial Ratios

48

vii.

Summery of Annual Operating Cost

49

viii.

Loans Repayment Schedules

51

EXECUTIVE SUMMARY

1.1 Description of the Project

This project is aim to produce fish from Lake Tana. The promoter, GILAD
TRADING PLC dedicates its resources, both financial and technical knowhow, to engagement in the business of processing fish in Ethiopia and
2

marketing locally and abroad. The process of fish involves use of

automated system.

The marketing of these products target customer

needs for high-quality fish products. The company aspires to meet local
needs and contribute to efforts of the country in generating foreign
exchange earnings. The organization and management system of the
business is designed to respond to the level of sophistication in the
production and marketing operations.
1.2 Amount of Financing Required
The total investment requirement of the proposed business intervention
is estimated at Birr 192,610,476.

It is also assumed to finance this

amount through a scheme of 70% and 30% between Bank and GILAD
TRADING Private Limited Company. Consequently, the Bank avails Birr
134,827,333 while GILAD TRADING Private Limited Company meets the
remaining Birr 57,783,143 .
1.3 Market Prospect
The market prospect of the proposed project is strongly linked with the
current attractive investment policy of Ethiopia. The government has
been on foreign direct investment (FDI) and has been improving the term
and conditions under which they are to operate. Having also reviewed the
countrys economic development, the consumption of fish is increasing
which in turn necessitate improvement in the fish processing industry and
the development of relevant infrastructures.
There are evidences that consumption of fish is increasing in all target
towns and regions. The most important terminal markets for fish,
however, are: the major urban centers of Gonder, Debre Tabor, Dessie,
and Kombolcha. Many smaller

towns within 200 to 300 km from Lake

Tana are also believed to have significant demand for fish.

Furthermore, there are several water bodies mainly rivers and reservoirs
which are yet untapped.

Hence, should the demand become realizable

there is sufficient potential in the country for further development and

exploitation.
The question, there fore, is how to satisfy the large demand on the one
hand while exploiting the vast potential resources on the other? There is
also a need to stimulate further demand, if the big non-frequent
consumers of fish are to be attracted to increase their consumption level.
All these opportunities coupled with the availability of manpower at a
lower labour cost as well as the strong desire of GILADs quality
appreciation, enhances the production and marketability of various fish
products.
1.4 Technical Feasibility
Technically, the GILAD Private Limited Company believes the use of
automated machines would be instrumental in terms of efficiency and
effectiveness of the fishery industry and related sectors. The project
bases itself on the use of automated production system to better meet
the current needs in the domestic and international market.
Ethiopia being resource abundant for fish and lucrative market to fish
products dictate the establishment of this company and engage in the
proposed business intervention. The project would provide the equipment
required to handle about 10,000 tons of fish per year, out of which 80%
for foreign markets. The equipment would allow for collecting the
catches, processes them in the processing plant at Tana, transport to
Addis Ababa and export to the EU, Middle East and other African
Countries and retail in the populated areas of central Ethiopia.

1.5 Organization and Management

The organization and management of the project is designed in line with
the requirements of adopting automated fish processing plant. The major
structural components of the organization involve a general assembly,
management

team,

three

divisions

(Production,

Processing,

and

Marketing). Much emphasis is given to capacity building as the machines

are automated and require a well organized skill transfer program. The
production, marketing and financial aspect of the project will also be
managed in line with relevant legal provisions and ethical standards of
the country.
1.6 Financial Viability
The financial analysis of the proposed project demonstrates a return on
investment rate of 323%, a profit margin of 12% and a loan repayment
pay

back

period

of

and

7years.

The

project

contributes

to

improvements in related sectors, offers more than 100 job opportunities,

pays taxes etc. In conclusion, the project has social and economical
benefits and hence it is recommendable.
II.

MARKET STUDY

2.1 General Review

2.1.1

General analysis

Ethiopia has an extensive body of inland waters, comprising eight

principal lakes, three reservoirs and numerous rivers. These water bodies
are not properly surveyed and hence no systematic assessment of their
fishing potential has been made. It is generally believed that the total
area of the lakes is more than 7,000 km 2 and their maximum yield of fish

is roughly estimated to be about 35,300 tonnes. The annual fishing

potential of the Baro River alone is estimated at 25,000 tonnes. Other
rivers such as Gilo, Omo, Awash, Abay (Blue Nile) and Wabi Shebele are
also known to have large potential.
And the country has the Fisheries Resource Development Department
(FRDD) (established in 1979 under Ministry of Agriculture and the Fish
Production and Marketing Corporation (1989) are the government
agencies vested with the responsibility of development and extension of
inland fisheries processing and marketing of fish in the country. According
to the FRDD, the total annual catch of fish from lakes and reservoirs is
around 4,400 tonnes. The biggest catch (57 percent) comes from Lakes
Abaya/ Chamo and Ziway which comprise about 21 percent of the total
area of lakes and reservoirs. Only a small number of fishermen,
estimated at about 1,000, earn their livelihood from fishing. This,
however, does not include part-time subsistence fishermen most of which
are from traditional fishing tribes.
Despite its large potential, attempts to develop Ethiopias fishery resource
are limited. It is estimated that only about 0.4 percent of the expenditure
in the agricultural sector is allocated for the development of fisheries
(MOA, FPFSN, sub programme up to, 1993).
Documents show fishing in Ethiopia was constrained by lack of efficient
infrastructure and marketing network. The infrastructure at fishing site is
undeveloped and inadequate and is devoid of transport facilities to link
remote water bodies with major consuming areas. Harvesting and
processing technology are not accessible, thus limiting the scope of
marketing to the nearest local outlets where fish can be sold fresh
immediately after catching. Inadequate extension services and lack of
credit for the purchase of fishing tools have constrained the production

capacity of fishermen. According to documents obtained from FAO, there

are no laws and regulations for productive utilization of fish resources and
protection of catchments areas or rechecking degradation around the
lakes. Feeding habits of the people is also one of the constraining factors
for advanced fishery development Document from the Ministry of
Agriculture and Rural Development also indicated that previously and to
some extent still the consumption of sea foods is restricted to urban
areas and to some seasons like Orthodox Christian fasting period. That is
so because the society tends to associate the consumption of sea foods
(fish) with fasting. So we can generally say sea foods are not usual staple
foods almost in all parts of Ethiopia. Recently, however, the consumption
of sea foods through we have good potential especially in southern parts
of the country, our utilization of sea foods is not in the way it should be.
That is so because in most cases the fishing methods on the lakes are
traditional.
Table 2.1: Empirically predicted potential yield and production for
the main water bodies
Lakes
Rift Valley
Cahmo
Abaya
Awassa
Shala
Langano
Abijata
Ziway
Koka
Other areas
Tana
Fincha
Total

Altitude
(m)

Area
(km2)

Potential
Mean depth
Production
annual yield
(m)
(mt)
(mt)

1280
1285
1710
1570
1585
1575
1850
Na

550
1160
90
410
230
205
435
255

13.0
7.1
11.6
8.6
17.0
7.6
2.5
9.0

3500
9800
600
1100
1300
1700
4500
2400

1350

1830
2160
0

3500
170
7005

8.0
9.0
0

24900
1700
51500

1000
0
5430

Ethiopia fishery sector overview (from NFSO)

2.1.2

Government Policy for Development of the Sector

660
0
320
0
2000
100

Aquaculture in Ethiopia remains more potential than actual practice;

despite the fact that the countrys physical and socio-economic conditions
support its development. Extensive aquaculture in the form of stocking
and enhancing artificial lakes, reservoirs and small water bodies has been
practiced since 1975 through the Sebeta Fish Breeding and Research
Centre (now a research wing of the Ethiopia Agricultural Research
Organization). In the period, over 2.5 million fingerlings, primarily
consisting of Nile tilapia (Oreochromisniloticus), Tilapia zilli and carp,
have been released, but in the absence of systematic monitoring and
evaluation (due to weak institutional capacity) the success or failure of
the programme is unknown.
Aquaculture is recognized as an alternative means of achieving food
security and poverty reduction in the rural area, and is now considered an
integral part of rural and agricultural development policies and strategies.
However, much remains to build institutional capacity in the areas of
research, technology and training, which will requires external assistance.
In the past two decades, the fishery sector has been supported by
external project assistance. But it was project activity oriented to
increase and improve fish production and marketing from the Rift Valley
lakes and phase out with the project. In addition to resource monitoring,
support was given to the government Fish Production and Marketing
Corporation (now enterprise) and to fisher cooperatives, which had in the
period the legal right to operate in fishery.
At the federal level, the status of fishery administration was downscaled
from a department to a team, and further to the current expert
representation in a big Animal and Fisheries Development Technology
Team

of

the

Animal

and

Fisheries

Development

and

Regulatory

Department under the Ministry of Agriculture and Rural Development.

Very recently, has been undergoing another restructuring process, which

is expected to upgrade the current status of the fishery administration to
a division or team within the existing structure. Such a small entity may,
even be better than in the past, allow overall coordination, planning and
supervision of the countrys fisheries development and management
activities.
The Government of Ethiopia, through the privatization process, hopes to
place the once nationalized enterprises in the hands of capable private
sector entrepreneurs with resources to undertake technological changes,
improve on the quality of products and bring the Ethiopian Industrial
sector to a higher level. In addition the Government offers incentives to
attract investment in the sector.
In terms of Investment proclamation No. 280/ 2002 and council of
Ministers Regulation No. 84/ 2003, the GoE has issued a number of
investment incentives and these incentives are applicable in a variety of
circumstances as follows
Tax and customs incentives
Income tax

An investor engaged in manufacturing and agro industrial

activities or production of agricultural products, to be determined
by the Federal Investment Board, exports at least 50% or supplies
to exporters at least 75% of the products as a production input is
eligible for income tax exemption for 5 years.
o Under special circumstances, the Federal Investment Board
may grant income tax exemption for not longer than 7 years.

A period longer than 7 years requires decisions of the Council

of Ministers.

An investor who exports at least 50% of his products or supply only

to the domestic market shall be eligible income tax exemption for 2
years.
o Under special circumstances, the Federal Investment Board
may grant income tax exemption for not longer than 5 years.
A period longer than 5 years requires decisions of the Council
of Ministers

Custom Duty

An investor will be allowed to import duty free capital goods and

construction materials necessary for the establishment of a new
enterprise or for expansion of an existing enterprise

In addition, an investor granted with a custom duty exemption

privilege shall be allowed to import duty free capital goods
necessary for his

enterprise

Spare parts not greater than 15% of the total value of the capital
goods shall be given the same privilege.

The fish processing sub sector is not under areas reserved to domestic
investors, thus it is open to international investors.
2.2

Target market

For the reason of high demand of fish products in the EU, Middle East and
Some African Countries, the products of the project are mainly sold to

10

the export market and about 20% of its production is expected to be

supplied to the domestic market of Ethiopia.
2.3

Analyzing International Fish Trade

2.3.1

Fish Production

To

undertake

trade,

adequate

production

is

an

important

first

requirement. Between 1963 and 2003, we observe significant increases in

fish production at the global level (200 percent), and for developing
countries

(420

percent).

The

developed

countries

increased

their

production by only 29 percent over these four decades. As a matter of

fact, production by developed countries has continuously declined over
the past seven years. However, fish production at all levels increased
faster than the human population. The performance of the developing
countries as a whole is particularly noteworthy. In both groupings of
countries, while the human population more than doubled between 1963
and 2003, fish production increased over four-fold and seven-fold
respectively. These increases have decreased the share of the developed
countries in global fish production from 56 percent to 23 percent over this
period. By 2003 the developing countries accounted for over threequarters of global fish production (Table 2.2).
Table 2.2 Trends in fish production (FP) and human population
(HP) (production in million tonnes and population in
billions). Figures in brackets are shares of world total in
respective year

Region
World
Developed

1963
FP
44.0
[100]
24.0
[55]

1976
HP
3.2
[100]
1.0
[32]

FP
68.8
[100]
39.4
[57]

11

2003
HP
4.1
[100]
1.1
[27]

FP
132
[100]
30.9
[23]

% increase
19632003
HP
FP
HP
6.3
200
97
[100]
1.3
29
30
[21]

Developing

20.0
[45]

2.2
[68]

29.4
[44]

3.0
[73]

101.9
[77]

5.0
[79]

410

127

There are few developing countries in the world that have not expanded
their fish production, because it is the natural resource that requires the
least lead time for development. Enhanced production has been the result
of: (i) sustained efforts by the respective countries in capture and culture
fisheries; (ii) development assistance in the realm of fisheries, often
provided by the developed countries and multilateral aid agencies; and
(iii) foreign direct investment. Among the countries examined in this
study, those that faced barriers on the path to fisheries development
were primarily those that experienced political constraints and turmoil.
Namibia was the classic example of this until it attained independence in
1990. Another was Nicaragua, where fish production in 2003 was only
22 000 tonnes far below potential and less than even that of the small
island state of Fiji, which produced 34 600 tonnes. In the case of
Namibia, since constraints were removed after independence, fisheries
have become a cornerstone of development for that country. Brazil,
Senegal and Sri Lanka have not expanded their fish production at the
average pace of the developing countries over the four decades. Here
again, in Sri Lanka, the ethnic conflicts in its northern territories were an
important cause of this stagnation. Fish production in Ghana, Kenya,
Thailand, the Philippines and Fiji has risen faster than the average
rates for developing countries. Chile, though among the worlds largest
fish producers, accounting for 4.1 million tonnes in 2003, saw production
drop from peak levels of nearly 8 million tonnes in 1995. Despite
variations in levels and rates of increase, fish production in all the
countries rose faster than the human population numbers.
2.3.2

Realms of Production

12

The three broad realms of fish production are marine capture, inland
capture and aquaculture. Their shares in the total have changed radically
between 1963 and 2003. In the realm of marine and inland capture
fisheries, as many as 15 developing countries featured in the list of the
top 50 fish-producing nations. These nations accounted for a third of
global capture fish production. The picture in aquaculture was more
dramatic. Developing countries in 2003 produced 34.1 million tones,
accounting for 81 percent of global production of 42.1 million tonnes.
China, alone, accounted for 84 percent (34.2 million tonnes) of this
developing countries aquaculture output. Together with India, the
Philippines and Indonesia, the share rises to over 95 percent.
At the global level, in 1963 inland capture and aquaculture together
accounted for only 8 percent of the total. This share increased to 35
percent in 2003. The developing countries accounted for 90 percent of
the fish from these sources. Within the developing countries, China,
alone, accounted for 79 percent of the inland and aquaculture production
in 2003. In 1963 Chinas share was only 37 percent.
The trade orientation of the three realms of fish production, particularly
the international trade orientation, varies considerably. By and large, fish
from inland capture is less oriented towards international trade. There are
important exceptions. Kenyas Lake Victoria capture fishery is now
almost entirely export oriented. Inland capture fisheries are also the
realm in which there is greater subsistence production, as has been
evident in Brazil. Aquaculture, on the other hand, is more market
oriented, with the international market figuring high in its priorities. The
case of Chile is an example of the latter. In China, Indonesia, the
Philippines and Thailand, aquaculture is oriented towards both the
domestic and international markets. The orientation of marine capture is
mixed. In countries in which fish is not the preferred source of domestic
13

animal protein consumption, as for example in Argentina, Nicaragua and

Namibia, even marine production may be largely exported. Usually,
rising aquaculture production and increases in fish production from
countries with a low preference for fish-eating will lead to greater
quantities of fish entering international trade.
Fish production in developing countries has increased in all three realms
marine and inland capture and aquaculture over the last four
decades. In marine capture, developing countries have caught up with
the developed countries. In inland capture and aquaculture, they have
become the world leaders. Production increases in aquaculture, being
more market oriented, tend to boost international fish trade.
Table 2.3 Trends in fishery product exports and imports (US$
billion) Figures in brackets are % change of 2003 over
1976
Region
World
Developing countries
Developing
countries /world %
2.3.3

1976
2003
Exports Imports Exports Imports
7.98
8.84
63.5 68.3 [673]
[695]
2.94
1.19
30.3
12.38
[931]
[940]
37
13
48
18

International Trade

The impetus for international trade in fishery products among many of

the developing countries predates our period of analysis. Sri Lanka, as
the former Ceylon, used to import dried and salted fish beginning in the
eighteenth century. Thailand started exporting in 1937. Most Asian
countries engaged in a vibrant intraregional trade after the First World
War. So did West African countries such as Ghana, Nigeria and Senegal.
Latin American countries such as Peru and Chile were major suppliers of
14

fishmeal to the United States. The closing of the Chinese market after the
1949 revolution created a big gap in the supply of fishery products in the
world market. As a result, major fish importers such as the United States
and countries in Europe were compelled to search for new sources of
supply for fishery products such as tropical shrimp. India and Thailand
were among the major beneficiaries of this supply gap. The rise in oil
prices and the spate of EEZ extensions in the late 1970s and early 1980s
made countries such as Japan cut back on their own fish production
obtained using distant water vessels. They adopted the strategy of
importing fish from the same developing countries where their vessels
once fished. Indonesia, the Philippines and India thus became major
suppliers to the Japanese market. The former two countries received aid
for fisheries development. This came to be called the development
import strategy.
FAO holds systematic data on international trade in fishery products from
1976 onwards. According to these data, by 1976 developing countries
had already accounted for about 37 percent of the value of exports, but
just 13 percent of imports. Their share of exports increased to 48 percent
and imports to 18 percent by 2003 (Table 2.3).
In nominal value terms, world fish exports rose by almost 700 percent
from around US$8 billion in 1976 to US$63 billion in 2003. The
developing countries focus on exports is self-evident. Their natural and
comparative advantage lies in this realm. However, given the phenomenal
increases in total production, as well as shifts of production to realms
that are more explicitly trade oriented, the foray of developing countries
into international trade is relatively less impressive and constrained.
The global value of fish imports, in nominal terms, increased by about
673 percent from US$8.84 billion to 68.3 billion between 1976 and 2003.

15

There are important regional and country variations. For example, the
role of fish imports into West African countries such as Cte dIvoire,
Nigeria and Ghana and into other countries such as Egypt, Brazil, Sri
Lanka and the Philippines
Over the last quarter century, the value of developing countries exports
increased substantially, though their share of global trade rose only
marginally. However, their

export

performance

pales

before

their

production performance. Their value of imports increased twofold, but

their share in global imports of fish products remained constant. The
priority accorded to exports is clearly evident, and greater direct and
indirect food-security implications are likely to arise from this.
2.3.4

Fish Trade and Fish Prices

There is another way to analyze the issue of the slowing down of the
growth of trade by examining the prices received (paid) for the fish
exported (imported). For the purpose of comparability, we express these
prices as the unit value of the live weight (UVLW) of exports and
imports. By taking live weight rather than product weight, we move
towards greater product homogenization, because expressing the vast
diversity of fishery products in their wet-weight terms implies equalizing
them in terms of their food values (Table 2.4).
Taking the developing countries, we see that the UVLW for exports
increased marginally in the pre-WTO phase, from US$2 390 to 2
476/tonne, and then dropped significantly in the WTO phase to US$1
763/tonne. However, the UVLW for imports decreased marginally in the
pre-WTO from US$308 to 277/tonne and then increased marginally in the
WTO phase to US$283/tonne. The impact of inflation is not considered,
as the values stated are in current prices. The trends we observe in the

16

post-1995 WTO phase are no cause for celebration. From the food-value
perspective, the earning per unit of developing countries exports reduced
during this period, while the unit cost paid for imports increased.
More conventional trade analysis, for example taking the barter terms of
trade, does not paint a rosier picture of the trends on the aggregate
(Table 2.5). The terms of trade of the developed countries show a slight
deterioration in the period 19902000. In fact, they have improved in the
WTO phase. Developing countries, on the other hand, experienced a
significant deterioration in terms of trade in the WTO phase. When we
account for the China effect, the decline is more modest.
The deteriorating terms of trade, caused primarily by falling unit export
prices, create pressures to export more quantity, or if possible graduate
to more value-added products. Both these options are limited. A rough
estimation of losses on this score is revealing. Consider the case of
shrimp, the mascot of developing countries fish exports. In 2000 the
value of global shrimp exports (all process forms) was valued at US$11
billion and the developing countries share was about a third or US$3.15
billion. Our calculations show that if world prices in 2000 had remained at
the 1996 level, the total shrimp export value would have been worth
US$1 billion more and developing countries would have made their
proportionate gains.
When examined from a food-value perspective, the unit earnings from
exports of developing countries have reduced more rapidly than the cost
paid out for unit of import. The conventional terms of trade in fishery
products for developing countries have deteriorated in the WTO phase.
The potential earnings loss to their economies has been considerable,
with attendant food-security implications.

17

Table 2.4 Unit value of live weight (UVLW) of developing

countries fishery product imports and exports

Year
1990
1995
2000

Import price
(US$ per
tonne)
308
277
283

Index
100
90
92

Export price
(US$ per
tonne)
2 390
2 476
1 763

Index
100
103
74

Table 2.5 Fishery product terms of trade (product weight)

Region
World
Developed
Developing

1976
1.00
1.00
1.00

1990
0.99
1.11
0.98

1995
0.98
0.91
1.07

2000
1.01
0.95
1.02

The long- and near-term trends in world and developing countries fishery
production and international fishery trade exhibit both disturbing and
encouraging trends as we have seen from the discussion above.
2.4 Analysis of Domestic Fish Market
2.4.1

Competition

Participants in primary market include the Government owned fish

production and marketing enterprise (FPME), fishermen, private formal
and informal traders and the general public including hotel owners. A few
traders have agents employed to coordinate their purchase. FPME has
shops and agents in the main primary fish markets of Bahir Dar, Ziway,
and Arba Minch. A significant number of fish traders operate on Lake
Ziway in comparison to other lakes, because of its proximity to the major
terminal market, Addis Ababa. None of the other traders go to Lake Tana,
and Baro River, because it is too far from the market area. Most of the
formal traders operate using family labor. In Addis Ababa the major
intermediaries are retailers, mainly informal traders. The biggest operator

18

in fish marketing business is FPME, which handles both whole selling and
retailing on a specialized basis.
Private traders would be in a better position to compete with the project
if they could have adequate storage facilities (small freezers rather than
refrigerators) to overcome the problem of the daily and seasonally
fluctuating demand for fish. This would allow them to procure fish from
fishermen daily as the project shall do and store in deep freezer to meet
the higher demand on the two weekly and monthly fasting days.
Therefore the facility available in the project shall make it competitive to
supply fish on sustainable condition all the year round.
2.4.2

The main competitors in the market

In local market the main challenge is competition from Fish Production

and Marketing Enterprise (FPME). FPME was established in 1978 as fish
Production and Marketing Corporation with objective of providing market
security for fishermen to encourage the fishing market.

The enterprise

has then passed through a number of reorganizations and expands its

objective to include both production and marketing of fish products. In
1994,

the enterprise was

reestablishes

as

public enterprise with

authorized capital of Birr 10 million.

The Head Office of the Enterprise is located in Addis Ababa where the
main processing and storage facilities are also found. The enterprise
operates in other eighteen sale outlets, out of which 14 are located in
Addis Ababa and the remaining are found outside the capital, in
Debrezeit, Zeway, Bahar Dar and Gonder. The Enterprise owns all of the
shops, except four in Addis Ababa which are rented from Rented Houses
Administration, the Municipality and an Individual.

19

The Enterprise has established a number of fish collection (receiving)

centers or stations in different parts of the country where fishing is
conducted. However the major fish receiving and handling work is being
done at the branches located in Arba Minch, Ziway and Bahir Dar.
Local Formal Sector (New Entrants)
Table 2.6: Companies registered with the Investment Authority to
be involved in Fish Processing (New Entrants)

2Tarig ahmed
Amhara
Mohammed elshafie
3Vittorino Viezzer and SNNPR
carlo Talarico PLC
4CARLO TALARICO
SNNPR

Bahir Dar

5Omo Wenze Fish

Trading PLC
6Atlatis ethiopia PLC

SNNPR

Wolaita Sodo

Capital
Investment
('000
Status
Birr)
351
Preimplementation
1,987
PreImplementation
9,509
Preimplementation
9,350
PreImplementation
7,500
Operation

SNNPR

Arba Minch

8,700

7Pascal Lafeneter
8Hashim Abdelkarim

Addis Ababa
Addis Ababa

Addis Ababa
Addis Ababa

17,540
2,000

No

Name of Investor

1A.T Pvt. Ltd. Co.

Region of
Investment

City/ Town
of
Investment

Oromia

9KO-BB international Addis Ababa

PLC
10Ashraf Industrial
Multiregional
Group PLC
11Fekadu Ambaye
Addis Ababa

Arbaminch

14,620
12,951
Addis Ababa

1,915

Preimplementation
Implementation
Preimplementation
PreImplementation
Implementation
PreImplementation

Source: Ethiopian Investment Authority

As the above table indicates most of the described firms are relatively
with better investment capital and as a result expected to compete well
with the project.
2.4.3

Market Prospect

20

Fish potential of the country can be placed at between 30.000 tons and
40,000 tons per year. The total demand is estimated at about 23,000
tons per year and the planned supply is expected to be 16,000 ton per
year. From this we can observe that there exists about 30 % capacity to
absorb existing demand or 40 50% to absorb the total potential of the
country.
Therefore a capacity of 30 40% of the unabsorbed capacity from the
total potential is estimated for this project being reasonable.
2.5 Key success factors
The following points are considered as key success factors to remain
competent in the fishery market:
-

The project ability to penetrate the export market

Better competitive position with respect to well established and

equipped business

III.

Good customers attraction

Better purchasing power and profit making ability

Good opportunity in expanding market size

RAW MATERIALS AND UTILITIES STUDY

3.1 Raw Materials

The main inputs for the factory are live fishes, fish food and packaging
materials. The factories will buy genetic lines from a known genetic
institute and produce live fishes by establishing fish farms. In order to
reduce the cost of the fish food (The food is about 85% of the production
cost) the company plan to install fish food plant. By doing this the project

21

will have a sustainable raw material inputs and gives a competitive

advantage over its competitors.
3.2 Supply of Raw Materials
3.2.1

Supply of Live Fish

3.2.1.1 Fingerlings Farms

The target is manufacturing of 10.000 ton Tilapia per year, the company
will establish fingerlings farm in order to supply fingerlings to fish farms.
The amount of fingerlings produced in the farm is 22 millions per year.
The species that will be bought: male line Aura and a female line
Nilotica Gana. The cross-breading will provide 100% male fingerlings.
The cross-breed between Male Aura and Female Nilotica Gana breeds
will provide 99.9% male.

22

Male - Aura

F1

Female
Female

Male plastic ponds 100 m XFemale plastic ponds 100 m

Male

Breeding pond 200 m

Breeding pond 200 m

Growing pond 200 m

Growing pond 200 m

Marketing females
3 ponds 100 m

5000 male

5 ponds of 200 m

15000 female

Plastic pond

Marketing male

Plastic pond
F2
Breeding season April - November

3.2.1.2 Fish Farms

10 ponds 500 m

The firm will build two fish farms in the Lake Tana, each one producing
3000 ton per year.Breeding
Farm season
size March
is show
in the figure below.
November

10 ponds 1000 m

1000 f, 330 m

Training cages 4m depth X 11m diameter

7 ponds 5000 m

Training pond

1 million fingerlings per circle

For each
fish
be market
should
receive
Fattening
cageto
Fattening
cages: 6m the
depth farm
X 12m diameter
Fattening
cage 1.1 fingerlings.
Fattening cage
Fingerlings will be kept in 360 m 3 training cages for 70 days up to the
weight of 80 grams. In this stage they will be transferred to fattening
cages. Every training cage support two fattening cages in a cycle.
In the fattening cage which is round cages 12m diameter and 6m depth,
with 378 m3, every fish will reach the weight of 750 800 grams in 150
days. In one year we can do two cycles and each farm will hold 74
fattening cages and 19 training cages.

23

Every fattening cage will hold 27.000 fish in total weight of 20 ton,
annual harvest 40 ton for each cage.
3.2.2

Supply of Fish Food

The fish will be fed with concentrated food (grains and other dry organic
matters). No chemicals, hormones, or artificial ingredients. The food is
very important and the company should hold a good position in order to
reduce the cost of the fish food (The food is about 85% of the production
cost). The project plans to supply the organic part of fish food from its
own fish food plant. The grain part of the fish food also planed to be
supplied from the waste of the sesame seed oil plant.

3.2.2.1 Rendering and Bio Diesel Plant

In order to use the processing plant waste and use it for the fish food
plant and to sell out fish oil a rendering and bio diesel plant will be
established.
Fish meal production process
Daily wastage quantity (based on filleting 40 ton/day of fish) is 24 25
ton. This wastage is processed in cooker tanks into fish meal and fish fat.
Total yield 3.5 4 ton/day of which about 62% fish meal and 38% fish
fat. The fish meal is used as an input for fish food. Fish fat is
commercialized to feeding meal producers or in Bio Diesel industry.
Wastage from the filleting plant will be transferred to the fish meal plant
in containers or via pump. The wastage is then transferred to the cooker
feeding tank and then by a screw conveyor to the cooker. Cooker

24

processes for about 4 hours. For the above-mentioned capacity 2 cooker

tanks of 10,000 lit each, for 2 shift working day were calculated.
After cooking the raw material is transferred to the percolator, then via a
screw conveyor to the press for the extraction of the fat from the meal.
The fish meal is then transferred via screw conveyor to the grinder and
after grinding to containers or bags and dispatched to feeding meal store.
Fish fat is pressed trough a sieve and decanter and transferred to storage
tanks. Fish fat is commercialized to feeding meal dealers or used to
produce bio diesel.
Bio Diesel production process
Fish fat is transferred to the reactors together with glycerol and methanol
as catalyzers. After the reaction the raw material is transferred to the
sedimentation tank. The sediment is separated to containers and back to
Glycerol and Methanol for repeated use. The raw material is transferred
to a water washing tank the resulting Bio Diesel is then stored in tanks.
Expected yield of 1 ton fish fat is about 85 90% bio diesel.
Other materials required in fish processing are carton and plastic bag.
Both carton and plastic bags used as raping the fillet. In addition plastic
bottles are required as a container for sesame seed and bio diesel oil.
3.3 Consumption and Cost of Raw Materials
Genetic lines are required once at the beginning of the project. The
factories will buy genetic lines from a known genetic institute at a cost of
500,000 USD.
Food diversion is 1:2 so 5500 6000 ton will be needed. Fingerlings food
will be 35% protein and fattening 30% protein. Fish food is a major
finance element 75-85% from production cost.

25

For 10 kg fillet one piece of carton with a dimension of 29.5 X 48.5 X 8.5
cm needed and each piece of fillet will be raped with plastic bag. The
plastic bottles with 350 g and 500 g capacity also required to pack the
sesame and bio diesel oil.
Table 3.1 Annual consumption of materials
Unit of
Meas.

Description

Year 1

Year 2

>Year 3

Filleting processing plant

%

Capacity Utilization
Production

60

75

100

tones

2520

3150

4200

tones

18

22

30

tones

12

15

20

tones

540

675

900

tones

1860

2325

3100

252000
5400

315000
6750

420000
9000

60

75

100

tones

1800

2250

3000

tones

13800

17250

23000

Pcs

12000

15000

20000

60

75

100

tones

450

560

750

tones

270

337

450

Direct Materials

1.
2.
3.
4.

Food
Food
Food
Food

for
for
for
for

fingerlings
parents
training
fattening

Auxiliary Materials
Pcs
kg

5. Carton
6. Plastic bag
Sesame seed oil plant

Capacity Utilization
Production
Direct Materials

Sesame seed
Auxiliary Materials
Plastic bottle

Bio diesel oil plant

%

Capacity Utilization
Production

1.
2.

Fish food
Bio diesel

26

Direct Materials

Wastage from filleting plant

tones

4500

5625

7500

72000
360000

90000
450000

120000
600000

Auxiliary Materials
Pcs
Pcs

1. Plastic bottle (500 g)

2. Plastic bottle (350 g)

Table 3.2 Unit price and annual cost of materials

Description

Unit
price

Year 1

Year 2

>Year 3

Filleting processing plant

Direct Materials

1.
2.
3.
4.

Food for fingerlings

27,280

491,040

600,160

818,400

Food for parents

20,130

241,560

301,950

402,600

Food for training

5,550

2,997,000

3,746,250

4,995,000

Food for fattening

4,450

8,277,000

10,346,250

13,795,000

12

3,024,000

3,780,000

5,040,000

13

70,200

87,750

117,000

5,000

69,000,000

86,250,000

115,000,000

36,000

45,000

60,000

Plastic bottle (500 g)

288,000

360,000

480,000

Plastic bottle (350 g)

1,080,000

1,350,000

1,800,000

Auxiliary Materials

5.
6.

Carton

Plastic bag
Sesame seed oil plant
Direct Materials
Sesame seed
Auxiliary Materials
Plastic bottle
Bio diesel oil plant
Direct Materials
Wastage from filleting plant
Auxiliary Materials

1.
2.
Total

85,504,800 106,867,360 142,508,000

3.4 Utilities
The utilities required are electric power and water. Electric power is
required for all the electric-driven machinery and equipment. It is also

27

required for factory and office building lights and other general services.
Low voltage, three-phase (380 400V, 50Hz) and single-phase (220240V, 50Hz) power is required for the running of all equipment and
machinery in the plant. The supply of power will be from the national grid
operated by the Ethiopian Electric Power Corporation (EEPCo).

It is

estimated that a total of 1000 KVA power is required, which could be

supplied from a 15kV overhead power line passing by the plant site. A
step-down transformer will be required to reduce the voltage to 380/220
V.
Water is used for drinking, factory cleaning, toilets, washing and
gardening. Water supply will be arranged by the Water Supply Authority
and the daily consumption will be up to 20 m3.
IV.

PANT

LOCATION

AND

ENVIRONMENTAL

CONSIDERATION
4.1 Location
Tana Lake contains fresh water and relatively high rate of microorganism.
Tana Lake is an ideal place to locate in fish farms in cages and specially
Tilapia. Sites should be carefully picked, taking into consideration local
sub streams and oxygen level in the water.
Seven hundred fish cages in the size of 5*5*5 to be installed in defined
sites in the lake. The breeding system will be located on the site of the
factory seven kilometers from the lake. The location of the plant will be
seven kilometers from the lake.
Two sites will be selected to hold the cage system. Every site will hold a
production unit of 2000-3000 ton. Every farm will hold 19 training cages
and 74 fattening cages. Total investment in every farm will be
28

approximately 1.7 million USD. The major part of the investment is

purchasing the cages 1.1 million USD which will make 62% of the total.
4.2 Environmental Consideration
The fish will be fed with concentrated food (grains and other dry organic
matters). No chemicals, hormones, or artificial ingredients. In the bottom
of the lake at the site Catfish will clean the leftovers and will eat the
algae. The cage system keeps the ecological balance of the lake, prevents
over fishing and does not break the balance between the different breeds
of fish in the lake. In the cage sites (two sites) rehabilitation of the banks
will take place as ecological balanced biotope will be made. The cage
system will use only environmental friendly tools and technology.
The breeding system is a close system off containers and ponds
controlled by sensors and computers. This system does not include
elements with pollution potential.
Daily capacity of the plant water use will be about 20 cubic meters. 90
percent of the water will be used only for containers and washing. 10
percent of the water which will hold organic waste will be filtered.
Biological water treatment will be used to decrease the BOD. The factory
waste will be processed to oil in another plant on the site. Leftovers from
the oil factory will be used as food for maggots which will be part of the
fish food.
V.

ENGINEERING AND TECHNOLOGY

5.1 Production Process

The plant will process 3 types of fish
-

Tilapia

24 ton/day

29

Silurid/ Catfish

10 ton/day

Barbs/ Carp

6 ton/day

Total

40 ton/day

After filleting, all fish are packed, weighed and transferred to freezing and
-18oC storage until dispatch. Production output is based on plant working
one 10 hour shift
Filleting process:
Receive fish in plastic creates, covered in ice flakes. Storage in 0 oC cold
storage. Processing on demand of production. Then transfer the fish into
container from which a low conveyor takes the fish to the ritual blood
letting tables. A table from each side of the conveyor letting operated on
the table (2 tables one from each side of the conveyor). An upper
conveyor takes the fish to the bleeding water tank, De scaling machine
and Washing and disinfection tank
Filleting room:
After washing and disinfection the fish is transferred vial conveyor or slide
to filleting room where fish home removal, skin removal and final
trimming take place. Then fillet in trays is transferred to freezing on
stainless steel trolleys.
Freezing
Fish fillet trolleys are held in freezing until the temperature in the center
of the product will reach -18oC. Afterwards the trolley is transferred to
the packing room.
Packing

30

Before packing, the fish in the packing room are transferred to a cold
water tank for glazing. The fish is packed for various commercial
demands: bulk package, trays, bags and carton package. After wholesale
packaging in cartons, sealing, weighing and labeling transferred to
storage in 18oC until dispatch.

5.2 Details of Cost Estimate/ Investments

The investments required for the plant can be grouped in terms of the
type of activities the company will involved.
5.2.1

Machineries and equipments

Item

Description

Total Price in
USD

Qty

Fishing system
1 Fishing Boats with Accessories
2 Pier
Total

50
5

16,500.00
50,000.00
66,500.00

29

5,800.00
18,000.00
5,000.00
6,000.00
4,000.00
10,000.00
50,000.00
98,800.00

Fingerlings farm
3 Water Drainer
4 Net
5 Covering Nets
6 Silos
7Disinfection Sprayer
8 Lifts
9Fish Transferring Container
Total

2,500
2
1
2
2

Fish farm
10 Silos
11 Feeding Boat
12 Boat
13Marketing Boat
14 Nets
15 Sucker
16 Wagon
17 Fingerlings Transferring Containers
18Scale - 100kg
19 Bridge Scale 17 M Long
20 Oxygenizers Wagon

31

11
2
1
1
2
1
1
2
1
1

77,000.00
100,000.00
8,000.00
90,000.00
180,000.00
56,000.00
3,000.00
6,500.00
1,400.00
29,000.00
8,000.00

21 Oxygenizers
Total

100

65,000.00
623,900.00

Filleting processing plant

22 Machineries
23 Cooling and air conditioning system
Total

250,000.00
250,000.00
500,000.00

Sesame oil processing plant

24 Machineries
Total

1,000,000.00
1,000,000.00

Fish meal plant

25 Feeding screw conveyors
26 2 cooking tanks of 1000 lit each
27Percolator (Reception tank after
cooking)
28Fat press
29 Grinder
30 Fat sieve
31 Decanter
32Meal and fat storage tanks
33 Boiler
34Condenser
35 Odor treatment system
Total

1
1
1

182,000.00
169,000.00
143,000.00

1
1
1
1
1
1
1
1

104,000.00
117,000.00
91,000.00
78,000.00
65,000.00
117,000.00
91,000.00
143,000.00
1,300,000.00

1
1
1
1
1
1

160,000.00
144,000.00
120,000.00
128,000.00
112,000.00
136,000.00

Bio diesel production

36 Centrifuge
37 Reactors
38 Pumps
39 Sedimentation tanks
40 Washing tank
41 Bio diesel storage/ commercializing
tanks
Total

Total FOB price

Freight to port of Djibouti
Insurance
Installation
Total Price CIF Djibouti
Exchange rate as at 28 March 2009,
Birr/USD
Total Price CIF Djibouti (in Birr)
Inland transport to the project site (3% of
CIF cost)
Contingency (10% of CIF cost)
Total cost at Project site (in Birr)

5.2.2

Auxiliary equipment

32

800,000.00

4,389,200.00
70,227.20
9,656.24
87,784.00
4,556,867.44
11.1025
50,592,620.75
1,517,778.62
5,059,262.08
57,169,661.45

S/No
A

B
C

Description

Utility equipment
1Transformer station (575
KVA)
2Diesel generator (542 KVA)
3Diesel generator (150 KVA)
4Diesel engines
Workshop equipment
Water and supply system
Sub total

Price
in USD

Qty
2
2
2
25

Inland transport (3% total cost)

Total cost
Contingency (10% of total cost)
Total cost at Project site

5.2.3

Total Cost
in Birr

100,000

1,110,250

250,000 2,775,625
50,000
555,125
3,000
33,308
50,000
555,125
10,000
111,025
463,000 5,140,458
13,890
154,214
476,890 5,294,671
47,689
529,467
524,579 5,824,138

Office equipment and furniture

Office furniture is required to furnish some of the offices of

administration and professional staffs. The office equipment includes
furniture, computer sets, photocopier, fax machine, calculators and
others. All of these are available on the local market. The total cost for
office equipment and furniture is estimated to be Birr 1,000,000.00.
5.2.4

Vehicles, trucks and portable equipment

S/No

Description

Qty

1Semi trailers for containers carriers

2Big forklift for containers
3Forklifts for factory use
4Electric forklift for indoor use in the
factory
5Toyota pickups double cabin with
carrier hooks
6Toyota pickups single cabin with
cooling units with carrier hooks for
trailers
7Tractor JCB with front fork plus back
fork
8Bobcat with fork and additional
equipment
9Toyota land cruiser
10Tractor 4x4 with long back fork

33

2
1
5
1

Price
Total Cost
in USD
in Birr
40,000
444,100
30,000
333,075
90,000
999,225
10,000
111,025

150,000

1,665,375

120,000

1,332,300

90,000

999,225

20,000

222,050

1
1

50,000
80,000

555,125
888,200

Sub total

680,000
20,400
700,400
70,040
770,440

11

Inland transport (3% total cost)

Total cost
12Contingency (10% of total cost)
Total cost at Project site

5.2.5

7,549,700
226,491
7,776,191
777,619
8,553,810

Building and construction

Detail building and construction design and estimation of cost performed

separately. The following table shows the summary of investment
required for the building and construction required for the project.
S/No.

Description

1Office and staff lodgings

2Fish processing plant
3Rendering and bio - diesel plant
4Sesame seed oil plant
5workshop
6Guard post (G+1)
7Guard post (G+0)
8Fence
9Feed mill
10Hatchery, nursery pond and cage culture
11Site work
Total
Construction approval cost 0.25% of total
cost
Total cost
5.2.6

Total Cost in
Birr
5,226,977
20,270,258
12,225,305
3,794,658
3,151,109
1,492,893
265,003
5,338,033
14,000,000
22,400,000
13,141,615
101,305,851
253,265
101,559,116

Working capital of the First Project Year

The initial working capital of the first project year is estimated to be Birr
11,102,500. This amount will serve as payment for purchase of wage and
salaries, operating expenses and other overheads till the finished product
(outputs) are sold and cash is realized.

Working capital of the project

does not include depreciation and interest costs.

5.2.7

Summary

S/No.

Description

Total Cost in Birr

34

1Machineries and equipments

2Auxiliary equipment
3Office equipment and furniture
4Vehicles, trucks and portable
equipment
5Building and construction
6Working capital
Total

ORGANIZATION,

VI.

57,169,661
5,824,138
1,000,000
8,553,810
101,559,116
11,102,500
185,209,226

MANAGEMENT

AND

POWER
Organization Structure

6.1

Management

Producing

Fingerlings
Fish food +
transport
transport

Fingerlings
farm

Processing

Processing plant

Raw
materials +
transport

Marketing

Distribution

Smoking

6.2
No

Manpower Requirement and Wages

Description

Head
count

Monthly
wage per
head in Birr

Management
35

Annual
salary in
Birr

MAN

1Firm President
2CEO
3Finings Manager
4Professional Assistance
5Man Power Manager
6Purchasing Manager
7Assistance
8Secretary
9Accounting Manager
10Assistance
11Legal Division
12Maintenance
13Cleaning
14Drivers
15Messengers

1
1
1
4
1
1
2
6
1
6
2
2
2
2
2

20,000
15,000
10,000
8,000
8,000
8,000
6,000
2,000
8,000
6,000
8,000
5,000
1,000
1,500
500

240,000
180,000
120,000
384,000
96,000
96,000
144,000
144,000
96,000
432,000
192,000
120,000
24,000
36,000
12,000

16Guard

1,000

72,000

Total

40

2,388,000

Professional
Section
1Professional Manager
(Foreigner)
2Local Professional Guides

13,000

156,000

10,000

360,000

3Head Veterinarian

8,000

96,000

4Veterinarian

6,000

216,000

5Biologist

6,000

72,000

6Secretary

2,000

48,000

7Drivers

1,500

36,000

Total

13

984,000

Manufacturing
Section
1Manager

8,000

96,000

2Secretary

1,500

18,000

3Accountant

6,000

72,000

4Assistant

4,000

48,000

5Marketing Manager

8,000

96,000

6Purchaser

1,500

18,000

7Drivers

1,500

18,000

8Cleaning

1,000

24,000

Total

390,000

Fingerlings Farm
1Foreign Expert

36

13,000

156,000

2Local Vice President

13,000

156,000

3Distributor

6,000

72,000

4Secretary

1,500

18,000

5Supervise - Parents

4,000

48,000

6Supervise - Fingerlings

4,000

48,000

7Feeding Workers

2,000

48,000

10

2,000

240,000

2,500

30,000

10Plumber

2,500

30,000

11Maintenance

3,000

72,000

12Warehouse

3,000

36,000

13Cleaning

1,000

12,000

14Guards

1,000

48,000

15Drivers

1,500

36,000

8Pond Workers
9Electrician

Total

30

1,050,000

Fish Farms
1Station Manager

8,000

96,000

2Secretary

1,500

18,000

3Accountant

4,000

48,000

4Fattening Supervisor

4,000

48,000

5Feeding Workers

18

2,000

432,000

6Pond Workers

18

2,000

432,000

3,000

180,000

3,000

72,000

1,000

72,000

10Divers

1,500

72,000

11Cleaning

1,000

24,000

7Cage Maintenance
Workers
8Warehouse And Net
Workers
9Guards

Total

Grand Total
VII.

59

1,494,000

151

6,306,000

PROJECT IMPLEMENTATION SCHEDULE

We expect the bank to avail a loan for the 70% of the total capital. In the
mean time the transfer of 30% capital will be transferred from our
account. Site plan preparation and construction will be done in less than
4 months; the houses will be ready for installation and start up of the
machinery. In preparation time, the utilities will also be ready like

37

installation of electricity, water, telephone lines etc. Installation of

machinery will take one month.
Following the commencement of the constructions of houses, the
importation process of the machinery and some other equipment will take
place. Side by side, the training of staffs will be done. Training will take
place in the process of installation and then after. Our products will be on
the market by the end of six month after approval of the loan.
7.1 Project implementation expense
It is assumed some costs will be incurred such as for feasibility study;
genetic lines, production know-how transfer (training of workers); and
designing cost. These costs are as follow:
Birr
1. Feasibility study

50,000

2. Genetic lines (USD 500,000)

5,551,250

3. Production know-how transfer (training of

1,300,000

workers)

500,000

4. Designing cost
Total project implementation expense

7,401,250

All these costs are amortized over the project years. Consequently, the
annual amortization amount would be Birr 493,416.67.

38

Figure 7.1: Project Implementation Schedule

No

Activities

Appling for a loan and

approval

Site preparation and

construction

Purchasing of machineries
& equipment

Installing utilities

Hiring labors

Installing the machineries

Training

Time table (in Weeks)

1

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

FINANCIAL STUDY

VIII.

Investment Outlay

8.1
8.1.1

Planned Investment Cost

As indicated under Table below, the total planned investment cost of the
project is about Birr 192,610,476. Out of which Birr 134,827,333 is financed
by bank (Bank loan) and the rest Birr 57,783,143 is promoters own
contribution (equity).
Table 8.1: Investment Requirements

S.N.

Description

1Machineries and equipments

2Auxiliary equipment

Foreign
Purchase
Amount in
USD
5,149,260

Total

8.1.2

5,824,138
1,000,000

770,440

1,000,000
8,553,810

101,559,116

101,559,116

11,102,500

11,102,500

500,000

1,850,000

7,401,250

6,944,279

115,511,616

192,610,476

6Working capital requirement

7Project implementation expense

Total in Birr
57,169,661

524,579

3Office equipment and furniture

4Vehicles, trucks and portable
equipment
5Building and construction

Local
Purchase
Amount in
Birr

Fixed Capital

The Fixed investment capital component is an expenditure on the required

fixed assets. The Fixed capital expenditures include costs of Machineries &
Equipments, Building, Furniture and Vehicles to Birr 174,106,726 as
described above in table 8.1. Out of this amount, the financial requirement
in terms of foreign currency to purchase machinery & equipment and
vehicles from abroad would be USD 6,444,279.
8.1.3

Source of Fund

The total planned investment cost of the project is about Birr 192,610,476.
Out of which Birr Birr 134,827,333 is financed by bank (Bank loan) and the
rest Birr 57,783,143 is promoters own contribution (equity).

A loan of Birr 134,827,333 will cover all costs of machinery & equipment,
under the following terms. The total loan of Birr 134,827,333 is to be repaid
on 15 equal annual installments of Birr 15,932,339 at a yearly interest rate
of 8.5%.

Production, Revenue and Operating Cost

8.2
8.2.1

Production Estimate

The factory planned to produce 4,200 tons of processed fish (fillets), 3000
tons of sesame seed oil and 450 tons of bio diesel oil. The production rate
is 60% at the first year, 75% in the second year and by the third year it will
attain its full capacity 100% of each product.
8.2.2

Revenue Estimate

The revenue source of the project will be from sales of processed fish. As
indicated in the sales plan of this proposal, the sales price of the products is
fixed at Birr 20.00 per kg for processed fish, Birr 40 per kg for sesame seed
oil and Birr 5.50 per kg for bio diesel oil throughout the life of the project.
Accordingly, the

gross

revenue

of the

project ranges

between

Birr

123,885,000 and 206,475,000 from the first to the last project Year.
8.2.3

Operating Costs Estimate

Operating costs include all project expenses other than fixed investment.
They are expenditures to be spent on annual operating items. In estimating
the operating costs, an attempt has been made to depend on current market
information and the experience of similar projects. Summary of operating
costs if the plant operates at full capacity is indicated below.

Raw Materials
Direct Labor
Manufacturing section
Fingerling farm
Fish farm

142,508,000
390,000
1,050,000
1,494,000
Total

Factory Over Head

2,934,000

Salaries of indirect labor

Utilities (electricity, water and
telephone)
Spare parts and maintenance
Depreciation of machineries and
building
Total
Marketing and Administration
Cost
Salaries of supporting staff
Office supplies
Depreciation of vehicles and
furniture
Total
Total Operating Costs
8.2.4

984,000
2,150,000
300,000
11,377,336
14,811,336
2,388,000
150,000
1,910,762
4,448,762
164,702,098

Depreciation

In the computation of depreciation expense, a straight line method of

depreciation is adopted on the amount of the fixed capital. Twenty years is
assumed as an effective service year for building, ten years for machineries
& equipments, five years for vehicles and furniture, there fore the annual
depreciation cost, assuming no scrap value, would be Birr 13,288,098.
8.3 Project Financial Results
8.3.1

Profit / Loss forecast

According to the projected income statement of the study (Annex II), the
project will generate a positive net profit over the entire project years, the
total net profit amounts to Birr 343,400,887.

8.3.2

Cash Flow forecast

Financially, the project is highly liquid. The cumulative cash inflow (Annex
III) shows a net and positive cash surplus starting the first year of the
project and result into Birr 2,760,440,250 at the end of the 15 th Year. The
net cash surplus of each year surpasses the financial obligation of the
company.

8.3.3

Balance forecast

According to the projected balance sheet of the study (Annex IV), the
project will have a Debt equity ratio of 2.49% at the end of the 15 th year of
the project.
8.4 Viability and other measure of project worth
8.4.1

Indexes

Net accumulated cash flow

= 2,760,440,250

Financial NPV (ic = 8.5%)

= 1,255,028,885

8.4.2

Financial IRR

= 58.65%

Return on Investment

As one of the major indicators of economic worthiness, the projects gross

total profit (Birr 623,071,448) is measured against the total investment (Birr
192,610,476).

Accordingly, the project generates an average of 323% of

return on investment.
8.4.3

Profit Margin

The GILAD TRADING PLC registers an average of 12% profit margin over the
15 years life time. In the computation of the profit margin, a percentage
difference

between

total

net

profit

of

Birr

343,400,887and

total

revenue/sales of Birr 2,962,916,250 are taken.

8.4.4

Pay Back Period

In order to cover the total loan of Birr 134,827,333 over the 15 years of the
project, a total of Birr 238,985,086 is required. Having reviewed the total
depreciation and net profit of the project, the loan repayment period would
be between the 6th and 7th year of the project.

8.4.5

Break even Point

The break even point can be calculated as follows:

BEP (Annual Sales)

=
Annual Sales X Annual Fixed Costs
Annual Sales Annual Variable Costs

206,475,000 X 20,087,514
206,475,000 145,108,000

Birr 67,586,316

Or it can also be calculated by BEP percentage as follow:

BEP (Percentage) =

8.4.6

Annual Fixed Costs X 100

Annual Sales Annual Variable Costs

20,087,514 X 100
.
206,475,000 145,108,000

32.73%

Ratio Analysis

The ratio analysis of the project is shown in detail in the Annex VI.
IX.

CONCLUSION AND RECOMMENDATION

9.1

Conclusion

According to the above analysis, implementation of the project can attain

improved development of the fisheries in Ethiopia.
Calculated for the 15 years of the project duration, the total revenue will be
Birr 2,962,916,250, income tax will be Birr 97,313,463 and net cash flow
(80% foreign exchange) will be Birr 2,760,440,250. Return on capital rate
will be 323%.
The production, marketing and financial aspect of the project will also be
managed in line with relevant legal provisions and ethical standards of the
country.

Construction and running of the project will bring more employment

opportunities to local people, which is in favor of improving the local living
standard.
At the same time this project will promote the development of other
industries, and have great positive impact on the economic and social
development in the whole area.
9.2

Recommendation

Considering the products better features, the conservative estimates in

sales, realistic cost estimates, and the sound financial projections the project
is considered very viable. Therefore it is recommendable to implement the
project, as it has social and economical benefits

Annex I
Projected sales forecast
Product Type
Capacity utilization (%)

Sales
Processed fish (fillet)
Sesame seed oil
Bio - diesel oil

Y-1

Y-2

Y-3

Y-4

Y-5

Y-6

Y-7

Project Year
Y-8
Y-9

Y - 10

Y - 11

Y - 12

Y - 13

Y - 14

Y - 15

60

75

100

100

100

100

100

100

100

100

100

100

100

100

100

123,885,000

154,856,250

206,475,000

206,475,000

206,475,000

206,475,000

206,475,000

206,475,000

206,475,000

206,475,000

206,475,000

206,475,000

206,475,000

206,475,000

206,475,000

50,400,000

63,000,000

84,000,000

84,000,000

84,000,000

84,000,000

84,000,000

84,000,000

84,000,000

84,000,000

84,000,000

84,000,000

84,000,000

84,000,000

84,000,000

72,000,000

90,000,000

120,000,000

120,000,000

120,000,000

120,000,000

120,000,000

120,000,000

120,000,000

120,000,000

120,000,000

120,000,000

120,000,000

120,000,000

120,000,000

1,485,000

1,856,250

2,475,000

2,475,000

2,475,000

2,475,000

2,475,000

2,475,000

2,475,000

2,475,000

2,475,000

2,475,000

2,475,000

2,475,000

2,475,000

Annex II
Projected income statements (Birr)
Particulars

Y-6

Project Year
Y-7
Y-8
Y-9

Y-1

Y-2

Y-3

Y-4

Y-5

Y - 10

Y - 11

Y - 12

Y - 13

Y - 14

Y - 15

123,885,000

154,856,250

206,475,000

206,475,000

206,475,000

206,475,000

206,475,000

206,475,000

206,475,000

206,475,000

206,475,000

206,475,000

206,475,000

206,475,000

206,475,000

Processed fish (fillet)

50,400,000

63,000,000

84,000,000

84,000,000

84,000,000

84,000,000

84,000,000

84,000,000

84,000,000

84,000,000

84,000,000

84,000,000

84,000,000

84,000,000

84,000,000

Sesame seed oil

72,000,000

90,000,000

120,000,000

120,000,000

120,000,000

120,000,000

120,000,000

120,000,000

120,000,000

120,000,000

120,000,000

120,000,000

120,000,000

120,000,000

120,000,000

1,485,000

1,856,250

2,475,000

2,475,000

2,475,000

2,475,000

2,475,000

2,475,000

2,475,000

2,475,000

2,475,000

2,475,000

2,475,000

2,475,000

2,475,000

85,504,800

106,881,000

142,508,000

142,508,000

142,508,000

142,508,000

142,508,000

142,508,000

142,508,000

142,508,000

142,508,000

142,508,000

142,508,000

142,508,000

142,508,000

2,934,000

2,934,000

2,934,000

3,110,040

3,296,642

3,494,441

3,704,107

3,926,354

4,161,935

4,411,651

4,676,350

4,956,931

5,254,347

5,569,608

5,903,784

13,651,336

14,198,836

14,811,336

14,870,376

14,932,958

14,999,296

15,069,613

15,144,150

15,223,159

15,306,908

15,395,682

15,489,783

15,589,530

15,695,262

15,807,337

Revenue:
Sales

Bio - diesel oil

Manufacturing cost
Raw materials
Direct labor
Factory overhead
Amortization

493,417

493,417

493,417

493,417

493,417

493,417

493,417

493,417

493,417

493,417

493,417

493,417

493,417

493,417

493,417

102,583,552

124,507,252

160,746,752

160,981,832

161,231,017

161,495,153

161,775,137

162,071,920

162,386,510

162,719,976

163,073,449

163,448,131

163,845,294

164,266,286

164,712,538

21,301,448

30,348,998

45,728,248

45,493,168

45,243,983

44,979,847

44,699,863

44,403,080

44,088,490

43,755,024

43,401,551

43,026,869

42,629,706

42,208,714

41,762,462

2,908,682

3,158,162

4,448,762

4,595,042

4,749,979

4,914,089

5,087,922

5,272,057

5,467,110

5,673,734

5,892,620

6,124,502

6,370,155

6,630,405

6,906,123

Interest on investment loan

11,281,866

10,870,808

10,423,417

9,936,481

9,406,504

8,829,683

8,201,876

7,518,576

6,774,880

5,965,448

5,084,469

4,125,621

3,082,020

1,946,174

709,930

Net profit (loss) before tax

7,110,900

16,320,027

30,856,068

30,961,644

31,087,500

31,236,075

31,410,065

31,612,447

31,846,500

32,115,843

32,424,461

32,776,746

33,177,531

33,632,135

34,146,408

9,370,822

9,423,020

9,483,734

9,553,950

9,634,753

9,727,338

9,833,024

9,953,259

10,089,640

10,243,923

Net profit (loss) after tax

7,110,900

16,320,027

30,856,068

30,961,644

31,087,500

21,865,252

21,987,046

22,128,713

22,292,550

22,481,090

22,697,123

22,943,722

23,224,272

23,542,494

23,902,486

Accumulated profit

7,110,900

23,430,927

54,286,995

85,248,640

116,336,139

138,201,391

160,188,437

182,317,150

204,609,700

227,090,790

249,787,913

272,731,635

295,955,907

319,498,402

343,400,887

Total manufacturing cost

Gross Profit (loss)
Less: Marketing
Financial cost:

Profit tax (30%)

Annex III
Projected cash flow statement (Birr)

Particulars

Project Year

Pre Operating
Period

Y-1

Y-2

Y-3

Y-4

Y-5

Y-6

Y-7

Y-8

Y-9

Y - 10

Y - 11

Y - 12

Y - 13

Y - 14

Y - 15

CASH INFLOW
Beginning cash balance

(773,167)

5,136,765

27,593,774

62,417,431

101,164,732

129,954,101

167,869,034

195,959,328

223,516,507

250,503,328

204,332,234

230,055,587

255,079,791

279,355,494

302,829,718

113,552,991

141,941,239

189,254,985

189,254,985

189,254,985

189,254,985

189,254,985

189,254,985

189,254,985

189,254,985

189,254,985

189,254,985

189,254,985

189,254,985

189,254,985

Revenue:

Cash Sales

Collection

Own fund

Loan from bank

10,332,009

12,915,011

17,220,015

17,220,015

17,220,015

17,220,015

17,220,015

17,220,015

17,220,015

17,220,015

17,220,015

17,220,015

17,220,015

17,220,015

57,783,143

134,827,333

192,610,476

112,779,824

157,410,013

229,763,770

268,892,431

307,639,732

336,429,101

374,344,034

402,434,328

429,991,507

456,978,328

410,807,234

436,530,587

461,554,791

485,830,494

509,304,718

85,504,800

106,881,000

142,508,000

142,508,000

142,508,000

142,508,000

142,508,000

142,508,000

142,508,000

142,508,000

142,508,000

142,508,000

142,508,000

142,508,000

142,508,000

Direct labor

2,934,000

2,934,000

2,934,000

3,110,040

3,296,642

3,494,441

3,704,107

3,926,354

4,161,935

4,411,651

4,676,350

4,956,931

5,254,347

5,569,608

5,903,784

Factory overhead

2,274,000

2,821,500

3,434,000

3,493,040

3,555,622

3,621,960

3,692,277

3,766,814

3,845,823

3,929,572

4,018,347

4,112,447

4,212,194

4,317,926

4,430,001

997,920

1,247,400

2,538,000

2,684,280

2,839,217

3,003,327

3,177,160

3,361,295

3,556,348

3,762,972

3,981,858

4,213,740

4,459,393

4,719,643

4,995,361

11,281,866

10,870,808

10,423,417

9,936,481

9,406,504

8,829,683

8,201,876

7,518,576

6,774,880

5,965,448

5,084,469

4,125,621

3,082,020

1,946,174

709,930

102,992,586

124,754,708

161,837,417

161,731,841

161,605,986

161,457,411

161,283,420

161,081,039

160,846,986

160,577,643

160,269,024

159,916,739

159,515,954

159,061,351

158,547,077

Acquisition of fixed
assets
Loan
and
other
payments:

Bank loan repayment

174,106,726

9,553,810

72,547,610

4,650,473

5,061,531

5,508,922

5,995,858

6,525,835

7,102,656

7,730,463

8,413,763

9,157,459

9,966,891

10,847,870

11,806,718

12,850,319

13,986,165

15,222,409

Project implementation
expense

Profit tax payment

7,401,250

9,370,822

9,423,020

9,483,734

9,553,950

9,634,753

9,727,338

9,833,024

9,953,259

10,089,640

Total Cash Inflow

CASH OUTFLOW
Operating costs:
Raw materials

Marketing and Admin

Interest on investment
loan
Sub total
Capital expenditure:

Raw material stock

Sub total
Total Cash Outflow
Net cash balance (Deficit)

11,875,667

193,383,642

4,650,473

5,061,531

5,508,922

5,995,858

16,079,645

7,102,656

17,101,286

17,836,782

18,641,193

92,068,451

20,482,623

21,534,056

22,683,343

23,939,425

25,312,050

193,383,642

107,643,059

129,816,239

167,346,339

167,727,699

177,685,631

168,560,067

178,384,706

178,917,821

179,488,179

252,646,094

180,751,647

181,450,796

182,199,298

183,000,775

183,859,127

(773,167)

5,136,765

27,593,774

62,417,431

101,164,732

129,954,101

167,869,034

195,959,328

223,516,507

250,503,328

204,332,234

230,055,587

255,079,791

279,355,494

302,829,718

325,445,592

Annex IV
Projected Balance Sheet (Birr)
Particulars

Pre -

Project Year

operating
period

Y-1

Y-2

Y-3

Y-4

Y-5

Y-6

Y-7

Y-8

Y-9

Y - 10

Y - 11

Y - 12

Y - 13 Y - 14

Y - 15

ASSETS
Current Assets
(773,167)

5,136,765

27,593,774

62,417,431

101,164,732

129,954,101

167,869,034

195,959,328

223,516,507

250,503,328

204,332,234

230,055,587

255,079,791

279,355,494

302,829,718

325,445,592

- Raw Materials
Inventory
- Accounts Receivable

11,875,667

11,875,667

11,875,667

11,875,667

11,875,667

11,875,667

11,875,667

11,875,667

11,875,667

11,875,667

11,875,667

11,875,667

11,875,667

11,875,667

11,875,667

11,875,667

10,332,009

12,915,011

17,220,015

17,220,015

17,220,015

17,220,015

17,220,015

17,220,015

17,220,015

17,220,015

17,220,015

17,220,015

17,220,015

17,220,015

17,220,015

Total Current Assets

11,102,500

27,344,441

52,384,452

91,513,113

130,260,414

159,049,783

196,964,716

225,055,010

252,612,189

279,599,010

233,427,915

259,151,269

284,175,473

308,451,175

331,925,400

354,541,273

57,169,661

57,169,661

57,169,661

57,169,661

57,169,661

57,169,661

57,169,661

57,169,661

57,169,661

57,169,661

114,339,323

114,339,323

114,339,323

114,339,323

114,339,323

114,339,323

5,824,138

5,824,138

5,824,138

5,824,138

5,824,138

5,824,138

5,824,138

5,824,138

5,824,138

5,824,138

11,648,277

11,648,277

11,648,277

11,648,277

11,648,277

11,648,277

1,000,000

1,000,000

1,000,000

1,000,000

1,000,000

2,000,000

2,000,000

2,000,000

2,000,000

2,000,000

3,000,000

3,000,000

3,000,000

3,000,000

3,000,000

3,000,000

8,553,810

8,553,810

8,553,810

8,553,810

8,553,810

17,107,620

17,107,620

17,107,620

17,107,620

17,107,620

25,661,430

25,661,430

25,661,430

25,661,430

25,661,430

25,661,430

101,559,116

101,559,116

101,559,116

101,559,116

101,559,116

101,559,116

101,559,116

101,559,116

101,559,116

101,559,116

101,559,116

101,559,116

101,559,116

101,559,116

101,559,116

101,559,116

13,288,098

26,576,196

39,864,293

53,152,391

66,440,489

79,728,587

93,016,684

106,304,782

119,592,880

132,880,978

146,169,076

159,457,173

172,745,271

186,033,369

199,321,467

174,106,726

160,818,628

147,530,530

134,242,432

120,954,334

117,220,047

103,931,949

90,643,851

77,355,753

64,067,656

123,327,168

110,039,070

96,750,972

83,462,874

70,174,777

56,886,679

7,401,250

7,401,250

7,401,250

7,401,250

7,401,250

7,401,250

7,401,250

7,401,250

7,401,250

7,401,250

7,401,250

7,401,250

7,401,250

7,401,250

7,401,250

7,401,250

493,417

986,833

1,480,250

1,973,667

2,467,083

2,960,500

3,453,917

3,947,333

4,440,750

4,934,167

5,427,583

5,921,000

6,414,417

6,907,833

7,401,250

7,401,250

6,907,833

6,414,417

5,921,000

5,427,583

4,934,167

4,440,750

3,947,333

3,453,917

2,960,500

2,467,083

1,973,667

1,480,250

986,833

493,417

192,610,476

195,070,902

206,329,399

231,676,545

256,642,331

281,203,996

305,337,415

319,646,194

333,421,859

346,627,165

359,222,166

371,164,005

382,406,695

392,900,883

402,593,593

411,427,952

9,370,822

9,423,020

9,483,734

9,553,950

9,634,753

9,727,338

9,833,024

9,953,259

10,089,640

10,243,923

9,370,822

9,423,020

9,483,734

9,553,950

9,634,753

9,727,338

9,833,024

9,953,259

10,089,640

10,243,923

134,827,333

130,176,860

125,115,329

119,606,407

113,610,549

107,084,715

99,982,058

92,251,595

83,837,832

74,680,373

64,713,481

53,865,611

42,058,893

29,208,574

15,222,409

(0)

134,827,333

130,176,860

125,115,329

119,606,407

113,610,549

107,084,715

99,982,058

92,251,595

83,837,832

74,680,373

64,713,481

53,865,611

42,058,893

29,208,574

15,222,409

(0)

57,783,143

57,783,143

57,783,143

57,783,143

57,783,143

57,783,143

57,783,143

57,783,143

57,783,143

57,783,143

57,783,143

57,783,143

57,783,143

57,783,143

57,783,143

57,783,143

57,783,143

64,894,042

81,214,069

112,070,138

143,031,782

174,119,282

195,984,534

217,971,580

240,100,293

262,392,843

284,873,932

307,571,055

330,514,778

353,739,050

377,281,544

7,110,900

16,320,027

30,856,068

30,961,644

31,087,500

21,865,252

21,987,046

22,128,713

22,292,550

22,481,090

22,697,123

22,943,722

23,224,272

23,542,494

23,902,486

57,783,143

64,894,042

81,214,069

112,070,138

143,031,782

174,119,282

195,984,534

217,971,580

240,100,293

262,392,843

284,873,932

307,571,055

330,514,778

353,739,050

377,281,544

401,184,030

- Cash

Fixed Assets
Machineries and
equipments
Auxiliary equipment
Office equipment and
furniture
Vehicles, trucks and
portable equipment
Building and
construction
Less: Accumulated
Depreciation
Net Fixed Assets
Other Assets

Project
implementation expense
Less: Accumulated
Amortization
TOTAL ASSETS
LIABILITIES
Current Liabilities
- Accounts payable
Total current liabilities
Long term Liabilities
- Loans payable
Total long term
liabilities
OWNERS EQUITY
- Capital Beginning
- Accumulated Capital
Add: Net Profit
Total Owner's Equity

192,610,476

TOTAL LIABILITIES &

EQUITY

195,070,902

206,329,399

231,676,545

256,642,331

281,203,996

305,337,415

319,646,194

333,421,859

346,627,165

359,222,166

371,164,005

382,406,695

392,900,883

402,593,593

411,427,952

Annex V
Internal Rates of Return Calculation

Particulars

Pre operating
period

Project Year
Y-1

Y-2

Y-3

Y-4

Y-5

Y-6

Y-7

Y-8

Y-9

Y - 10

Y - 11

Y - 12

Y - 13

Y - 14

Y - 15

Accumulated Cash Flow

(773,167)

4,363,599

31,957,373

94,374,804

195,539,536

325,493,637

493,362,671

689,321,999

912,838,506

1,163,341,834

1,367,674,068

1,597,729,655

1,852,809,446

2,132,164,940

2,434,994,658

NPV

(712,596)

4,734,346

23,439,677

48,867,112

72,997,869

86,425,380

102,894,500

110,702,588

116,378,216

120,211,456

90,373,167

93,779,015

95,833,907

96,732,101

96,645,616

95,726,531

Accumulated NPV

(712,596)

4,021,750

27,461,427

76,328,539

149,326,409

235,751,789

338,646,289

449,348,877

565,727,094

685,938,549

776,311,716

870,090,731

965,924,638

1,062,656,739

1,159,302,354

1,255,028,885

Net accumulated cash flow

2,760,440,250

NPV

1,255,028,885

IRR

58.65%

2,760,440,250

Annex VI
Projected financial ratio (%)
Particulars
1. Sales Margin:
Pre-tax profit
Net sales
2. Return on Asset (ROA):

Y-1
5.74

Y-2
1
0.54

Y-3

Y-4

Y-5

Y-6

Y-7

Project Year
Y-8
Y-9

Y - 10

Y - 11

Y - 12

Y - 13

Y - 14

Y - 15

14.94

15.0
0

15.06

15.13

15.21

15.31

15.42

15.55

15.70

15.87

16.07

16.29

16.54

13.32

12.0

11.06

10.23

9.83

9.48

9.19

8.94

8.74

8.57

8.44

8.35

8.30

Pre-tax profit
Gross assets
3. Return on Equity:
Net profit after tax
Capital + Reserve
4. Current Ratio:
Current assets
Current liabilities
5.Return on investment:
Pre-tax profit
Capital invested
6. Debt Ratio:
Total debt
Total assets

3.65

7.91

12.31

2
5.15

37.99

27.6
3

21.73

12.56

11.22

10.15

9.28

8.57

7.97

7.46

7.03

6.66

6.34

- 2,101.89

2,388.35

2,663.64

2,926.53

2,422.77

2,664.15

2,890.01

3,099.00

3,289.76

3,460.99

1
65.42

37
9.64

717.79

720.2
4

723.17

726.63

730.67

735.38

740.83

747.09

754.27

762.47

771.79

782.36

794.33

66.73

6
0.64

51.63

44.2
7

38.08

35.81

31.81

27.99

24.30

20.70

17.13

13.57

9.97

6.29

2.49

Annex VII
Summary of annual operating cost
No

Cost Items
1Raw Materials
2Direct Labor
3Factory Over Head
Salaries of indirect labor
Utilities

Y-1

Y-2

Y-3

Y-4

Y-5

Y-6

Total Annual Amount (Birr)

Y-7
Y-8
Y-9
Y - 10

Y - 11

Y - 12

Y - 13

Y - 14

Y - 15

85,504,800

106,881,000

142,508,000

142,508,000

142,508,000

142,508,000

142,508,000

142,508,000

142,508,000

142,508,000

142,508,000

142,508,000

142,508,000

142,508,000

142,508,000

2,934,000

2,934,000

2,934,000

3,110,040

3,296,642

3,494,441

3,704,107

3,926,354

4,161,935

4,411,651

4,676,350

4,956,931

5,254,347

5,569,608

5,903,784

13,651,336

14,198,836

14,811,336

14,870,376

14,932,958

14,999,296

15,069,613

15,144,150

15,223,159

15,306,908

15,395,682

15,489,783

15,589,530

15,695,262

15,807,337

984,000

984,000

984,000

1,043,040

1,105,622

1,171,960

1,242,277

1,316,814

1,395,823

1,479,572

1,568,347

1,662,447

1,762,194

1,867,926

1,980,001

1,290,000

1,612,500

2,150,000

2,150,000

2,150,000

2,150,000

2,150,000

2,150,000

2,150,000

2,150,000

2,150,000

2,150,000

2,150,000

2,150,000

2,150,000

225,000

300,000

300,000

300,000

300,000

300,000

300,000

300,000

300,000

300,000

300,000

300,000

300,000

300,000

11,377,336

11,377,336

11,377,336

11,377,336

11,377,336

11,377,336

11,377,336

11,377,336

11,377,336

11,377,336

11,377,336

11,377,336

11,377,336

11,377,336

11,377,336

4Marketing and
Administration Cost
Salaries of supporting
staff
Office supplies

2,908,682

3,158,162

4,448,762

4,595,042

4,749,979

4,914,089

5,087,922

5,272,057

5,467,110

5,673,734

5,892,620

6,124,502

6,370,155

6,630,405

6,906,123

907,920

1,134,900

2,388,000

2,531,280

2,683,157

2,844,146

3,014,795

3,195,683

3,387,424

3,590,669

3,806,109

4,034,476

4,276,544

4,533,137

4,805,125

90,000

112,500

150,000

153,000

156,060

159,181

162,365

165,612

168,924

172,303

175,749

179,264

182,849

186,506

190,236

Depreciation of vehicles
and furniture
5Amortization

1,910,762

1,910,762

1,910,762

1,910,762

1,910,762

1,910,762

1,910,762

1,910,762

1,910,762

1,910,762

1,910,762

1,910,762

1,910,762

1,910,762

1,910,762

493,417

493,417

493,417

493,417

493,417

493,417

493,417

493,417

493,417

493,417

493,417

493,417

493,417

493,417

493,417

105,492,234

127,665,414

165,195,514

165,576,874

165,980,996

166,409,243

166,863,059

167,343,977

167,853,620

168,393,710

168,966,069

169,572,633

170,215,449

170,896,691

171,618,662

Spare parts and

maintenance
Depreciation of
machineries & building

Total

The operating costs have been calculated for the year of operation when the designed capacity is
expected to be utilized.
Assumptions:
-

The operating cost computation is based on the data contained in the previous section of
this report. These data include the product outputs, requirement of labor, consumables,
spare parts, fuel, electric energy, water, etc.

All costs and normative values used in this cost estimates are based on the data
available on the current market and assumed to increase by 5% every year

Cost of electric energy has been calculated based on the annual power requirement and
the cost of Birr 0.4168 per kwh, if the energy supply is provided from the external power
transmission line.

Expenses for spare parts and maintenance during the operation of machineries are
assumed to be 2% of their cost.

Calculation of the depreciation charges have been made on the basis twenty years is
assumed as an effective service year for building, ten years for machineries &
equipments, five years for vehicles and furniture

The cost of purchase of pure blood is amortized over 5 years period.

Annex VIII
Loans Repayment Schedule
Principal
(Birr)

Project Year
0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
Total

Interest
(Birr)

15,932,339
15,932,339
15,932,339
15,932,339
15,932,339
15,932,339
15,932,339
15,932,339
15,932,339
15,932,339
15,932,339
15,932,339
15,932,339
15,932,339
15,932,339
238,985,086

54

11,281,866
10,870,808
10,423,417
9,936,481
9,406,504
8,829,683
8,201,876
7,518,576
6,774,880
5,965,448
5,084,469
4,125,621
3,082,020
1,946,174
709,930
104,157,753

Balance
Bank Loan (Birr)
Reduction (Birr)
4,650,473
5,061,531
5,508,922
5,995,858
6,525,835
7,102,656
7,730,463
8,413,763
9,157,459
9,966,891
10,847,870
11,806,718
12,850,319
13,986,165
15,222,409
134,827,333

134,827,333
130,176,860
125,115,329
119,606,407
113,610,549
107,084,715
99,982,058
92,251,595
83,837,832
74,680,373
64,713,481
53,865,611
42,058,893
29,208,574
15,222,409
(0)
(0)