Project Proposal of Ato Elias W/Amanuel

UNIT ONE
Executive Summary
The contribution of transportation to a country's development is high. Its share of contribution to the
GDP of a country is incontrovertible, though the nature and extent of the contribution varies from
country to country. Transportation plays a big role in what is known in both national and international
trade as invisible trade. It has been confirmed that its share in this respect in many developed
countries is as high as 26%.
The role of transportation in the investment sector varies between the developed and the developing
countries. Because a good part of infrastructure development has been taken care of in the developed
countries, most of the investment there focuses on automotive equipment, whereas the investment in
the developing countries focuses on infrastructure development. Of the total investment expenditure
of developing countries, 30-35% goes to infrastructure development, whereas in the developed
countries the share of expenditure for same is only 15-20%
In terms of creating job opportunities, the share of the transportation sector in the developing
countries is only 2-4% due to the low-level performance of the economy, while in the developed
countries, the figure stands at 4-8%. And the job creating role of the sector does not include the labor
force deployed in the building of infrastructure. When the living condition of a country's population
improves, the population's transport demand increases accordingly. While the per capita transport
demand in the developing countries covers a travel distance ranging between 200 and 500 Km, that of
the developed countries lies between 7,000 and 10,000 Km.
This study is done for the newly created project of Ato Elias W/Amanuel, till this stage he has been
working as a heavy duty truck driver since 2001. By saving some of the money he earns and
involving in several equb’s, he can manage to purchase his own Sino Truck by paying 50% of its cost
price in cash, which is 740,000.00 birr. The rest 50% of the cost is planned to be acquired from one of
the private Bank’s which entertains the demand of Ato Elias W/Amanuel. Ato Elias is a married
person and has two children; currently he and his family’s reside in Dukem town.
Ato Elias already has made an agreement with one of the known Sino Truck importer in the town
(TEKHAF Plc) and paid 50% of the total cost of the truck in advance.
The transportation business is one of the profitable sectors in the nation with ample manpower and
resources; he knows the business for the last nine years and has brought a good return on equity to the
owners and companies he was worked with as an employee.
The project, as per the financial analysis and examination will be profitable and will repay its debt
equity within the specified period of time including all its interests and related charges.
Introduction
This study is organized for Ato Elias W/Amanuel’s transpiration business plan and will be presented
to Bank’s for requisition of transportation long term debt. Ato Elias is a well known and one of the
respected and responsible driver and business men in the sector, he initially enters the business sector
in 2001E.c.
The promoter has an ideal mix of educational background, versatile work and business experience in
a wide range of business sectors and activities’ including the transportation sector. He is fully familiar
with the envisaged project, locality area and environment. He is therefore highly enthusiastic to
contribute as a corporate citizen playing socially responsible and exemplary roles as developmental
entrepreneurs.
He is also cognizant of the fact that transport sector is the mainstay of the Ethiopian economy plus as
the main resource of the country, it contributes the predominant share of the GDP, Construction
works, Import/Export earnings and is the source of livelihood of the majority of the population.

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Project Proposal of Ato Elias W/Amanuel

This brief survey has been undertaken to assess the technical as well as economic viability of the
complex outfit. As subsequent sections of the report reveal, the project shall be financially sound
while its socio-economic contributions cannot be neglected.
Currently, Ato Elias makes a total net income of more than 270,000.00 per year from the net salary
payment of his current job and his commission works.
At present the promoter Ato Elias plans to purchase one heavy duty Sino truck, which will be used
for the transportation service of soils, sand, several types of aggregates, construction stones, pumices
and other construction materials in different parts of the country. Ato Elias already has paid
740,000.00 birr to the importer of the vehicle and made an agreement to get hold of the car when the
bank issues a confirmation letter to pay the remaining 740,000.00 to the seller till the title transfer
process is over in the name of the promoter.
As per the Banks and financial rules and regulations of National Bank of Ethiopia, he requests the
bank to cover 50% of purchasing cost of the new truck. The promoter will cover the rest 50% of
purchasing cost of the truck. Therefore this study is mainly structured in order to assess the viability
and profitability of the new project of Ato Elias; whether it is being competitive in ever changing
market or not.
This project, which has been initiated by the promoter who has been encouraged by the current
favorable investment atmosphere in Ethiopia, especially he focused on the transportation sector since
it is the main economical sector of the country on which the government relies on to move forward
the developmental route of the nation.
The major factors that motivated the promoter for the involvement to the transportation sector are
opportunities created for new entrants into the sector of transportation of sand, aggregates, pumices
and other construction input material transportation demand in the country. The major opportunities
for engaging in the business of this sector are:
- The sector is proved to be one of the profitable business sectors in the nation
- He can manage the business easily since he knows the sector for the last 9 years
- He can own and do the business at the same time
- He has a lot of clients who needs this type of transportation services
- Dukem town is in near distance to Addis Ababa, where he resides permanently
- The construction work is currently growing
- There are sufficient demand and supply to the business
- He can drive his own car and cut some commission payments
- The Country's anticipated economic growth with the corresponding increase in consumption
of construction material inputs heavily;
- Banks willingness to give long term debt;
- The government's support for the establishment of local heavy duty truck importers; and
- The removal of unfavorable pre-conditions.
Given the vital role, the transport sector, plays in the economic development of many developing
countries including Ethiopia, this project envisage case studies be made on Ato Elias’s project on
which he was involved since 2001E.C.
Location: even though the promoter resides in Dukem town, based on the nature of the business he
can move from one place to another and region to region in order to be profitable and make the
periodically bank loan repayments.
The Study
This study relies much on secondary data that was obtained from various documents and publications
available. This is also supported by intensive interviews with key informants, on-field visits to

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Project Proposal of Ato Elias W/Amanuel

different sites and focused group discussions of various stakeholders. Major Chain actors involved in
transportation sector have been characterized and mapped.
In the following section, objectives of the project and theoretical framework of the nation and its
transportation economic status in particular are put forward. Then after, it attempts to address the
social and economical situation of the country. The overall position of transportation sector in
Ethiopia and its market analysis in the national and global economy is deeply clarified in the next
section, which will then be followed by a discussion on the marketing analysis and the promoter’s
operational and technological aspects. The final section of this project intensively shows the financial
analysis of the new project including the conclusion and recommendation part of the study.
Projects Goal
The Goal of Ato Elias W/Amanuel lies on the transportation sector elevation and poverty reduction
and improving the livelihood of drivers, co-drivers and other stakeholders related with the
transportation sector. Play a great role for sustainable growth of transportation sector as a national
level, through new technological advancements, an improved and advanced heavy duty trucks, and
increased the output and profitability of the project.
The Mission of the Project is to:
- Contribute to the development of the country by providing quality and efficient transportation
services in order to enhance construction materials distribution services;
- Provide efficient, high quality value adding services combined with the highest ethical, safety
and environmental standards locally;
- Bring the distribution services of construction materials and inputs to the international
standard;
- Strive to operate at all times in a responsible manner which means fair and honest treatment of
all those with whom the promoter deals, including customers, officials, employees and the
general public; and
- Provide favorable working atmosphere and opportunity for creativity and growth for several
types of stakeholders.
Objectives of the Project
The General Objective of the Proposed Project is:
By using advanced and improved technological heavy duty trucks, contribute to the increased
non-interrupted construction materials and inputs delivery to several contractors and
individuals and give a hand for the next five year transformation plan of the country and
thereby to bring the country to self-sufficiency, promote import/export of diversified
construction inputs, contribute to economic development and poverty reduction, conservation
of integrity of natural resources and the environment as a whole.
The Specific Objectives of the Project is to:
- Provide the services to dissimilar types of demanders that are to the standards attained by
well-rated competitors and contenders;
- Support the development and growth of the national economy through the establishment of
efficient and responsible transportation network for construction input products;
- Increase the service network of the new project through rational use of resources and
introduction of modern and efficient operation systems;
- By trying to attaining its goal and mission commit to surmount its bank loan
- provide stable employment to its co-drivers & workers; and
- Generate a return on investment that will allow a reasonable return on capital to the owner as
well as ensure continued growth of the proposed project.

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Project Proposal of Ato Elias W/Amanuel

What will the Project Achieve?

Working with local partners and stakeholders in Ethiopia, especially with Building Contractors; will
make the project to achieve the following objectives:
- Increase stakeholders income through higher services and lower input cost
- Improve environmental quality through using advanced and new technological vehicles and
reduced carbon air pollution
- Engage in the modern transport sector services and managements
- Widen its transportation services to freight and public transportation sectors including unban
transportation services so as to enhance the involvement on the renaissance of the economic
development of the nation
- Serve as a demonstration center for similar projects as an exemplary one for other investors
within Ethiopia and the citizens from abroad who involve in similar sectors
- Participation and co-operation in community development schemes in the locality and the
region in general through financial, material and other resources by means and capacity of the
project
- Generate business profit to sustain the promoter’s growth and development
- Contribute for the advancement and growth of the poorly performed transport sector of the
country
- To create strong and sustainable technological system transfer and linkage between
stakeholders
Beneficiaries of the Project
- The owner
- Heavy duty truck importers (TEKHAF PLC)
- Private Micro Enterprises at loading/unloading sectors
- Consumers of different construction material inputs
- Contractors
- Banks & Insurances
- Resource extracting Companies and Persons
- Commission Workers
Developmental Impact of the Project in Socio-economic
Given the multi-sectoral nature of the transport economic sector in Ethiopia and as a major gear to
enhance the renaissance and transformation of the country, a valuable impact will be create since
every economic sector needs sufficient supply of construction material inputs as well as
transportation services.
The project will help the sector to minimize the current market price of transportation cost if it is
assisted by the government, banks and related parties to extensive involvement of freight
transportation trucks, help for the foreign exchange earner of the producing factories, as an important
source for human and animal shipments, as well as provider of urban and rural employment,
improvements as an input in the production and processing of the agricultural and industry sectors.
As a whole it will have significant socio-economic development impact.

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Project Proposal of Ato Elias W/Amanuel

UNIT TWO
Background of the Business
A Brief History of the Development of Modern Transportation in Ethiopia:
When we speak of modern transportation in the Ethiopian context, the reign of Emperor Menelik
holds a cardinal place. According to some writers, the idea of road construction started with the reign
of Emperor Tewodros, when he used manual labor for clearing land for a pathway across which to
haul his canon, the Sebastopol, to Mekdela. Since, however, the purpose of the roadway had nothing
to do with serving the public, let us limit our observation to the fact alone and pass on to the reign of
Menelik.
Using his close relationship with the government of Austria, Emperor Menelik imported the roller,
one of the technological products of the time, circa 1885-1887, Gregorian calendar. But the building
of the roadway itself on which this roller was operated carried out by clearing the forest and leveling
the land with a labor force drawn both from the governments army and the public. Documents reveal
that the first bridge to be built was that across the Awash, which took place in 1886/87. According to
the records, after the roller was transported to Addis Ababa, Menelik had a 45-Kilometer stretch of
road built through the combined labor of the military and the civilian population, while the roller was
simultaneously put to work on this same road, but it did not take long for the machine to break down
and be abandoned, never, it appears, to function ever after. Different historical sources also point out
that the first automobile came to Ethiopia in 1907/08, Gregorian calendar, following which other cars
with different models were imported from England and Germany. The sources also point out that in
1908, Gregorian calendar; several trucks were operating in Dire Dawa during the dry season. Given
the cultural disposition of the society at the time, those who were able to operate cars seemed to have
satisfied themselves with the idea of just driving the respective vehicles they owned, traffic laws and
regulations being alien to them until the years between 1915 and 1917.
Gradually, however, oral directives and orders were given both to vehicle operators and pedestrians.
Although the Italian invasion of 1935-41 had inflicted damage on the country, it nevertheless had its
own contribution to the expansion of modern transportation. It has been reported that public
transportation, but especially taxi and bus services, started in Ethiopia during the Italian invasion.
Although, according to historical records, the first motor vehicle operator was Emperor Menelik
himself, the first operator with a legal driver's license was Negadras Tesemma Eshete, who learned
the skill while he was in Germany. Regarding the promulgation of transportation codes, the laws
promulgated in 1934 and 1935 (Ethiopian Calendar) are considered the first written laws. At the level
of government offices, however, the first institution in charge of transportation was the Road
Transport Administration Bureau, which was established in 1960. Prior to that, the administration of
most of transportation activities was the responsibility of a board and some share companies under
the jurisdiction of the Ministry of Transport and Communications.
Regarding the administration of other transportation systems, we find that rail transport
administration came into being along with the beginning of rail transportation in the 1910s. As for air
transport, Captain Mekonnen Beri tells us, in his book, “Aviation in Ethiopia” that the first airplane
came to Ethiopia in 1921. Following that, towards the end of the 1930s (more specifically in 1938),
Ethiopian Airlines was legally established. Regarding water transport, the Ethiopian Merchant Navy
was established during the reign of Emperor Haile Selassie, towards the end of the 1950s and the
beginning of the 1960s, alongside which seaport and maritime transport offices as well as maritime
transport authority were mandated to administer the country's international water transport system.
The 1950s and '60s constitute that period in the history of the development of our country's
transportation sector in which much was accomplished. The period was one during which many

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agencies and companies were created and competitions among them to provide better services and
attract passengers and clients flourished. Consequently several laws and regulations related to the
administration of transportation were issued. After 1967/68, however, many things changed,
especially changes that brought the development of transportation to a virtual standstill. Several
transport companies were nationalized and brought under the jurisdiction of Freight Transport
Agency and Public Transport Corporation. Everything pertaining to transportation was administered
through zonal structures.
During the Derg period, the role of private transportation was restricted, because of which there was a
high shortage of public transportation. The building and administration of transportation
infrastructure was completely under the jurisdiction of the Highway Authority. This centralized
transportation service, as well as infrastructure development and administration, continued until
1984/85, a situation that is still fresh in our memory.
The Current Situation of the Ethiopian Transport Sector
The transportation branches for which data are available in Ethiopia are Road transport, Air transport,
Rail transport and Water transport. Of these four types, the biggest service provider is the road
transport branch. Accordingly, 90% of freight transportation both in the import and export sectors and
95% of the public transportation services is provided by the road transport branch. Whereas the
majority of the urban population covers short- and medium-range distances on foot, in the urban areas
people for the most part travel on foot, save for those limited instances where they use draught
animals. It has been noted that the size of the population with access to modern transportation in
Ethiopia does not exceed 40% (Federal Transport Authority, Megabit 2006). When we look at the
overall situation in the transport sector, we observe instability of operation and, in some cases,
deterioration.
When we look at the total manpower employed by the government, the share of the labor force
employed by government institutions in the transport sector, namely, Transport Authority, Ethiopian
Road Authority, Road Fund Administration, is 46.7%. This figure does not include the manpower
employed by the regional transport institutions. Following in second place, the air transport sector's
share of manpower is 39.3%. At the moment, of all the branches of the transport sector, these two
branches have the best performance records.
As per the current data considered based on the high construction works performed by the
government and private individuals and institutions throughout the country, there is a high demand of
heavy duty freight transports including providers of different types of construction materials.
Profile of the Country's Road Transport
According to data obtained from the Federal Transport Authority, the annual rate of increase in the
number of vehicles was 14%, with only 166,310 vehicles for 2007. The past 12 years from 1996-2007
constitute a period during which the increase in the number of vehicles in the country was high.
Compared to the other African countries, the number of motor vehicles in Ethiopia is very low. When
it comes to loading capacity in terms both of freight and passengers, the number of vehicles with low
and midlevel capacities is very limited. A large share of the country's motor vehicles goes to private
(domestic) cars with over 37% of the total. While the share of public transport vehicles stands at 70%,
the remaining 30% goes to freight transport.
The Strong Points of the Transport Sector
While the modern transport system in our country is about a hundred years old, it has not been
developed as it should have. Of the different modes of transportation, rail and freight transport
especially have been on a path of regression, with the former faring even worse to reach a stage of
total closure. With regard to showing improvement and growth, the level of the changes registered in

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our air transport system makes it the one area in which we should take pride. Although this branch of
the transport sector is more than 60 years old, the level of development it has currently attained is one
that gives it pride of place both in Africa and around the world. Notable among its strong points is its
capacity to maintain a steady and sustainable growth, with no trace of vacillating.
One can assert that road transport is everything to Ethiopia. The reason simply is that there is no other
transport branch that is as close home to the hearts of the people than this branch in terms of
providing services for transporting passengers as well as freight goods. In this regard, among the
strong points of the country's road transport, we find the following:
1. It has the lion's share (90-95%) when it comes to transporting passengers and freight goods
within the country;
2. The effort made in the area of building new roads and upgrading and expanding the existing
ones is highly significant;
3. The ability of the sector to create jobs for many Ethiopians;
4. The high role it plays in bringing producers and consumers together;
5. The improvement shown in the level of our use of modern vehicles for transporting goods and
passengers;
6. The initiatives taken, relative to the previous regime, to extend administrative structures to the
lowest possible level, thereby affecting the principle of decentralization.
The Weak Points of the Transport Sector
In poor countries, such as ours, any social and economic activity is confronted with many problems
and constraints both internally created and caused by external pressures. These problems can be taken
care of through structural changes in systems as well as minor adjustment measure. This being the
case, it is easy to realize that there is a high level problem of capacity limitation and lack of proper
management initiative in poor countries, such as Ethiopia. With respect to this, when we turn our
attention to our countries transport sector, but especially to road, rail and water transport, we find that
the sector suffers from many serious weaknesses, among which we find the following:
1. The country does not have competent and safe transport policy and strategy;
2. Adopting issuing to fire fighting laws, proclamations, regulations and directives; Problems of
traffic safety in the road transport sector;
3. Unlimited and uncontrolled selling of driving licenses in several regions;
4. Absence of limits on the producing year of motor vehicles imported into the country;
5. Absence of strategic systems of functioning transports service sectors and agencies;
6. The prevalence of measures those are detrimental to our natural environment resources;
7. Lack of proper attention and attitude towards non-motorized vehicles;
8. The uneven distribution of transport vehicles throughout the country, one result of which is high
traffic congestion in few cities;
9. The relative expensiveness of transport unit cost per passenger/freight tone; lack of knowledge on
the part of many operators about their running costs, except for a few modern transport
companies;
10. Problems of service operation allotment that does not discriminate between new and old
vehicles;
11. Lack of effort in expanding urban transport;
12. Denying rural transport the attention due to it;
13. The limited nature of the country's strategy with respect to withstanding the pressures from
countries with sea ports.

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Economic Growth Performance

According to the National Accounts data produced by the Ministry of Finance and Economic
Development (MoFED) the Ethiopian economy experienced a real GDP growth rate of 11.8 percent
in 2007/08. Over the past 5 years the real GDP grew by 11.7, 12.6, 11.6, 11.5 and 11.8, respectively.
This impressive growth is attributed to a significant double digit growth especially in the service
sector averaging 13 percent in the last 5 years. The growth in the distributives services sector has
continuously increased from 6.4 percent in 2003/04 to 15.2 percent in 2007/08.
Sectoral Growth Performance

-
1960/61

1991/92

1997/98

2002/03

2003/04

2004/05
- 73/74

- 96/97

- 07/08

2005/06

2006/07

2007/08
1974-
75
Agriculture and 2.1 0.6 4.5 4.7 10.5 16.9 13.5 10.9 9.4 7.5
Allied Activities
Industry 7 3.6 8.7 7.1 6.5 11.6 9.4 10.2 10.2 10.4
Distributive Services 7.8 2.5 8.9 7.2 5.5 6.4 14.7 14.2 16.0 15.2
Other Services 6.9 4.7 8.1 8.9 6.5 6.1 10.9 12.5 12.5 18.9
GDP 3.7 2 6.3 6.2 -2.1 11.7 12.6 11.6 11.5 11.8
Per capita GDP 1.4 0.5 3.4 5.3 -4.8 8.7 9.6 8.6 8.2 8.3
Source: Ministry of Finance and Economic Development
The Service Sector
The service sector is a more diverse sector composed of different components ranging from Trade
and Hotels to Transport and communications, banking and non-market services. Overall the service
sector has grown at a much faster rate than both agriculture and industry. During 2006/07 and
2007/08 the service sector grew by 14.3 percent and 17 percent, respectively. This has led to the
increase of the share of services in the total GDP from 39 percent in 2003/04 to 43 percent in
2007/08. This impressive growth in the service sector could mainly be attributed to the growth of four
major components; namely Trade and Hotels, Financial Intermediation and real estate and Education
plus transportation services. These components grew by more than 15 percent during 2006/07 and
2007/08.
Service Sector Growth Performance
Sub-Sectors Share Share Growth
in in
Sector GDP
1997/98 1997/98 2001/02 2003/0 2004/05 2005/06 2006/07 2007/0
- - -07/08 4 8
2007/08 2007/08
Services 100.0 39.2 10.4 6.3 12.8 13.3 14.3 17.0
Distributive Services 50.5 19.8 10.9 6.4 14.7 14.2 16.0 15.2
Trade, Hotels, & Restaurant 36.9 14.5 11.1 5.2 12.8 17.9 18.6 15.6
Transport & 13.6 5.3 10.5 9.5 19.2 5.7 9.3 13.9
Communication
Other Services 49.5 19.4 10.0 6.1 10.9 12.4 12.5 18.9
Financial Intermediation 23.5 9.2 12.9 6.8 10.2 17.2 15.2 18.9
and Real Estate
Public Administration & 11.8 4.6 4.5 0.2 11.6 6.4 2.8 24.8
Defense

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Education 6.6 2.6 12.8 11.5 12.6 8.6 21.2 16.4

Health 2.4 0.9 9.7 15.9 16.9 9.8 8.6 20.9
Domestic & Other Services 5.2 2.0 6.8 4.4 7.4 8.8 8.6 10.5
Source: Ministry of Finance and Economic Development
Distributive services and other services take almost equal shares in total services. Trade, Hotels and
Restaurants, transport and communications are classified under distributive services. Trade, Hotels
and Restaurants have grown in double digits since 2004/05 for 4 consecutive years peaking at
2006/07 with 18.6 percent growth. Transport and Communications on the other hand saw two good
years of growth in 2004/05 and 2007/08 with 19.2 percent and 13.9 percent growth, respectively. The
growth in distributive services depends on the growth of the agricultural and industrial sectors and the
other services and hence is a reflection of the growth in these sectors. Financial intermediation and
real estate services took a larger share taking up 23 percent of total services. During 2006/07 and
2007/08 this component grew by 15.2 percent and 18.9 percent, respectively. Another sector that has
shown a significant growth in the past two years is the education sector. Because of the massive
investment by the government on education services the sector grew by 21.2 percent and 16.4 percent
in 2006/07 and 2007/08, respectively. The growth in public administration and health has jumped to
24.8 percent and 20.9 percent, respectively in 2007/08 from 2.8 percent and 8.6 percent in 2006/07.
Transport and Safety
Safety is critical in any transport system. The degree of safety that one will enjoy differs from one
mode of transport to the other. Evidently, air transport is considered as the safest mode of transport
while road transport the least safe. According to the World Bank, every year more than 1.17 million
people die in road accidents around the world, of which about 70 percent occur in developing
countries. Sixty-five percent of the deaths involve pedestrians, out of which 35 percent are children.
Over 10 million are also crippled or injured each year. It has been estimated that at least 6 million
more will die and 60 million will be injured in developing countries during the next 10 years unless
urgent actions are taken. The majority of road accident victims (injuries and fatalities) in
developing countries are not motorized vehicle occupants, but pedestrians, motorcyclists,
bicyclists and Non-Motorized Vehicles (NMV) occupants. The Global Burden of Disease study
undertaken by the World Health Organization (WHO), Harvard University and the World Bank
showed that in 2014 traffic crashes were assessed to be the world’s seventh most important
health problem, and by the year 2020 this would move up to third place in the table of leading causes
of death and disability. According to World Bank, Ethiopia had 3 vehicles per 1,000 population
just next to Bangladesh, Togo and Sao Tome and Principe each of which had 2 vehicles per
1,000 population. Despite the low per capita vehicle ownership, the country’s accident record is very
high. Road traffic accidents have been growing in Ethiopia overtime, with the exception of the
two recent years of 2006/07 and 2007/08. The registered growth is presumed to be
significantly under-stated due to the challenge of getting the exact number of accidents occurring
throughout the country. This could be due to under reporting, sheer absence of information,
negligence, informal negotiations between victims and drivers, or absence of traffic police at
accident sites at the time of the occurrence. The number of deaths, serious, and slight injuries
increased, on average, by 6, 4.5 and 3.6 percent, respectively, in the period 2002/03-2007/08.
All the three effects of traffic accidents have been trending together due to their joint
occurrence.
Road Traffic and Composition
Traffic is concentrated on a few major routes, including many radiating from Addis Ababa,
with around 80 percent of traffic in 2006 moving on half the surveyed network. The all-weather

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network has a length of 6,593 km, thus comprising 49 percent of the surveyed ERA network for
2006. Over these (15) all-weather roads estimated traffic movements were 4,717 million vehicle-km
per day, or 79 percent of the total surveyed traffic in 2006.

Estimated Traffic Flows on Selected Routes in 2006

(’000 vehicle-km per day)
Routes Cars Buses Trucks Truck & Trailers All Vehicles
Addis Ababa - Adama (98 km) - 252.5 184.9 306.5 110.9 854.9
Adama - Awash (125 km) - 31.6 31.8 73.0 72.4 208.8
Awash - Mille - Galafi (491 km) - 33.9 17.2 77.0 194.4 322.5
Total: Addis Ababa - Galafi (714 km) - 318.0 233.9 456.5 377.7 1,386.2
Other All - Weather Roads (5,879 km) - 668.8 914.4 1,462.6 286.5 3,332.2
Total: All - Weather Roads (6,593 km) - 986.8 1,148.3 1,919.1 664.2 4,718.4
Other Surveyed Roads (6,945 km) - 246.7 224.5 637.1 137.4 1,245.7
All Surveyed Roads (13,538 km) - 1,233.5 1,372.8 2,556.2 801.6 5,964.1
Source: Based on ERA Traffic Report
Based on the assessment of this study the truck which the promoter of this business Ato Elias will
buy will use to transport and deliver construction materials and inputs to individual demanders,
contractors, companies and government enterprises and agencies.
Therefore the main transport route he will use mainly is between Addis Ababa and Awash as well as
Addis Ababa and Hawassa. There are also secondary flows out side this region and it will be used if
he can get contractual jobs. Ato Elias is programmed himself to drive his own vehicle since he has
full capacity and knowledge about the nature of the cars and the business as well.
Currently he work with other individual transport owner’s with an agreement to bring a net profit of
birr 2,300.00 per day so that he will give the owner of the vehicle birr 69,000.00 per month.
Usually a Sino truck driver gets about 9,000 br a month and their assistants receive 3,000 Br,
including their per diems. Nevertheless, this experience revealed the practice of hired drivers. As per
the agreements made with the owner of the truck the excess amount gained above 2,300.00 birr will
be the benefit of the driver and it is ranging from 800.00 to 1,500.00 birr per day.
Major Pricing Issues
For freight haulage, the tariffs set out by the Transport Authority suggest that, in general, operating
costs are not being fully recovered. This may be due to insufficient allowance for vehicle depreciation
and replacement. There are consequent issues of quality of service (convenience, frequency, etc) and
vehicle roadworthiness standards. As a land-locked country with a large and relatively sparsely
populated land area, Ethiopia faces considerable difficulties and high costs in reaching regional
and international markets, importing key imports and delivering services to firms. Transport can
form a very high proportion of Export Value. For instance, in a study of the garment trade in 2004 it
was found that transport costs formed some 28 percent of the Value Added. When handling and Port
Fees were excluded this dropped to 18 percent, but this remains a high proportion. In a study of the
coffee trade in 2004 it was found that transport costs formed some 10 percent of the value of one ton
of coffee.
However in the construction material input transports the main factor is the purchase price and type of
soil, stone, sand, pumice and other construction materials, labor cost and distance are the main factors
in pricing. The competition and the availability of transport are well sufficient to support the needs of

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Project Proposal of Ato Elias W/Amanuel

demanders. Other price changing factor is that of cost of fuel and oils and the length and nature of the
road.
The construction materials input transport industry is affected by the peak periods caused by bunched
arrival and demand of materials and construction periods. In such situations all available truck
capacity has failed to cope. During peak times, transport prices have jumped from over two times
average prices, whilst in non-peak time prices have dropped to the lowest.
Freight Transport Service Forecast
In order to keep pace with the growing economic activity, replacement of old fleet, upgrading of
trucking technology and expansion, is required to match with the pattern of change in the nature of
demand. Furthermore, measures to restrict import of used vehicles and replacement with obsolete
trucks will tend to reverse the present distribution of old trucks. It is expected that there will be a shift
towards modern Sino trucks, which currently account for a relatively low proportion of the trucking
fleet. In order to have sufficient number of modern Sino trucks in the business, there has to be
sustainable increase in economic activity as a whole.
Considering the strong positive performance of the Ethiopian economy in recent years and taking into
account that it is in the earlier stages of transition to a full market economy, the increase in road
freight transport fleet will be at a high rate for future.
Political Context
Institutional Structure Including Allocation of Powers between Jurisdictions:
The present institutional structure of the Federal Democratic Republic of Ethiopia (FDRE) is
of relatively short provenance. In 1991 was formed the Transitional Government that laid the basis
for the current constitutional arrangements which were ratified by a Constitutional Assembly in late
1994, and took effect in 1995.
The federal arrangement, established under the Constitution, has guaranteed the rights of the Regional
States to administer their own affairs. They are empowered to formulate policies that are appropriate
for their respective development; to lay the foundation for economic and social infrastructures; to
participate directly in sectors that are critical for their economic development; and to safeguard law
and order in their own areas.
Other Relevant Government Institutions
The highest level relating to commercial road transport is the Federal Government of
Ethiopia, responsible for determining national policies and strategies, as well as developing
regulatory framework in the form of basic laws. To this effect, special organs of the federal
government have been established. These authorities are discussed below.
The second level (type of function) relates to Regional level authorities and the third level (type of
function) to City administrations/municipalities which are similarly dwelt upon in the following
paragraphs.
Ministry of Transport and Communications (MoTC):
The Ministry of Transport and Communications (MoTC) was established with responsibilities for the
overall national transport policy and the preparation of basic laws and directives governing
commercial road transport.
Transport Authority:
The organization with prime responsibility for control and regulation of road transport is the
Transport Authority (TA), formerly named the Road Transport Authority until its remit was widened
in 2005 to also include rail and maritime transport activities. Despite this widening of the TA scope,
regulation of road transport has remained the dominant function. In fact some maritime functions

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Project Proposal of Ato Elias W/Amanuel

which were transferred to the TA have now been re-assumed by the parent Ministry of Transport and
Communications (MoTC).
Ethiopian Roads Authority (ERA):
The Ethiopian Roads Authority is a federal government institution with responsibilities for providing,
improving and maintaining the major roads (trunk, link and main access roads).
The Federal Police Commission:
The Federal Police Commission is entrusted, among other functions, with the management of road
traffic and enforcement. The Regional Police Commissions share these functions.
Regional Bureaus of Transport and Communications:
The Regional Bureaus of Transport and Communications have been empowered to administer the
regulations of road transport, including registration and technical inspections of motor vehicles and
regulating commercial road transport services within their geographic jurisdictions. This came into
effect in accordance with Proclamation No. 7/1992 (Transitional Government of Ethiopia: 1992),
and the Regulation for the Definition of Powers and Duties of the Central and Regional
Executive Organs of the Transitional Government of Ethiopia (Transitional Government of Ethiopia:
1993). They also have powers to establish and operate public road terminals.
Regional Rural Road Authorities:
The Regional Rural Road Authorities have responsibilities for providing roads that are functionally
classified as collectors and feeders, or what are more commonly called rural roads.
City Administrations/Municipalities:
The third level/type of governmental commercial road transport functions relate to city
administrations/municipalities. City administrations, particularly Addis Ababa, have substantial
commercial road transport responsibilities, including roads, parking, transit systems, terminals and
traffic management.
However, city transport authorities with comprehensive roles have not yet begun to appear.
Transport Associations:
The largest freight transport associations may have 200 to 300 members, operating 300 to 400 trucks,
but many are much smaller; on average, however, there are over 100 trucks per association. Eighteen
associations operate more than 100 trucks.
The characteristics of the sampled transport associations/operators (public, liquid and dry cargo
freight) are summarized as follows:
- Associations are groupings of in general a small number of vehicle owners;
- Associations act as brokers facilitating prompt loading to their members and collecting
commissions for the services they render;
- As associations are not registered companies, but are groups of independent operators, the
sizes of their combined capital could not be estimated;
- There are deficiencies in data management: in recording, organizing, retrieving
operational and financial data for management purposes;
- Some of the associations do not have proper office facilities and personnel. Offices of most
associations are not well organized, there is insufficient space and they serve other purposes
aside from transport. Conversely, some have organized offices with the necessary human
resources; very few associations have small and clean offices with reasonably skilled
personnel;
- In general associations are fragmented, uncoordinated and unorganized;
- Associations are preoccupied with day-to-day management of operations;

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Project Proposal of Ato Elias W/Amanuel

- They do not engage in business planning, study of costs, revenues, tonnages and other
operational and financial performance indicators. There are no organized consultations on
problems of common interest;
- In general, a shortage of skilled staff, a lack of proper facilities and ineffective
management, an absence of rationale for pricing, the instability of demand, poor asset
management and weak financial position characterize a large share of the associations that
were sampled;
Private Companies:
The Private Limited Companies are better organized in having better organizational designs with the
required job descriptions, position classification and pay systems, facilities -workshop, terminals, and
stores, than the associations. They have better data management systems, although most companies
were not willing to provide access to records for commercial reasons. The private transport carriers
should enhance their organizational capacity, so that they can effectively carry out business planning,
fleet scheduling, cost analysis and tariff setting, financial management and control in order to be
sustainable within a competitive environment. In order to adopt a competitive environment and
improve service quality, it may be necessary to determine optimum fleet size for efficient
management and adjust association membership accordingly. Of particular significance is for private
transport carriers to establish their business objectives in terms of vehicle productivity, market share
and profitability for sustainability. As the technology of commercial road transport continues to
change, the dependence of passengers and shippers on a limited number of common carriers
(generally for-hire carriers) will change. Some operators can even afford to operate their own truck
fleets. As the regulatory environment is becoming more competitive, the hire-carriers, particularly the
associations have to be much more responsive to the needs of shippers.
Financial Performance and Sustainability
Access to Credit/Loan:
Access to credit/ loan from financial institutions is critical for modernization and sustainability of the
commercial road transport industry. An inability of most transport operators to generate surplus from
their activities for reinvestment is one of the major inhibiting factors in the improvement and
modernization of the commercial road transport industry in Ethiopia.
As part of the process of evaluating the level of access to credit financial institutions (banks and
insurances) provide to the Commercial Road Transport sector, and to examine the operational results
of the operators engaged in the business, questionnaires were distributed to nine banks, six insurance
companies and fifteen transport organizations. Almost all of the contacted organizations responded to
the questionnaires.
Data collected from the commercial banking system showed that loans to the commercial
road transport industry have been increasing, reaching cumulative amount of more than 976 million.
The interest rate falls in the range of 14.5 to 16 percent p.a., whilst the maximum loan tenure is 5
years.
The financial needs of the commercial road transport industry should be evaluated so that a range of
flexible and affordable solutions (at competitive interest rates and affordable monthly payments)
could be tailored to meet business requirements for modernization in a globalized and competitive
economy.
All of the banks surveyed, provide credit facility for partial financing of purchases of commercial
vehicles (freight and public). Some of the financiers have only 3 to 5 years of experience in granting
loans to the sector. Although banks consider trucking as a high-risk business, the non-performing
loans (NPL) of the industry are minimal or negligible, and for some of the banks the NPL is almost

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Project Proposal of Ato Elias W/Amanuel

zero. It is striking that the Non-Performing Loan (NPL) from the total amount provided by
commercial banks for transport companies is less than 7 percent. This figure is far lower than the
aggregated maximum of 15 percent (set by the National Bank) or than an internationally accepted
NPL hurdle of 10 percent.
Even those loans reported as “Non Performing Loans” by some banks, have been settled through the
process of negotiation and rescheduling. This signifies that borrowers are meeting their commitments
accordingly or are credit worthy. This is a fundamental issue when considering the future upgrading
of the technology of the vehicle fleet to enhance competitiveness, through the reduction of unit
vehicle operating costs.
Most banks have the same terms and conditions for both urban and rural transport
commercial vehicles.
• Most banks require a clearance from all financiers, which show that the applicants have non-default
status; no record of any mal-operational practice of checking account in the banking industry;
• Applicants are expected to have:
- Sufficient experience and be licensed to operate in the business, and
- Tax Identification Number;
• There are no banks that finance 100 percent of the value of vehicles to be purchased by creditors.
• Different banks have different criteria on the kind of vehicle they finance.
- Some banks finance truck with loading capacity of up to 10 tons; buses less than 45 seats.
- Others finance a truck with trailer up 300 quintals loading capacity, a fuel tanker with
40,000 liters loading capacity and a bus with at least 30 seats.
- Some banks require that the motor vehicle to be purchased meets the standard specification of
the Transport Authority;
• The maximum tenure of the loan is 4-5 years; and
• If the loan is sought for the procurement of tanker, some banks require a tripartite agreement,
involving the borrower, the oil company and the bank.
Financial Constraints:
The transport industry suffers from a lack of sources of finance both for capital investment and for
working capital. Cash flow is a problem for all transport companies as they seek to retain their
position or expand. There is an urgent need for more banking services and the establishment of
leasing services. Cash flow problems are also a reflection of a lack of business management
experience in the industry.
It is usual that cash income from transport activities exceeds direct cash expenses (particularly in the
first few years of operation), as an excess of revenue over direct expenses is needed for vehicle
depreciation purposes.
The excess cash generated will often be spent on peripheral activities and not re-invested, leading to
cash flow problems later. A clear example of this is where depreciation is ignored altogether or at best
not accounted for in saving (or investing elsewhere) to replace the vehicle at due time. In this
situation vehicles have to literally last the lifetime of the owner. Performance in the industry could be
improved with new training in management skills. This could be done through aid funding at low cost
and quite quickly.
Increasing costs of operation (particularly the rise in the price of construction materials and inputs)
vis-à-vis regulated tariff and market rate for the services provided has resulted in some cases in poor
financial performance. This has major implications for the future replacement of trucks, and the
modernization of the industry for greater competitiveness and sustainability. The future prognosis for
the financing of replacement of trucks remains uncertain.

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Project Proposal of Ato Elias W/Amanuel

The loan tenure is very short (3-5 years) and not really suitable for fleet replacement which typically
requires medium term finance (8-10 years). From the point of view of access to credit, commercial
road transport is not yet generally recognized as an industry. There are serious weaknesses in the
development of databases and their management which could generate valuable business information.
Motor Vehicle Insurance:
An effective insurance industry has a critical role in improving the safety of the commercial road
transport system. The Ethiopian Insurance business, when compared with other neighboring countries
like Kenya, can be classified as an infant industry. A review of what insurance products the insurance
industry in Ethiopia offers, specifically tailored for the commercial road transport industry, including
heavy motor fleet liability and road freight has been carried out as part of the study of this project.
The Ethiopian insurance industry is not yet well developed, with relatively limited offerings
and coverage. According to data collected from most of the private insurance companies, about 60
percent of the revenue generated by the industry is from "Motor Policy Insurance". One of the key
issues raised by transport operators is that there is no sound rationale for the valuation of property. It
has also been stated that the premium is insufficient to cover loss or damage to property. Although
data management capacity is weak, it has been confirmed by most of the insurance companies that the
total number of commercial road transport vehicles with Comprehensive motor insurance policies is
not more than 79,531, or about 40 percent of the total registered and inspected fleet.
In general, the insurance industry has to expand its services with insurance products
specifically tailored for the commercial road transport industry, including heavy motor, fleet, liability
and road freight. Some of the observations made include the lack of a clearly defined framework for
motor insurance policy, the absence of statute of limitations, the lack of thresholds for making claims,
the lack of any provision to expand choices of services, and weaknesses in the development of
databases.
The premium structure of comprehensive motor insurance cover of the commercial road transport
vehicle differs from company to company and generally depends on the following factors:
- Age of the vehicle;
- Use of the vehicle;
- Value of the vehicle; and
- Carrying capacity of the vehicle.
Since there is no minimum premium rate fixed by the regulatory body, the premium rate for
commercial vehicle varies among the insurance companies. There are few insurance companies who
have established their own fixed minimum premium rate; whereas most of the insurance companies
have ranges of minimum and maximum rates for each category of commercial road transport vehicles
(cargo, public and tankers).
Most of the insurance companies could not provide complete statistical data on commercial road
transport vehicles insured on “individual organization” basis as they haven’t organized their database
in such manner. According to information collected from some insurance companies, the total
number of commercial road transport vehicle that are insured over the last 5 years is to be about
79,531 or about 40 percent of the total registered and inspected vehicles.
This shows that 60 percent of the vehicles on the road are without any type of insurance coverage
except third party insurances. Almost all insurance companies have taken some underwriting
measures by the form of premium loading and increase compulsory excess on some highly risky
(ISUZU trucks) and expensive vehicles due to repetitive accidents by the drivers, which resulted in
substantial increase in compensations settled. Third party insurance in commercial road transport
industry is long overdue. According to Proclamation No. 14/1992 (The Road Transport Regulation,

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Project Proposal of Ato Elias W/Amanuel

FDRE, August 2005), the Authority is empowered among others to “ensure that all motor vehicles
have third party insurance coverage; and in consultation with the appropriate organs, issue and
enforce directives relating to the provision of insurance policy coverage for passengers and cargo”.
According to the information derived from the survey, all insurance companies support the
implementation of compulsory third party motor insurance policy in the sector. Draft legislation for
compulsory third party motor insurance has been submitted to the Council of Ministers, reviewed and
passed by the House of People’s Representatives of the Federal Democratic Republic of Ethiopia.
Manpower Requirement
Due to the nature of the business, no need of excess manpower is required to run the project. The
proposed project will be managed and run by the promoter of the business Ato Elias W/Amanuel who
has adequate and ample work and driving experience for the last 9 years in the business.

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Project Proposal of Ato Elias W/Amanuel

UNIT THREE
Transportation Service Plan
Demand Gap: - The development programs of Ethiopia entail full participation of the population and
benefiting the population phase by phase. On the other hand, the Government has developed
Agriculture Development Led Industrialization (ADLI) Strategy which supports the country to
eradicate poverty and it is at the stage of its implementation.
Based on the umbrella of this development strategy all sector development programs are at
operational stage for the full implementation of the strategy.
The Government of Ethiopia has developed wide range of development program on the promotion
and expansion of power sector and electricity service. Accordingly there are projects on going on
power development, transmission and distribution. On the other hand the search on oil exploration
and studies has been done and today this activity is strengthened. The purpose of oil exploration is to
use fuel for the transport service and transport service will enhance the economic development of the
nation. Realizing these factors for the last 15 years the Ethiopian Federal Democratic Republic of
Ethiopia (EFDRE) has given high priority for infrastructure development. The development of the
infrastructure coupled with the high national income has exacerbated the demand for fuel. In addition
to transport, fuel is important for industry, agriculture, households and societal service. The demand
for freight transportation will increase when the economic growth of the nation increases.
Thereafter to transport construction material inputs and other materials the freight transport business
will be enhanced and encouraged, thus there is a huge demand for freight, liquid as well as public
transportation trucks and vehicles.
Some Important Challenges in Road Transport
There is no visible preparedness, in view of Ethiopia’s possible World Trade Organization Accession
Agreement (in terms of freight transport, maintenance and repair services, storage and warehousing,
etc.); and there is an absence of, or inadequate, freight forwarding and cargo consolidation services at
strategically located centers. Some important challenges have been identified in the recently
completed studies as follows:
Lack of Motorized Transport:
More percent of the vehicles are found around and in Addis Ababa. Elsewhere in the country pre-
dominate non-motorized transport. Transport of goods by pack animal is widespread. Most urban
journeys are made on foot, and given the size of city mobility in Addis Ababa are particularly low.
There is not enough rural transport, especially on unpaved roads. Measures are needed to encourage
freight and public transport services and intermediate transport.
Poor Vehicle Productivity:
Poor vehicle productivity, which is reduced by the poor road system, enforced traffic delays
for customs and other purposes, and the age of the fleet. The system of transport associations reduces
competition and vehicle utilization.
Poor Safety:
The road safety situation is serious and will become more so. Ethiopia has one of the highest accident
rates, per vehicle/km in the world. More than half of those killed in roads accidents each year are
pedestrians.
Increasing Air Pollution:
Since the Brundtland Commission report, the central importance and inter-connected dimensions of
sustainability have become understood. Not only this is a necessary national goal, it has become an
urgent global imperative. Controlling green-house gases [GHGs] by greater energy efficiency and
changing the energy mix have particular implications for the transport sector that remains heavily

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Project Proposal of Ato Elias W/Amanuel

dependent on CO-intensive fuels. Solutions require a holistic approach to land use development and
accessibility and energy efficiency.
Pollution is a growing problem in Addis Ababa. Reducing the sulfur content in diesel fuel would
follow world trends and is needed to benefit from the more modern and cleaner engine technology in
the recently imported vehicles. A project is needed to ensure such change goes smoothly. Looking
further ahead, the use of domestic electricity, biomass or natural gas for transport needs to be
investigated and implemented over time as opportunities arise.
Investment Incentives set by the Government
To encourage private investment, the Ethiopian Government has developed a package of incentives
under Regulations No.84/2003 for investors engaged in new enterprises and expansions, across a
range of sectors. These incentives are available both to foreign and domestic investors and the said
Regulations doesn’t discriminate between a foreign and domestic investor or between foreign
investors of different nationalities. The type of incentives that are available both to foreign and
domestic investors who need to involve in construction material input transportation sector are the
following:
Customs Duty Exemption: A 100 percent exemption from the payment of import customs duty and
other taxes levied on imports is granted to investment capital goods and construction materials
necessary for the establishment of a new enterprise or for the expansion or upgrading of an existing
enterprise as well as spare parts worth up to 15 percent of the value of the imported capital goods;
- Investment capital goods imported without the payment of import customs duties and other
taxes levied on imports may be transferred to investors enjoying similar privileges;
- Exemptions from customs duties or other taxes levied on imports are granted for raw
materials and packing materials necessary for the production of export goods. Taxes and
duties paid on raw materials and packaging materials are drawn back at the time of exports of
finished products. The voucher system and bonded manufacturing warehouse facilities are
also in place.
- All goods and services (except semi-processed hides and skins below crust level) destined for
export are exempted from any export and other taxes levied on exports.
Loss Carry Forward: Business enterprises that suffer losses during the tax holiday period can carry
forward such losses for half of the income tax exemption period, after the expiry of such period.
Remittance of Funds: Foreign investors are entitled to make the following remittances out of
Ethiopia in convertible foreign currency at the prevailing rate of exchange on the date of remittance:
- Profits and dividends accruing from investment;
- Principal and interest payment on external loans;
- Payments related to a technology transfer agreement;
- Proceeds from the sale or liquidation of an enterprise;
- Proceeds from the transfer of shares or of partial ownership of an enterprise to a domestic
investor;
- Expatriate employees may remit, in convertible foreign currency, unspent salaries and other
payments accruing from their employment in hard currency.

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Project Proposal of Ato Elias W/Amanuel

UNIT FOUR
Marketing Analysis
To attain the project objectives, the strategies to be followed will include providing efficient and
reliable customer services, utilizing modern distribution and service facilities, strengthening the
marketing wing of the project, introducing productivity improvement schemes, establishing standards
for enhanced quality of services.
Since the project will engage in the business of distribution of construction materials and input
products, the promoter will focus on distribution of soil, sand, pumice, stones and aggregates due to
the better need and selling price of the products.
In order to meet its sales targets, the promoter Ato Elias has planned to create a distribution network
plan through usage of several commission brokers and agents. Ato Elias has made an agreement with
some Contractors in Addis Ababa to provide Sand regularly till they finalize their construction jobs.
Generally the previous work experience of the promoter helped him how he can manage the business
without an interruption and continuous supply of materials. Plus the new truck that will purchase in
relation with the loan provided by the bank will serve Ato Elias to increase his daily as well as
monthly income.
The Ethiopian commercial trucking industry serves as a key link between raw material suppliers,
manufacturers, wholesalers, distributors, and contractors in most industries. According to the
Ethiopian Roads Authority, the industry includes heavy duty trucks, dry van trucks, high & low bed
trucks, refrigerated and bulk/tank trucks for different types of freights all over the country. Timely
acquisitions of these trucks will help to compete in the market for medium and long distance freight
transports in the country. This market serves businesses ranging from the packaged goods/grocery
industry to the clothing industry to high-tech equipment, as well as commercial relocations and
construction input materials.
Customers which require frequent construction input materials generally have the appropriate-sized
loading for the standard of 15 – 16m 3 of products. Ato Elias will begin by focusing specifically on the
segment of building contractors in Addis Ababa and 9 Special Zone of Oromias, after the first year he
is planning to expand his sells destination to the entire regional states of Ethiopia.
By serving those clients, Ato Elias can provide an affordable transportation solution for new and
growing contractors. Raw material suppliers sometimes require a smooth and good communications
to sell and load the materials on time. These segments are expected to yield some extra customers in
the future, but by focusing first on the middle of the supply chain with contractors, Ato Elias will
introduce himself to raw material suppliers and customers who may require frequent and un-
interrupted supply of construction input materials to their services without having massive problems.
Construction Input Material Demands
Unless one is equipped with special natural ability to predict the future, it is very difficult, in this
changing world of ours, to say with any degree of certainty what turns things that are good or bad at
present would take tomorrow. This notwithstanding, in order to live on this earth, one ought to have a
vision of some kind and work and live with some degree of faith and hope. Because of the changing
nature of developments, it has been observed over the years when goals envisioned at one time in a
given present changed either for the better or for the worse at another moment ahead. Similarly, in
our attempt to project what could possibly become of our transport sector in the future, we have to
recognize that the state of affairs in the other social and economic sectors of our country plays a
crucial role. Because, the fate of the transport sector, more than any other sector of the economy, is
determined by what takes place in the other sectors.

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Project Proposal of Ato Elias W/Amanuel

Construction input materials are considered to be so needy in all economic status of the country, it is
due to the fact that there will be a construction work whether it is in a good or bad economic
conditions. The difference will lie on the quality and quantity needed only.
To some extent there is a high rate of economic growth for the last few years in Ethiopia, the growth
in the transport sector which provides construction input materials are also increases with a high
speed too, because the backward and forward linkage between the different sectors will increase.
Conversely, the growth of the transport sector will in turn contribute highly to country's economic
growth. To cite one example by way of corroborating this claim, the one sector that made a
significant contribution to the economic growth of Ethiopia is the special increase made in the
transport sector, especially in the area of road infrastructure development, following the policies of
the Government. Because the linkage between the general economy and the transport sector would
result in mutual support, in which the one contributes to the other, the envisioned change and growth
will take place in line with the projections made.
Competition and Efficiency
For the market economy to work effectively, competition needs to be on an equal basis so that the
most efficient can survive and the least efficient go out of business. Bankruptcies are not a loss to the
economy, as the assets remain and will be used by others. The threat or reality of bankruptcy is an
essential part of the economic mechanism that leads to efficiency. If efficient organizations cannot
survive and grow because of unequal competition from protected inefficient operators, or from
hidden subsidies to others, then efficiency will not be achieved.
The Government does not yet insist on realistic standards of vehicle condition that would eliminate
some of the older less efficient and more polluting vehicles, as well as those that are dangerous for
the driver, pedestrians or other road users.
As a general rule current government policies and the tax regime has create an incentive for private
companies to invest in new vehicles that would lead to greater transport efficiency.
Entrance to Market
The governing legislation for transportation is the 1992 Proclamation to Provide for the Regulation of
Road Transport. Subsequent legislation allows each Regional administration (including the City of
Addis Ababa) to develop its own regulatory framework, but this opportunity has not yet been availed.
In effect, this proclamation deregulated the supply of such transport in line with the prevailing
accepted view of the time.
It was anticipated that new market entrants would be attracted to the business opportunity, and this
would both improve service quality and reduce the financial burden on the public sector in its
provision.
Any intending operator can readily procure a business permit from the City administration
(the Transport Authority acting on behalf of the Bureau of Trade and Industry). The only provisos are
that he must have a vehicle with a valid certificate of roadworthiness, and must employ a driver with
the appropriate category of license. This permit covers the whole of the conurbation, and is not
confined to a specific route or area.
Competitive Edge
Ato Elias will establish a competitive edge through its determined focus on on-time deliveries for its
specific target market. By having high-quality communication systems, operational choices and
marketing materials will all be oriented around his goal. By making customers more assured of on-
time delivery with the promoter of this business than with competitors, they will be more likely to use
the business overall, as they can never be sure when a few hours can make an incredible difference to
their potential revenues or expenses.

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Project Proposal of Ato Elias W/Amanuel

Sales Forecast
As per the current scenario of the business plus work experience of Ato Elias, he can manage to sale
his product at least once in a day. Otherwise if the delivery site is near to the supply station he can
manage to sell two times a day. The cost of sales is approximately 56.33% of total sales price. Costs
include fuel, purchasing cost of material, truck driver per dime, labor and some other daily expenses.

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Project Proposal of Ato Elias W/Amanuel

UNIT FIVE
Financial Projections & Analysis
The financial analysis of the project is based on the data provided in the previous chapters and the
following assumptions:-
- Total Project Cost: 1,600,000.00
- Source of finance: 53.75 % equity – (860,000.00)
46.25 % loan – (740,000.00)
- Tax holidays: 0 years
- Bank interest: 15%
- Loan Period: 4 Years
- Repayment Period: Quarterly
- Insurance Expense: 2.4% of Fixed Assets
- Depreciation Expense: 20% of Fixed Assets
- Work in progress: 300 days
- Accounts payable: 90 days
Loan Request
- The credit requirement that the promoter of this project presented to the bank is 740,000.00
(Seven hundred forty thousand birr) that can be repaid back within the next 4 years including
all the interest and related charges.
- The repayment will be made quarterly due to the nature of the business.
- The requested loan amount will be utilized for purchasing of 1 new heavy duty Sino truck
(100% of the loan will cover 50% of the whole purchasing cost of the vehicle).
Loan Repayment Schedule
- The banks are assumed to charge an interest rate for transportation term loans which lasts for
four years is 15% per year as per the present scenario.
- Hence the requested transportation term loan will be paid within the scheduled period through
quarterly repayment amount of 61,784.26, which leads to an annual repayment amount of
247,137.04, the related interest charges and principal payments are presented below.
Number of Annual Interest Principal Outstanding
Payments Repayment Payment Payment Loan Balance
- - - - 740,000.00
1 247,137.00 101,239.41 145,897.59 594,102.41
2 247,137.00 77,785.72 169,351.28 424,751.13
3 247,137.00 50,561.74 196,575.26 228,175.87
4 247,137.00 18,961.37 228,175.87 -
Total 988,548.00 248,548.24 740,000.00 -
Total Investment Cost
The total initial investment cost of the project is estimated at Birr 1,600,000.00 (One million six
hundred thousand birr only), out of which 46.25% (740,000.00 Seven hundred forty thousand birr)
will be covered from banks in the form of debt equity, which will be used for purchase of one Sino
truck from TEKHAF Plc as per the presented Performa invoices. Out of the total project plan the
promoter will cover 53.75% of the total cost birr 860,000.00 (Eight hundred sixty thousand birr).
Details are indicated in the underneath table.

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Project Proposal of Ato Elias W/Amanuel

Initial Investment Cost & Source of Finance

Owners Equity Debt Equity
Items Total Cost (53.75%) (46.25%)
1 Heavy Duty Sino Truck 1,480,000.00 740,000.00 740,000.00
Total Purchasing Cost 1,480,000.00 740,000.00 740,000.00
Ownership Certificate 29,600.00 29,600.00 0.00
Other Legal Fees 23,400.00 23,400.00 0.00
Repair Costs 27,000.00 27,000.00 0.00
Working Capital Requirement 40,000.00 40,000.00 0.00
Other Costs 120,000.00 120,000.00 0.00
Grand Total 1,600,000.00 860,000.00 740,000.00
%age Share TIC 100% 53.75% 46.25%
Revenue Projection
Even though the existing price for sand transportation service in the market has fluctuates, the current
market price of transportation for sand shows that in each trip from the supply area to Addis Ababa
ranges from 7,500.00 to 8,500.00 birr per vehicle. In addition to that in sales forecast of this study as
well as the existing market proves that at least Ato Elias W/Amanuel will trade one trip of sand to his
customers daily.
So that he will produce total sales of birr 2,250,000.00 birr on the first year of operation, it is assumed
with the minimum sells price of 7,500.00 and minimum working days per month of 25 days. The
market price is expected to get higher by 5% annually.
Projec No. of Gross
t No of Trip/ Income/ Total Income Total
Years Type of Service Truck Month Trip Per Month Revenue/Year
1 Transportation Service 1 25 7,500.00 187,500.00 2,250,000.00
2 Transportation Service 1 25 7,875.00 196,875.00 2,362,500.00
3 Transportation Service 1 25 8,268.75 206,718.75 2,480,625.00
4 Transportation Service 1 25 8,682.19 217,054.69 2,604,656.25
Grand Total 9,697,781.25
Associated Costs and Other Expenses
The collected information is based on estimates made by this study and information’s collected from
related professionals and stakeholders regarding the different cost items involved in the production of
transportation sector income per truck. Even though the underneath costs are some of the costs that
will be incurred at the time of service, due to the nature of the costs plus the existing price inflation
observed in the Ethiopian market makes them difficult to forecast their exact price.
Type of annual construction input materials sells and operating cost types that are considered to the
transportation service of each trip from supply site to Addis Ababa and surrounding towns are
described as follows. The illustration has assumed that the associated costs will be incurred on
average for each trips made by the truck and then converted to yearly costs and expenses. 53.75% is
considered to be the total cost of each trip, so that 46.25% will be considered to be net profit per trip.
In each trip of the vehicle the associated costs are determined as per the following assumptions:

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Project Proposal of Ato Elias W/Amanuel

%age/
Type of Costs Cost
Fuel & Gas Expense 54.44
Oil & Lubricants Expense 8.28
Car Wash 2.13
Repair & Maintenance 7.10
Labor Cost 23.67
Office Rent Expense 1.42
Other Expense 2.96
Total %age 100.00
Other than the above daily expenses, there will be extra expenses incurred yearly; those expenses are
Purchase of tires, Insurance Expenses, Depreciation Expenses and Bank Interest fees are considered
as annual expenses.
All expenses and costs are expected to rise by 4% annually.
Transportation Fuel & Gas Input Costs:
Generally speaking, as per the current situations observed from the trucks involved in the sector and
personal experience of Ato Elias, each truck on average uses a transportation fuel and gas expense of
birr 3,538.60 for each trip. In addition the vehicle will convey input materials for its clients 25 days
per month. So that the vehicle will utilize birr 88,465.00 birr of fuel and gas expense per month. The
fuel and gas input with corresponding costs will be expected to increase by 4% annually.
The details are shown below:
No. of Fuel and Total
Trip/ Gas Exp / Expense / Total
Sr. No. Description Month Trip Month Expense/Year
1 Fuel and Gases Expense 25 3,538.60 88,465.00 1,061,580.00
Grand Total 88,465.00 1,061,580.00
Projected Fuel & Gas Cost
No. of
Projec Trip/ Fuel and Total
t Mont Gas Exp / Expense / Total
Years Type of Cost h Trip Month Expense/Year
1 Fuel and Gases Expense 25 3,538.60 88,465.00 1,061,580.00
2 Fuel and Gases Expense 25 3,680.14 92,003.60 1,104,043.20
3 Fuel and Gases Expense 25 3,827.35 95,683.74 1,148,204.93
4 Fuel and Gases Expense 25 3,980.44 99,511.09 1,194,133.13
Grand Total 4,507,961.25
Other Associated Expenses:
Tire Expense: The major essential cost of the transportation service sector is that, costs incurred for
replacing and maintaining tires for the vehicle. The trucks need 10 new tires every year as per the
current scenario. It is the current situation that each tire for Sino Trucks will have a cost of birr
10,000.00 for replacement and maintenance expenses every year. In each year it will be estimated by
this study to increase this cost by 4% as per the table presented below.
Project Unit Cost of Total
Years Type of Cost Tire Expense/Year
1 Tire Expenses 10,000.00 100,000.00

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Project Proposal of Ato Elias W/Amanuel

2 Tire Expenses 10,400.00 104,000.00

3 Tire Expenses 10,816.00 108,160.00
4 Tire Expenses 11,248.64 112,486.40
Grand total 424,646.40
Oil, Lubricants, Car Wash, Repair & Maintenance Service Expenses:
The Oil & Lubricants expense are estimated through the experience of the promoter’s previous
history and the current market price of oils and lubricants. This study collects the information that
each vehicle will take birr 8,745.75 for oil and lubricants, birr 2,249.81 for cash wash service and birr
7,499.38 for repair and maintenance fee, labor cost will be birr 25,001.44, office rent expense will be
birr 1,499.88 and other expenses will be birr 3,126.50 every month. Due to the current inflation rate
and un-stability of purchasing costs of commodities, these expenses are expected to rise by 4% each
year.
Oil, Lubricants, Car Wash, Repair & Maintenance Service Expenses are estimated as follows:
- Oil & Lubricant Expense – 8,745.75
- Car Wash Service – 2,249.81
- Repair & Maintenance Fee Expense – 7,499.38
- Labor and Wage Expenses - 25,001.44
- Office Rent Expense - 1,499.88
- Other Miscellaneous Expense - 3,126.50
- These expenses are assumed to increase by 4% annually
Monthly Projected Years
Type of Expenses Expense 1 2 3 4
Oil & Lubricants 8,745.75 104,949.00 109,146.96 113,512.84 118,053.35
Car Wash Service 2,249.81 26,997.75 28,077.66 29,200.77 30,368.80
Repair & Maintenance Fee 7,499.38 89,992.50 93,592.20 97,335.89 101,229.32
25,001.4
Labor Costs 4 300,017.25 312,017.94 324,498.66 337,478.60
Office Rent Expense 1,499.88 17,998.50 18,718.44 19,467.18 20,245.86
Other Expenses 3,126.50 37,518.00 39,018.72 40,579.47 42,202.65
48,122.7
Grand Total 5 577,473.00 600,571.92 624,594.80 649,578.59
Insurance Expense: Is expected to be 2.4% of the value of total fixed assets owned by Ato Elias
W/Amanuel 35,520.00 will be assumed as an annual insurance expense of the project.
Depreciation Expense: Fixed assets of the project will have their proportional depreciation expenses as
per the following determination.
Original Value
of New Depreciatio Annual
Fixed Assets Vehicles n Rate Depreciation
Sino Truck 1,480,000.00 20% 296,000.00
Office Furniture 0.00 10% 0.00
Total 1,480,000.00 296,000.00
Office Rent Expenses
The promoter will has to be rented an office used for the purpose of operation of the business in
Addis Ababa with a monthly rental fee of birr 1,499.88. Annually it is assumed that 4% increment
will be expected from office rent expense.
Expense Project Years

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Project Proposal of Ato Elias W/Amanuel

Item 1 2 3 4
Rent
Expense 17,998.50 18,718.44 19,467.18 20,245.86
Total Cost 17,998.50 18,718.44 19,467.18 20,245.86

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Project Proposal of Ato Elias W/Amanuel

Projected Total Operational Costs

Hence, the annual transportation cost at full operating capacity of the project is estimated at Birr
2,171,812.41 (Two million one hundred seventy one thousand eight hundred twelve birr and 41/100).

Ato Elias W/Amanuel

Projected Total Cost Table
Project Year
Cost Items 1 2 3 4
Fuel & Gas Expense 1,061,580.00 1,104,043.20 1,148,204.93 1,194,133.13
Tire Expenses 100,000.00 104,000.00 108,160.00 112,486.40

Oil & Lubricants 104,949.00 109,146.96 113,512.84 118,053.35

Car Wash Service 26,997.75 28,077.66 29,200.77 30,368.80
Repair & Main. Exp. 89,992.50 93,592.20 97,335.89 101,229.32
Labor Cost 300,017.25 312,017.94 324,498.66 337,478.60
Insurance Expense 35,520.00 35,520.00 35,520.00 35,520.00
Office Rent Expense 17,998.50 18,718.44 19,467.18 20,245.86
Other Expense 37,518.00 39,018.72 40,579.47 42,202.65
Bank Interest Fees 101,239.41 77,785.72 50,561.74 18,961.37
Operational Costs 1,875,812.41 1,921,920.84 1,967,041.46 2,010,679.49
Depreciation Expense 296,000.00 296,000.00 296,000.00 296,000.00
Non-operational Costs 296,000.00 296,000.00 296,000.00 296,000.00

Total Cost 2,171,812.41 2,217,920.84 2,263,041.46 2,306,679.49

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Project Proposal of Ato Elias W/Amanuel

Ato Elias W/Amanuel

Projected Income Statement
Project Years
Description 1 2 3 4
Revenue:
Total Revenue 2,250,000.00 2,362,500.00 2,480,625.00 2,604,656.25
CGS - Fuel & Gas 1,061,580.00 1,104,043.20 1,148,204.93 1,194,133.13
Gross Profit 1,188,420.00 1,258,456.80 1,332,420.07 1,410,523.12
Operating Expense:
Tire Expenses 100,000.00 104,000.00 108,160.00 112,486.40
Oil & Lubricants 104,949.00 109,146.96 113,512.84 118,053.35
Car Wash Service 26,997.75 28,077.66 29,200.77 30,368.80
Depreciation Expense 296,000.00 296,000.00 296,000.00 296,000.00
Repair & Main. Exp. 89,992.50 93,592.20 97,335.89 101,229.32
Labor / Wage Expense 300,017.25 312,017.94 324,498.66 337,478.60
Insurance Expense 35,520.00 35,520.00 35,520.00 35,520.00
Office Rent Expense 17,998.50 18,718.44 19,467.18 20,245.86
Other Expense 37,518.00 39,018.72 40,579.47 42,202.65
Bank Interest Fees 101,239.41 77,785.72 50,561.74 18,961.37
Total Operational Exp. 1,110,232.41 1,113,877.64 1,114,836.53 1,112,546.36
Profit Before Tax 78,187.59 144,579.16 217,583.54 297,976.76
Profit Tax Payable 20,585.65 32,602.71 58,154.24 86,291.87
Profit After Tax 57,601.93 111,976.45 159,429.30 211,684.90

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Project Proposal of Ato Elias W/Amanuel

Projected Cash Flow Statement

This study applies a Decomposition Approach of projection of cash inflows and outflows of Ato Elias
W/Amanuel. Cash flows rather than profits are used in financial analysis for the following three
reasons.
- Cash is what ultimately counts; profits are only a guide to cash availability: they cannot
actually be spent.
- Profit measurement is subjective, the time period on which income and expenses are recorded,
and so on, are a matter of judgment.
- Cash is used to pay the term loans and owners equity-owners equity are the ultimate method
of transferring wealth to the project holders as a dividend at the time of official declaration of
the members.
Ato Elias W/Amanuel
Projected Statement of Cash Flow
Project Years
Description 1 2 3 4
Cash Inflows:
Beg. Cash on Hand 860,000.00 208,874.35 437,449.52 686,253.56
Bank Loan 740,000.00 0.00 0.00 0.00
Total Revenue 2,250,000.00 2,362,500.00 2,480,625.00 2,604,656.25
Total Cash Inflows 3,850,000.00 2,571,374.35 2,918,074.52 3,290,909.81
Cash Outflows:
Investment Cost 1,600,000.00 0.00 0.00 0.00
Direct Cost of Sales 1,061,580.00 1,104,043.20 1,148,204.93 1,194,133.13
Operating Expense 712,993.00 740,091.92 768,274.80 797,584.99
Loan Repayment 247,137.00 247,137.00 247,137.00 247,137.00
Tax Payment 20,585.65 32,602.71 58,154.24 86,291.87
Total Cash Outflows 3,642,295.65 2,123,874.83 2,221,770.96 2,325,146.98
Net Cash Inflow 207,704.35 446,329.52 705,183.56 984,692.82

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Project Proposal of Ato Elias W/Amanuel

Ato Elias W/Amanuel

Depreciation & Amortization Expense Schedule

Depreciation & Amortization Schedule

Original Rate Depreciatio
Project Years
Description Value % n Amount

1 2 3 4

Office Furniture &

Fixtures 0.00 0.20 0.00 0.00 0.00 0.00 0.00
Heavy Duty Sino
Truck 1,480,000.00 0.20 296,000.00 296,000.00 296,000.00 296,000.00 296,000.00

Generator 0.00 0.20 0.00 0.00 0.00 0.00 0.00

Pre-operating Cost 0.00 0.20 0.00 0.00 0.00 0.00 0.00

Total 1,480,000.00 0.20 296,000.00 296,000.00 296,000.00 296,000.00 296,000.00

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Project Proposal of Ato Elias W/Amanuel

Ato Elias W/Amanuel

Projected Balance Sheet
PROJECT YEARS
DESCRIPTION
0 1 2 3 4
ASSETS
Current Assets
Cash 1,600,000.00 207,704.35 446,329.52 705,183.56 984,692.82
Inventory 0 0 0 0 0
Total Current Assets 120,000 207,704 446,330 705,184 984,693
Fixed Assets
Building and Civil Work 0 0 0 0 0
Heavy Duty Sino Truck 1,480,000 1,480,000 1,480,000 1,480,000 1,480,000
Office Furniture & Fixtures 0 0 0 0 0
Accumulated Depreciation 0 -296,000 -592,000 -888,000 -1,184,000
Computer and Its accessories 0 0 0 0 0
Total Fixed Assets 1,480,000 1,184,000 888,000 592,000 296,000
Total Assets 1,600,000 1,391,704 1,334,330 1,297,184 1,280,693
LIABILITIES & CAPITAL
Bank Loan 740,000 594,102.41 424,751.13 228,175.87 0
Business Tax Payable 0 20,585.65 32,602.71 58,154.24 86,291.87
Sub Total 740,000 614,688 457,354 286,330 86,292
CAPITAL
Owner's Equity 860,000 719,414 764,999 851,424 982,716
Current Year Profit 0 57,602 111,976 159,429 211,685
Sub Total 860,000 777,016 876,976 1,010,853 1,194,401
Total Liabilities and
1,600,000 1,391,704 1,334,330 1,297,184 1,280,693
Capital

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Project Proposal of Ato Elias W/Amanuel

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Project Proposal of Ato Elias W/Amanuel

UNIT SIX
Financial Evaluations
Profitability
Based on the projected profit and loss statement, the project will generate a profit throughout its
operation life. Annual net profit after tax will be Birr 57,601.93 at the first year of its operation and at
the end of the project year it will have a profit of birr 86,291.87.
Liquidity
The cash flow projection also shows an incremental cumulative cash balance from Birr 207,704.35 of
the first project year to Birr 984,692.82 of the last projection period implying that the project will not
face liquidity constraint to finance its operational cost meeting at the same time its debt obligation.
Ratios
In financial analysis financial ratios and efficiency ratios are used as an index or yardstick for
evaluating the financial position of a firm. It is also an indicator for the strength and weakness of the
firm or a project. Using the year-end balance sheet figures and other relevant data, the most important
ratios such as return on sales which is computed by dividing net income by revenue, return on assets
(operating income divided by assets), return on equity (net profit divided by equity) and return on
total investment (net profit plus interest divided by total investment) has been carried out over the
period of the project life and all the results are found to be satisfactory.
Acid Test Ratios: - Is a strength indicator that determines whether a firm has enough short-term
assets to cover its immediate liabilities without selling inventory. The acid-test ratio is far more
strenuous than the working capital ratio, primarily because the working capital ratio allows for the
inclusion of inventory assets. As per the determination of this ratio it shows that the project has an
acid test ratio of 10.09 at the beginning of the project year and 11.41 at the end of its projected years.
Debt Ratio: - A financial ratio that measures the extent of a company’s or consumer’s leverage. The
debt ratio is defined as the ratio of total debt to total assets, expressed in percentage, and can be
interpreted as the proportion of a company’s assets that are financed by debt.
The higher this ratio, the more leveraged the company and the greater its financial risk. As per this
ratio indicates that at the end of first year the projects debt ratio shows 0.43 and then will decline as
long as the loan is paid regularly, finally at the end of its project life the debt ratio will become zero.
Asset Turnover Ratio: - The amount of sales or revenues generated per birr of assets. The Asset
Turnover ratio is an indicator of the efficiency with which a company is deploying its assets.
Generally speaking, the higher the ratio, the better it is, since it implies the company is generating
more revenues per birr of assets. At the first the project will record a 1.62 asset turnover ratio and
finally will reach 2.03 at the end of its project life.
Gross Profit Margin: - A financial metric used to assess a firm's financial health by revealing the
proportion of money left over from revenues after accounting for the cost of goods sold. Gross profit
margin serves as the source for paying additional expenses and future savings. This study proves that
the project will amount 0.53 gross profit margins at the beginning and 0.54 at the end of its project
life.
Return on Assets/Return on Investment: - An indicator of how profitable a company is relative to its
total assets. ROA gives an idea as to how efficient management is at using its assets to generate
earnings. Calculated by dividing a company's annual earnings by its total assets, ROA is displayed as
a percentage. Sometimes this is referred to as "Return on Investment". The project reaches 4.14
percent of Return on Asset/Investment at the beginning and finally will reach 16.53 percent of Return
on Assets/Investments at the end of its project life.

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Project Proposal of Ato Elias W/Amanuel

Break-even Analysis
The break-even analysis establishes a relationship between operation costs and revenues. It indicates
the level at which costs and revenue are in equilibrium. To this end, the break-even point of the
project including cost of finance when it starts to operate at full capacity (year 1) is estimated by
using income statement projection.
BE = Fixed Cost = 4.28%
Sales – Variable Cost
Payback Period
The payback period, also called pay–off period is defined as the period required recovering the
original investment outlay through the accumulated net cash flows earned by the project.
Accordingly, based on the projected cash flow it is estimated that the project’s initial investment will
be fully recovered within its project life time.
Socio - Economic Benefits
There are several objectives and reasons for the creation of this project due to its viability. The social
and economic benefits of the proposed project include the following:
- Contributes towards transportation service coverage in the country thought improves the lack
of freight transportations existence in major towns of the country other than the metropolis
- In addition to supply of the domestic needs, the project will generate Birr 197,634.47 in terms
of tax revenue within the next four years of project life

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Project Proposal of Ato Elias W/Amanuel

UNIT SEVEN
Conclusions & Recommendations
As discussed above, transport sector is the driving force of all forms of economic sectors. If there is
no transportation facility, there is no economic growth in a nation. There are a number of options for
mitigating the current price hike of freight transportation and become much expensive in the future.
These options could be categorized into three groups - efficiency and conservation measures, using
available local resources including transportation services, and developing alternative resources.
Nevertheless for all type of freight transportation resource one of the most common and adopted type
of solution is importing less polluted and advanced technical and mechanical heavy duty trucks from
abroad, even though Ethiopia does not manufacture this vehicles, it imports a huge amount of
vehicles from abroad, in order to bring this sector improved those imported vehicles should be
scattered in the hands of individual traders and private enterprises so as to enter to the untouched
business opportunities. Since this sector has an enormous gap between the demand and supply of
freight transportations, the government should develop several types of incentives and make it
practical in the future. Therefore financing this project in other words will also mean helping the
consumers, stakeholders and the country as a whole and moving the countries goal forward.
Conclusions:
This feasibility study indicates that this project is feasible, for the reason that:
- The project can repay all the bank debt including the interest with in its proposed life period of
the loan.
- The project is believed that, Ato Elias W/Amanuel will play his own part to the modern
commercial freight transportation sector of the nation.
- The financial analysis confirms sustainability of the projects growth and development.
- Improve market intelligence; competitive power can be increased by knowing the markets: the
users as well as the competitors.
- By investment in advanced technologies and by implementing codes of conducts and road safety
standard more added values can be generated.
- The bank will gain an interest income of birr 248,548.24 in the proposed project time.
- Doing international business means complying with international trade rules on contract
discipline and quality. Ethiopia has to regain name as reliable importer in this field. It is important
to realize ‘contract is contract’ for creating a sustainable business environment with International
partners.
Recommendations:
The overall analysis for Ato Elias W/Amanuel’s project to participate in transport sector within
Ethiopia highlights the following facts:
- Ethiopia has ample potential for the sector of freight transport that would suffice the domestic
market;
- In spite of this potential, very limited proportion is being currently produced which is channeled
almost entirely to the domestic market;
Furthermore, government should assist the sector in forming transport associations and other forms of
links to promote their marketing accesses.
The next stage that needs a lot of work on part of both the private sector and the government is in
terms of improving the efficiency and productivity of the transportation services, road safety
measures, standardized rules, policies and regulations.

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Project Proposal of Ato Elias W/Amanuel

Consequently this study believes that financing this project will have a direct and indirect positive
effect on the project owners’ wealth as well as other stakeholders and yet the project will have a great
impact to the development and renaissance of the country as a whole.

36