[FOOD MAINLY BISCUITS, FLOUR, PASTA AND MACARONI.

] 2023

PROJECT PROPOSAL FOR FOOD

COMPLEX MAINLY BISCUITS,
,

FLOUR, PASTA AND MACARONI

FACTORY

PROJECT TO BE IMPLEMENTED IN: - ADDIS ABABA

PROMOTER:- ABEDULAKIM ABEDU

NOV, 2023

ADDIS ABABA, ETHIOPIA

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TABLE OF CONTENT
TABLE OF CONTENT.................................................................................................................................2
EXECUTIVE SUMMARY...........................................................................................................................4
1. INTRODUCTION.................................................................................................................................5
1.1. Justification for Project Expansion................................................................................................5
1.2. Objective for Project Expansion....................................................................................................6
1.3. The Socio-Economic Significance of the Project Expansion........................................................6
1.4. Location and Premises Required...................................................................................................8
1.5. Location Map of the Area............................................................................................................10
2. MARKET STUDY AND PLANT CAPACITY..................................................................................11
2.1. Market Study................................................................................................................................11
2.1.1. Demand factors for Processed Food items...........................................................................11
2.1.2. Market Potential& Demand Gap for Pasta and Macaroni...................................................14
2.1.3. Projected Demand................................................................................................................14
2.1.4. Market Completion..............................................................................................................16
2.1.5. Target Customers.................................................................................................................17
2.1.6. Market Prospects..................................................................................................................17
2.1.7. Marketing Strategy and Promotion......................................................................................17
2.2.1. Plant Capacity......................................................................................................................18
2.2.2. Production program.............................................................................................................18
3. TECHNICAL STUDY OF THE PROJECT........................................................................................19
3.1. Product Nature and characteristics...............................................................................................19
3.2. Raw materials and Input..............................................................................................................19
3.3. The Production Process................................................................................................................19
3.3.1. Traditional processing technology.......................................................................................20
3.4. Quality control.............................................................................................................................22
3.5. Machinery and Equipments.........................................................................................................23
3.6. Source of Technology..................................................................................................................23
3.7. Project Design and Engineering...................................................................................................23
3.8. Plant Lay out and Construction Works........................................................................................23

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3.9. Utilities.........................................................................................................................................24
4. MANPOWER AND ORANIZATIONAL MANAGEMENT.............................................................24
4.4. Manpower....................................................................................................................................24
4.5. Organizational Structure and management..................................................................................27
5. FINANCIAL REQUIRMENT AND ANALYSIS..............................................................................31
5.1. Total Initial Investment Cost.......................................................................................................31
5.1.1. Fixed Investment..................................................................................................................32
5.2. Annual Production Cost at Full Capacity....................................................................................34
5.3. Financial Analysis and Statements..............................................................................................35
5.3.1. Underlying Assumption.......................................................................................................35
5.3.2. Sources of Fund...................................................................................................................36
5.3.3. Loan repayment Schedule....................................................................................................36
5.3.4. Depreciation Schedule.........................................................................................................36
5.3.5. Revenue Projection..............................................................................................................37
5.3.6. Balance Sheet (Beginning)..................................................................................................37
5.3.7. Income Loss Statement........................................................................................................38
5.3.8. Cash Flow Statement...........................................................................................................38
5.3.9. Profitability..........................................................................................................................39
5.3.10. Pay-Back Period...................................................................................................................39
6. ENVIRONMENTAL IMPACT OF THE PROJECT..........................................................................40

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EXECUTIVE SUMMARY
1. Project name FOOD COMPLEX FACTORY

2. Project Owner ABEDULAKIM ABEDU

3. Nationality Ethiopian

4. Project Location Addis Ababa City

5. Project Composition Diversified type of processed food mainly Biscuits, Flour, Pasta
and Macaroni.

6. Premises Required for The envisioned project expansion requires a total of 3,000M2
expansion
7. Total initial investment Cost Br. 120,000,000 of which amount 30% equivalent to
36,000,000 financed by the owners equity and the rest 70%
equivalent 84,000,000 financed through bank loan

8. Employment Opportunity The total manpower required for the envisioned plant
expansion will be 141 employees at full capacity.

 Permanent workers 113

 Skilled 80
 Unskilled 33
 Temporary workers 28
 Skilled 3
 Unskilled 25
9. Benefits of the factory For The Supply/producer of quality processed food Products, Source of
Region/ Country
Revenue, Employment opportunity, Save/generate the Country
Foreign Exchange, Benefit for the Local Community, Stimulate
the Local Economy and technology transfer.

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1. INTRODUCTION

Among basic need of human being, Food comes to the prime that is very essential for human life
particularly to have a balanced diet for the development physical and mental status of the human
being. In relation to food complex have great nutrition values that fulfill nutrition need of human
being. Currently, processed food prices are increasing in the global market and domestic markets and
needs for current investment in this sector.

The Ethiopian government has highly encouraging private investment (local and foreign) to meet the
development agenda and to bring prosperity for its citizens. At present, the growth and
transformation are implementing that will pave the road for advancement of the economy.

Therefore, the lucrative market potential and those viable investment policies attracted the promoter
of the envisioned food processing complex factory to expand its factory for the production of various
types of processed food complex mainly Biscuits, Flour, Pasta and Macaroni in Addis Ababa,
Oromia Region State. Therefore, the owner is committed to establish the factory and believe to get
the required cooperation from regional and local governments.

1.1. Justification for Project Expansion

Although Ethiopia has been passing through dynamic, fast and double digit economic growth in all
sectors of Economy for the last nine years, food processing industry has to be viewed in the context
of the low level of development that seeks more investment on it.

At present, the government of Ethiopia has implementing the second phase of the five years Growth
and Transformation Plan (2015/16-2019/20) that aimed to achieve wider development spectrum in all
sectors. GTP also plan expands industrialization with the involvement of private sectors to make the
nation under the category of middle income earner.

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In addition to the above facts, the following points further explain the rationale for the expansion
project by the owner.

 Shortage of production space for existing factory

 High population especially the kids and youth takes the majority.

 Favorable and attractive investment incentives packages by the governments

 Availability of skilled labor force at reasonable price

 Availability of raw materials and inputs for the production of processed food complex.

1.2. Objective for Project Expansion

The main objective of the expanded factory is to produce high quality , cost effective and diversified
processed food complex mainly Biscuits, Bread Flour, Pasta & Macaroni using the state of the- art-
technology for domestic market and international market in the future.

1.3. The Socio-Economic Significance of the Project Expansion

The envisaged expanded project deemed to contribute to the economic development of the nation in
general and the region in specific with following ways:

A. Supply of Quality Products

By producing and supply quality and diversified food complex mainly Biscuits, Flour, Pasta &
Macaroni the expanded project will satisfy the consumers need. Besides, the project will add to the
nutritional value of the citizens.

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B. Source of Revenue

As public policy of any nation, the government collects different forms of taxes from different
business organizations and individuals. Among the different forms of taxes, business income taxes,
VAT and payroll taxes are collected from undertaking business activities. Therefore, the expanded
factory will serve as sources of revenue for both the region and nation in general.

C. Employment Opportunity

One of the problems that our country faced is unemployment. Therefore, the current objective of the
government is working on tackling the problem of unemployment and fostering the development
process either through creating self employment or employment in other organization. Hence, this
expansion project will hire around 141 persons.

D. Save and Generate the Country Foreign Exchange

Food complex like pasta and biscuit are imported from the international market. Hence, the
expansion project will help to reduce the nation’s foreign exchange cost to import this product.
Besides, in the future, when the factory start export to global market, the nation will generate foreign
currency form this specific project.

E. Benefit for The Local Community

As a corporate responsibility the company will engage in different development activities on the
surrounding areas (Addis Ababa). This will better worth the community and contribute for the
development of the region.

F. Stimulate the Local Economy

This expanded factory has positive externality in the zone that will encourage the economic
movement of local economy. There will be economic relationship and transactions among different
actors.

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1.4. Location and Premises Required

i. Location

The envisioned expansion project will be located in Addis Ababa (which is 25 kms far from the
center) The main justifications behind the selection of this location are:

 Strategically located to the central and largest market of the nation (Addis Ababa)
 Relatively advanced development in infrastructure (Power, Water, Telephone internet, road
etc.

 All asphalt road to the nearest market outlets

 Availability of huge skilled labor force

 High construction works are undergoing in the vicinity

 The gate to port Djibouti and Mojo dry port that will make ease for inputs and machines

 Conducive investment policy and governance

 Environmentally fit for Food Complex Factory

ii. Premises Required

The envisioned expansion project will require a total of 3,000M 2, the premises required and the land
use plan shown as follows in table below;

Table Premises required and Land use plan for expansion project

SN Description Land
Requirement(M2 )
1 Production Area
1.1 Production Hall 800
1.2 Packing area 150
1.3 Quality Control 50
Total production area 1000
2 Warehouse
2.1 Raw Material & Input 500
2.2 Finished Products 600
Total warehouse area 1100
3 Office Building (G+1) 250
4 Waste Accumulation area 100

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5 Green area, loading unloading 550

and Parking
Total 3,000.00

iii. Floor Lay Out

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1.5. Location Map of the Area

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2. MARKET STUDY AND PLANT CAPACITY

2.1. Market Study

2.1.1. Demand factors for Processed Food items

There exist main demand factors for processed food items particularly, Pasta, macaroni, Biscuits,
Flour and different others enriched food items. The most factors are fast economic growth and
population (demography) factors as indicated below.

1. Fast Economy Growth

The Ethiopian economy has been experiencing dynamic and double digit growth that experienced
annual average growth of 11.4% in past 8 years. According to Ministry of Finance and Economic
Development (MOFED), the forecasted economic growth the economic growth (GDP at constant
basic price) for 2011/2012 is estimated to be 10.4 %. As per the estimates, annual growth rates of the
major sectors, i.e. Agriculture, industry and service were 7.6 %, 10.6 % and 13.0 %; respectively and
their shares out of the total GDP were 42%, 13% and 45 %, respectively. This continuous and a-two-
digit high growth would place Ethiopia among the fast growing countries in the world.

As sectors of the economy, the agriculture and construction sector also grows with double digit with
the average annual growth 10.31% and 12% respectively in the past 8 years. As shown in the table
below the growth of the sectors directly related with the economy as parts of the economy.

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Table Major Economic Indicators

Trends in Performance of the Economy: Growth Rates (%)

Item 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10

GDP in 1999/00
Prices -2.1 11.7 12.6 11.5 11.5 11.6 10 10.4

Agriculture -10.5 16.9 13.5 10.9 9.4 7.5 6.4 7.6

Industry 6.5 11.6 9.4 10.2 10.2 10.4

O/w: Manufacturing 0.8 6.6 12.8 10.6 8.3 7.1

Construction 13.6 19.5 7.5 10.5 10.9 11.3 11.7 10.9

Services 6 6.3 12.8 13.3 14.3 17

O/w: Banking and

insurance 10.8 19.7 24.2 28.7 15.1 24.9 16.5 13.7

Distributive
services 5.5 6.4 14.7 14.2 16 15.2

Other services 6.5 6.1 10.9 12.5 13.1 14.2

Real GDP per

capita GDP -4.6 10.7 9 8 7.5 7.6

Inflation 15.1 8.6 6.1 10.6 15.8 25.3

Source: MOFED & NBE

This fast growth of these sectors resulted from different bodies like government, non government and
private activities in Ethiopia is growing in the fastest rate. Moreover, the current five years Ethiopian
Growth and transformation plan will expand the economic growth paramount level by harnessing the
resource and expanding industrialization.

As economics sciences witnesses, when there exist fast economic growth the income of the citizens
will be also increase that strengthens the purchasing power. Income and consummation of goods and
services have direct relationship. Hence, as one component of basic consumption goods, the fast

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economic growth will increase the demand food items particularly Biscuits, Bread, Flour Pasta &
Macaroni and different others enriched food items.

2. Population and Population growth(Demography)

The rate of growth of the urban population is increasing from year to year. The latest report of the
United Fund for Population Agency revealed that Ethiopia’s population has reached 73 million in
July 2005, which puts Ethiopia as the second most populous country in Africa. According to the
Central Statistics Authority (CSA), current population growth is estimated to be 2.8% per annum, and
the growth rate is expected to remain above 2% for the next 20 years. Rural population is growing at
about 3.0% while the urban population is growing at about 4.3%. Total population is projected to
reach 129 million by 2030. In Ethiopia, of the total population, about 16.0% is estimated to reside in
the urban areas. The trend suggests that the size of urban population is likely to continue to grow at a
high speed in the future. The share of urban population will rise from 16.0% in 2005 to about 23% by
2030. Nearly 30 million of the total 129 million will live in cities and Ababa by 2030.

As a result from big population and population growth, which the kids and youth account the major
shares, the demand for food items particularly Biscuits, Bread, Flour, Pasta & Macaroni and different
others enriched food items.

2.1.2. Market Potential& Demand Gap for Pasta and Macaroni

Pasta, a ready-to-eat food item is very popular in develop countries and now it has created good
market potential in our country also and is becoming a popular item. The factors governing its
demand are:
1. Increasing population of the country.
2. Rapid industrialization in the country.
3. Increase in the purchasing capacity of the people.
4. Durability of the product.
5. Change in people’s eating habits especially the younger generation.
6. It is ready-to-eat product.
7. Convenience of preparation.

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In Ethiopia though there are different pasta and macaroni factories, they are not producing the
Noodles which are very delicious and takes 2-3 minutes to be ready for consumption.

2.1.3. Projected Demand

i. Projected Demand and Unsatisfied Demand (Tonnes) For Pasta and
Macaroni
Year Total Projected Domestic Unsatisfied
Demand Supply Demand
2008 44,082 40,258 3,824
2009 45,845 40,258 5,587
2010 47,679 40,258 7,421
2011 49,586 40,258 9,328
2012 51,570 40,258 11,312
2013 53,632 40,258 13,374
2014 55,778 40,258 15,520
2015 58,009 40,258 17,751
2016 60,329 40,258 20,071
2017 62,742 40,258 22,484
2018 65,252 40,258 24,994
2019 67,862 40,258 27,604
2020 70,577 40,258 30,319

ii. Projected Demand for Composite Flour

Year Projected Demand
(Tonnes)

2008 9,270
2009 9,548
2010 9,835
2011 10,130
2012 10,433
2013 10,746
2014 11,069
2015 11,401
2016 11,743
2017 12,095
2018 12,458
2019 12,832

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2020 13,217

iii. Projected Demand, Domestic Supply and Unsatisfied Demand for Biscuits
(Tones)
Year Total Projected Domestic Unsatisfied
Demand Supply Demand
2008 15,153 9084 6,069
2009 15,516 9084 6,432
2010 15,889 9084 6,805
2011 16,270 9084 7,186
2012 16,661 9084 7,577
2013 17,060 9084 7,976
2014 17,470 9084 8,386
2015 17,889 9084 8,805
2016 18,319 9084 9,235
2017 18,758 9084 9,674
2018 19,208 9084 10,124
2019 19,669 9084 10,585
2020 20,141 9084 11,057

Therefore, the majority of Noodles are imported from aboard. Hence, this project deemed to bridge
the demand gaps for noodles in our country by locally producing.

2.1.4. Market Completion

There are different competitors in the market competing with this envisaged project in the market.

Those importing pasta and macaroni from abroad

Those producing Pasta and Macaroni in the domestic market

The potential competitors who deemed do engage in similar production line.

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Therefore, there are different forms of competition that may face this project. These are price and non
price based competition. Moreover, the different competitors may compete with the project under
discussion either directly or indirectly. But the project under discussion has diversified marketing
strategies that could enable it cope up with the different competitors in the market. In addition, it will
frequently conduct competitors research which focuses on, the strength and the weaknesses, the
different competitor’s strategies, the techniques they use in rendering the service, their customer
handling methods, and others. Then it will devise different strategies like:

1. Diversification of product and product lines

2. Diversified promotional tools
3. Lowering prices by increasing production which will result in the decrease in the
per unit cost of production.
4. Diversified customer centric marketing strategies.

2.1.5. Target Customers

The target customers of for the envisioned expanded factory are:

 The residents of the Ababa, cities, villages in rural area.

 The different super markets in the country
 The government workers club
 Hotels and supermarkets
 Small shops
 Other retailers and wholesalers

2.1.6. Market Prospects

From the above market demand and supply analysis for the envisioned expanded food process
complex project products (Pasta , Macaroni, Biscuits and Flour) there exists huge market gap in
Ethiopia. Hence, the factory will be pioneer and very successful by entering in to this market.

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2.1.7. Marketing Strategy and Promotion

The company will follow the following promotional methods:

 Website Development

 Advertising(Media, flayer and news paper)

 Public Relations

 Branding

The marketing strategy mainly focus on the satisfying the needs, order and the requirement of the
customers.

2.2. Plant Capacity and Production Program

2.2.1. Plant Capacity

Based on plant capacity (105kg/hr biscuit, 800 units of bread per day, 250 kg/hr flour, 100kgs/hr of
pasta and macaroni ) and program this plant assumed to produce of 512,000.00 kgs of Pasta and
Macaroni, 1,280,000.00 kgs of Flour and 537,600.00 kgs of Biscuits at full capacity utilization (third
year) operating 320 days per year and 16 hours (2 shifts) per day.

2.2.2. Production program

Considering the gradual growth of demand and the time required to develop the required skill the rate
of capacity utilization during the first, second and third year of production will be 55%, 85 % and
100% respectively. Full capacity utilization will be reached during the third year of operation.

Table Production Programmed

Description Year
1 2 3 and above
Capacity utilization (%) 55 85 100

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Pasta & macaroni in kg 281,600.00 435,200.00 512,000.00

Flour in kg 704,000.00 1,088,000.00 1,280,000.00
Biscuit in kg 295,680.00 456,960.00 537,600.00

2.3. Pricing

It would be important to examine the possible level of price based on the competitor’s action. In this
connection, the existing average retail prices of similar imported products were assessed for the
benefit of comparison. Based on the existing price in the market the firm stetted the price as follows;

Table Pricing of the Plant

SN Product Description Price of the

company
br/kg
1 Pasta & macaroni in kg 28
2 Flour 15
3 Biscuits 35

3. TECHNICAL STUDY OF THE PROJECT

3.1. Product Nature and characteristics

The envisioned expansion project will produce different kinds of products based on the customer
preferences

These include:

 Biscuits

 Flour

 Pasta & macaroni

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3.2. Raw materials and Input

The raw materials for the envisaged expansion project will be collected from different domestic
suppliers. The raw materials include wheat, sugar, different ingredients and other packing materials.
The company will purchase the raw materials from domestic market.

Besides, all products use different type of packaging materials.

3.3. The Production Process

The characteristics of starch pasta and Macaroni, unlike wheat based products, depends heavily upon
the functional properties of the starch as it undergoes one or two heat treatments during processing.
The heat treatment may involve boiling or steaming that gelatinizes the starch and the subsequent
retro gradation sets the structure of the starch noodles. The processing technology is unique and can
be divided into three styles, namely, dropping, extruding and cutting.

The first step in these product producing manufacturing involves dissolving the salt or kan sui, starch,
flavorings, and other ingredients (except flour) in water. This mixture is added to the flour and the
crumbly dough is rested to mature and then kneaded to uniformly distribute the ingredients and
hydrate all the flour particles. The dough is then passed through two rotating rollers to produce two
sheets which are compounded into a single pasta, Macaroni belt or sheet. The sheet is repeatedly
folded and passed through the rollers to facilitate gluten development, which gives the noodle its
stringy and chewy texture. The gap between the finishing rolls is adjusted to produce the desired
thickness of the pasta, Macaroni, and Noodles belt that is then immediately cut. The wavy food items
are produced by setting the conveyor belt at a slower pace than the cutting rolls above it.
Alternatively, the strands emerging from the slitter are hindered by metal blocks (weights) resulting
in the waves. Liquid seasonings are sometimes added to the foods strands prior to cutting and
molding into blocks or another suitable shape. The food items are then steamed at 100 ºC for 1-5
minutes, which gelatinizes the starch and improves the texture of the pasta, noodle or macaroni. The
next step is drying the pasta, Macaroni and noodles either by frying in oil (fried instant noodles) or
drying with hot air (non-fried instant noodles). Frying the pasta, Macaroni and noodles in oil at 140-
160 ºC for 1-2. In hot air drying, the pasta, Macaroni and noodles are held at 70-90 ºC for 30-40
minutes to achieve an 8-12% moisture content. The heating during frying or hot air drying further
gelatinizes the starch and the stated food items now obtain a porous texture. Frying is the preferred

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method of drying and more than 80% of instant noodles are fried because hot air drying can result in
uneven drying that adversely affects the texture of the finished noodles. Non-fried instant noodles
also require a longer cooking time.

The disadvantage of frying, however, is that fried noodles contain about 15-20% oil (compared with a
maximum of 3% fat in hot air-dried noodles) and are more susceptible to oxidation and spoilage; the
use of antioxidants prolongs the shelf life of fried food items. The dried pasta, Macaroni and noodles
are then quickly cooled, checked for moisture, color, shape and other quality characteristics, and
packaged with seasonings using films that are impermeable to water and air.

3.3.1. Traditional processing technology

1. Dropping method
The dropping method is the most traditional method. About 5% of starch is cooked in water using a
double boiler to prepare starch paste and used as dough binder. The cooked gelatinized starch (starch
paste) is then mixed with 95% of starch and water to give 50% moisture content in the dough and
then mixed and stirred at the rate of 100 r/min about 10 min using a blender to distribute water evenly
and to obtain a smooth ball (starch dough) that does not stick to the hands. The dough was extruded
through the holes (diameter about 0.5–1.5 cm) of the stainless steel cylinder by gravity, directly into
hot water (98–100C), and heated for 30–60 s before transferring into cold water (when noodles
floated upon the surface of water then transfer them into cold water). After rinsing in cold water, the
strands were drained, subsequently, separated and hung to partially dry, kept at 4C for 2 h and 10 C
for overnight, dried at 40 C in convection dryer, and then packed in polyethylene bags and stored at
room temperature.

2. Forming of starch dough

The forming and quality of starch dough is a crucial step in the processing of starch noodles. The
drop of starch dough and the formation of filament depend on the theological properties of the dough
itself, especially shear-thinning properties and gravity, which decreases viscosity, increases the
fluidity of starch dough and facilitates the dropping of filaments. In addition, process parameters such
as the content of moisture and starch paste, stirring rate and temperature in starch dough, are also
important.

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3. Cooking of starch pasta, Macaroni and Noodles.

After obtained a smooth ball (starch dough) that does not stick to the hands, the starch dough is
extruded using a dropper into boiling water for 30s. This course, virtually, is the gelatinization of
starch. Pasta, Macaroni and Noodles are dropped into boiling water and removed after they are
sufficiently cooked as they floated up to the surface of the water. This is due to the change in specific
gravity of the noodle strand as it is cooked or gelatinized. Uncooked starch granules have a specific
gravity of about 1.5, so uncooked noodles settle directly to the bottom of the cooking container, but
as they gelatinize, the granules swell as they absorb more water and float.

Cooking temperature is immobile because starch strands drop into boiling water (100C or close to
100C). Cooking time, therefore, is a variable parameter in the cooking step.

Water uptake during cooking was closely related to the texture and cooking qualities of starch
noodles insufficient water uptake (swelling) usually results in noodles with hard and coarse texture,
but excess water uptake often results in too soft and sticky

4. Drying
After starch strands were retrograded by cooling, it should be dried at 40 C in convection dryer, and
cooled to room temperature finally before packing. The surface firmness of pasta increased as drying
temperature increased.

5. Cutting method
Cutting method is also a traditional method without freezing. Starch slurry is cooked on a steel belt
that moved into a steam chamber. Gelatinized starch is then quickly chilled and moved from the belt
in a sort of elastic sheet. The starch sheet is subsequently aged in a refrigerator and then cut into thin
noodle strands which are then dried in an air oven. This non-freezing process is simple and cost-
effective and good for straighter strands producing compared with conventional methods (dropping).
However, the noodles from this process are often inferior in texture and quality after cooking
compared with pasta, macaroni and noodles produced with freezing.

Extrusion cooking has become a popular processing method for starch-based foods and for pre-
gelatinized starches. It has also been used for the production of pre-cooked cereal-based blends and
pasta products . The extruding method involves this process for producing starch noodles, which
comprises adding 45–55 parts by weight of hot water to 100 parts by weight of starch obtained from
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at least one member-selected from the group consisting of various starches and a product thereof
followed by being mixed to prepare large particles of dough, extruding the dough under degassing at
vacuum to produce a dough sheet, gelatinizing the dough sheet with steam, retrograding the
gelatinized dough sheet by cooling without freezing; cutting the dough sheet into noodles. Starch
food items can be produced efficiently in simple procedures without preparing starch paste separately
and need not special rollers. Further, starch foods produced in this method are highly transparent and
less melted by boiling.

3.4. Quality control

Quality assurance and control ensures that the manufactured food is safe, unadulterated, properly
labeled, and meets all company quality specifications and any government regulations. Quality
control procedures for the fortification step can be easily incorporated into the existing quality
assurance system for the manufacture of instant noodles. The micronutrient premixes must be tested
against reference standards. Periodic testing must be done to ensure that the desired amounts of
micronutrients are in the final product, especially the ones that are most unstable, such as vitamin A.
Quality criteria should be established for all key characteristics of the product, including fortification
levels. Facilities, procedures, and properly trained staff are, therefore, essential. Determination of
vitamins A, B1, B2, niacin, B6, and folic acid is done using quantitative methods that employ the use
of an HPLC or a spectrophotometer. Minerals such as iron can be determined using atomic
absorption or spectrophotometer methods. When instant noodles are fortified with more than one
micronutrient using vitamin mineral premixes, one micronutrient (for example, iron) may be chosen
as a reference nutrient and its level determined during routine quality control procedures. All
micronutrients, however, should be determined occasionally to ensure adequate fortification with all
micronutrients intended to be present in the food.

3.5. Machinery and Equipments

The factory will use machineries for macaroni, pasta, flour, biscuit and noodles.

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3.6. Source of Technology

The company will use world standard production technology mainly from china.

3.7. Project Design and Engineering

The proposed expansion project comprises stock of different components to be executed at different
phases of the project life. These activities include: Design and Construction of various buildings,
importing of machineries and vehicle.

3.8. Plant Lay out and Construction Works

As indicated in part 1 the total land requirement for the expansion project is estimated to be
3,000M2.The buildings are planned to accommodate production houses, store and other utility
requirements as well as offices and a show room/constructions.

In general the buildings must be capable of being kept clean and provision should be made for
keeping the sewerages drained out properly and room temperature is attained to keep healthy
environment. In most environments, equipment should be totally enclosed in a light structure: where
the climate is suitable. A concrete floor, which can be swept, is usual.

The loading and offloading areas together with incoming and outgoing roads are proposed to be
paved to ensure a clean environment around the project site. The site will be encircled by a chain
linked fence fastened to concrete posts. The project construction is designed by professional
engineers and construction will be done under close supervision and collaboration of the engineers.

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3.9. Utilities

A number of utilities would be put in place in order to ensure smooth functioning of this expansion
factory. These utilities include:

 Water Supply,

 Supplementary Electricity supply,

 Telephone line

 Paved Road Transportation,

 Drainage Facility

4. MANPOWER AND ORANIZATIONAL MANAGEMENT

4.4. Manpower

At the top of the organizational structure, there will be a general manager with the responsibility of
supervising the overall activity of the plant. Depending up on the nature of the center and the amount
of work to be performs; there will be auxiliary units under the general manager. Employees under
each unit will be supervised by the unit head that is accountable for the general manager.

The company will use efficient trained staffs in the area of marketing to be competitive supplier of
processed food complex to the market. The opportunities of being serviced by well skilled
professionals well enable the company to evaluate the internal weakness and strength of the company
as well as to assess the global opportunity and risks in the world market so that the company can cope
up with the dynamics of the market situation.

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The total manpower required for the envisioned plant expansion will be 141 employees at full
capacity.

 Permanent workers 113

 Skilled 80
 Unskilled 33
 Temporary workers 28
 Skilled 3
 Unskilled 25
The total number of manpower, Manpower list, qualification and salary are listed in the table below.

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Table - Manpower list, Number, Qualification and Salary composition of the project

SN Description No Qualification Monthly Salary Annual Salary

in Br. in Br.
1 Permanent Worker
1 General Manager 1 MBA 15,000.00 180,000.00
2 Production Manager 1 BSC in Food Technology 5,000.00 60,000.00
3 Quality control 2 BSc in Chemistry 3,000.00 72,000.00
4 Operator 40 10+1 in Machine technology 1,100.00 528,000.00
5 Chemist 1 Bsc in Chemistry 3,000.00 36,000.00
6 Helpers 2 Basic 800.00 19,200.00
7 Packing & packaging Laborer 25 Unskilled 700.00 210,000.00
8 Marketing head 1 BA in Marketing Management 5,000.00 60,000.00
9 Personnel 1 Diploma in HRM 1,500.00 18,000.00
10 Sales person 6 Diploma in Marketing 1,500.00 108,000.00
11 Admin & Finance head 1 BA in Accounting/Management 5,000.00 60,000.00
12 Accountant 2 BA in Accounting 3,000.00 72,000.00
13 Electrician 2 10+2 in General Electricity 1,300.00 31,200.00
14 Cashier 3 10+2 in Bookkeeping 1,100.00 39,600.00
15 Purchaser 2 Diploma in Purchasing Mgt 1,500.00 36,000.00
16 Store keeper 2 10+2 in Store management 1,100.00 26,400.00
17 Cleaner 6 Unskilled 700.00 50,400.00
18 Office Boy 1 10 Completed 900.00 10,800.00
19 Driver 4 10 completed 1,100.00 52,800.00
20 Guards/Security 8 Basic 800.00 76,800.00
21 Gardner 2 Unskilled 700.00 16,800.00
Sub Total 113 1,764,000.00
II Temporary Worker
1 Auto Mechanic 2 Diploma in Automotive technology 1,500.00 36,000.00
2 Plumber 1 10+2 in Lumbering 1,300.00 15,600.00
3 Laborer 25 Unskilled 700 210,000.00
Sub Total 28 261,600.00
Total 141 2,025,600.00
Benefit (20% of Basic Salary) 405,120.00
Grand Total 2,430,720.00

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4.5. Organizational Structure and management

The organizational structure of the project is designed by including all the necessary personnel under
the right division. At the top of the organizational structure, there will be a general manager with the
responsibility of supervising the overall activity of the plant. Employees under each unit will be
supervised by the department head that is accountable for the general manager. General Manager is
accountable to the owner of the factory as indicated in figure below

Owners

General
Secretary
Manager

Production Admin. & Marketing &

Dept. Finance Dept. Sales Dept.

Admin. & Finance section

HRM Section
Dept.

Marketing Sales Section

Section

Fig Organizational Structure

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Hence the following section deals with the duties and responsibilities of the departments.

1. Manager
Duties and responsibilities

 She/he will plan, organize, direct and control the overall activities of the factory
 She/he will devise policies and strategies that will enable the factory to be profitable.
 She/he will incorporate modern technological innovation that will facilitate the service
delivery of the project center and increase customer’s satisfaction.
 He/he will plan, organize, direct and control the human and non-human resources of the plant
so as to achieve the short and long run objectives of the organization.
2. The Production Department
Duties and responsibilities:-

It is the core department of the project center for the production of processed foods. It will have the
following responsibilities.

 Design and prepare the prototype of pasta , macaroni, Biscuits and Flour based on the plant
standard and customer preferences
 Use modern manufacture, processing technologies that will enhance the quality of pasta ,
macaroni, Biscuits and Flour products.
 Produce quality pasta , macaroni, Biscuits and Flour products that will enable the factory
competent both in the domestic and international market.
 Control on the quality of raw materials, inputs, quality of the product and also the overall
production process.
 Produce products in least cost so that the profitability of the center is guaranteed.
 Moreover control over the quality of the final products (pasta , macaroni, Biscuits and Flour).

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3. Administration and Finance Department

Duties and responsibilities:-

 Will plan, organize direct and control the financial transaction of the plant by using the entire
necessary document.
 Will develop sound financial control system by developing modern financial control systems.
 Will prepare the annual financial statements and prepare condensed reports for the general
manager, owner and other concerned government body.
 Will control the human and non human resources of the plant, which include: effective
handling of the different inventories of the machineries, equipments, raw materials, finished
products, and devise strategies of controlling against fraud and damage.
 Manage and execute the company national and international procurement procedure
 Administer and control the company logistic resource
 Provide and manage general supportive service to the plant.

4. Marketing and Sales Department

Duties and responsibilities:-

 Will handle the overall marketing activities of the organization which include planning,
organizing, directing, and controlling.
 Provide cost estimates for pricing
 Gather information on new product design, profile
 Approval of new products profile & brand plan analyzes market research.
 Plan and execute sales.
 Will develop effective customer handling strategies
 Will develop the marketing strategies for future project center’s development.
 Conduct both foreign and domestic market research for expanding the sales of the company

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5. FINANCIAL REQUIRMENT AND ANALYSIS

5.1. Total Initial Investment Cost

The total amount of money that is required to establish the envisaged expanded factory is
estimated to be birr 20,036,400.

Table Total Initial Investment Capital

SN Description Cost in birr in Br.

1 Land, Building & Construction 15,855,937.50
2 Machines & Equipments 16,500,119.00
3 Vehicles 13,600,000.00
4 Office Equipment 224,500
Total Fixed Investment Cost 66,180,557
5 Pre service Expense 141,500
6 Initial Working capital 12,760,229.00
Total 19,082,286
Contingency (5%) 6,954,114.28
Total Initial Investment Capital 120,036,400

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5.1.1. Fixed Investment

A. Land, Building & Construction
SN Description Land Requirement(M2) Unit cost in Br per m2 Total cost in Br.
1 Production area 1,000.00 2,100.00 2,100,000.00
2 Warehouse 1,100.00 2,050.00 2,255,000.00
3 Office Building 250.00 1,500.00 375,000.00
4 Waste Accumulation area 100.00 500.00 50,000.00
5 Green area and parking 550.00 250.00 137,500.00
6 Fences 125,000.00
7 Site Development 100,000.00
8 Design and supervision 300,000.00
9 land lease initial 413,437.50
Total 3,000.00 5,855,937.50

B. Machinery and Equipment

SN Description UOM Oty Unit Price in Br. Total in Price in Br.
1 Full Flour Making Machines Set 1 1,100,000.00 1,100,000.00
2 Full Pasta and Marconi Making Machines Set 1 3,150,119.00 3,150,119.00
3 Full Biscuit Making Machine Set 1 1,850,000.00 1,850,000.00
4 Generator 250 KVA Unit 1 400,000.00 400,000.00
Total 6,500,119.00

C. Vehicles
SN Description Q Unit Price in Total Price in Remark
t Br. br.
y
1 FSR Isuzu Truck 2 1,000,000 2,000,000 Duty Free
2 Worker service mid bus 1 900,000 900,000 Duty Free
3 Pick up 1 700,000 700,000 Duty Free
Total 3,600,000.00

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D. Office Equipments
SN Description Qty Unit cost in br. Total cost in
br.
1 Managerial Tables 5 6,000.00 30,000.00
2 Secretarial chairs with table 1 4,000.00 4,000.00
3 Managerial Chairs 5 3,500.00 17,500.00
4 Office table 8 1,150.00 9,200.00
5 Office chair 16 1,500.00 24,000.00
6 Computer with printer 4 15,000.00 60,000.00
7 Shelf 3 4,100.00 12,300.00
8 Filing Cabinets 3 2,500.00 7,500.00
9 Decoration(Carpet, paint & Curtain) Ls 60,000.00
10 other Miscellaneous office items Ls 50,000.00
Total 224,500.00

E. Initial Working Capital

The initial working capital is estimated to be birr. 2,760,229.00

F. Pre-Service Expense
SN Description Cost in br.
1 Project proposal 15,000
2 Environmental Impact Assessment 25,000
3 Licensing and other fee 1,500
4 Worker capacity training 100,000
Total 141,500

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5.2. Annual Production Cost at Full Capacity1

i. Raw Materials and Inputs

SN Description Unit measure Qty Unit cost in birr Total cost in

birr
1 Sugar Ton 71.00 14,000.00 994,000.00
2 Wheat & other Ton 2,121.00 11,200.00 23,755,200.00
3 Other ingredients LS 4,000,200.00
4 Packaging LS 2,100,000.00
Total 30,849,400.00

ii. Salary Expense

As indicated in part 4.2 (Manpower) of this study, the total cost of salary and wage is estimated
to be Br. 2,430,720.00

iii. Other Operating Expenses

SN Description Annual Cost in br Assumption Used

1 Property Insurance 200,364 1% of fixed Investment Cost
2 Audit & Legal Fee 12000 1000per month
3 Uniforms 28,000 140*200br
4 Telephone, fax and postal 10,800 900 per month
5 Cleaning goods supplies 9,600 800per month
6 Repair and maintenance 500,910 2.5 % of the Fixed Investment Cost
7 Advertisement 350,000 % of sales
6 Stationery and other office supplies 9,000 750 per month
8 Electricity 33,500 0.335*100,000KW per year
9 Water 4,500 1.5*3,000m3 per year
10 Fuel 321,300 15300 lit*21 per year
11 Oil and lubricant 32,130 10% of fuel cost
12 Miscellaneous Expense 66,000 5500 per month
Total 1,578,103.99

5.3. Financial Analysis and Statements

5.3.1. Underlying Assumption

1
At the third year of Operation

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The financial analysis of the envisioned expansion plant is based on the data provided in the
preceding sections and the following assumptions.

A. Construction and Finance

Construction period 1.5 years

Source of finance 30% equity and 70% loan

Tax holidays 2 years

Bank interest rate 10 %

Raw materials and Operating Costs Increase by 5 % after year 3

Salary and wages increase by 2% after year 3

Price of processed food products will increase by 5% after year 3

B. Depreciation

Building 5%

Machinery and equipment 10%

Office furniture 10%

Vehicles 20%

C. Working Capital

Accounts receivable 30 days

Raw material local 90days

Work in progress 5 days

Finished products 30 days

Cash in hand 5 days

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Accounts payable 30 days

5.3.2. Sources of Fund

SN Description % share Amount in Birr
1 Owners Share 30 6,010,920
2 Bank Loan 70 14,025,480
Total 100 120,036,400

5.3.3. Loan repayment Schedule

Principal Total Annual Payment Remaining Balance
Year Payment Interest (10%) in Br. in Br.
0 0 0 0 14025480
1 1402548 1402548 2805096 12622932
2 1402548 1262293 2664841 11220384
3 1402548 1122038 2524586 9817836
4 1402548 981784 2384332 8415288
5 1402548 841529 2244077 7012740
6 1402548 701274 2103822 5610192
7 1402548 561019 1963567 4207644
8 1402548 420764 1823312 2805096
9 1402548 280510 1683058 1402548
10 1402548 140255 1542803 0

5.3.4. Depreciation Schedule

Original Value In Depreciation
SN Description Birr rate in % Depreciation Per year
1 Construction and Civil Work 5,855,937.50 5 292,796.88
2 Machines & Equipments 6,500,119.00 10 650,011.90
3 Vehicles 3,600,000.00 20 720,000.00
4 Office Equipment 224,500 10 22,450.00
Total 16,180,557 1,685,258.78

5.3.5. Revenue Projection

Based on the price and the capacity program of the factory indicated in previous chapter (chapter 2), the
revenue of the factory projected as indicated in the table below;

Table Revenue projection

SN Description Year 1 Year 2 Year 3-10

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1 Pasta & macaroni in 3,097,600.00 4,787,200.00 5,632,000.00

2 Flour 10,208,000.00 15,776,000.00 18,560,000.00
3 Biscuit 10,348,800.00 15,993,600.00 18,816,000.00
Total 23,654,400.00 36,556,800.00 43,008,000.00

5.3.6. Balance Sheet (Beginning)

Asset
Current Asset Value in Br.
Cash 1,095,614
Inventory of raw materials and inputs 2,760,229.00
Total Current Asset 3,855,843
Fixed Asset
Land, Building and Construction 5,855,937.50
Machineries and Equipments 6,500,119.00
Office Equipment 3,600,000.00
Vehicle 224,500
Total fixed Asset 16,180,557
Total Asset 120,036,400
Liability
Account payable 14,025,480
Owners Equity
Capital 6,010,920
Total Liability & Owners’ Equity 120,036,400

5.3.7. Income Loss Statement

Revenue Year 1 Year 2 Year 3-10
Sales Revenue 23,654,400.00 36,556,800.00 43,008,000.00
Purchase of Raw Material 16,967,170 26,221,990 30,849,400.00
Gross profit 6,687,230 10,334,810 12,158,600
Expenses
Salary Expense 1,336,896.00 2,066,112.00 2,430,720.00
Other Operating Expenses 867,957.20 1,341,388.39 1,578,103.99

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Deprecation Building 292,796.88 292,796.88 292,796.88

Deprecation Vehicles 720,000.00 720,000.00 720,000.00
Deprecation Machineries & Equip. 650,011.90 650,011.90 650,011.90
Deprecation office Equip 22,450.00 22,450.00 22,450.00
Interest Expense 1,120,004.25 1,008,003.82 631,146.59
Lease payment 75,938 75,938 75,938
Total Expense 5,086,053.72 6,176,700.49 6,401,166.86
Profit Before Tax 1,601,176.28 4,158,109.51 5,757,433.14
Tax(30% ) 0 0 1,727,229.94
Net Profit 1,601,176.28 4,158,109.51 4,030,203.20

5.3.8. Cash Flow Statement

Year Year 0 Year 1 Year 2 Year 3-10
Equity Capital 6,010,920
Loan principal 11,200,042
Net sale 23,654,400.00 36,556,800.00 43,008,000.00
Total cash in flow 17,210,962 23,654,400 36,556,800 43,008,000
Cash payment
Purchase of raw materials 0 16,967,170 26,221,990 30,849,400.00
Salary expense 0 1,336,896.00 2,066,112 2,430,720.00
Investment 7,651,350 0 0 0
Other Operating cost 0 867,957.20 1,341,388.39 1,578,103.99
loan repayment 0 2,805,095.97 2,664,841.17 2,033,694.58
Lease payment 413,437.50 75,938 75,938 75,938
Tax payment 0 0 0 1,727,229.94
Total payment 8,064,788 22,053,057 32,370,269 38,695,086
Cash surplus / Deficit 9,146,174.89 1,601,343.34 4,186,530.94 4,312,913.99
Cumulative Balance 1,601,343.34 5,787,874.27 10,100,788.26

5.3.9. Profitability
According to the projected income statement, the project will start generating profit in the 1st
year of operation. Important ratios such as profit to total sales, net profit to equity (Return on

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equity) and net profit plus interest on total investment (return on total investment) show an
increasing trend during the lifetime of the project.

The income statement and the other indicators of profitability show that the project is viable.

5.3.10. Pay-Back Period

The investment cost and income statement projection are used to project the pay-back period.
The project's initial investment will be fully recovered within 6.4 years of operation.

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6. ENVIRONMENTAL IMPACT OF THE PROJECT

The envisaged project is environmentally benign. That is it has no impact on the environment as
there is no polluting factors that will be emitted from the production plant. It rather has
multitudes of positive impact on the environment as it bride the demand of foods in the country
and again it will generate employment opportunities for the local individuals. However, this
project has some minimal impact on the environment. And the following are some of the
pollutants and their respective mitigation measures.

(i) Water pollution

Harmful wastes disposed of in pits or waterways can leach into groundwater and affect water
quality for workers and the community. Contamination of water sources may not occur
immediately, but can increase or accumulate over time, eventually causing damage to product
quality and affecting worker health.

Selected mitigation strategies:

• Site small dumps or waste treatment sites far away from surface or groundwater water
sources.

• Separate harmful chemical waste from organic waste, and use more care in handling
chemical waste. Dispose of chemical waste in methods in a manner that prevents
chemicals from leaching into ground or surface waters (such as clay- or concrete-lined
pits).

• If the enterprise stores waste temporarily before transporting it to a treatment facility or

landfill, make sure it is not leaking into the ground.

(ii) Working conditions

Certain working conditions—excessive heat caused by operating machinery, lack of ventilation,
skin irritating acids can damage workers’ health. An unhealthy workforce may be unproductive,
miss work too often and make costly mistakes.

Selected mitigation strategies:

• Maintain safety equipment and reinforce safety training. Safety measures may already be in
place, but workers should be reminded often; designate one person as the safety trainer

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and have that person train others. Check existing safety equipment regularly, and replace
elements like dust filters frequently.

• Create a prevention strategy. Sometimes small changes such as buying a face mask or
rubber gloves can dramatically reduce incidences of harm to workers. Find ways of
preventing accidents.

• Find ways of reducing harmful byproducts. For example, clean the floors in between
production cycles to get rid of excess dust, or install drip trays to catch acidic particles

(iii) Spoilage
Certain structural features of buildings used in food processing may lead to spoilage or
contamination of the products. Such site or building features include inadequate drainage or a
lack of screens to keep out insects/rodents. Increased spoilage causes more waste and less
profitability, while contamination may result in health problems for consumers.

Selected mitigation strategies:

• Ensure that the building structure is secure not only from people but also from animals.
Screens should be placed over drains and windows to keep out disease-carrying rodents
and flies.

• Storage areas should be well-ventilated and large enough so that excessive heat and
moisture

(iv) Solid Waste

Food processing creates substantial amounts of organic and inorganic wastes. This can lead to
increased waste disposal costs. In addition, high volumes of land-filled or treated waste may
place a greater strain on limited land resources. Minimizing waste can save on the cost of
supplies and labor needed for waste disposal. Converting waste to productive uses can provide
an extra source of income.

Selected mitigation strategies:

• Re-use organic waste.

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• Modify waste disposal to facilitate faster decomposition/breakdown of organic material.

Add layers of dirt and dry organic material to waste pits, or spread waste over large areas
of land. This type of composting and “land spreading” can speed up decomposition and
quickly lowers waste volume. Ensure material does not attract disease-carrying vectors
including birds, rodents and insects.

• Minimize wastes by improving production processes. Identify and change elements of

production that may be inefficient or produce excess waste. For example, improved
techniques for cutting food produce can reduce waste and yield more product.

(v) Poorly maintained machinery

Machinery that leaks chemicals or fuel wastes energy, can contaminate water supplies and may
threaten workers’ health. Repairing leaks lowers fuel costs and can prevent costly accidents such
as fire.

Selected mitigation strategies:

• Schedule regular machine maintenance checks and repairs. Ensure up-to-date training in
operation and maintenance. Do not wait until machinery is broken before checking it;
leaks can occur long before serious equipment breakdown and may be costing you
money. If possible and cost-effective, replace faulty machinery with more efficient
machinery.

If machinery is difficult to access, then monitor wastes or emissions to detect leaks. For
example, check for puddles underneath machinery or chemical/fuel smells.

• Use wood shavings, drop cloths and/or oil/water separators to catch spills and leaks.

• If you are disposing of organic and chemical wastes separately, ensure that chemical or fuel
waste does not contaminate the organic waste.

• If it is not cost-effective to replace or to repair machinery, make sure harmful effects are
minimized. Increase ventilation around any machinery that has high gas or chemical
emissions.

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(vi) Water use

Food processing workers sometimes use too much water, usually when cleaning equipment or
food materials. This may not only cause others in the community to have less water, but also
diminish the enterprise’s own future access to water. It may also mean that water costs are
unnecessarily high, even with use of a well. New wells may have to be drilled more frequently as
groundwater levels drop

Selected mitigation strategies:

• Decrease water usage through “dry cleanup.” Dry cleanup involves an initial cleaning
without water (sweeping, wiping down) before washing. This method reduces the amount
of water required to dislodge solid wastes from floors or machinery.

• Regulate water flow. Using high-pressure water hoses can ease cleaning and cut water use;
usually this only involves adding a new nozzle to the end of a hose.

• Reuse water. Some food processors use steam to purify or clean packaging materials; a
closed-loop system can cycle hot water back into the system. This process saves money
on both water and energy costs.

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