1- INTRODUCTION

Economic Development in any case needs both attentions of the private

as well as the public sector. There are investments, which could not be
employed by both privet and public sector due to the passed command
economy system (passed regime policies). Investment constraints have
been over a decade since Ethiopia adopted the free market economic
policy and promote the privet sectors in different ways. In this new
economic order, investment of privet sector happens to be determinant
factor of economic development. Both privet sector and government
bodies in many ways have commonly agreed an investment is usually
considered qas the engine of an economy. There are investments that
still not will be undertaken by private sector due to the above-mentioned
passed regime policy and its difficult nature, such as long gestation
period and high initial capital.
An increase a needs of fuel consumption, such as transport vehicles and
trucks,

Construction activities and construction machinery are to attract the

establishment of modern fuel stations at every where especially at
important places. This investment activity in Ethiopia is up to now not
developed to carry out the demand for it. So that, the modern fuel
station investment in future has positive impact on the over all national
economy development.

Now a day, any one confidently said that the future development of fuel
station in Ethiopia is not constrained on the demand side but there is
not enough supply. Due to this reason the project under consideration
envisages.
To exploit this business potential for the benefit of the promoter and the
country.
The investment under consideration is also prepared with the aim of
establishing a modern fuel station with modern commercial complex
services at Debre-Zeiet town.

As the area not very far from the center of capital city of the country,
Addis Ababa, it has well share development social and economical
infrastructure. Such as, electric power, water, telephone and other
infrastructures. To generalize the prject is ideally located for purpose of
fuel station. Like most business venture the project aims to maximize
return on invested capital. In addition to this, in a process of attaining
this basic new idea it also benefit able the community by employment
creation, revenue generation through the taxation and soon. It is clear
that Ethiopia follows the free market system and this in turn needs the
individual inject its potential in to the economy, so that the problems
above mentioned gradually eliminated and the national economy also
garadually become develop. With this understanding this project to be
planned by promoter, Ade Abebech G/Mariam and this paper indicated
that to briefly show the project’s importance, area advantages, planned
activities, estimated project capital and other important aspects.

2. BACKGROUD
Being any investment before starting investment processes, rendering
institution primary requirement the exixtence of target customers and
necessary infrastructure facilities in the project site. Its establishment at
proper place for its users will have a direct effect on sales of its supplies
as well. So that, during it’s planning stage, the surround availability of
target for the users must take a first stage. Such a, road net work,
electrical power and water supply are the main one. With out such
infrastructure establishing of any project has no tood result for the both
promoter and customers.
To come in to the actual, the area which ideally proposed by the
promoter ade Abebech G/Mariam has widely assessed all the above
mentioned parameters and other related aspects before coming up with
her final decision of its establishment at Deber Zeite town.

Debre Zeite town currently has its own decision make power for any
investment that established around its administration boarder. Due to
this reason, in the town recently would allocated different investment for
industry, agro-industry, services and soon that would accommodate
large number of workers the dwellers and farmers residents around. IN
other hand, there are high traffic movement through and in /to and
for/the town and there is high qulity asphalt road via through greatly
enable high truck and vehicle traffic movement. From this in the future
the project has not the restraint of demand.

East part of the country pass through project area, debre Zeit include
East Show, Arse, Bale, Borena, Guji,West and East Harar Zones Oromia
and far to South people’s, Somalia, Harare, Dire dewa, Afar regional
states and abroad, Kenya , Djubuty, Somalia countries. This part of the
country is known by high cash crop, and cereals production as from
wholwe parts of the country both for domestic and foreign export
markets. Againg = n, there are also high supply of agricultural inputs
and industrial productsto the areas and import and eport transaction
also high in ghe areas. In addition to this, in the area there are different
tourist attraction sites which created with nature.

All such conditions have necessitated continuous traffic movement and

from such areas that increasing the demand for fuel supply at out skirt
of Addis Ababa.
To generalize, the promoter’s Ade Abebech G/Mariam has rich experience
to lead the under consideration investment and to cover the finance of
expected.

3. BASIC FECATURES OF THE PROJECT AREA

3.1. Project Location and site Area
As it has been mentioned earlier, the envisaged Modern Fuel station with
commercial complex project of Adde Abebech G/mariam, is planned to
be established at the Debre Ziet which located in Debre Ziet local
government.

Administration, Oromia region along the main road which is via from
Addis Ababa to east of the country said.

This, Which for a long time had been serving as tourism Debre Ziet site is
located at about 50 kms, east of Addis Ababa and is currently allocated
for industrial establishments of private entrepreneurs by the regional
govermment as well as the local Govermment administration. This
investment project is expected to supply the basic input(fuel) to those
industries, surrounding residents and to passing trucks and vehicles.
There fore, initiated as a result of the Govermment’s overall commitment
towards the integrated private sector development in all spheres.

The project under consideration requires a site area of about 8000m2 in

order to accommodate all the necessary fuel supply structures, buildings
and other necessary facilities, properly. Depending on the projects
unique nature expected (during land allocation) that the site should be
along side the main road.
3.2. Infra structural Development
3.2.1. Accessibility
The main asphalted road which has been serving to connect Addis Ababa
with earlier mention zones, regions and abroad and other eastem areas
passes through this site and altermatively, based on Govermment’s Road
improvement plan, higher-quality access road is being on the use which
will directly pass through the proposed site under consideration.

3.2.2. Power and water supply

While preparing the industrial zone, main electric power and water lines
have been extended to the site with adequate supply capacity. More
over, there is ample under ground water potential as observed in
surrounding.

3.2.3. Other Socio-economic services

These include education and health services, transport facilities,
financial institutions, goermment offices etc. Regarding the fulfillment of
these ones, since the area is allocated for the above-mentioned purposes;
so far, these have been developed there. However, since it is at a
distance of only 50 kms. From Addis, one can easily be served from A.A.
and surrounding towns like mojjo and Dukam at any required service
level.

4. IMPORTANT ASPECTS OF THE PROJECT

4.1. Project component and services
As its name implies the proposed project will accommodate both the
fuel supply service with commercial activities at the planned project
site.
The project’s fuel station will mainly provide the following major
services:-
 Fuel supply of petrol, diesel, naphtha and kerosene with al types of
oils and lubricants,
 Car wash with lubrication service:- To provide this service the
project has planned to prepare four car washing structures and
facilities that tow of them for heavy trucks and two for light
vehicles and
 Tire-repair service.
 Again the building to be built for commercial activities will consist
of a well-equipped cafeteria service, a super market and a project
office, as well. In planning to perform these activities the promoter
has approached the new NOC-Ethiopia Company and got positive
response and acceptance, waiting only for the land securing
process to be finalized soon.

4.2. Objective and benefits

Obviously, the primary objective of the project is to effectively implement
to generate adequate profit for the promoters that will enable him
develop his investment career. Similarly, this will play a significant
positive role in the over all development prospect of the government.

To mention some of the expected major benefits of it , the project intends

to:-
 Supply fuel and lubricants in a required amount and provide full
car wash and tire repair services
 Create job opportunities for a number of employees during
construction and its full operation
 Generate reasonable retune on planned investment
 Increase government revenue through taxation and
 Contribute to the over ala socio economic development of the
region and the country as well.

4.3. Management and manpower

Generally, the envisaged project under consideration is expected to be
equipped with all necessary facilities and modern Organizational
setups, based on the company’s standards and requirements. These
will all be fulfilled in order to attain at maximum customers
satisfaction level in all aspects.

In this respect there fore the projects is planned to be organized in

such a way that it will employ a well experienced manager at the top
who will be responsible to manage the over all day-to day operation of
the project. The project is planned to provide all the services 24
hours each day, by the 3- shifts manpower allocation with proper
work evaluation and control measures to be implemented.

For the planned full-time or 3-shifts working condition, it will recruit

about 53 workers on permanent basis, who are all expected to have
adequate work experience with respect to all requirements of each
work position (title)for wh2ich he/she is assigned.
 Project Manpower and corresponding salary bill (in birr)
Position(title) No Monthly Annual salary
Salary/head Expense
1. Project Manager 1 1,600 19,200
2. Sales and personnel chief 1 800 9,600
3. Inputs supply worker 1 800 9,600
4. Fuel sales Workers 12 2,400 28,800
5. Oil & lubr.Sales Workers 6 1,200 14,400
6. Tyre repair workers 5 1,000 12,000
7. Car washers 10 2,000 24,000
8. cafeteria workers
9. cashier 1 300 3,600
10. cafeteria service men 5 750 9,000
(waiters)
11. Cleaners 2 300 3,600
12. Guards 4 800 9,600
13. Shop keeper 4 1,000 12,000
14. Store man 1 600 7,200

Total 53 13,550 162,600

4.4. Market Prospects

In order to determine the project’s future market prospect of its service
provisions, different conditions should be considered. This is due to fact
that its sustainability could be influenced by a not of factors like the
availability of potential service-seekers, the existence and few in number
of similar
Service providers around, the quality of its service provision and
management quality, etc.

In this regard, as it has been discussed above topic the planned project
is on a main road via to the eastern part of country from Addis Ababa.

Addis Ababa this shows that the station will be the fourth along the line
with convenient service supply condition especially for heavy trucks
unlike the fuel stations in urban areas working under very congested
working conditions creating great inconvenience to vehicles. Moreover,
eastern Ethiopia known for its high cash crop and cereals production, on
one hand, and is also among the highest consumers of agricultural
inputs and industrial products. This has created high product transport
traffic that passes through the site under consideration.

The expected high number of industrial and agro-industrial

establishments in the eastern part of the country is also the other
dependable market prospect for the project.

In general, the shortage of similar service provider around, the expected

highly growing number of services-seekers with the intended good service
and management quality are some of the indicators which will guarantee
the existence of reliable market prospect for all project service provisions.
The annual overall capacity utilization of each project service item is
estimated and described under the forthcoming topics of this paper.

4.5. Capacity determination

Even though the exact value of the demand situation of the project’s
services at the specific area under consideration is not easy to estimate
the expected capacity, the conditions of the recently built similar fuel
stations around have been considered, as well. On these bases, the
following assumptions and estimates have been made:

 Fuel and oil supply:-

- Estimated total fuel supply 80,000 lit/day
- Percentage share of diesel (Naphtha), petrol (Benzene) and
Kerosene are 75%, 20% and 5%, respectively
- Estimated average supply of oil and Lubrication is 100
Kg/day
 Car wash service:-
- Estimated daily Truck wash (av.)….. = 10
- Estimated daily small vehicles wash(av.)…= 15
 Cafeteria service:-
- Here it is assumed that daily total sales birr 800 and,
estimated sales profit is about 40%.

These being at full (100%) capacity utilization, the actual attainable

capacity of each is assumed to be 80%, 90% and 100% for the project’s
1st, 2nd and 3rd for the remaining years of operation.
 5. FINANCIAL ANALYSIS
5.1. Fixed Investment cost Estimates (birr)

No Cost item Amt. Unit cost Total cost

1 Construction and civil works
1.1 Land prep. with tanker pits Lamps 180,000
1.2 Hangar Shade construction 2 250,000 500,000
1.3 Café, office and shop bldg. Lamps - 250,000
1.4 General service store 1 45,000
1.5 Car wash pits with open rooms 4 14,000 56,000
1.6 Tyre repair room 1 19,000 19,000
1.7 Compound concrete and asphalt coating - - 800,000
1.8 Water installation 2% - - 37,000
1.9 Electric power installation 25 - - 37,000
1.10 Side and Back side fencing 1% - - 18,6000
- Sub total - - 1942500
- Contingency (10%) - - 213675
- Total - - 2156175
2 Equipments and materials*
2.1 50,000lit. Capacity tankers 4 50,000 200,000
2.2 Tyre repair equipments & materials - - 40,000
2.3 Cafeteria equipments & materials - - 60,000
2.4 Office equipments & materials - - 10,000
2.5 Vehicle mounting hydraulic structures 3 20,000 45,000
-Sub total - - 370,000
- Contingency (100%) - - 37,000
- Total - - 407,000
- GRAND TOTAL (1+2) - - 2563175

 Other fuel station machineries will expect to be supplied by the

company.

5.2. Annual Operating Cost Estimates (Birr)

As we know any investment needs operating cost to start its work. The
operating cost different from project to project. That means some of
them not need high operating cost. The project investigated estimate
annual operating cost mention as follows.
 5.2.1. Repair and maintenance
Is assumed to cost about 5% of the fixed cost = birr 12787.50
5.2.2. Property Insurance
This premium is estimated to be about 3% o the fixed cost = birr
76312.50

5.2.3. Utilities expense

These include electric, water, postal and telecommunication service
charges and other office utilities, too. These are also estimated to cost
about birr 5000 per month = 60000/year.

5.2.4. Worker’s uniform purchase

Is estimated to cost about 10% of the salary expense = birr 16260/year.

5.2.5. Other miscellaneous expenses

These may include expenses such as land rent fee, license payments,
and other unanticipated costs that are estimated to be about birr
14000/year.

5.2.6. Input Expenses

Based on assumptions and estimates made under topic number 4,5
earlier with current supply prices of each in put calculated as the below
table. The in puts sales in the project under consideration are fuel, oil
and lubricate and cafeteria in puts majors.
The following annual expense is estimated,
Input Item Supply Yr(3- Unit Annual Expense (in’000br.)
Amount (in 10) Cost
‘000) (br.)
Yr-1 Yr-2 Yr-1 Yr-2 Yr(3-10)
- Naphtha 1t. 10,95 12,31 13,68 4.28 46,866 52725.32 58584.64
0 9 8
- Benzene 1t. 2920 3285 3650 5.47 159272.4 17968.95 19965.5
- Kerosene 1t. 730 821 913 2.95 2153.5 2421.25 2693.35
- Oil & Lubr. Kg. 29.2 32.85 36.5 16 467.2 525.6 584
- Café Inputs br. - - - * 70.08 78.84 87.6
Total - - - - 65529.18 73720.66 81915.09
 5.3. Annual Operating cost estimate and working capital requirement (Birr)

No Description Annual operating costs Working capital requirement

Yr-1 Yr-2 Yr(3-10) Req. Yr-1 Yr-2 Yr-3
Period
1 Input expenses 65529.180 73720.660 81915.090 1 weel 1260176.5 1417705 1575290.20
2 Workers Salary 162600 162600 162000 3 months 9380.77 9380.77 9380.77
3 Repair & 127187.50 127187.50 127187.50 6 months 63593.75 6393.75 63593.75
Maintenance
4 Property insurance 76312.50 76312.50 76312.50 1 year 76312.50 76312.50 76312.50
5 Utilities expenses 60000 60000 60000 1 months 5000 5000 5000
6 Workers uniform 16260 16260 16260 6 months 8130 8130 8130
7 Other 14000 14000 14000 3 months 3500 3500 3500
Miscellaneous exp.
TOTALCOSTS 65985540 74177020 82371450 - 1362499.8 1520028.30 1677613.50
INCREASE IN WORKING CAPITAL - 157528.47 157585.17
5.4. Total Initial Project cost components (birr)
Being under consideration investment is covered means of finance. All
expected sources of finance for modern fuel station with commercial
activities investment could be overd by promoter own capital and bank
loan. Finance requirement is composed of fixed investment cost and
annual operating cost estimated to birr 3906249.80 out of this total
capital fixed cost accounts about birr 3499249.80 and annual operating
cost estimated.
Fixed investment items including constriction/civil work/cost,
machinery cost, and different equipment, while annual operating cost
estimated including the cost expending per annum for the operation of
the project to be cover-running cost of the principal income generating
unit. The existing total project costs requirement of this unit is
calculated as follows.
R.N Description Total cost Cost Component
Local Foreign
1 Fixed Investment cost 2543750 3499249.80 40700
1.1 Construction & civil 2136750 2136750 ----
Works
1.2 Equipments & Material 407000 ------- 40700
2 Initial Working Capital 1362499.80 1362499.80
INITIAL PROJECT CAPITAL 3906249.80 3499249.80 40700

5.5. Financial Sources plan

 Promoter’s equity share (40%) = birr 1562499.90
 Expected bank loan (60%) = birr 2343749.90
Total = birr 3906249.80
 Bank Loan repayment period is 7 years.
5.6. Bank Loan amortization Schedule (in ‘000br.)
Years Principal Bank Interest Total Outstanding
(7%50%) repayment balance
0 - - - 2344
1 335 176 511 2009
2 335 151 486 1674
3 335 126 461 1339
4 335 100 435 1004
5 335 75 410 669
6 335 50 385 334
7 335 25 360 0
 5.7 Annual Depreciation of fixed assets (in ‘ooobr.)
R.N Fixed assets Initial value Annual depreciation
Rate Value
1 Construction & civil 2137 5% 107
Works
2 Equipments & 407 10% 41
Materials
Total 2544 - 148

6. ANNUAL REVENUE PROJECTION

It has been made clear that the project under consideration gets its
revenue from sales of its supplies and from the services like car wash
and cafeteria. The government sets the selling price of different types of
fuel and the current profit margin of birr 0.03 is considered here. The
corresponding prices of the remaining items are estimated on the basis of
current prices and from experiences of other similar establishments.
Taking the assumptions and estimates made earlier into consideration,
the annual revenue of the project is summarized as follows:-

Input Item Supply amount(in’000) Unit Annual revenue (in’000br.)

pric
e
(br.)
Yr-1 Yr-2 Yr(3-10) 4.31 Yr-1 Yr-2 Yr (3-10)

Naphtha 1t. 1095 12319 13688 4.31 4719450 53094.8 58995.2

0 9 8
Benzene 1t. 2920 3285 3650 5.50 16060 18067.5 20075
0
Kerosene 1t. 730 821 913 3.00 2190 2463 2739
Oil & Lubr. Kg. 29.2 32.85 36.5 20.3 592.76 666.86 740.95
Truck wash no 2.92 3.285 3.65 140 408.8 459.9 511
Café Output br. 1.46 1.6425 1.825 45 65.7 73.91 82.13
-Total 116.8 134.4 146 - 116.8 131.4 146
- - - - 66628.5 74957.4 83289.3
6 6 6
 7. PROJECTED FINANCIAL STATEMENTS
7.1. Forecasted Income statement of the project (in ‘000br.)
Description Project Years
1 2 3 4 5 6 7 8
Gross Revenue 66628.5 74957.46 83289.36 83289.36 83289.36 83289.36 83289.36 83289.3
6 6
Less: Operating 65986 74177 82371 82371 82371 82371 82371 82371
costs
Income from 643 780 918 918 918 918 918 918
Operation
Less:Depreciation 148 148 148 148 148 148 148 148
: Interest 176 151 126 100 75 50 25 0
Profit before tax 319 481 644 670 695 720 745 770
Less: Profit tax(35%) 112 168 225 241 250 259 268 268

NETPROFIT 207 313 419 429 449 461 477 508

 7.2. Cash flow Statement of The Project (in ‘000br)
Description Project Years
0 1 2 3 4 5 6 7 8 9 10
Cash Inflow
equity 1562 - - - - - - - - - -
Bank loan 2344 - - - - - - - - - -
Depreciation - 148 148 148 148 148 148 148 148 148 148
Net Profit - 207 313 419 429 449 461 461 508 508 508
Total Inflow 3906 355 461 567 577 597 609 609 656 656 656
Cash Out flow
Fixed Inv. 2544 - - - - - - - - - -
Initial W. Cap. 1362 - - - - - - - - - -
Increasein - - 158 158 - - - - - - -
W.cap
Principal Rep. - 335 335 335 335 335 335 335 335 335 335
Total outflow 3906 335 493 493 335 335 335 335 - - -

Net Inflow - 20 32 32 242 262 374 274 656 656 656

Cumm.Balance - 20 12 12 304 566 840 840 1786 2442 3094
8. Summary of the Financial Analysis
The project operating 365 days per annum at two eight hour shifts will
have a net annual profit of birr 229 million as shown in the simple
financial analysis below. Costs of production are the fixed and variable
costs which include depreciation of the fixed assets, land rent payment,
average loan interest payment, raw materials and utilities, wages and
salary and other unforeseen misecellaneous costs.
Total Cost of production (Birr)

Fixed costs In Birr

Depreciation of Building (5%) 107
Depreciation of machinery (10%) 41
____________

Total of depreciation 148

Interest payment (Average)

Total Fixed cost 483

335
Variable Cost
Raw material and utilities 66
Wages and salary 163
Miscellaneous 179
Total Variable cost 407

Total annual prod.Cost(Birr) 890

The net Annual Profit

 Annual Revenue (Birr)

Revenue 6639

Sales Tax/VAT(15%) 9994

Net Revenue 56634
Production cost 890
Gross Profit 55744
Income/Business Tax (35%) 19510

Net Profit (Birr) 362 33

9. The payback Period

The project worthiness can easily be tested using the simple pay back
period calculation. Thus, The pay back period of the project is calculated
as the ration of the total investment cost to the sum of the net profit and
total depreciatin cost as shown below.

Total Investment cost

Pay back Period = ---------------------------------
Net Profit + Depreciation
3006
= ----------------------------------
36381 + 148

= 6.1 years
10- Conclusion.
As shown in the above simple analysis, the project will pay back for itself
in about sex years. Create a job opportunity for not less than 53
nationals. Contribute to the government significant revenue in the form
of income tax and VAT. There fore the project is beneficiary both to the
owner and to the government and is recommended for implementation.