Feasibility Study On Edible Oil Manufacturing Project

Feasibility Study on Edible Oil Manufacturing Project
Project Owner:- ------------Manufacturing PLC

Address: -
Addis Ababa
Sub-City: Bole
Woreda: 00
Phone: 0911216863
0974351919
0910580822
Email: [email protected]
[email protected]
April 20, 2023
----------Manufacturing PLC Page 0

Table of Contents
Executive Summary.........................................................................................................................3
1. Introduction..............................................................................................................................4
2. Background of the Project.......................................................................................................5
2.1 Project Development Rationale.............................................................................................5
2.2 Project Description.................................................................................................................6
2.3 Promoters’ Background....................................................................................................7
2.4 Project Objectives...........................................................................................................10
2.5 Product Description and Application..............................................................................11
3. Market Analysis.....................................................................................................................12
3.1 Market Segmentation and Destination............................................................................12
3.2 Ethiopian Market Analysis..............................................................................................12
3.2.1 Demand....................................................................................................................13
3.2.2 Demand Projection..................................................................................................16
3.2.3 Supply......................................................................................................................17
3.2.4 Supply Projection.....................................................................................................21
3.2.5 Demand - Supply Gap.............................................................................................21
3.3 By products.....................................................................................................................23
3.4 Market Arrangement and Strategy..................................................................................23
3.5 Market Channel...............................................................................................................24
3.6 Price Trend......................................................................................................................24
3.7 Plant Capacity.................................................................................................................25
3.8 Production Programme........................................................................................................25
4.1 Raw Material and Auxiliary Materials................................................................................26
4.2 Utilities.................................................................................................................................26
5. Technology and Engineering.....................................................................................................27
A. Production Process...........................................................................................................27
B. Machinery and Equipment................................................................................................29
5.2 Land, Building and Civil Works..........................................................................................30
5.2.1 Building and construction.............................................................................................30

5.2.2 Land Lease....................................................................................................................30

5.2.3 Proposed Location........................................................................................................30
6. Organization and Management..................................................................................................31
6.1 Man Rower Requirement...................................................................................................31
6.2 Organizational Structure......................................................................................................33
6.3 Training Requirement..........................................................................................................34
7. Environmental Analysis.............................................................................................................34
7.1 Environmental protection and safety...................................................................................34
7.1.1 Solid waste and by-products.........................................................................................34
7.1.2 Water consumption and management...........................................................................35
7.1.3 Energy consumption and management.........................................................................35
7.1.4 Social benefit of the project..........................................................................................36
8. Financial Analysis......................................................................................................................37
8.1 Total Initial Investment Cost...............................................................................................37
8.2 Production Costs..................................................................................................................38
8.3 Sales Forecast.......................................................................................................................38
8.4 Financial Evaluation............................................................................................................39
A. Profitability.......................................................................................................................39
C. Pay Back Period................................................................................................................39
D. Internal Rate of Return and Net Present Value.................................................................40
E. Economic Benefits.............................................................................................................40
Annex 1: Operating cots................................................................................................................41
Annex 2: Projected Profit and / Loss Statement.........................................................................42
Annex 3: Projected Cash Flow Statement.....................................................................................43
Annex 4: Projected Balance Sheet Statement................................................................................44
Annex 5: Loan Repayment Schedule.............................................................................................45

Executive Summary
KEY INFORMATION HIGHLIGHTS
Project Promoter
Proposed Project Type ___________Manufacturing PLC
Total Area of the Factory Required 5000M2
Project Area Amhara Region, Godar Town
Buildings Constructed Factory hall, Warehouse, Administration Offices and
Packaging workshop
Products Manufactured and Production Annual Plant
Capacity Products
Capacity
Sesame Oil 2,400 tons
Niger Oil 1,800 tons
Oil Cake(by product) 4,500 tons
Market Local and International Consumers
Investment Cost Promoter 28,512,362 Birr
Finance required 66,528,845 Birr
Total investment cost 95,041,207 Birr
Project Life 10 Years

500+
NPV (Net Present Value) 2.52 billion Birr
IRR (Internal Rate of Return) 29%

PBP ( Pay Back Period) ≤1 year
The Project is Technically Feasible, Financially and Commercially Viable as well as Socially and
Economically Acceptable.

1. Introduction
Agriculture now is at the centres of Ethiopia`s growth yet way forward is planned by the
government that gradually the economy is to be led by the industry in the long run. Yet there is
still a big development potential in the agriculture sector and much is expected that the sector
will remain leading for the coming years. Growth is in the agriculture sector by and large has
stimulated the agro industry sub- sector since most of the people in rural and urban area are
striving for a better living and working condition which brought about growth in the
consumption of processed food items such as refined edible oil. Edible oil is an essential element
for day to day consumption in almost all forms of daily meal both in the rural and urban area.
Currently the majority of refined edible oil products are imported while a few proportions are
being supplied by local producers, yet the demand has not yet fully satisfied.
Ethiopia has a huge potential for scaling up its production of edible oil; favourable agro-climatic
condition for increased oilseed cultivation, the labour-incentive nature of the sub-sector, a
conductive business environment and the huge local demand. Despite this potential, however, the
edible oil processing industry remains underdeveloped. Main constraints are: low production,
poor quality of seeds, inadequate trading infrastructure, poor agro- processing facilities and week
business development services on the part of edible oil processors. On the other hand good
performance of the economy brings a huge demand for quality product. The country’s economy
has been experiencing a consistence growth of about 10.8% for the last 8 years. It is believed that
this achievement the change is the nation’s work culture and other factor.
The oil processing company has taken the initiative to engage in the production of refined oil
after carful observation and survey of the market trends. The assessment made in this study also
shows that there exists and increasing and unsatisfied demand for edible oil.
According to financial analysis made, the envisage project will be profitable and viable.

2. Background of the Project

2.1 Project Development Rationale
In Ethiopia edible oil has been in its lowest mode of production for a number of years. Most in
the small-scale oil mill sector were supplying the market with oil in crudest form, with the oil
seeds crushed by mill and filtered through a thin cloth, locally Shemma. Their product hardly
underwent any kind of refining process. After issuance of the proclamation which compels
industry operator processing other oilseeds to go through an industrial refining process, this
supply has been banned and those small scale industries supply crude oil to refineries. Currently
there are about 40 refining and semi refineries known to operate in a medium and large scale oil
mill firms in the country.
In Ethiopia, the two principal crops within edible oils are sesame (46% edible
oil production area) and niger seed (32%). Given that Amhara is one of the largest oilseed
producers in the country. Within Amhara, sesame is the principal oilseed amounting to about
three-fifths of all rain fed edible oil land and half of the total produce. It is produced in the
northern and western parts of the region and accounts for about 44% of all of Ethiopia’s sesame
production.
The government is working aggressively to incentivise multi-million dollar investments from
both domestic and international investors, and Amhara is the hub for the development of
oilseeds. Here, investors have recently built or are in the process of building three new multi-
million dollar oil processing factories one of which included an investment valued at USD 100
million.
This feasibility study aims at showing the business plan of new Niger and Sesame Oil Company
and to establish a large scale edible oil refinery in Amhara Regional State, North Gondar, and
Gondar town. It is well aware that there exists a huge demand for edible oil in the country as a
whole and wishes to participate in sector and play to active role in satisfying this demand by
establishing a modern and competitive production firm.
On the other hand good performance of the economy brings a huge demand for quality product.
Edible oil is an essential element for day to day consumption in almost all forms of daily meal
both in the rural and urban area. Currently the majority of refined edible oil products are while a
few proportions are being supplied by local producers, yet the demand has not yet fully satisfied.
The oil processing company has taken the initiative to engage in the production of refined oil

after carful observation and survey of the market trends. The assessment made in this study also
shows that there exists and increasing and unsatisfied demand for edible oil.
The project under consideration, upon going operational, will generate income mainly from
business activities; sales of refined edible oil and by product (oil cake). The oil is sold to the
general public for cooking food whereas the oil cake will be sold to commercial livestock farms
such as dairy, poultry, and fattening farms.
2.2 Project Description

The oil production company planned to installed a state of the art machinery that perform
cleaning sorting grinding and bagging raw oil seeds and spices before being exported. The
company plan to endow with a team of professionals and competent management with solid
experience in the field of oil and seed export. The company`s policy is to command high
reputation from its clients by rendering fast, compressive and most efficient service.
The company decided to establish edible oil processing plant after observing the ever growing
demand for the product particularly in the domestic market. This project will established in
Gondar town on a total area of 5000m2 leased from the regional government. The new oil
processing plant will have a capacity to process 4,200 tons of two kinds of oil seeds including
Niger and Sesame. The technology selected offers greater opportunity to produce edible oils
from any of the given oil seeds variety based on the prevailing market situation. Taking in to
account the current market demand, raw materials availability and future prospects, the subject is
planned to produce edible oil of Niger seed and Sesame seed at a product mix ratio of 43% and
57% respectively. The larger production proportion of edible oil has recognised due availability
of the raw materials in the market particularly in Amahara Region in abundance.
The project under consideration upon going operational, generate income mainly from business
activities; sales of refined edible oil and by product (oil cake). The oil is sold to the general
public for cooking food whereas the oil cake will be sold to commercial livestock farms such as
dairy, poultry, and fattening farms. According to financial analysis made, the envisage project
will be profitable and viable and it will generate profit beginning from the first year of the
operation. Moreover, the project is expected to generate an average of net profit of Birr 172
million during the project period of ten years. It is anticipated that the project will have positive
net cash flow in the projection period. Furthermore, it will generate a positive NPV while the

FIRR will be expected to exceed the prevalence lending rate by registering 27% and 29% before
and after tax which indicates that the oil mill project will be a successful venture.
In addition to this, the proposed project possesses wide range of economic and social benefits such as
increasing the level of investment, tax revenue, employment creation and import substitution.
2.3 Promoters’ Background

The company is endowed with a team of professionals and competent management with solid
experience in various fields of investment.
According to the Ethiopia standard all edible oil must be refined, although a number pf specific
oil seed must be semi refining. Several efforts geared towards addressing the growing demand
for cooking oil with locally produced oil is well underway. The project proposal are planned to
establish and owned by three Ethiopian national investors. The investors include MR. Abrham
Geletu, MR. Sleshi Temesgen and Aderajewe Tsegaye, where the first two have equity share of
35% each while the last one investor have equity share of 30%. Its current paid up capital is birr
10 million. The head office of the company is found in Addis Ababa where it runs and manages
its business. There is also a liaison office in Addis Ababa to facilitate export, undertake trade
negotiation with the buyers and suppliers of export items.
______________Manufacturing PLC is being promoted by three investors and brief profile of

each partner is presented below:
Abraham Geletu
MR. Abraham has found the first bamboo manufacturing factory in amhara rigion Injibara tawon
didn’t stop his ambition for new creative ideas there; he began his investment in his home
country Ethiopia, and initiated the first manufacturing factory on bamboo products. He was
employed by Honeywell International Inc, - in aerospace, building technologies, performance
materials and technologies, and safety and productivity solutions- as an aerospace engineer and
worked there for 25 years. His 25 years’ experience in engineering gave him good capacity to
run his own business.
The company was established in 2009 E.C with initial capital of Birr 20,000,000.00 (Twenty
Million) which later grew up to be 31,000,000 (thirty one million) capital. It was established as a

sole proprietor ship, under the rules and regulations stipulated by the FDRE. The company is
now mainly operating and producing Bamboo Charcoal product under the product name “Pro-
Star” at Enjibara town. Other than the charcoal product, Stick Perfume (Incense Stick),
Barbecue Stick and tooth pick products are being produced here in the capital city at different
locations. In addition, the promoter had been doing business in foreign country for more than 30
years.
Hence, following the government incentive to promote local investors to invest in many
manufacturing sectors, Ato Abraham invested 31 million Ethiopian Brr and start producing
Bamboo products for local market as well as exporting to other countries.
The idea behind the business is to provide quality and different type of bamboo products to the
public and also introduce Ethiopian bamboo products to the other world. Currently, the company
has begun producing Bamboo tooth pick, Bamboo barbecue stick, stick perfume, Bamboo
charcoal and new plastic straw products.
Sleshi Temesgen
Sleshi Temesgen is a 45 year old business owner and manager. He holds a Master Degree in
Development Studies, Specialization in Human Resource and Employment Bachelor of Laws
(to be Completed) Bachelor of Art in Political Science and International Relations, Minor in
Public Administration.
 Sleshi has more than 20 years’ of experience in working with government, non-government
and private organizations as a permanent employee, as consultant and as a long term
professional advisor
 Hands on experience in mandate analysis, job analysis, job design, and restructuring.
 Hands on experience in, performance management, designing performance management

tools, and designing key performance indicators.
 Hands on experience in organizational assessment and designing, organization leadership gap

assessment, analysis and capacity development.
 Hands on experience in drafting and preparing training modules, guidelines, rule and
procedures, laws.

Hands on experience in providing trainings on collective bargaining and social dialogue,

performance
 management, entrepreneurship, business planning, strategic planning, among others to

private firms job seekers, members of employers’ federation and trade union leaders etc.
 Hands on experience on Business processing reengineering (involved on BPR of Ethiopians

foreign employment and expatriate employment department of Ministry of Labour and Social
affairs, Ethiopia. Besides:
o Led the national study of situations and needs of Ethiopian returnees (169,000 plus)
from Republic of Saudi Arabia, in 2015.
o Led the national study on expatriate employment in Ethiopia,
 Has a protracted hand on experience in working with diversity. He has consulted private
companies in different sectors (food and beverage, transport, agriculture, trade and service,
textile, horticulture, etc for example led the feasibility study for Raya Valley Horticulture
Development Coridor, for EHPEA), government organizations (Ministry of Labour and
Social affairs, Ministry of Education, Ministry of Defense, Ministry of Health, The Ethiopian
Commodity Exchange, Ethiopian Biodiversity Institute, Federal TVET Agency …), non-
governmental organization (AMREF, Helpage International, CAFOD, WaterAid, CNFA …)
and International Organizations bilateral/multilateral (USAID,DFID, GIZ, British Embassy,
SNV, ILO).
 He has worked/ is working in partnership with international consultancy firms and individual
consultants in different projects (Denk Modelle from Germany, GOPA from Germany, and
Thomas International from South Africa etc.).
 He has the exposure to most parts of Ethiopia including the highland and the lowland areas
/Pastoralists
 He has been involved and led different studies: value chain analysis, market feasibility and
marketing campaigns, baseline studies, feasibility studies, needs assessments, mandate
analysis studies, legal analysis, project evaluations (on- going and terminal/end
termevaluations), organizational restructuring and designing, optimal staffing, people
development, salary survey, work climate/ employe satisfaction survey, among others and a

number of trainings
 In relation to migration he has been involved and led a number of national studies/researches
among others:
 He has lead the research team for Situation and Needs assessment of Ethiopian Returnees
from the Republic of Saudi Arabia a research done for the ILO and MOLSA.
 He has worked as a lead consultant on the national study of expatriate employment in
Ethiopia, a research done for the MOLSA. Worked as a lead consultant and coordinator
on the organizational structure study for the national TVET Agency and more than 10
private companies
Aderajew Tsegaye
Aderajewe is a 40 year old trained Business Consultant and Manufacturing business Manager.
He holds a Bachelor of Science in Accounting from the University of Alemaya and also has got
his Masters degree of MBA in international Business from Greenwich University. He has 15+
years of sound commercial and business experience under the belt. He has extensive knowledge
and experience in manufacturing business and he is the owner of APHEM Sock and Tectile
manufacturing Plc.
Aderajew has concrete experience in working with government and private organizations and
has got various reward and certificate for his extraordinary performance during his career. He
had practical experience as finance head from government finance biro. He has been working as
management trainer and consultant for more than 4 year form management institute and
government office. He has lead Addis Ababa city municipality reform consultant team for 4 ears.
2.4Project Objectives
At ______Manufacturing PLC, we have a long term aim and focus for the business. We
believe in starting small but dreaming and reaching for bigger things. The primary
objectives of ______Manufacturing PLC over the next couple of years are as follows:
 Obtain financing to cover capital expenditure costs and operating expenses to cover raw
materials purchase and operational cost

 Generate a net profit of in the first year of operations by developing a

strong customer base and keeping overhead costs to a minimum;
 Develop and strengthen the Niger and Sesame Seed value chain with farming and edible
oil producers and traders.
 Develop business processes, develop the organizational structure and
establish benchmarks aimed at making business run smoothly and
efficiently.
 These systems include the set-up of an accounting process/system, procurement process,
establishing and enforcing quality standards.
 Strive to achieve 100% capacity utilization in from commencement of
operations in year 3.
 Be the primary receiver of raw materials from local farmers
 Expand production capacity from year one of operation to the life of the factory
 Expand into other regional markets and serve bigger clients within the industry
 Forward integrate into Soap making and chemical industry for the local market.
 Bring foreign currency by selling its products to foreign market
2.5 Product Description and Application

Edible oil produced from Niger seed and Sesame seed which are common in the edible oil
market will be the major product of the envisaged project. The oil and protein contents of the
seeds vary with the variety and agro climatic conditions. Some verities may have up to 25% oil
content.
Refined oil is used mainly for food purposes such as salad and cooking oils, shortening,
margarine and to lesser extent in packing of fish and cured meat. Low grade oil is used in
manufacturing of soaps, lubricants and protective coating. The by-product of the proposed plant
is expeller cake which is used for animal feed.
Sesame oil is pale yellow bland semi-drying, fatty oil obtained from sesame seed. Oil
has a particularly good fatty acid distribution being high in the relatively stable
unsaturated acids, oleic and linoleic, 35-49% and 37-48%, respectively.
Refined sesame oil is exceptionally good edible oil. It is used directly as a bland salad oil

and for cooking purposes. It is also used in making margarine. Sesame oil compares very
favorably in these uses with olive oil and this often leads to sesame oil being used as an
adulterant of olive oil rather than straight forward substitution.
Because of its high stability compared with other vegetable oils, sesame oil also has some
specific end-uses in the pharmaceuticals industry, which employs the oil as a vehicle for
medicaments which are required to be administered subcutaneous or intramuscularly. It
may also be used in the preparation of liniments, plasters, ointments and special soaps & small
quantity in perfumery as a fixative. Niger
seed oil has high oleic acid content. It is non drying and has a specific gravity (at15o c). The
oil is mainly used for cooking. The by-product of Niger seed
oil processing is expeller cake which is left from expeller press. Its major use is as animalfeed.
3. Market Analysis
This part of the study deals with market of edible oil in Ethiopia specifically demand
(existing and future), supply (existing and future), demand supply comparison, market
arrangement and strategy, problem and challenges with regard to edible oil market and price
of the product.
3.1 Market Segmentation and Destination
The market segmentation of Ethiopian edible oil depends on the destination where the
product is to be sold. In Ethiopia there is shortage of edible oil and almost more than 95% of
demand is being fulfilled by import from abroad. In addition, Ethiopia has no experience in
exporting refined edible. As a result the market of this commodity is segmented only to
domestic market in order to substitute import and satisfy domestic demand which in turn
saves foreign currency.
3.2 Ethiopian Market Analysis
Refined edible oil is of everyday food expenditure in urban areas as well as in most of the
rural areas of Ethiopia. However, the Ethiopian refined edible oil industry is beset by a
paradox albeit in the midst of adequate resource base and substantial production opportunity,
the country satisfies almost all of its edible oil need from import; paying its hard earned
foreign currency.

Essentially refined edible oil can be produced from cotton seed, rape seed, lint seed, nigger
seed, and sesame seed and from palm. In Ethiopia cotton and rape seed oils are dominant
local product in the market followed by lint and nigger seed oils. Palm oil the dominant
edible oil in the market is totally imported product. Sesame oil is not easily available in the
market due to the higher price of the sesame seed in the international and it is export oriented
crop rather than being processed domestically. Next to sesame, nigger seed and also other oil
seeds are cash crops or export oriented crops. As a result, the production of refined edible oil
is mainly from cotton and rape seed followed by sunflower, which have lower price relative
to sesame and other oil seeds.
In Ethiopia both refined and crude oils are equally consumed and being demanded in the
market. Even though some health effect material (acid) is present in crude oil, it is being
consummated even more than refined edible oil because of its relative low cost. As
information obtained from respondents during field survey, crude oil produced by small scale
manufacturer constitute the highest share of domestic production and supply of edible oil.
Similarly there is no judgment which differentiates and identifies refined oil consumers from
crude oil consumers in Ethiopia. So the market part of the study focuses on edible oil as a
whole.
3.2.1 Demand
A. Domestic consumption
Edible oil is a consumable material and used to cook food and as raw material for food
industries. Consumption demand of edible oil is the main and has lion share than food
processing industrial demand. The major determinants of edible oil demand includes
Population dynamics, per capita income, improvement in living standard of the people and
changing food habits of the peoples. These determinants have direct relationship with edible
oil demand. It is fact that the Ethiopia’s Economic Growth registered in the past few years
increased the disposable income of peoples which in turn have positive effect on their
consumption habit and hence increase the demand of edible oil in Ethiopia.
B. Apparent and per capita consumption

Total actual edible oil consumption in Ethiopia on year 2016 G.C. is 507,191 metric ton out
of which almost 98.70% is imported edible oil. Most of the oil consumed is imported palm

oil, followed by locally-produced Niger seed oil. Small amounts of linseed, ground nut,
cotton, and soya oils are also being consumed. Following increased demand, limited
domestic production and the country’s heavy reliance on import, there is frequent supply
shortages especially in urban areas. In addition, as consumers become increasingly diet
conscious, they are looking for healthier alternatives to palm oil. Local consumers consider
Niger seed and soybean oil to be healthier. (USDA Foreign Agricultural Service Report on
Oil Seeds and Products, 2016)
To determine the food demand of edible oil in Ethiopia, apparent consumption approach is
appropriate model and it is applied in this study. Apparent consumption of edible oil is
reckoned by [Domestic production + Import] since there is no export of edible oil. Import
constitutes both Edible Palm Oil and edible oils of other oil seeds.
As shown on the following table 1, edible oil consumption in Ethiopia is increased from
318,737 metric ton to 507,191 metric ton by 12.31% Geo mean from year 2012 to 2016 G.C.
The country full fills almost its entire edible oil requirement from import particularly edible
palm oil.
Table 1: Apparent and Per Capita Consumption of Edible Oil
Year Domestic Imported Apparent consumption
production (Domestic production
Edible Edible Oils Total imported
plus Import)
palm oil excl. palm oil edible oil
2012 6,520 292,797 19,420 312,217 318,737
2013 4,573 139,899 18,139 158,038 162,611
2014 9,596 377,763 11,323 389,086 398,682
2015 5,612 442,536 36,052 478,588 484,200
2016 6,575 457,946 42,670 500,616 507,191
Geo mean 0.21% 11.82% 21.75% 12.53% 12.31%
Source: CSA, RCA Team computation
Once the apparent consumption is known, it is possible to reckon the per capital consumption
of edible oil by dividing the apparent consumption figures by the number of population in
their respective year. Year 2017 G.C. total population data sourced from “CSA report on
Population Projection of Ethiopia for All Regions at Woreda Level from 2014-2017” is taken
as base and projected by 2.37% growth rate observed in year 2014 to 2017. Domestic
production is sourced from CSA report on medium and large scale manufacturing (See table
2 below)

Table 2: Apparent and Per Capita Consumption of Edible Oil

Domestic Import (‘Ton) Apparent PCC of
Year production Edible Consumption) (‘Ton) PCC of other
(‘Ton) Palm Edible Oils Total palm oil edible
Edible Others (kg) oils (kg)
Oil of others oil Population
Palm Oil Edible Oil
seeds
A B C B D=A+C E F=B/E G=D/E
2012 6,520 292,797 19,420 292,797 25,940 83,927,678 3.489 0.309
2013 4,573 139,899 18,139 139,899 22,712 85,916,764 1.628 0.264
2014 9,596 377,763 11,323 377,763 20,919 87,952,991 4.295 0.238
2015 5,612 442,536 36,052 442,536 41,664 90,076,012 4.913 0.463
2016 6,575 457,946 42,670 457,946 49,245 92,206,006 4.967 0.534
Geo- 0.21% 11.82% 21.75% 11.82% 17.38% 2.37% 9.23% 14.66%
Mean
Source: CSA report on Population Projection of Ethiopia for All Regions at Woreda Level from 2014-
2017, ERCA and Team computation Assumption: 1kg = 1 liter
The computed per capita consumption figures illustrate the actual consumption of edible oil in
Ethiopia. The per capita consumption of edible oil calculated from oil seeds other than edible
Palm oil increased from 0.3 liter in the year 2012 to 0.5 liter in the year 2016 by 14.66% growth
rate.
On the other hand, the per capita consumption of edible palm oil was increased from 3.5 liter
in the year 2012 to 5.0 liter in the year 2016 by 9.23% growth rate. The per capita
consumption of edible oil produced from Cotton seed, soya been and Oil seeds is much lower
than the per capita consumption of palm oil in Ethiopia. This implies that the imported edible
palm oil is being consumed much more than locally produced edible oil and imported edible
oil other than palm oil because of high price difference and low purchasing power of
consumers. However, the overall demand for edible oil is increasing with an increase in
income, way of life and consumption habit resulted from development in Ethiopia Economy.
In Ethiopia, Agro Industries, Bakery Industries, Food Products plc demand edible oil as input
for their industry. As per information obtained from Ministry of Trade, such industries
require or demand and request 1,512 metric ton import of edible oil per year on average.
These industries produce consumable product and hence their demand of edible oil as an
input increase as population and purchasing power increase which indirectly boost the
apparent consumption.

3.2.2 Demand Projection

Assuming that the consumption pattern observed in the past will continue in the future, the
demand for edible oil other than palm oil, is projected by average per capita consumption
growth rate (14.66%) registered in the past five years and taking per capita consumption of
year 2016 as base year. Similarly the demand for edible palm oil is projected by 9.235
growth rate of per capita consumption for the purpose of comparison and to estimate the total
demand for edible oil in Ethiopia. Total population of year 2017 sourced from CSA report on
Population Projection of Ethiopia for All Regions at Woreda Level from 2014-2017report is
taken as a base and projected by 2.37% growth rate observed from year 2014 - 2017 G.C.
As shown on the following table 3, the overall demand for edible oil will increase to 909,874
metric ton at the end of projection period from 569,597 metric ton at the base year. But if the
current consumption pattern continuous as it is, the demand for domestic product (edible oil
other than edible palm oil) will be 109,628 metric ton (12% of total projected demand) at the
end of projection period.
Table 3: Projected Demand of Edible Oil (‘Ton)
Total Projected PCC (kg) Projected Demand (Ton)
projected Edible Edible oil excluding Edible Edible oil excluding
Year Total projected
population palm oil edible palm oil palm oil palm oil demand (‘Ton)
2017 94,351,001 5.425 0.612 511,854 57,743 569,597

2018 96,587,120 5.926 0.702 572,375 67,804 640,179
2019 98,876,234 6.473 0.805 640,026 79,595 719,621
2020 101,219,601 7.071 0.923 715,724 93,426 809,149
2021 103,618,506 7.723 1.058 800,246 109,628 909,874
Source: Team computation

3.2.3 Supply
Supply of Refined Edible Oil in Ethiopia emanates from both domestic production and
import from abroad. As per Food, Beverage & Pharmaceutical Development Institute, the
supply of edible oil for consumption in Ethiopia can be seen from five perspectives.
 Large and modern private refineries produce and supply for the consumption of
middle and high income urban dwellers.
 Low and middle technology semi refinery or crude oil producer house industries in
small towns produce and supply to low and middle income urban dwellers.
 Rural house industries produce crude oil by traditional system and supply to rural
residents by low price.
 Since the difference between domestic productions supply and demand for edible oil
is being wide from time to time, government takes the action of importing palm oil
through selected importing companies and this supply takes the lion share.
 Private traders also import edible oil by free market.
a. Domestic supply
The production of edible oil in Ethiopia is characterized by refined, semi -refined and crude
edible oil. As per data obtained from Food, Beverage & Pharmaceutical Development
Institute, there are less than ten refineries, few semi refinery and so many crude oil producers
with different production capacity in Ethiopia. The potential areas for edible oil production in
Ethiopia are Addis Ababa cluster, Burayu cluster, Adama cluster and Bahirdar cluster. On
these sites government planned to organize producers and promote them to plant refineries by
cooperation.
As per the institutes and field survey information, currently the industry operates under
capacity on average 51% of their installed capacity. (Estimation based on 80 samples sourced
from the institute). Currently, local production in Ethiopia meet less than 5% of consumption
and such a gap has led Ethiopia to rely on imports, of mostly palm-oil, for its edible oil
consumption. The main reasons for producing under capacity of edible oil refineries are oil
seed supply shortage, high price competition from imported edible oil and small scale crude
oil producers’ aligned with policy gap. Some refineries are even closed up because of old

technology, site selection problem, etc in addition to raw material shortage and high market
competition.
As observed on the following table 4, the production of edible oil in Ethiopia is not consistent
and it fluctuates from year to year by 0.21% geo mean growth rate in the years under
consideration. Despite the fact that oilseeds are a large part of the country’s crop production
and the third largest export commodity for the country, local production of edible oil is low
with slight growth rate compared to concrete edible oil consumption. High price competition
from imported edible oil and crude oil producers are the major challenge for refined edible
oil production in addition to oil seed supply shortage. Weak backward linkage among the
value chain and outdated edible oil processing technology are also among the factors
contributing to low domestic production.
Table 5.4: Edible Oil Production Trend in Ethiopia (Tons)
Year 2012 2013 2014 2015 2016* Geo Mean

Production 6,520 4,573 9,596 5,612 6,575 0.21%
Source: CSA Report on Large and Medium Scale Manufacturing
*Estimate (Average)
Even though it is difficult to account the capacity and production of small scale producers of
semi refined and crude edible oil since they are scattered all over the country and no
organized data, they supply significant amount to low income consumers especially at rural
areas.
The supply data depicted on the above table 4 is only production (both refined and crude oil)
of large and medium scale firms registered in the specified CSA report excluding production
at small scale. As a result, the domestic supply is expected more than the figures on the table
4 above.
As per data obtained from Food, Beverage and Pharmaceutical Industry Development
Institute, 80 firms the institute surveyed on year 2017 G.C have capacity to produce 379,370
ton per year and actually produce 194,401 tons of edible oil per year by 51% capacity
utilization on average.

b. Expansion and New entrants

As per data obtained from Food, Beverage & Pharmaceutical Development Institute, there is
one expansion and four new entrant firms on edible oil production. Their capacity and
implementation plan is depicted on the following table 5.
Table 5: Expansion and New Entrant Edible Oil Producing Firms
Project Name Capacity Year of
Sr/No. Project Site (Ton/24hr) Commencement
1. Right Edible Oil Factory (New) Adama 50 2010 E.C.

2. Shemu PLC (New) Dire Dawa 100 2009 E.C.
3. Tena Food Products Factory Addis Ababa 150 2009 E.C.
(Exp.)
4. WA Oil Production (New) Debre Markos 70 2010 E.C.
5. Fibela Agro Processing PLC Gojam (Bure) 360 2009 E.C.
(New)
Source: Food, Beverage & Pharmaceutical Development Institute
As can be observed from the above table 5, two new entrant and one expansion firms start
operation this year (2009 E.C.) while the rest two new firms start operation next year (2010
E.C). So their supply is included in the future domestic supply of edible oil by assuming they
will start and operate constantly at an industry average (51%) of their installed capacity.
c. Import
Import constitutes the major and lion’s share part of country’s edible oil supply. Currently,
government of Ethiopia imports edible palm oil from Indonesia and Malaysia and supply to
consumers (especially for low income society) at lower price to make them beneficiary in
both price and accessibility wise.
As can be seen on the following table 6, imports of edible oil have been rapidly increasing
over the last five years, with annual growth rate of 13%. The percent share of edible palm oil
out of total import is 94%, 89%, 97%, 92% and 91% in the years 2012, 2013, 2014, 2015 and
2016 respectively.
In year 2016 G.C, Ethiopia imported 500,616 metric tons of cooking oil, valued at nearly
$501 million dollars out of which 457,946 metric ton is edible palm oil. Generally, edible
palm oil constitutes more than 90% imported oil, because of its price competitiveness. The
remaining imported edible oil is made up of sunflower, soybean and olive oils. The leading

supplier of soybean oil is Egypt, while Turkey is the largest supplier of sunflower oil. (USDA
Foreign Agricultural Service Report on Oil Seeds and Products, 2016)
Table 6: Edible oil Import Volume (‘Ton)
Type of edible oil imported Edible Oil Import Trend (Ton) Geo
2012 2013 2014 2015 2016 Mean
Edible Palm Oil 292,797 139,899 377,763 442,536 457,946 12%
Edible Sunflower Oil 1,453 2,198 2,450 9,704 11,768 69%
Edible Soya Oil 654 2,001 656 6,746 6,774 79%
Imported edible
oil other than
Edible Vegetable Oil 17,041 13,487 11,316 16,954 22,109 7%

Edible Olive Oil 174 253 308 758 887 50%
palm oil
Edible Sesame Oil 14 5 16 13 5 -23%

Others Edible Oil 85 194 577 1,877 1,127 91%
Sub total 19,420 18,139 11,323 36,052 42,670 22%
Total (Palm oil plus others oil) 312,217 158,038 389,086 478,588 500,616 13%
Source: ERCA, Food, Beverage & Pharmaceutical Development Institute Basic Information Data
The total existing supply of edible oil is the sum of domestic production and imported
quantity. Out of total supply domestic production share is only 1.30% in the year 2016 G.C.
Similarly the survey study conducted by Food, Beverage and Pharmaceutical Development
Institute on “Problems and Possible Solutions of Edible Oil Supply, April 2009 E.C”
indicated that the percent share of domestic production is only 3% out of total supply in year
2015 G.C.
Table 7: Total Supply of Edible Oil (‘Ton)
Year 2012 2013 2014 2015 2016 Geo mean
Domestic production 6,520 4,573 9,596 5,612 6,575 0.21%
Edible palm oil 292,797 139,899 377,763 442,536 457,946 11.82%
Import
Edible Oils excl. palm oil 19,420 18,139 11,323 36,052 42,670 21.75%
Total imported edible oil 312,217 158,038 389,086 478,588 500,616 12.53%
Total supply (Domestic 12.31%
production plus Import) 318,737 162,611 398,682 484,200 507,191
Source: CSA and ERCA
NB: Excl. = excluding
3.2.4 Supply Projection

The future supply of refined edible oil is projected by assuming that supply trend observed in
the past five years will continue in the near future. Accordingly, the following points are
considered to forces supply.
 Domestic production of edible oil and registered past five years growth rate (0.21%)
from CSA report on medium and large scale manufacturing report is used to forecast
future supply.
 Supply of new entrant and expansion is estimated based on the fact that existing firms
operate 240 days by two shifts per year (existing experience). The new entrant and
expansion firms are assumed to start and operate constantly at industry average (51%) of
their installed capacity.
 Past trend growth rate of total import (13%) is used to forecast future import of edible
oil.
As shown on the following table 8, the future total supply will increase to 988,863 tons at the
end of projection period from 622,310 tons in the year 2017 by 12% average growth rate.
This projection is based on the past and existing experience. But, if problems and challenges
of the sector are solved, the domestic product supply will be much more than the projected
figures and the import will be expected to decline in the future.
Table 8: Projected Supply (‘Ton)
Description 2017 2018 2019 2020 2021
Existing domestic supply 6,589 6,603 6,617 6,630 6,644
New entrant & expansion 50,025 59,866 59,866 59,866 59,866
Projected domestic production 56,614 66,469 66,483 66,496 66,510
Import projection 565,696 639,237 722,337 816,241 922,353
Total projected supply 622,310 705,706 788,820 882,737 988,863
3.2.5 Demand - Supply Gap

Despite of Ethiopia’s favorable geographical condition and potential areas for oil seed
production even for export, and existence of many firms engaged in edible oil production, it
is fact that more than 98% demand for edible oil is being satisfied by imported edible oil as
exhibited in the past five years. Domestic production fills the gap (only less than 2%) of
demand and the firm performs under capacity since the competitive position of imported
edible oil out shines the domestic production being competitive in price. If there is no

observable remedial action from concerned stake holders to alleviate the prevailing bottle
neck in the sub-sector, import will continue at its past pace and the competitive position of
domestic edible oil producers falls in question to share the projected gap shown on table 5.9
below. As discussed in the demand part, the lion share of demand constituent was palm oil
once as a replica of consumers were high price elastic relative to other types of edible oil.
This prevalent situation in the market appreciates actors (firms) which base their raw material
other than oil seeds, soya bean, and cotton seed. Hence, unless otherwise aforementioned
problems and challenges of the sub-sector are solved and/or the firm has a pragmatic strategy
to overcome them, the beneath Demand-Supply gap is in stiff market competition from bulk
and lower price imported quantity to secure domestic market share.
From the market analysis, the following findings have to be considered together with the
quantified gap.
 The volume of other edible oil is far below than edible palm oil when compared in
terms of magnitude;
 Maximum volume of domestic production of edible oil is so meager,i.e.,9,596 ton in

year 2014;
 Average domestic production of edible oil is recorded to be 6,575 ton and registered
past five years growth rate is so minimal, i.e., 0.21%;
 Average five years apparent consumption (effective demand) is 374,284 ton;
 Market share of domestic edible oil production is calculated to be 1.76%;and
 Average five years per capita consumption of edible palm oil is estimated to be 3.86
kg far exceeding other types of edible oil, i.e., 0.36 kg as a repercussion of trend of
consumption.
Table 9: Demand Supply Gap of Overall Edible Oil in Ethiopia

Projected domestic Demand -Supply Gap
Year Demand (‘Ton) production (‘Ton) (‘Ton)
2017 569,597 56,614 512,983
2018 640,179 66,469 573,710
2019 719,621 66,483 653,138
2020 809,149 66,496 742,653

2021 909,874 66,510 843,364

3.3 By products
In the edible oil production process there are two types of co products (husk and cake)
produced and used as animal feed. These products are the side product of extraction process.
If the edible production process of the firm have no decortications plant, the by product will
be oil cake only. Both by products are highly demanded product in the market and being sold
at the factory gate to the local community as well as traders. The co products production rate
per unit of input used and its price is included in the parameter part of the study.
3.4 Market Arrangement and Strategy
Edible oil refining firms have heavy competition from imports. The price of domestically
produced oil is usually higher than the imported palm oil. There was also a consumer perception
that domestic product is inferior in quality compared to imported one. The high price of
domestically produced edible oil with poor quality perception from customers compared to
imports makes domestic product not to be competent in the market.
As per information obtained from field visit and survey, consumers’ perception towards the
domestically produced edible oil has been changing to good by extensive advertisement
campaign made by the incumbent refineries. Consumers start perceiving that domestically
produced oil has superior quality to imports. Another challenge that domestic refineries face
is that small scale oil seed crushers supply crude edible oil at low price compared to refined
edible oil. These small scale oil seed crushers have an advantage over large scale oil
refineries in terms of price because of their low operation cost. New entrant firm is expected
to confront with these challenges and required to have an extensive advertisement campaign
to promote the health benefit of refined edible oil over unrefined edible oil and palm oil.
Small scale edible oil producers supply to the supermarket customers by covering
transportation cost to scope up high competition. Large scale oil refineries in the country
have almost similar output selling strategy with small scale crude oil producers. Most of them
have selling outlet at their farm get and in the Central market, Addis Ababa. Whole sellers
and large institutional buyers directly purchase edible oil from the refineries at the factory
gate or order the producers to supply at their shop gate. Transportation cost from the

refineries to the central market and nearby market outlets is covered by the refineries
themselves and added on the final product price.
3.5 Market Channel
Producer (Refiner)
Consumer
Whole Seller
Import Consumer
Retailer
Consumer
Figure 5.1: Market value chain
3.6 Price Trend
Edible oil is among the commodities with price skyrocketed and promoted the government of
Ethiopia to intervene in the market through importing of the palm oil. The increase in refined
edible oil price is cost-push rather than demand-pull. The high production cost of refineries
contributed for the escalation of prices of edible oil. The devaluation of exchange rate, by
increasing the price of imported inputs; and the high and increasing price the major raw
materials (of oilseeds) are the major factors. Since there is no organized data on price trend of
edible oil, the study includes only current price per unit in the parameter part of the
study.
The current retail price of imported edible oil and locally produced crude oil is depicted as
follows for the purpose of comparison and contrast. As can be seen below, the imported palm
oil price is much more less than locally produced Edible oils price.

 Palm oil price (import)..............................................................................45 birr/Liter

 Refined sunflower oil (imported) ............................................................75 birr/Liter
 Crude nigger oil (local product)................................................................60 birr/Liter
 Sesame Seed (local product)…………………………………………….70 birr/Liter
 Crude sunflower, groundnut and lint seed oil (local product)..................54 birr/Liter
 Oil cake (by product)…………………………………………………….3500 birr/ton
3.7 Plant Capacity

Based on the unsatisfied demand of edible oil and availability of the major raw
material, i.e., sesame and Niger seed, the envisaged edible oil plant will have a production
capacity of 2,400 tonnes of sesame oil and 1,800 tonnes Niger seed per annum, in a single shift
of 8 hours per day and 300 working days per year. The plant will also produce 4,500 tonnes of
oil cake per annum that can be used for animal feed.
Table 10: Plant Capacity
S.R Product type Total Production (Ton)
1 Niger seed oil 1,800

2 Sesame seed oil 2,400
Sub total 4200
3 Oil cack 4500
3.8 Production Programme

Considering a period for production skill development and market penetration, the
capacity utilization rate is set at 75%, 80%, 95% in the first, second and third year of
operation, respectively. The plant will operate at full capacity in the fourth year and then
after.
4. Material and Inputs

4.1 Raw Material and Auxiliary Materials
The main raw material required by the edible oil plant is the oil bearing sesame and Niger seed.
The region, especially in the eastern part, has very high potential for this seed. The
auxiliary raw materials necessary for refining the oil and packing are phosphoric acid,
bleaching earth, caustic soda, common salt, barrel, plastic (PET) bottles and packing card
boards. All raw & auxiliary materials except phosphoric acid are locally available.
The total annual cost of raw
materials is estimated at birr 98.56 million. Annual requirements and cost of raw &
auxiliary materials are depicted on Table 11.
Table 11: Raw Material and Auxiliary Materials
No Material and Input Qty (tons) Cost
1 Sesame Seed 2400 48,000,000
2 Niger Seed 1800 36,000,000
3 Caustic Soda 35 1,375,000
4 Bleaching earth 115 1,500,000
5 Phosphoric acid 35 1,900,000
6 Barrel (2001t) 135 1,750,000
7 common salt 25 1,800,000
8 Plastic container 1 lt 1,750,000 pcs 5,500,000
9 packing card boards 200,000 psc 2,500,000
sub total 98,575,000
4.2 Utilities
Utilities required for the envisaged oil mill include: electricity, water and fuel oil.
Annual requirement and their costs at full operation capacity of the mill are depicted on
Table 12. The total cost of utilities is estimated at Birr 4,260,000 annually
Table 12: Utilities
N Descriptio Unit Qty/year Uni Total

o n t Cost

cost
1 Electricity KW 1,000,00 1.5 1,500,00
h 0 0
2 Furnace oil Kg 300,000 7 2,100,00
0
3 Water M3 120,000 5.5 660,000
4 Total 4,260,00
0
5. Technology and Engineering

5.1 Technology
A. Production Process
There are two extraction technologies, one is mechanical pressing and the other is solvent
extraction. The most important factor in the choice of the processing plant, and the
processing sequence, is the seed to be worked, its yield, capacity and the quality of
products to be achieved. The minimum capacity recommended for solvent extraction
process is 150-200 t /day feed stock. In addition to the above restriction, mechanical
presses has the advantage of reduced capital cost, no danger of fire from combustible
solvent, simpler process control and smaller number of skilled staff over solvent
extraction process. Therefore, screw press expulsion is recommended for the envisaged
plant.
The seed requires a thorough cleaning process to remove sand, stalk, plant debris and any
foreign matters by rotary or table sieves, usually with air aspiration by fans, and cyclones
for dust removal from the air. Then, the seed have to be prepared for efficient oil
recovery. The stages involved in pre-treatment are:
 Size reduction of the seeds by breaking them, usually in fluted roller mills;
 Flaking of the seed particles in roller mills with smooth roller surfaces (0.2 -
0.3 mm);
 Conditioning the seed by adjusting their moisture content and temperature,
while keeping the seed hot (say 90-950C) for periods that vary widely (30-60
minutes).

Then, extraction by using high pressure screw press follows.

The crude oil obtained from the press requires undergoing refining processes to produce a
bland tasting, light coloured oil without odour or flavour. To obtain fully refined oil from
crude oil, the following steps are necessary: degumming, neutralizing, bleaching,
Winterizing and deodorizing. The refined oil is, then, packed and marketed. The main
waste material from oil manufacture is water and much attention should be given to the
water treatment to avoid its adverse effect in the environment. Biological treatment by
aerating, activated sludge system, addition of flocculating agent and filtration are used
before the effluent is discharged.
Oil refining line

Filter machine Deodorization process
B. Machinery and Equipment

Machinery and equipment required by the proposed project are shown in Table 13. The
total cost of machinery and equipment is estimated to be Birr 30.5 million.
Table 12: List of Machinery and Equipment
No Description Quantity Cost

1 Seed cleaning unit 1 1,016,666.67
2 Dust blower 1 1,016,666.67
3 Cyclones 2 2,033,333.33
4 Hammer mill 1 1,016,666.67
5 Screw conveyors 3 3,050,000.00
6 Bucket elevator 2 2,033,333.33
7 Roller crusher 1 1,016,666.67
8 Screw press 1 1,016,666.67
9 Weighing scale 2 2,033,333.33
10 holding tanks 3 3,050,000.00
11 Pumps 5 5,083,333.33
12 Neutralizer 1 1,016,666.67
13 Bleacher 1 1,016,666.67
14 Vacuum pump 1 1,016,666.67
15 Condenses 1 1,016,666.67
16 Deodorizer 1 1,016,666.67
17 Water treatment plant 1 1,016,666.67
18 Boiler house 1 1,016,666.67
19 Filling sealing machine 1 1,016,666.67
Total Cost 30,500,000

5.2 Land, Building and Civil Works
5.2.1 Building and construction
The total land area designated for the factory buildings is about 5,000 square meters. A minimum
of total built up area of 4,000 square meters would be allotted for factory hall, Warehouse,
Administration Offices and Packaging workshop and other facilities. The building and
construction cost is estimated based on built up areas and rates for various categories of
structures. The factory building and stores shall be built with local materials and the total
estimated cost of construction is estimated to be Birr 26.78 million.
Table 14: Land, Building and Civil Work
No Block Type No. Of Block Area/M2 Cost
1 Production Room 1 1,500 9,000,000
2 Product Store 1 1,000 6,000,000
3 Administration offices 1 1,000 6,000,000
4 Packaging workshop 1 500 3,000,000
5 Land clearing and levelling 1,000,000
6 Land lease (10%) 500,000
Sub Total 25,500,000
Contingency (5%) 1,275,000
Grand Total - 26,775,000
5.2.2 Land Lease
The overall land required is about 5,000 square meters. Land lease cost at the rate of Birr 1,000
per m2 average and for 99 years land holding is estimated to be Birr 5 million. Thus, the total
land & construction cost assuming that the total land lease cost will be paid in advance (10%)
amounts to Birr 500,000 government has following significances the remaining 112,500 amount
paid within 40 years per year .
5.2.3 Proposed Location

Plant location is a compromise between the availability of markets, raw materials, labour,
energy and water. To avoid bulk raw materials transportation, the plant is proposed to be
located at region, where most of the zones can grow sesame and Niger seed. The plant can also
get market for the oil cake as animal feed in the nearby. The proposed location of the plant is
in Amhara Region, Gondar town.

6. Organization and Management

6.1 Man Rower Requirement
Man power requirement vary with level and technology of production involved in the industry in
question. Most mills in the oil production industry are driven to operate 24 hours, 6-7 days a
week, by the high expense of plant and machinery, huge unsatisfied demand and significant
production start-up cost, among others. Some mills operate two 12-hour shifts and other operates
three 8-hour shifts. Considering the type of work in the involved and other factors, the promoter
planned to operate 8-hour shifts for 300 working days per annum and shall recruit at least 179
preliminary skilled employees and 321 daily labours when operation commences. As the
proposed project surrounding is good source of adequate workforce, the required skilled and
semiskilled manpower would be recruited from the society found in and around the project area.
The following table shows the total manpower requirement and remuneration plan.
Table 14: Man Power Requirement
No. of Monthly Annual

No Position
employee salary salary
1 Management
1.1 General manager 1 15,000 180,000
1.2 Executive-Secretary 4 3,500 168,000
2 Production & technical
2.1 Department Manager 1 10,500 126,000
2.2 Production Supervisions 4 4,000 192,000
2.3 Machine Operators 10 2,500 300,000
2.4 Mechanical engineer 5 3,500 210,000
2.5 Electrician 6 2,500 180,000
2.6 Forklift Operator 11 1,500 198,000
2.7 Laborers 28 750 252,000
3 Quality control & standard
3.2 Chemist 10 3,500 420,000
4 Administration
4.2 Human resource officer 5 3,500 210,000
4.3 Safety officer 1 2,500 30,000
4.4 Central Archivist 3 2,500 90,000
4.5 General service coordinator 4 2,500 120,000
4.6 Receptionist/Tell.operation 3 1,750 63,000

4.7 Security Head 1 1,500 18,000

4.8 Driver 4 2,750 132,000
4.9 Wage labourers coordinator 3 1,500 54,000
4.10 Security personnel 8 1,500 144,000
4.11 Time keeper 5 1,200 72,000
4.12 Tools keeper 6 1,200 86,400
4.13 Cleaner and Janitor 10 850 102,000
4.14 Gardener 8 850 81,600
4.15 Messenger 2 850 20,400
4.16 daily labour 321 500 1,926,000
5 Finance Department
5.2 Financial Analysis 3 3,500 126,000
5.3 Accountant 4 3,000 144,000
5.4 Cashier 3 2,700 8,100
6 Marketing & Customer Dvt
6.2 Purchaser 7 3,000 252,000
6.3 Sales person 5 3,000 180,000
6.4 Product Receipt/Deliv.officer 10 1,500 180,000
Sub Total 500 131,400 6,769,500
Benefit (10%) 676,950
Grand Total 7,446,450

6.2 Organizational Structure

Nature, scale and size of business are the normal factors which determine forms of internal
organization. The oil production firm of similar size as the envisaged project currently operating in
Ethiopia have line type of organizational structure, where each department is a complete self-
contained unit. Based on this experience, the organization structure is devised to incorporate owners
at the top followed by general manager and other line departments. The owner will have the power
to control the overall activities of the proposed factory and decide on the highest level attention
requiring issues that impede the normal operation or that affect the future performance of the
project. The General Manager, there will be separate departments which are responsible for their
respective units.
The organizational structure of the factory is proposed to look like the following.
Owners
General Manager
Marketing & Finance

Production & Quality control & Administration
Customer Dvt Department
technical standard Department Department
Department Department
[Type text] Page 33

6.3 Training Requirement

Workers directly related to production; supervisors, foreman, operators, mechanics and
electricians need to be given on-the-job training for one month by qualified personnel of
machinery supplier.
7. Environmental Analysis
7.1 Environmental protection and safety
Environmental issues associated with the operational phase of edible oil production and
processing primarily include the following:
• Solid waste and by-products
• Water consumption and management
• Energy consumption and management
7.1.1 Solid waste and by-products
Edible oil processing activities generate significant quantities of organic solid waste, residues and
by-products, the amount of waste generated depends on the quality of the raw materials and on
process efficiency. Wastes, residues, and by-products may be used for producing commercially
viable by-products or for energy generation. Other solid wastes from the Niger seed oil
manufacturing process include soap stock and spent acids from chemical refining of crude oil;
spent bleaching earth containing gums, metals, and pigments; deodorizer distillate from the steam
distillation of refined edible oils; mucilage from degumming; and spent catalysts and filtering aid
from the hardening process.
Recommended techniques for minimizing the volume of solid waste and by-products for disposal
include the following:
Reduce product losses through better production/storage control (e.g., monitor and adjust air
humidity to prevent product losses caused by the formation of molds on edible materials).
• Collect residues from the raw material preparation phase for conditioning (drying) and
reprocessing (grinding) to yield by-products (e.g., animal feed).
34
• Return waste and residues to fields to assist in soil nutrient management; for example,
EFBs from oil palm plantations with tree trimmings are a valuable soil amendment and/or
can be composted with vegetable oil wastewater effluent.
7.1.2 Water consumption and management
Edible oil facilities require significant amounts of water for crude oil production (cooling water),
chemical neutralization processes, and subsequent washing and deodorization. General
recommendations to reduce water consumption, especially where it may be a limited natural
resource. Sector-specific recommendations to reduce water consumption, optimize water use
efficiency, and reduce subsequent wastewater volumes include the following:
When economically viable, consider the use of physical refining instead of chemical refining to
reduce water consumption.
• Replace water-based conveyor systems by mechanical systems  Use dry clean up

techniques before rinsing floors.
• Apply cleaning chemicals using the correct dose and application method.
• Properly treat and discharge cleaning solutions
7.1.3 Energy consumption and management

Edible oil processing facilities use energy to heat water and produce steam both for process
applications and cleaning processes. Other common energy consumption systems include
refrigeration and compressed air. Sector-specific recommendations include the following:
• Improve uniformity of feed to stabilize and reduce energy requirements. Increase
efficiency of air removal in sterilization vessels to improve heat transfer.
• Identify and implement opportunities for process heat exchange
• Where feasible, use anaerobic digestion for wastewater treatment and capture methane for
heat and / or power production.
35
7.1.4 Social benefit of the project
The envisaged project possesses wide range of benefits that help promote the socio-economic
goals and objectives stated in the strategic plan of the Amharaa Regional State. It also boosts the
inter-sectorial linkage between the agricultural and industrial sector. At the same time, therefore,
it helps diversify the economic activity of the region. The other major benefits are listed as
follows:
Employment and Income Generation the proposed project is expected to create employment
opportunity to several citizens of the region. That is, it will provide permanent employment to 179
professionals as well as support stuffs. Consequently the project creates income of Birr 172
million birr per year. This would be one of the commendable accomplishments of the project.
Environment Project: - The proposed production process is environment friendly.

Profit Generation The project is found to be financially viable and earns a profit of Birr 1.7
billion within the project life. Such result induces the project promoters to reinvest the profit
which, therefore, increases the investment magnitude in the region.
Tax Revenue In the project life under consideration, the region will collect about Birr 60 million
from corporate tax payment alone (i.e. excluding income tax, sales tax and VAT). Such result
create additional fund for the regional government that will be used in expanding social and other
basic services in the region
Import Substitution and Foreign Exchange Saving Based on the projected figure we learn that
in the project life an estimated amount of US Dollar 50.12 million will be saved as a result of the
proposed project. This will create room for the saved hard currency to be allocated on other vital
and strategic sectors.
36
8. Financial Analysis
The financial resource is a prime resource for undertaking any activities. The financial analysis of
the sesame oil project is based on the data presented in the
previous chapters and the following assumptions:-
Construction period 1 year
Source of finance 30 % equity
70 % loan
Tax holidays 3 years
Bank interest 12%
Discount cash flow 12.5%
Accounts receivable 30 days
Raw material local 30days
Work in progress 5 days
Finished products 30 days
Cash in hand 5 days
Insurance 0.75% of fixed investment
Repair and Maintenance 1% of fixed investment
Promotional Expense 1% of sales
Depreciation
Building & Construction 5%
Plant and Machine 10%
Vehicles 20%
Office Equipment 10%
8.1 Total Initial Investment Cost

The total investment cost of the project including working capital is estimated at Birr
95.04 million of which 40 per cent will be required in foreign currency.
The major breakdown of the total initial investment cost is shown in Table 15
Table 15: Investment Cost
Description Total Investment cost (birr)
Building & Construction 26,775,000
Plant And Machinery 30,500,000
Vehicles 8,900,000
Office Equipment 905,395
Working Capital requirement 27,960,812
Total Project Investment Cost 95,041,207
37
8.2 Production Costs

The annual production cost at full operation capacity is estimated at Birr 117.29
million (see Table 17). The material and utility cost accounts for 87.68 per cent, while
repair and maintenance take 0.64 per cent of the production cost.
Table 16: Raw Material Requirement
No Material and Input Qty (tons) Cost
1 Sesame Seed 2400 48,000,000
2 Niger Seed 1800 36,000,000
3 Caustic Soda 35 1,375,000

4 Bleaching earth 115 1,500,000
5 Phosphoric acid 35 1,900,000
6 Barrel (2001t) 135 1,750,000.00
7 common salt 25 1,800,000

8 Plastic container 1 lt 1,750,000 pcs 5,500,000
9 packing card boards 200,000 psc 2,500,000
sub total 98,575,000
Table 17: Production Cost

S.N Items Cots
1 Raw materials 98,575,000.00
2 Utilities 4,260,000
3 Wages and Salaries 7,446,450
4 Spares and Maintenance 750,000
Factory costs 111,031,450.00
5 Depreciation 6,259,290
Total Production Cost 117,290,739.50
8.3 Sales Forecast

The financial projections are made for a period of ten years. Total sales revenues of the project are
determined based on various criteria that consists types of products sold, total quantities of
products sold, and selling prices of the products. The overall plant system is designed with especial
features that enable the production of edible oil from Niger and Sesame seed. The
technology selected offers greater opportunity to produce edible oils from any of the given oil
seeds variety based on the prevailing market situation. Taking into account the current market
38
demand, raw materials availability and future prospects, the subject project is planned to produce
edible oil of Niger seed and Sesame seed at a product mix ratio of 43% and 57%, respectively.
The project under consideration when it is at operation generates income mainly from two business
activities: sales of refined edible oil and by-products (oil cake). The oil is sold to the general public
for cocking food whereas the oil cake will sold to commercial livestock farms such as dairy,
poultry, and fattening farms. At full capacity utilization the envisaged project is planned to generate
Birr 300.58 million.
Table 18: Sales Forecast
SN Description Revenue
1 Sesame Oil 168,000,000
2 Niger Oil 117,000,000
3 Oil Cake 15,575,000
Total 300,575,000
8.4 Financial Evaluation

A. Profitability
As per the projected profit and loss statements, the project is planned to generate a net income of
Birr 171.26 million in the first year which is projected to grow to Birr 196.38 million in the tenth
year. The profit of the project expected at its initial investment period is taken as reasonable in view
of various project implementation aspects and influences.
The income statement and the other indicators of profitability show that the project is
viable.
B. Break-even Analysis
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= 30%

Sales – Variable Cost
C. 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 1 year.
39
D. Internal Rate of Return and Net Present Value

Based on the cash flow statement, the calculated IRR of the project is 29 % and the net present
value at 12.5% discount rate is Birr 2.52 billion.
E. Economic Benefits
The project can create employment for 500 persons. In addition to supply of the domestic
needs, the project will generate Birr 504.45 million in terms of tax revenue over the project life of
10 years. The establishment of such factory will have a foreign exchange saving effect to the
country by substituting the current imports.
40
Descriptions Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Direct costs:
Raw material
98,575,000 103,503,750 108,678,938 114,112,884 119,818,529 125,809,455 132,099,928 138,704,924 145,640,170 152,922,179
Sub-total
98,575,000 103,503,750 108,678,938 114,112,884 119,818,529 125,809,455 132,099,928 138,704,924 145,640,170 152,922,179
Indirect
costs:
Salary &
Wages 7,446,450 7,818,773 8,209,711 8,620,197 9,051,207 9,503,767 9,978,955 10,477,903 11,001,798 11,551,888
Insurance
503,103 528,258 554,671 582,405 611,525 642,101 674,206 707,916 743,312 780,478
Repair and
Maintenance 670,804 704,344 739,561 776,539 815,366 856,135 898,941 943,889 991,083 1,040,637
Lease
Payment 112,500 112,500 112,500 112,500 112,500 112,500 112,500 112,500 112,500 112,500
Electricity
Power 1,500,000 1,575,000 1,653,750 1,736,438 1,823,259 1,914,422 2,010,143 2,110,651 2,216,183 2,326,992
Water
660,000 693,000 727,650 764,033 802,234 842,346 884,463 928,686 975,121 1,023,877
Furnace oil
2,100,000 2,205,000 2,315,250 2,431,013 2,552,563 2,680,191 2,814,201 2,954,911 3,102,656 3,257,789
Supplies
500,000 525,000 551,250 578,813 607,753 638,141 670,048 703,550 738,728 775,664
Misc. Expense
300,000 315,000 330,750 347,288 364,652 382,884 402,029 422,130 443,237 465,398
Promotional
Expense 3,005,750 3,156,038 6,627,679 6,959,063 7,307,016 7,672,367 8,055,985 8,458,784 8,881,723 9,325,810
Sub-total
16,798,607 17,632,912 21,822,772 22,908,286 24,048,075 25,244,854 26,501,472 27,820,920 29,206,341 30,661,033
Total
115,373,607 121,136,662 130,501,710 137,021,170 143,866,604 151,054,309 158,601,399 166,525,844 174,846,512 183,583,212
Annex 1: Operating cots
[Type text] Page 41

Annex 2:Projected Profit and / Loss Statement
Description Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
GrossSales Revenue 300,575,000 315,603,750 331,383,938 347,953,134 365,350,791 383,618,331 402,799,247 422,939,210 444,086,170 466,290,479
Direct Costs 98,575,000 103,503,750 108,678,938 114,112,884 119,818,529 125,809,455 132,099,928 138,704,924 145,640,170 152,922,179
Gross Profit 202,000,000 212,100,000 222,705,000 233,840,250 245,532,263 257,808,876 270,699,319 284,234,285 298,446,000 313,368,300
Operating Expenses
Salary & Wages 7,446,450 7,818,773 8,209,711 8,620,197 9,051,207 9,503,767 9,978,955 10,477,903 11,001,798 11,551,888
Insurance 503,103 528,258 554,671 582,405 611,525 642,101 674,206 707,916 743,312 780,478
Repair and Maintenance 670,804 704,344 739,561 776,539 815,366 856,135 898,941 943,889 991,083 1,040,637
Lease Payment 112,500 118,125 124,031 130,233 136,744 143,582 150,761 158,299 166,214 174,524
Electricity Power 1,500,000 1,575,000 1,653,750 1,736,438 1,823,259 1,914,422 2,010,143 2,110,651 2,216,183 2,326,992
Water 660,000 693,000 727,650 764,033 802,234 842,346 884,463 928,686 975,121 1,023,877
Furnace oil 2,100,000 2,205,000 2,315,250 2,431,013 2,552,563 2,680,191 2,814,201 2,954,911 3,102,656 3,257,789
Supplies 500,000 525,000 551,250 578,813 607,753 638,141 670,048 703,550 738,728 775,664
Misc. Expense 300,000 315,000 330,750 347,288 364,652 382,884 402,029 422,130 443,237 465,398
Promotional Expense 3,005,750 3,156,038 3,313,839 3,479,531 3,653,508 3,836,183 4,027,992 4,229,392 4,440,862 4,662,905
Depreciation &
Amortization 6,259,290 6,259,290 6,259,290 6,259,290 6,259,290 6,259,290 6,259,290 6,259,290 6,259,290 6,259,290
totla Indirect cost 23,057,896 23,897,827 24,779,754 25,705,777 26,678,101 27,699,042 28,771,029 29,896,616 31,078,483 32,319,442
Profit Before Interest 178,942,104 188,202,173 197,925,246 208,134,473 218,854,161 230,109,834 241,928,290 254,337,669 267,367,517 281,048,857
Interest Payment 7,684,082 6,885,735 6,087,389 5,289,043 4,490,697 3,692,351 2,894,005 2,095,659 1,297,312 498,966
Net Profit before tax 171,258,022 181,316,438 191,837,857 202,845,430 214,363,464 226,417,483 239,034,285 252,242,010 266,070,204 280,549,891
Profit tax - - - 60,853,629 64,309,039 67,925,245 71,710,286 75,672,603 79,821,061 84,164,967
Net Profit after tax 171,258,022 181,316,438 191,837,857 141,991,801 150,054,425 158,492,238 167,324,000 176,569,407 186,249,143 196,384,924
Annex 3: Projected Cash Flow Statement
Description Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
1. Inflows
Own Fund 28,512,362
Bank Loan 66,528,845
Net Profit 171,258,022 181,316,438 191,837,857 141,991,801 150,054,425 158,492,238 167,324,000 176,569,407 186,249,143 196,384,924
Depreciation &
Amortization 6,259,290 6,259,290 6,259,290 6,259,290 6,259,290 6,259,290 6,259,290 6,259,290 6,259,290 6,259,290
Total Inflows 95,041,207 177,517,311 187,575,727 198,097,147 148,251,090 156,313,714 164,751,528 173,583,289 182,828,697 192,508,433 202,644,213
2. Out flows
Fixed Assets 67,080,395

Increase in
Working Capital 27,960,812 - 29,889,052 3,715,328 3,072,635 3,226,266 3,387,580 3,556,959 3,734,807 3,921,547 4,117,624
Pri. Repayment 6,652,885 6,652,885 6,652,885 6,652,885 6,652,885 6,652,885 6,652,885 6,652,885 6,652,885 6,652,885
Owners
withdrawal 42,814,505 45,329,109 47,959,464 35,497,950 37,513,606 39,623,060 41,831,000 44,142,352 46,562,286 49,096,231
Total out flows 95,041,207 49,467,390 81,871,046 58,327,677 45,223,469 47,392,757 49,663,524 52,040,843 54,530,043 57,136,717 59,866,740
Net Cash flows - 128,049,921 105,704,681 139,769,470 103,027,621 108,920,957 115,088,004 121,542,446 128,298,654 135,371,715 142,777,473
Cumulative Cash
Flows 128,049,921 233,754,602 373,524,072 476,551,693 585,472,650 700,560,654 822,103,100 950,401,754 1,085,773,470 1,228,550,943
Retained earning 128,443,516 135,987,328 143,878,393 106,493,851 112,540,819 118,869,179 125,493,000 132,427,055 139,686,857 147,288,693
Cumulative
retained
earning 128,443,516 264,430,845 408,309,238 514,803,088 627,343,907 746,213,086 871,706,085 1,004,133,141 1,143,819,998 1,291,108,691
Annex 4: Projected Balance Sheet Statement
Description Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Assets:
58547265
Cummulative Cash 0 128049921 233754602 373524072 476551693 700560654 822103100 950401754 1085773470 1228550943
0
working capital 27960812 27960812 57849865 61565193 64637827 67864094 71251674 74808632 78543439 82464986 86582610
65333674
Total Current Assets 27960812 156010734 291604467 435089265 541189521 771812328 896911733 1028945193 1168238455 1315133553
4
Fixed Assets
Building & Construction 26775000 25436250 24097500 22758750 21420000 20081250 18742500 17403750 16065000 14726250 13387500
plant and Machine 30500000 27450000 24400000 21350000 18300000 15250000 12200000 9150000 6100000 3050000 0
Vehicles 8900000 7120000 5340000 3560000 1780000 8900000 7120000 5340000 3560000 1780000 0
Office Equipment 905395 814856 724316 633777 543237 452698 362158 271619 181079 90540 0
Total Fixed Assets 67080395 60821106 54561816 48302527 42043237 44683948 38424658 32165369 25906079 19646790 13387500
69802069
Total Assets 95041207 216831839 346166283 483391791 583232758 810236986 929077101 1054851272 1187885245 1328521053
2
Liablity & Capital
Liability: Bank Loan 66528845 59875961 53223076 46570192 39917307 33264423 26611538 19958654 13305769 6652885 0
capital:
Cumulative retained 62734390
0 128443516 264430845 408309238 514803088 746213086 871706085 1004133141 1143819998 1291108691
earning 7
Owners Contribution 28512362 28512362 28512362 28512362 28512362 30212362 30212362 30212362 30212362 30212362 30212362
69082069
Total Liability & Capital 95041207 216831839 346166283 483391791 583232758 803036986 921877101 1047651272 1180685245 1321321053
2
Annex 5: Loan Repayment Schedule
Principal
Interest Payment Total Payment Ending Balance
Repayment
66,528,845.10
6,652,884.51 7,684,081.61 14,336,966.12 59,875,960.59
6,652,884.51 6,885,735.47 13,538,619.98 53,223,076.08
6,652,884.51 6,087,389.33 12,740,273.84 46,570,191.57
6,652,884.51 5,289,043.19 11,941,927.70 39,917,307.06
6,652,884.51 4,490,697.04 11,143,581.55 33,264,422.55
6,652,884.51 3,692,350.90 10,345,235.41 26,611,538.04
6,652,884.51 2,894,004.76 9,546,889.27 19,958,653.53
6,652,884.51 2,095,658.62 8,748,543.13 13,305,769.02
6,652,884.51 1,297,312.48 7,950,196.99 6,652,884.51
6,652,884.51 498,966.34

Feasibility Study On Edible Oil Manufacturing Project

Uploaded by

Copyright:

Available Formats

Feasibility Study On Edible Oil Manufacturing Project

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Feasibility Study On Edible Oil Manufacturing Project

Uploaded by

Copyright:

Available Formats

Feasibility Study on Edible Oil Manufacturing Project

Feasibility Study on Edible Oil Manufacturing Project

Project Owner:- ------------Manufacturing PLC

April 20, 2023

----------Manufacturing PLC Page 0

----------Manufacturing PLC Page 1

5.2.2 Land Lease....................................................................................................................30

----------Manufacturing PLC Page 2

Project Life 10 Years

IRR (Internal Rate of Return) 29%

----------Manufacturing PLC Page 3

----------Manufacturing PLC Page 4

2. Background of the Project

----------Manufacturing PLC Page 5

2.2 Project Description

----------Manufacturing PLC Page 6

2.3 Promoters’ Background

______________Manufacturing PLC is being promoted by three investors and brief profile of

----------Manufacturing PLC Page 7

 Hands on experience in, performance management, designing performance management

 Hands on experience in organizational assessment and designing, organization leadership gap

----------Manufacturing PLC Page 8

Hands on experience in providing trainings on collective bargaining and social dialogue,

 management, entrepreneurship, business planning, strategic planning, among others to

 Hands on experience on Business processing reengineering (involved on BPR of Ethiopians

----------Manufacturing PLC Page 9

----------Manufacturing PLC Page 10

 Generate a net profit of in the first year of operations by developing a

2.5 Product Description and Application

----------Manufacturing PLC Page 11

----------Manufacturing PLC Page 12

B. Apparent and per capita consumption

----------Manufacturing PLC Page 13

----------Manufacturing PLC Page 14

Table 2: Apparent and Per Capita Consumption of Edible Oil

----------Manufacturing PLC Page 15

3.2.2 Demand Projection

2017 94,351,001 5.425 0.612 511,854 57,743 569,597

Source: Team computation

----------Manufacturing PLC Page 16

 Private traders also import edible oil by free market.

----------Manufacturing PLC Page 17

Year 2012 2013 2014 2015 2016* Geo Mean

----------Manufacturing PLC Page 18

b. Expansion and New entrants

1. Right Edible Oil Factory (New) Adama 50 2010 E.C.

----------Manufacturing PLC Page 19

Edible Vegetable Oil 17,041 13,487 11,316 16,954 22,109 7%

Edible Sesame Oil 14 5 16 13 5 -23%

3.2.4 Supply Projection

----------Manufacturing PLC Page 20

3.2.5 Demand - Supply Gap

----------Manufacturing PLC Page 21

 Maximum volume of domestic production of edible oil is so meager,i.e.,9,596 ton in

 Average five years apparent consumption (effective demand) is 374,284 ton;

 Market share of domestic edible oil production is calculated to be 1.76%;and

Table 9: Demand Supply Gap of Overall Edible Oil in Ethiopia

----------Manufacturing PLC Page 22

2021 909,874 66,510 843,364