Agro-Logistics and Market Integration Hub(ALMIH)

Project Pre-Feasibility Study Development of Agro-Logistics and Market Integration Hub (ALMIH) in West Part of Amahara National Regional State

Pre-Feasibility Study

[Agro-Logistics and Market Integration Hub (ALMIH)]

-

Development of Agro-Logistics and Market Integration Hub (ALMIH) in West Part of Amahara National Regional State

Project Pre-Feasibility Study



Preface In every developmental endeavour, sustainability is one of the major critical issues that are to be given great emphasis based on systemic intervention. The provision of policies and strategically emulated agendas by their own virtue has substantive advantages in crafting the direction and soundness of purposes. Transformation from agrarian economy to modern economy needs an immense effort not only allocation of resources but solicitation of innovative ideas and systems which deemed to be beneficial for accelerating the planned developmental programs. On account of this notion, we can learn a great deal from developing nations who already make use of t heir expertise knowledge and large expenditure for testing and verifying of system functionality. The simplest thing to do is to search for these t hese sound projects and make an adaptation to our country specific. This concept note is one among such manoeuvres to ensure sustainability in agriculture and alleviate poverty.

The project was formerly produced and submitted to Bahirdar University as part of a term paper for the study of Masters of Business Administration in Executive. In



Table of Contents PREFACE..................................................................................................................... .................................................................................................................................. ............. III TABLE OF CONTENTS CONTENTS .......................................................... ......................................................................................................... ............................................... IV LIST OF FIGURES ................................................................... .................................................................................................................. ............................................... VI LIST OF TABLES ................................................................................................................. ................................................................................................................... .. VII VII LIST OF APPENDICES APPENDICES ....................................................................................................... ....................................................................................................... VIII ACRONYMS ACRONYMS ........................................................ .......................................................................................................................... ..................................................................... ... IX EXECUTIVE EXECUTIVE SUMMERY .............................................................................. ......................................................................................................... ........................... X LIMITATION OF THE STUDY........................................................ ............................................................................................ .................................... XII 1. INTRODUCTION INTRODUCTION .............................................................. .................................................................................................................. ....................................................1 1.1.

Background of the project ............................................................... .............................................................................................. ............................... 2 1.1.1. Demographic situation of the Amahara Amahara ........................................................ ................................................................. ......... 2 1.1.2. Socio-Economic condition ................................................................ ..................................................................................... ..................... 2 1.1.3. Agro ecology .............................................................. .......................................................................................................... ............................................3

1.2.

Purpose, objectives & scope of the t he project ................................................................... ..................................................................... 6 1.2.1. Purpose of the project .......................................................................................... ............................................................................................ .. 6 1.2.2. Project General Objectives ................................................................................. .................................................................................... ... 6 1.2.3. Project Specific Objectives .................................................................................... .................................................................................... 6

Pre-Feasibility Study 4.3.


Value Chain and Marketing strategy st rategy of the t he project .....................................................20 4.3.1. The agro-industry system ..................................................................................... .....................................................................................20 4.3.2. Aggregation of outputs as a viable viable marketing strategy ....................................... ....................................... 20

4.4.

Materials and Input Supplies Study ............................................................................. 21 4.4.1. Grain Crops .........................................................................................................21 4.4.2. Agricultural Inputs ................................................................. ............................................................................................... .............................. 21 4.4.3. The role of Farmers Cooperatives ....................................................................... ....................................................................... 22

5. TECHNICAL TECHNICAL AND TECHNOLOGICAL TECHNOLOGICAL ASPECTS....................................................... ASPECTS.......................................................24 5.1.

Technical & technological requirements of the project ............................................... ............................................... 27

5.2.

Location and site Selection .......................................................................................... .......................................................................................... 28 5.2.1. Locations for Development Development of Agro-Logistics and Marketing Marketing Hub ..................... 28 5.2.2. Possible Locations for Development of Agro-Logistics Hub ............................... 28 5.2.3. Proposed site of ALMIH in West Gojjam Zone....................................................31 5.2.4. Details of Agro and Horticultural Horticultural produce of B/dar Zuria Zuria and Mecha weredas. weredas. 31 5.2.5. Accessibility of the selected site to the rest of West part part of Amhara regions....... 32

5.3.

Options for Project Implementation............................................................. ............................................................................. ................ 33

5.4.

Modes of Implementation ............................................................................................ ............................................................................................ 35 5.4.1. Role and obligations of the Private Partner for development of ALMIH ............ 37 5.4.2. Role and obligations of the ANRS for development development of ALMIH

38



List of Figures Figure 1: ANRS Government Revenue and Expenditure from 1995-2010 .................................. .................................. 2 Figure 2: Trend of Agricultural Productivity over the past eight ei ght years (Qt/ha) ............................ 4 Figure 3: Production (P) (Millions of Qtls) versus Cultivated land (C) (Millions of Htrs) .......... .......... 4 Figure 4: Areas and Production through Irrigation from 2001-2010 ............................................ 5 Figure 5: Topographic map of ANRS ................................................................. ........................................................................................... .......................... 5 Figure 6: Conceptual framework of Agro-logistics and Market Integration Hub......................... 9 Figure 7: Flow of produce in the agro logistics and marketing integration int egration hub ......................... 11 Figure 8: Flow of Inputs in the agro logistics and marketing integration hub ............................ 11 Figure 9: Curtailment of the Agro-supply Chain ........................................................................ ........................................................................ 12 Figure 10: Hub and Spoke Mechanism ............................................................... ....................................................................................... ........................ 13 Figure 11 : Flow Chart of the Approach and Methodology for the t he Study .................................. 18 Figure 12: Marketing activities (Purchasing) of cooperatives in five years in Qt ...................... 24 Figure 13: The product Value chain ........................................................................................... 20 Figure 14: Farm Input Utilization Practices in i n the period of 2003/04- 2009/10 ......................... 22 Figure 15: Established Cooperatives and their membership during the past five years only ..... 23 Figure 16: Marketing activities acti vities of Agricultural related cooperatives from 2005/06 - 2009/10 .. 23



List of Tables Table 1: Distinguishing features between ALMIH and ECX ..................................................... ..................................................... 17 Table 2: Marketing activities of cooperatives/unions c ooperatives/unions from 2005/06 to 2009/10 in qt ................ 24 Table 3: Total Supply forecast of agricultural products and inputs for the years (2010-2014) .. 26 Table 4: West part of Amhara's available Freight Potential ....................................................... 26 Table 5: Five years Forecasted marketable freights in West part of Amhara in million qt ........ 27 Table 6: Location advantage of the Zonal Administrations on selected parameters................... 28 Table 7: Composite score of the t he Zones under each parameter based on suitable weightings .... 30 Table 8: Details of Cultivated land and Production around selected project site ....................... 32 Table 7: Risks associated with the implementation options ....................................................... 34 Table 8: Comparative study amongst the modes of implementation .......................................... 37 Table 9: Breakup of the project Cost .......................................................................................... .......................................................................................... 43 Table 10: Revenue and Expenses Estimates for the first 5 years of operations (Million Birr) ... 44 Table 11: Cash flow over the next five years (Million Birr) ....................................................... 45 Table 12: Social cost benefit analysis of the project ......................................................... ................................................................... .......... 49



List of Appendices Appendix 1: Area Allocation of the Facilities Proposed for the ALMIH in west part of Amhara ........................................................................................................................... ......................................................... ........................................................................................... ......................... 53 Appendix 2: Assumptions for the Project ........................................................... ................................................................................... ........................ 54 Appendix 3: Agricultural and horticultural production and supply of inputs in Amhara in the year 2009/10...................................... 2009/10........................................................................................................ .......................................................................................... ........................ 56 Appendix 4: Selection parameters and composite scores of weredas in west Gojjam Zone ...... 57



Acronyms ADLI

Agricultural Development Led Industrialization

ALMIH

Agro-logistics and Market Integration Hub

ANRS

Amhara National Regional State

BOFED

Bureau of Finance and Economic Development Development

CSA

Central Statistics Authority

ECX

Ethiopian Commodity Exchange

FDRE

Federal Democratic Republic Ethiopia

GDP

Growth Domestic Product

GTP

Growth and Transformation Plan

IRR

Internal Rate of Return

MIC

Market Integration Center

MOFED

Ministry of Finance and Economic Development

NPV

Net Present Value



Executive Summery Despite its richness and abundance of natural potential, Amhara region is not doing very well yet in boosting its competitiveness in the domestic and overseas markets. Regardless of large quantity, high diversity and general attractiveness of agricultural and horticultural supplies, several constraints exist in the value chain. According to some observations, exceedingly price escalation and too fragmentation and fluctuation of outputs are an important bottleneck in value chain of agricultural produce. Examples of other agro logistical bottlenecks are sub optimal post harvest processes and a lack of conditioning throughout the agro chain. To be able to overcome some of the bottlenecks, new logistic concepts are required. One possible solution is to increase the shelf life of the products. For example by means of enhancement of the cultivation process (cutting back plants, using fertilizers), improvement of the selection process (check on quality and ripeness), pre-cooling of the products and conditioning of the chain. Based on these t hese premises ALMIH is conceived.



region. The second project will be for the East part of Amhara region and will be developed after this project proved functional and getting it into operational. The project’s profitability is determined to show NPV = 153.05 million birr, IRR= 17.65%, and Discounted Pay Back period of 4.07 years if is being operated as private firm. The project’s social cost benefit analysis has also shown that its profitability indexes will get more acceptable even from the societal benefit point of view. It is my strong conviction that the regional government will be interested to put the project into effects at all its it s disposal either independently independently or as partnership with the available resources despite the big investment outlay that the project requires.



Limitation of the Study Even though every effort has been made to follow the project formulation procedures and produce the pre-feasibility study document based on the selected project idea, due to the project’s intriguing nature, complexity, and the requirement of having sufficient time and technical capability compounded by the newness of the concept in the country compelled me to prepare the project’s pre-feasibility study document only at the present condition. Therefore, it is my strong belief that the facts and findings given in the document should be updated and supported with rigorous assessment to verify their authenticity with sufficient time of inquiry. Secondly, despite having limited resource at hand some of the topic provided p rovided in the document require detailed workout by b y specialists with multidisciplinary involvement and at least should be attached to practical experiences experiences so as to t o enhance the credit worthiness of the conceived idea.

1. Introduction It is becoming almost a decade now for Ethiopia’s economic growth in getting its grip and pace profoundly and achieving its milestones. Agriculture sector is still playing the leading role and serves as the backbone of the economy in driving the service and industry sectors for gradual transformation that will be taking place within the next twenty years. However, the periodical and cyclical drought and environmental impacts coupled with traditional and poor agricultural practices creates a stumbling block and threatened the sustainability of the result obtained so far. Amhara region is full of untapped natural resources but its richness will be substantial and meaningful if and only if it is supported by modern practices and techniques to cope up with the agility of technological advancements. Following the relative success of PASDEP, the Government of Ethiopia has developed a macro development agenda to sustain and reinforce the progress of this tangible outcome – the Growth and Transformation Plan (2010/11- 20014/15). The GTP



1.1. Background of the project 1.1.1. Demographic situation of the Amahara

According to Development Indicators of Amhara Region produced by BoFED (2009/10), the demographic situation of the Amhara region shows an annual growth of 1.8 percent which leads the total population size to 18.2 million as of 2009/2010. The population of the region accounts roughly 22.78 percent of the total population of the country while in terms of area the region contributes around only 15 percent. Regarding the settlement pattern, the overwhelming majority, i.e. nearly 87.4 percent of the population, resides in rural areas and is engaged mainly in agriculture. In addition, population distribution is uneven among zones and Woredas. The report has indicated that generally, the highlands hi ghlands are densely populated than the lowlands and the age structure of the population, 42.59 percent are age 14 and under and those who are greater than or equal to 65 constitute 3.97 percent of the population. Remarkably, the young age dependency ratio is 79.69 and that of the old age is 8.53 percent this makes the societal dependency ratio as 87.13 per cent.



With regard to investment, the region is working hard to attract investors by availing a comprehensive incentive packages packages at its disposal. The current current Status of Licensed Investment Investment Projects (1992/03 - June 2009/10) in the t he region show that a total of 2,348 Agricultural related projects have been given Investment Certificate but out of which only 591 (25%) are entered implementation phase creating 222, 872 employment opportunity(BoFED, opportunity(BoFED, 2009). In Amhara National Regional State, though agriculture contributed about 55.8 percent of the total regional GDP accounting for employment of 88.7 percent of the total population (BOFED, 2006), no aggregate data is available that shows the recent contribution for the country GDP in each economic activities. As per the brief note released by MoFED about the country’s estimate in i n 2003 EFY(MoFED, 2003); •

Consumption has registered about 91.2% of GDP of which the share of Government is 8.1% and the remaining balance (83.1%) is attributed to the Private final consumption.

•

Rate of Investment has reached 25.5% of GDP and has registered 30.3 % annual



However, the lion’s share of the bulk of crop production in the region is during “Meher” season (BoFED, 2010a; CSA, 2009). Natioonal

Regional

18 16 a h 14 / t q 12 n i 10 y t i v i t 8 c u 6 d o r 4 P

2 0 2002

2003

2004

2005

2006

2007

2008

2009

2010

Figure 2: Trend of Agricultural Productivity over the past eight years (Qt/ha)

According developmental developmental indicators report released by BoFED (2009 and 2010), during the past six years from the year 2004/05 to 2009/10 the total Grain Crops cultivated area of the region has exhibited an increment of 18.3% from 3.36 to 4.0



232,650 to 444,620 hectare (91.1%) and the yield from 13.68 to 51.38 million quintals (275.6%) respectively.

Area/ha/ in 000'

Production/Qtls/ in 100,000'

600.00 500.00 400.00 300.00 200.00 100.00 2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Figure 4: Areas and Production through Irrigation from 2001-2010

According to BoFED, 2008/09 the region owns about eight major lakes that cover an area of 2,543 Sq. Km among which Lake Tana share 95% of all the total size



Purpose, objectives & scope of the project

1.2.

1.2.1. Purpose of the project

Harnessing the opportunity presented by global trends and local advantages require an enabling framework to accelerate growth. Thus, the purpose of this project is to address the key concerns affecting the agricultural growth by improving productivity, minimizing post harvest losses, enhancing post harvest processing and value addition, enhancing value realization through better marketing channels, sustainable practices in production, processing, branding, marketing, etc. and create job opportunity. 1.2.2. Project General Objectives

Since the development of agro-logistics infrastructure in any location is dependent upon the quality of delivery mechanisms that are designed as a part of any such facility, the nature of the intended i ntended project is physical, strategic, and developmental investment having the following main objective: •

To create an enabling agricultural institutional structure for addressing supply


•


To create brand image for unique agro food products of Amhara and develop ‘key products’ to gain market dominance

•

To create new markets and new product lines and develop alternate marketing channels

•

To encourage high realization and value added exports meeting international standards

•

To create employment opportunity for people living around the project

Finally, Special emphasis shall be laid down to make small-scale agro based processing in the state to remain competitive in global markets. 1.2.4. Scope of the Project

The project operates in ANRS focusing on all agricultural and horticultural activities excluding livestock and it is envisaged to cover facilities such as: a) Warehousing Storage allows accumulation of stock to be transported in bulk quantities thereby



c) Cold Storage Perishable goods are among the major commodities grown in the region. Approximately 40% of the perishable goods grown in the region get damaged before they reach the market. To attract horticulture commodities to the logistics hub, modern cold storage units have been planned. Modern cold storages would be supported by pre-cooling units. d) Grain & Horticulture Procurement For successful procurement of grain and horticulture produce, the wholesale market needs to facilitate the coming together of farmers, traders, wholesalers, processors and retail chain operators under one roof. The proposed market is conceptualized conceptualized and designed to ensure transparency and efficiency, encouraging farmers to get maximum advantage. Along with procurement services various other value added services pertaining to agricultural and horticulture produce will further attract this cargo to the logistics hub. e) Agro & Horticulture processing processing In order to garner the benefit from the horticulture resource looking for



benefited. The system adopts professionally managed open auction methods in serving its customers. 1.3.

Name and description of the ‘service’ for the project 1.3.1. The concept of Agro-Logistics and Marketing Integration Hub

The name of the project is Agro-Logistics and Marketing Integration Hub (ALMIH) and the concept is adapted from Asian countries especially Indian experience

of developmental initiatives which is essentially a strategically located multi-modal logistics platform, allowing efficient hinterland operations by incorporating truck-stop facilities, container cranes and gantries, terminal stacking, warehousing facilities, high end food processing facilities and other value added services(ICRA, n d; IDCL, 2009, 2010; Thornton, 2007). Value added products

Agro Processing



as they would enable supply chain/ logistics to function much efficiently by removing the cargo bottlenecks in the transit related activities. Integration of such facilities helps in shortening the supply chain for the producers who had to traverse a long marketing channel to reach the market due to unavailability of the necessary infrastructure. From a mere combination of transportation of transportation and storage services, agro-logistics is fast emerging as a strategic function that involves end-to-end solutions that improves efficiencies and which would enable apportionment of associated capital costs across a larger base of users leading to significant costs reduction. 1.3.2. Components of ALMIH

The concept of ALMIH aims at developing the backward and forward linkages, streamlining the supply chain from farm to market and also to provide value added services to the stakeholders in the value chain. This is to encourage the farmers to move up the value chain by diversifying to higher margin products and ensure that the produce meets end user and market requirements of quality, grades and standards apart from ensuring reliable and un-interrupted supply of adequate volume of produce.



exchanges (ECX) would be provided to help the farmers to market their produce to a large spectrum of customers. In addition such activities would also reduce seasonality of consumption of the perishable agro-products, increase the viability, profitability and sustainability of production systems through their impact on increasing farm incomes, rural employment and foreign exchange earnings, while reducing marketing risks. The typical flow in the MIC is as set out in the t he diagram below. Produce from farmers

Produce received at MIC

Stacking Stacking

Produce unload

Quality Check

Grading Compartment

Com Com artm artmen entt

Sorting Sorting Compartment Com Com artm artmen entt

Auction

Cold storage

Ripening



PCC

Farmer/Cooperati ves/Unions

Intermediary 1

Local market

Intermediary 2

Bigger Market

MIC

Value addition and lesser price

Figure 9: Curtailment of the Agro-supply Chain

As illustrated in the figure above, the long agro-supply chain could be curtailed if the entire operations of the intermediaries are replaced by “Collection Centers”. The collection centres would need to be identified on the basis of expected throughput and logistical feasibility. Development of such nodal collection centers at clusters of woreda



centres could be connected directly to the ALMIH. As illustrated in the figure below, every node in the supply chain i.e. collection centres, farmers unions, and cooperatives are connected directly to the ALMIH. This mechanism would help transporting the farm produce directly to the ALMIH from the nodal centres through a fleet of transport systems and Information Technology (IT) support systems in place.

Collection centre

Farmers/coope ratives/unions

Collection centre

Collection centre

Backward linkage

Market Integration & Access

ALMIH

Value adding process

Retail consumer

Processors & Exporters

Wholesalers & institutional

Forward linkage


ii.


Farmers realize the right value for their produce. This is enabled through the assurance of the right price for right quality and correct weighting.

iii.

Greater convenience for selling the farmers produce and the cash settlement is also faster when compared to the traditional markets.

iv.

Availability of better infrastructural facilities which reduce the wastage of the produce.

v.

Minimization of pre and post harvest losses, transit losses and storage losses.

b) Benefits to the Buyers i. ii.

Graded and sorted produce is available to the buyer. Produce in the requisite lot sizes is available as a result of which transaction costs are minimized by avoiding collection/ purchase from a large number of sellers.

iii.

Quality and hygienic produce is available to the t he buyer.

iv.

Efficient logistics minimize the wastages of the perishable produce.

c) Overall Benefits



fit for its profitability, adaptability and functionality before it gets fully operational. The second phase is a period of replicating the same project as a ordinary establishment in the other corner of the region based on the location and site selection criteria’s adopted in this project document. Therefore, the total project life span will only be f ive years. 1.6.

Project sponsor Since the nature of the project is related metaphorically to blood vessel of the

major economic activity that is agriculture and have an impact on the vast majority of the region’s population, care must be taken for the smooth implementation of the project. However, the project encourages the public- private partnership as long as the government deemed to have the larger stake in sponsoring of the project. It is expected that state owned developmental firms will be actively involve themselves in consolidating and expanding their business for mutual benefit they can reap from the project.

2.

Compatibility with government priorities



platform that will be closely linked to managing and facilitating the supply chain of the agricultural practice, marketing, processing and credit provisions. The closest link between GTP and agro-logistics, however, falls directly under the objectives of Maintaining Agriculture as a Major Source of Economic Growth of GTP that stresses that

fundamentals of the strategy include the shift to produce high value crops, a special focus on high-potential areas, facilitating the commercialization of agriculture, supporting the development of large-scale commercial agriculture where it is feasible. Moreover the policy aspires to create efficient and functioning local agro-logistics transit facilities, it has a direct alignment with growth and transformation efforts(MoFED, 2010). 2.2.

Need for Integrated Approach The regional government currently has to seek a system that highly managed

and competitive alternate marketing structure that provides multiple choices to farmers for sale of produce along with a comprehensive solution to meet key needs of all the stakeholders. A well integrated approach is required to establish efficient linkages


2.3.


Linkages with existing Marketing Channels The

project

is

somewhat

conceptually

complemented

with

Ethiopian

Commodity Exchange (ECX) which is engaged in similar activities but focussed more of on specific exportable commodities. Nevertheless the vision of ECX is to transform the Ethiopian economy by becoming a global commodity market of choice and its mission is to connect all buyers and sellers in an efficient, reliable, and transparent market by harnessing innovation and technology and based on continuous learning, fairness, and commitment to excellence (ECX, 2010; Website, 2011) whereas ALMIH’s mission is geared to serve the majority farmers in short term facilitating the transformation of Amhara’s economy by becoming an efficient domestic agro supply platform and in the long term to be the major agricultural input producer and supplier agent vertically integrating itself with the supply chain. The main distinguishing feature between the two concepts is summarized as follows; Table 1: Distinguishing features between ALMIH and ECX

Feature Main customer focus

•

ALMIH Restricted to Farmers/cooperatives

•

ECX Traders and no restriction



logistics with respect to land transportation and the type of major transport agents in the region were examined; c) The indicative locations for setting up logistics hubs were identified based on the proposed agro-industrial potential zones and taking into account the key issues in agriculture, and d) An approximate costing for setting up a logistics hub has been estimated. A flow chart indicating i ndicating the approach and methodology for the Study is provided below. Review of the Regional state’s economy, agricultural production sizes and exports potential

Examine Market outlets and existing practices

Discussions with:

Project specific analysis: Development of parameters to assess attractiveness of locations for development of ALMIH • Assessment of current status of logistics in the identified locations. • Estimation of the area required for development of logistics hub/MIC. •

Examine Transport Network and utilities

Assessment of Integration of Agrologistics with market channels

Development of interlinkages of the ALMIH

Proposed agro-logistics hub

Agriculture personnel • Representatives of farmer associations • Government agencies /Institutions • Planning consultants • practitioners •

Desk Review:



a) The need to diversify into new markets for higher value products, or add value to current products through improved quality, niche markets, etc. and the needs to improve information flows and develop synergy between the different actors in the production and marketing system. s ystem. b) The agro marketing supply chain prevailing in the region lacks a systematic approach. It cannot afford to go to distant places on account of lack of facilities, expensive transportation and malpractices in assembling markets. This has resulted in formation of long marketing channels, which has also proved to be detrimental to the quality and safety of the perishable products. c) The long chain of intermediaries between the farmer and the market, adds cost but no value to the product. Some study indicate that the escalation in the cost of the produce reach to an extent of 250% of the cost of production at the farm level. d) It has also blocked the flow of market information resulting in exploitation of the farmers. Poor front end infrastructure such as storage facilities, improper warehousing facilities, redundant food processing technology and the farmers’


4.2.


Value Chain and Marketing strategy of the project 4.2.1. The agro-industry system

The different economic activities that result in a marketed product can be represented as a system. The word “chain” denotes a linear sequence of mutually dependent and primary activities related to input delivery, production, processing, and marketing, etc. The word “chain” also emphasises that the different actors involved in the different links of the chain are mutually dependent. A weakness of one link will affect the price or attractiveness of the final product and hence all the actors will suffer. There is no point in spending scarce research and development resources on improving production on the farm, if the transportation of the product is expensive, or the processing and marketing are inefficient.

Produce

Stacking

Transporting

Marketing

Processing

Consumer Consumer


•


Afford access to the agricultural value chain including inputs, services, transport and logistics, processing, retail and in some cases storage and post-harvest management.

4.3.

•

Increase the flow of information to and from the farming farmi ng community.

•

Provide non-farm jobs and a local market for food crops.

•

Create a natural medium for the transfer of skills and agronomic extension.

Materials and Input Supplies Study The project mainly utilizes agricultural raw materials such as Agricultural and

Horticultural crops, fertilizers, and improved seeds. The potential characteristics of each materials explored in the following sub topics. 4.3.1. Grain Crops

According to the agricultural sample survey report of (CSA, 2009), Cereals, Pulses, and Oilseeds are the three major Grain Crops that are produced in the region having a proportion of 80.1%, 16.1%, and 3.8% from the total production respectively.



1,148,971 quintals of UREA+DAP (73%), 302,883 quintals of DAP (19%), and 122,179 quintals of UREA (8%) were utilized in the region. However, as compared to the country’s level, the region’s consumption of fertilizers amount to be 48.2%, 43.6%, and 23.1% in its UREA, UREA+DAP, and DAP application respectively and 37.4% of all the type of fertilizers. With regard to utilization of productive seed, during the year in 2008/09 the region has made use of 3,018,889 quintals of indigenous seed and 55,321 quintals of improved seed which has a 33.6% and 25.2% share from the country’s size respectively. The Pesticide amount is not reported except its application on an area of 244,124 hectare of farm land. Even though, the region has an ample production potential and market access even to the nearby Sudan, it had never reaped the opportunity as it would have supposed to be.

Fertilizers in qt (000') 1400 1200 1000

Improved seed in qt (000')

Pesticides ha (000')



kebele all the way up to country country level. Most importantly the document document stressed the creation of transparent, efficient and effective agricultural marketing system that involves farmers’ cooperatives, modern output market centers and private sector will be established and strengthened. The data obtained in the GTP of the regional government indicate that currently there are 5,977 cooperatives and 43 unions that are functional in the region. At the end of the GTP period, they t hey are expected to grow by 53.4% and 44.2% respectively. 1000 900 800 700 r e b m u N

600 500 400 300 200 100 0

No of Members (00')

2005/06

2006/07

2007/08

2008/09

2009/10

0

913.89

97.38

267.90

228.25


4.4.


Market characterization and demand forecasting f orecasting The agricultural sector suffers multitude problems in bringing sustainable and

dependable food security system in all part of the region. This is characterized by the failure of achieving a comprehensive integration of the output with efficient market outlets. Data obtained from the document of the GTP of the Amhara region shows that currently the marketable amount of grain crops in the region is about 39.7 million quintals which is around 35% of the annual Meher and irrigation production of 112.1 million quintals and it expected to grow by 58.9% at the end of the GTP period (BoFED, 2010b). 4.4.1. Demand and supply factors

Currently farmers’ cooperatives/unions are the major actors in agricultural input transaction especially in purchasing and selling of fertilizers to the farmers. However the role that they are playing in Grain Crop transaction is almost barely existent. The data obtained from Developmental Indicator of BoFED (2010) indicates that during the past five years the proportion of cooperatives marketing transaction in Purchasing and Selling of agricultural goods from the total available stock is highly irregular and is only



In order to keep pace with the changes on the demand side, the markets have to evolve rapidly so that the interests of both the farmer and the bu yer are taken care of. The key interests of the farmer are: •

Realization of a higher percentage share of the consumer price.

•

Presence of increased alternatives for the sale of his produce.

•

Provision of better infrastructure for handling the produce.

•

Establishment of a transparent and efficient price discovery system.

The key interests of the buyer are: •

Availability of graded produce.

•

Availability of quality and hygienic produce.

•

Establishment of a transparent and efficient price discovery system

•

Presence of efficient logistics so as to minimize the wastages during transit services.



Table 3: Total Supply forecast of agricultural products and inputs for the years (2010-2014)

Item (Million Qt)

Present assessed capacity

Forecasted need five years from now

GTP baseline 2010

GTP forecasted need in 2014

1

2

3

4

(Base case scenario)

Increment in % 1 to 2

3 to 4

60.7

80.05

61.91

152.42

31.9

146.2

0.50

0.68

3.41

6.82

35.0

100

51.38 1.30

53.56 2.03

51.38 2.2

100.00 5.30

4.2 56.2

94.6 140.1

0.05

0.07

0.13

1.82

40

1300

Vegetables Root Crops

0.79

1.07

-

0

35.0

-

3.1

4.19

-

0

35.0

-

Fruit Crops

0.16

0.22

-

0

35.0

-

118 14.1

141.87 18.56

119.03 15.1

266.36 37.20

20.2 31.6

123.8 146.4

Meher Crop Belg Crop Irrigation Crop Fertilizers Improved Seed

Total Volume Productivity

The table indicate that within the next five years the total volume of crop production and agricultural input supply will be expanded between the conservative 20.2 percent to optimistic 123.8 percent. Therefore, at present condition west part of



Table 5: Five years Forecasted marketable freights in West part of Amhara in million qt Yearly volume of freight under GTP & Nominal Forecasting Particulars

Year 1

Year 2

Year 3

GTP

Forecast

GTP

Forecast

GTP

Grain

27.37

26.4

35.72

27.67

Vegetables

0.00

0.21

0.00

Root Crops

0.00

0.85

Fruit Crops

0.00

Fertilizers Improved seeds Total

5. 5.1.

44.08

Forecas t 28.95

0.23

0.00

0.00

0.92

0.04

0.00

1.01

1.01

0.03 29.17

Year 4 GTP

Year 5

52.44

Forecas t 30.22

GTP 60.79

Forecas t 31.49

0.25

0.00

0.27

0.00

0.28

0.00

1.00

0.00

1.07

0.00

1.14

0.04

0.00

0.05

0.00

0.05

0.00

0.05

1.79

1.15

2.57

1.30

3.35

1.44

4.13

1.58

0.03

0.30

0.03

0.57

0.04

0.84

0.04

1.11

0.04

28.54

37.81

30.05

47.22

31.57

56.63

33.08

66.03

34.59

Technical and technological aspects Technical & technological requirements of the project As it is been cited in (Bosona, 2010) the technological dimension of innovation

through the food supply chain such as advanced information and communication technology (e.g. e-commerce) systems are increasingly becoming the backbone of integrated supply chains (Trienekens et al., 2003). This project is designed mainly based



setting despite the government’s relentless effort to expand the network to the remote areas of the country. 5.2.

Location and site Selection 5.2.1. Locations for Development of Agro-Logistics and Marketing Hub

The project intends to establish two agro-logistics hubs and its location for the development of ALMIH is determined based on six parameters that make the location potentially feasible. These are; a) Population density per Sq. Km b) Productivity in Qt/ha c) Area of Irrigated land in ha d) Land usage in ha (annual/temporary crop land use, permanent crop land use, fallow land use, grazing land use, wood land use, and other land use), and e) Agricultural input supply in Qt (Fertilizers and Improved Seeds) Based on the region’s geographical topography the two locations were determined by segmenting into West and East part of Amhara sub-regions.



Four step processes is followed in determining the two potential ALMIH sites; 1. Relative scores were calculated for each location under each parameter indicated above. The formula utilized for calculating the score is as set out below. Relative score for each location under each parameter (SR): (SL /SH *100)

Wherein; SL: Value of the parameter for the location under consideration. SH: Highest value across all the locations under consideration and for the

parameter being considered. For example: example: Calculations of relative score for East Gojjam under the population density parameter is as set out below. i. Population density of East Gojjam zone is approximately 162.2 per Sq.Km (SL). ii. Highest population density amongst all the locations listed in the table above is of West Gojjam zone and is approximately 167 per Sq.Km (S H). iii. Relative score of East Gojjam under population density parameter (SR) = (162.2/167*100) = 97.13.



Composite Score (Cs) = Weightings assigned to the parameter X Relative score under each parameter (S R). For Example: Calculation of the composite score for East Gojjam is as set out below. i.

Relative scores of East Gojjam are 97.13, 93.3, 47.74, 83.0, 84.72, and 84.35 under the parameters of Population, Productivity, Irrigated land area, Land usage, and Input supply (fertilizers & improved seeds)

ii.

Composite score of East Gojjam;

Cs = (97.13*25%+93.3*25%+47.74*15%+83.0*15% (97.13*25%+93.3*25%+47.74*15%+83.0*15%+84.72%*10%+84.35*10 +84.72%*10%+84.35*10%) %) = 84.12

4. The location with highest composite score was ranked the highest. Therefore, West Gojjam zone from West part of Amhara and North Shoa zone from East part of Amhara are selected as the two potential locations that ALMIH will be developed. The ranking of the locations based on the composite score calculated for each of the locations is set out in the table below. Table 7: Composite score of the Zones under each parameter based on suitable weightings

Zone

Population density/km2

Productivity (Qt/ha)

Irrigated land in

Land usage in ha

Input Supply Fertilizers in Qt

Improved seed in

Total Score



5.2.3. Proposed site of ALMIH in West Gojjam Zone

In order to determine the specific place of the project site the same technique is used as above except in this case some change was made in the type of parameters. The parameters for determining the woreda upon which the project site will be developed are; •

Population size

•

Productivity of both Meher and and Irrigation production production in Qt/ha

•

Distance of Woreda center to B/dar in Km, and

•

Unutilized land area Since Population and Productivity are the two main determinant factors that

show the project’s growth potential, the site selection is seen differently from additional two perspectives. The project site’s ease of connectivity to road outlets both to Sudan and Djibouti ports which was subtracted from the total composite score to give advantage for locations nearer to Bahirdar and sufficiency of extra land for the construction of project infrastructure and relocation of farmers in case of the displaced



territory. The details of cultivation and production pattern of the two weredas in the year 2009/10 is summarised in the following foll owing table; Table 8: Details of Cultivated land and Production around selected project site Type of Crops Cereals

Teff Finger millet Wheat Barely Oats Rice Maize Pulses Field peas Hourse beans Haricot beans Chick peas Lentil Grass peas Gibto Oilseeds Niger seeds

Bahirdar Zuria Wereda Meher Irrigation

Production of 2009/10 in Quintals Mecha Wereda Total Meher Irrigation Meher Irrigation

Gross prodn 4,233,413.9

1,824,479.8

151,930.5

2,146,401.4

110,602.2

3,970,881.2

68,218.5 303,958.5 59,439.0 48,465.0 2,835.0

-

33,279.0 350,186.0 33,614.0 109,145.0 100.0 -

1,341,563.8

-

1,620,077.4

-

101,497.5 654,144.5 93,053.0 157,610.0 100.0 2,835.0 2,961,641.2

-

173,814.3

-

57,071.5

-

230,885.8

-

230,885.8

11,355.0 36,937.8 17,884.6 36,018.0 664.0 70,955.0 -

-

3,557.5 25,749.0 12,320.0 350.0 10,010.0 5,085.0

-

14,912.5 62,686.8 17,884.6 48,338.0 1,014.0 80,965.0 5,085.0

-

-

19,538.0

-

96,745.0

-

116,283.0

-

116,283.0

17,805.0

-

84,315.0

-

102,120.0

-

-

262,532.7

-



theoretical model of flow of production from each PCC to ALMIH is depicted in the following graphic picture;

Figure 17: Hypothetical Model of Flow of goods to ALMIH from all PCCs



A comparative analysis of the risks associated in an event of implementation of the two options discussed above is set out in the table below:

Options

Development, Operation and Maintenance by Government

Parameters

Impact

Manpower

Development, Operation and Maintenance by GA.

Skill Set

ANRS would need to appoint technical consultants for developing a strategy for development of ALMIH in Amhara. ANRS would also be required to hire skilled manpower to operate and maintain the project facilities.

Service Delivery

Since payments to operational staff are not performance based and often their motivation levels are low, this could affect the level of service delivery.

Finances

GA would need to mobilize finances for procurement of tools / equipment and vehicles and for development of project facilities.

Projects Risks Risks

The projects related risks such as design risk, cost cost over-run over-run risk, time risks etc. and adherence to applicable laws would be retained by GA.

Manpower

GA would need only supervisory staff as the private



take part on the project as it might help consolidate its operational activities through the project by reducing reducing its operational costs. costs. Tiret under its conglomerate conglomerate has an efficient efficient freight transport, “Tikur Abay Transport ” and agricultural input distribution, “ Ambassel” firms which will give the company an equity advantage over its competitors. In view of the local situation, and from the point of view of effective implementation of the Project, Option 2 is more suitable for development of ALMIH in Amhara. 5.4.

Modes of Implementation

The following are the various modes of implementation under Option 2 that could be considered for the development of the ALMIH: A LMIH: a) Lease

ANRS will transfer the land to the private partner on the date of execution of agreement for the development of ALMIH. The private partner will develop the project facilities. Basic infrastructure and amenities like roads, drainage systems, street lighting, water supply, power/electricity, communication networks –



carrying out the construction activities. The roles and responsibilities of the SPM are set out below a. Mobilisation of finances and development of envisaged facilities as per the scope of project. b. Develop the facilities in accordance with design and construction requirements set out by ANRS. c. Maintenance of common facilities for a period of stipulated time period. d. Market the project. e. Share the revenue with ANRS as per the agreement. c) Concession

The private partner could develop the project facilities. Basic infrastructure and amenities like roads, drainage systems, street lighting, water supply, power/ electricity, communication networks – telephone connections, cable and internet connectivity as per requirements of agro-logistics industry would be provided by the private partner. The private partner would be responsible for raising finances and carrying out the construction activities. The ownership of the land and the



the area in accordance with bye-laws and in adherence to the minimum requirements set by ANRS. • •

No marketing responsibility to ANRS.

•

Skills required for contract management.

The land and the facilities developed on it would be transferred back to ANRS at the end of the concession period.

•

Assured and fixed revenue stream.

•

Uniform quality of services.

•

private partner and may require higher returns.

Risk of time bound completion and revenue risk is transferred to the private partner

Table 10: Comparative study amongst the modes of implementation

Considering the issues discussed above, the requirement of upfront finances, manpower and associated risks, it is proposed to develop the Project under a Concession framework due to the following foll owing advantages; advantages; •

Mobilization of finances would be the responsibility of the private partner. The entire finance required for the Project would have to be raised by the private partner within a pre-specified time frame. Therefore, the Government would not be responsible for raising the funds for meeting the initial capital expenditure.



The private partner would be responsible for development of project facilities which have been categorized into seven broad activities namely; 1. Development of project facilities – core facilities, specialized infrastructure, common utilities, roads and other utilities; 2. Procurement of equipments as envisaged for the operation of the project facilities; 3. Procurement of trucks required for the transportation of produce from collection centres to the MIC; 4. Operations and maintenance of the project facilities; 5. Make annuity payment to the GA on a quarterly basis; 6. Obtain necessary permits as required under Applicable Law for development and operation and maintenance of the project facilities. 7. Pay all taxes, duties and outgoings, including utility charges relating to the project facilities, as may be applicable. 5.4.2. Role and obligations of the ANRS for development of ALMIH



In this option private partner would need to make mutually agreed fixed payments to GA at regular intervals (say monthly or quarterly). Estimation of the fixed payments could be ascertained based on the projected cash flows envisaged for the project. Advantage of such mechanism is that GA could be assured of the fixed payments during the concession period and private partner would, well in advance, be aware of the fixed liabilities during the operational period. Revenue risk is passed on to the private partner.

6.

Environmental and Social impact assessment The Environmental impact assessment should take into account the following

points both at construction and operation phases: Measures to miti gate the adverse environmental impacts during construction phase; a) Site preparation The development of site will involve the movement of top soil, removal of trees, shrubs, soils, rocks, debris etc. The site grading operation will also involve stock piling of backfill material. All the distorted slopes need to be stabilized suitably.



by accidental spillage is avoided. Unauthorized dumping of waste oil will be prohibited. d) Installation of machineries The project would involve the use of modern machineries like drying and ripening refrigerators and forklifts for manoeuvring stacks of pallets from place to place that needs care of spillage of gases and falling of loads on human beings. There should be an informative safety signs in all work areas and premises. e) Storage of hazardous material/dumping materials Petrol, diesel, lubricating oil etc. will be required to be stored at site. These materials will be stored as per stipulated safety standards. Also a lot of material may be generated for disposal during construction activity. These, if disposed off haphazardly can pollute the nearby water bodies adversely. They would increase the accident incidences also. Utmost care will be taken to store these materials at a suitable place and then disposed off at a place in consultation with and as per the implementation guideline.



designated for administering the whole of the food park area to collect these generated Non Hazardous solid waste, which can be recycled. b) Health facility Medical facilities, first aid centre and health centre near the site, which would be provided by project authorities, will help to protect the health of the project staff. c) Green Space An additional mitigation measure that has a broad definition in as much as it can be used to alleviate a number of adverse impacts due to air and noise emissions is the development of a green space around the facility. It has been proposed to develop green belt around the compound as per the master planning guidelines. These would not only absorb air and water pollutants but also help in arresting noise and soil erosion and creating favourable aesthetic condition. Pollutants in air settle on the ground and vegetation of surrounding area. Plants interact with the pollutants, absorb them and thus remove them from the atmosphere. Plants intercept incoming and outgoing radiation, precipitation and wind and thus have


7.1.


Investment costs of the pilot project

The following assumptions were used in calculating the project’s initial outlay; •

The 2009/10 total marketable agricultural & horticultural horti cultural produce (meher and irrigation) of the region was 116.65 million quintals (Forecasted five years from now = 139.77 qtls)

•

West part of Amhara Share from the total Production - 67% of the total production = 78.16 million of quintals

•

Marketable surplus - 35% of the yearly marketable marketable surplus (referenced (referenced from GTP) = 27.35 million of quintals (Forecasted five years from now = 32.77 qtls)

•

Inputs – 1.35 million quintals (Forecasted five years from now = 2.1 million qtl s)

•

Total size of logistics 28.7 million qtls per annum (up to 34.87 million qtls in five years)

•

Lease of land – 100 birr/Sq.meter

•

costs] Required number of vehicles [ NB: All prices include transportation costs •

Heavy trucks - 40 (uplifting capacity 40 tonnes/truck)[Unit cost 3.6million



Table 11: Breakup of the project Cost

No 1 2 3 4 5 6 7 8

7.2.

Particulars Amount in Birr Civil works and land acquisition Land leasing cost Outdoor works Site preparation and development Buildings and structures Machinery and Equipments Working Capital Contingency (5%) Total

280,500,000.00 42,700,000.00 42,700,000.00 16,000,000.00 16,000,000.00 21,800,000.00 200,000,000.00 399,460,000.00 50,000,000.00 36,498,000.00 766,458,000.00

Projected cash flow

The details of revenues and expenses sources are as set out below 1) Rental Receipts The operating income from rental receipts includes rentals for premises rented for warehouse facilities, cold storage facilities, commercial space, various office and services, etc. These will be the incomes which will be generated year after year. Corresponding to these incomes, the expenditures will cover items like


No A


Table 12: Revenue and Expenses Estimates for the first 5 years of operations (Million Birr) Particulars Year 1 Year 2 Year 3 Year 4 Year 5 Revenues Warehouse rentals Sorting and grading facilities

173.50 39.38

199.98 43.31

228.88 47.25

259.57 51.19

292.04 55.13

Weigh bridge

0.16

0.17

0.19

0.20

0.22

Operation of trucks Commercial space rentals

7.09 0.26

7.80 0.29

8.51 0.32

9.21 0.34

9.92 0.37

10.40

12.42

14.62

17.01

19.57

230.78

263.98

299.77

337.52

377.25

8.69 0.10

8.69 0.11

8.69 0.12

8.69 0.13

8.69 0.14

0.13

0.14

0.15

0.16

0.18

15.06

16.57

18.07

19.58

21.09

0.79

0.87

0.95

1.03

1.11

1.30

1.39

1.47

1.55

1.64

26.076 204.70

27.77 236.21

29.46 270.31

31.15 306.37

32.85 344.40

Cold Storage rentals B

Total Revenues Expenses Administrative expenses Water supply charges Power supply charges Transport fleet – Fuel charges Repairs and maintenance – Transport fleet. Other Maintenance Charges Total Expenses

C

Annual Net Profit

The following assumptions were used in preparing the project’s cash flows;



Based on the calculation, WACC will found to be 11%. Table 13: Cash flow over the next five years (Million Birr) No 1

Years

0

Capital requirement (with 5% contingency)

1

2

3

4

5

(763.92) (44.80)

2

Land leasing cost

3

Outdoor works

4

Site preparation and development

(22.89)

5

Buildings and structures

(210.00)

6

Machinery and Equipments

(419.43)

(16.80)

(50.00)

7

Working Capital requirement

8

Revenues

230.78

263.98

299.77

337.52

377.25

9

Expenses (other than deprec. & Int.)

26.07

27.76

29.45

31.14

32.84

10

Depreciation (yearly 25% at DBV)

157.36

118.02

88.51

66.39

49.79

11

PBT (8-9-10)

47.35

118.19

181.80

239.99

294.61

12

Income Tax (30%)

14.20

35.46

54.54

72.00

88.38

13

PAT (11-12)

33.14

82.73

127.26

168.00

206.23

14

Net salvage value

149.37

15

Recovery of WC

50.00

16

Initial outlay

(763.92)


•


Rigorous screening of contract growers in terms of credit and husbandry rating through community representatives will reduce the risk of side marketing and poor farming practice

•

Peer review mechanism will be used in many schemes where groups instituted ‘self policing’ and underwrote the loans of all members of the group.

•

Insurance of crop inputs and in some cases the entire crop may prove a major incentive to investors as well as farmers.

•

Access to storage facilities such as grain silos might reduce the risk of price volatility.

9. 9.1.

Social cost benefit analysis Considerations The social cost benefit analysis is carried out following the UNIDO’s five step

approach in which only two of the major steps emphasized in the report. The remaining three steps namely; adjustment for the impact of the project on saving and investment, adjustment for the impact of the project on income distribution, and adjustment for the



market exchange rate (20 birr/USD). Whereas, the value on non-traded good such as grain crops, vegetables, and agricultural inputs are measured in terms of what domestic consumers are willing to pay for the service provided by the project because still the government is striving to fulfil the country’s food self-sufficiency level in all agricultural produces. Therefore, on the output side, since the impact of the project is to increase the consumption of the product in the economy, the measure of value is taken the marginal consumers’ willingness to pay. Hence, the following price adjustment was carried out based on shadow prices; •

Warehouse fasciitis – birr 20/metric tonne

•

Cold storage fasciitis – birr 25/metric tonne

•

Grading and sorting facilities – birr 700/metric tonne

•

Weighbridge – birr 70/truck

•

Freight transportation – birr 5/km On the input side also, since the impact of the project is to reduce the

availability of the input to other users, their willingness to pay for that input is considered as social value. Hence, the following price adjustment was carried out



benefit to the society around the project. However, the development of such big project by itself needs conducive landscape and work area that can only be realized at the expense of displacement or relocation of settlement areas. In this case some households will definitely be affected by the measure that would be taken. Hence, due to its complexity of valuing the benefit at this stage the negative effects just incorporated by assuming somewhat 10% of the cost of setting up of the plant as cost of negative externalities. f) Labour inputs The project is assumed to be run totally by local expertise and workforce however takes labor away from other employments, and the shadow price of labor is taken only for non-professionals that is assumed to be equal to what other users of labor are willing to pay for this labor. Average wage rate; •

Field supervisors – birr 1,500/person/month

•

Drivers – birr 2,000/person/month

•

Other staffs – birr 1,500/person/month

At present conditions, for professionals the market is assumed relatively free and

No

Table 14: Social cost benefit analysis of the project Form Private Investor point of view (Million Birr) Years 0 1 2 3 4 5

From social point of view (shadow pricing)(Milli on Birr) 0

1

One Shot Costs

2 4

land acquisition Civil works Machinery and Equipments

5

Skilled Labour

6

Semi-skilled Labour

(38.40)

(27.30)

7

Working Capital requirement

(50.00)

(50.00)

(805.32)

(807.92)

3

8

Subtotal of One Shot Costs

9

Benefits/revenues

10

Warehouse facilities

1

2

3

4

5

(44.80) (249.69)

(261.58)

(419.43)

(466.04)

(3.00)

(3.00)

173.50

199.98

228.88

259.57

292.04

347.00

399.97 457.77

519.14

584.08

11

Cold Storage facilities

10.40

12.42

14.62

17.01

19.57

17.33

20.70 24.37

28.35

32.62

12

Grading and Sorting facilities

39.38

43.31

47.25

51.19

55.13

55.13

60.64

66.15

71.66

77.18

13

7.09

7.80

8.51

9.21

9.92

17.72

19.49 21.26

23.03

24.81

14

Operation of freight transportation Weighbridge

0.16

0.17

0.19

0.20

0.22

0.22

0.24

0.26

0.29

0.31

15

Commercial space rent

0.26

0.29

0.32

0.34

0.37

0.26

0.29

0.32

0.34

0.37

230.78

263.98

299.77

337.52

377.25

437.66

16

Subtotal of Benefits

17

Periodic Costs

18

Power supply

0.13

0.14

0.15

0.16

19

Water supply

0.10

0.11

0.12

0.13

20

Rolling stock(Fuel)

15.06

16.57

18.07

21

Repairs and maintenance

0.79

0.87

0.95

22

Miscellaneous 5%

1.30

1.39

17.38

19.07

Subtotal of Periodic Costs

By Mesfin Raji | S oc oc i a l c o s t b e n e f i t a n a l y s i s

642.81

719.35

0.00

0.00

0.00

0.00

0.00

0.18

0.25

0.28

0.30

0.33

0.35

0.14

0.19

0.21

0.23

0.25

0.26

19.58

21.09

15.06

16.57

18.07

19.58

21.09

1.03

1.11

0.79

0.87

0.95

1.03

1.11

1.47

1.55

1.64

1.19

1.27

1.37

1.44

1.52

20.77

22.46

24.15

17.48

22.62

24.33

49

501.33 570.13

19.19 20.92



No

Form Private Investor point of view (Million Birr)

Years 0

From social point of view (shadow pricing)(Million Birr)

1 17.38

2 19.07

3 20.77

4 22.46

Net Profit

213.40

244.90

279.00

315.06

353.09

157.36

118.02

88.51 88.51

66.39

49.79

26

Depreciation (yearly 25% at DBV) PBT (24-25)

56.04

126.88

190.49

248.68

303.30

27

Income Tax (30%)

16.81

38.06

57.15

74.60

90.99

28

PAT (26-27)

39.23

88.82

133.34

174.08

212.31

23

Subtotal of Periodic Costs

24 25

5 24.15

29

Net salvage value

149.37

30

Recovery of WC

50.00

31

Initial outlay

32

Operating cash inflow (25+28)

(805.32)

33

Terminal cash inflow

34

Net cash flow (31+32+33)

35

0

1 17.48

2 3 19.19 20.92

4 22.62 22.62

5 24.33

420.18

482.14

549.21

620.18

695.03

420.18

482.14

549.21

620.18

695.03

420.18

482.14

549.21

620.18

695.03 50.00

(807.92) 196.59

206.84

221.85

240.46

262.10

420.18

482.14

549.21

620.18

695.03

(805.32)

196.59 196.59

206.84

221.85

240.46 240.46

461.47

(807.92)

420.18 420.18

482.14

549.21

620.18

1,115.21

(805.32)

177.10

167.87

162.22

158.40

273.86

36

Discounted at 11% cost of capital NPV

(807.92)

381.98

398.46

412.63

423.59

692.46

134.13

1,501.20

37

Discounted Pay Back (years)

4.19

2.02

38

IRR

16.58%

58.2%

199.37

420.18

NB: The NPV and IRR of the Private shows some variation from the previous figure due to a rounding of error in the computation

By Mesfin Raji | So So c i a l c o s t b e n e f i t a n a l y s i s

50

10. Conclusion and recommendations The genesis of agro-logistics somewhat related to the idea of Harvard professor Michael Porter who introduced the concept of industry “clusters” to denote the grouping of actors involved in one industry (different firms producing one or related products, their suppliers, buyers and supporting services, etc.) in a specific location(ICRA, n d). Efforts to link small-scale farmers to markets face a number of constraints some of them are: a) The need to diversify into new markets for higher value products, or add value to current products through improved quality, niche markets. b) The need to build economies of scale to compete with large farms and increase bargaining power with buyers that require certain quantities, e.g. through collective action, farmer associations, etc.; c) The risks associated with change: e.g. the change to new production systems or to new relationships with other actors. d) The need to reorient research and extension from a “supply-driven” mode of generating information led by researchers to a “demand-driven” or “client-oriented” mode of service delivery. e) The need to improve information flows and develops synergy between the different actors in the production



References Indicators of Amhara Region (2009/10) (2009/10). ANRS (p. 10). BoFED. (2009). Development Indicators

BoFED. (2010a). 2009/10 Budget year Annual Statistical Bulletin. BoFED. (2010b). Amhara National Regional State GTP (Amharic version). Working paper . Bosona, T. G. (2010). Cluster Building and Logistics Network Integration of Local Food Supply Chain. SLU, Swedish University of Agricultural Sciences (p. 9). Production of Crops (Private (Private Peasant Peasant Holdings, Meher Meher season). CSA. (2009). Area and Production Agricultural sample survey 2008/2009 2008/2009 (2001 (2001 E.C.) (Vol. 2009, pp. 27-38).

CSA. (2011). Area and Production Production of Belg Season Season Crops for Private Peasant Peasant Holdings. Agricultural sample survey 2010/11 2010/11 (2003 E.C.) E.C.) (Vol. V, pp. 24 & 40). DOA, W.-G. (2011). West Gojjam Department of Agriculture 2003EC Annual report . ECX. (2010). Rules of The Ethiopia Commodity Exchange. Materials, 1-8. ICRA. (n.d.). Agribusiness & Markets – Key Concepts. Learning Materials



Appendices Appendix 1: Area Allocation of the Facilities Proposed for the ALMIH in west part of Amhara No

Particulars

Unit

1 2 3

Common facilities (Specialized Infra, Utilities and Special Amenities) Auction Centre Loading, Unloading and dispatch centre Quality Testing Laboratory

Sq.m Sq.m Sq.m

15,000

4

Admin Block

Sq.m

1,500

5

Commercial Block

Sq.m

15,500

6

Security Block

Sq.m

500

7

Sub-Station

Sq.m

1,000

8

Generator Room

Sq.m

1,000

9

Weigh Bridge Room

Sq.m

150

10

Cold Storage

Sq.m

4,400

11

Warehouse

Sq.m

160,000

12

Playing field for outdoor Games

Sq.m

10,500

13

Grading and Packaging Hall

Sq.m

4,700

14

Other amenities (canteen, Hotel, bank etc.)

Sq.m

16,800

15

Rejected Produce Shed

Sq.m

1,000

A

Area

46,000 1,000



Appendix 2: Assumptions for the Project

Assumption taken in calculating Revenues and expenses of the Project 1. Revenues a) Service charges Receipts i. Warehouse facilities •

Annual total Agricultural Freight available 2,754,000 tonnes

Rentals assumed to be Birr 10 per tonnes per month. ii. Cold storage facilities •

•

Annual total Horticultural Freight available 110,000.0 tonnes

Rentals assumed to be Birr 15 per tonnes per month. iii. Commercial space •

•

Space available is to an extent of 50,000 square meter.

Lease rentals assumed to be Birr 10 per square meter per month. b) Grading and Sorting Facilities •

•

Capacity of the sorting and grading lines: 500 tonnes per day.

Rentals: Birr 500 per metric tonne. c) Weigh Bridge •

•

Number of trucks utilizing the facility: 20 trucks per day.



Electric charges: Birr 1.0 per kwh. d) Rolling stock expenses •

•

•

Total distance travelled by the transport fleet per annum: approximately 6,750,000 kilometers Fuel mileage: 4 kilometers per litre of fuel.

Cost of fuel: Birr 16 per litre. Repairs and Maintenance cost: Rolling Stock •

Approximately 5% of the cost of the rolling stock. Other maintenance cost •

•

5% of the project cost.

horticultural production and supply of inputs in Amhara in the year 2009/10 Appendix 3: Agricultural and horticultural Zone

Cultivated Area in ha Irrigatio n

Meher

Meher Production in Qt

Total

Grain Crops

Vegetables

Root Crops

Fruits

Total

Produc tivity (Qt/ha)

Input Supply in Qt Fertilizers

Improved seed

Total

West Amhara West Gojjam

9,095.0

567,549.4

576,644.4

9,214,516.0

239,754.7

538,947.3

43,385.0

10,036,603.0

17.4

660,450.0

25,940.0

686,390.0

East Gojjam

14,343.0

580,180.4

594,523.4

9,097,746.0

120,373.0

462,880.2

348.0

9 ,681,347.2

16.3

559,520.0

22 ,160.0

581,68 0.0

Awi

30,041.0

254,362.0

284,403.0

3,377,272.0

66,442. 6

218,027.4

2,912.8

3,664,654.8

12.9

161,940.0

9,150.0

171,090.0

South Gonder

8,809.0

534,730.2

543,539.2

6,228,764.0

43,544.5

766,202.3

-

7,038,510.8

12.9

138,570.0

11,300.0

149,870.0

North Gonder

6,228.0

738,612.6

744,840.6

10,341,728.0

127,620.5

404,270.0

-

10,873,618.5

14.6

114,500.0

7,760.0

122,260.0

Sub total

68,516.0

2,675,434.5

2,743,950.5

38,260,026.0

597,735.3

2,390 ,327.1

46,645.7

41,294,734.1

74.1

1,634,980.0

76,310.0

1,711,290.0

North Shoa

15,145.0

522,856.0

538,001.0

7,108,359.0

89,661.1

374,559.3

17,995.2

7,590,574.6

14.1

312,670.0

26,270.0

338,940.0

South Wello

7,590.0

430,849.5

438,439.5

5,627,709.0

36,284.4

170,768.7

229.4

5,834,991.6

13.3

119,810 .0

14,260.0

134,070.0

North Wello

8,787.0

258,094.5

266,881.5

3,698,082.0

31,804.4

140,367.2

-

3,870,253.6

14.5

31,580.0

7,070.0

38,650.0

Oromiya

4,724.0

61,564.6

66,288.6

839,381.0

30,136.2

-

5,318.9

874,836.1

13.2

1,470.0

450.0

1,920.0

Waghimera

1,460.0

103,612.2

105,072.2

1,188,346.0

-

8,003.5

-

1,196,349.5

11.4

98.0

1,170.0

1,268.0

East Amhara

Sub total Region

37,706.0

1,376,976.7

1,414,682.7

18,461,877.0

187,886.1

693,698.7

106,222.0

4,052,411.3

4,158,633.3

56,721,903.0

785,621.4

3,084,025.8

By Mesfin Raji | A p p e n d i c e s

23,543.5 70,189.2

56

19,367,005.3 60,661,739.4

66.5 14.1

465,628.0

49,220.0

514,848.0

2,100,608.0

125,530.0

2,226,138.0



Appendix 4: Selection parameters and composite scores of weredas in west Gojjam Zone

Woreda

Distance of Woreda center to B/dar in Km

RI

CI

30%

Population size

RI

CI

10.34

15%

RI

CI

Productivity (Meher+ Irrigation) Qt/ha

45%

62.24

15.56

Unutilized land area in ha 25%

RI

CI

Total Score

50.96

88.13

26.44

52.34

30%

Bahir Dar Zuria

0.00

0.00

0.00

191,141

68.91

Mecha

35.20

13.69

4.11

277,388

100.00

15.00

45%

62.47

15.62

46.31

80.10

24.03

50.54

Yilemana Densa

42.20

16.41

4.92

193,693

69.83

10.47

44%

60.65

15.16

53.33

92.24

27.67

48.39

Sekela

161.30

62.71

18.81

145,673

52.52

7.88

57%

79. 65

19.91

57.82

100.00

30.00

38.98

South Achefer

59.30

23.06

6.92

143,830

51.85

7.78

56%

78. 23

19.56

35.67

61.69

18.51

38.92

North Achefer

101.50

39.46

11.84

199,823

72.04

10.81

39%

54.55

13.64

38.20

66.07

19.82

32.42

Womberema

165.30

64.27

19.28

106,135

38.26

5.74

72%

100.00

25.00

40.09

69.34

20.80

32.26

Burie

149.60

58.16

17.45

112,295

40.48

6.07

50%

69. 32

17.33

44.43

76.85

23.05

29.01

Gonji Kolela

61.80

24.03

7.21

111,974

40.37

6.06

50%

68. 97

17.24

24.81

42.91

12.87

28.96

Dega Damote

257.20

100.00

30.00

159,946

57.66

8.65

65%

90. 92

22.73

51.79

89.57

26.87

28.25

Quarite

228.20

88.72

26.62

120,473

43.43

6.51

49%

68. 44

17.11

54.60

94.43

28.33

25.34

Jabitahenan

171.70

66.76

20.03

181,841

65.55

9.83

46%

63. 28

15.82

37.24

64.42

19.32

24.95

Dembecha

253.00

98.37

29.51

119,308

43.01

6.45

51%

70. 72

17.68

48.91

84.59

25.38

20.00

257.20

100.00

277,388.0

100.00

72%

100.00

57.82

100.00

Max

By Mesfin Raji | A p p e n d i c e s

57

Agro-Logistics and Market Integration Hub(ALMIH)

Recommend Documents