PROJECT PROPOZAL ON THE ESTABLISHMENT OF ELECTRIC

MATERIALS AND FITTINGS (SWITCHES, PLUGS, SOCKETS,

PUSH BUTTONS AND LAMP SHED) MANUFACTURING PLANT

Location: - Oromia Special Zone Dukem town

PROMOTER: SENA BEKELA

June, 2020
Dukem,Ethiopia

Contents

1
Executive Summary....................................................................................................4

1. INTRODUCTION......................................................................................................6

1.1 Renewable energy in Ethiopia...........................................................................10

1.1.1 Hydropower................................................................................................11

1.1.2 Wind power................................................................................................11

1.1.3 Geothermal.................................................................................................11

1.1.4 Biofuels......................................................................................................12

1.1.5 Solar Energy...............................................................................................12

1.2. Project Justification.........................................................................................12

1.3 The Project Promoter........................................................................................13

1.4. Objective of the project....................................................................................13

1.5 The Economic Significance of the Project..........................................................13

1.6 Location, Infrastructure and Land....................................................................15

2. MARKET STUDY AND PLANT CAPACITY...............................................................16

2.1.1. Past Supply and Present Demand..............................................................16

2.1.2. Demand Projection....................................................................................17

2.1.3. Pricing and Distribution............................................................................18

2.2. Plant capacity and production program...........................................................18

2.2.1 Plant Capacity............................................................................................18

2.2.2. Production Program...................................................................................19

2.3. Pricing and Distribution..................................................................................19

3. MATERIALS AND INPUTS......................................................................................21

3.1. Raw Materials....................................................................................................21

3.2. UTILITES............................................................................................................22

4.1. Technology......................................................................................................23

4.1.1. Machinery and Equipment.........................................................................23

4.1.2. Production Process....................................................................................24

2
 4.2. Civil Engineering, Building and Civil Works.....................................................25

5. OGANIZATION, MANAGEMENT AND MANPOWER.................................................26

5.1. Organization and Management........................................................................26

5.2. Man Power......................................................................................................26

5.3. Organizational Structure.................................................................................27

6. FINANCIAL REQUIRMENT AND ANALYSIS............................................................30

6.1. Total Initial Investment Cost........................................................................30

6.1.1. Fixed Investment....................................................................................30

6.1.2. Initial Working Capital..............................................................................32

6.1.3. Pre -Service Expense..............................................................................32

6.2. Annual Salary Expense....................................................................................32

6.3. Financial Analysis and Statements..................................................................34

6.3.1. Underlying Assumption.............................................................................34

6.3.2. Source of Fund..........................................................................................34

6.3.3. Loan Repayment Schedule.........................................................................34

6.3.4. Depreciation Schedule..............................................................................35

6.3.5. Revenue Projection....................................................................................35

6.3.6. Balance Sheet...........................................................................................36

6.3.7. Income/Loss Statement...........................................................................37

6.3.8. Cash Flow Statement.............................................................................38

7. ENVIRONMENTAL IMPACT OF THE PROJECT......................................................39

7.1. Environmental Impact Assessment of the Project.............................................39

3
Executive Summary

1 Project Name Electric materials and fittings (switches, plugs,

sockets, push buttons, Tv, lamp shed and …)
2 Project Owner
manufacturing plant
3 Nationality Ethiopia
4 Project Dukem Town
Location
5 Project switches, plugs, Tv, sockets, push buttons and
  Composition lamp shed and …
6 Premises 10,000m2
Required
7 Total Initial The total investment cost of the project is
Investment estimated at Birr 80,000,000out of which 30%
Cost or Birr 24,000,000is to be financed by the
owner's equity, where as the balance (70% or
56, 00,000) is expected to be covered from Bank
loan.
8 Employment The total manpower required for the factory will
Opportunity be 288 individuals 99 permanent workers (40
skilled and 59 unskilled) and 189 casual
laborers (9 skilled and 180 Unskilled)
9 Benefits of the Value add, supply of quality product,
Project for the employment, income generation, save foreign
Region/Natio currency, and technology transfer
n

4
10 Market Share 50 % of the product supplied to Domestic
market and the remaining 50 % will be exported
11 Production at Switches 3,000,000,
to Different plugs 2,000,000, sockets
African countries.
full capacity 3,000,000, push buttons 2,000,000 and lamp
in pcs shed 3,000 and others 5000,000
12 Raw Materials The major raw material for the manufacture of
used the electrical items mentioned are thermosetting
plastics and electroplated metal and auxiliary
raw materials such as nickel dip, zinc dip,
degreasing mixtures and cleaning chemicals;
all to be imported from abroad.
13 Production The production of those Electric materials and
process fittings (switches, plugs, sockets, push buttons,
lamp shed and) involves process such as
forming, machining stage, galvanizing,
insulation and assembly
14 Technology Latest technologies/developments in Electric
materials and fittings (switches, plugs, sockets,
push buttons, lamp shed and…) manufacturing
equipment’s especially from an angle of better
environmental management practices that able
to provide clean and hygienic working
conditions and hence environmentally
appropriate are selected.

5
1. INTRODUCTION

Ethiopia is one of the few African countries with the potential to

produce hydroelectric and geothermal power. As of mid-1991,
however, no comprehensive assessment of this potential was
available, although some estimates indicated that the total potential
could be as much as l43 billion kilowatts. The main sources of this
potential were thought to be the Abay (Blue Nile; 79.9 billion
kilowatts), the Shebele (2l.6 billion kilowatts), and the Omo (l6.l
billion kilowatts). The remaining 25.9 billion kilowatts would come
from rivers such as the Tekezé, Awash, Baro, Genale, and Mereb.

Ethiopia's first large hydroelectric generating facilities were

constructed in the Awash River basin. The three plants- -Awash I
(Koka) with 54,000 kilowatts capacity, Awash II with 32,000
kilowatts capacity, and Awash III with 32,000 kilowatts capacity--
were finished between l960 and l972. In l974 the Fincha River
facility in central Welega opened with a generating capacity of
84,000 kilowatts. Other major power-generating facilities included
those at Bahir Dar (7,680 kilowatts) and Aba Samuel (6,560
kilowatts). The total installed capacity of thermal generating units
amounted to 210,084 kilowatts in l985/86.

Electric power production in l985/86 totaled 998.7 million kilowatt-

hours, 83 percent of which was produced by hydroelectric power
installations. Thermal generating units produced the remaining 17
percent. The thermal generating units in the public utility system,

6
many of which were comparatively small, had a generating capacity
of 95,635 kilowatts in l985. Major units were located close to
Asmera (3l,900 kilowatts), Dire Dawa (4,500 kilowatts), Addis
Ababa (3,l00 kilowatts), and Aseb (3,l00 kilowatts). In l985/86
various business enterprises and local communities owned
electrical generators of unspecified capacity.

The regional electrical distribution system included an

interconnected system and a self-contained system. By 1988 most
power generating sources, including all major hydroelectric power
plants, were interconnected in a power grid. The interconnected
system served more than l00 towns. Power from the Awash, Fincha,
and Aba Samuel stations ran the central system, the largest
component of the interconnected system. The Bahir Dar
interconnected system, which served parts of oromia, and the
Eritrean Region Electricity Supply Agency (ERESA) were two of the
other major systems. A majority of the self-contained systems got
their power from thermal power plants, with the power often being
used for domestic purposes and to run small mills.

The Ethiopian Electric Light and Power Authority (ELPA), a

government corporation, operated most of the country's power
systems. Prior to the revolution, ELPA incorporated more than forty
electric power stations and generated about 80 percent of the
nation's total electrical output. Two Italian firms, Società Elettrica
dell'Africa Orientale and Compagnia Nazionale Impresse Elettriche,
chiefly serving Eritrea, produced another l6.5 percent of the

7
country's electrical energy. Independent stations generated the
remaining 3 to 4 percent. In 1975 the government nationalized all
private utility companies and placed them under ELPA. Since then,
utility services have been reserved exclusively to the state. In l987
ELPA served about l70 towns and produced about 92 percent of the
national electrical output. Mass organizations, sugar factories, and
the Aseb refinery administered the remaining 8 percent.

In 1985/86, of the total 847.7 million kilowatt-hours of power sold

by ELPA, 59 percent was for industrial use, 29 percent for domestic
use, l0 percent for commercial use, and the remaining 2 percent for
other uses such as street lighting and agriculture. By 1987 about 9
percent of the total population (4.3 million people) were using
electricity.

Ethiopia's second commercial energy resource is oil. Despite reports

of natural gas reserves and traces of petroleum, Ethiopia still
depends on imported crude oil, which accounted for an average of
about l2 percent of the value of imports during the period l982/83
to l987/88. Exploration for petroleum and natural gas in the
Ogaden and the Red Sea basin has been going on for many years.
In May l988, International Petroleum, a subsidiary of Canada's
International Petroleum Corporation (IPC), signed a production
sharing and exploration license for the Denakil block, which covers
34,000 square kilometers on and off shore along the Red Sea coast.
The IPC also has conducted geothermal studies and undertaken
mapping projects. In late 1990, the government announced that

8
geologists had discovered oil in western Ilubabor, with an expected
deposit ranging from 100 million to 120 million tons.

Since the early 1970s, there has been exploration and development
of geothermal resources in the Great Rift Valley. In early 1972, the
United Nations Development Programme (UNDP) conducted
preliminary explorations in the area and detected what appeared to
be one of the world's largest potential sources of geothermal power.
In mid-1979 the EEC, assisted by the UNDP, provided a grant to aid
exploration in the valley's lake region. In l984 Ethiopia reported the
discovery of a promising geothermal source in the Lake Langano
area. However, no indication has been provided as to when
production will start. The primary energy sources for most
Ethiopians are charcoal, animal manure, and firewood. Some
estimates indicate that as much as 96 percent of the country's total
energy consumption is based on these traditional sources

In the rural areas of developing countries, around 75% of the

population or two billion people live without electricity (Zahnd,
2009). The same population has a growing desire for basic services
such as lighting, water, health care, and education. This places
heavy pressure on local governments to keep pace with the demand
for electricity. However, the installation and maintenance of grid
electricity in these often small and geographically remote, isolated
populations is often near impossible. People not served by
centralized power grid mostly rely on solid fuels and fossil fuels like
kerosene and diesel for most of their energy needs. Fossil fuels are

9
often imported, and their use leaves local economies vulnerable to
global price fluctuations and disruptions in supply. Transporting
these fuels to remote locations can be expensive and difficult, and
their indiscriminate use can also be harmful to health and the
environment. Moreover, maintenance of fossil fuel driven generators
can also be problematic for people living in rural areas.

Accordingly, renewable energy systems have been increasingly

utilized in most developing countries as means to rural
electrification provision. In Ethiopia there are an abundance of
renewable resources such as hydro, solar, wind, and biomass.
These resources offer considerable potential to provide Ethiopia
with a diverse energy supply sources and reduce its dependence on
imported fossil fuels. However, the challenge is how to make a
transition from the traditional energy supply source to the
renewable energy sources. Currently there are a few small wind and
macro-hydro projects in Ethiopia. Wider scale dissemination of
these two renewable technologies in the rural areas has been
limited due to the non-point-of-use power generation and the
resulting need for a mini power transmission grid and the
associated technical operation/maintenance requirement.

Photovoltaic systems, such as Solar Home Systems (SHS), are being

promoted by both governments and international aid organizations
as a feasible and cost effective alternative for the basic
electrification of rural households (Nieuwenhout, 2002). A number
of successful SHS pilot projects received widespread attention such

10
as Sukatani in Indonesia (Surya, 1992). After these success stories,
solar home systems gradually came to be adopted as a viable option
for rural electrification. According to estimates by GTZ (Deutsche
Gesellschaft für Technische Zusammenarbeit) and other
institutions, over one million SHS have been installed worldwide,
the majority in rural areas of Africa, Latin America and Asia (GTZ,
1992).

A commonly acknowledged major barrier to widespread use of SHS

in developing country rural areas is the high initial system cost
(Urmee, 2009). However, even with substantial subsidies, (such as
the government programs in India (MNES, 1999) and Mexico (Jorhe,
1998)) or when access to loans is possible (World Bank loans in Sri
Lanka and Zimbabwe (World Bank, 2000), government loans in
Botswana and Namibia (Schoon, 1998)) the growth is still limited.
In addition to the high entry barrier of SHS, it is not known how
many existing systems are being operated properly. Monitoring
costs as well as practical and methodological problems make it
difficult to obtain reliable data on the effective service life of the
installed SHS.

There have been numerous SHS project reviews and studies on

determining the contributing and limiting factors to SHS project
success and its dissemination (Martinot, 2001). Of particular note
is the World Bank SHS 1993-2000 evaluation report where twelve
large scale SHS projects were reviewed on their approaches, early
implementation experiences and corresponding lessons learned.

11
The World Bank report, along with other studies (Urmee, 2009), can
be summarized as using four main themes for evaluating SHS
projects: (1) institutional, (2) financial, (3) technical findings, (4)
user experiences. These themes cover most of the aspects around
deployment of SHS in developing countries.

This report contributes to the continuing effort to understand and

improve developmental process of SHS by presenting an alternative
way to plan, guide, and assess/evaluate projects using a project
lifecycle sustainability framework. A project assessment tool based
on life cycle sustainability framework was developed by Jennifer
McConville (McConville, 2006) from her experience as a Peace Corps
Volunteer in the water/sanitation sector.

Ethiopian Electric Power has tapped U.S. Company Green

Technology Africa (GTA) to help develop 300 MW of solar power in
the country, which is making an aggressive drive to expand
electricity capacity from its current 55% coverage to 75% 2015.GTA
is planning to set up turnkey projects in the Ethiopian cities of Dire
Dawa (pictured), Kombolcha and Desse.

1.1 Renewable energy in Ethiopia

The Renewable Energy (RE) sector around the world, including

Ethiopia, is developing rapidly. Within RE, solar is one of the major
growth segments globally with almost 30% of all investments in the
sector going into solar. The Ethiopian solar industry, which is in the
nascent stage, holds huge potential. But the pace at which it is

12
growing does not compare to global standards. One of the main
reasons for this is the lack of adequate investment in solar PV
manufacturing and R&D. There is an urgent need to facilitate and
enhance investment in solar PV manufacturing in Ethiopia. This
would enable the domestic solar PV industry to provide cost-
effective and sustainable solutions to the domestic market and
compete with the rest of the world.

Ethiopia generates most of its electricity from renewable energy,

mainly hydropower on the Blue Nile. In 2011, over 96% of
Ethiopia's electricity was from hydropower.[1] The country began a
large program to expand electricity supply in the 2010s from 2,000
MW to 10,000 MW. This was to be done mainly with renewable
sources. Wind and geothermal were included to offset seasonal
differences in water levels. Ethiopia plans to export electricity to
neighboring countries but transmission lines will need to be
upgraded and expanded.

Most of the energy needs of Ethiopia are filled by bio fuels for
cooking, heating, and off-grid lighting. Petroleum, including
gasoline, diesel and kerosene supply less than 7% of the country’s
energy supply. Solar photovoltaic’s is being promoted to replace
fuel-based lighting and off-grid electrical supply with a solar panel
assembly plant opening in Addis Ababa in early 2013. The majority
of the Ethiopia's population lives in rural areas and very few have
access to electricity.

13
1.1.1 Hydropower

Dams built in Ethiopia provided over 1,500 MW of capacity by

2010. The four largest dams were built between 2004 - 2010. The
Grand Ethiopian Renaissance Dam will be the largest hydropower
dam in Africa and among the largest in the world. When completed
it will be able to generate 6,000 MW, almost triple Ethiopia's entire
national capacity.

1.1.2 Wind power

Ethiopia plans 800 MW of wind power as the dry season is also the
windy season; wind power is a good complement to hydropower.
The first wind installation in the country was the 51 MW Adama I
wind farm, built in 2011 The 120 MW Ashegoda Wind Farm opened
in October 2013 and was the largest wind farm in Africa at that
time. The larger 153 MW Adama II wind farm went online in May
2015, bringing Ethiopia's installed wind capacity to 324MW total.

1.1.3 Geothermal

Ethiopia has one geothermal plant, the 7MW Aluto Langano

Geothermal Pilot Plant. This is being expanded to 70MW in 2015.
Ethiopia is planning to build geothermal plants to offset restraints
on power production by hydroplanes due to seasonal water
variation. American-Icelandic Company Reykjavik Geothermal has
an agreement to develop a 1000 MW geothermal farm. The first 500
MW would be completed by 2020.

14
1.1.4 Biofuels

The majority of Ethiopia's energy needs are met by biofuels

(fuelwood) for cooking. The government plans to distribute 9 million
more efficient stoves by 2015 to reduce wood use while improving
air quality and lowering CO2 emissions. Reduced use of firewood
should also help the government's goal of reforestation.

1.1.5 Solar Energy

Photovoltaic solar cells are thin silicon disks that convert sunlight
into electricity. These disks act as energy sources for a wide variety
of uses, including: calculators and other small devices;
telecommunications; rooftop panels on individual houses; and for
lighting, pumping, and medical refrigeration for villages in
developing countries. Solar cells in the form of large arrays are used
to power satellites and, in rare cases, to provide electricity for power
plants.

When research into electricity began and simple batteries were

being made and studied, research into solar electricity followed
amazingly quickly. As early as 1839, Antoine-Cesar Becquerel
exposed a chemical battery to the sun to see it produce voltage.
This first conversion of sunlight to electricity was one percent
efficient. That is, one percent of the incoming sunlight was
converted into electricity. Willoughby Smith in 1873 discovered that
selenium was sensitive to light; in 1877 Adams and Day noted that
selenium, when exposed to light, produced an electrical current.

15
Charles Fritts, in the 1880s, also used gold-coated selenium to
make the first solar cell, again only one percent efficient.
Nevertheless, Fritts considered his cells to be revolutionary. He
envisioned free solar energy to be a means of decentralization,
predicting that solar cells would replace power plants with
individually powered residences.

1.2. Project Justification

Switches, plugs, sockets, push buttons and lamp shed are electrical
devices used to connect electrical operated equipment’s to electrical
power. After electrical wiring system installation is performed there
should be outlets for different electrical equipment’s and
appliances. These outlets should transfer the electric power to the
equipment’s safely with simple plugging. Plugs and sockets cover
the electrical wires from direct contact and give slots and
protruding for easy connection.

1.3 The Project Promoter

The promoter of this project Commotion agent executive

Distributer and advertising promotion and printing is strong
and committed business person who have ample experience in
Electric Light equipment’s & accessories Manufacturing and lead
different business entities which will help him to enter the market
in short possible time.

16
1.4. Objective of the project

The main objective of this factory is to manufacture cost effective,

market oriented, client based and quality Electric materials and
fittings (switches, plugs, sockets, push buttons, lamp shed and …)
manufacturing plant for local market and international market.

1.5 The Economic Significance of the Project

The establishment of such factory will have a foreign exchange

saving effect to the country by substituting the current imports. The
project will also create forward linkage with the construction sector
by supplying the inputs required by the sector and also generates
income for the Government in terms of tax revenue and payroll tax.
The envisaged project deemed to contribute to the economic
development of the nation in general and the region in specific with
following ways:
 Contribute to the Nation’s Development
By supplying customer oriented, high quality and cost effective
Electric Materials and Fittings it will satisfy the demand for
different purposes.

 Source of Revenue

As public policy of any nation, the government collects different

forms of taxes from different business organizations and
individuals. Among the different forms of taxes, business income
taxes, payroll tax and VAT are collected from undertaking business

17
activities. Therefore, the project will serve as sources of revenue for
both the region and nation as a whole.

 Employment opportunity

One of the problems that our country faced is unemployment.

Therefore, the current objective of the government is working on
tackling the problem of unemployment and fostering the
development process either through creating self-employment or
employment in other organization. Hence, this project will hire 288
workers. 99 permanent workers (40 skilled and 59 unskilled) and
189 casual laborers (9 skilled and 180 Unskilled)

 Save/Generate the country Foreign Exchange

All type of the envisioned products (produced by the project) is

mostly imported from abroad. By producing in Ethiopia, the factory
will save the foreign currency of the nation.
By minimizing the market demand and supply gab for these
products, the factory will help to reduce the nation’s foreign
exchange cost to import these products. Moreover, the nation can
generate foreign currency when the factory start exports these
products to international market.

 Benefit For The Local Community

As a corporate responsibility the company will engage in different

development activities on the surrounding areas (Addis Ababa town

18
Administration). This will better worse the community and
contribute for the development of the nation.

 Technology Transfer

By producing Electric materials and fittings (switches, plugs,

sockets, push buttons, lamp shed and …) manufacturing plant, the
project will train and develops the capacity of the technical staffs.
By doing this, the company will add value in technology transfer for
the nation/region in this area.

19
1.6 Location, Infrastructure and Land
A. Location

The envisioned project will locate in Dukem Oromia region town

Administration, which is around 35 km far from the Addis Ababa .
B. Land Use Plan

The factory will planned to have a total of 10,000 m 2 areas of land.

This land will be planned to use as indicated in table below.
SN Description Land
Requirement (M2)
1 Production line ware house 3,000
2 Raw materials Warehouse 3000
3 Finished product store 2000
4 Office Building 500
5 Waste Accumulation area 500
6 Green Area, parking and Buffer 500
zone
7 Quality control 500
Total 10,000

20
2. MARKET STUDY AND PLANT CAPACITY

2.1 MARKET STUDY

2.1.1. Past Supply and Present Demand

Switches, plugs, sockets and lamp sheds are electrical devices used
to connect electrical operated equipments to electrical power in
buildings. As there is no local manufacturer of the products the
demand for switches, plugs, sockets and lamp sheds is supplied
through import. The amount of imports during the period 2002 -
2011 is shown in the following Table.
Table Import of Switches, Plugs, Sockets and Lamp Sheds
(Tons)

Year Import
2002 221
2003 631
2004 609
2005 601
2006 854
2007 1,442
2008 1,838
2009 1,925
2010 1,806
2011 1,665

Source: - Ethiopian Revenues & Customs Authority.

As can be seen from the Table 3.1, import of switches, plugs,

sockets and lamp sheds shows a substantial growth though

21
fluctuates slightly from year to year. The growth can be clearly seen
when the data is arranged in three years interval.

During the period 2003 – 2005, the average import or apparent

consumption of the products was 614 tons which has increased to
an average of 1,378 tons during the subsequent three years (2006 –
2008). Moreover, during the period 2009 – 2011 the average
apparent consumption has further increased to 1,799 tons. Thus,
during the period 2006-2008 as compared to 2003 – 2005 import
has increased by 124.54% and during the period 2009 – 2011
import has increased by 30.52% compared to the period 2006 –
2008.

During the period under reference (2002--2011), excluding year

2002, where import was exceptionally low, apparent consumption of
the products has registered an annual average growth rate of 16%.

To estimate the present (2012) effective demand for the products

the average of the most recent three years (2009 – 2011) is assumed
to reflect the effective demand for year 2011. Moreover, the past
growth trend in the apparent consumption of the product (16%) is
assumed to continue at least in the near future. Accordingly,
taking the average import of 2009 – 2011 as a base and applying
16% growth rate, the present effective demand for the products is
estimated at 2,086 tones.

22
2.1.2. Demand Projection

The demand for switches, plugs, sockets and lamp sheds is directly
related with the growth in the construction sector in general and
the housing construction sub sector in particular which in turn
depends on the overall economic development of the country.

The contribution of the construction sector to the GDP during the

period 2001 – 2010 have been growing at annual average growth
rate of 13 percent which is above the average annual growth rate
of real GDP during the period under consideration (11.4 %),
indicating a rise in the share of the construction sector within the
overall economy.

According to the GTP, during the period 2010/11 – 2014/15 the

real GDP of the country (at a base case scenario) is expected to grow
at an average annual growth rate of 11.2%. Moreover, during the
same period the annual average planned targets of growth for the
construction sector is 20%.

Accordingly, by considering the above factors the demand for

switches, plugs, sockets and lamp sheds is conservatively assumed
to grow at a rate of 10%. Projected demand is presented in next
Table

PROJECTED DEMAND (TONS)

23
 2013 2,295
2014 2,524
2015 2,776
2016 3,054
2017 3,360
2018 3,695
2019 4,065
2020 4,472
2021 4,919
2022 5,411
2023 5,952
2024 6,547
2025 7,201

2.1.3. Pricing and Distribution

The sales price of switches, plugs, sockets and lamp shed varies
according to capacity and design. For the purpose of financial
analyses an average price of Birr 14 per pieces is adopted. The
products can be distributed through the existing building material
shops or by establishing own distribution centers at strategic
locations.

2.2. Plant capacity and production program

2.2.1 Plant Capacity

Considering the projection of the product demand from the market

study, implementation period, and economic scale of production the
capacity of the plant is set to be 3,000,000 pieces of those electrical
items per year. And the envisaged plant will operate in two shifts

24
eight hours per day for three hundred days within a year
considering 13 holidays and 52 Sunday per year and assuming that
maintenance activities will be performed during off hours and
Sunday.

2.2.2. Production Program

The envisaged manufacturing plant will achieve its full production

capacity in three years. The plant will start to operate at 70% of its
capacity during the first year of operation. During the second and
third year and then after it will operate at 85% and 100%,
respectively. The details of capacity utilization and production
program are shown in the next table.
Production program
Units of Year
Description Productio
1 2 3
n
Capacity
(%) 60 80 100
Utilization
switches Pieces 1,800,000 2,400,000 3,000,000
plugs Pieces 1,200,000 1,600,000 2,000,000
sockets: Pieces 1,800,000 2,400,000 3,000,000
push buttons Pieces 1,200,000 1,600,000 2,000,000
lamp shed: Pieces 1,800,000 2,400,000 3,000,000
others Pieces 3,000,000 4,000,000 5,000,000

25
2.3. Pricing and Distribution

It would be important to examine the possible level of price based

on the competitor’s action. In this connection, the existing average
retail prices of similar factory were assessed for the benefit of
comparison. Based on the existing price in the market the
envisioned factory stetted the price as follows;

26
Pricing of the factory
mkt factory
Units of Annual
Product price in price in
Production production
Birr Birr
switches pcs 3,000,000 10 8
plugs pcs 2,000,000 15 13
sockets: pcs 3,000,000 30 22
push pcs
2,000,000 30 22
buttons
lamp shed: pcs 3,000,000 12 10
others pcs 5,000,000 10 8

27
3. MATERIALS AND INPUTS

3.1. Raw Materials

The major raw material for the manufacture of the electrical

items mentioned are thermosetting plastics and electroplated
metal and auxiliary raw materials such as nickel dip, zinc dip,
degreasing mixtures and cleaning chemicals; all to be imported
from abroad. The raw material combination will vary depending
on the type of electrical item to be produced. Annual cost of raw
materials at full capacity operation is estimated at Birr 22.66
million. The description, annual requirement of those raw
materials and their related cost is shown in Table
Annual Raw Material Requirement & Cost

Sr. Description Annu

No. al Total
Unit Cost
Consum ( Birr)
Injection 90.0
ption
grade

Decreasing 7.2

Cleaning 7.0

Insurance, import duty, port handling

cost, in land

28
29
3.2. UTILITES

The major utilities required by the plant are electricity and water.
Annual cost of utilities at full capacity operation is Birr 618
thousand. The annual consumption and the related cost are
shown in Table.Annual Utilities Consumption & Cost
Unit Cost
Annual Cost ( `000
Consumption ( Birr) Birr)
1 Electricity 925,000 kw 0.58 536.5
2 Water 8,150 m³ 10 81.5
Total Annual Cost 618

30
4. TECHNOLOGY AND
ENGINNERING

4.1. Technology

A literature review and extensive internet browsing was carried out

to get information on latest technologies/developments in
Electric materials and fittings (switches, plugs, sockets, push
buttons, lamp shed and…) manufacturing equipment’s especially
from an angle of better environmental management practices.
The technology provides clean and hygienic working conditions and
hence environmentally appropriate.

4.1.1. Machinery and Equipment

The list production and auxiliary machineries, machine tools and

equipment’s with their associated cost required for the envisaged
plant is shown in Table
Machinery and Equipment Requirement & Cost

Total Cost ( `000 Birr )

Total

1 Hydraulic press 4 976,5 - 3,906. 3,906.

2 Shearing machine 4 1,134,0 - 4,536. 4,536.
3 Automatic eccentric 2 441,0 - 882. 882.
4 C frame eccentric 3 567,0 - 1,701. 1,701.
Injection molding

6 Milling machine 1 1,260,0 - 1,260. 1,260.

7 Surface grinder 1 2,205,0 - 2,205. 2,205.
8 Air compressor 1 630,0 - 630. 630.
9 Bench lathe 3 157,5 - 472. 472.
31
10 Tempering furnace 1 315,0 - 315. 315.
11 Electroplating device 2 850,5 - 1,701. 1,701.
12 Bench drill 1 630,0 - 630. 630.
13 Bench tap 3 126,0 - 378. 378.
14 Lathe 1 1,575,0 - 1,575. 1,575.
1 Spare parts and 1,198. 1,198.
Total Fob 25,170 25,170
Insurance, import duty, port
handling cost, in land transport etc
(15%)

4.1.2. Production Process

The production of those electrical items involves manufacturing

process such as forming, machining stage, galvanizing stage,
insulation and assembly are describes as follows:

Forming and Machining

Here, the sheet metal components of the electrical items will
undergo metal forming operations such as bending, piercing,
blanking, machining and cutting to the desired shape and size as
per the design specification using either mechanical, pneumatic, or
hydraulic press machine.

Electro Plating

After the desired shape and size of the sheet metal components are
obtained, they will undergo to electroplating process in
electroplating bath where either zinc or nickel will be platted over

32
their surface to avoid rusting and to give good surface finish that
lasts for long time.

Insulation

In this step the electroplated metal components will be partially

insulated with thermosetting plastic material and also the plastic
components will be produced by with plastic injection machine as
per the design requirement

Assembly and Finishing

Here, the metal and plastic components of the electrical items will
be assembled to produce the specific electrical item such as
switch, sockets, and lamp shades and the electrical
wire/conductor for sockets and lamp shade will be supplied as one
raw material since the production of the conductor is by itself a
large investment, so, the envisaged plant will create an integration
with other industries

4.2. Civil Engineering, Building and Civil Works

As indicated in part 1 the total land requirement for the project is

estimated to be 15,000 M2. The buildings are planned to
accommodate production houses, storage and other utility
requirements as well as offices and a social rooms/constructions.
In general the buildings must be capable of being kept clean and
provision should be made for keeping the sewerages drained out
properly and room temperature is attained to keep healthy

33
environment. In most environments, equipment should be totally
enclosed in a light structure: were the climate is suitable. A
concrete floor, which can be swept, is usual. Besides, the loading
and offloading areas together with incoming and outgoing roads are
processes to be paved to ensure a clean environment around the
project site. The site will be encircled by a chain linked fence
fastened to concrete posts. The project construction is designed by
professional engineers and constriction will be done under close
supervision and collaboration will be done under close supervision
and collaboration of the engineers.

34
5. OGANIZATION, MANAGEMENT AND MANPOWER
5.1. Organization and Management

The organizational structure should be in a way that the company

able to achieve its objectives as well as the satisfaction of standard
requirement.
5.2. Man Power

The total manpower required for the factory will be 288 individuals,
permanent 99 (40 skilled and 59 unskilled)) and 189 casual laborer
(9 skilled and 180 Unskilled). The labor cost is shown in part 5 on
the financial-part.
SN Description No Qualification
1 General 1 BA in Business Management
2 Production 1 BSC in industrial Engineering
3 Shift supervisor 2 BSC in Production Technology
4 Secretary 1 Diploma In Secretarial Science
5 Public Relation 1 Degree in Social Science
7 Personnel 1 BA in HRM
8 Planning Officer 1 BA in Economics/Statistics
9 General service 1 BA in management
10 Color Operator 3 Diploma in
11 Hydraulic 3 10+2 in general Mechanic.
12 Machine 12 10+2 in general Mechanic
13 Helper and 45 10 completed
14 Marketing head 1 BA in Marketing management
15 Purchaser 1 Diploma in Pur. & Supplies
16 IT officers 1 BSC in Computer Science
17 Administer 1 BA in Management
18 Sales person 3 Diploma in sales management
19 Finance head 1 BA in Accounting
20 Accountant 2 Diploma in Accounting
21 Electrician 1 10+2 in general electricity
22 Cashier 2 10+2 in bookkeeping
23 Store keeper 2 '10+2 in logistic management
24 Cleaner 3 Unskilled

35
 25 Office Boy 1 10 Completed
26 Driver 2 10 completed
27 Gardner 2 Unskilled
28 Guards/Security 4 Basics
29 Casual skilled 9 BSC/MSC
29 Casual unskilled 180 Unskilled
  Total 288  
5.3. Organizational Structure

The organizational structure of the project is designed by including

all the necessary personnel under the right division. At the top of
the organizational structure, there will be manager with the
responsibility of supervising the overall activity of the plant.
Depending up on the nature of the center and the amount of work
to be performs; there exist auxiliary units under the general
manager.
Employees under each unit will be supervised by the department
head that is accountable for the general manager. General Manager
is appointed by the owners.

Owner

General Manager
Executive Secretary

Manufacturing Admin & Finance Commercial

Department Department Department

Fig:-2. Organizational Structure

36
Hence the following section deals with the duties and
responsibilities of some-
departments
1. General Manager Duties and responsibilities

 She/he will plan, organize, direct and control the overall

activities of the factory
 She/he will devise policies and strategies that will enable the
factory to be
profitable
 She/he will incorporate modern technological innovation that will
facilitate the
service delivery of the project center and increase customer's
satisfaction.
 He/he will plan, organize, direct and control the human and non-
human
resources of the plant so as to achieve the short and long run
objectives of the organization.
2. The Manufacturing Department Duties and
responsibilities:-
It is the core department of the project center and has the
following responsibilities
 Design and prepared prototype for irrigation pipe, conduit,
fittings and accessories based on the plant standard and
customer preferences.
 Use modern manufacture, processing and technologies

37
 that will enhance the quality of those products.
 Produce quality product that will enable the center competent
both in. the Domestic and international market.
 Use appropriate technology to manage its products.
 Produce some of the project products from recycled PVC
materials
 Control on the quality of raw materials, inputs, quality of the
product and also the overall production process.
 Produce products in least cost so that the profitability of the
center is guaranteed.
 Moreover control over the quality of the final products

Administration and Finance Department Duties and

responsibilities: -

 Will plan, organize direct and control the financial transaction of

the, plant by using the entire necessary document.
 Will develop sound financial control system by developing
modern financial control systems.
 Will prepare the annual financial statements and prepare
condensed reports for the general manager, owner and other
concerned government body.
 Will control the human and non-human resources of the plant,
which include
effective handling of the different inventories of the machineries,
equipment, raw materials, finished products, and devise
strategies of controlling against fraud and damage.

38
 Manage and execute the company national and international
procurement Procedure.
 Administer and control the company logistic resource
 Effectively administer the company Procurement process
domestically as well as internationally.
 Manage the public relation of the company/factory with external
parties/stakeholders.
 Provide and manage general supportive service to the plant.
4. Commercial Department Duties and responsibilities:-
 Will handle the overall marketing activities of the organization
which include planning, organizing, directing, and controlling.

 Provide cost estimates in preparation for securing

 Gather information on new product design, profile
 Approval of new products profile & brand plan analyzes-
market research
Plan and execute sales.
 Will develop effective customer handling strategies
 Will design and implement effective advertisement and
promotion schemes

 Will develop the marketing strategies for future project

center's development.

 Conduct both foreign and domestic market research for

expanding the sales of the company
The production employees of the factory expected to take basic

39
Electric materials and fittings (switches, plugs, sockets, push
buttons, lamp shed and …) manufacturing skill training for 5 days.
In addition training could be given to the Mechanic and to the
supervisor will also take skill training.

40
6. FINANCIAL REQUIRMENT AND ANALYSIS

6.1. Total Initial Investment Cost

The total amount of initial investment capital required to establish

the envisaged factory is estimated to be Br 80,000,000and from
this total investment cost 30% will be covered by the promoter while
the rest will be financed by bank.
Total Initial Investment Capital
SN Description Cost in birr
1 Land, Building & Construction 19,209,000
2 Machines & Equipments 40,000,000
3 Vehicles 19,091,000
4 Office Equipment 500,000
Total Fixed Investment Cost 62,800,000
5 Pre service Expense 200,000
6 Initial Working capital
17,192,100.00
7 Salary Expense at full capacity 3,807,900.00
Total 17,200,000
Total Initial Investment Capital 100,000,000

6.1.1. Fixed Investment

A. Land, Building & Construction
SN Description Total cost in Br.
1 Workshop 2,500,000
2 Warehouse 7,209,000
3 Finished product stores 2,000,000
4 Office Building 2,000,000
5 Waste Accumulation area 500,000
6 Green Area,Parking and Buffer Zone 1,000,000
7 Fence and others 1,000,000
41
 8Site Development 500,000
9Design and Supervision 1,000,000
10Land lease Initial Fee 1,500,000
Total 19,209,000
B. Machinery and Equipment

Equipment Name Capability Cost(birr)

Screen Printer for Vision, Integrated  9,000,000
Insulation Inspection
UV Cure System High throughput  9000,000
Stencil Printer for Vision, Integrated  7000,000
Conductive Adhesive Inspection
Dispenser Vision, Integrated  3000,000
Inspection
Placement Tool Vision, Placement of  4000,000
Routing, EVA & TPE
Automated Optical High Throughput,  6000,00
Inspection (AOI) Pattern Recognition
Total   40,000,000.00
C. Vehicles
SN Description Qty Unit Price Total Price Remark
1 DumTruck 4 1,500,000 6,000,000 Duty free
2 Pick Up 5 700,000 3,500,000 Duty free
3 Truck 3 2,500,000 7,500,000 Duty free
4 Bus 1 2,091,000 2,091,000 Duty free
  Total     19,091,000  
4. Office Equipment

42
SN Description Qty Unit cost In Total cost in
1 Managerial chair with 6 Br.
15,000 Br.
90000
2 Secretarial
tables chairs with 1 8000 8000
3 Office
table Chairs with 10 15000 150000
4 Computer
tables with printer 6 15000 90000
5 Shelf 4 3000 12000
7 Telephone machine set 3 2000 6000
8 Filing Cabinets 4 2000 8000
9 Assembly chair and     82,000
10 Decoration(Carpet
table &     54,000
  Total
Curtain)     500,000

43
6.1.2. Initial Working Capital
The initial working capital is estimated to be Br. 13,192,100.00

6.1.3. Pre -Service Expense

SN Description Cost in br.
1 Project proposal 20,000
2 Environmental impact Assessment 40,000
3 Staff Capacity Building 135,000
4 Licensing fee and others 5000
  Total 200,000
6.2. Annual Salary Expense
S Description No Qualification Monthly Annual
1 General 1 BA in Business 15,000.0 24,000,0
2 Production 1 BSC in industrial 10,000.0 12,000,0
3 Shift 2 BSC in Production 5,000 12,000,0
4 Secretary 1 Diploma In 2000 24,000
5 Public 1 Degree in Social 3000 36,000
7 Personnel 1 BA in HRM 3000 36,000
8 Planning 1 BA in 4,000 48,000
9 General 1 BA in 3,000 36,000
1 Color Operator 3 Diploma in 2,000 72,000
1 Hydraulic 3 10+2 in general 1,500 54,000
1 Machine 12 10+2 in general 1,370 328,800
1 Helper and 45 10 completed 800 480,000
1 Marketing 1 BA in Marketing 3,000 36,000
1 Purchaser 1 Diploma in Pur. & 1,150 13,800
1 IT officers 1 BSC in Computer 1,800 21,600
1 Administer 1 BA in 1,750 21,000
1 Sales person 3 Diploma in sales 1,100 66,000
1 Finance head 1 BA in Accounting 10,000.0 120,000
2 Accountant 2 Diploma in 1,500 36,000
2 Electrician 1 10+2 in general 1,500 18,000
2 Cashier 2 10+2 in 1,900 45,600
2 Store keeper 2 '10+2 in logistic 980 23,520
2 Cleaner 3 Unskilled 700 33,600
2 Office Boy 1 10 Completed 700 8,400
2 Driver 2 10 completed 1000 24,000
2 Gardner 2 Unskilled 400 9,600
2 Guards/ 4 Basics 500 36,000
2 Casual skilled 9 BSC/MSC 10,000 1,080,00
44
2 Casual 18 Unskilled 500 12,000,0
  Total 28   79,150 2,955,60

45
iii. Other Operating Expenses
SN Descript Annual Cost in Assumption
1 Property Insurance
ion 2526950
Br. 5% Used
of the fixed
2 Audit & legal fee 18,000.00 1500per month
3 Unifor 13,300.00 70*190br
4 Advertisement & 400,000.00 % of Sales
5 Telephone, fax and 10,800.00 900 per month
6 Cleaning goods . 12,000.00 1000 per month
7 Maintenance & Repair 600,000.00 Estimated Lump
8 Stationery and other 8,400.00 700 per month I
9 Electri 50,250.00 0.45*150,000W
10 Water 40,000.00 2*2000 m3 per
11 Fuel 62,000.00 6500 lit*20 per
12 Oil and lubricant 6,200.00 10% of fuel cost
13 Miscellaneous Expense 60,000.00 5000 br month
Total 3,807,900.00

46
6.3. Financial Analysis and Statements

6.3.1. Underlying Assumption

The financial analysis of the envisioned factory is based on the data
provided in the preceding sections and the following assumptions.
A. Construction and Finance

Construction period 2years

Source of finance 30% equity and 70% loan
Tax holidays 2 years
Bank interest rate 10 years
Utilities and operation expense increase 5% per annum after
3rd yr
Wages and Salary increase 5 % per annum after 3 rd y
Depreciation Method Straight Line
Building 5%
Machinery and equipment 10%
Office Equipments 10%
Vehicles 20%
6.3.2. Source of Fund

SN Description % share Amount(in birr)

1 Owners Share 30 24,000,000
2 Bank loan 70 56,000,000
Total 100 80,000,000

6.3.3. Loan Repayment Schedule

Year Principal Interest (10%) Total Annual Remaining

47
 payment payment Balance
0 - - 0 70,000,000
1 5,600,000 5,600,000 11,200,000 50,400,000
2 5,600,000 5,600,000 10,640,000 44,800,000
3 5,600,000 5,600,000 11,200,000 39,200,000
4 5,600,000 4,900,000 10,500,000 33,600,000
5 5,600,000 4,200,000 9,800,000 28,000,000
6 5,600,000 3,500,000 9,100,000 22,400,000
7 5,600,000 2,800,000 8,400,000 16,800,000
8 5,600,000 2,100,000 7,700,000 11,200,000
9 5,600,000 1,400,000 5,600,000 5,600,000
10 5,600,000 700,000 6,300,000 0

6.3.4. Depreciation Schedule

SN Description Original Depreciatio Depreciation

Value In n rate in % Per year
1 Land, Building & 14,209,000 5 710,450.00
2 Machines & 29,000,000 10 2,900,000.00
3 Vehicles 19,091,000 10 1,909,100.00
4 Office Equipment 500,000 20 100,000.00
  Total 62,800,000   5,619,550.00

6.3.5. Revenue Projection

Based on the assumption of plant capacity, production program
and pricing as indicated in part 2 of this paper, the revenue of the
project at full capacity" projected in the table below.

Description unit Qty Un P TP

48
switches pcs 3,000,000 8 24,000,000
plugs pcs 2,000,000 13 26,000,000
sockets: pcs 3,000,000 22 66,000,000
push buttons pcs 2,000,000 22 44,000,000
lamp shed: pcs 3,000,000 10 30,000,000
others pcs 5,000,000 8 40,000,000
Total 230,000,000

49
6.3.6. Balance Sheet

Asset
Current Asset Value in Br.
Cash 19,192,100
Initial inventory of raw materials and inputs 9,007,900
Total Current Asset 27,200,000
Fixed Asset -,
Land, Building & Construction 34,209,000
Machines & Equipments 29,000,000
Vehicles 19,091,000
Office Equipment 500,000
Total fixed Asset 56,800,000
Total Asset 80,000,000
Liability
Account payable 56,000,000
Owners Equity Capital 24,000,000
Total liability & Owners' Equity 80,000,000

50
6.3.7. Income/Loss Statement

Revenue Year 1 Year 2 Year 3-10

Sales Revenue 138,000,000 184,000,000 2 230,000,000
Purchase of Raw 107,400,000 143,200,000 3 179,000,000
Material
Gross profit 30,600,000 40,800,000 5 51,000,000
Expenses 1
Salary Expense 2,955,600 3,251,160 5,112,237
Other Operating 2094345 3046320 3,807,900
Pre-operating
Expenses 92,000 0 0
Deprecation Building 1,440,000 2,880,000 1 1,440,000
Expense
Deprecation 1,401,000 2,802,000 1 1,401,000
1
Deprecation
Machineries Vehicles 275,655 551,310 2
1 275,655
Deprecation office 65,800 131,600 5, 65,800
Interest Expense 4,340,000 3,906,000 15,624,000
Equip 2
Lease payment 253,000 253,000 253,000
Total Expense 12,917,400 16,821,390 1 12,917,400
Profit Before Tax 17,682,600 23,978,610 32 38,082,600
Tax(35% ) 6,188,910 8,392,513.5 8
1 13,328,910
Net Profit 15,493,690 15,586,097 3 30,753,690

51
6.3.8. Cash Flow Statement

Year Year 0 Year 1 Year 2 Year 3-10

Equity 70,000,0
Loan
Capital 70,000,0
00
Sale
principal 000 138,000,00 184,000,0 230,000,0
Total cash in 100,000, 138,000,00
0 184,000,0
00 230,000,0
00
flow Cash 000 0 ' 00
- 00
Purchase of raw 0 17,985,000 26,160,00 32,700,0
materials 0 00
Salary 0 2,955,600 3,251,160 5,112,237
Pre operating
expense 92,000 0 0 0
Investment 50,539,0 0 0 0
expense
Other 0
00 2094345 3046320 3,807,900
loan
Operating 0 8,680,000 8,246,000 6,727,000
repayment
Lease 0 253,000 253,000 253,000
Tax payment
payment 0 4,815,160 7,692,514 9,058,910
Total 50,631,00 36,783,105.0 48,648,994 57,659,04
payment
Cash 0
11,369,00 0
7,876,895.00 7
13,351,006 24,352,953
Cumulative Cash
surplus/Deficit 11,369,00
0 28,906,210.0 35,297,988 65,259,032
flow 0 0

52
7. ENVIRONMENTAL IMPACT OF THE PROJECT

7.1. Environmental Impact Assessment of the Project

Environmental aspects are fundamental to the sustainability

assessment of the current and novel designs of Electric materials
and fittings (switches, plugs, sockets, push buttons, lamp shed and
…) manufacturing plant. In this regard the factory will undertake a
separate and detail Environmental impact Assessment.

53