PLASTIC FURNITURE

MANUFACTURING INDUSTRY

PROJECT OWNER: SHIFERAW

HABTESELASE

DEBREBIRHAN CITY ADMINISTRATION, NORTH

SHOA ZONE, AMHARA NATIONAL REGIONAL STATE,
ANRS, ETHIOPIA

ADDIS ABABA, 2023

1
 TABLE OF CONTENTS
TABLE OF CONTENTS ................................................................................................... 2
LIST OF TABLES.............................................................................................................. 4
LIST OF ABBREVIATIONS ............................................................................................ 5
1. EXECUTIVE SUMMARY ............................................................................................. 6
2. PRODUCT DESCRIPTION AND APPLICATION ..................................................... 7
2. 1. Vision of the Project .................................................................................................. 8
2. 2. Mission of the Project ............................................................................................... 8
2. 3. Objectives of the Project ........................................................................................... 8
2. 4. Keys to Success ......................................................................................................... 9
3. MARKET STUDY, PLANT CAPACITY AND PRODUCTION PROGRAM ........... 10
3. 1. Market Study ........................................................................................................... 10
3. 1. 1. Present Demand and Supply ........................................................................... 10
3. 1. 2. Projected Demand ........................................................................................... 12
3. 1. 3. Pricing and Distribution .................................................................................. 13
3. 2. Plant Capacity ......................................................................................................... 13
3. 3. Production Program................................................................................................. 14
4. RAW MATERIALS AND UTILITIES ........................................................................ 16
4. 1. Availability and Source of Raw Materials .............................................................. 16
4. 2. Annual Requirement and Cost of Raw Materials and Utilities ............................... 16
5. TECHNOLOGY AND ENGINEERING ..................................................................... 19
5. 1. Production Process .................................................................................................. 19
5. 2. Machinery and Equipment ...................................................................................... 21
5. 3. Land, Building and Civil Works Cost ..................................................................... 22
6. HUMAN RESOURCE AND TRAINING REQUIREMENT ..................................... 23
6. 1. Human Resource ..................................................................................................... 23
6. 1. 1. Training Requirement ..................................................................................... 25
6. 2. Organizational Structure ......................................................................................... 26
6. 2. 1. General Manager ............................................................................................. 28
 6. 2. 3. Finance and Administration Department ........................................................ 29
6. 2. 4. Commercial Department ................................................................................. 30
6. 2. 5. Quality Control And Assurance Department .................................................. 31
6. 2. 6 MIS Services Department ................................................................................ 32
7. FINANCIAL ANALYSIS ............................................................................................. 33
7. 1. Underlying Assumption .......................................................................................... 33
7. 2. Implementation Schedule ........................................................................................ 34
7. 2. 1. Implementation Cost ....................................................................................... 36
7. 3. Office Furniture and Equipment ............................................................................. 37
7. 4. Investment ............................................................................................................... 39
7. 5. Production Costs ..................................................................................................... 40
7. 6. Financial Evaluation ................................................................................................ 41
7. 6. 1. Profitability...................................................................................................... 41
7. 6. 2. Breakeven Analysis ......................................................................................... 41
7. 6. 3. Payback Period ................................................................................................ 41
7. 6. 4. Internal Rate of Return , IRR and Net Present Value, NPV ........................... 42
7. 6. 5. Profit Generation ............................................................................................. 42
7. 6. 7. Tax Revenue .................................................................................................... 42
7. 6. 8. Employment and Income Generation .............................................................. 42
7. 6. 9. Employment and Income Generation .............................................................. 42
7. 6. 10. Import Substitution and Foreign Exchange Saving ....................................... 43
7. 6. 11. Technology Transfer ..................................................................................... 43
7. 6. 12. Diversification And Inter-Sectoral Linkage. ................................................. 43
7. 7. Environmental and Social Impact Assessment (ESIA) ........................................... 44
ANNEXES: FINANCIAL ANALYSIS ............................................................................ 46

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 LIST OF TABLES
TABLE 3. 1 : IMPORT OF FURNITURE (PIECES) .......................................................... 10
TABLE 3. 2 : PROJECTED DEMAND FOR BASED FURNITURE .................................. 13
TABLE 3. 3 : TYPES OF THE LIST OF FURNITUR WITH ITS PERCENTAGE .............. 14

TABLE 4. 1 : ANNUAL MATERIAL REQUIREMENT AND RESPECTIVE COSTS AT FULL

CAPACITY 17
TABLE 4. 2 : ANNUAL UTILITY REQUIREMENT AND RESPECTIVE COSTS AT FULL
CAPACITY 18

TABLE 5. 1 : MACHINERY AND EQUIPMENT ................................................................ 21

TABLE 6. 1 : HUMAN RESOURCE REQUIREMENT ....................................................... 23

TABLE 7. 1 : CONSTRUCTION AND FINANCE; DEPRECIATION AND WORKING

CAPITAL (MINIMUM DAYS OF COVERAGE) ................................................................. 33
TABLE 7. 2 : PROJECT IMPLEMENTATION SCHEDULE ............................................. 34
TABLE 7. 3 : IMPLEMENTATION COST .......................................................................... 36
TABLE 7. 4 : OFFICE FURNITURE AND EQUIPMENT COST, ETB ............................. 37
TABLE 7. 5 : TOTAL INITIAL INVESTMENT (000 ETB) .................................................. 39
TABLE 7. 6 : PRODUCTION COST (000 ETB) ................................................................. 40

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 LIST OF ABBREVIATIONS
ANRS : Amhara National Regional State
CAGA : compound annual growth rate
CNT : Caron Nanotubes
EPA : Environmental Protection Authority
ETB : Ethiopian Birr
EUROMAP : Europe Plastics and Rubber Machinery
FMCG : Fast moving consumer goods
kt : Kilo ton
IRR : Internal Rate of Return
MIS : Management Information System
M² : Square meter
M3 : Cubic meter
NPV : Net Present Value
PVC : Polyvinyl chloride
PLA : polylactic acid
PHA : polyhydroxyalkanoate
PP : Polypropylene
PPHP : Polypropylene Homo-Polymer
PPCP : Polypropylene Co-Polymer
HDPE : high density polyethylene
LLDPE : linear low density polyethylene
PPRCP : Polypropylene Random Co- Polymer
PVC : Polyvinyl chloride
UNEP : United Nations Environment Programme

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 1. EXECUTIVE SUMMARY
This project profile deals with the establishment of plastic furniture production plant at
Debre Birhan City Administration, Amhara National Regional State (ANRS). The
following presents the main findings of the study.

The supply of plastic furniture was increasing in the last decades at Ethiopia due to the
expansion and development of economic values of the societies. Demand projection
divulges that the domestic demand for furniture is substantial and is increasing with time.
Accordingly, the planned plant is set to produce 400 tons annually.

The principal raw materials required are PPHP, PPCP, HDPE, LLDPE, PPRCP / PP
Random /, filler and master batch. All raw materials have to be imported.

The total investment cost of the project including working capital is estimated at ETB
115. 00 million at 10,000 square meter of land and creates 147 jobs and ETB 16. 66
million of income per year. Most of the costs go to working capital and machine
equipment.

The financial result indicates that the project will generate profit beginning from the first
year of operation. Moreover, the project will break even at 31. 43% of capacity utilization
and it will payback fully the initial investment less working capital in 4 years and 1
months. The result further shows that the calculated IRR of the project is 20. 09% and
NPV discounted at 10% of ETB 39. 23 million.

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 backward linkage
with chemical manufacturing sub sector and forward linkage with the hotel, restaurant,
household, and consumer durables manufacturing sub sectors. The project also generates
income for the Government in terms of tax revenue and payroll tax.

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 2. PRODUCT DESCRIPTION AND
APPLICATION
Furniture refers to movable objects intended to support various human activities such as
seating (e. g. , chairs, stools, and sofas), eating (tables), and sleeping (e. g. , beds).
Furniture is also used to hold objects at a convenient height for work (as horizontal
surfaces above the ground, such as tables and desks), or to store things (e. g. , cupboards
and shelves). Furniture can be a product of design and is considered a form of decorative
art. In addition to furniture's functional role, it can serve a symbolic or religious purpose.
It can be made from many materials, including metal, plastic, and wood. Furniture can
be made using a variety of woodworking joints which often reflect the local culture.

As per the importance of the furniture, furniture is a product designed and built to meet
the needs of many users, such as comfortable and efficient use of spaces, especially in
terms of comfort and functioning of living spaces. They can be designed with space and
also independently of space, and they can also assume a task of defining the function and
identity of the space they are located in. When we look at the definitions of the furniture,
which is an indispensable member of the order of life and its result, we see. One of the
recent furniture input are organic compounds. Plastics are a wide range of synthetic or
semi-synthetic organic compounds that are malleable and so can be moldable into solid
objects. Plastic furniture is standardized by an international norm set by the International
and regulated by national or regional regulations. Marketers and manufacturers of plastic
products must be compliant to these regulations to be able to market their furniture
products in the corresponding areas of jurisdiction.

Plastic furniture is one of the common plastic technologies with different types and sizes
widely used for day to day activities at house hold and hotels. The trend for furniture has
changed from the wood to plastics to a modern and up-to-date material. Nowadays,
plastic furniture is used by almost every manufacturer and supplier of perishable, non-
perishable and fragile products. Plastic furniture has inherent benefits as they are
environment friendly and have recycling capability. This is the major reason; the
international market prefers plastic furniture.

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 Manufacturing process involved include mixing, molding, and coloring. The out-put of
the plant will serve as a service material for the outputs of many industries. The linkage
effect of the plant is, therefore, forward.

2. 1. Vision of the Project

Our vision is to establish a high quality furniture production business to be customers
first choice when selecting a world-class manufacturer of plastic parts, assemblies and
products, and the provider of related technical services. The customers first choice and
to plays a prominent role to household and others and secure a market share in the local
and regional with a strong and reliable environmental, economic, cultural, and
developmental benefit and opportunity to the country.

2. 2. Mission of the Project

Our mission is to embrace a propensity for satisfying the needs and expectations of our
customers by supplying on-time, high quality products and services, with competitive
pricing and long term consistent value. The industry will provide furniture to both local
(40%) and foreign (60%) market with best quality and fair prices, ensuring, in the
meantime, a sufficient financial return on the investment. In addition, it is our goal to
serve the increasing number of many industries in the country and urban areas.

2. 3. Objectives of the Project

The establishment of the industry is initiated by the unfulfilled demand gap of highly
standardized plastic furniture products in the current market situation. This has created a
good market and investment opportunity. To effectively utilize the opportunity, we
devised many objectives and plans.

Some of them are:

 Stressing on quality product to ultimately satisfy customers and withhold their interest.
 Committing into the market by providing a unique and quality product at reasonable
price.
 Providing competitive product as much as possible at full capacity to create market for

8
 the product and shortly improve the market share of the business.

2. 4. Keys to Success
In descending order of importance, the critical keys to success for the envisaged the
furniture is
 Ability to meet and exceed the beliefs of its clients and partners with modern
lifestyles.

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3. MARKET STUDY, PLANT CAPACITY AND
PRODUCTION PROGRAM
3. 1. Market Study
3. 1. 1. Present Demand and Supply
Furniture has now a day become very expensive and the price is exorbitantly growing
from year to year due to increasing scarcity and rising price of timber in the world. Wood
based furniture is getting out of reach for households even in the middle and higher
income bracket. Second-hand furniture is expensive for many low and medium income
families. It is becoming extremely difficult for a newly couple and young people who
secure their first job and who want to live independently of their parents to acquire decent
household furniture due to the high cost of the product. Plastic furniture and articles can
be good substitute for wood furniture. The price is still lower that households with lower
income bracket can manage to get hold of them. In these respect, the best substitute one
can think is plastic furniture especially for lower income households and even for middle
and higher income households at country and regional level.

TABLE 3. 1 : IMPORT OF FURNITURE (PIECES)

YEAR IMPORT

2002 141,631

2003 81,916

2004 565,727

2005 163,195

2006 209,690

2007 329,297

2008 376,599

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 2009 206,110

2010 383,879

2011 327,338

2012 370,099

2013 386,747

2014 403,394

2015 420,042

2016 436,689

2017 453,337

2018 469,984

2019 486,632

Source: - Ethiopian Revenue and Customs Authority

As can be seen from Table 3. 1, import of furniture for the period 2002-2019 ranges from
the lowest 81,916 pieces (year 2003) to the highest 383,879 pieces (year 2010) with
annual average of about 278,538 pieces. Though import of furniture fluctuates from year
to year, a general growth trend can be observed. For example average import during the
first five years of the data set (2002 – 2006) was 232,432 pieces tones which has
increased to 324,645 pieces during the next five years (2007-2019) average.

Accordingly, due to the nature of the import data the recent four years (2008-2019)
average level of import is assumed to reflect the current unsatisfied demand.
Accordingly, current unsatisfied demand for furniture is estimated at 305,776 pieces and
conservatively assuming that 25% of the current unsatisfied demand for furniture will be
replaced by plastic furniture the current (2019) is estimated at 486,632 pieces.

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3. 1. 2. Projected Demand
Currently there are about 2. 41 million urban populations (projection for 2000) in ANRS,
which is equivalent to 547,200 families. As estimated by DSA, 30% of the urban
population does not have modern sets of furniture. The remaining 70 percent use
traditional or homemade furniture. A raised place made of mud and built around the inner
edge of the house. They rarely use tables, if they use, the tables are crudely made from
unprocessed logs. The demand for plastic based furniture is directly related to the rate of
new family formation. Therefore it is necessary to project the growth of new families,
and then work backward to arrive at a corresponding demand for plastic furniture.

For the purposes of demand projection and to arrive at a reasonable figure for plastic
furniture, the following assumptions are developed.
a) In Ethiopia the rate of urbanization is 5. 5% per annum and average family size is 4. 4
people.
b) The current (2000) urban population of ANRS Region is estimated at 2. 41 million.
This indicates that at list 30,000 new families are created annually.
c) Due to social and economic factors, it is assumed that 40% of these families (12,000)
are in need of plastic furniture thus suggesting the present demand to be 12,000 sets
per annum.

Based on these assumptions the future demand for plastic furniture is projected as shown
in Table 3. 2. Demand has increased from 569,870 sets of plastic furniture in 2024 to
669,755 sets in 2030. At the same time, the production and demand of plastic furniture
and home equipment are increasing at global level in the last decades. Modern life of the
human being starts to use plastics in the industrial era. This indicates that the market
potential for the product seems to be available in the region provided that high standard
and quality plastic furniture are produced.

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TABLE 3. 2 : PROJECTED DEMAND FOR BASED FURNITURE

YEAR QUANTITY / SETS /

2024 569,870

2025 586,517

2026 603,165

2027 619,812

2028 636,460

2029 653,107

2030 669,755

3. 1. 3. Pricing and Distribution

The type of plastic furniture products has almost the same price based on the size and
types of the products based on the weight of the product. These product mixes is selected
to attract various target societies as seen in Table 3. 3. The plant can also produce other
types of the furniture depends on demand of the customers. Some of the target clients for
a manufacturer of plastic furniture are newly house construction, hotel, restaurants etc.
The available retail and wholesale network shall be used by the envisaged plant. The
current whole sale price of the plastic furniture are ETB of 400,000.00-450,000.00 per
ton. Therefore, this industry has set a price of ETB 300,000.00 per ton to compete in the
market with feasible profit.

3. 2. Plant Capacity
Considering the expected demand for plastic furniture as presented earlier, and the
planned technology, the envisaged plant is set to annually produce 400 tons of plastic
products (Plastic Chairs, Plastic Dining Table. Plastic Tables, Plastic Stool and Jugs).
This proposed production amount is equivalent to 400 tons, which is less than 5% of the

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local production reported in 2012 / 13. A list of plastic furniture has described on Table
3. 3 below.

TABLE 3. 3 : TYPES OF THE LIST OF FURNITUR WITH ITS PERCENTAGE

SR. NO. DESCRIPTION PERCENTAGE OF THE

FURNITURE PRODUCT

2 Plastic Chairs, Plastic Dining

17. 00
Table and Plastic Tables

3 Plastic Stool 12. 00

4 Jugs 13. 00-

5 Agricultural and Water Proofing

5. 00
Film

6 Plastic Drum 3. 00

7 Storage Tanker 10. 00

8 Baby Chair 5. 00

9 Hard Plastic Bottle and

20. 00
Container

10 Plastic Shoes 2. 00

11 Window Sealing 3. 00

12 Lid Or Tray 10. 00

3. 3. Production Program
The program is scheduled based on the consideration that the envisaged plant will work
300 days in a year in 1 shift 8 hours, where the remaining days will be holidays and for
maintenance. During the first year of operation the plant will operate at 70% capacity,
growing to 80% and 90% in the 2nd and 3rd year respectively. The capacity will grow to

14
100% starting from the 4th 3rd year. This consideration is developed based on the
assumption that market and logistics barriers would take place for the first three years of
operation.

The manufacturing process includes involves arrangement of tools and services so the
manpower in production will take a considerable time until they develop a skill in
operation and troubleshooting of the production process so the production program of
plastic furniture for the envisaged plant for three years.

15
 4. RAW MATERIALS AND UTILITIES
4. 1. Availability and Source of Raw Materials
The raw materials used in producing plastic furniture uses 60.00% PPHP (Polypropylene
Homo-Polymer), 6.50% PPCP (Polypropylene Co-Polymer), 7.70% HDPE (high density
polyethylene) / by 3.00% injection and 4.70% blow /, 16.50% LLDPE (linear low density
polyethylene) / by 6.00% injection and 10.50% blow /, 5% PPRCP (Polypropylene
Random Co- Polymer) / PP Random /, 3% filler and 2% master batch. The source of the
raw materials and inputs are internationals for resin. All of the raw materials are imported
from abroad especially from Middle East. There is a complete transfer of raw materials
and inputs to the product equals to 99. 30%. The production ratio of the raw materials
are in consideration of international standard.

Masterbatch (MB) is a solid additive for plastic used for coloring plastics (color
masterbatch) or imparting other properties to plastics (additive masterbatch). A liquid
dosage form is called liquid color. Masterbatch is a concentrated mixture of pigments
and / or additives encapsulated during a heat process into a carrier resin which is then
cooled and cut into a granular shape.

4. 2. Annual Requirement and Cost of Raw Materials

and Utilities
The annual raw material and utility requirement and the associated cost for the envisaged
plant are listed in Table 4. 1 and 4. 2 here under.

The total cost of raw materials at full capacity of production is estimated to be ETB 36.
66 million per year. Furthermore, the production requires electricity, water, lubricant oil,
fuel, and steam for the process. Water is one of the important utilities in cooling of the
system of the factory. Lubricant oil is also vital for smooth processing of machine.

The total running cost for utilities reaches to ETB 1. 04 million per year. The total
running cost for raw materials and utilities reaches to ETB 37. 70 million per year.

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TABLE 4. 1 : ANNUAL MATERIAL REQUIREMENT AND RESPECTIVE COSTS
AT FULL CAPACITY

UNI TOTAL FOREIG LOCAL TOTAL

RAW T COST PER N COST COST COST PER
MATERIA QUAN UNIT (In (IN 000 (IN 000 YEAR (IN
L TITY ETB) ETB) ETB) 000 ETB)

240. 102,650. 24,636.

PPHP Ton
00 00 00 24,636. 00
109,400.
PPCP Ton
26. 00 00 2,844. 40 2,844. 40

HDPE Ton 30. 80 60,450. 00 1,861. 86 1,861. 86

LLDPE Ton 66. 00 57,500. 00 3,795. 00 3,795. 00

100,600.
PP Random Ton
20. 00 00 2,012. 00 2,012. 00

Master Ton 105,390.

Batch 8. 00 00 843. 12 843. 12

Filler Ton 55,390. 00

12. 00 664. 68 664. 68

Total 36,657. 06

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TABLE 4. 2 : ANNUAL UTILITY REQUIREMENT AND RESPECTIVE COSTS AT
FULL CAPACITY
QUANTIT PRICE PER LOCAL TOTAL
Y UNIT COST (IN COST PER
(INETB) 000 ETB) YEAR (IN
000 ETB)
UTILITY UNIT
Electricity 135,400.
KWH 3. 40 460. 36 460. 36
00
FUEL Li 7,000. 00 66. 00 462. 00 462. 00
Lubricant Li / kg 21. 00 550. 00 11. 55 11. 55
Water m3 7,650. 00 10. 00 76. 50 76. 50
ICT 33. 00 33. 00
Total Utility
Cost 1,043. 41 1,043. 41

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 5. TECHNOLOGY AND ENGINEERING
5. 1. Production Process
In molding process, plastic raw materials are heated and sent to the mold, and it is formed
by pressure and casting methods are used by pouring and mixing the two compounds
which will enter the polymerization after pouring the mold glass fibers. The assembling
of plastic materials is also done by heat-pressure or dielectric method. Plastic materials
are divided into two major classes according to their status against pressure and
temperature. These are Thermoplastics and Thermosets.
1. Thermoplastics: It is also called as polyplast. They soften and become fluid after a
certain temperature level and with the impact of pressure. After they cool down, they
preserve the form they are positioned at. It can be shaped repeatedly when heated. It
is decomposed in dissolvents with applicable features. It has high thermal expansion
coefficient and low softening point. It can be molded, become foam or expanded. It
is cut properly. Cellulose plastics, Vinic resins, Polyacrylic resins, Polyvinyl resins,
Polyamides are the main thermoplasts .
2. Thermosets: It is also called as monoplast. They preserve their initial forms during
softening, and it becomes carbonized without melting after a specific temperature. It
is not suitable for reheating and shaping. It is not properly cut and therefore causes
rubble. Phenoplasts, Aminoplasts, Polyepoxides, Polyesters, Silicones,
Polyurethanes are the main Thermosets.

Plastics furniture’s are formed by two different methods according to their structure.
 Alternative technology 1 : Plastic Injection : It is the method where the heat-melted
plastic raw material is injected into a mold to take the shape of the mold and then
cooled and removed from the mold. It is used in methods such as pressure molding
and wrapping. It is suitable for thermoplastics.
 Aleternative technology 2 : Plastic extrusion : It is the method where with the help
of heat and pressure, it is ensured that the material passes continuously from the
mold and long parts are produced. This process is called extrusion. It is suitable for
thermoset.

19
The company is recommended to use plastic extrusion technology. Commodity plastics
are suitable for most applications and account for 90% of all thermoplastic use. They are
readily available, easy to process, and the least expensive plastic for extruded products.
Examples of commodity plastics include polypropylene (PP), polyethylene (PE), and
others. In the plastics extrusion process, raw thermoplastic material, or resin, is gravity
fed from a top mounted hopper into the barrel of an extruder. Additives, such as colorants
and UV inhibitors, in either liquid or pellet form are often used and can be introduced
into the resin below arriving at the hopper. The process has much in common with
plastics injection molding though differs in that the process is usually continual. While
injection molding can offer many similar profiles in continuous lengths, usually with
added reinforcing, the finished product is pulled out of a die instead of extruding the fluid
resin through a die.

Plastics extrusion is a high-volume manufacturing process in which raw plastic is melted

and formed into a continuous profile. Extrusion produces items such as pipe/tubing,
weather-stripping, fencing, deck railings, window frames, plastic films and sheeting,
thermoplastic coatings, and wire insulation. This process starts by feeding plastic
material (pellets, granules, flakes or powders) from a hopper into the barrel of the
extruder. The material is gradually melted by the mechanical energy generated by turning
screws and by heaters arranged along the barrel. The molten polymer is then forced into
a die, which shapes the polymer into a shape that hardens during cooling.

The alternative technological option available involves the use of fully automated
machinery. Fully automated machinery employs lesser labor and gives the highest
production. But as the proposed business will be initially order based and the targeted
capacity is not as such huge, it is recommended that the envisaged plant should
concentrate on capturing the market while keeping the project costs at lower end.
Moreover it is important to notice that there is a huge difference in the costs of the two
methods where the fully automated technology costs 4 times higher than the semi-
automated one. Therefore, the proposed project will be operating on semi manually
operated corrugation technology.

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5. 2. Machinery and Equipment
The machineries and equipment required for producing plastic furniture is detailed in
Table 5. 1 below

TABLE 5. 1 : MACHINERY AND EQUIPMENT

NO DESCRIPTION QUANTITY

1 Extruder Machine With Complete Line

1
Set

2 Extruder Machine With Complete Line

1
Set

3 High Speed Mixer 1

4 Injection Molding Machine 2

5 Extrusion Dies 1

6 Injection Molds 1

7 Lathe 2

8 Hydraulic Press Machine 1

9 Welding 1

10 Bench Grinder 1

11 Compressor 1

12 Tools Of Different Type 1

13 Extruder Machine With Complete Line

1
Set

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The total cost of machinery and equipment (Extra Large Molding Machine with semi-
automatic process (1150Ton - 4000Ton)) including freight, insurance and bank cost is
estimated to be about ETB 44. 77 million.

The following are some of the machineries suppliers’ address for the envisaged project
1. Sino Holdings Group Co. Ltd,
Add: 369# Xinxiang Rd. ,
Xinqian Street, Huangyan Taizhou, Zhejiang, China; P. C. 318020;
Tel : +86 158-5868-5625;
E-mail: export@dakumar. com

2. Ningbo Chuangji Machinery Co. Ltd. ;

Add: Phone Number: +86-574-62523811, 805 0574-62523837 +86 18605847957
loginjmachine@logge. com.
Simen Industrial Zone, Yuyao City, Zhejiang Province, China.

5. 3. Land, Building and Civil Works Cost

The total site area for the envisaged plant is estimated to be 10,000 m2. The major
buildings and civil works include buildings for production, offices, workshops and
warehouses. The tTotal cost of building and other civil works is estimated at ETB 31,07
million.

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 6. HUMAN RESOURCE AND TRAINING
REQUIREMENT
6. 1. Human Resource
The list of required manpower for the envisaged plant is stated in Table 6. 1 below. The
envisaged plant therefore, creates 147 jobs and about ETB 16. 66 million of income. The
professionals and support staffs for the envisaged plant shall be recruited from the
surrounding region of the Debre Birhan City Administration, Amhara National Regional
State (ANRS).

TABLE 6. 1 : HUMAN RESOURCE REQUIREMENT

Annual
Sr. Monthly Salary
Position No. Salary (In
No. (ETB)
000 ETB)
1 Overhead Labour

1. 1 General Manager Office

1. 1. 1 General Manager 1 25,000. 00 300. 00

1. 1. 2 Executive Secretary 1 15,000. 00 180. 00

Sub Total 2 480. 00

Finance And Administration

1. 2
Department

1. 2. 1 Department Head 1 15,000. 00 180. 00

1. 2. 2 Senior Accountant 2 12,000. 00 288. 00

1. 2. 3 Junior Accountant 4 7,500. 00 360. 00

1. 2. 4 Senior Cost Accountant 3 10,000. 00 360. 00

1. 2. 5 Personnel 4 7,000. 00 336. 00

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1. 2. 6 General Service 5 7,000. 00 420. 00

1. 2. 7 Driver 3 14,000. 00 504. 00

1. 2. 8 Security Head 1 10,000. 00 120. 00

1. 2. 9 Guard 6 7,000. 00 504. 00

1. 2.
Janitors 17 6,000. 00 1,224. 00
10
1. 2.
Gardner 5 6,000. 00 360. 00
11

Sub Total 51 4,656. 00

1. 3 Commercial Department

1. 3. 1 Department Head 1 15,000. 00 180. 00

1. 3. 2 Purchaser 3 10,000. 00 360. 00

1. 3. 3 Salesperson 5 10,000. 00 600. 00

1. 3. 4 Storekeeper 2 7,000. 00 168. 00

1. 3. 5 Assistant Store Keeper 3 6,000. 00 216. 00

Sub Total 14 1,524. 00

Total 67 6,660. 00

Employee’s Benefit And

Expense (20% Of Basic Salary 1,332. 00

Total Overhead Labour 67 7,992. 00

2 Direct Labour

Production And Technical

2. 1
Department
Department Head/ Specialized
2. 1. 1 1 15,000. 00 180. 00
In Plastic Science

2. 1. 2 Production Supervisors 1 13,000. 00 156. 00

2. 1. 3 Plastic Processing 2 9,000. 00 216. 00

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 2. 1. 4 Chemistry 3 8,000. 00 288. 00

2. 1. 5 Assistant Operators 37 7,000. 00 3,108. 00

2. 1. 6 Operators 21 6,000. 00 1,512. 00

2. 1. 7 Mechanic 5 10,000. 00 600. 00

2. 1. 8 Electrician 5 10,000. 00 600. 00

Sub Total 75 6,660. 00

Quality Control And Assurance
2. 2
Service
Service Head Specialized In
2. 2. 1 1 15,000. 00 180. 00
Plastic Science
2. 2. 2 Quality Controller Technologist 2 8,000. 00 192. 00
2. 2. 3 Laboratory Technician 2 8,000. 00 192. 00
Sub Total 5 564. 00
Employee’s Benefit And
Expense (20% Of Basic Salary 1,444. 80
Total Direct Labour Cost 80 - 8,668. 80
Grand Total Cost 147 - 16,660. 80

6. 1. 1. Training Requirement
Training of key personnel is very essential and shall be conducted in collaboration with
the suppliers of the plant machineries. The training should primarily focus on the
production technology and machinery maintenance and trouble shooting. It is suggested,
to train production and technical manager, production and technical head, and quality
control head, mechanics, electricians and operators on-the-job training at the actual site
on the actual working condition by competent expert of the machinery and technology
supplier for about one month during erection and commissioning period.

25
6. 2. Organizational Structure
There are numerous reasons why having an organizational structure is key for a plastic
furniture manufacturing business.
Provides a management planning tool: An organizational structure can help a company
plan more strategically for the future so it can meet its goals. It can help determine the
hiring process and how it plans to expand in the future.
Improves decision-making: It creates a company-wide understanding of how information
flows throughout the business, whether it's from executives to manager to employee or
employee to employee.
Helps employee engagement: Having an organizational structure gives each employee a
specific role within the industry. It can help employees understand how their work fits
with the industry’s vision and may enable more effective teamwork and management
expectations.
Provides a visual: Many industries that use an organizational structure create a chart that
they can use as an employee.
The company organizational structure shall consist of the following six departments
related to Plastic Furniture Manufacturing Industry:
1. General Manager Department,
2. Management Information System Service
3. Production and Technical Department,
4. Finance and Administration Department,
5. Commercial Department, and
6. Quality Control And Assurance Department.
The organizational structure of the industry is shown in Figure 6. 1.

26
FIGURE 6. 1 : ORGANIZATIONAL STRUCTURE OF THE PLASTIC FURNITURE MANUFACTURING INDUSTRY

GENERAL MANAGER

QUALITY CONTROL DEPARTMENT INFORMATION MANAGEMENT SERVICES

ADMINISTRATION AND PRODUCTION AND TECHNICAL COMMERCIAL

FINANCE DEPARTMENT DEPARTMENT DEPARTMENT

Finance Division Production Division Procurement and Stores

Division
Personnel and General Service Technical Division
Division Market Research and Sales
Division

27
Functional description of each of the six department units is as summarized below.

6. 2. 1. General Manager
The General Manager1 discharges all the duties and responsibilities. Besides strategic
and policy directing role, the General Manager is in charge of the following main duties
and responsibilities.
 Develops strategic and operational plans and organizes, administers and controls
the overall operation of the industry in line with Company policy,
 Manages the day to day affairs of the industry,
 Represents the industry before courts of law and all other parties, and delegates
his power as may be necessary,
 Draws, signs, endorses, accepts and negotiates any commercial documents in
accordance with the internal regulations of the industry,
 Authorizes expenditures, sign checques and authorize signatories on checques as
appropriate,
 Ensures the accomplishment of the enterprise objectives, plans and policies set,
 Issues policy guidelines to the various managerial staff, and
 Chairs management and other higher committee meetings of the industry.

 6. 2. 2. Production And Technical Department

 The major duties and responsibilities to be performed by the Production and
Technical Department include:
 Planning, organizing, directing, coordinating and supervising the production and
technical operations of the industry;
 Ensures that the necessary manpower, equipment and facilities that are organized
for industry and maintenance operations;
 Assess the requirements in relation to production capacity and performance,
manpower availability and materials supply;

1 The General Manager of the company has to have at least Bachelor Degree in
Chemistry or Related field

28
  Sets industry processing and performance targets in consultation with top
management;
 Ensures that the required type, quality and quantity of raw materials are available
to maintain continuous and optimum level of operation;
 Ensures that industry plan and program, records etc are properly maintained for
future reference;
 Studies equipment developments and improved industry techniques;
 Devises inspection program to control quality and develops industry reporting
procedures;
 Ensures that all equipment and machinery are operated and maintained in
accordance with the required standards;
 Develops and recommends equipment management system for efficient
operation, usage maintenance and replacement of equipment and machinery
 Assists management in establishing criteria, policies and procedures for
replacement, disposal or obsolesce of equipment and vehicles
 To carry out the above activities, the Production and Technical Department will
have two functional divisions, namelyProduction Division, and Technical
Service Division

6. 2. 3. Finance and Administration Department

The major duties and responsibilities to be performed by the Finance and Administration
Department include:
 Plans, directs, coordinates, organizes and controls the overall activities of
personnel, man power planning and development, health and safety and general
service activities;
 Ensures that personnel policies, regulations and procedures of the company are
compiled;
 Develops an efficient human resource planning and development system and on
approval, ensures its implementation;
 In consultation with concerned departments, performs personnel actions such as
recruitment, placement, promotions; and demotions;
 Ensures that maintenance of vehicles are properly carried out;

29
  Provides efficient office services in the areas of communications (telephone),
transport, safety protections, and cleanliness;
 Makes sure that, the properties of the industry are identified, well protected,
safely handled and guarded;
 Makes sure that each personnel file is up-to-date and well documented with the
pertinent information. Handles also the general archives and records management
system;
 Ensures that the industry has modern accounting and costing systems and fiscal
policies and procedures; also ensures their implementation;
 Keeps up-to-date and reliable accounting and cost records;
 Coordinates the preparation of annual budgets and controls its allocations and
utilizations;
 Checks and ensures the regularity and authority of requests for payment and
effects disbursements;
 Sends bills and statement of accounts to clients and ensures their prompt
payment;
 Receives cash and deposits daily collections intact in the industry’s Bank
Accounts;
 Ensures timely reconciliation of bank accounts, creditors, debtors and other
accounts;
 Effectively manages the working capital of the company and with the approval
of the Board of Directors and/or Management, arranges short and long-term bank
credits; and
 Prepares and issues daily, monthly and annual financial reports.
The Finance and Administration Department is internally structured comprising
divisions including:
 Finance Division and
 Personnel and General Service Division.

6. 2. 4. Commercial Department
The major duties and responsibilities to be performed by the Procurement and Marketing
Department include:

30
  Plans, organizes directs, coordinates and controls the overall activities of the
domestic and foreign sales and purchase and the store and property
administration;
 Develops systems and procedures necessary for the efficient and effective
operation of the sales, purchasing and storage functions of the industry;
 Promotes the business of the company through sales campaigns and
advertisements;
 Identifies suitable supply markets for local and foreign purchases on the basis of
established systems and procedures and bargains prices; ascertains the delivery
of supplies on time;
 Ensures that all supplies purchased are of the required type, quality and standards;
 Initiates and prepares operational directives and guidelines governing
procurement, sales and store and property administration of the company;
 Ensures that all materials (raw materials, spare parts, office supplies and finished
products) are properly received and kept in stores as per established rules and
regulations; and
 Exercises inventory control and materials programming that ensures an effective
materials management system
The Procurement and Marketing Department is internally structured comprising division
including:
Procurement division and
Market research and sales division

6. 2. 5. Quality Control And Assurance Department

The major duties and responsibilities to be performed by the Quality Control and
Assurance include:
 Select easy quality control and assurance methods for plastic furniture production
process,
 Responsible to prepare environmental management plan per year,
 Develops a standard of the raw materials for plastic furniture and over all
activities in written document to other department,
 States the quality of the inputs and outputs of the systems of plastic furniture
manufacturing,

31
  Branding the quality of its products for local and global customers with the state-
of-art-technology, and
 Training the staff of the industry in consideration of global standard related to
plastic furniture manufacturing .

6. 2. 6 MIS Services Department

The major duties and responsibilities to be performed by the MIS Services Department
include:
 Develop input-output follow-up software platform for staff of the production to
customize the good working practice within the system,
 Coordinate researchers from Production and Technical Department and Quality
Control and Assurance Department to innovate a new way of sustainable plastic
production in consideration of plastic furniture quality and profit,
 Promotes the business of the company through modern internet platform in
discussion with commercial department,
 Prepare business pamphlets as a company profile in local and international
languages, and
 Develop accessible data for all the staffs in written and online for sustainable
production and technology transfer.
The MIS services department in plastic furniture production develops computer software
platforms used to track to and document transformation of raw materials to the finished
products. The data management within the system of the industry used to monitor the
flow of inputs and products throughout the organization that update the critical business
data. Additionally, this department coordinates research and product development within
the plastic furniture production process. All the experts who have bachelor degree in
chemistry and other related discipline will participate to get a more plastics. The research
will looks into inputs of plastic furniture to transportation of the different product.
Finally, the MIS grows into Research and Product Development.

32
 7. FINANCIAL ANALYSIS
7. 1. Underlying Assumption
The financial analysis of Plastic Furniture Manufacturing Industry is based on the data
provided in the preceding sections and the following assumptions as seen in Table 7. 1-
7. 3.

TABLE 7. 1 : CONSTRUCTION AND FINANCE; DEPRECIATION AND

WORKING CAPITAL (MINIMUM DAYS OF COVERAGE)
CONSTRUCTION AND FINANCE UNITY VALUE
Construction Period year 1
Tax Holidays year 2
Source Of Finance (Equity) % 30%
Source Of Finance (Loan) % 70%
Bank Interest Rate % 11. 5%
Discount For Cash Flow % 12%
DEPRECIATION UNITY VALUE
Building % 5%
Machinery And Equipment % 10%
Office Furniture % 10%
Vehicles % 15%
WORKING CAPITAL UNITY VALUE
Raw Material Local day 30
Raw Material Foreign day 120
Factory Supplies In Stock day 70
Spare Parts In Stock And Maintenance day 75
Cash In Hand day 10
Accounts Payable day 30
Work in progress day 2
Finished products day 30
Accounts receivable day 30

33
7. 2. Implementation Schedule
The implementation schedule covers the activities starting from the project construction
to operation period, bid-purchase-trial run of machineries, and commissioning. It is
envisaged that the complete implementation program requires a total of 12 months as
seen in Figure 7. 2.

TABLE 7. 2 : PROJECT IMPLEMENTATION SCHEDULE

ITEM ACTIVITIES MONTH
SR. 1-2 3-5 6-9 10 11 12
NO.
1 Preparatory Period, 1. Approval xxxx
Of Feasibility Study, 2. Financial
Arrangement
2 Tender Document Preparation xxxx xxxx
For Construction of the x
Warehouse and Machinery
Supply
3 Tendering For Machinery Supply xxxx xxxx
x
4 Tender Evaluation, Negotiation,, xxx
And Contracting
5 Design of Installation of xxxx
Machinery And Equipment x
6 Equipment Delivery xxx
7 Erection xxx
8 Manpower Recruit And Training xxx
9 Trial Run And Commissioning xxx
10 Start Of Operation xxx

The formation of implementation team, employment of the implementation consultant

and financial arrangement will be carried out within one month after the approval of the
feasibility study.

34
Machinery and Equipment: Tender document preparation for production machinery and
equipment will start a month after project approval and will take 4 month period. Tender
floating will start 4 month after the approval of the project study and will be completed
within 2 month. Tender evaluation, contract negotiation, signing and LC opening, which
will also start 2 months after the approval of the project, will be completed within 2
month. Installation plastic furniture manufacturing machinery and equipment will start
after 4 months from project approval and supply will be completed within 5 months’ time
frame from contract is signed.

Erection of machinery and equipment will start after completion of the machinery and
equipment delivery and will take one month. Delivery of raw materials will be arranged
before of erection of machinery and equipment is completed.

Completion of the warehouse: Finalizing of the construction of warehouse will

commence after 10 months from approval of the project in consideration of machine
arrival to the park.

Recruitment and training of human resource will start 12 months after the project
approval and before the start of erection of machinery and equipment and will continue
up to commissioning and start up. The production will start commissioning 11 months
after the project approval and will be completed in 1 month. Similarly, technology and
knowhow transfer will be conducted starting from together with the erection and
commissioning activities for one-month duration.

Finally, the industry will start production at the end of 12th months from the approval of
the project and be operational then after. Moreover, project activities will be handled by
project management tools so as to optimize time and project cost utilization towards
realization of the project on the ground with minimum project implementation cost and
time as per the planned duration. Many activities of the project may undertake in similar
period if it does not need sequential work plan.

35
7. 2. 1. Implementation Cost
The plastic furniture production project implementation cost for which comprises project
office running and follow-up expenses, and erection and commissioning is estimated at
ETB 2. 33 million the breakdown of which is indicated in Table 7. 3.

TABLE 7. 3 : IMPLEMENTATION COST

Sr. Duration Cost ( In 1000 ETB)
Position No.
No. Month Monthly Annual
I Project Staff
1. 1 Project Manager 1 12 25,000. 00 300. 00
1. 1. 1 Project Coordinator 1 12 10,000. 00 120. 00
1. 1. 2 Executive Secretary 1 12 10,000. 00 120. 00
Finance And
1. 2 0. 00
Administrative Team
1. 2. 1 Accountant 1 12 8,000. 00 96. 00
Personnel And General
1. 2. 2 1 12 5,000. 00 60. 00
Service
1. 2. 3 Driver 0 12 15,000. 00 0. 00
1. 2. 4 Security Guards 1 12 5,000. 00 60. 00
Procurement And Supply
1. 3 0. 00
Team
1. 3. 1 Procurement Expert 1 12 8,000. 00 96. 00
Supplies And Store
1. 3. 2 1 12 5,000. 00 60. 00
Management Expert
1. 3. 3 Store Keeper 1 12 5,000. 00 60. 00
Engineering, Technical
1. 4 0. 00
And Quality Control Team
1. 4. 1 Chemistry 1 12 10,000. 00 120. 00
1. 4. 2 Civil Engineer 1 12 12,000. 00 144. 00
1. 4. 3 Mechanical Engineer 1 12 12,000. 00 144. 00
Electrical And Automation
1. 4. 4 1 12 12,000. 00 144. 00
Engineer

36
 1,524.
Sub Total
00
II Project Supplies And Office Running
Sr.
Descriptions Quantity Unit Unit Cost Amount
No.
1 Fax 1 Pcs 16,000. 00 16. 00
2 Telephone 1 Pcs 17,500. 00 17. 50
3 Printer 1 Pcs 20,000. 00 20. 00
4 Office Furniture 5 Set 21,500. 00 107. 50
150,000.
5 Office Running Cost 1 Set 150. 00
00
Sub Total 311

III Detailed Design, Supervision, Erection And Commissioning

Engineering, Erection And

1 130. 00
Commissioning Service
Sub Total 130. 00
IV Erection Machineries Rent
Sr. Rate/ Duration
Descriptions Quantity Cost
No. Day Days
30,000.
1 Crane 12 1 360. 00
00
2,325.
Grand – Total Cost
00

7. 3. Office Furniture and Equipment

The office furniture and equipment are vital component of the initial investment for
conducive environment of the production processes. The details of the furniture and
equipment are presented in Table 7. 4. The total cost related to office furniture and
equipment is estimated at ETB 3. 20 million.

TABLE 7. 4 : OFFICE FURNITURE AND EQUIPMENT COST, ETB

37
 Total Price
Sr. Unit Price
Item Description Unit Quantity (In 000
No. (ETB)
ETB)
Presidential High Back Gas Lift
1
Swivel
Chair (Genuine Leather) And 170,000.
Set 1 170. 00
Executive 00

Desk, Hanging Side Cabinet

Conference Table And 8 Standard 140,000.

2 Set 3 420. 00
Chairs 00

4 High Quality Guest Chair Pcs 11 12,500. 00 137. 50

Executive Managerial Table And

5 Chair With High Back Gas Lift Set 4 40,000. 00 160. 00
Swivel, Side Cabinet

6 Office Chair And Table Pcs 23 20,000. 00 460. 00

7 Shelves Pcs 4 15,000. 00 60. 00

8 Filing Cabinet Pcs 4 15,000. 00 60. 00

9 Guest Chairs Pcs 14 13,500. 00 189. 00

10 Laptop Pcs 13 21,000. 00 273. 00

Personal Computers With

11 Pcs 7 20,000. 00 140. 00
Accessories

12 Printer Pcs 2 16,000. 00 32. 00

13 Copy Machine Pcs 2 40,000. 00 80. 00

14 Scanner And Fax Machine Pcs 2 22,000. 00 44. 00

15 Telephone System Set 1 75,000. 00 75. 00

38
 450,000.
16 Cafeteria Furniture And Equipment Set 2 900. 00
00

17 Ups Light Duty Pcs 0 12,500. 00 0. 00

Total Cost 3,200. 50

7. 4. Investment
The total investment cost of the project including working capital is estimated at ETB
115. 00 million as shown in Table 7. 5 below. The Owner shall contribute 30% of the
finance in the form of equity while the remaining 70% is to be financed by bank loan.
The foreign component of the project accounts for 35. 39% of the total investment cost.
Most of the total investment goes working capital, machineries, and warehouse
construction. The remaining goes to vehicles and others. The detail of the investment
cost has been presented in Table 7. 5.

TABLE 7. 5 : TOTAL INITIAL INVESTMENT (000 ETB)

SR. LOCAL FOREIGN TOTAL
COST ITEMS %
NO. COST COST COST

1. 0 Fixed Investment

1. 1 Land 3,500. 00 3,500. 00 3. 04

1. 2 Building And Civil Work 31,074. 75 31,074. 75 27. 02

1. 3 Machinery And Equipment 4,070. 00 40,700. 00 44,770. 00 38. 93

1. 4 Vehicle 5,582. 05 5,582. 05 4. 85

Office Furniture and

1. 5 2. 78
Equipment 3,200. 50 3,200. 50

Sub -Total 47,427. 30 40,700. 00 88,127. 30 76. 63

2. 0 Pre-Operating Cost 2,325. 00 2,325. 00 2. 02

39
 2. 1 Pre-Expenditure2 0. 00 0. 00 0. 00 0. 00

Interest During First 0. 00 0. 00 0. 00 0. 00

2. 2
Year/Construction

Sub -Total 2,325. 00 2,325. 00 2. 02

Total Investment 49,752. 30 40,700. 00 90,452. 30 78. 65

3. 0 Working Capital 24,548. 01 24,548. 01 21. 35

Grand Total 74,300. 31 40,700. 00 115,000. 31 100. 00

35.
Foreign Currency
39%

7. 5. Production Costs
The total production cost at full capacity operation is estimated at ETB 74. 68 million as
detailed in Table 7. 6 below. Most of the production cost goes to raw materials and inputs.
The main raw material in this industry is plastic materials that imported from oil
producing nations.

TABLE 7. 6 : PRODUCTION COST (000 ETB)

ITEMS COST %
Raw Material And Inputs 36,657. 06 49. 08
Utilities 1,043. 41 1. 40
Maintenance And Repair 7,192. 10 9. 63
Labor Direct 8,668. 80 11. 61
Labor Overheads 7,992. 00 10. 70
Administration Costs 450. 00 0. 60

Cost of Marketing And Distribution 300. 00 0. 40

2
Pre-production capital expenditure includes - all expenses for pre-investment studies,
consultancy fee during construction and expenses for company‘s establishment, project
administration expenses, commission expenses, preproduction marketing and interest
expenses during construction.

40
 Land Rehabilitation Payment 15. 00 0. 02
Total Operating Costs 62,318. 37 83. 44
Depreciation 5,887. 32 7. 88
Cost of Finance 6,480. 27 8. 68
Total Production Cost 74,685. 95 100. 00

7. 6. Financial Evaluation
7. 6. 1. Profitability
According to the projected income statement attached in the annex part (see Annex) the
project will generate profit beginning from the second year of operation. Ratios such as
the percentage of net profit to total sales, return on equity and return on total investment
rises in the subsequent years. Furthermore, the income statement and other profitability
indicators show that the project is viable.

7. 6. 2. Breakeven Analysis
The breakeven point of the project is estimated by using income statement projection.
Accordingly, the project will break even at 31. 43% of capacity utilization. The break-
even analysis establishes a relationship between operation costs and revenues. It indicates
the level at which costs and revenue are in equilibrium. To this end, the break-even point
for capacity utilization and sales value estimated by using income statement projection
are computed as followed.
 BESV = Brake- Even Sales Value = ((Fixed Cost + Financial Cost) / Variable
Margin ratio) (%) = ETB 37,720,323. 32.
 BECU = Brake -Even Capacity utilization = ((Brake -even Sales Value) / Sales
revenue) X 100 = 31. 43%.

7. 6. 3. Payback Period
Investment cost and income statement projection are used in estimating the project
payback period. The projects will payback fully the initial investment less working
capital in 4 years and 1 month.

41
7. 6. 4. Internal Rate of Return , IRR and Net Present Value,
NPV
Based on cash flow statement described in the annex part, the calculated IRR of the
project is 20. 09% and the NPV at 10% discount is ETB 39. 23 million.

7. 6. 5. Profit Generation
The project is found to be financially viable and earns on average a profit of ETB 326.
66 million within the project life. Such result induces the project promoters to reinvest
the profit which, therefore, increases the investment magnitude in the region.

7. 6. 7. Tax Revenue
In the project life under consideration, the region will collect about ETB 115. 10 million
from corporate tax payment alone (i. e. excluding income tax, sales tax and VAT). Such
result creates additional fund for the regional government that will be used in expanding
social and other basic services in the region.

7. 6. 8. Employment and Income Generation

The proposed project is expected to create employment opportunity to several citizens of
the region. That is, it will provide permanent employment for 147 staffs from the city
dwellers. As the city has many plastic industries, the new factory can get well
experienced experts within the city. Consequently the project creates income of ETB 16.
66 million per year. This would be one of the commendable accomplishments of the
project.

7. 6. 9. Employment and Income Generation

The proposed plastic furniture production project is expected to create employment
opportunity to several citizens of the City . That is, it will provide permanent employment
to 147 persons with different disciplines and laborers. Consequently, the project creates
income of ETB 16. 66 million per year. This would be one of the commendable
accomplishments of the project.

42
7. 6. 10. Import Substitution and Foreign Exchange Saving
In line with the volume of production and the import volume, it is assumed that this
industry substitutes a huge amount of the import volume. Accordingly, plastic furniture
manufacturing will save an estimated amount of US Dollar 14. 18 million. At the same
time this industry uses starch instead of imported plastic materials from petroleum
producing nations. Additionally, in the future, the project can also expand its investment
related to plastic furniture production. This will create room for the saved hard currency
to be allocated to other vital and strategic sectors. In short, the industry saves hard
currency by three ways. The two ways of hard currency saving are exporting its product
to international market, and substituting imported product.

7. 6. 11. Technology Transfer

As stated above many industries has established to combat the conventional plastics
impact in the environmental medium, this industry will also work to manufacture
biodegradable plastic furniture in the future and become a centre of technology transfer
place. The new plastic technology will harness new inputs of plastic furniture production
like straw, waste and other. Therefore, the industry will try to get a new inputs for its
industry as alternative to synthetic polymer in collaboration with universities and other
research centres. As the technology is related to plastic industry, it will transfer basic
application and production of plastic furniture and plastic related sciences. The industry
will work with research centres related to plastic furniture processing concepts. The
universities are the main stockholders to transfer the technology to communities.

7. 6. 12. Diversification And Inter-Sectoral Linkage.

The proposed project helps to diversify ANRS’ and Ethiopian economy. It contributes to
industrialization of the region as well as the county’s economy. mining minerals, nano-
materials production, production of chemicals, plastic production, plastic recycling
industries, and manufacturing sub-sector and forward linkage with the food, tourism,
health, and consumer durables manufacturing sub sectors.

43
7. 7. Environmental and Social Impact Assessment
(ESIA)
The proposed production process is less polluting industry. Based on cleaner production
principles, an ESIA has been conducted for the envisaged industry with the objectives of
identification of effects or impact of production of plastic furniture on the environment
(if any) and if negative impacts are identified for proposing possible measures that could
compensate for the damaging consequences. Accordingly, for the purpose of identifying
the main environmental problems of the envisaged industry (if any), an EIA has been
conducted. The following environmental regulations must be observed in Ethiopia. These
are Environmental Policy of Ethiopia (1997); EIA Proclamation (2002), Environmental
Pollution Control Proclamation (2002), Regulation to Provide for the Prevention of
Industrial Pollution (2008) and Solid Waste Management Proclamation (2007).
Potential positive environmental impacts among other benefits, the project is to:
1. Create opportunity for the community or population related to cereals especially corn
cultivation sector.
2. Makes job opportunity for 147 people which generate income.
3. Contributes to the realization of the development strategy particularly in the area of
life-standard facilities improvements.
4. Earns considerable profit to the promoters as well as to the city administration through
tax.
Plastic furniture were started to be a culture for Ethiopian in urban areas that need
industries. Increases of plastic furniture production aside, plastic furniture production in
itself has a profound, adverse impact on the environment, including diminishing
biodiversity during inputs production, depletion of natural resources, and contributions
to climate change. The diminishing biodiversity and resilience, depletion of natural
resources and global warming are the backward and forward impact of the Plastic
Furniture Manufacturing Industry. The major and specific adverse environmental
impacts expected as a result of the plastic furniture project are generation of solid waste,
noise environment and offensive odor. The assessment has been made considering the
following three main thematic areas:
Environmental pollution to the medium (soil, air, water, living and non-living matter).
Resource utilization
Human health hazard and safety issues.

44
The industry does not create pollutants of land, soil, noise, air and solid waste. This
industry has designed to solve the impacts plastic industry to environmental, social and
economic conditions.
Generally, the Plastic Furniture Manufacturing Industry does not have any serious hazard
impact on the human and environment since the process uses renewable sources. This
makes it a good backup industry when abrupt changes in weather and environmental
conditions occur. At the same time, the production process has no huge waste.

45
ANNEXES: FINANCIAL ANALYSIS

46
ANNEX 1 : NET WORKING CAPITAL (IN 000 ETB)
Construction Production Production Production Production
Items
Year1 Year 2 Year 3 Year 4 Year 5
Total 34,897. 39,259. 43,621. 43,621.
30,535. 33
inventory 52 71 90 90
Accounts
2,565. 99 2,932. 56 3,299. 14 3,665. 71 3,665. 71
receivable

Cash-in-hand 855. 33 977. 52 1,099. 71 1,221. 90 1,221. 90

Total Current 30,987. 34,860. 38,734. 38,734.

27,114. 01
Asset 43 86 29 29
Accounts
2,565. 99 2,932. 56 3,299. 14 3,665. 71 3,665. 71
payable
Total Current
2,565. 99 2,932. 56 3,299. 14 3,665. 71 3,665. 71
Liabilities
Net Working 28,054. 31,561. 35,068. 35,068.
24,548. 01
Capital 87 73 59 59

xlvii
Production Production Production Production Production Production

Year 6 Year 7 Year 8 Year 9 Year 10 Year 11

43,621. 43,621.
43,621. 90 43,621. 90 43,621. 90 43,621. 90
90 90

3,665. 71 3,665. 71 3,665. 71 3,665. 71 3,665. 71 3,665. 71

1,221. 90 1,221. 90 1,221. 90 1,221. 90 1,221. 90 1,221. 90

38,734. 38,734.
38,734. 29 38,734. 29 38,734. 29 38,734. 29
29 29

3,665. 71 3,665. 71 3,665. 71 3,665. 71 3,665. 71 3,665. 71

3,665. 71 3,665. 71 3,665. 71 3,665. 71 3,665. 71 3,665. 71

35,068. 35,068.
35,068. 59 35,068. 59 35,068. 59 35,068. 59
59 59

xlviii
ANNEX 2 : PRODUCTION COST (IN 000 ETB)
year
Item year 1 Year 2 Year 3 Year 4 Year 5
0

Raw material 25,659. 94 29,325. 65 32,991. 35 36,657. 06 36,657. 06

Utilities 723. 92 832. 09 939. 07 1,043. 41 1,043. 41

Repair and
maintenance 7,189. 10 7,190. 10 7,191. 10 7,192. 10 7,193. 10

Direct Labor 6,068. 16 6,935. 04 7,801. 92 8,668. 80 8,668. 80

Overhead Labor 5,594. 40 6,393. 60 7,192. 80 7,992. 00 7,992. 00

Administrative
costs 315. 00 360. 00 405. 00 450. 00 450. 00

Marketing costs 210. 00 240. 00 270. 00 300. 00 300. 00

Land And
Rehabilitation 15. 00 15. 00 15. 00 15. 00 15. 00
Payment
Total Operating
45,775. 52 51,291. 47 56,806. 24 62,318. 37 62,319. 37
Costs
Depreciation 71. 88 7,181. 27 6,498. 98 5,887. 32 5,338. 46

Cost of Finance 9,257. 53 8,331. 77 7,406. 02 6,480. 27 5,554. 52

Total Cost 55,104. 92 66,804. 51 70,711. 24 74,685. 95 73,212. 34

xlix
Year 6 Year 7 Year 8 Year 9 Year 10

36,657. 06 36,657. 06 36,657. 06 36,657. 06 36,657. 06

1,043. 41 1,043. 41 1,043. 41 1,043. 41 1,043. 41

7,194. 10 7,195. 10 7,196. 10 7,197. 10 7,198. 10

8,668. 80 8,668. 80 8,668. 80 8,668. 80 8,668. 80

7,992. 00 7,992. 00 7,992. 00 7,992. 00 7,992. 00

450. 00 450. 00 450. 00 450. 00 450. 00

300. 00 300. 00 300. 00 300. 00 300. 00

15. 00 15. 00 15. 00 15. 00 15. 00

62,320. 37 62,321. 37 62,322. 37 62,323. 37 62,324. 37

4,845. 52 4,402. 39 4,003. 68 3,644. 63 3,320. 99

4,628. 76 3,703. 01 2,777. 26 1,851. 51 925. 75

71,794. 64 70,426. 76 69,103. 31 67,819. 50 66,571. 11

l
ANNEX 3 : INCOME STATEMENT (IN 000 ETB)

Item Year0 Year1 Year 2 Year 3 Year 4 Year 5

- 84,000. 96,000. 108,000. 120,000. 120,000.

Sales revenue
00 00 00 00 00
31,728. 36,260. 40,793. 45,325. 45,325.
Less variable costs
10 69 27 86 86
52,271. 59,739. 67,206. 74,674. 74,674.
Variable Margin -
90 31 73 14 14

in % of sales revenue 62. 23 62. 23 62. 23 62. 23 62. 23

115,000. 14,047. 15,030. 16,012. 16,992. 16,993.

Less fixed costs
31 41 78 96 51 51
(115,000. 38,224. 44,708. 51,193. 57,681. 57,680.
Operational Margin
31) 48 53 76 64 64

in % of sales revenue 45. 51 46. 57 47. 40 48. 07 48. 07

Financial costs

Depreciation 9,257. 53 8,331. 77 7,406. 02 6,480. 27 5,554. 52

Gross Profit 71. 88 7,181. 27 6,498. 98 5,887. 32 5,338. 46

(115,000. 28,895. 29,195. 37,288. 45,314. 46,787.

in % of sales revenue
31) 08 49 76 05 66

Income (corporate) tax 34. 40 30. 41 34. 53 37. 76 38. 99

Net Profit 11,186. 63 13,594. 21 14,036. 30

(115,000. 28,895. 29,195. 26,102. 31,719. 32,751.

in % of sales revenue
31) 08 49 13 83 36

in % of sales revenue 34.40 30.41 24.17 26.43 27.29

li
 34,500.0 34,500.0
Equity 34,500.09 34,500.09 34,500.09 34,500.09
9 9

Interest to investment 9,257.53 8,331.77 7,406.02 6,480.27 5,554.52 4,628.76

Ratios (%)

Net profit to equity (3.33) 0.84 0.85 0.76 0.92 0.95

Net profit to net worth 1.00 1.00 1.00 0.70 0.70 0.70

Year 6 Year 7 Year 8 Year 9 Year 10

120,000. 00 120,000. 00 120,000. 00 120,000. 00 120,000. 00

45,325. 86 45,325. 86 45,325. 86 45,325. 86 45,325. 86

74,674. 14 74,674. 14 74,674. 14 74,674. 14 74,674. 14

62. 23 62. 23 62. 23 62. 23 62. 23

16,994. 51 16,995. 51 16,996. 51 16,997. 51 16,998. 51

57,679. 64 57,678. 64 57,677. 64 57,676. 64 57,675. 64

48. 07 48. 07 48. 06 48. 06 48. 06

4,628. 76 3,703. 01 2,777. 26 1,851. 51 925. 75

4,845. 52 4,402. 39 4,003. 68 3,644. 63 3,320. 99

48,205. 36 49,573. 24 50,896. 69 52,180. 50 53,428. 89

40. 17 41. 31 42. 41 43. 48 44. 52

14,461. 61 14,871. 97 15,269. 01 15,654. 15 16,028. 67

33,743. 75 34,701. 26 35,627. 68 36,526. 35 37,400. 22

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ANNEX 4 : CASH FLOW FOR FINANCIAL MANAGEMENT (IN 000 ETB)
Item Year 0 Year 1 Year 2 Year 3 Year 4 Year 5
Total Cash Inflow
Inflow Funds
Equity 34,500. 09
Bank Loan 80,500. 22
84,000. 96,000. 108,000. 120,000. 120,000.
Inflow Operation -
00 00 00 00 00
Other Income - - - - - -
115,000. 84,000. 96,000. 108,000. 120,000. 120,000.
Sub Total
31 00 00 00 00 00
Total Cash Outflow
Increase In Fixed
88,127. 30 - - - -
Assets
Pre-Production
2,325. 00
Costs
Initial Working
24,548. 01
Capital
45,775. 51,291.
Operating Costs - 56,806. 24 62,318. 37 62,319. 37
52 47
Income Tax - - - 11,186. 63 13,594. 21 14,036. 30
Financial Costs - 9,257. 53 8,331. 77 7,406. 02 6,480. 27 5,554. 52
Loan Repayment - 8,050. 02 8,050. 02 8,050. 02 8,050. 02 8,050. 02
115,000. 63,083. 67,673.
Sub Total 83,448. 91 90,442. 87 89,960. 20
31 06 27
20,916. 28,326.
Net Cash Flow - 24,551. 09 29,557. 13 30,039. 80
94 73
Cumulative Cash 20,916. 49,243.
52,877. 83 54,108. 22 59,596. 93
Balance 94 67

liii
Net Cash Flow For (115,000. 20,916. 28,326.
NPV and IRR 31) 94 73 24,551. 09 29,557. 13 30,039. 80

Year 6 Year 7 Year 8 Year 9 Year 10

120,000. 00 120,000. 00 120,000. 00 120,000. 00 120,000. 00

- - - - -
120,000. 00 120,000. 00 120,000. 00 120,000. 00 120,000. 00

- - - - -

62,320. 37 62,321. 37 62,322. 37 62,323. 37 62,324. 37

14,461. 61 14,871. 97 15,269. 01 15,654. 15 16,028. 67
4,628. 76 3,703. 01 2,777. 26 1,851. 51 925. 75
8,050. 02 8,050. 02 8,050. 02 8,050. 02 8,050. 02
89,460. 76 88,946. 37 88,418. 65 87,879. 04 87,328. 81
30,539. 24 31,053. 63 31,581. 35 32,120. 96 32,671. 19
60,579. 05 61,592. 88 62,634. 98 63,702. 31 64,792. 15

liv
ANNEX 5 : DISCOUNTED CASH FLOW (IN 000 ETB)
Item year0 Year 1 Year 2 Year 3 Year 4 Year 5

Total Cash 115,000. 84,000.

96,000. 108,000. 120,000. 120,000.
Inflow 31 00
00 00 00 00

Total Cash 115,000. 63,083. 83,448. 90,442. 89,960.

67,673.
Outflow 31 06 91 87 20
27

Net Cash 20,916. 24,551. 29,557. 30,039.

- 28,326.
Flow 94 09 13 80
73
Net Cash
Flow for 20,916. 24,551. 29,557. 30,039.
(115,000. 28,326.
NPV & IRR 94 09 13 80
31) 73
Calculation

Year 6 Year 7 Year 8 Year 9 Year 10

120,000.
120,000. 00 120,000. 00 120,000. 00 120,000. 00
00

89,460. 76 88,946. 37 88,418. 65 87,879. 04 87,328. 81

30,539. 24 31,053. 63 31,581. 35 32,120. 96 32,671. 19

30,539. 24 31,053. 63 31,581. 35 32,120. 96 32,671. 19

lv
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