CHEBAIGA FARMERS CO-OPERATIVE SOCIETY LIMITED

Project proposal submitted to: The United States African Development Foundation

PROJECT SUMMARY

Name of Co-operative: Chebaiga Farmers’ Co-operative Society Limited

Address: P. Box.77-30102 Burn Forest

Telephone: 0721287908

Project Title: Maize Milling Plant

Project Location Cheptiret/Kipchamo Ward

Kesses Sub-County

Uasin Gishu County, Kenya

Total cost of Project: Ksh. 50,000,000/=

Contribution from Members: Ksh. 20,000,000/=

Capital Reserve Ksh 5,000,000/=

Grant Requested Ksh25, 000,000/=

Purpose of the Grant: Construction of Maize Mill

Project Coordinator: 1. William K. Matelog

Cell Phone 0721 287 908

2. Stephen K. Yego

Cell Phone 0729 266 397

Project Consultants: Uasin Gishu County

Department of agriculture

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 EXECUTIVE SAMMARY

Chebaigaa Farmers’ Co-operative Society Ltd was registered on 12th November 1993 under
registration number Cs/6962. The objects of this Co-operative Society is to organise and
promote the welfare and economic interests of its members and in particular to arrange for
co-operative marketing, processing, grating, packaging and transporting the members
produce and such other operations as may be necessary for the most profitable disposal of its
produce

In 1995 the co-operative went under as a result of the structural programmes which caught
many co-operative especially those in the cereal sector unaware and ill-prepared for the
changes. In 2019, a group of young and energetic farmers resolved to revive the co-operative
and embarked on a serious value addition campaign and each of the two thousand members is
contributing a minimum of ksh.10, 000 towards the project raising a total of Ksh 20 million

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Business Description

Introduction

Maize is the main staple food for the majority of Kenyans and hence food security in the
Country depends largely on its production. Whereas maize is grown across a large range of
ecological zone, Uasin- Gishu County is among the leading maize production in the North
Rift Region and is considered as the Breadbasket in the Country. The County is situated in
the Mid-West of the Rift Valley, some 330kms North West of Nairobi. The County has a
population of 894,179 and covers an area of 2,955km2

Maize farmers in the County have had a downward income from maize marketing in the
recent years as a result of a number of factors which include the outbreak of fall armyworms,
increased cost of production leading to reduced returns to farmers, heavy rains during harvest
period, inadequate capital as a reduced returns and flooding of the local market with cheap
maize imports.

The farmers from Cheptiret/Kipchamo ward of Kesses Sub-County are no exception and have
not been spared either. The Situation, if not tackled now, may lead to a number of challenges
which + include high rate of crime, high dropout of school going children, high rate of
unemployment in the region among others. Faced with this scenario, the farmers from the
region resolved to register a Co-operative Society to spear head Value addition and
Chebaigaa Farmers’ Co-operative Society Ltd was registered on 12th November 1993 under
registration number Cs/6962. The objects of this Co-operative Society is to organise and
promote the welfare and economic interests of its members and in particular to arrange for
co-operative marketing, processing, grating, packaging and transporting the members
produce and such other operations as may be necessary for the most profitable disposal of its
produce. Further to this objective and others as provided in its by-laws, the Co-operative
Society, may do acts and things that are permissible under the Act, rules and its by-laws
including but not limited to acquiring property and chattels and doing all such other things as
are incidental or consequential to the economic enhancement of its members interests
provided such act is approved by members in a general meeting.

Vision

To provide Quality flour in the County.

Mission

To produce top quality and competitive maize flour in the region using modern technology
and ensuring the producer/member reaps maximum returns for sustainable maize farming in
the region.

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Core Values

1. Integrity

2. Honest

3. Teamwork.

4. Professionalism

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THE MARKET

The Maize Industry

The Maize industry in the Country has faced a number of Challenges over time and farmers
have witnessed unsteady income leading to a number of them abandoning the business for
other business which can sustain them and guarantee an income. In Kenya it accounts for
about 14% of household income (Nyoro, et al 2004) .Maize is considered as a staple food
crop in the country and Food Security depends on its production.

Some of the Leading Counties in Maize production include Uasi Gishu, Nandi and Trans-
Nzoia where the farmers who are engaged in its production depend largely as an Income
generating activity. Whatever is in the granaries for most rural families may be in most cases
be equated to food security.

Maize production in the Country has been on the decline despite the fact that the area under
cultivation has increased. Apart from human and other economic factors rainfall and
temperatures are major determinants of maize production and directly affects yields. Apart
from rainfall and temperatures, human and economic factors, maize yields are affected by
diseases, army worms and pests which reduce production and in the long run leading to a
reduced income to the farmer.

Maize production in Kesses Sub-County has neither been spared either and farmers have
always been counting losses year in year out. The area is largely ideal for maize production
and farmers from the area have been engaged in this activity since early seventies.

CRITICAL NEEDS OF THE MARKET

The market for maize flour requires high quality and affordable products for its customers. In
the recent years, the prices of this valuable product have been skyrocketing and have proved
to be beyond the reach of most low income citizens. The net effect of this has been the entry
of low quality, low priced maize products which may be harmful to this vulnerable group.

Chebaigaa Farmers’ Co-operative Society Ltd will always strive to produce high quality,
competitive and affordable maize flour products for the perceived market and will ensure that
the quality is sustained.

TARGET MARKET

Chebaigaa Farmers’ Co-operative Society Ltd will be targeting to have a share of Eldoret
Town Market which includes major supermarkets and other outlets like individuals’ shops,
and largely Western Kenya and Nyanza regions. The Co-operative will be providing high
quality and readily available and affordable maize products to its customers in the defined
market.

Chebaigaa Farmers’ Co-operative Society Ltd will also strive to have a market share of
between 10% and 25% in its target market. It will use all available marketing strategies which
include promotion, pricing, place and high quality maize flour products.

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The major competitors which are well established may pose a challenge to the products of
Chebaigaa Farmers’ Co-operative Society Ltd, but the co-operative has more comparative
advantage as all the producers are members who have already subscript to be loyal and also
its pricing and quality strategy which will always be competitive compared to those of the
competitors. The Co-operative society will establish a strong and motivated marketing team
to ensure that the society product penetrates the market and remains competitive throughout.

PRODUCTS AND SERVICES

MKULIMA BRAND

Chebaigaa Farmers’ Co-operative Society Ltd will produce and build its products which will
largely be branded as ‘LIMA’ Maize flour and Wheat flours respectively and shall be in
various Kilogrammes. ‘LIMA’ will be produced using the latest technology and a very high
Quality control supervision to ensure that the brand remains competitive throughout its life
time. ‘LIMA’ will be packed in 0.5kgs, 1kg, 2kgs, 5kgs, 10 kg , 25kgs and 50kgs. The
packaging and prising will be done to reflect its affordability by its loyal customers and also
its demand. Its prices will be pocket friendly.

SERVICES

Chebaigaa Farmers’ Co-operative Society Ltd will provide a number of services which
include extension services to its members, who are the Major producers, Farm Stores services
for farm inputs and financial services as well as after sales services to its customers.

Extension services

The extension services will be provided by a team of staff head by an Agricultural Officer
employed by the co-operative. The extension will complement the County Governments
Team but will largely be biased to those members and farmers who will be supplying their
maize products to the society’s factory. The team will provide all services which are critical
in the value chain and which may affect the production both positively and negatively.

Stores Services

Farm inputs are critical products which needs proper attention for a sustainable product
supply. Out of production activities as a result of lack of raw materials will worsen the
production of the product and will make the product more expensive. The operation of own
stores will ensure a steady supply of the raw material for the co-operative as the farmers will
plan the farms on a timely basis and timely harvests.

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Financial Services

Financial services are critical to maize farmers as the business is seasonal in nature and given
the fact that there is no Financial Institutional which is willing or funding the sector currently.
To ensure that the members can access credit facilities in the near future, Chebaigaaa
Farmers’ Co-operative Society Ltd will register a SAVING AND CREDIT co-operative
society to pool members’ resources to this worthy cause. The Financial services provided will
purely be at the minimal cost and will be directed at enhancing production of Maize in the
area and other worthy purposes that will empower the member economically.

After sales service

After sales service will be provided by a team of Sales and Marketing team headed by a
Marketing Manager. The sole objective is to provide feedback for continuous improvement
of the LIMA Maize flour and Wheat flour for a superior quality.

The services mention above will be considered to be competitive as they will be primarily
considered as supportive to the Main Business at cost prices.

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 ORGANISATION AND MANAGEMENT

The Annual General Meeting is the supreme Authority of the Co-operative and is considered
as the policy makers. All important decision making must have the blessings of the members.

Below the Annual General Meeting is the Board of Directors or the Management committee
who are the Governing Authority of the Co-operative Society. The Board of Directors or the
Management committee is elected from the general membership and consists of 9 members
and holds office for a period of one year. The Board of Directors or the Management
committee sits once every month to deliberate on the affairs of the co-operative but delegates
the daily routine work to members of staff who are headed by a manager.

ANNUAL GENERAL MEETING

BOARD OF DIRECTORS/MANAGEMENT
COMMITTEE Supervisory committee

CHIEF EXECUTIVE OFFICER/MANAGER

Production Internal
Chief Accountant Marketing Agricultural
Manager Auditor
Manager Manager

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ANNUAL GENERAL MEETING

This is the Supreme Authority of the Co-operative society and is the highest decision organ.
Its duties include approval of policies, election of the Board of Directors, Approval of
Borrowing powers, Approval of Investments and many others as per the by-Laws of the
Society.

BOARD OF DIRECTORS/ MANAGEMENT COMMITTEE

This is the Governing Authority of the Co-operative and is elected from the membership. The
term of office is tree years and is eligible for re-election. This team comprises of nine
members who include Chairman, Vice Chairman, Secretary, Treasurer and Five committee
members. The Current Board members include:-

1. Mr William Matelong - Chairman

2. Mr David K Singoei - Vice Chairman

3. Mr David Bargetuny - Secretary

4. Mr Stephen Yego - Treasurer

5. Mr Jacob Busienei - Member

6. Mr David Chepkwony - Member

7. Mr Simion Kirwa - Member

8 Ms Peris Memgich - Member

SUPERVISORY COMMITTEE

This is the team who is elected by membership to provide checks and balance and in most
cases referred to as a ‘Watch Dog’. The team is directly answerable to the Members and
present their reports to them every year during the Annual General Meeting.

CHIEF EXECUTIVE OFFICER

The Chief Executive officer is the Highest Management staff in the organisation and is hired
and fired by the Board Members. The Chief Executive officer shall be In-Charge of all the
staff in the Organisation and oversees the daily activities of the Co-operative. The holder
shall be answerable to the Board.

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CHIEF ACCOUNTANT

The chief accountant shall be responsible financial activities of the Co-operative and is hired
by the board as well. He reports to the Chief Executive officers and prepares a financial
report on a monthly basis. He is responsible for the preparation of budgets, trial balances,
cash projections, and financial statements as required by Law.

PRODUCTION MANAGER

The production Manager shall be responsible for the production at the factory and shall
ensure quality products are produced. He shall be responsible for smooth production and will
be in-charge and answerable to all products in the factory. The Production Manager shall also
keep proper records on all costs related to production and any other information relevant to
his department.

MARKETING MANAGER

The Marketing Manager shall be hired by the Board members and shall be responsible for all
marketing department. The manager shall ensure that the product penetrates the market and
he shall be in-charge of all staff in the department. He shall prepare sales reports and
segments the market and prepares marketing reports which shall be tabled at board meetings
on monthly basis or as required.

AGRICULTURAL MANAGER

The Agricultural Manager shall be a graduate in the relevant field with a vast experience in
the Agriculture and shall be recruited by the Board of Directors. The holder shall head a team
of staff to provide extension services to members and maize farmers in the society’s area of
operation.

INTERNAL AUDITOR

The holder shall be somebody qualified as per the regulations and shall be hired by the Board
of directors of the co-operative. He shall advice the board on all matters of internal control
and he shall bring to the attention of the board all matters of financial that may not be
inconformity to the regulation and laws governing the management of a co-operative society.

PERMITS AND LICENCES

Chebaigaa Farmer’s Co-operative Society Ltd, being a body corporate is required to pay
taxes as required including permits licences and insurances. These fees include singe business
permits and factory licences as prescribed by the factories and safety Act.

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MARKETING AND SALES STRATEGY

The market for LIMA products shall be Markets Centres and Major towns of Uasin Gishu
County Tranz-Nzoia County, Western Counties which include Kakamega, Bungoma, Busia
and Vihiga and Nyanza Counties which incude Kisumu, Siaya, Homabay ,Migori ,Kisii and
Nyamira. Those targeted to buy Chebaigaaa Farmer’s Co-operative Society Ltd products
(LIMA Maize Flour) will be small traders like shops and food kiosks, Supermarkets and
Wholesale and retail outlets.

The marketing team will provide after sales services to its customers and any other related
services.

CHANNELS OF DISTRIBUTION

Chebaigaaa Farmer’s Co-operative Society Ltd farmers’ Co-operative Society will use a
number of sales strategies who include pricing, promotion, products, and place.

PRICING

In pricing of its LIMA BRANDS, Chebaigaaa farmers’ co-operative society Ltd will use a
number of pricing policies which includes cost based pricing, mark-up pricing, product
penetration pricing and target pricing policy

PRODUCT

Chebaigaaa Farmer’s Co-operative Society Ltd appreciates the advantages brought about by
technology, which has totally shortened the product life cycle. This means the co-operative
must get the product right first time. The Co-operative will therefore invest heavily in
Research and Development to ensure the product productions remains sustainable and
competitive in the market.

PROMOTION

The co-operative society will be employing a number of sales strategies which include print
media, electronic media which includes partnering with local radio station and road shows,
one-to-one sales and use.

PLACE

This is the process of moving LIMA Products from Chebaigaaa Farmer’s Co-operative
Society Ltd Maize Mill to the intended customers. The movement of products will be done
through a combination of intermediaries such as distributors, wholesalers, retailers and
agents. To ensure that the products are available to its customers, Chebaigaaa Farmer’s Co-
operative Society Ltd will lease sub-stores in various to ensure that the products are readily
available within the shortest time possible.

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 FINANCIAL AND OPERATIONAL PLAN

Start -Up Capital

Maize Milling is a process where tried maize kernels are refined to produce maize
flour. It is a process which includes maize cleaning, grinding, and sieving. Maize
milling requires heavy investments in Land, Machinery, and Fleet of Transport, water,
Buildings for the Factory, Stores, and walking capital. The initial costs is estimated at
ksh.50 million
1. Land
Chebaigaaa Farmer’s Co-operative Society Ltd requires a total of 5acres of land to
fully operationalize the maize milling factory and its incidental factory for its by-
products for production of animal feeds. The land will cost the co-operative ten
million considering the current market prices in the area.

2. Maize mill machine HDFM and other Insfrastructure

This Modern Machine including all other costs is Kenya shillings fifteen million only

a) 150t/24h milling machine for industrial production

c) European standard roller mills and plan sifters
d) Japan Technology DE germinator to make sure the final product is pure white and
fine maize flour.
e) Stainless steel pipes life time which is 3 times than galvanised pipes
f) Automatic PLC control, high technical with easy operation.
g) ISO certificate guarantee quality
Specifications
a) Maize cleaning section
b) Maize mills milling section
c) Maize milling plant control
d) Maize flour mill packaging system
4. Electricity
This is the main source of power to run the machines and involves the installation of a
three face electricity to run the machines and pump water to the factory. This will cost
the co-operative two million including all incidental costs.
5. Buildings
The buildings include factory building to house the factory, stores and sub-stores and
offices. This will cost the co-operative twenty million Kenya shillings.
6. Transport
To facilitate easy movement of products within and outside the factory, the co-
operative will outsource transport facilities. The initial cost is one million Kenya
shilling and thereafter the co-operative will be using its revenue from sales of its
products.
Water
Maize milling requires clean water for industrial use and is expected to cost the co-
operative Kenya shillings five million only for installation supply and storage.

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 Walking Capital
This is the amount of capital required to run the daily operation of the co-operative
and for payment of raw materials in form of maize which is readily available and
requires a seed capital of Kenya shillings five Millions

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 Projected statement of comprehensive income

Income

Sales of LIMA Products 75,000,000

Cost of production 52,500,000

Gross Profit 22,500,000

Expenditure

Governance costs 3,000,000

Financial costs 1,000,000

Administrative costs 10,000,000

Marketing and sales costs 3,000,000 17,000,000

Net Surplus 5,500,000

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 Projected Balance sheet year one

Current Assets

Cash and cash Equivalent 4,000,000

Trade and other receivables 5,000,000 9,000,000

Non-Current Assets

Land 10’000,000/=

Building 20,000,000/=

Machinery 15,000,000/=

Water tanks &Machines 5,000,000/=

Furniture &Equipment 1,000,000/= 51,000,000/=

60,000,000/=

Current Liabilities 4,000,000/=

Trade and payables 6,000,000/= 10,000,000

Share Capital 20,000,000/=

Grants 25,000,000/=

Capital Reserve 5,000,000/= 50,000,000/=

60,000,000/=

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Projected Cash Flow Statement

Particulars Ksh.
Cash inflows
Sales 75,000,000
Share Contribution 20,000,000
Donor Grant 25,000,000
Total Cash inflows 120,000,000

Cash Out Flows

Pre-Operational Expenditure 7,000,000
Capital Expenditure 51,000,000
Operational Expenditure 52,500,000
Total Cash outflow 110,000,000
Net cash inflow 10,000,000
Balance b/f -
Balance c/f 10,000,000

CAPITAL REQUIREMENTS (Desired Financing)

i) Pre-Operational Costs……………….. 7,000,000/=

ii) Working Capital……………………… 2,000,000/=
iii) Fixed Assets…………………………… 51,000,000/=

SOURCES OF CAPITAL (Proposed Capitalisation)

i) Owners Contribution 20,000,000/=

ii) Grants 25,000,000/=
iii) Capital Reserve 5,000,000/=

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