Project Proposal On Iodized Salt Production Factory: Promoted By: Mr. Abdulsemed Negash

PROJECT PROPOSAL ON
IODIZED SALT PRODUCTION

FACTORY
Project Location: - Northeastern Ethiopia, Afar region estate
Promoted by: Mr. Abdulsemed Negash

January 2022
Contents
1. EXECUTIVE SUMMARY.............................................................................................12
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2. INTRODUCTION...........................................................................................................15
2.1. Investment in Ethiopia......................................................................................................15
2.2. Introduction about Iodized table salt................................................................................16
2.3. Iodine and uses.................................................................................................................17
2.4. Ambition of creating the iodized salt project...................................................................18
2.5. Project Objective..............................................................................................................18
2.6. Promoter Background.......................................................................................................19
3. Project location and justification.....................................................................................20
3.1. Project Area......................................................................................................................20
3.2. Demographics...................................................................................................................20
3.3. Land features....................................................................................................................21
3.4. Environment.....................................................................................................................22
3.5. Agriculture........................................................................................................................22
3.6. Regional instability...........................................................................................................23
3.7. Fossil finds.......................................................................................................................23
4. MARKET STUDY..........................................................................................................25
4.1. General Review................................................................................................................25
4.2. past supply and present demand.......................................................................................26
4.3. Factors of market achievement.........................................................................................26
4.4. Demand and Supply Analysis..........................................................................................27
4.5. Projected Demand............................................................................................................27
4.6. Plant Capacity and production program...........................................................................29
4.6.1. plant capacity................................................................................................................29
4.6.2. Production Programme.............................................................................................29
4.7. Pricing analysis.................................................................................................................30
4.8. Marketing promotion and strategy...................................................................................30
4.9. Competitors Overview.....................................................................................................30
5. TECHNICAL STUDY....................................................................................................32
5.1. Production process...........................................................................................................32
5.1.1. Solar Evaporation Method........................................................................................32
5.1.2. Rock Salt Mining Method.........................................................................................33
5.1.3. Vacuum Evaporation Method...................................................................................35
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5.2. Inputs/ raw materials and utilities....................................................................................37
5.2.1. Raw Material cost.....................................................................................................37
5.3. Machinery and equipment................................................................................................38
Product machine Specification................................................................................................39
5.4. Land, Building and civil work..........................................................................................41
5.4.1. Land lease.................................................................................................................41
5.5. Environmental impact assessment....................................................................................41
5.6. Implementation Schedule.................................................................................................42
6. ORGANIZATIONS AND MANAGEMENT.................................................................43
6.1. Organizational Structure...................................................................................................43
6.2. Management.....................................................................................................................43
6.3. Manpower Requirement...................................................................................................44
6.4. Training Requirement.......................................................................................................45
7. FINANCIAL STUDY.....................................................................................................46
7.1. Classified Investment cost................................................................................................46
7.1.1. Fixed costs.................................................................................................................46
7.1.2. Operational cost costs...............................................................................................48
7.2. Project Capital and financing...........................................................................................50
7.2.1. Project Capital...........................................................................................................50
7.2.2. Financing...................................................................................................................50
4.1. Purpose and Amount of Loan...........................................................................................51
7.3. Revenue projection...........................................................................................................53
7.4. Financial statements.........................................................................................................54
7.4.1. Projected Profit/loss statement......................................................................................54
7.4.2. Projected cash flow statement......................................................................................55
7.4.3. Balance sheet.............................................................................................................56
7.4.4. Viability and other measurement..............................................................................57
8. SENSITIVITY ANALYSIS............................................................................................59
9. RISK ANALYSIS...........................................................................................................59
10. MONITORING AND EVALUATION..........................................................................61
11. CONCLUSION AND RECOMMENDATION..............................................................61
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Basic Information
 Name of the Promoter: Mr. Abdulsemed Negash
Contact Address: 0916582073
 Type of the Project: Iodized table salt production factory
 Project Location: Northeastern Ethiopia, Afar regional estate
 Project capital: The total investment capital of the project is estimated
at birr 350,398,455 of which: -
 Birr 111,338,500 (32%) is for fixed investment cost
 Birr 239,059,955 (68%) will be assign for working capital
 Source of finance: The total investment capital of the project is to be
financed from the promoter’s equity and bank loan.
 Birr 105,119,536 (30%) is contributed by the promoter
 Birr 245,278,919 (70%) is to be financed by local banks.
 Man power requirement: 135 permanent employees of which (35 skilled &
100 unskilled or 8th grade) and 300 casual workers will be benefited on the
project
 Land requirement: The overall land require to the salt production project is
60,000 square meters. Of which
 10,000 meter square land used for salt processing factory and
 50,000 meter square Land for slat harvesting area(query)
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1. EXECUTIVE SUMMARY
The project proposal proposed on to establish Iodized table salt production factory
has promoted by Mr. Abdulsemed Negash located in afar regional state. Afar
Region is a regional state in northeastern Ethiopia and the homeland of the Afar
people. Its capital is the planned city of Semera, which lies on the paved Awash–
Assab highway and it have bulky salt production area. This is therefore the
promoter wants to selects this region to create iodized salt production factory
founded its base on it.
Iodized table salt is a white crystalline powder salt fortified by Iodine. Salt has
become the most accepted food for iodine fortification because it is one of the
commodities that are almost universally consumed by all sections of a community
and at approximately the same level throughout the year irrespective of economic
level.
Iodized salt is one of day-to-day household consumption commodities. According
to World Bank source in 2016, 85.6% of Ethiopian household consumed iodized
salt
Currently, the population of Ethiopia estimated at over 110 million it is growing on
average by 2.6 per cent per annum. The economy of the country has been
growing for the last decade thereby raising the per capital income of the citizens
though by less than the growth of the economy. These developments have played
greater role in increasing the demand for Iodized table salt in the country.
Due to the above assumption, the promoter wants to establish large sale iodized
salt factory project in Afar region at investing 350.4million birr capital on 10,000
meter square of land. For industry and 50,000 square for quarry production
Plant capacity the project will be harvest 40 tons per hour and generate The
annual production capacity of the proposed project is 72,000 meter tone iodized
per annum.
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Main objectives of the project
 To produce standard and quality iodized salt product for society
 Produce and distribute for society using whole sales price
 Generate foreign currency by means of export standard iodized salt
product
 To full fill the demand of Ethiopian household iodized salt consumption
 To growth and rise the Ethiopian economic sector
Profitability: The financial analysis of the envisaged project is carried out for the
following ten years. Based on the 10 years’ financial projections using the income
statement, cash flow statement and financial internal rate of return (FIRR) results
are obtained.
 Income statement: According to the projected income statement, the
project will generate profit beginning from the first year of operation. Based
on the 10 years’ financial projections the projects average annual net profit
after payment of bank interest, depreciation and tax amounts to birr
160.5 million
 Cash flow statement: The cash flow statement also shows a substantial
amount of cash surplus right from the first year of project operation life. The
cash balance grows from birr 278.8 in the first year to cumulative balance
of birr 3.5 billion during the 10th year of operation indicating the capacity
of the project to finance itself and generate cash surplus for further
investments.
 FIRR Computation: The computation of the project FIRR shows that the
project will profitably generate reasonable return on investment. Before tax,
financial internal rate of return is calculated to be 34.1%. This indicates
the project is financially viable with an internal rate of return (IRR) of 34.1
% and net present value (NPV) 1.27 billion at discount rate 35 %.
 Socio economic benefits: The socio economic benefit of the project is also
very high.
o The project will provide 135 permanent employs,
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o Generate revenue to government in the form of taxes,
o Facilitate and give a sales quality salt for local and international
customers
 Conclusion and recommendation: The Project is operationally profitable,
viable & has significant socio-economic benefits. We recommended that
according to this attractive, financial and economic benefit of the project
all concerned offices & financial institutions should give their support to
facilitate the implementation of this plan.
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2. INTRODUCTION
2.1. Investment in Ethiopia
Ethiopia is now becoming more and more investment friendly country. The
Government is creating favorable condition that would highly encourage the
private Sector to be engaged in almost all areas of the economy. The country
with population of come 110 million offers significant domestic market for
locally for Locally produced goods and service the country is also a member of
the common Market for eastern and southern Africa Comesa offering huge
benefit of Exporting commodities in preferential tariff rates to a wider regional
market.
Privet investment should be encouraged to increase form year to year and
Investment constraints have to be improved in order to pave development ways
so that investment sector happens to be determinant about factor of economic
development of the country like Ethiopia.
it is usually considered as the engine of the economy. both private and
government Bodies in many ways have commonly agreed this idea economic
development in Any case needs both efforts of the privet as well as the public
sector. There are Investments that could not be undertaken by privet sector
due to its difficult nature I .e high initial capital and long gestation period.
However, the passed command economy system and the lack of experience
Between both sides have made it so hard for a private sector to flourish .
But now a day as Ethiopia follows free market economy ‘the roll of private sector
for the achievement of the economy policy. Accordingly, the Ethiopia federal
democratic government is encouraging investors to invest their records to
contribute to the development of the country in all sectors by avoiding all
barriers and facilitating all the mince for the investment
By taking this encouraging and opportunity; the promoter plan to establish
iodized table salt production project in Afar Region for the benefit of the
promoter, the district community as well as the country as a whole.
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2.2. Introduction about Iodized table salt
Iodized salt is table salt mixed with a minute amount of various salts of the

element iodine. The ingestion of iodine prevents iodine deficiency. Worldwide, iodine
deficiency affects about two billion people and is the leading preventable cause
of intellectual and developmental disabilities .[1][2] Deficiency also causes thyroid gland
problems, including endemic goitre. In many countries, iodine deficiency is a major
public health problem that can be cheaply addressed by purposely adding small
amounts of iodine to the sodium chloride salt.
Iodine is a micronutrient and dietary mineral that is naturally present in the food

supply in some regions, especially near sea coasts but is generally quite rare in
the Earth's crust since iodine is a so-called heavy element, and abundance of
chemical elements generally declines with greater atomic mass. Where natural levels
of iodine in the soil are low and the iodine is not taken up by vegetables, iodine
added to salt provides the small but essential amount of iodine needed by
humans.
An opened package of table salt with iodide may rapidly lose its iodine content in
high temperature and high relative humidity conditions through the process of
oxidation and iodine sublimation
Four inorganic compounds are used as iodide sources, depending on the

producer: potassium iodate, potassium iodide, sodium iodate, and sodium iodide. Any of these
compounds supplies the body with its iodine required for the biosynthesis
of thyroxine (T4) and triiodothyronine (T3) hormones by the thyroid gland. Animals
also benefit from iodine supplements, and the hydrogen iodide derivative
of ethylenediamine is the main supplement to livestock feed.
Salt is an effective vehicle for distributing iodine to the public because it does
not spoil and is consumed in more predictable amounts than most other
commodities. For example, the concentration of iodine in salt has gradually
increased in Switzerland: 3.75 mg/kg in 1952, 7.5 mg/kg in 1962, 15 mg/kg in
1980, 20 mg/kg in 1998, and 25 mg/kg in 2014. These increases were found to
improve iodine status in the general Swiss population.
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Salt that is iodized with iodide may slowly lose its iodine content by exposure to
excess air over long periods.
It is theoretically impossible to develop an allergic reaction to iodine from the

inorganic forms used in salt. There are no confirmed cases of an "iodine allergy"
2.3. Iodine and uses
Iodine is essential in small amounts for normal physiologic function. It is a

critical component of thyroid hormones, which are necessary for controlling
metabolic rate, growth, and development of body structures, as well as neuronal
function and development. The World Health Organization (WHO) recommended
intake (population requirement) of iodine is 150 μg/day for adults and
adolescents 13 years of age and older, 200 μg/day for women during pregnancy
and lactation, 120 μg/day for children 6–12 years of age, and 90 μg/day for
children 0–59 months of age .
Healthy humans require iodine, an essential component of the thyroid

hormones, thyroxin, and triiodothyronine. Failure to have adequate iodine leads
to insufficient production of these hormones, which affect many different parts
of the body, particularly muscle, heart, liver, kidney, thyroid gland, and the
developing brain. Inadequate hormone production adversely affects these
tissues resulting in the disease states known collectively as iodine deficiency
disorders (IDD). These include mental retardation, defects in development of the
nervous system, goiter, physical sluggishness, growth retardation, reproductive
failure, increased childhood mortality, and economic stagnation. The most
devastating of these consequences are on the developing human brain [2].
Iodine deficiency disorders are major public health problems in several areas of
the world, especially in developing countries. It has been reported that 2.2
billion people (38% of the world’s population) live in areas with iodine deficiency
and are at risk of its complications [3]. At least 350 million Africans are at risk
of iodine deficiency. According to WHO estimates, goiter presents in 28.3% of
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the African population and approximately 25% of the global burden of iodine
deficiency as measured by disability-adjusted life years occurs in Africa
2.4. Ambition of creating the iodized salt project
According to the preliminary market research, the demand Iodized table salt
service is very high and yet the supply is limited leaving a huge service gap to
the people. Unfortunately, there is no quality and affordable oil in the country.
Although few less industries have already working in the oil project but the
majorities quality iodized salt are import from abroad, but still huge gap
between demand and quality supply in country.
Iodized salt manufacturing project is widely accepted in Ethiopia, because
Ethiopian population is increase from day to day and need more demands for
household commodity to cooking food. So there is good scope for establishing
and maintain Iodized table salt project in Afar and sale to all countries.
2.5. Project Objective
The main objective of the project is aimed at to maximize the return on invested
capital in the form of profit for the promoter. However, its implementation will
benefit the employee, the consumer society and the government at different
levels. In this respect the project is aimed to promote the following objectives:-
 To maximize the return on invested capital through quality Iodized table
salt services
 To raise the significance and importance of the sector and thereby raising
its contribution to the national economic development
 To give quality and affordable iodized table salt for society as well as
export in to east African countries.
 Effectively use local inputs and strengthening the linkage between
industry and other sectors of the economy
 To provide gainful employment to a large segment of the population of the
project area and augment earning capacity at the grassroots level,
 Increase government revenue through the different forms of taxes, which
in turn used to facilitate social and economic development.
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In general, the project is believes to have significant social and economic
benefits that accrue to the society.
Mission
 Mission of the particular project is to expand quality and low price Iodized
table salt for our country and neighbor African countries.
 To prove to other people that struggle for a better life and economic
independences can do business and bring change and can make a
difference if opportunities are given.
 To become financially liquid and guaranteed more than ever
Goal
Objectives are the goals toward which activities of the business are directed and
one of the most important functions the business owner must perform is setting
objectives. This important aims of this sole proprietorship business among
others include the following highly interrelated general goals with each other.
 To create employment opportunities for 135 permanents and over 200
causal workers
 To achieve the demand of quality Iodized table salt production for society.
 To link market linkage between salt quarry farmers
2.6. Promoter Background
The promoter, Mr. Abdulsemed Negash is a diaspora investor, he lives in………

he has well experience in business management activities. During this time, the
promoter gained a vast knowledge and skill. With this reliable experience, Mr.
Abdulsemed Negash knows how to manage and lead any organization to profit
and know how to handle different challenges in the working environment.
Moreover, the promoter has a very good reputation with banks and different
financial organizations.
2. Project location and justification
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2.7. Project Area
The proposed project of Iodized table salt production factory plans to be located
at Afar region Afar Region formerly known as Region 2, is a regional state in
northeastern Ethiopia and the homeland of the Afar people. Its capital is the
planned city of Semera, which lies on the paved Awash–Assab highway.
The Afar Triangle, the northern part of which is the Danakil Depression, is part
of the Great Rift Valley of Ethiopia, and is located in the north of the region. It
has the lowest point in Ethiopia and one of the lowest in Africa. The southern
part of the region consists of the valley of the Awash River, which empties into
a string of lakes along the Ethiopian–Djibouti border. Other notable landmarks
include the Awash.
2.8. Demographics
Based on the 2017 projections by the Central Statistical Agency of Ethiopia (CSA), the
Afar Regional State has a population of 1,812,002, consisting of 991,000 men
and 821,002 women; urban inhabitants number 346,000 of the population, a
further 1,466,000 were pastoralists.
Based on the 2007 Census conducted by the Central Statistical Agency of Ethiopia
(CSA), the Afar Regional State has a population of 1,390,273, [4] consisting of
775,117 men and 615,156 women; urban inhabitants number 185,135 or
13.32% of the population, a further 409,123 or 29.43% were pastoralists. With an
estimated area of 96,707 square kilometers, this region has an estimated
density of 14.38 people per square kilometer. For the entire region 247,255
households were counted, which results in an average for the Region of 5.6
persons to a household, with urban households having on average 4 and rural
households 6 people.
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In the previous census, conducted in 1994, the region's population was
reported to be 1,106,383 of whom 626,839 were men and 479,544 women;
urban inhabitants were 85,879 or 7.76% of the population.
Afar is predominantly (89.96%) spoken in the region and is the working

language of the state. Other languages with a significant number of speakers in
the state include Amharic (6.83%), Tigrinnya (1.06%), Argobba (0.79%),
Wolaitigna (0.43%), and Oromifa (0.4%).
According to the CSA, as of 2004, 48.57% of the total population had access to
safe drinking water, of whom 26.89% were rural inhabitants and 78.11% were
urban.[8] Values for other reported common indicators of the standard of living
for the Afar Regional State as of 2005 include the following: 67.3% of the
inhabitants fall into the lowest wealth quintile; adult literacy for men is 27%
and for women 15.6%; and the regional infant mortality rate is 61 infant deaths
per 1,000 live births, which is less than the nationwide average of 77; at least
half of these deaths occurred in the infants’ first month of life. [9] On 20 April
2007, the regional government announced that it had increased health coverage
from 34% to 40%, the result of construction of 64 new health clinics, increasing
the total for the region to
2.9. Land features
Afar Depression, Erta Ale active volcano, Awash National Park , Yangudi Rassa National Park, Hadar
and Aramis areas, are the major tourist attraction area of the region. The hot
springs, Afar culture and cultural games are other attraction areas.
In 2005, a giant rift was formed in just a few days. The rift opened when the
Dabbahu Volcano, situated in the north of the region, erupted. The crack forming is
thought to be part of the process in which the Arabian Plate and the two African
plates, the Nubian Plate and the Somali Plate, are moving apart. This new crack,
500 metres (1,640 ft) long, and 60 metres (197 ft) deep, opened when the lava
20
from the erupting volcano flowed underground and cooled forming a 60
kilometres (37 mi) long, 8 metres (26 ft) wide dike within days.
2.10. Environment
The Afar Depression, a plate tectonic triple junction, is found in the Afar Regional
State. This geologic feature is one of Earth's great active volcanic areas. Due to
this volcanic activity the floor of the depression is composed of lava, mostly
basalt.
The continuous process of volcanism results in the occurrence of major minerals,
including potash, sulfur, salt, bentonite and

gypsum. In addition to these minerals,
there are also promising geothermal energy
sources and hot springs in different areas

of the region. Most of the region's
mineral potential are found in Dallol,
Berhale and Afdera woredas of Zone Two.

Elidar, Dubti and Millee in Zone One, and Gewane in Zone Three, also have some
mineral possibilities.
Afar is home to peculiar wild life, which notably include the African wild ass, Grevy's
zebra, wild fox, wild cat, cheetah, and ostrich. These wild animals are found in
the region's national parks. Because the region's tourism development is still in
a poor state there are only two lodges in Awash National Park.
2.11. Agriculture
The CSA estimated in 2005 that farmers in the Afar Regional State had a total
of 327,370 cattle (representing 0.84% of Ethiopia's total cattle), 196,390 sheep
(1.13%), 483,780 goats (3.73%), 200 mules (0.14%), 12,270 asses (0.49%),
99,830 camels (21.85%), 38,320 poultry of all species (0.12%), and 810
beehives (less than 0.1%). The CSA estimated on the basis of a survey
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performed in December 2003 that nomadic inhabitants had 1,990,850 cattle
(an 83.8% share of those animals in the region that year), 2,303,250 sheep
(90.6%), 3,960,510 goats (90%), 759,750 camels (85.9%), 175,180 asses
(92.5%), 2960 mules (88.6%), and 900 horses (100%).
2.12. Regional instability
As of 2012, the area has been increasingly unstable, as tensions between

Ethiopia and Eritrea remain high after the Eritrean–Ethiopian War of 1998 to 2000.
On January 18, 2012, five foreign tourists were murdered while on holiday in
the region. The Ethiopian government has accused Eritrean gunmen of being
responsible for the attack. Many governments around the world advise against
traveling to the Afar region, citing increasing security concerns.
2.13. Fossil finds

Hadar, a community in Afar, was the site of the discovery in 1973–74 of " Lucy", the
Australopithecus afarensis skeletal remains,
by Donald Johanson of the Cleveland Museum of
Natural History. On March 5, 2005,

another skeleton, estimated to be 3.8
million years old and said to be the
world's oldest bipedal hominid skeleton, was
found in the region. Yohannes Haile-Selassie
led digs there each year from 2004 to

2007.
On March 24, 2006, it was reported that a "significantly complete" cranium had
been found at Gawis in the Gona area. The cranium appears as an intermediate
form between Homo erectus and Homo sapiens.
On October 1, 2009, scientists reported that they had found a skeleton, which
dates around 4.4 million years ago. Named Ardi, it is a form of the species
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Ardipithecus ramidus. The specimen is a distant cousin of the Australopithecus
afarensis, Lucy's species.
In June 2010, the oldest direct evidence of stone tool manufacture was found in
the Afar region and attributed to Australopithecus afarensis.
In 2013, a graduate student from the Arizona State University discovered a hominid
jawbone in the Ledi-Geraru region of Afar. Scientists estimated that the fossil dates
back around 2.8 million years ago, which is 400,000 years before the next
oldest hominid fossil remains.
In 2015, a hominin jawbone and teeth was discovered in the Afar region.
Scientists believe that the bones belonged to a previously undiscovered
ancestor. The new species was named "Australopithecus deyiremeda", meaning
"close relative" in the native Afar language. The species lived around 3.5–3.3
million years ago, about the same time period as other hominins such as
Australopithecus afarensis.
Based on the above socio economic information; the promoter wants to

choice Afar region to invest and establish the iodized salt project .
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3. MARKET STUDY
2.14. General Review
The increasing global demand for and prices of Iodized table salt coupled with
Ethiopia’s ample potentials presents high opportunities. However, the
opportunities have not yet realized due to variety of reasons including backward
production technology, inefficient marketing system, and low awareness about
the opportunities among potential investors.
Approximately 70% of households in the world used iodized salt by 2000,

compared with less than 20% in 1990. The elimination of iodine deficiency, by
expedient production, marketing, and universal consumption of iodized salt,
represents a significant development effort in public nutrition. Although globally
iodine nutrition has greatly improved, 20% to 30% of pregnancies and thus
newborns still do not fully benefit from the use of iodized salt .
Universal salt iodization has been extremely effective at reducing the burden of
IDD and represents a major global public health success. In Africa, great
progress has been made towards the elimination of iodine deficiency, saving
millions of children from its adverse effects, largely due to the increased
household availability of iodized salt [6].
In Ethiopia, one out of every 1000 is a cretin mentally handicapped, due to a

congenital thyroid deficiency, and about 50,000 prenatal deaths are occurring
annually due to iodine deficiency disorders. Of the total population, 26% have
goiter and 62% are at risk of IDD according to national survey made by the
previous Ethiopian Nutrition Institute [7]. According to the Ethiopian
Demograph
Demographic and Health Survey (EDHS), only 15.4 percent of the households
were using iodized salt . Many potential barriers have been identified to receive
24
adequate iodine intake and reducing IDD. Some of these include household salt
washing, impurities in salt, salt packaging, education, and environmental
factors (moisture, light, heat, and contaminants). Thus, this study assessed
availability of adequately iodized salt at household level and associated factors
in Gondar town, northwest Ethiopia.
2.15. past supply and present demand
Salt (sodium chloride) is essential to the health of human beings. The

country's requirement of salt has been met both from local production and
import. Local supply of salt comes mainly from a place called Afdera which is
found in the Afar Regional state. Other traditional producers or local suppliers
include cooperatives found in Somali and Oromiya Regional States. However,
the locally produced salt does not have the required iodine content. As a result,
a disease of the thyroid gland commonly called goiter is wide spread in most
parts of the country. The major means of mitigating this problem is to
establish a number of plants that can iodized the locally produced salt from the
above sources.
2.16. Factors of market achievement
Promotion of local Iodized table salt is very critical especially in the face of the
various challenges the sector has faced previously from unethical practice of
some of the local producers who sold unhealthy product and hence created
suspicion among consumers about the safety of local products. Despite the
need for intensive advertisement campaign, about 50 percent of the producers
do not advertise their product by any means.
The majority of stakeholders (55 percent) asserted that they are not providing
the best service that the sector deserves for its development due to shortage of
workers, shortage of logistics, and shortage of Budget Absence of branch offices.
In addition, the Iodized table salt sector of the country has been suffering from
various setbacks including lack of finance to expand their operation, lack of raw
materials in terms of quality and quantity, market and production technology in
order of importance.
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2.17. Demand and Supply Analysis
Based on the Ethiopian Nutrients Institute (ENI), the estimated consumption of iodized table
salt per capita is 10 grams per day or 3.65 kg-4 kg per year. Ethiopia’s Iodized table salt
projected demand shows an increasing demand in the succeeding years. In
accordance to the population increase the demand has also, a raising trend i.e.
in the table below shows that, in the year 2013 the estimated amount 351.5
thousand tons and at the end of 2022 it reaches about 410.8 thousand tons.
According to ERCA, Ethiopia has been importing various types of Iodized table
salt s from different countries moreover uses inland products in major. Some
study shows that the existing Iodized table salt producing manufacturing
industries cover about 20 percent of the total consumption by producing
various types’ Iodized table salt s.
Table4.1. list of Salt Manufacturing Companies, Factories, Industries and Suppliers in Ethiopia
S/N NAME OF COMAPNIES
1 ADEF MELIY P.L.C
2 AFAR SALT PRODUCTION SHARE COMPANY
3 DUCK PLC
4 ETHIO-WEBE INTERNATIONAL PLC
5 JASE MANUFACTURING PLC
6 KALME PLC.
7 M/AMOLE TABLE SALT ENTERPRISE
8 MESERET ALEMAYEHU KITAW
9 S AGRO INDUSTRY PLC
10 STAR BUSINESS GROUP P.L.C.
11 TOFIK SHETU LENGANE
12 TSEGAB HAILU ABRHA
2.18. Projected Demand
Table Salt consumption is directly related with population growth. Based on

this fact population growth rate which is about 3 % is used to project the
future demand for iodized salt by taking the current effective demand as a
base. The projected demand up to the year 2020 is shown in Table 3.2.
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Table 4.2: projected demand for table salt (tonnes)
Year Projected Demand

2008 289,959
2009 298,658
2010 307,617
2011 316,846
2012 326,351
2013 336,142
2014 346,226
2015 356,613
2016 367,311
2017 378,331
2018 389,681
2019 401,371
2020 413,412
2021 425813.38
2022 438586.54
2023 451741.5
2024 465290.07
2025 479242.95
Projected Demand forecasted graph
As can be seen from Table 4.2 the total country level consumption for table salt is estimated at
451,747 tons of iodized salt.
27
Based on the above demand and supply gap and finding of the assumption, it
conclude that availability of adequately iodized salt at household level was very
low in Ethiopia household. Using packed salt, not exposing salt to sunlight,
shorter storage of salt at household, and good knowledge of participants about
iodized salt were identified as factors associated with availability of adequately
iodized salt at household level. Hence, households should be sensitized to
importance of iodized salt and its proper handling at the household level. This is
therefore the promoter wants to produce standard packed iodized salty project
and supply for society
2.19. Plant Capacity and production program
2.19.1. plant capacity
According to the market study, the demand of table salt in the year 2022 will
be 451,714 tones, whereas this demand will grow to 479,242 by the year
2025. The envisaged proposed project plant will have an annual
production capacity of 72,000 tons o f table will be installed. Production
capacity is based on a schedule of 300 working days per annum and 8
shifts of eight hours per day.
Description Unit Estimated analysis

Production capacity per hour tone 40
Production per hour Kg 40000
Production per day Kg 320,000.00
Production per year Kg 96,000,000.00
75% 1st year program kg 72,000,000
50kg pag production per annum Bag(50 kg) 1,440,000
3.1.1. Production Programme
The plant under consideration is assumed to operate in a single shift of 8 hrs

28
a day for 300 days a year. It is also planned that the plant will operate at 75%
and 100% capacity in the first and second year, respectively considering the
problem of market penetration and skill development of production.
4.7. Pricing analysis
Currently in our country one kg iodized pack salt is sold 20 birr per kg
but the promoter wants to distribute the product using whole sales price
at birr 800 per quintal (100kg) for distributer and
S/N Raw materials Unit Amount Unit price/unit

1 iodized table salt Bag(50kg) 1,000,000.00 400birr
2 Other Iodized salt Bag(50kg) 440,000.00 300birr
Total 1,440,000.00
4.8. Marketing promotion and strategy
In order to penetrate and gain considerable market share, one of the major
marketing strategies for the project is consistently rendering quality product to
its customers. Due emphasis must be placed on improving quality of iodized
salt product. The major marketing strategies to promote the project and gain
considerable market share include:
 Advertising through different means focusing on the product
 Keeping the quality of its products and consistently improving
 use professional and well experienced employee
 Working on public relations to reach and influence key personas and
organization with a capacity of making decision.
 Customer focused and committed for Quality
 Cost Effectiveness and continuous Improvement
 Safety Environment
2.20. Competitors Overview
currently there are few standard and fair price business engagements for the
iodized salt factory in the country as well as the area, but also There are
29
different forms of competition that may face the envisaged industries in the
town by means of price and quality service but the promoter is more smart
and check frequently conduct competitors and research which focuses on, the
strength and the weaknesses of competitors’, the different competitors’
strategies, the techniques they use in rendering the service, teachers handling
methods, and others.
30
5. TECHNICAL STUDY
5.1. Production process
Common salt or sodium chloride (Nacl) is specially produced for human

consumption. The iodine content present in each kilogram of salt is around
70-100 mg, which is adequate to prevent the formulation of goiter in the neck.
The production of table salt is very simple because it involves few simple unit
operations i.e. crushing and mixing.
Usually in iodized salt production, raw salt either in rock or in evaporated

brine salt form are put in a crusher to reduce the size of the crystals to the
required standard or then stored in an intermediate silo or container. From
there it is gradually fed to the mixer, where iodine a specified amount of
iodine is dozed. After the iodine is thoroughly mixed with powder salt for
some time in the mixer packing machine where is packed in half kilogram
package of plastic bag and card box.
Collecting raw Crushing Mix iodine Screening

salt
Packed Draying
There are three methods used to produce salt: solar, evaporation and
rock mining.
5.1.1. Solar Evaporation Method
This is the oldest method of salt production. It has been used since salt crystals
were first noticed in trapped pools of sea water. Its use is practical only in warm
climates where the evaporation rate exceeds the precipitation rate, either
annually or for extended periods, and ideally, where there are steady prevailing
winds. Solar salt production is, typically, the capturing of salt water in shallow
ponds where the sun evaporates most of the water. The concentrated brine
31
precipitates the salt which is then gathered by mechanical harvesting
machines. Any impurities that may be present in the brine are drained off and
discarded prior to harvesting.
Usually two types of ponds are used. First is the concentrating pond, where the
salty water from the ocean or salt lake is concentrated. The second is called the
crystallizing pond, where the salt is actually produced.
Crystallizing ponds range from to 20 to 100 ha with a foot-thick floor of salt

resulting from years of depositions. During the salt-making season of four to
five months, brine flows continuously through these ponds. This is a saturated
brine solution, containing as much salt as it can hold, so pure salt crystallizes
out of the solution as the water evaporates. Natural chemical impurities are
returned to the salt water source.
5.1.2. Rock Salt Mining Method
Morton also uses the second oldest method of producing salt – underground
mining. This is probably the most dramatic method of gathering salt. Large
machines travel through vast cave-like passageways performing various
operations.
32
Salt mines are among the safest of mines. They are also the most comfortable to
work in. While mine temperature varies with depth, the average temperature
remains about 70° F year round.
Salt may appear in veins, as does coal. Veins are the original bedded salt
deposits. Salt also may be found in domes, which were formed when Earth
pressures forced salt up through cracks in the bedrock from depths as great as
30,000 or 40,000 feet; they resemble plugs of almost-circular shape a few
hundred yards to a mile across. Some domes occur close to the surface. Both
domes and veins are mined in a similar way. Most domes in North America are
located in the south from Alabama to Texas with many out under water in the
Gulf of Mexico.
To enter a salt mine, miners go down a shaft from the Earth’s surface to the salt
bed. There are two shafts in each Morton mine – one for personnel and one to
lower materials and equipment into the mine, as well as to hoist the mined rock
salt to the surface. The shafts also are used to deliver a constant supply of fresh
air to the miners while they work hundreds to thousands of feet below the
surface. Most mine shafts are lined with a concrete wall called a shaft liner.
33
Salt is mined by the room and pillar method. It is removed in a checkerboard
pattern to leave permanent, solid salt pillars for mine roof support. Usually 45
to 65 percent of the salt is removed. The room height may average 18 feet in a
bedded deposit to 100 feet in a dome mine.
Normally, the first operation is undercutting. Large machines cut a slot 10 or

more feet in depth across the bottom of a solid salt wall. This leaves a smooth
floor for picking up the salt after blasting.
Next, small holes are drilled into the salt wall to a depth of 10 or more feet and
explosives are loaded into the drilled holes. After the work shift, the explosives
are set off electrically. Several hundred to several thousand tons of rock salt are
blasted and fall onto the mine floor.
Equipment is used to load and haul the salt to machines that crush and feed
the salt onto a conveyor belt. The lumps are conveyed to a series of stations for
crushing and additional sizing of the lumps. The salt is then placed in a storage
bin to await hoisting to the surface.
The above ground processing of the rock salt consists of screening the mined
salt into various marketable sizes by sorting through mechanically operated
screens. When separated, each size is conveyed to its individual storage bin to
await packaging for shipment or to be loaded as bulk salt into railroad cars,
trucks, river barges or lake boats for shipment to customers.
5.1.3. Vacuum Evaporation Method

Another method of salt production used by Morton Salt is the evaporation of
salt brine by steam heat in large commercial evaporators, called vacuum pans.
This method yields a very high purity salt, fine in texture, and principally used
in those applications requiring the highest quality salt.
34
The first part of the operation is known as solution mining. Wells are drilled
from several hundred to 1,000 feet apart into the salt deposit. These wells are
connected via lateral drilling, a recently developed technology. Once the wells
are connected, the solution mining operation begins: water is pumped down one
well, the salt below is dissolved, and the resulting brine is forced to the surface
through the other well. It is then piped into large tanks for storage.
Next, the brine is pumped into vacuum pans. These are huge closed vessels
under vacuum about three stories high. They are normally arranged in a series
of three, four or five, with each one in the line under greater vacuum than the
preceding one. This series of vacuum pans operates on a very simple principle:
Whenever pressure is lowered, the temperature at which water will boil is also
lowered. For instance, under normal air pressure at sea level, water boils at
212°F. But at ten thousand feet above sea level, where air pressure is much
less, water boils at 194°F. Vacuum pans may operate at as low as 100°F.
In the vacuum pan process, steam is fed to the first pan. This causes the brine
in the pan to boil. The steam from the boiling brine is then used to heat the
brine in the second pan. The pressure in the second pan is lower, allowing the
steam made by the boiling in the first pan to boil the brine in the second pan.
The pressure is reduced still further in each succeeding pan. This allows the
35
steam made by the boiling brine in the previous pan to boil the brine in the next
pan. While the boiling operation could be done with just one pan, several pans
in a row produce more salt per pound of steam, thus allowing greater energy
efficiency.
5.2. Inputs/ raw materials and utilities
5.2.1. Raw Material cost

The initial source of their raw salt supply was Amole rock salt from Berehale.
Amole salt has long history in Ethiopia. This salt bar is cut into different
shapes by local traditional producers. The salt bar is brownish in color
mainly due to soil contamination and several minerals embedded in it (sulfur,
iron, chlorides, phosphates and gypsum……). The salt bar is traditionally
carried to salt market places with caravan of camels (the famous camel
caravan trade) and this has continued to date.
Table 5.1. Raw material item and estimated cost
Unit
Description Quantity/tone Estimated Cost
S/N unit price/tone
1 raw salt tone 72000 3000 216,000,000.00
2 iodine kg 5000 600 3,000,000.00
packaging
materials(plastic 1,920,000 5 9,600,000.00
3 bag + card box) pcs
36
Total 228,600,000.00
Electricity is the major utility required, as it is uses as power source for heavy
duty crushing machines installed in the plant. The estimated annual
consumption is 450,000 kWh. Water is also required for general purpose in
3
the plant. Its annual consumption is estimate to be 30,000 m . The annual
total cost of electricity and water is estimate at about Birr 2.2 million a nd
Birr 105,000 birr respectively. The total cost of utilities is estimate at Birr 2.6
million.
Table 5.2. Utilities and other Requirement and Cost

Sr. Quantity Annual
Description
No used/year unit price Esteemed cost
1 Electricity /kwh 450000 5 2250000
2 Water/m2 30000 3.5 105000
vehicles fuel and
3 generator Lamp sum 300000
Naphtha
Total Cost 2,655,000
5.3. Machinery and equipment
Iodine deficiency leads to many health

problems such as mental retardation, speech
difficulty, goiter disease. The iodine needed
for the human body is provided by salt.
Iodizing machine is used for mixing salt and
iodine dosing method.
Salt is ioaded into the feed hopper and released into the mixing chamber at a
constant rate through the rotary feeder. While salt falls into the mixing
chamber, the potassium iodide or iodate solution is sprayed into the mixing
chamber through the injection hole. Salt and iodine are mixed in the mixing
bowl to obtain a homogeneous mixture. Finally, iodized salt is discharged to
the discharge chamber and stored.
37
The list of machinery and equipment of the project is indicated in table 5.3.
The total cost of machinery and equipment is estimated at Birr 52.9 million,
S/N Description # Unit cost Total cost
1 Salt crusher 1 12,000,000.00 12,000,000.00

2 Salt screw washer 1 4,500,000.00 4,500,000.00
3 Salt de watering 1 7,500,000.00 7,500,000.00
4 Salt draying machine 1 4,500,000.00 4,500,000.00
5 Vibrating screen machine 1 6,000,000.00 6,000,000.00
6 Storage tank 1 2,500,000.00 2,500,000.00
7 Bag filling machine 1 5,000,000.00 5,000,000.00
packing machine 1 1,000,000.00 1,000,000.00
Salt Pulverizer Mill 1 3,500,000.00 3,500,000.00
Total 42,000,000
Sapir part 8,400,000
Generator 2,500,000
Total 52,900,000
Product machine Specification

Product Name Automatic Iodised salt production line
Product Group Food processing machines
Production Capacity 40 tone per hour
Main Materials Raw salt
Primary Packaging Option 1 Small sachet packing
Primary Packaging Option 2 Big pouch packing
Primary Packaging Option 3 Big bag packing
Secondary Packaging Option Bulk bag packing
Ancillary Equipment 1 Air compressor
Ancillary Equipment 2 Steam boiler
Ancillary Equipment 3 Packing table
Floor Space Requirement 50 Square Meters
Height Requirement 3000 mm
Skilled Men Power
5
Requirement
Unskilled Men Power
10
Requirement
PLC Control Siemens, Japan or equivalent
HMI Siemens, Japan or equivalent
AC Variable Drive Delta, Taiwan or equivalent
38
Pneumatic Festo, Germany or equivalent
Main Motor Siemens, Japan or equivalent
Main Gear Box Bonfiglioli - Italy or equivalent
Digital Temperature Controller Omron, Japan or equivalent
Switch Gears Schneider - France or equivalent
440 Volts,50 Hz,A.C.,Three phase with neutral ( can also
Power Supply
be designed as per specific requirement
Connected Load About 40 KW
-10 DegreeC to 40 DegreeC (14 DegreeF to 104 DegreeF
Working Temperature
)
Working Humidity Up to 90 percentage
Noise Level Up to 80 dbA
IP Protection Class IP54
Working Hours 24 hours per day
Total Weight 12000 Kg. (Approx.)
Exact specifications may vary and shall be made
Note
available upon specific request
Minimum Order Quantity 1 Number
39
5.4. Land, Building and civil work
5.4.1. Land lease
The overall land require to the salt production project is 60,000 square
meters. Of which
 10,000 meter square land used for salt processing factory and
 50,000 meter square Land for slat harvesting area(query)
Which is calculated at the at the rate current Afar region lease cost
investment office Thus, the total land & construction cost assuming that
the total land lease cost will be paid in advance (5%) amounts and has
following significances the remaining amount paid within 30 years per year.
Land use plan of the project
A properly designed building construction starting in last year before and

insures smooth functioning of all operations. The building will have well-
ventilated appropriate Iodized table salt production factory area the
structure includes separate services and other different activates The
construction of workshop, office building and an additional building for
producing the detail as follows.
Table 5.4. Description of Land use plan
S/n Description Area/m2

1 factory Building 3000
2 Office building (G+1) 1000
4 Store for raw materials 1000
5 store in finishing materials 1500
6 Commercial center (shop) 500
7 Generator and pump house 500
8 Guard house 500
19 Parking area 1000
10 Garden area and internal road 1000
Total industry area 10000
Query area 50,000
Total 60,000
5.5. Environmental impact assessment
The project will seriously involve itself protecting conserving and developing
the natural and flora of the project area in line with the millennium
development goal. To this to will play a vital role in participating the varies
organization and the community around the project area to from an
environmental commute in charge of all environmental issues to be handled
in accordance to varies environmental and water policies of 97/99.
The owner of the project believes to undertake several environmental issues
for the conservation development and creation of sustainable environmental
around the project area.
5.6. Implementation Schedule
The actual implementation of the iodized salt is planned to begin on the May
2022. The major activities envisaged are processing of land preparation,
construction and delivery, installation and commissioning of the factory line.
Undertaking of civil design works and execution of construction works
which will be carried out by side which opening and processing of L/C will
take 3 months. The FOB delivery of plant machinery and equipment will
take 4 months. Allowing additional one month for sea freight and clearing,
the delivery of plant of project site and thus commencement of installation
work requires 5 month. Plant installation and commissioning will take place
for 4 months.
The provision of infrastructural facilities such as Electric Power and water
will be carried out in the course of project implementation schedule. Other
activities such us man power recruitment and training, system development,
and procurement of raw and other supplies will also be duty performed to
ensure that everything is in place by the time the plant is ready for
operation. All in all the project is expected to take 12 months for completion
as per the below detailed implementation schedule.
Table 5.5. Implementation schedule
(Months) in Gregorian Calendar
Description 2 3 4 5 6 7 8 9 10 11 12 13
Acquisition of Investment Land
(May 2022 )
Opening & Processing of L/C x x x
Building Construction x x x x x x
Delivery of Plant machinery and x x x x x
Clearing
Page 41
Installation and Commissioning x x x x
Recruitment of man power x x x x x X
arranging for other works
6. ORGANIZATIONS AND MANAGEMENT
6.1. Organizational Structure
The organizational structure of the project is designed by including all the

necessary personal under the right division. At the top of the organizational
structure, there will be a general manager with the responsibility of
supervising the overall activity of plant. Depending up on the nature of the
center and the amount of work to be performs under each will be supervised
by the unit head that is accountability for general manager
CEO
Adviser G/Manager Internal Auditing

& Inspection
Coordinator
Manager/supervisor
Secretary
Sales & technical Marketing Admin &

Unit Unit finance Unit
As clearly shown the organizational structure, the integrated projected

center has CEO three Departments under the general manager, Addition
and the internal Auditing and inspection. The departments are the
production Department, the marketing department and the general service
department under each department there are different section which are
undertaking different activities
6.2. Management
Page 42
As to the management of the project is concerned the owner will be
responsible for the overall project planning, co-ordination and
implementation. After project implementation, the promoter serves as a top
management body and frequently visits and supervises the organization.
The promoter is businessman; who has a long year experience in managing
business activities. Therefore, the extensive experience he has enables him
to organize and properly manage the envisaged Iodized table salt production
project
6.3. Manpower Requirement
For smooth and efficient operation of the organization, it has been

anticipated that each units will have adequate number of qualified and
experienced manpower. The labor component of the Iodized table salt
production factory G/manager will hire qualified and experienced in
management whose main responsibility is to coordinate the overall activity
of the project.
The distinct units have their own operational teams under them. To fill in all
these work units with the required manpower The project will provide 135
permanent employee (35 skilled & 100 unskilled) and 300 casual skilled
and unskilled workers. For smooth operation of the project, employees will
be given on job training, clear duties and responsibilities under the direct
supervision of their respective units.
Table 6.1: Manpower Requirement

Sr. Req. Salary
Description Qualification Annual
No. No. (Birr)
1 Manager BSc in management 1 8,000 96,000
BSc in marketing
2 Marketing Manager 1 6,000 72,000
management
3 Production manager BSc or above in chemistry 2 5,000 120,000
Diploma in secretarial
4 Secretary & Casher 2 3,000 72,000
science
5 Chemist BSc or above in chemistry 2 4,000 96,000
6 Quality control BSc or above in chemistry 1 5,000 60,000
7 Production worker Skill worker 5 3,000 180,000
Diploma or BSc in
9 Electrician 2 2,500 60,000
Electrical eng.
Page 43
10 Junior Technician Diploma in Mechanical Eng 2 2,000 48,000
12 Sales man 12 complete 4 2,000 96,000
13 Purchaser Diploma marketing 2 2,500 60,000
14 Accountant Diploma in Accounting 2 3000 72,000
15 Store Keeper no education 2 2500 60,000
17 Guard 8th Grade or above 2 1,500 36,000
18 Cleaner 8th Grade 5 2000 120,000
Daily Labors 100 1500 1,800,000
Total 135 3,048,000
6.4. Training Requirement
Since the machinery and equipment and services are easy to operate, a
special training arrangement is not needed. But operators, chemists,
mechanics & electricians need a two weeks training during erection,
commissioning period on the production process, raw material and product
quality and operation and maintenance of machinery and equipment by the
expert of machinery supplier..
Page 44
7. FINANCIAL STUDY
Financial analysis of the proposed of Iodized salt production factory will be

projected to test the financial visibility if the investigated organization.
Quantifying both project cost and benefits over the assumed project life,
which is ten years, made the project visible. Besides it has been tried to
make a realistic forecasting of costs and the benefits based in current
market price of all necessary materials.
7.1. Classified Investment cost
The cost of the project is classified in to fixed investment cost and initial
working capital. About fixed investment cost of the project, the land lease,
building and civil works cost, machinery and equipment cost, and office
furniture costs fuel costs will be required as to working and operating cost a
brief illustration will be given as to utilities, salary expense, maintenance
cost and depreciation cost and the other related costs
7.1.1. Fixed costs

Fixed cost that include Land development, Building and civil work,
machinery equipment and vehicles and office furniture estimated birr 111.3
million. which is 31.8 % of the total project.
Table 7.1 land development
S/n Description Total Price (Br)
1 Land clearing and leveling 2,500,000
3 land lease 5% 1,312,500
5 Water reservoirs 1,500,000
Total 5,312,500
Table 7.2 Building and civil works

Total
S/n Description Area/m2
estimated cost
1 factory Building 3000 20,000,000.00
2 Office building (G+1) 1000 5,000,000.00
4 Store for raw materials 1000 6,000,000.00
5 store in finishing materials 1500 5,000,000.00
6 Commercial center (shop) 500 5,000,000.00
7 Generator and pump house 500 2,000,000.00
Page 45
8 Guard house 500 2,000,000.00
19 Parking area 1000 750,000.00
10 Garden area and internal road 1000 500,000.00
Total 10000 46,250,000.00
Table 7.3 List of summarized machinery and equipment’s and cost

S/ Automatic iodized salt Unit/
Unit cost Total cost
N production machine number
1 Salt crusher 1 12,000,000.00 12,000,000.00
2 Salt screw washer 1 4,500,000.00 4,500,000.00
3 Salt de watering 1 7,500,000.00 7,500,000.00
4 Salt draying machine 1 4,500,000.00 4,500,000.00
5 Vibrating screen machine 1 6,000,000.00 6,000,000.00
6 Storage tank 1 2,500,000.00 2,500,000.00
7 Bag filling machine 1 5,000,000.00 5,000,000.00
packing machine 1 1,000,000.00 1,000,000.00
Salt Pulverize Mill 1 3,500,000.00 3,500,000.00
Total 42,000,000
spar part 8,400,000
Generator 2,500,000
Total 52,900,000
Table 7.4. Procurement of Vehicles and furniture’s

ID Supplies Qt Unit Price Total Remark
1 Vehicles
Isuzu track 2 1,800,000.00 3,600,000.00 duty free
Mini bas 2 950,000.00 1,900,000.00 duty free
Pick up 1 1,100,000.00 1,100,000.00 duty free
subtotal of vehicles 6,600,000.00
2 Office furniture
managerial table and chair 1 30,000.00 30,000.00 local market
Expert table and chair 4 10,000.00 40,000.00 local market
Shelf 2 5,000.00 10,000.00 local market
guest chair 4 3,000.00 12,000.00 local market
Subtotal of office furniture 92,000.00
6 Computer and accessories
computer Desktop GX755 4 30,000.00 120,000.00 duty free
Laptop 2 20,000.00 40,000.00 duty free
Printer 2 12,000.00 24,000.00 local market
subtotal of computer and
184,000.00
accessories
6,876,000.00
Table 7.5 Summary of Fixed asset
Page 46
Cost Estimate
S/n Description
(Birr)
1 Land development 5,312,500
2 Building & Constructions 46,250,000
3 Machinery and equipment 52,900,000
4 office furniture and vhicles 6,876,000
Total 111,338,500
7.1.2. Operational cost costs
Production cost of the project includes direct production and overhead costs.
The major cost item under this category includes cost of material and labour
inputs, fuel and lubricants, repair and maintenance, employee salary and
benefits, insurance, office supplies and other miscellaneous expenses; the
total estimated production cost is birr 239 million68.2% of the total project
capital is.
Direct cost
Table 7.6.Raw materials
Unit
Description Quantity/toneprice/ton Estimated Cost
S/N unit e
1 raw salt tone 72000 3000 216,000,000.00
2 iodine kg 5000 600 3,000,000.00
packaging
materials(plastic 1,920,000 5 9,600,000.00
3 bag + card box) pcs
Total 1,997,000.00 228,600,000.00
Utilities
Sr. Quantity Annual
Description
No used/year unit price Esteemed cost
1 Electricity /kwh 450000 5 2250000
2 Water/m2 30000 3.5 105000
vehicles fuel and
3 Lamp sum 300000
generator Naphtha
Total Cost 2,655,000
Administration cost
 Employee benefits : It includes medical expense, uniform and other
incentive package and assumed to be 25% of annual salary expense = birr
762,000
 Travel expense: It is assumed to be 10% of annual salary expense i.e. birr
304,800
Page 47
 Repair and maintenance: It is assumed to be 1% of fixed investment
cost = birr 2.2 million
 Insurance: It is assumed to be 1% of fixed investment cost = birr 1.1
million
 Office supplies: Including stationery and sanitary supplies annual
cost of birr 100,000 is considered.
 Miscellaneous expense: It includes cost of land rent, telephone and
postage, audit, legal and license fees and other miscellaneous
expenses. The total annual cost of these cost components is estimated
to be birr 100,000 /year.
Summary of Operational cost/ working capital
Table 7.8 Determination of Initial Working capital requirement

Estimated Annual cost
S/n Description
Birr
1 Direct cost
1.1 raw materials 228,600,000.00
1.4 Utilities 2,655,000.00
Subtotal(1) 231,255,000.00
2 Administrative costs
2.1 Salary and wage 3,048,000
2.2 Advertisement cost 150,000
2.3 Employee benefits 762,000
2.4 Travel expense 304,800
2.5 Repair and maintenance 2,226,770
2.6 Insurance 1,113,385
2.7 Office supplies 100,000
2.8 Miscellaneous expense 100,000
Sub total 7,804,955
Initial W.C. requirement 239,059,955
Page 48
7.2. Project Capital and financing
7.2.1. Project Capital

The total investment capital of the project is estimated at birr 350,398,455 of
which birr 111,338,500 (32%) is for fixed investment items while the
remaining balance of birr 239,059,955 (68%) will be initial working capital.
The detail of investment capital of the project is given below
7.9. Project capital and source of income
Investment capital (Br.)
S/n
Item Local currency
1 Land development 5,312,500
2 Building & Constructions 46,250,000
3 Machinery and equipment 52,900,000
4 office furniture and vhicles 6,876,000
Sub total 111,338,500
5 Working Capital 239,059,955
Total 350,398,455
7.2.2. Financing
The total investment capital of the project is to be financed from the

promoter’s equity and bank loan. Out of the total capital birr 105,119,536
(30%) is contributed by the promoter, while the remaining balance of birr4
245,278,919 (70%) is to be financed by local banks. The bank loan will be
repaid based on the following terms and conditions:
 Loan amount = birr 245,278,919
 Installment period/ term = 10 years
 Interest on loan (including service charge) = 14.5%
Table 7.10 Loan Repayment Schedule

Principal Interest Year ending
Year
Repayment Payment Balance
0 - - 245,278,919
1 24,527,892 35,565,443 220,751,027
2 24,527,892 32,008,899 196,223,135
3 24,527,892 28,452,355 171,695,243
4 24,527,892 24,895,810 147,167,351
5 24,527,892 21,339,266 122,639,459
Page 49
6 24,527,892 17,782,722 98,111,567
7 24,527,892 14,226,177 73,583,676
8 24,527,892 10,669,633 49,055,784
9 24,527,892 7,113,089 24,527,892
10 24,527,892 3,556,544 0
0
2.1. Purpose and Amount of Loan
Purpose and amount of loan requested: The purpose of the loan is to

import machineries and steel for building construction. Beside on this the
promoter believes that, the loan will strengthen the relationship between the
investor and the bank. Furthermore, the investor gets strength to advance
to various viable economy sectors in the country.
Depreciation of fixed investment items

The straight-line method has been used to depreciate/amortize all fixed
items of the project. The depreciation rate applied for all fixed assets is given
below:
Table 7.11 Depreciation Schedule
Original Annual Depreciation

S/n Item
Value % Amount (Br.)
1 Land development 5,312,500 10 531,250
2 Building & Constructions 46,250,000 10 4,625,000
3 Machinery and equipment 52,900,000 10 5,290,000
4 office furniture and vehicles 6,876,000 10 687,600
Total 111,338,500 - 10,446,250
Page 50
Table 7.12 Summary of project Annual production costs
S/n Cost item Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
1 Direct cost
1.1 raw materials 228,600,000 240,030,000 252,031,500 264,633,075 277,864,729 291,757,965 306,345,863 321,663,157 337,746,314 354,633,630
1.4 Utilities 2,655,000 2,787,750 2,927,138 3,073,494 3,227,169 3,388,528 3,557,954 3,735,852 3,922,644 4,118,776
231,255,000 240,030,000 252,031,500 264,633,075 277,864,729 291,757,965 306,345,863 321,663,157 337,746,314 354,633,630
2 Administrative costs
2.1 Salary and wage 3,048,000 3,200,400 3,360,420 3,528,441 3,704,863 3,890,106 4,084,612 4,288,842 4,503,284 4,728,448
2.2 Advertisement cost 150,000 157,500 165,375 173,644 182,326 191,442 201,014 211,065 221,618 232,699
2.3 Employee benefits 762,000 800,100 840,105 882,110 926,216 972,527 1,021,153 1,072,211 1,125,821 1,182,112
2.4 Travel expense 304,800 320,040 336,042 352,844 370,486 389,011 408,461 428,884 450,328 472,845
Repair and
2.5 2,226,770 2,338,109 2,455,014 2,577,765 2,706,653 2,841,985 2,984,085 3,133,289 3,289,953 3,454,451
maintenance
2.6 Insurance 1,113,385 1,169,054 1,227,507 1,288,882 1,353,326 1,420,993 1,492,042 1,566,645 1,644,977 1,727,226
2.7 Office supplies 100,000 105,000 110,250 115,763 121,551 127,628 134,010 140,710 147,746 155,133
Miscellaneous
2.9 100,000 105,000 110,250 115,763 121,551 127,628 134,010 140,710 147,746 155,133
expense
Sub total 7,804,955 8,195,203 8,604,963 9,035,211 9,486,972 9,961,320 10,459,386 10,982,355 11,531,473 12,108,047
Total cost working capital 239,059,955 248,225,203 260,636,463 273,668,286 287,351,700 301,719,285 316,805,250 332,645,512 349,277,788 366,741,677
Note: Production costs are assumed to increase by 5% annually.
Page 51
7.3. Revenue projection
The project will collect its revenue from the provision of selling of purified
Iodized table salt production on the current market price and similar service
provision in the country. The annual sales program is formulated based on
proposed plant capacity considered the following table
Table 7.13 Description of revenue projection
S/N Raw materials 50Kg(bag) Unit price/qt Estimated Cost

1 iodized table salt 1,000,000.00 400 400,000,000.00
2 Other Iodized salt 440,000.00 300 132,000,000.00
Total 1,440,000.00 532,000,000.00
Page 52
7.4. Financial statements
7.4.1. Projected Profit/loss statement

Mr. Abdulsemed Negash
Iodized table salt production project
Projected profit/loss statement
Table 7.14 Project Profit/loss statement
In ‘birr
Project Year
Description 1 2 3 4 5 6 7 8 9 10
Gross Sales 532,000,000 558,600,000 586,530,000 615,856,500 646,649,325 678,981,791 712,930,881 748,577,425 786,006,296 825,306,611
Less:
239,059,955 251,012,953 263,563,600 276,741,780 290,578,869 305,107,813 320,363,204 336,381,364 353,200,432 618,421
Production costs
Gross Income 292,940,045 307,587,047 322,966,400 339,114,720 356,070,456 373,873,978 392,567,677 412,196,061 432,805,864 454,446,157
Less: Interest on
35,565,443 37,343,715 28,452,355 24,895,810 21,339,266 17,782,722 14,226,177 10,669,633 7,113,089 112,000
loan
Less:
10,446,250 752,000 752,000 752,000 752,000 752,000 752,000 752,000 752,000 752,000
Depreciation
Profit before tax 246,928,352 269,491,332 293,762,045 313,466,909 333,979,190 355,339,257 377,589,500 400,774,428 424,940,776 453,582,157
Less: Income 86,424,923.
94321966.17 102816715.77 109713418.28 116892716.38 124368739.87 132156325.00 140271049.86 148729271.44 158753755.09
tax (35%) 14
Net Profit 160,503,429 175,169,366 190,945,329 203,753,491 217,086,473 230,970,517 245,433,175 260,503,378 276,211,504 294,828,402
Note: Sales revenue is assumed to increase by 5% annually
Page 53
7.4.2. Projected cash flow statement
Projected cash flow statement
Table 7.15 Project cash flow Statement
Project Year
Description
0 1 2 3 4 5 6 7 8 9 10
Cash Inflow
Equity 105,119,537 - - - - - - - - - -
Bank loan 245,278,919 - - - - - - - - - -
Total revenu - 532,000,000 558,600,000 586,530,000 615,856,500 646,649,325 678,981,791 712,930,881 748,577,425 786,006,296 825,306,611
Depreciation - 10,446,250 10,446,250 10,446,250 10,446,250 10,446,250 10,446,250 10,446,250 10,446,250 10,446,250 10,446,250
Total Inflow 350,398,455 542,446,250 569,046,250 596,976,250 626,302,750 657,095,575 689,428,041 723,377,131 759,023,675 796,452,546 835,752,861
Cash Out

Flow
Fixed Cost 111,338,500 - - - - - - - - - -
Initial W.C 239,059,955 239,059,955 251,012,953 263,563,600 276,741,780 290,578,869 305,107,813 320,363,204 336,381,364 353,200,432 370,860,454
Loan
24,527,892 24,527,892 24,527,892 24,527,892 24,527,892 24,527,892 24,527,892 24,527,892 24,527,892 24,527,892
Repayment
Total Out flow 350,398,455 263,587,847 275,540,845 288,091,492 301,269,672 315,106,761 329,635,705 344,891,095 360,909,256 377,728,324 395,388,345
Net Inflow - 278,858,403 293,505,405 308,884,758 325,033,078 341,988,814 359,792,337 378,486,035 398,114,419 418,724,222 440,364,516
Cumulative
- 278,858,403 572,363,809 881,248,566 1,206,281,644 1,548,270,458 1,908,062,794 2,286,548,830 2,684,663,249 3,103,387,471 3,543,751,987
balance
Page 54
7.4.3. Balance sheet
Balance Sheet
Liability and
Current Asset
Asset capital
Direct cost 231,255,000
Variable /admin cost
Salary and wage 3,048,000
Advertisement cost 150,000
Employee benefits 762,000
Travel expense 304,800
Repair and maintenance 2,226,770
Insurance 1,113,385
Office supplies 100,000
Miscellaneous expense 100,000
Total Current asset 7,804,955
Fixed Asset
Land development 5,312,500
Building & Constructions 46,250,000
Machinery and equipment 52,900,000
office furniture and vehicles 6,876,000
Total Fixed cost 111,338,500
Total asset 350,398,455
Liability and capital
Liability (Loan payable) 245,278,919
Initial capital 105,119,537
Total Liability and capital 350,398,455
Page 55
7.4.4. Viability and other measurement
Financial IRR computation
Table 7.16 Financial IRR computation
In ' birr
Year 0 1 2 3 4 5 6 7 8 9 10
Gross income 532,000,000 558,600,000 586,530,000 615,856,500 646,649,325 678,981,791 712,930,881 748,577,425 786,006,296 825,306,611
Total costs 350,398,455 239,059,955 251,012,953 263,563,600 276,741,780 290,578,869 305,107,813 320,363,204 336,381,364 353,200,432 618,421
Gross profit -350,398,455 292,940,045 307,587,047 322,966,400 339,114,720 356,070,456 373,873,978 392,567,677 412,196,061 432,805,864 824,688,190
Less: Profit 9,049,001
102,529,016 107,655,467 113,038,240 118,690,152 124,624,659 130,855,892 137,398,687 144,268,621 151,482,052
tax .60
After tax net
-350,398,455 190,411,029 13,478,615 13,976,013 14,503,150 15,061,512 14,873,630 15,596,585 16,355,688 17,152,746 17,989,656
benefit
DF at 15%
1 0.741 0.549 0.406 0.301 0.223 0.165 0.122 0.091 0.067 0.05
rate
Present Value -350,398,455 394,212,000 306,671,400 238,131,180 185,372,807 144,202,799 112,031,996 86,977,567 68,120,546 52,662,422 41,265,331
Net present
1,279,249,592 - - - - - - - - - -
Value
DF at 10%
1 0.769 0.592 0.455 0.35 0.269 0.207 0.159 0.123 0.094 0.073
rate
409,108, 330,691, 266,871,15 215,549,7 173,948, 140,549,2 113,356,0 92,075, 73,884, 60,247,
Present Value -350,398,455
000 200 0 75 668 31 10 023 592 383
Net present
1,525,882,577 - - - - - - - - - -
Value
Page 56
 NPV (Net Present Value)
It is a method of calculating the expected net gain or loss from project by

discounting rate of all expected future cash inflow and outflows to the
present point in time In the above table shoes that NPV at 30% and 35 %
discount rate is 1.5 and 1.2 billion respectively, this figure is positive value
or NPV>0 it is indicate that accepted the project until 30 % and 35 % of
discount rate
Break-even Analysis
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 of the project including cost of finance when it starts to operate at full
capacity ( year 4) is estimated by using income statement projection.
BE = Fixed Cost = 23 % Sales

– Variable Cost
 Payback Period (PBP)
The payback period is the amount of time required for a firm to recover its
initial investment in a project, as calculate from cash inflow
The investment cost and income statement projection are used to project
the pay-back period
PBP = Initial investment Cost

Gross Profit + Depreciation
250
= 350,398,455
150,816,772 + 10446,
2.17=4Years
The payback period =2 is less than the maximum acceptable payback
period (10) therefore accept the project.
Project Proposal on iodized salt production
 IRR
The internal rate of the project is the rate of discount that radios the present
value of the investigated project to zero. In calculating the IRR, the discount
rate can be adjusted until the NPV becomes Zero or at least as to zero.
Hence, the IRR of this project is calculated as follows
After tax IRR = 35 + 5 (1.2/1.5)
=34.1%
IRR=34.1% of the project returns its initial investment cost within its life
8. SENSITIVITY ANALYSIS
Sensitivity analysis is variant of scenario analysis in which each scenario

represents a change in only one variable, rather than a number of variables.
For the proposed project, the sensitivity of the project has been computed at
30% and 35% for sales reduction, operating cost increase and investment
cost increased accordingly, as described in table 7.16 the result shows that
IRR at 34.1% operating cost increase and 30 and 35% investment cost
increase and 30% service sales reduction. Predicting among these sales
reduction is more sensitive to the project and it should further expand after
the project proposed life time because in this case NPV equal zero at
IRR=34.1
9. RISK ANALYSIS
The major risk of this project shall be high market price fluctuation and
turnover the skilled and trained man power. These risks can be mitigated.
The high staff turnover may be lessened by creating conductive working
atmosphere and providing some benefits. For this project, 25% benefit is
proposed for the permanent employees
Characteristic (Personal) Risk: This is the most important risk, which
should be seriously considered? As to this company, the promoter have
sufficient years of work experience in both government and private
organization (leading private business by engaging themselves), so personal
risk is minimum under this context
58
Business Risk: The fate of the business is generally found to be dependable.

The demand- supply analysis exhibits the need of the service of the business
organization. According to the overall demand the effect of competitors in
the sector would not be an immediate alarming threat at least for the
coming few years. In additional to this Long year experience of the owner in
the field will help to react against any adverse situation in the business.
However, the reaction of competitors should be attended. In additional to an
advanced promotional work and sustainable goodwill development by
creating new and best quality products with good service deliveries
Collateral Risk: Since the owners of the project are engaged on different
related business, there is no any risk related to collateral. In this regard, the
proposed building and other proposed equipment and the business as a
whole are dependable securities. The experience and skill of the owner as
well as the manager and the other expertise add confidence to the lenders.
Therefore, there is no risk regarding collateral in general.
Construction Risk: Construction risk is one of the most important areas

of risk that need great consideration during project implementation. In the
case of filtered Iodized table salt project, the construction work of the
proposed building will be made by phase with self-response supervision.
Hence, there is no as such serious risk related to construction work.
All the identified risks, which are related to the universally accepted lending
policy, are to the acceptable level that keeps the lender’s interest in safe
position. Furthermore, the quality of the assets of the company is
dependable and the projected finical reports show that the company will
have a capacity to pay the principal and interest without any problem with
in short period of time.
59
10. MONITORING AND EVALUATION
Monitoring and Evaluation (M&E) has long been recognized as a vital

aspect of development projects generally and of industrial and services
projects in particular. The monitoring of project performance consists of
the tracking of human, physical and financial resources and the recording
of how they are converted into outputs (project goods and services), and in
turn, outcomes and impacts.
11. CONCLUSION AND RECOMMENDATION
Conclusion: The Project is found to be operationally profitable & has

significant socio-economic benefits. According to the projected income
statement, the envisaged project starts earning profit from the first year of
production. The income statement and other profitability indicators show that
the project is viable. The project is believed to have significant social and
economic benefits that accrue to the society beyond those financial returns
to its owner. The most remarkable social benefits can be expressed in terms
of job creation that leads to reduction in the level of unemployment.
Recommendation: The project directly employs 135 persons; therefore,

considering the attractive financial and economic benefits the project is to
produce, the promoter has made the necessary preparation hoping that all
the concerned offices & financial institutions should give their support to
facilitate the implementation of this plan.
60

Project Proposal On Iodized Salt Production Factory: Promoted By: Mr. Abdulsemed Negash

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Project Proposal On Iodized Salt Production Factory: Promoted By: Mr. Abdulsemed Negash

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PROJECT PROPOSAL ON

IODIZED SALT PRODUCTION

Project Location: - Northeastern Ethiopia, Afar region estate

Promoted by: Mr. Abdulsemed Negash

Contact Address: 0916582073

 Type of the Project: Iodized table salt production factory

 Project Location: Northeastern Ethiopia, Afar regional estate

 Project capital: The total investment capital of the project is estimated

at birr 350,398,455 of which: -

 Birr 111,338,500 (32%) is for fixed investment cost

 Birr 239,059,955 (68%) will be assign for working capital

 Source of finance: The total investment capital of the project is to be

financed from the promoter’s equity and bank loan.

 Birr 105,119,536 (30%) is contributed by the promoter

 Birr 245,278,919 (70%) is to be financed by local banks.

o The project will provide 135 permanent employs,

2.1. Investment in Ethiopia

Iodized salt is table salt mixed with a minute amount of various salts of the

Iodine is a micronutrient and dietary mineral that is naturally present in the food

Four inorganic compounds are used as iodide sources, depending on the

of ethylenediamine is the main supplement to livestock feed.

It is theoretically impossible to develop an allergic reaction to iodine from the

2.3. Iodine and uses

Iodine is essential in small amounts for normal physiologic function. It is a

Healthy humans require iodine, an essential component of the thyroid

2.4. Ambition of creating the iodized salt project

2.6. Promoter Background

The promoter, Mr. Abdulsemed Negash is a diaspora investor, he lives in………

2. Project location and justification

Afar is predominantly (89.96%) spoken in the region and is the working

2.9. Land features

The continuous process of volcanism results in the occurrence of major minerals,

including potash, sulfur, salt, bentonite and

sources and hot springs in different areas

Berhale and Afdera woredas of Zone Two.

2.12. Regional instability

As of 2012, the area has been increasingly unstable, as tensions between

2.13. Fossil finds

Natural History. On March 5, 2005,

led digs there each year from 2004 to

form between Homo erectus and Homo sapiens.

Based on the above socio economic information; the promoter wants to

2.14. General Review

Approximately 70% of households in the world used iodized salt by 2000,

In Ethiopia, one out of every 1000 is a cretin mentally handicapped, due to a

2.15. past supply and present demand

Salt (sodium chloride) is essential to the health of human beings. The

2.18. Projected Demand

Table Salt consumption is directly related with population growth. Based on

Year Projected Demand

2.19. Plant Capacity and production program

2.19.1. plant capacity

Description Unit Estimated analysis

3.1.1. Production Programme

The plant under consideration is assumed to operate in a single shift of 8 hrs

4.7. Pricing analysis

S/N Raw materials Unit Amount Unit price/unit

4.8. Marketing promotion and strategy

2.20. Competitors Overview

5.1. Production process

Common salt or sodium chloride (Nacl) is specially produced for human

Usually in iodized salt production, raw salt either in rock or in evaporated