Vegetable Farm Business Development
Vegetable Farm Business Development
Traits and vegetables are important sources of vitamins ,minerals and antioxidants useful for human
health. They are consumed directly in their raw an cooked form, as an important seasoning to add
aroma, taste, and flavour to dishes after passing through food processing industries as major
components of healthy human diet. Fruits and vegetables are generally classified as root crops, such
as potato, carrot, red and white (garlic) onions, leaf crops, such as lettuce, cabbage, Spinach and fruit
crops, such as tomato, pumpkin, watermelon and chilli pepper.
Ethiopia is endowed with favourable climate, altitude, adequate water supply, large stock of
cultivable land and suitable soils for production of high value fruits and vegetable crops. In spite of
the vast resource base, production of fruits and vegetables have not been a major component of the
agricultural economic activity and per capital consumption and percentage of food budget spent on
fruits and vegetables is very low compared to other Sub Saharan Countries, such as Kenya, Uganda
and Tanzania'. currently Ethiopia's per capita consumption of fruits and vegetables stands at 97
grams per day, which is much below from the recommended per capita daily consumption of 400
gram or 147 kg per annum by the World Health organization (WHO). According to the WHO report,
insufficient intake of fruit and Vegetables is a major cause of gastro-intestinal cancer deaths (14%),
anemic heart disease failures (11%) and deaths as a result of stroke (9%) globally.
The major diet of traditional households in Ethiopia is cereal crops that are dominated by starchy
food. However, a recent research study carried out over the period 1996 to 2011published by
International Food Policy Research Institute indicated that the content and variety of food
consumption is changing with a gradual shift towards high-value foods, such as animal products,
fruits and vegetables, processed food with high calories intake. This shift is driven by improvement in
household level of income and increased awareness of nutrition for healthily human diet.
In light of this background and context, this project is designed with a special focus to improve
production and marketing of high value vegetable crops through commercial agriculture
development and to promote and emphasis awareness on nutritional attributes of fruits and
vegetables for human healthy diet.
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Per capita fruits and vegetables consumption in Kenya is 300 gram Uganda 200 gram and
The project plans to establish vertically integrated farming business, focusing Cultivating quality
vegetable products using irrigation based farming technology with modern farm management
system supported by qualified horticulture professionals. The project aims to improve harvest
management and storage system and promote efficient marketing and distribution mechanism to
meet and satisfy the growing market demand for fresh fruit and vegetable products for local
markets.
The area identified for the project development is Dembia Woreda, Central Gondar
Amhara region. The woreda is located about 197 km west of Gondar, bordering
Alefa and Takusa to the West, Lake Tana to the South, Gondar Zuria Woreda to the
East and Gondar city to the North. Koladebia is the administration center of the
Woreda. It lies in semi-kola agro- ecology and the landscape is predominantly plain
with some hills. The temperature varies between 15-45 Celsius and the annual
Based on the recent CSA census report ( 2017), Dembia woreda has a projected total
population of 311,398, of whom 157,876 men and 153,522 female. Of the total
kilometers, Dembiya has a population density of 246.75, which is greater than the
The local economy is mixed farming with crop and livestock production. The major
crops are teft, sorghum, lentil, chick pea, finger millet, and maize. Oxen are used by
Sudan via Metema. Insurance, bank and and close to border towns of Sudan via Metema.
Insurance,Bank and COmmunications services including full access to mobile networks are availaoic
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A total of 5 hectares of land is required for setting up the farm development project the total land,
the farming land covers about 80 % of the land area and the remaining 20 % will be used to
construct farm related infrastructure and facilities. The proposed cultivable land and efficiency of the
operation will form the basis for determining the type and quantity of machinery and equipment to
be employed lo the development.
In accordance to the investment proclamation No 280/2002, the project is eligible to acquire land
for investment at competitive lease price, access to long-term credit with low interest rate,
exemptions from customs duty for capital and spare parts, export incentives and tax holiday from
income taxes for five years.
In the project area, land requests for agricultural investment is handled and processed at the Zonal
and/or Regional level Environmental Protection and Land Management Bureau. The Bureau requires
investors who wish to obtain land from the woreda to Submit a project profile document and
provide bank statement that show financial capacity and resources to undertake proposed projects.
This project development plan is developed for the purpose of requesting land for investment in
accordance with this general regulation.
Although no immediate environmental problem is anticipated from the proposed farming activities,
the project plans to establish strategic collaboration with the local administration and area residents
to engage in activities aimed at minimizing soil erosion and land degradation caused by rain water
flooding, over grazing of communal lands and over cultivations. The project will also allocate specific
budget for seedling /nursery development of indigenous tree species to be planted in the farmland
between blocks. The merit of this plan is to serve as wind break to the crops, to prevent wind
erosion and maintain ecological balance of the farm area.
In addition to the financial benefit the promoter expect to gain from the investment, the project will
create over 26 permanent and temporary employment opportunities for skilled and unskilled area
residents and will generate substantial tax revenue for the local government form its various
business activities and transactions.
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Furthermore, the project Will also actively support and participate in local development projects to
help improve the welfare and quality of life of local residents through sponsoring educational
seminars and trainings on nutrition and consumption culture.
The project is compatible with the present Agriculture Development Led Industrialization (ADLI)
policy and the Growth and Transformation Plan (GTP) which emphasis in promoting and providing
support for development of commercial agriculture with a special focus on high value crops
production for local and export markets.
Furthermore, the project development plan discussed and outlined in this document fulfills and
satisfies directive NO 9/2006, a directive issued by the Head and Council of the Regional Government
on formalities and conditions for granting agricultural land for investment purposes.
The project will be incorporated as private farming business entity according to the commercial law
of Ethiopia, obtain investment license from Ethiopian Investment Authority and register for VAT and
Tax Identification Number (TIN) with Revenue Authority.
The total planned investment to set up the farm development program during the first phase of the
project implementation period is estimated to be Birr 2,001, 225, of which 30 % is owner's
contribution and the remaining 70 % is expected to be financed with long term bank loan.
III. Relevant National Development Strategies & Policy Frameworks for Investment
a) Growth and Transformation Plan (GTP) - The strategy aims in addressing poverty and ensuring
sustainable development through effective utilization of human and land resources as basis of rural
development and speedy economic growth in urban areas. The policy also attaches high importance
to private sector development to contribute to the national economic development and creation of
employment both in the urban and rural sectors.
Growth& transformation Plan (2010-2015), GTP 11 (2015-2020), Ministry of Finance & Econoinic
Developmet (Ethiopia)
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b) The Council of Ministers Regulations No.270/2012 specifies the areas of investment eligible for
investment incentives to encourage and promote the inflow of foreign capital and technology into
country. It entitles incentives to both domestic and foreign investors with provision of land at
negotiated land lease rate, customs duty exemptions for capital goods and tax holiday for period of
up to five years depending on the sector.
According to CSA Agricultural Sample Survey (2014/15), the total area covered by fruits and
vegetable crops was reported to be 2,008,988 hectares or 13.2 % of the total country level crops
covered land area, The survey also indicates cultivation is focused on traditional vegetable crops and
yield per hectare was lower compared to the potential output level that could be obtained from
improved cultivation methods. From the total output, a small amount of vegetables consisting of
potatoes, tomatoes and onions are exported to neighbouring Djibouti, Somalia and other Middle
Eastern countries.
Table 1(a): Cultivated Land under Vegetable and Fruits (CSA 2014/2015)
Table 1 (b): Crops Output by Private and Commercial Holdings (CSA 2014/2015)
The total cultivated land under irrigation was 179,000 hectares or l1.3 % of the total cultivated land
under all food crops. Of the total irrigated land, 60 % was covered under vegetable crops and the
remaining 40 % covered with cereal crops.
Although some experts claim up to 30% of harvested vegetable crops to be lost due to poor
post-harvest handling, from the total cultivated land tomato represents 30 %,red pepper 22
% and onion 26 %.,
4.2. Fruits and Vegetables Consumption and Supply Trends
Vegetables like onion, tomato, potatoes, cabbage, salad and peppers are used by the
average Ethiopian on a daily basis. It is the essential input for creating Ethiopian
dishes in every household, the other segments are Hotel, restaurants and
international communities use more types of veggies. There will always be a market
for vegetables in Ethiopia. Additionally, Djibouti, Somalia, and Sudan are consumers
of Ethiopian farm products thus it has potential as a profitable to export.
The price of vegetables has sky-rocketed in the past ten years as an increasing
amount of Ethiopian farmland is being used to grow crops for export rather than
domestic use. Vegetable prices will remain steady or rising.
Fresh vegetables have a large domestic market in Ethiopia, significantly higher than
the exported volumes. The size of the Ethiopian population is currently estimated at
about 110 million. This is a strong indication of the existence of large potential
demand for fresh
vegetable crops in the country.
Ethiopia a major centre of trade and commerce, one of the main tourism destinations in
Africa and it hosts a wide range of seminars and meetings on a regular basis.
In spite of the vast resource base, production of fruits and vegetables has not been a major
component of the agricultural economic activity and per capita consumption and
percentage of food budget spent on fruits and vegetables is very low. In the country, per
capita consumption of fruits and vegetables is very low. However, there is a growing shift
towards consumption of high protein dishes, fresh fruits and vegetables and processed food
items by the middle income group. The change is highly associated with improvement in
household level of income and increase awareness of health and nutrition.
Presently, smallholder farmers and per-urban cooperatives as well as backyard growers with
traditional production techniques and harvest management practices dominate the fruit
and vegetable product market (mainly traditional vegetables, such as red onion, spinach,
lettuce, and green peppers). Furthermore, extracted fruit and vegetable products, such as
mango and mixed fruit juices, are offered and supplied by small scale business operators,
such as cafes and juice houses, and supply of industrial processed vegetable products, such
as tomato paste and tomato juice are dominated by Merti products (government owned
enterprise) and a few imported brands from the Middle East.
In spite of expanding demand, the local vegetable market generally suffers from seasonal
supply fluctuations due to traditional production system characterized by low productivity,
fragmented and uncoordinated product marketing and distribution mechanism and absence
of well-developed market infrastructure aimed at promoting sustainable product
development. For these reasons, demand surpasses supply throughout the year, reaching its
peak during the lent season; while supply tend to be moderately high during the rainy
season only.
Vegetable wholesale and retail stands in major market places. Most households and low
income consumers also purchase vegetable products from informal market stands, such as
neighbourhood "gulets” and street side vendors.
There is no uniform size or standard packaging of vegetable products supplied in the local
market. As plastic or wood crates are in short supplies due to higher prices, fruits and
vegetable packaging for local markets use rudimentary packagıng practices. For example,
baskets are used to contain leafy vegetables, while jute and plastic sacks are used for
marketing onions, potatoes, carrots, and head cabbages. Growers of leafy vegetables near
urban areas do not use any containers, but instead tie the product into bundles.
Although, some farmers produce and market good quality vegetables, hygienic condition of
most vegetables marketed in the formal and informal production and distribution channels
are questionable qualities.
4
Monthly Producer Price Survey, Central Sialics Agcncy (October, 2019)
5
Nutritional contents of products is reprinted from Joumal of Biology, Agriculture and Healthcare, Vol
5,# 21 (2015)
As vegetables are highly perishable food products and require high level of care, the
temperature of the storage area will be maintained at low humidity and inspected
frequently to check for spoilage and damage that could affect quality, aroma and taste of
products. Uniform size or standard material will used for packagıng products for the local
markets.
Quality control system will be installed to ensure planting, harvesting, collection, Sorting,
cleaning, weighing, packaging, storing and transporting process meet the required standards
at satisfactory level.
Basic parameters and assumptions used for the study and detailed calculations for each cost
category is presented separately as part of the financial feasibility study.
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working capital = operating cost – depreciation
Revenue forecast is dependent on production volumes and sales prices in each production year. In
this financial study, the total revenue from production and marketing of the farm product is
estimated to be Birr 1,000,000 in the first production year and Birr 2,196,150 in the fifth production
year. In anticipation of future production cost increases, an average of 10% increase is added to
costs of production and an equal percentage increases is added in sales revenue projections.
Table 7: Profit & Loss Projections
Description Year
1 2 3 4 5
Revenue 1,000,000 1,237,500 1,875,000 1,996,500 2,196,150
Less: operating 696,612 743,623 804,586 837,091 871,504
cost
Profit before 303,388 493,877 1,070,414 1,159,409 1,324,646
interest
Interest on loan 30,779 36,854 37,795 25,197 12,598
profit before Tax 272,609 457,023 1,032,619 1,134,212 1,312,048
Profit Tax (35%) - - - - -
Net Profit 272,609 457,023 1,032,619 1,134,212 1,312,048
Assuming the investment falls with the five-year tax exemption category, the profitability
assessment excluded the 55 % profit tax and included 9.5 % cost of bank financing in the net profit
calculation. Accordingly, the project's net profit will be Birr 272,609 in the first production year and
Birr 1,312,048 in the fifth production respectively.
The cash flow forecast shows incremental cumulative cash balance of Birr 269,501 in the first year
and Birr 4,345,989 in the fifth projection year, implying that the project would not face any cash
shortage to finance its debt obligations and to meet its operational costs.
The financial viability study indicated that the project expected to generate sufficient amount of net
profit starting from its first year of operation. The cash flow forecast shows the proposed project will
be liquid throughout its life. The discounted cash flow as well as the sensitivity test analysis for
adverse impacts (decreasing revenue and increasing operating costs by 10%) shows greater than the
current rate of inflation(17%) and real interest rate of 5% offered by commercial banks.
IX .