PROFILE ON SESAME FARM

2-2
TABLE OF CONTENTS
PAGE
I.

SUMMARY

2-3

II.

PRODUCT DESCRIPTION AND APPLICATION

2-3

III.

MARKET STUDY AND FARM CAPACITY

2-4

A. MARKET STUDY

2-4

B. FARM CAPACITY AND FARMING PROGRAMME

2-6

FARM MATERIALS AND AGRICULTURAL INPUTS

2-7

A. FARM MATERIALS

2-7

B. UTILITIES

2-8

FARM OPERATION TECHNOLOGY AND ENGINEERING

2-9

A. FARM OPERATION TECHNOLOGY

2-9

B. ENGINEERING

2 - 10

MANPOWER AND TRAINING REQUIREMENT

2 - 11

A. MANPOWER REQUIREMENT

2 - 11

B. TRAINING REQUIREMENT

2 - 11

FINANCIAL ANALYSIS

2 - 13

A. TOTAL INITITAL INVESTMENT COST

2 - 13

B. FARMING COST

2 - 14

C. FINANCIAL EVALUATION

2 - 15

D. ECONOMIC BENEITS

2 - 16

IV.

V.

VI.

VII.

2-3

I.

SUMMARY

This profile envisages the establishment of a farm for the production of 22,000 quintals of
sesame per annum.

The present demand for proposed product is estimated at 578,243 quintals and it is projected to
reach at 1.36 million quintals by the year 2013.

The farm will create employment opportunities for 55 persons.

The total investment requirement is estimated at Birr 28.88 million, out of which Birr 9.1
million is required for machinery and equipment.

The project is financially viable with an internal rate of return (IRR) of 25% and a net present
value (NPV) of Birr 32.03 million, discounted at 10.5%.

II.

PRODUCT DESCRIPTION AND APPLICATION

Sesame is an important oil-seed crop. It is grown in Africa, Asia and parts of Latin America for
its edible seeds which are source of sesame oil. The semi-drying oil is of high quality and is
used as a substitute for olive oil as a salad and cooking oil. The oil is used in the manufacture of
margarine and compound cooking fats and poorer grades in soap and paints, and as a lubricant
and illuminant. It is used as a vehicle for medicinal drugs and perfumes.

2-4
III.

MARKET STUDY AND FARM CAPACITY

A.

MARKET STUDY

1.

Post Supply and Present Demand

Sesame is highly demanded crop in the international market and is consumed by existing
domestic large and small-scale oil mills. Table 3.1 shows the country's total production of oil
seeds and sesame as well as the total export of oil seeds.

Table 3.1
PRODUCTION OF OIL SEEDS, SESAME AND
EXPORT OF OIL SEEDS (QUINTAL)

Year

Total

Sesame

Share of

Total

% of Export

Production

Production

Sesame

Export of

from Production

(%)

oil seeds

of Oil seed
1997/98

1,674,770

98,250

5.9

665,540

39.7

1998/99

1,567,400

176,770

11.3

513,650

32.8

1999/00

1,794,910

166,340

9.3

431310

24.0

2000/01

2,383,300

188,780

7.9

550,510

23.1

2001/02

2,081,357

388,995

18.7

766,040

36.8

2002/03

1,965,470

362,720

18.5

828,010

42.1

Total

11,467,207

1,318,855

Average

1,911,201

230,309

3,755,060
12.1

625,843

32.8

Source:- CSA, Statistical Abstracts for Domestic Production

National Bank, Annual Reports, for Export.
Table 3.1 reveals that during the past six years, i.e, from 1997/98 upto 2002/03, the annual
average production of all types of oil seeds in the country was 1,911,200 quintals. Of the total
annual production of oil seeds, the share of sesame is about 12%. Although total production of
oil seeds fluctuates from year to year, it has generally grown by about 4% in the past six years.

2-5

The production of sesame in the past six years has shown a tremendous increase. The production,
which was 98,250 quintals in the year 1997/98 has reached to 388,995 quintals and 362,720
quintals in the year 2001/02 and 2002/03, respectively. This means that domestic production of
sesame in the past six years has almost quadrubled.

On the other hand, export of oil seeds in the past four years, i.e, from 1999/00 to 2002/03 has
almost doubled. Export of oil seeds which was 431,310 quintals in 1999/00 has grown to
822,010 quintals in the year 2002/03. In general, of the total production of oil seeds about 33%
has been exported in the past six years.

The BGRS has a good potential for the production of oil seeds. According to CSA Agricultural
Sample Survey, the level of production of oil seeds in the region in the year 2001/02 was about
120,392 quintals, out of which 55,551 quintals or 46% is the share of sesame.

To determine the present effective demand for sesame, the average production level of years
2001/02 and 2002/03 which was 375,858 quintals has been taken as a base. Since the major users
of sesame, i.e., existing oil mills are working much below their capacity and there are a number
of projects under implementation, the existing production is assumed to cover only 65% of the
demand (domestic and export). Hence, the present demand is estimated at 578,243 quintals.

2.

Projected Demand

The demand for sesame is believed to increase with improved capacity utilization of existing
mills, new projects that demand the crop as well as wide export market in Europe and Middle
East countries. Hence, taking the current effective demand as a base and assuming an annual
average growth rate of 10% the project demand is presented in Table 3.2. Moreover, of the total
projected demand 65% is assumed for local consumption and 35% for export market.

2-6
Table 3.2
PROJECTED DEMAND FOR SESAME (QUINTAL)
Year

3.

Total

Existing Production

Unsatisfied

Projected Demand

Capacity

Demand

2003/04

578,243

375,858

202,385

2004/05

636.063

375,858

260,205

2005/06

699,674

375,858

323,816

2006/07

769,641

375,858

393,783

2007/08

846,606

375,858

470,748

2008/09

931,266

375,858

555,408

2009/10

1,024,392

375,858

648,534

2010/11

1,126,832

375,858

750,974

2011/12

1,239,515

375,858

863,657

2012/13

1,363,466

375,858

987,608

Pricing and Distribution

Price of sesame is mainly influenced by the export market and domestic supply of the crop.
Current market price of sesame in Addis Ababa is Birr 750/ quintal. Assuming transportation and
other marketing costs, farm-gate price of Birr 700/quintal is assumed for the project. The product
can be directly exported to the world market or can be sold directly to bulk consumers in the
country.

B.

FARM CAPACITY AND FARMING PROGRAMME

1.

Farm Capacity

The capacity of the envisaged farm at its full production capacity is estimated to be 22,000 qts
per annum.

The above volume of sesame produce is expected to be generated from 2,200

hectares of net irrigable land.

2-7

2.

Farming Programme

The farm will start with 50 per cent capacity in the first production season, then will reach full
capacity in the fifth year of operation. The production programme of the farm is shown in Table
3.3.

Table 3.3
FARMING PROGRAMME OF SESAME FARM

Year

Total Area

Yield/ha (Qt)

Total Production (Qt)

1.

1100

10

11000

2.

1300

10

13000

3.

1600

10

16000

4.

1900

10

19000

5.

2200

10

22000

IV.

FARM MATERIALS, AGRICULTURAL INPUTS AND UTILITIES

A.

FARM MATERIALS AND AGRICULTURAL INPUTS

Commercial fertilizers, seeds, chemicals and sacks are among the most important materials
required for sesame farm.

The materials and inputs required along with their corresponding costs at full capacity operation
of the farm are described in Table 4.1

2-8
Table 4.1
LIST OF FARM RAW MATERIALS REQUIREMENT AND COSTS

Sr.

Description

Unit of

No

Coast (000 Birr)

Measure

FC

LC

Total

Seeds

Qt

180

90

90

Fertilizer

Qt

2200

660

220

880

Chemicals

Qt

22

165

55.0

220

Sacks

Pcs

22,000

66.00

66.00

825

431

1,256

Grand Total

B.

Qty

UTILITIES

In general terms, the utilities required by the farm include electricity, water, fuel, grease and
lubricant. The costs of utilities at full production capacity of the farm are shown in Table 4.2.

Table 4.2
UTILITIES REQUIREMENT AND COST

Sr.

Description

No.
1.

Qty

Cost ('000 Birr)

(000)
Electricity (kWh)
3

206

97.65

208.7

352.35

2.

Water (m )

3.

Fuel (lt)

337

843.5

4.

Lubricant, grease and oil (lt/kg)

33.7

84.4

Total

1,377.9

2-9

V.

FARM OPERATION TECHNOLOGY AND ENGINEERING

A.

FARMING TECHNOLOGY

1.

Farming Process

a)

Land Development

The main production process of sesame farm will be started with land development activities,
such as surveying, land clearing, leveling and irrigation system, and access and farm road
construction. The land development activities are expected to be undertaken by machinery and
equipment such as Bulldozers, leveling and surveying instruments.

These machinery and

equipment are expected to be rented from other enterprises.

b)

Land Preparation, Sowing and Fertilization

Generally, land development for sesame production is followed by land preparation.

It

comprises ploughing, disking and harrowing. Sowing follows harrowing with fertilizer
application. For this purpose, tractors with various bottoms like disc plough, disc harrows and
seed and fertilizers drillers are employed in general.
c)

Pre-harvest Management

The pre-harvest management in sesame production usually involves irrigation application,

weeding and cultivation, insect pest and disease control. Irrigation water application using
different canals by gravity and weed control will be performed by casual labour. Moreover,
insect pest control is carried out by chemicals and motorized sprayer.
d)

Post-Harvest Management

Post harvest in sesame growing include harvesting, threshing, packing, storing and marketing.
Harvesting & threshing are expected to be carried out mechanically/manually by casual labour.
While transporting will be done by tractor driven trailers and trucks, from the farm and stores,
respectively.

2 - 10

2.

Sources of Technology

The machinery and equipment required by the envisaged farm could be supplied by Ries
Engineering, Nazareth Tractor Assembly Plant, TETRACO. PLC etc.. Whereas seeds, fertilizers
and chemicals could be supplied by a number of organizations like Agricultural Input Supply
Enterprise, Ambassel, Dinsho, Wondo, etc.
B.

ENGINEERING

1.

Farm Machinery and Equipment

The machinery and equipment required by the farm and the corresponding costs are given in
Table 5.1. The net cultivable area and the efficiency of the machinery were the basis for
calculating the total required machinery and equipment.
Table 5.1
FARM MACHINERY AND EQUIPMENT REQUIREMENT AND ESTIMATED COST
Sr.
No.
1
2
3
4
5
6
7
8
9
10
11
12
13

Description
Tractor 110 HP-125 HP
Disc Plough 5-6 furrow
Disc Plough of set type
Planter 6 rows
Cultivator
Sprayers (manual)
Ringer
Trailers
Workshop (set)
Tools (set)
Generator
Sickles
Total FOB
Inland Cost (20% of FOB)
Grand Total

Qty.
No.
5
5
5
5
1
50
5
4
1
1
1
83
-

Coast (000 Birr)

FC
LC
Total
1350
1350
300
300
450
450
1000
1000
25
25
50
50
200
200
360
360
50
50
12.50
12.50
155
155
2.2
2.2
3952.5
2.2
3954.7
790.94
790.94
3952.5
793.14
4745.64

2 - 11
2.

Land, Building and Civil Works

The total land required for the envisaged project is estimated to be about 3,200 hectares. The
land will be allocated for sesame production, residential houses, offices, stores, launge,
workshop, access and farm road constructions. Rural land lease rate in BGRS ranges from Birr
15 to Birr 30 per hectare, taking the maximum lease rate, and for 70 years of land holding, the
total land lease cost is estimated at Birr 6.72 million. Even though the actual practice is to pay a
certain portion in advance and the balance within a defined period, in this profile it is assumed
that the total land lease cost is paid in advance.

Building area of the farm which includes stores, residential houses, offices, launge and workshop
is estimated to be 7,000 m2 and its total construction costs will be about Birr 4.900 million, at
unit cost of Birr 700 per meter square.

Surveying, clearing and leveling of farm land and main canal, drainage, access and farm road
and hydraulic structures constructions will be among the civil work activities to be carried out
for sesame production. The total costs are estimated at Birr 4.2 million.

3.

Proposed Location

The location of the proposed sesame farm is expected to be in Kamashi zone which has big
potential for the production of oil seeds.

VI.

MANPOWER AND TRAINING REQUIREMENT

A.

MANPOWER REQUIREMENT

The envisaged sesame farm requires 55 permanent work force. The corresponding costs for both
permanent and casual labour for each production season are shown in Table 6.1.

B.

TRAINING REQUIREMENT

No special training is required.

2 - 12
Table 6.1
MANPOWER REQUIEREMENT AND ANNUAL LABOUR COST
2009
Sr.
No.

Description

Req.
No.

Monthly Salary
Birr '000

Total Annual Salary

Birr '000

Farm Manager

2250

27.00

Secretary

700

8.40

Agronomist

2000

24.00

Plant Protection Inspector

1500

18.00

Irrigation Agronomist

2000

24.00

Production Supervisor

500

12.0

Accountant

800

9.6

Cashier

600

7.2

Purchaser

700

8.4

10

Salesperson

700

8.4

11

Tractor Operator

10

500

60.0

12

Assistant Tractor Operator

10

300

36.0

13

Chief Mechanic

700

8.4

14

Assistant Mechanic

500

6.0

15

Generator Operator

300

3.6

16

Driver

500

18.0

17

Assistant Driver

300

7.2

18

Storekeeper

300

3.6

19

Office Boy

200

2.4

20

Guard

10

200

24.00

21

Janitor

200

2.4

Sub-Total

318.6

Employee Benefit 25%

79.65

Sub-Total

55

Casual labour
Grand Total

398.25
1,042.0

55

1,440.25

2 - 13

VII.

FINANCIAL ANALYSIS

The financial analysis of seasam farm project is based on the data presented in the previous
chapters and the following assumptions:-

Construction period

2 years

Source of finance

30 % equity
70 % loan

Tax holidays

6 years

Bank interest

10.5%

Discounted cashflow

10.5%

Repair and maintenance

5 % of the total farm machinery & equipment

Accounts receivable

30 days

Raw material, local

30 days

Raw materials, import

90 days

Work in progress

270 days

Finished products

30 days

Cash in hand
Accounts payable

A.

5 days
30 days

TOTAL INITIAL INVESTMENT COST

The total initial investment cost of the project including working capital is estimated at Birr
28.88 million, out of which about 14% will be required in foreign currency. Details are indicated
in Table 7.1.

2 - 14

Table 7.1
INITIAL INVESTMENT COST ('000 BIRR)

Sr.

Cost Items

No.

Foreign

Local

Currency

Currency

Total

1.

Land

6,720.00

6,720.00

2.

Building and Civil Work

9,100.00

9,100.00

3.

Farm Machinery and Equipment

3952.5

793.14

4745.64

4.

Office Furniture and Equipment

50.00

50.00

5.

Vehicle

2000.00

2000.00

6.

Pre-Farming Expenditure*

4,808.86

4,808.86

Total Investment cost

3952.5

23,472.00

27,424.50

Working Capital

219.68

1,244.88

1,464.56

4,172.18

24,716.88

28,889.06

Total

B.

FARMING COST

The annual production cost at full operation capacity of the farm is estimated at Birr 7.82 million
(see Table 7.2). The farming material and utility cost accounts for 32 per cent while repair and
maintenance take 5.34 per cent of the production cost.

-----------* Pre-farming expenditure include interest during construction (Birr 4.2 million), training,
and costs of registration, licensing and formation of the company including legal fees,
commissioning expenses, etc.

2 - 15

Table 7.2
ANNUAL PRODUCTION COST ('000 BIRR)

Year
Items

10

Farming Material and Inputs

628.00

742.16

1,256.00

1,256.00

Labour direct

100.98

119.34

201.96

201.96

Utilities

688.70

813.89

1,377.40

1.377.40

Casual labour

521.00

615.71

1042.00

1042.00

Maintenance and repair

212.13

250.69

424.25

424.25

Labour overheads

42.08

49.72

84.15

84.15

Administration Overheads

67.32

79.56

134.64

134.64

Total Operating Costs

2,268.20

2,671.06

4,520.4

4,520.4

Depreciation

1,537.38

1,537.38

1,537.38

1,030.56

Cost of Finance

2,479.64

2,327.74

1,769.48

1,016.27

Total Production Cost

6,277.21

6,577.36

7,827.26

1,016.27

C.

FINANCIAL EVALUATION

1.

Profitability

According to the projected income statement, the project will start generating profit in the first
year of operation. Important ratios such as the percentage of net profit to total sales, net profit to
equity (return on equity) and net profit plus interest to total investment (return on total
investment) will show an increasing trend throughout the production life of the project. The
income statement and other profitability indicators show that the project is viable.

2 - 16

2.

Break-even Analysis

The break-even point of the project is estimated by using income statement projection.

BE =

Fixed Cost

= 20 %

Sales Variable cost

3.

Pay-Back Period

The investment cost and income statement projection are used to project the pay-back period.
The project's initial investment will be fully recovered within 5 years.

4.

Internal Rate of Return and Net Present Value

Based on the cashflow statement, the calculated IRR of the project is 25 % and the net present
value at 10.5% discount rate is Birr 32.03 million.

D.

ECONOMIC BENEFITS

The project can create employment for 55 persons. In addition to supply of the domestic needs,
the project will generate Birr 30.83 million in terms of tax revenue. Moreover, the Regional
Government can collect employment, income tax and sales tax revenue. The establishment of
such farm will have a foreign exchange earning effect to the country by exporting its produce.