Project Profile on Woven Fabric of Cotton Yarn

By: Team Members

May, 2013
Dire Dawa

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 Table of Content
1. Executive Summary …………………………………………………………………. 3

2. Introduction …………………………………………………………………………...3

3. Background ………………………………………………………………………….. 4

4. Policy Environment & Incentives …………………………………………………….6

5. Project Objectives & Rational ………………………………………………………..8

6. Project Area Description ………………………………………… …………………..9

a. Land Availability …………………………………………………………..... 9

b. Infrastructure ……………………………………………...............................10

c. Service Facilities …………………………………………………………….10

7. Project Description …………………………………………………………………..10

8. General Market Description ……………………………………………………........11

9. Required Machinery and Utilities …………………………………………………...14

10. Indicative Project Cost ………………………………………………………………15

11. Conclusion …………………………………………………………………………..17

12. Appendix …………………………………………………………………………….18

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1. Executive Summary

In the textile manufacturing processes one of the major products is woven fabric next to yarn
product. The woven fabric of cotton yarn has higher share from the woven fabric. The major
woven fabric of cotton yarn raw material is cotton yarn and auxiliary materials. The present
capacity of the proposed project is 7 million m 2 per year. It will create job opportunity for 68
persons. The total investment requirement is estimated at about 29,644,000 Birr.

2. Introduction

Textile manufacturing begins with fiber, which can be harvested from natural resources. After
the raw fibers are shipped from the farm or the chemical plant, they pass through four main
stages of processing such as yarn production, fabric production, finishing and fabrication.
Among these processes of textile manufacturing fabric production is one of the selected
processes in Dire Dawa Administration.

The fabric production refers the woven fabric using the cotton yarn as raw materials. Cotton
fabric is manufactured in standard sizes. In the proposed product it is assumed that the woven
fabric will have a dimension of 1mx10mn m. In this document included the proposed project
production description included with the objective, policy and incentive and project area
description. Finally the document describes the project market and indicative in detail with
conclusion

3. Background

The Dire Dawa administration where the proposed projects will implements is found in the
eastern Ethiopia far from Addis Ababa about 510 k.m. It is bounded by the Oromyia Regional
state to the South and East and by the Somali regional state to the North and West. The
geographical coordinates of Dire Dawa Administrative are between 41 o 38’ E and 42o 19’E
longitude and 9o 27’ N 9o 49’N latitudes. Dire Dawa is placed in the Awash River basin, at the
bottom of the northern side of the Amhar mountain chain, in the eastern part of the country. It
extends down up to boarders of the Somali lowlands. The Dire Dawa Administrative consists the

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Dire Dawa town and 38 peasant associations (PAs). It has at present an estimated total
population of 377,000; out of this about 256,774 (70%) are urban population and 120,220 (30%)
rural populations. It is very ideal place to invest on various projects due to the existence of
enormous raw materials and its strategic location for market and proximity to Djibouti port.
Currently, in addition to, the existing one various mega projects such as cement and textile
factory have been established. All established factory projects have both forward and backward
linkage effects. Because of this many other projects pulled and established as small and medium
factory. Textile is one of the proposed industries which have a potential to establish in the Dire
Dawa Administration. The textile industry consists of establishments engaged in spinning natural
and manmade fibers into yarns and threads. These are then converted (by weaving and knitting)
into fabrics. Finally, the fabrics and in some cases the yarns and threads used to make them, are
dyed and finished. The process of the textile product from the starting point up to the end point
includes fiber, yarn, fabric and garment.
 Fibers are most commonly transformed into yarn
 Yarns are intertwined by either a weaving or a knitting process to form
fabrics, or knit directly into garments.
 Fabrics are cut into garment components; components are sewn into garments.
 Garments may be embroidered, dyed, “stone washed,” or otherwise further
processed.

The textile industry is characterized by product specialization. Most mills only engage in one
process or raw material. For example, a mill may be engaged in either broadloom weaving of
cotton or broadloom weaving of wool. Similarly, many mills specialize in either spinning or
weaving operations, although larger integrated mills may combine the two operations. These
large mills normally do not conduct their own dyeing and finishing operations. Weaving,
spinning, and knitting mills usually send out their fabrics to one of the dyeing and finishing
plants.

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4. Policy Environment and Incentives

In order to overcome the economical and social basic problem of the people and to bring
sustainable development through giving high emphases to the private investment every
developing country must be formulate suitable development strategies and policy. In Ethiopian
development endeavors, the relevant and effective policy formulated and implemented for the
last 10 years. This policy has given emphases for the agriculture and industry sector. In regard to
the industrial sector policy, it aims to achieve an accelerated pace of competitive and sustainable
industrial growth within a framework of increased market orientation and private sector
development. Such growth should also bring about greater socio-economic development,
including increased employment and incomes, and thereby improved living standards.

The Dire Dawa administration also has taken the federal development objective such as Growth
and transformation Plan GTP as frame work in the administration. The GTP mainly include the
higher growth of industry sector, the optimal use of material and human resources, higher levels
of income and employment, and significant improvement in living condition and living
standards.
In particular, the basic objectives of the industrial policy should be to achieve an accelerated
pace of competitive and sustainable industrial growth within a framework of increased market
orientation and private sector development. Such growth should also bring about greater socio-
economic development, including increased employment and incomes, and thereby improved
living standards. And also the industrial development strategy focuses on export manufacturing
with priority given to textile and garments, leather and leather products, agro-processing, and
small and micro-enterprises.

The very rational of the manufacturing project lies in the strategy of the government that is being
used for implementation of the policies to achieve the overall government goals. The success of
any policy demands for private sector investment, which in turn leads to the inevitability of
industrial development.
The foremost and basic step to make effective this policy is the government incentive to
encourage the investors by various ways. The incentive which the government implements
through its investment proclamation includes the following main issue:
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  100% exemption from the payment of import duties and other taxes levied on
imports of capital goods, equipment and spare part up to 15% of the value of
capital invested;
 Exemption from the payment of import duties levied on the import of raw
material for production of export- orientated goods;
 Income tax exemption for periods ranging from three to eight years; this is a
function of where the investment is located and also the priority accorded to that
particular good;; and
 Remittance from the proceeds of the sale or transfer of shares or assets upon
liquidation of enterprises to domestic investors is exempted from the payment of
any tax.
In general, in regard to the textile industry economic policy of the country considers it directly
since the industry absorbs large number of work force and uses agricultural product as raw
materials.

5. Project Objectives and Rationale

5.1 The project objective

One of the identified and included in the GTP is textile industry. This industry has backward
linkage with the agricultural sector and forward linkage with the agro processing sector.
Therefore the general objective of this project is to contribute the growth of the economy by
creating the conducive environment for the participation of the private investors . The specific
objectives of the project are listed as below.
a) To increase the linkage of agriculture and agro processing sector
b) To create job opportunity to the city

c) Generate optimum profit to the owner

5.2 Project Rationale

Dire Dawa is eligible for various investments because of the existence of rail, road and air
transport, hydroelectric power supply, clean potable water, digital and cable communication and
of wide and reliable market. Dire Dawa, by virtue of its location to the Red-sea port of Djibouti

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and of being the final big town in the east with rail and high way links with neighboring
Djibouti, almost all exportable goods produced within the country and those imported from
abroad reach their destinations via Dire Dawa. Because of the existence of the above advantage
there are two textile factories. But these two factories have not fill the demand gap in the
influential area. Furthermore the proposed project possesses wide range of benefit in regarded to
the financial aspect for potential investors as well as to the city. Therefore the establishment of
the woven factory is very important.

6. Project Area Description

a. Land Availability

The proposed project may obtain land through two options. The first option is through by lease
contract for certain years. In Dire Dawa Administration land development and administration is
managed by the newly established bureau ‘Land development and management bureau.’ This
bureau provides land for investors in the already prepared investment village. This industry
village covered total area of 110 hectares. It has the necessary infrastructure such as electric
power, water and telecommunication line.

The other option is that if the investor may purchase the land through land bid or have for its
own land, it is possible to change the land use permit to the intended purpose but it should be
compatible with the local development plan. In general the land provision for the coffee roasting,
grinding and packing project is very simple and it is available every time especially with first
option.

The total land area required for the establishment of this project is estimated to be 6000m 2 , from
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this total estimated land the built up area should be 2000m. Regarding to the city Cost of
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building construction, at a unit cost of Birr 4000 per m , is estimated at Birr 8 million. Total land
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lease cost, for a period of 80 years with cost of Birr 9.78 per m , is estimated at Birr 4,694,400.
The total investment cost for land, building and civil works, assuming that the total and lease
cost will be paid in advance is estimated at Birr 12,694,400.00

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b. Infrastructure

To facilitate the production and the market activity of the proposed project there is well
organized infrastructure in sufficient amount. In regard to the road access the Dire Dawa
administration has a good level of passenger transport interaction with adjoining areas and with
other towns particularly Nazareth and Addis Ababa. There are Ethio-Djibuti and Ethiopian Train
Corporation which will serve from Djibouti to Addis Ababa via Dire Dawa so that the project
can transport the raw material and workers place to place. Beside this the other fast transport for
passenger and commodity is airline transport which serves as international standard. The other
best infrastructure which is available in sufficient amount for this project is electrical power
supply, water supply and telecommunication which is may provide as the project request.

c. Service facilities

In Dire Dawa city there are 20 bank and insurance financial institution which give networked
strong service for the manufacturing sector. In line with the financial service foreign trade which
gives service for any exportable and import product with the collaboration of revenue and
customs service. In related to standardization services the Quality and Standards Authority of
Ethiopia has a regional branch office in Dire Dawa gives certification give the laboratory testing
certification based on the international standard.

7. Project Description

In the textile manufacturing processes one of the major products is woven fabric next to yarn
product. Woven fabrics are the most commonly used for apparel, though knit fabrics have
become increasingly popular because of the comfort from their inherent stretch. Woven fabrics
are produced by intertwining two yarns in a perpendicular orientation. The yarns (ends) that run
the length of the fabric are called “warp” yarns, and may be thicker and usually must be stronger
than the crosswise yarns. The latter are called “weft” or “filling” yarns. The production process
of woven cotton fabrics consists of the following unit operations:

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Raping: - This is a process of preparing warps for a loom. The cotton yarn of appropriate size is
wound by warping equipment.
Sizing: - This is to align and prepare the weaver’s beam in specified number of ends and length
for weaving and to add the sizer on the warps in order to make the warps smooth and
strong for easy weaving.
Reeding (reed drawing):- This is a process of inserting 2-6 of warps through the reed hole in
order.
Weft Pirn Winding: - This is a process of winding the yarn on the shuttle bobbin by automatic
winder.
Weaving:- The yarns are arranged according to weft counts and woven by a weaving machine
with the warp separately supplied. The woven fabrics are taken up onto wooden rolls.
Shearing: - This is the process of removing the unwanted parts of the woven fabric by using the
shearing machine.
Inspection:- The product is made to pass onto inspection machine for quality checkup.
Folding:- The inspected woven cotton fabric is then folded onto a roll made of wood or hard
rolled paper.
Packing: - The product is then packed and passed on to finished product store.

8. General Market Description

On the other hand the recent five year average import and export is 225,380.00 and
12,952.86 sq.mt respectively. Based on these figure the effective demand of the year 2004 E.F.Y
is 43,165,977 sq.mt. To arrive at the total current (2006) effective demand, population growth
and income rise has been considered. Accordingly, a 5% growth rate is applied by taking the
year 2004 as a base year.

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Table-1: Domestic Production of cotton fabric

Production year (E.F.Y) Quantity in ‘000 Sq.m

1997 35619
1998 41603
1999 46817
2000 29288
2001 18053
2002 22907
Average 32381.17

Source: CSA 2003/04 E.F.Y

Table-2: Projected Cotton Fabric production in ‘000 Sq.m

Production Year Projected Quantity in ‘000 Unsatisfied Demand

Sq.m in‘000 Sq.m
2006 47,590.49 2266.21
2007 49,970.01 4645.738
2008 52,468.51 7144.24
2009 55,091.94 9767.66
2010 57,846.53 12522.26
2011 60738.86 15414.59
2012 63,775.80 18451.53
2013 66,964.59 21640.32
2014 70,312.82 24988.55
28504.19
2015 73,828.46

8.2. Man power, Raw Materials and Utilities

8.2.1 Raw materials

For the production of the cotton fabric the main raw material used is cotton yarn and auxiliary
materials such as dyestuffs, printing ink and other auxiliaries from domestic and foreign source.
The amount of the raw materials depends on the capacity of the machine and demand of the
product.

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8.2.2. Man power

One of the factories which required the high number of skilled and unskilled human manpower is
textile factory. The proposed woven cotton factory by its very nature required a total of 68
persons to operate the envisaged plan. Training of operators can be conducted in one of the
textile factors in Addis Ababa.

Table-3: Required Manpower

No Description Required amount
A. Administration
1 Plant Manager 1
2 Secretary 1
3 Personnel Officer 1
4 Accountant 2
5 Sales Man 1
6 Stores man 1
7 Clerk 1
8 General Services 8
Sub total 16
B. PRODUCTION
9 Production Supervisor 1
10 Forman 2
11 Operator 30
12 Laborer 15
13 Quality control 4
Sub total 52
Total 68

9. Required Machinery and Utilities

The list of required machinery and utilities for the project are shown in Table 6 and 7

respectively.

Table-4: List of machinery and equipment

Sir. No Machine/Equipment Description Qty(No.)

1 Warping Machine 2
2 Sizing machine 2
3 Reeding machine 1

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 4 Pirn winding Machine 2
5 Weaving Machine 4
6 Shearing Machine 1
7 Inspection Table 2
8 Folding Machine 2
9 Packing Machine 1
10 Auxiliaries

Table-5: Required utilities

No Utility Requirement (Annual) Unit price

1 Electricity 1000MWH 10
2 Water 1100 m3 0.5
3 Telecommunication
- Fixed line
- Mobile
- Fax
- Internet

10.Indicative Project cost

The woven cotton fabric project may have different cost component.
 Land lease value
 Building and civil work
 Plant machinery and equipment
 Office furniture and equipment
 Vehicle
 Pre-production expenditure
 Working capita

Underlying Assumption
The financial analysis of woven cotton fabric project plant is based on the data provided in the
preceding chapters and the following assumptions.

Table-6: Construction and Finance

Construction 2 years

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 Source of Finance 30% Equity and 70% Loan

Tax Holidays 1 years

Bank interest Rate 12%

Value of Land 9.78/m.sq

Table-7: Depreciation
Building 5%
Machinery And Equipment 10%
Office Furniture 10%
Vehicles 20%
Pre-production (Amortization) 20%

 Land lease value …………………………..4,694,400

 Building and civil work ………………….. 8,000,000
 Plant machinery and equipment …………. 10,000,000
 Office furniture and equipment …………..350,000
 Vehicle ……………………………………1,500,000
 Pre-production expenditure ………………1,100,000
 Working capital ……………………………4,000,000
Based on the above cost component the indicative total investment cost is 29,644,000 birr.

11.Conclusion

The process of converting raw fibers into finished apparel and non-apparel textile products is
complex; thus, most textile mills specialize. Little overlap occurs between hitting and weaving,
or among production of manmade, cotton, and wool fabrics. In this proposed plant the cotton
fabric will produced separately. It has guaranteed demand and will bring good profit to the
investor. On the other hand it creates high job opportunity and will generate income to the city
administration.

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Appendix

Table-1: Dire Dawa Administration lease period description

Activity Lease periods
Housing 99
Manufacturing and industry 80
Education, health, science and technology, culture, sport, 99
research and study and nonprofit making philanthropist
institutions
For commercial purpose 70
For urban agriculture 15
For other purposes 70
Source: Dire Dawa Provisional Administration lease regulation No. 3/1996

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