ESTABLISHMENT OF RECREATION CENTER

PROJECT PROPOSAL

Project to Be Implemented In Amhara Region Oromia Zone Bati Town

Administration

Submitted To: BATI Town Administration, City and Infrastructure office and

BATI Town Administration Industry and Investment office

PROMOTED BY: W/RO Sofia Ali Mohammed

Mob.NO: +251910646844

May, 2022

BATI, ETHIOPIA
Table of Contents
PROJECT INFORMATION.................................................................................................................4
Executive Summary........................................................................................................................6
1. Introduction................................................................................................................................7
1.1. General Background............................................................................................................7
1.2. Project Rationale..................................................................................................................9
1.3. Objective of the project.....................................................................................................11
2.4. The significance of the project...........................................................................................11
2.5. Background of the Project Location...................................................................................12
2.6. Proposed Project Location.................................................................................................14
2. Service Description and Application.........................................................................................15
3. Market Study and Service Capacity...........................................................................................16
3.1. Market Study.....................................................................................................................16
3.1.1. Past Supply and Present Demand...............................................................................16
3.1.2. Projected Demand......................................................................................................16
3.1.3. Pricing.........................................................................................................................17
3.1.4. Marketing promotion and strategy.............................................................................18
3.1.5. Marketing and Sales Strategy......................................................................................19
3.2. Plant capacity.....................................................................................................................20
3.3. Service delivery program...................................................................................................20
4. Materials and Consumables and Inputs....................................................................................21
4.1. Materials and Consumables...............................................................................................21
5. Technology and Engineering.....................................................................................................22
5.1. Technology.........................................................................................................................22
5.2 Civil Engineering Cost..........................................................................................................22
5.2.1. Locations and Site.......................................................................................................24
5.2.2. Project implementation..............................................................................................24
6. Manpower and Training Requirement......................................................................................25
6.1. Manpower Requirement....................................................................................................25
6.2. Training Requirement........................................................................................................26

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7. Financial Analysis......................................................................................................................27
7.1. Underlying Assumption......................................................................................................27
7.2. Total Initial Investment Cost..............................................................................................29
7.3. Operation Cost...................................................................................................................30
7.4. Financial Evaluation...........................................................................................................31

3
PROJECT INFORMATION
Proposed Project: Establishment of new recreation center

Project Owners: Ms. Sofia Ali Mohammed

Project Location: South western Ethiopia Amhara Regional State, Bati

town Kebele 03 around Qeresa Vegetable Area

Project Type: Service Industry

Requested Area: The site is 2500 M2 square in area, located Bati town
Kebele 03 around Qeresa Vegetable Area
Total investment cost: 15 Million
Our value:-
 Loyalty and Reliability
 Customer focus
 Innovative culture
 Cost effectiveness
 Social responsibility
 Care for the environment
 Compliance with code of conduct

Facilities will be provided: Recreational centers are places where people

get entertainment and enjoyment. The facilities provided include various
indoor and outdoor games, swimming pools, cinema halls and facilities to
stage theaters and music shows.

Job opportunity: The project will create employment opportunities for

85 persons

4
Need and Desirability: The envisaged project deemed to add to the
economic development of the Region in general and zone and town in
specific with following ways:

A. Source of Revenue
B. Employment opportunity
C. Sources of social service
D. Income
E. Source Of Fund
F. Hospitality – focus on the customers, promoting an exceptional
guest experience.
G. Efficiency – offer a good service with the adequate resources.
H. Superior Customer Service

Source Of Fund: 30 % equity & 70% loan

Implementation Period: two year

Social and Economic Benefit: Provide better Building service,

employment opportunities, generation of income and benefits for the
local people.

Objective:

 To construct and provide excellent child play care in a kid-friendly

atmosphere while ensuring our customers, both parent and child,
receive excellent service in a playful,
 Establish recreation facilities and services to meet the needs of the
Community.
 create both short and long term job opportunity for the local
community and develop the local skills base.

5
Executive Summary
This profile envisages the establishment of recreational center in Bati
town Amhara Regional State. Demand projection divulges that there is
high demand for recreational centers in the region. Accordingly, the
planned plant is set to provide a recreational service in zonal largest
city is Bati town. The proposed Recreation Centre will meet the
current and long-term needs of the community of Bati Town
Administration and Bati Town Administration. The total investment cost
of the project including working capital is estimated at Birr 15 million
and creates 85 job opportunity .The proposed infrastructure will support
the Government’s objective to provide conditions and services. The
proposed recreation facility will enhance the tourism experience in many
ways and create opportunities for residents and businesses in Bati town.

The financial result indicates that the project will generate profit
beginning from the first year of operation. Moreover, the project will
break even at 29.6% of capacity utilization and it wills payback fully the
initial investment less working capital in 3 years. The result further
show that the calculated IRR of the project is 25.7% and NPV discounted
at 18% of Birr 351,871.79 .In addition to this, the proposed project
possesses wide range of economic and social benefits such as increasing
the level of investment, tax revenue and employment creation. Generally’
the project is technically feasible, financially and commercially viable as
well as socially and economically acceptable. Hence the project is worth
implementing. To this effect, the promoter the owner of the envisaged
project, planned to establishment of recreational center in Bati town and
undertaken this project study to check the market, technical and financial
feasibility of this project. The promoter is very ambitious and committed
to realize the project. Hence, they expects to get the necessary support
from Bati Town Administration Industry and investment office and city
administration to make the project to be operational
6
1. Introduction

1.1. General Background

Ethiopia is now well-known as among the five1/ fastest growing economies
of the world. According to IMF, the average growth of the economy is about
10.7% for the last 11 consecutive years, up to 2013/14. The development is
broad-based and in paradigm transformation. It is apparent that the
development policy and strategy of the Government created an enabling
environment for the participation of all citizens, who reside both in and
outside of the country, and contributed for the achievement of the stated
fruits of development. At this juncture all the development actors in
general and the government in particular is determined to sustain the pace
of on-going growth and transformation of the economy and it is explicitly
indicated in the Second Five Year (2015/16-2019/20) of Growth and
Transformation Plan. The stated economic growth of the country brought a
wide range of positive social and economic outcomes, which includes,
among others, the expansion of all rounded business and investments. The
project has multifaceted contributions for the socio-economic development
of a nation. In addition to the inclusive provision of best goods and quality
services, it is also beneficial in terms of job creation, revenue generation
for the government, an induced role in business and investment
expansion and facilitation, tourist attraction, etc. It is in this view that
the promoter of establishment of recreational center in Bati town has
to first implement a plan to bridge the demand gap of the Region in general
and to the city of Bati town in particular. The current fast and dynamic
economic growth of Ethiopia especially in urban area necessitates
equivalent growth of building and construction sector. The sector should
expand rapidly to support the overall economic development sustainable.

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Service delivery is the provision of comprehensive and coordinated
services to people in need. Human service delivery is complex in
contemporary Western societies, with high community expectations,
competing demands and often delivered under fiscal constraints.
Specializations can mean that individual service providers or agencies
develop the expertise to deliver a very specific service, yet individuals,
families and communities often experience multiple needs and
interrelated problems The Government of the Federal Democratic
Republic of Ethiopia, after closely examining youth issues, gave
attention to youth problems and established the Ministry of Youth,
Sports and Culture in October 2001. This ministry has the duty and
responsibility to follow up, direct and coordinate youth affairs. The
Ministry of Youth, Sport and culture formulated a new National Youth
Policy in 2004. Following the formulation of the National Youth Policy,
the Ethiopian government developed an Urban and Rural Youth
Development Package in 2006 and has started partnering with
different local governmental organizations, community based
organizations and international agencies for program implementation.
The Urban Youth Development Package is a comprehensive development
package that is designed to solve the socio- economic problems of urban
youth. In Ethiopia youth Perception towards youth center service
delivery have not as such received significant research attention of
concerned bodies. This has resulted in scarce literature, low practice
and intervention on the area of youth services delivery.

To this effect, the owner of the envisioned establishment of recreational

center in Bati town Amhara Regional State who has been living for long
time in this town, planned to establishment of recreational center in Bati and
undertaken this project study to check the market, technical and financial
feasibility of this project. The promoter is very ambitious

8
and committed to realize the project. Hence, expects to get the necessary
support from the city administration to make the project to be
operational.

To this effect, the promoters of establishment of recreational center in

Bati committed to developing in Eastern part of Amhara Bati town. Besides,
the government policies and incentives for the private sector investment are
very promising that initiate the promoter to engage in establishment of
recreational center in Bati project

1.2. Project Rationale

Man's struggle for self-realization assumes many forms and has many parts.
The road to individual integrity and dignity requires the exercise of our
rights and freedoms in responsible and constructive ways. Important among
these is the way each person chooses to exercise the right to enjoy
increasingly longer periods of respite from work and other responsibilities.
We are changing from a work-centered society to one in which people have
a better opportunity to balance their work with meaningful recreation
experiences, These leisure experiences should bring a greater measure of
satisfaction and fulfillment into our daily lives. As we balance our
individual lives in this manner, we contribute to the proper balance of
society. Whether individually or as part of a group such as the family, are
find much of the balancing experience through some form of recreation
activity. The nature and quality of the experience, which we call recreation,
determines in large measure the nature and quality of our lives.

The values we experience and demonstrate in our leisure behavior reflect

the values we hold as individuals and as a community of human beings.
Recreation is first and foremost a personal matter. It is something that a
person does voluntarily during his leisure because he believes that it will
be satisfying to him. Enjoyment of the activity is basic to the recreation

9
experience, but the values of recreation which give it depth and fullness
of meaning include the maintenance and improvement of physical and
psychic well-being, the growth and development of personality, and the
easing of social adjustments. Recreation is one of the keys to abundant
living. Because of its importance in the building of our social fabric,
recreation is more than a personal responsibility. As ingenious and
resourceful as man may be, his attempts to provide for him self
recreationally, meets an impasse unless he pools his resources with
those of his fellow man to enable provision of certain kinds of recreation
opportunity.

The very things that have given us increased freedom and leisure have also
worked in many ways to our disadvantage. The rapid increase in population
and the new leisure have created vast new economic markets and helped
to promote financial affluence. During the past quarter century while we
have been depleting our recreation resource potential, the recreation
needs and demands of the population have increased many times over.
Scientific and technological advances have prolonged life, produced
labor-saving devices, increased production per man-hour of work, and
reduced the work day and the work week. Longer life combined with
compulsory retirement practices has produced a new leisure group of
"senior citizens." The increase in leisure provides for small allotments of
time on weekdays, larger allotments on weekends and occasional holidays,
and substantial blocks of time for vacations. If this time is to be enjoyed and
used in a manner that will contribute to the positive growth of our culture,
suitable recreation opportunities must be conveniently accessible.

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1.3. Objective of the project
The major goal of this project is to contribute towards the growth of the
trade sector in Bati town. Its specific objectives include the following:

 To provide excellent child play care in a kid-friendly atmosphere

while ensuring our customers, both parent and child, receive excellent
service in a playful, educational, and safe environment.

 Establish recreation facilities to meet the needs of the population;

 Provide basic recreation services to the Community.

 The proposed infrastructure upgrade will create both short and long
term job opportunity for the local community and develop the local
skills base.

 To create a service-based company this exceeds customers’

expectations.

 Become an established community destination by end of first year.

 Educate the community on what the company has to offer.

 To create employment opportunities for the population in the town

and Contribute towards the beautification of the town through the
construction of modern building infrastructure and facilities.

2.4. The significance of the project

The proposed development will have numerous positive impacts to the
area residents and to the general area. Some of the anticipated benefits
include:-

A. Source of Revenue

As public policy of any nation, the government collects different forms of

taxes from different business organizations and individuals. Among the
11
different forms of taxes, business income taxes, payroll
income tax and VAT are collected from undertaking
business activities. Therefore, the building will serve as
sources of revenue for the town as well as for the region.

B. Employment opportunity

One of the problems that our country faced is unemployment.

Therefore, the current objective of the government is
working on tackling the problem of unemployment and
fostering the development process either through creating
self-employment or employment in other organization. This
will be a significant impact since unemployment is currently
quite high in this area hence, this project will hire 85
individuals

C. Sources of social service

In addition to serving as a source of employment and

income for the region, the project renders social services
for different group of people. Hence, it is also providing
the following services;

 Serve as a source of mental satisfaction for the different users,

 Since, the center encompasses different
recreational areas; it will divert the attention of
the users from different evil deeds.
 It deemed to minimize the demand of services in the area.

2.5. Background of the Project Location

As aforementioned on the introductory part the envisioned project is
intended to be located in Amhara Region Oromia zone Bati town . Bati city is
found in Amhara regional state at about 418kms away from Addis Ababa , in
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the eastern Amhara direction . Baati is a town in north-central Ethiopia.
Located in the Oromia Zone of the Amhara Region , east of Dessie this town
has a latitude and longitude of 11°11′N 40°1′E with an elevation of 1502
metres above sea level. It is the largest town in Baati woreda. Baati is known
for its market, located between the Ethiopian highlands and the Great Rift
Valley. According to Philip Briggs, this market "forms an important cultural
crossroads for the Amhara, Oromo and semi-nomadic, desert-dwelling Afar
people. Baati has hosted Ethiopia's largest cattle and camel market, attracting
up to 20,000 people every Monday."[1]

Based on figures from the Central Statistical Agency in 2005, Baati has an
estimated total population of 24,257 of whom 12,229 are men and 11,958 are
women.[2] The 1994 census reported this town had a total population of
13,965 of whom 6,471 were men and 7,494 were women. the total area of
land of the city was estimated over 1928.8 hectares . on the other hand
According to the 2013 ADM, StatisticS the total population of Oromia zone for
2013 was estimated to be 596,687 and the Bati town population is also
estimated to be above 42,725.

Bati town is one of the oldest town in the eastern part of the region and its
strategic location and availability of major infrastructures makes it the main
market center for crop productive and cattle and camel market, and
surrounding areas such as south wello zone of amhara region and zone 5 of
Afar Region.

The coverage of basic infrastructure facilities are increasing dramatically in

recent years following free market policy of the Federal Democratic Republic
of Ethiopia’s (FDRE) in general and Regional Government of Amhara in
particular. As has been the case in the past, Government continues its
commitment to give an opportunity for its national to invest on various
feasible projects, with positive present value when compared to that of
without project case. The coverage of basic infrastructure facilities are
13
increasing dramatically in recent years following free market policy of the
Federal Democratic Republic of Ethiopia’s (FDRE) in general and Regional
Government of Amhara in particular. With this understanding and inspired
by current fast development of the city, the applicant has developed strong
desire of investing in the town to construct and operates recreation center

Area:

According to the current used master plan, Bati has the total area of 1928.8
hectares. Information on land zoning of the town shows, 7.2% of the total
area of the town is to be covered by residential buildings, 1.5% by
commercial activities, 0.4% by Industrial activities, 4.7% by social & public
services, 0.2% by administrative zone, 4.6% is land reserved for construction
of roads and the proportion of land left for other infrastructures is about
81.4%.

Ecologically

Bati Town lies in wet land Ecosystem .It is bounded by wet evergreen
mountain forest land ecosystem. Because of the climatic stability the
green coverage of the city, is very significant and estimated to be about
35% including farmlands & vacant places. In the city green areas are
found long streets, in urban parks, in public & private gardens, along
stream banks and flood plains, in stream and downstream, ridges and
hills and left over spaces.

14
In spite of the rapid urban population growth and associated growing
demand for greenery during the past 10 years, only few planned green
structures, i.e. one is Yosef Ayalew green recreational center (TVET
college), Chigign tabia green recreational center, Project Dam Green
Area, & One private parks were developed for public greenery and
recreation in the city.

2.6. Proposed Project Location

For the proposed development to be feasible, accessibility plays a major
role Before choosing project we conducted feasibility studies and market
analysis and identify the location that serve the market and benefit
greatly and decided to settle at Bati town kebele 03 Around Qeresa Area.
The proposed development site is located within the Bati administrative city
03 kebele around Qeresa or BATI TVET college Area within the urban
industrial area of Bati town. The proposed project site is approximately
2500m2.

15
2. Service Description and Application
Recreational centers are places where people get entertainment and
enjoyment. The facilities provided include various indoor and outdoor
games, swimming pools, cinema halls and facilities to stage theaters and
music shows. At the same time these facilities also serve for conducting
various ceremonies such as wedding, and other assemblies. The
dedicated sports facility is proposed to be provided by way of a new
Community Recreation Centre (including swimming pool, multi-use
recreation hall, change rooms and ancillary rooms and service areas). It
is to be integrated with the adjacent existing community sports oval. The
proposed facilities are intended to balance the commercial and social
benefits for all community. To create a welcoming space to help cultivate
a strong sense of community, promote health and wellness in our
community and support for the needs of local residents. There will also
be indirect benefits from complimentary development which will occur
adjacent to the facility, promoting greater business investment interest,
regional awareness and tourism opportunities. The proposed recreation
facility will enhance the tourism experience in many ways and create
opportunities for residents and businesses in Bati.

16
3. Market Study and Service Capacity

3.1. Market Study

3.1.1. Past Supply and Present Demand
At present the recreational facilities available in the various are very
inadequate in terms of the type of service and standards. As a matter of
fact, with the decentralization of government structures zonal capitals the
second largest city have become centers of important administrative
functions as well as commerce, industry, education, etc. Accordingly, the
population of the urban centers which are designated to be capitals of
respective zones has increased substantially. At the same time in these and
other urban centers of the region the population number is increasing
substantially. Nonetheless, there has not been a corresponding increase in
recreational facilities. For example, no indoor and outdoor games, no
swimming pools, no musical shows, and no theaters in most of the places.
For example if we assume that 10% of the population do pay visit to well
established recreational centers once in a week, then the number of
individuals in the target group would amount to 20,956 every month.
This can be fairly assumed as the current level of demand and at the same
time suggests the existence of ample demand. Therefore, if well-equipped
recreation facilities are established in zonal the second largest city, they will
definitely have enough customers.

3.1.2. Projected Demand

The future demand for recreational services in the zonal the second largest
city will increases mainly due to population increase. Moreover, the growth
of urbanization will attract additional traders, social workers and families
into the towns. Consequently, the numbers of individuals that do visit the
envisaged type of recreational services will also increase. In this connection
if we assume that the number of population in general

17
Increases by 3%, the target population will increases Substantially as
shown in table 1 below.

Table 1: Projected Demand for Recreational Center (per week)

According to the forecasted demand presented in table 1 above, the

future is very promising provided that quality and customer centered
services are rendered by the recreational centers.

3.1.3. Pricing
The envisaged plant as a startup will focus on providing entertainment
activities such as video games, snooker, watching of video films and
refreshment drinks. Moreover, the center shall rent its hall and
compound for weeding and meeting purposes. Based on the market
research result and the capacity of the envisaged plant, the following
selling price is set.

• Birr 3 for one session video game

• Birr 5 per snooker played

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• Birr 2,000 for renting the hall for weeding ceremony

• Birr 600 per day for renting the hall for assembly purpose

• Birr 5 per person for watching video film and ;

• Birr 15 on average per person for soft drinks, hot drinks and food.

3.1.4. Marketing promotion and strategy

Nowadays the sphere of professional commercial activity is being
developed rapidly in Ethiopia. There are several operating modern
hotel centers in large cities, the large amount of projects are in
development and are going to entry into the market in the coming
years. According to the plan mentioned above for developing of the
consumer market by means of complete meeting clients’ requirements,
providing them with safe and high quality goods and services in civilized
way, and also for making-up principally new ways of market wholesale
trade providing goods that are high-performance and high-demand on
inner and outer market. In order to penetrate and gain considerable market
share, one of the major marketing strategies for the project is consistently
rendering quality service to its tenants. Due emphasis must be placed on
improving quality of service and facilities. The major marketing strategies
to promote the project and gain considerable market share include:

Advertising through different means focusing on the existing

service and facilities Promote in association to the key location and
nearby business Working on sustained promotional work.

organization with a capacity of making decision.

improving
with changing situations.

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3.1.5. Marketing and Sales Strategy
The marketing strategy for this new hotel is going to be driven basically
by making available standard excellent customer service and provision of
complimentary services. We will work hard to build a loyal customer
base; customers that will always patronize us over and over again and as
well help us use word of mouth publicity to get their friends and
acquaintance to patronize us. Our marketing strategy is a simple one:
satisfied customers are our best marketing tool. When a customer leaves
our business, they know that they got the best price and service money
can buy, our name and service will stand on its own via our cheaper process
and very competitive prices.

In view of that, we are going to adopt the following strategies to ensure

that we do not only attract customers but ensure that they become loyal
customer. Part of the marketing strategies that we will adopt is;
Introduce our hotel by sending introductory

• Open our business with a party so as to capture the attention of

residence that is our first targets

• Advertise our hotel on national dailies, local TV stations and local radio
station

• Promote online via our official website and all available social media
platforms and Continuous improving the performance of our brands

• Hire the services of experts to make our brands the first choice

• delivering consistent customer experiences to all our clients; making our

first impression count positively

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3.2. Plant capacity
Thus, given the expected demand for the service, and the planned
technology, the envisaged plant is set to attract the following number of
visitors.

• 50 individuals per day for video game

• 50 visitors per day to play snooker

• 120 individuals per day to watch video film in two programs

• Accommodate 50 wedding ceremonies in a year

• Accommodate 25 meeting programs and workshops in a year that take

on average 3 days

per program.

• Cater food and beverage for 100 individuals per day.

3.3. Service delivery program

The program is scheduled based on the consideration that the envisaged
plant will work 300 days from 8 A.M till 8 P.M where the remaining days
will be for maintenance. During the first year of operation the plant will
operate at 70 percent capacity and then it grows to 85 percent in the
2ndyear. The capacity will grow to 100 percent starting from the 3rd year.
This consideration is developed based on the assumption that market and
logistics barriers would be eliminated gradually within the first two years
of operation.

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4. Materials and Consumables and Inputs

4.1. Materials and Consumables

The raw materials used in providing the cervices stated earlier are mainly
beverages and various ingredients used to prepare food.

4.2 Annual Requirement and Cost of Raw Materials and Utilities

The annual raw material and utility requirement and the associated cost
for the envisaged plant is listed in table 2 here under.

Table 2: Material and Utility Requirement

According to the above table the annual cost of material and utility at full
capacity of operation is estimated to be Birr 5 million

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5. Technology and Engineering

5.1. Technology
The machineries and equipment required for providing the various
services stated earlier is detailed in table 3 below

Table 3: Machinery and Equipment

The, total cost of machinery and equipment including is estimated to be

about Birr 4 million

5.2 Civil Engineering Cost

The total site area for the envisaged plant is estimated to be 2500m2 is
allocated to the building for the various game playing area, hall, café and
related activities. The remaining space is left open compound. The
following outlines the functional components of the proposed multiple
use

Recreation Centre:

Lobby/Foyer; Reception, Staff administration offices; Kitchen / Kiosk;

Public

toilets/change rooms; staff toilets; Crè che/Child minding facilities, a

multi-purpose sports hall to cater for net ball, volley ball, basketball,
equipment stores, hall viewing and seating, multi-purpose activity room,
Gymnasium, First aid, 25m pool, External paving / Hardstand for
pedestrians, Car parking and drop off facilities, General power and site
23
lighting, Sewage collection from toilet facilities, Storm water and runoff
collection, treatment and disposal and screen fencing

Gymnasium

The envisaged gymnasium will composed of one machine room (200sq.mt),

one Aerobics studio (100 sq. mt)Laundry Center

The laundry center provides in-house cleaning service to bed room, and
sauna/stem bathrooms by providing clean towels, linens, covers and
uniform of the employees with the required time and quantity. The main
processes of laundry center are sewing (if any), washing, and squeezing
drying, folding and pressing. The laundry center will have a daily
capacity of providing 200 clean sets of towels, 300 sets of linen and cover
100 sets of uniforms and other miscellaneous items.

Children’s Play Ground

The facilities included in the children’s playground are swings, sliding

stands, tunnels, merry go round, sand filled pits, and coin operated toy
vehicles and different kinds of arcade video games. The whole area of the
playground shall be free from any obstruction that could result in
accident and the recreational tools are installed in such a way that they
will not cause any accident. The arcade coin operated video game room
having an area of about 100 m2will be constructed from prefabricated
material with ventilation and lighting, and it will be carpeted. It should
also be free from any visible electrical connections and free from an
accident or hazard. The provision of such service doesn't have any
adverse impact on environment.

24
 5.2.1. Locations and Site
The appropriate locations for the envisaged project in view of the
availability of infrastructure as well as market for the output are Bati city
03 Kebele Around Bati TVET College or Qeresa area.

5.2.2. Project implementation

The project’s implementation is expected to take 24 months. The major
activities include Bank loan processing construction of the building, cleaning
the area around the building, Procurement of equipment and start
rendering services. The time schedule for the above matured major activities
is presented below:

Table: project Implementation schedule

Activity M Ap Ma Jun July Au Sept O Nov Dec Jan Feb

ar ril y e g ct
ch

2022/2023
Land acquisition Don
e

Document Preparation 

Construction of □ □
Factory Buildings

Debt Financing

Import of Machinery

Purchase of Vehicles
& Equip

Recruitment,

Installation and
Commissioning

Operation

Grace Period

25
 6. Manpower and Training Requirement

6.1. Manpower Requirement

The envisaged hotel requires 85 labor forces. The list of manpower and
the annual cost of labor is indicated in Table

Table 6.1 Manpower Requirement and Annual Labour Cost

Human resource plan

SN Position No Qualification Monthly Annual

salary in salary in
Birr Birr

1 General manager 1 BA in management 3000 36,000

2 Building admin 1 BA in Acct/Mgt 2500 30,000

3 Secretary 1 10+2 in secretariat science 900 10,800

4 HRM Officer 1 10+2 in HRM/Management 950 11,400

5 Technical and maintenance 1 Diploma in building maintenance 1500 18,000

manager

6 Finance head 1 BA in Accounting 2500 30,000

7 IT Technician 1 Diploma in computer science/IT 1150 13,800

8 Marketer 1 Diploma in marketing 1150 13,800

9 Accountant 1 Diploma in accounting 1150 13,800

10 Guards/Security 8 Basic 500 24,000

11 General Service head 1 Diploma in Management 1500 18,000

12 Purchaser 2 Diploma in purchasing &Sup Mgt 1150 13,800

13 Electrician 1 10+2 in general electricity 1000 12,000

14 Plumber 2 10+2 in general mechanic 1000 12,000

15 Casher 4 10+1 in bookkeeping 850 20,400

26
16 Cleaner 10 Unskilled 450 27,000

17 Maintenance officer 2 10+2 in General mechanic 1000 12,000

18 Driver 3 10 completed 850 10,200

19 Guard 5

20 watires 5

Total 85 327,000

Benefit (20%) 65,400

Grand Total 1,326,542

6.2. Training Requirement

All the staffs, in the catering and recreation sections, including
physiotherapists, and supervisors should be given at least two weeks on-
the-job- training by the equipment supplier’s expert during
commissioning. The management members should also be given a two
weeks training in local training centers. The total cost of training is
estimated at Birr 200,000

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7. Financial Analysis
The financial analysis of the international standard Recreational center is
based on the data presented in the previous chapters and the following
assumptions:-

7.1. Underlying Assumption

The financial analysis of Recreational center is based on the data
provided in the preceding chapters and the following assumptions.

Construction and Finance

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 Depreciation

Working Capital (Minimum Days of Coverage)

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7.2. Total Initial Investment Cost
The total investment cost of the project including working capital is
estimated at Birr 15 million. The major breakdown of the total initial
investment cost is shown in Table 7.1.

Table 7.1 Initial Investment Cost

Items L.C F.C Total

Land lease 1,000,000

Building and civil work 6,000,000

Office equipment 500,000

Vehicles 700,000

plant machinery & equipment 5,000,000

Total fixed investment cost 13,200,000

Pre production capital
expenditure* 200,000
Total initial investment
13,400,000
Working capital at full 1,600,000
capacity
Total
15,000,000
N.B Pre-production expenditure includes interest during construction,
training ( Birr 200 thousand) and Birr 25000 costs of registration,
licensing and formation of the company including legal fees,
commissioning expenses, etc

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7.3. Operation Cost
The annual production cost at full operation capacity is estimated at Birr
12.06 million (see Table 7.2). The major components of the production
cost depreciation, financial cost and material and input which account
for 26.82%, 22.63% and 18.72%, respectively. The remaining 31.82% is
the share of direct labor, utility, repair and maintenance, labor overhead
and other administration cost

Table 7.2 Annual Production Cost at Full Capacity ('000 Birr)

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7.4. Financial Evaluation
I. Profitability

According to the projected income statement attached in the annex part

(see annex 4) the project will generate profit beginning from the first
year of operation. Ratios such as the percentage of net profit to total
sales, return on equity and return on total investment are 10%, 14% and
22% in the first year and are gradually rising. Furthermore, the income
statement and other profitability indicators show that the project is
viable.

II. Breakeven Analysis

The breakeven point of the project is estimated by using income

statement projection. Accordingly, the project will break even at 29.6%
of capacity utilization.

III. Payback Period

Investment cost and income statement projection are used in estimating

the project payback period. The projects will payback fully the initial
investment less working capital in 3 years.

IV. Simple Rate of Return

For the envisaged project the simple rate of return equals to 25.1%

V. Internal Rate of Return and Net Present Value

Based on cash flow statement described in the annex part, the calculated
IRR of the project is 25.7% and the net present value at 18 % discount

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VI. Sensitivity Analysis

The envisaged plant is profitable even with considerable cost increment.

That is the plant maintains to be profitable starting from the first year
when 10 % cost increment takes place in the sector. This result is
accompanied with payback period of 3 years and 5 months.

9 Economic and Social Benefit and Justification

The envisaged project possesses wide range of benefits that promotes the
socio-economic goals and objectives stated in the strategic plan of the Bati
town in Amhara Regional state. It also plays a role in diversifying the
economic activity of the region. These other benefits are listed as follows

A. Profit Generation

The project is found to be financially viable and earns a profit of Birr

2.48 million with in the project life.

B. Tax Revenue

In the project life under consideration, the region will collect about Birr
about 1million from corporate tax payment alone (i.e. excluding income
tax and). Such result create additional fund for the regional government
that will be used in expanding social and other basic services in the
region

C. Employment and Income Generation

The proposed project is expected to create employment opportunity to

several citizens of the region. That is, it will provide permanent
employment to 85 professionals as well as support stuffs.

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ANNEXES

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