agro-logistics and market integration hub(almih)

i

By

Mesfin Raji Kiltu, EMBA

Development of Agro-Logistics and Market Integration Hub (ALMIH) in West Part of Amahara National Regional State

Project Pre-Feasibility Study

A concept note from Indian success stories and is only

adapted structurally to our country’s context while it

needs further refinement for its technicality &

functionality by agricultural specialists.

Submitted to: ANRS

2012

Bahidar

Pre-Feasibility Study [Agro-Logistics and Market Integration Hub (ALMIH)]

ii

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Development of Agro-Logistics and Market Integration Hub

(ALMIH) in West Part of Amahara National Regional State

Project Pre-Feasibility Study

By

Mesfin Raji Kiltu

June 2012

Bahidar


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Preface

In every developmental endeavour, sustainability is one of the major critical

issues that are to be given great emphasis based on systemic intervention. The provision

of policies and strategically emulated agendas by their own virtue has substantive

advantages in crafting the direction and soundness of purposes. Transformation from

agrarian economy to modern economy needs an immense effort not only allocation of

resources but solicitation of innovative ideas and systems which deemed to be

beneficial for accelerating the planned developmental programs. On account of this

notion, we can learn a great deal from developing nations who already make use of their

expertise knowledge and large expenditure for testing and verifying of system

functionality. The simplest thing to do is to search for these sound projects and make an

adaptation to our country specific. This concept note is one among such manoeuvres to

ensure sustainability in agriculture and alleviate poverty.

The project was formerly produced and submitted to Bahirdar University as part

of a term paper for the study of Masters of Business Administration in Executive. In

preparing the former as well as this revised document, even though I played the leading

role & devoted much of the time, energy and efforts from inception to preparing the

whole document, I extend my thanks to the following colleagues of mine; Amlaku

Adamu, Tamirat Dejene, Kindyehun Egezew, Gashaw Awoke, Tadesse Eshetu, and

Zerihun Tesefaye and would like to acknowledge their contribution as group member in

giving me constructive comments and in providing me with the relevant statistical data.

Therefore, they also indeed deserve for the credit perhaps, I didn’t consult with them on

submission of the document to third parties since for good reason I took the full

responsibility in doing so.

Finally, what I would like to emphasis at this point is I am providing the project

to the regional government in the notion of contributing something valuable even

though I may not specialized in the field but the document may serve as a start point as

it is stated clearly in the cover page, and advice the pertinent bodies to make

arrangement for a thorough review of the document by agricultural specialists before

endorsing, pending or totally rejecting the project idea since it cost nothing other than

benefiting the society at large.


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Table of Contents PREFACE .................................................................................................................................. III

TABLE OF CONTENTS ......................................................................................................... IV

LIST OF FIGURES .................................................................................................................. VI

LIST OF TABLES ................................................................................................................... VII

LIST OF APPENDICES ....................................................................................................... VIII

ACRONYMS ............................................................................................................................. IX

EXECUTIVE SUMMERY ......................................................................................................... X

LIMITATION OF THE STUDY ............................................................................................ XII

1. INTRODUCTION .................................................................................................................. 1 1.1. Background of the project .............................................................................................. 2

1.1.1. Demographic situation of the Amahara ................................................................. 2

1.1.2. Socio-Economic condition ..................................................................................... 2

1.1.3. Agro ecology .......................................................................................................... 3

1.2. Purpose, objectives & scope of the project .................................................................... 6

1.2.1. Purpose of the project ............................................................................................ 6

1.2.2. Project General Objectives .................................................................................... 6

1.2.3. Project Specific Objectives .................................................................................... 6

1.2.4. Scope of the Project ............................................................................................... 7

1.3. Name and description of the ‘service’ for the project .................................................... 9

1.3.1. The concept of Agro-Logistics and Marketing Integration Hub ............................ 9

1.3.2. Components of ALMIH ........................................................................................ 10

1.3.3. Market Integration Center (MIC) ........................................................................ 10

1.3.4. Product Collection Centre (PCC) ........................................................................ 11

1.3.5. Agro-processing projects development ................................................................ 13

1.4. Benefits of an Agro-logistics Hub ............................................................................... 13

1.5. Life span of the project ................................................................................................ 14

1.6. Project sponsor ............................................................................................................. 15

2. COMPATIBILITY WITH GOVERNMENT PRIORITIES ............................................ 15 2.1. Government Policies .................................................................................................... 15

2.2. Need for Integrated Approach...................................................................................... 16

2.3. Linkages with existing Marketing Channels ................................................................ 17

3. APPROACH & METHODOLOGY ................................................................................... 17

4. MARKET PLANNING AND DEMAND ANALYSIS ...................................................... 18 4.1. Situational analysis ...................................................................................................... 18

4.2. Market characterization and demand forecasting ........................................................ 24

4.2.1. Demand and supply factors .................................................................................. 24

4.2.2. Demand & Supply Forecasting ............................................................................ 25


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4.3. Value Chain and Marketing strategy of the project ..................................................... 20

4.3.1. The agro-industry system ..................................................................................... 20

4.3.2. Aggregation of outputs as a viable marketing strategy ....................................... 20

4.4. Materials and Input Supplies Study ............................................................................. 21

4.4.1. Grain Crops ......................................................................................................... 21

4.4.2. Agricultural Inputs ............................................................................................... 21

4.4.3. The role of Farmers Cooperatives ....................................................................... 22

5. TECHNICAL AND TECHNOLOGICAL ASPECTS....................................................... 24 5.1. Technical & technological requirements of the project ............................................... 27

5.2. Location and site Selection .......................................................................................... 28

5.2.1. Locations for Development of Agro-Logistics and Marketing Hub ..................... 28

5.2.2. Possible Locations for Development of Agro-Logistics Hub ............................... 28

5.2.3. Proposed site of ALMIH in West Gojjam Zone .................................................... 31

5.2.4. Details of Agro and Horticultural produce of B/dar Zuria and Mecha weredas. 31

5.2.5. Accessibility of the selected site to the rest of West part of Amhara regions ....... 32

5.3. Options for Project Implementation ............................................................................. 33

5.4. Modes of Implementation ............................................................................................ 35

5.4.1. Role and obligations of the Private Partner for development of ALMIH ............ 37

5.4.2. Role and obligations of the ANRS for development of ALMIH ............................ 38

5.4.3. Payment Terms and Mechanism .......................................................................... 38

6. ENVIRONMENTAL AND SOCIAL IMPACT ASSESSMENT ...................................... 39

7. FINANCIAL ANALYSIS AND FORECAST .................................................................... 41 7.1. Investment costs of the pilot project ............................................................................ 42

7.2. Projected cash flow ...................................................................................................... 43

8. PROJECT RISK ................................................................................................................. 45

9. SOCIAL COST BENEFIT ANALYSIS.............................................................................. 46 9.1. Considerations .............................................................................................................. 46

9.2. Determination of social value of the project ................................................................ 48

10. CONCLUSION AND RECOMMENDATIONS ................................................................ 51

REFERENCES ........................................................................................................................... 52

APPENDICES ............................................................................................................................ 53


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List of Figures Figure 1: ANRS Government Revenue and Expenditure from 1995-2010 .................................. 2

Figure 2: Trend of Agricultural Productivity over the past eight years (Qt/ha) ............................ 4

Figure 3: Production (P) (Millions of Qtls) versus Cultivated land (C) (Millions of Htrs) .......... 4

Figure 4: Areas and Production through Irrigation from 2001-2010 ............................................ 5

Figure 5: Topographic map of ANRS ........................................................................................... 5

Figure 6: Conceptual framework of Agro-logistics and Market Integration Hub ......................... 9

Figure 7: Flow of produce in the agro logistics and marketing integration hub ......................... 11

Figure 8: Flow of Inputs in the agro logistics and marketing integration hub ............................ 11

Figure 9: Curtailment of the Agro-supply Chain ........................................................................ 12

Figure 10: Hub and Spoke Mechanism ....................................................................................... 13

Figure 11 : Flow Chart of the Approach and Methodology for the Study .................................. 18

Figure 12: Marketing activities (Purchasing) of cooperatives in five years in Qt ...................... 24

Figure 13: The product Value chain ........................................................................................... 20

Figure 14: Farm Input Utilization Practices in the period of 2003/04- 2009/10 ......................... 22

Figure 15: Established Cooperatives and their membership during the past five years only ..... 23

Figure 16: Marketing activities of Agricultural related cooperatives from 2005/06 - 2009/10 .. 23

Figure 17: Hypothetical Model of Flow of goods to ALMIH from all PCCs ............................. 33


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List of Tables Table 1: Distinguishing features between ALMIH and ECX ..................................................... 17

Table 2: Marketing activities of cooperatives/unions from 2005/06 to 2009/10 in qt ................ 24

Table 3: Total Supply forecast of agricultural products and inputs for the years (2010-2014) .. 26

Table 4: West part of Amhara's available Freight Potential ....................................................... 26

Table 5: Five years Forecasted marketable freights in West part of Amhara in million qt ........ 27

Table 6: Location advantage of the Zonal Administrations on selected parameters................... 28

Table 7: Composite score of the Zones under each parameter based on suitable weightings .... 30

Table 8: Details of Cultivated land and Production around selected project site ....................... 32

Table 7: Risks associated with the implementation options ....................................................... 34

Table 8: Comparative study amongst the modes of implementation .......................................... 37

Table 9: Breakup of the project Cost .......................................................................................... 43

Table 10: Revenue and Expenses Estimates for the first 5 years of operations (Million Birr) ... 44

Table 11: Cash flow over the next five years (Million Birr) ....................................................... 45

Table 12: Social cost benefit analysis of the project ................................................................... 49


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List of Appendices Appendix 1: Area Allocation of the Facilities Proposed for the ALMIH in west part of Amhara

.................................................................................................................................................... 53

Appendix 2: Assumptions for the Project ................................................................................... 54

Appendix 3: Agricultural and horticultural production and supply of inputs in Amhara in the

year 2009/10................................................................................................................................ 56

Appendix 4: Selection parameters and composite scores of weredas in west Gojjam Zone ...... 57


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Acronyms

ADLI Agricultural Development Led Industrialization

ALMIH Agro-logistics and Market Integration Hub

ANRS Amhara National Regional State

BOFED Bureau of Finance and Economic Development

CSA Central Statistics Authority

ECX Ethiopian Commodity Exchange

FDRE Federal Democratic Republic Ethiopia

GDP Growth Domestic Product

GTP Growth and Transformation Plan

IRR Internal Rate of Return

MIC Market Integration Center

MOFED Ministry of Finance and Economic Development

NPV Net Present Value

PASDEP Plan for Accelerated and Sustained Development to End Poverty

PCC Produce Collection Center

SWOT Strength, Weakness, Opportunity, and Threats

UNIDO United Nations Industrial Development Organization

USD United States Dollar


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Executive Summery

Despite its richness and abundance of natural potential, Amhara region is not

doing very well yet in boosting its competitiveness in the domestic and overseas

markets. Regardless of large quantity, high diversity and general attractiveness of

agricultural and horticultural supplies, several constraints exist in the value chain.

According to some observations, exceedingly price escalation and too fragmentation

and fluctuation of outputs are an important bottleneck in value chain of agricultural

produce. Examples of other agro logistical bottlenecks are sub optimal post harvest

processes and a lack of conditioning throughout the agro chain. To be able to overcome

some of the bottlenecks, new logistic concepts are required.

One possible solution is to increase the shelf life of the products. For example by

means of enhancement of the cultivation process (cutting back plants, using fertilizers),

improvement of the selection process (check on quality and ripeness), pre-cooling of the

products and conditioning of the chain. Based on these premises ALMIH is conceived.

The central idea is that Amhara region serves as a hub (central collection and

distribution point) for the regional and national market of local food grains, fruits, and

vegetables. ALMIH offers opportunities for taking lead and adding value. The general

idea of this concept is that Amhara, a producer of considerable amount of agricultural

crops, fruits, and vegetables both in volume as varieties, could develop towards a

regional market place or hub where products not only from farmers of the region but

also from regional producers are brought to this hub where (potential) buyers are also

present. The hub potentially supports the development of more efficiency along the

value chains of the various produce at offer as well as an improved functioning of the

markets.

Hence, based on the above premises, this project is designed with a total capital

outlay of nearly 766.5 million Birr. The project is designed to serve the whole Amhara

especially individual and organized farmers are believed to benefit at large from the

project outputs. This pre-feasibility study is conducted for one of the two projects which

will be developed in the region and expected to be established in between the area

adjacent to weredas’ of Bahirdar Zuria and Mecha to serve the West part of Amhara


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region. The second project will be for the East part of Amhara region and will be

developed after this project proved functional and getting it into operational.

The project’s profitability is determined to show NPV = 153.05 million birr,

IRR= 17.65%, and Discounted Pay Back period of 4.07 years if is being operated as

private firm. The project’s social cost benefit analysis has also shown that its

profitability indexes will get more acceptable even from the societal benefit point of

view.

It is my strong conviction that the regional government will be interested to put

the project into effects at all its disposal either independently or as partnership with the

available resources despite the big investment outlay that the project requires.


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Limitation of the Study

Even though every effort has been made to follow the project formulation

procedures and produce the pre-feasibility study document based on the selected project

idea, due to the project’s intriguing nature, complexity, and the requirement of having

sufficient time and technical capability compounded by the newness of the concept in

the country compelled me to prepare the project’s pre-feasibility study document only at

the present condition.

Therefore, it is my strong belief that the facts and findings given in the

document should be updated and supported with rigorous assessment to verify their

authenticity with sufficient time of inquiry. Secondly, despite having limited resource at

hand some of the topic provided in the document require detailed workout by specialists

with multidisciplinary involvement and at least should be attached to practical

experiences so as to enhance the credit worthiness of the conceived idea.

By Mesfin Raji | Introduction 1

1. Introduction

It is becoming almost a decade now for Ethiopia’s economic growth in getting

its grip and pace profoundly and achieving its milestones. Agriculture sector is still

playing the leading role and serves as the backbone of the economy in driving the

service and industry sectors for gradual transformation that will be taking place within

the next twenty years. However, the periodical and cyclical drought and environmental

impacts coupled with traditional and poor agricultural practices creates a stumbling

block and threatened the sustainability of the result obtained so far. Amhara region is

full of untapped natural resources but its richness will be substantial and meaningful if

and only if it is supported by modern practices and techniques to cope up with the

agility of technological advancements.

Following the relative success of PASDEP, the Government of Ethiopia has

developed a macro development agenda to sustain and reinforce the progress of this

tangible outcome – the Growth and Transformation Plan (2010/11- 20014/15). The GTP

maintains ADLI as a foundation of policy development, and targets an economic growth

rate of 14.9 percent. ADLI continues as a foundation of development and the GTP also

aims to create favourable conditions for the industry to play a key role in the economy.

This project is conceived taking the outstanding achievements as an opportunity

to show my ambition and strong commitment to the agriculture led transformation

initiative for the government and contribute modern concept of agricultural management

system that will boost the competitiveness of the sector in domestic and international

markets.

I found it to be worthy to note that the data gathered in producing the document

are used all from secondary sources especially from the yearly reports of statistical

bulletin and developmental indicators of the Regional Bureau of Finance and Economic

Development (BoFED) and yearly Agricultural Sample Survey Reports of Central

Statistics Authority (CSA) unless specified exclusively. Nonetheless, all the graphs and

tables are produced by the author of this document based on either cross-sectional or

time serious data from the sources of same.



1.1. Background of the project

1.1.1. Demographic situation of the Amahara

According to Development Indicators of Amhara Region produced by BoFED

(2009/10), the demographic situation of the Amhara region shows an annual growth of

1.8 percent which leads the total population size to 18.2 million as of 2009/2010. The

population of the region accounts roughly 22.78 percent of the total population of the

country while in terms of area the region contributes around only 15 percent. Regarding

the settlement pattern, the overwhelming majority, i.e. nearly 87.4 percent of the

population, resides in rural areas and is engaged mainly in agriculture. In addition,

population distribution is uneven among zones and Woredas.

The report has indicated that generally, the highlands are densely populated than

the lowlands and the age structure of the population, 42.59 percent are age 14 and under

and those who are greater than or equal to 65 constitute 3.97 percent of the population.

Remarkably, the young age dependency ratio is 79.69 and that of the old age is 8.53

percent this makes the societal dependency ratio as 87.13 per cent.

1.1.2. Socio-Economic condition

Over the past six consecutive periods of 2005 to 2010, the total revenue of the

region grows from year to year. However, the revenue covers only 22.53% of the

expenditure and still more is to be done to expand the capacity of covering the

expenses(BoFED, 2009).

Figure 1: ANRS Government Revenue and Expenditure from 1995-2010

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1,000

2,000

3,000

4,000

5,000

6,000

7,000

Amou

nt in

Mill

ion(

Birr

)

Revenue in million Expenditure in million

Capital Recurrent



With regard to investment, the region is working hard to attract investors by

availing a comprehensive incentive packages at its disposal. The current Status of

Licensed Investment Projects (1992/03 - June 2009/10) in the region show that a total of

2,348 Agricultural related projects have been given Investment Certificate but out of

which only 591 (25%) are entered implementation phase creating 222, 872 employment

opportunity(BoFED, 2009).

In Amhara National Regional State, though agriculture contributed about 55.8

percent of the total regional GDP accounting for employment of 88.7 percent of the

total population (BOFED, 2006), no aggregate data is available that shows the recent

contribution for the country GDP in each economic activities. As per the brief note

released by MoFED about the country’s estimate in 2003 EFY(MoFED, 2003);

• Consumption has registered about 91.2% of GDP of which the share of

Government is 8.1% and the remaining balance (83.1%) is attributed to the

Private final consumption.

• Rate of Investment has reached 25.5% of GDP and has registered 30.3 % annual

average growth over the last eight years.

• Domestic saving has been 8.8% of GDP and Export has been 16.8% of GDP and

has registered 32.1 % annual average growth over the last eight years.

• Import has been 31.8% of GDP and has registered 30.1 % annual average

growth over the last eight years.

1.1.3. Agro ecology Crop production is the major agricultural activity in the region with the largest

share. In this regard, different annual crops (cereals, pulses, oil seeds, fibers, cotton and

root crops) & Perennials are grown in different parts of the region based on their agro-

ecology suitability condition. Cereals account for more than 72 percent of cultivated

land and 81 percent of total crop production. The principal cereal crops in the Amhara

region are teff, barley, wheat, maize, sorghum and oats. Pulses and oil crops are the

other major categories of field crops (BoFED, 2010). Thus, in the region there is high

potential for specialization. The region experiences bi-modal type of rainfall distribution

where there is large coverage rainy season “Meher” which encompassing all areas of the

region and small rainy season “Belg” which covers the Eastern parts of the region.



However, the lion’s share of the bulk of crop production in the region is during “Meher”

season (BoFED, 2010a; CSA, 2009).

Figure 2: Trend of Agricultural Productivity over the past eight years (Qt/ha)

According developmental indicators report released by BoFED (2009 and 2010),

during the past six years from the year 2004/05 to 2009/10 the total Grain Crops

cultivated area of the region has exhibited an increment of 18.3% from 3.36 to 4.0

million of hectare of land in area cultivated and an increment of 51.7% from 37.63 to

57.1 millions of quintals in production.

Figure 3: Production (P) (Millions of Qtls) versus Cultivated land (C) (Millions of Htrs)

Regarding irrigation development practices, within the past six years from the

year 2004/05 to 2009/10 the cultivated area and production level has increased from

0 2 4 6 8

10 12 14 16 18

2002 2003 2004 2005 2006 2007 2008 2009 2010

Prod

uctiv

ity in

qt/

ha

Natioonal Regional

0

0.5

1

1.5

2

2.5

3

3.5

0 5

10 15 20 25 30 35 40 45 50

2004/05 2005/06 2006/07 2007/08 2008/09 2009/10

Prod

uctio

n in

Mill

ion

Cereals (P) Pulses (P) Oilseeds (P)

Cereals (C) Pulses (C) Oilseeds (C)



232,650 to 444,620 hectare (91.1%) and the yield from 13.68 to 51.38 million quintals

(275.6%) respectively.

Figure 4: Areas and Production through Irrigation from 2001-2010

According to BoFED, 2008/09 the region owns about eight major lakes that

cover an area of 2,543 Sq. Km among which Lake Tana share 95% of all the total size

of the lakes. Its topography ranges 29.6% below 1500 meter, 53% ranges from 1500-

2500 meter, 16.5% ranges from 2500-3500 meter, and 0.9% above 3500 meter. The

region is more vulnerable for torrential flooding and erosion due to its terrain

characteristics of about 44.8 % has a slope of greater than eight degrees.

Figure 5: Topographic map of ANRS

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100.00

200.00

300.00

400.00

500.00

600.00

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Area/ha/ in 000' Production/Qtls/ in 100,000'



1.2. Purpose, objectives & scope of the project

1.2.1. Purpose of the project

Harnessing the opportunity presented by global trends and local advantages

require an enabling framework to accelerate growth. Thus, the purpose of this project is

to address the key concerns affecting the agricultural growth by improving productivity,

minimizing post harvest losses, enhancing post harvest processing and value addition,

enhancing value realization through better marketing channels, sustainable practices in

production, processing, branding, marketing, etc. and create job opportunity.

1.2.2. Project General Objectives

Since the development of agro-logistics infrastructure in any location is

dependent upon the quality of delivery mechanisms that are designed as a part of any

such facility, the nature of the intended project is physical, strategic, and developmental

investment having the following main objective:

• To create an enabling agricultural institutional structure for addressing supply

chain alignment with domestic and international requirements by enhancing the

quality, transportation and distribution of grain crops and inputs, improvement

of market access through market Intelligence, and to facilitate flow of

investment and modern agricultural management practices in the regional state.

1.2.3. Project Specific Objectives

The Specific Objectives are the following:

• To address the Supply Chain Management Issues – uneconomic scale of

operation, lack of consistency in supply and quality, lack of cost

competitiveness, inadequate & inappropriate storage and distribution

infrastructure, lack of technical support for the sector, etc.

• To Develop infrastructure for handling, preserving, processing and marketing of

agro produce and centralized distribution network for agricultural inputs

• To Enhance the shelf life of perishable fruits and vegetables and encourage

product diversification and value addition for better profitability

• To minimize wastage at all stages in the food processing chain by the

development of infrastructure for storage, transportation and processing of agro-

food produce



• To create brand image for unique agro food products of Amhara and develop

‘key products’ to gain market dominance

• To create new markets and new product lines and develop alternate marketing

channels

• To encourage high realization and value added exports meeting international

standards

• To create employment opportunity for people living around the project

Finally, Special emphasis shall be laid down to make small-scale agro based

processing in the state to remain competitive in global markets.

1.2.4. Scope of the Project

The project operates in ANRS focusing on all agricultural and horticultural

activities excluding livestock and it is envisaged to cover facilities such as:

a) Warehousing

Storage allows accumulation of stock to be transported in bulk quantities thereby

reducing the transportation costs. Various warehousing services like sorting,

grading, labelling, picking, re-bagging, inspection etc. will be provided at the

logistics hub. There are a variety of warehousing services planned for the

facility, and the layout and facilities have been planned to cater to all of these

services. Warehousing enables a concern to achieve the economies of large-scale

production, large scale buying and selling, etc. as the goods may be kept in

stores.

b) Transportation logistics

Transportation logistics is a part of the supply chain dealing with the

transportation of goods/ commodities from the point of production to the end

customer (or point of consumption) or to transhipment centers for exports. The

region’s agricultural practice is tremendously uses the transport sector to address

the ever increasing demand of the farmers for agricultural inputs and outputs

especially moving of fertilizers and improved variety of seeds from dry and wet

ports of the country to the farming sites and carrying away the produce to the

market. Amhara region has an annual freight potential of 60.9 million quintal of

all agricultural crops, 1.5 million quintal of fertilizers, and 3 million quintal of

seed that needs to be transported from place to place.



c) Cold Storage

Perishable goods are among the major commodities grown in the region.

Approximately 40% of the perishable goods grown in the region get damaged

before they reach the market. To attract horticulture commodities to the logistics

hub, modern cold storage units have been planned. Modern cold storages would

be supported by pre-cooling units.

d) Grain & Horticulture Procurement

For successful procurement of grain and horticulture produce, the wholesale

market needs to facilitate the coming together of farmers, traders, wholesalers,

processors and retail chain operators under one roof. The proposed market is

conceptualized and designed to ensure transparency and efficiency, encouraging

farmers to get maximum advantage. Along with procurement services various

other value added services pertaining to agricultural and horticulture produce

will further attract this cargo to the logistics hub.

e) Agro & Horticulture processing

In order to garner the benefit from the horticulture resource looking for

alternative means of adding value to the existing agricultural outputs seems

imperative for efficient marketing system. To this endeavour the proposed

project has a primary objective of promoting and expanding the value adding

process by creating a quality process line of grading, labelling, and packaging

services aimed at augmenting the export market.

f) Market Information Systems

At present, market information is disseminated through various media like radio,

newspapers, community and public address system at Wholesale Market yards.

The information provided by these methods has a limited use and does not

provide considerable help to the farmers in taking decisions in marketing of their

produce. The farmers are also unable to know about the prices prevailing in

other markets, as the Market actors are able to disseminate information mostly in

respect of their own markets. Market Information Systems will provide real-time

information to the farmers.

g) Trading & Collective Marketing

The project will also try to equip itself and facilitate the trading system through

collective bargaining and exchanging local experiences to optimize the market

dynamics so as ensure the owners of the marketable products primarily



benefited. The system adopts professionally managed open auction methods in

serving its customers.

1.3. Name and description of the ‘service’ for the project

1.3.1. The concept of Agro-Logistics and Marketing Integration Hub

The name of the project is Agro-Logistics and Marketing Integration Hub

(ALMIH) and the concept is adapted from Asian countries especially Indian experience

of developmental initiatives which is essentially a strategically located multi-modal

logistics platform, allowing efficient hinterland operations by incorporating truck-stop

facilities, container cranes and gantries, terminal stacking, warehousing facilities, high

end food processing facilities and other value added services(ICRA, n d; IDCL, 2009,

2010; Thornton, 2007).

Figure 6: Conceptual framework of Agro-logistics and Market Integration Hub

However, taking the socio-cultural and agro-ecological differences into account

ALMIH in Amhara regional state is geared to addresses some of the issues effectively

Aggregation of Outputs

Market Integration

Horticulture Grain Crops

Agricultural Inputs

Transportation & Distribution

Agro Processing

ALMIH

Backward Integration

Value added products



as they would enable supply chain/ logistics to function much efficiently by removing

the cargo bottlenecks in the transit related activities. Integration of such facilities helps

in shortening the supply chain for the producers who had to traverse a long marketing

channel to reach the market due to unavailability of the necessary infrastructure. From a

mere combination of transportation and storage services, agro-logistics is fast emerging

as a strategic function that involves end-to-end solutions that improves efficiencies and

which would enable apportionment of associated capital costs across a larger base of

users leading to significant costs reduction.

1.3.2. Components of ALMIH

The concept of ALMIH aims at developing the backward and forward linkages,

streamlining the supply chain from farm to market and also to provide value added

services to the stakeholders in the value chain. This is to encourage the farmers to move

up the value chain by diversifying to higher margin products and ensure that the

produce meets end user and market requirements of quality, grades and standards apart

from ensuring reliable and un-interrupted supply of adequate volume of produce.

Agro-logistics is an efficient integration of transportation, warehousing, food

processing and other value added services enabling value addition at each level of the

agro-supply value chain. Warehousing is an important part of this whole system and

comprises approximately 20-25% of logistics. Transport comprises 40% of the logistics

and the balance is value added services. The facilities that would need to be developed

for setting up ALMIH are as set out below.

1.3.3. Market Integration Center (MIC)

The distance factor adds a significant cost to both inputs and outputs and there is

little in the way of extension, research, support, marketing or post-harvest management

and storage in the more remote locations. Market integration center essentially

comprises warehousing, grain processing, logistics services and other relevant value

added services. Once the produce arrives, facilities like weighing services, testing &

certification, fumigation, storage, cleaning, processing, packaging along with an auction

yard with amenities for exports are being proposed under one roof. Moreover, a modern

lab testing facility within the same premises will ensure enhancing the crop’s value.

Even a nationally integrated electronic platform through Ethiopian commodity



exchanges (ECX) would be provided to help the farmers to market their produce to a

large spectrum of customers.

In addition such activities would also reduce seasonality of consumption of the

perishable agro-products, increase the viability, profitability and sustainability of

production systems through their impact on increasing farm incomes, rural employment

and foreign exchange earnings, while reducing marketing risks. The typical flow in the

MIC is as set out in the diagram below.

Figure 7: Flow of produce in the agro logistics and marketing integration hub

Figure 8: Flow of Inputs in the agro logistics and marketing integration hub

1.3.4. Product Collection Centre (PCC)

The central idea of the proposed concept is helping farm earnings grow by

shortening of the supply chain, establishing cost effective and standardized linkages.

The concept intends to revive market extension activity with re-oriented and appropriate

physical infrastructure and technological support.

Produce from farmers

Produce received at MIC

Dispatching Channel

Payment Settlement

Bank Access

Ripening hood

Produce unload

Quality Check

Cold storage

Sorting

Compartment

Grading Compartment

Stacking

Compartment

Auction

Sorting Compartment

Stacking

Compartment

Ports/multiplication centers

Inputs received at MIC

Inputs Unload

Distribution to clients

Stacking

Blending

Payment settlement

Bank Access

Inspecting



Figure 9: Curtailment of the Agro-supply Chain

As illustrated in the figure above, the long agro-supply chain could be curtailed

if the entire operations of the intermediaries are replaced by “Collection Centers”. The

collection centres would need to be identified on the basis of expected throughput and

logistical feasibility. Development of such nodal collection centers at clusters of woreda

level would enable collection of farm produce from the cluster of villages, farmers, and

producers.

The small hold farmers, village clusters and the various other producers could

store their farm produce in their respective collection center storage houses. The

function of the collection centres would also include collection of the produce from the

woreda cluster storage houses and its transportation to the MIC in ALMIH. This would

help in shortening the supply chain for the producers who had to traverse a long

marketing channel to reach the market due to unavailability of the necessary

infrastructure. The collection centres would also function as a cold/dry storage house for

horticultural products until the transport fleet reaches the centre for further

transportation. This would result in value addition to the farm produce and

maximization of the profit for the farmers with minimizing the number of

intermediaries.

The collection centres could be located at key production centres to allow easy

farmer access and the catchment area of each collection centre is to be based on meeting

the convenience needs of farmers, operational efficiency and effective capital utilization

of the investment. Further, by adopting the hub and spoke mechanism, these collection

MIC Farmer/Cooperatives/Unions Intermediary

1

Local market Intermediary

2

Bigger Market

PCC

Value addition and lesser price

escalation



centres could be connected directly to the ALMIH. As illustrated in the figure below,

every node in the supply chain i.e. collection centres, farmers unions, and cooperatives

are connected directly to the ALMIH. This mechanism would help transporting the farm

produce directly to the ALMIH from the nodal centres through a fleet of transport

systems and Information Technology (IT) support systems in place.

Figure 10: Hub and Spoke Mechanism

1.3.5. Agro-processing projects development

One of the major drawbacks in the agriculture is the lack of efficient linkage

mechanism that supports and guides the transformation process of the local resources

into value added products and paves the way to lay ground for the flourishing of agro-

processing industries in the surrounding of the project area. The project will address the

issue by identification of the potential of process-able resources, quality enhancement

and assurance development, and branding of the region’s key agricultural products

through its quasi-research and development engagements.

1.4. Benefits of an Agro-logistics Hub

Agro logistics hub offers several benefits to the different stakeholders in the

value chain as follows:

a) Benefits to the Farmers:

i. Farmers get multiple choices for marketing their produce apart from the

traditional markets.

Forward linkage Backward linkage

Collection centre

Collection centre

Collection centre

Farmers/cooperatives/unions

Retail consumer

Processors & Exporters

Wholesalers &

institutional

ALMIH

Value adding process

Market Integration &

Access



ii. Farmers realize the right value for their produce. This is enabled through

the assurance of the right price for right quality and correct weighting.

iii. Greater convenience for selling the farmers produce and the cash

settlement is also faster when compared to the traditional markets.

iv. Availability of better infrastructural facilities which reduce the wastage

of the produce.

v. Minimization of pre and post harvest losses, transit losses and storage

losses.

b) Benefits to the Buyers

i. Graded and sorted produce is available to the buyer.

ii. Produce in the requisite lot sizes is available as a result of which

transaction costs are minimized by avoiding collection/ purchase from a

large number of sellers.

iii. Quality and hygienic produce is available to the buyer.

iv. Efficient logistics minimize the wastages of the perishable produce.

c) Overall Benefits

i. Access to seasonal and developmental finance – implemented and

monitored locally.

ii. Access to 21st century technology and appropriate mechanisation and

particularly: Area specific hybrid seeds and fertilizers.

iii. Access to agricultural inputs at the right price in the right pack sizes and

on time.

iv. Provide planning, agronomy and extension services.

v. Access to information communication technology.

vi. Centralised marketing and storage.

vii. Post harvest management services and processing.

viii. A conduit to government and donors to absorb the systemic shocks of

droughts and floods.

1.5. Life span of the project

The project is intended to be implemented and tested within its first phase that

lasts five years including all the development of Statutory & legal frameworks,

networking, construction, and procurement of vehicles and equipments tasks will be

finalized and during this time the system will be tested and adjustment will be made to


By Mesfin Raji | Compatibility with government priorities 15

fit for its profitability, adaptability and functionality before it gets fully operational. The

second phase is a period of replicating the same project as a ordinary establishment in

the other corner of the region based on the location and site selection criteria’s adopted

in this project document. Therefore, the total project life span will only be five years.

1.6. Project sponsor

Since the nature of the project is related metaphorically to blood vessel of the

major economic activity that is agriculture and have an impact on the vast majority of

the region’s population, care must be taken for the smooth implementation of the

project. However, the project encourages the public- private partnership as long as the

government deemed to have the larger stake in sponsoring of the project. It is expected

that state owned developmental firms will be actively involve themselves in

consolidating and expanding their business for mutual benefit they can reap from the

project.

2. Compatibility with government priorities

2.1. Government Policies

PASDEP was the fundamental macro growth policy in Ethiopia (2005/06 -

2009/10) and the principle of Agricultural-Development-Led-Industrialization (ADLI),

which pays a particular focus on peasant agriculture, was its foundation. ADLI was

adopted in mid - 1990's and has guided government programs since then. PASDEP

emphasized the need to strengthen rural-urban linkages in order to reduce the negative

impact of rural-urban migration and maximize growth and its impact on poverty

reduction. PASDEP recognized the central role of improving infrastructure, human

capital, and credit markets in rural areas in facilitating rural-urban linkages. The policy

addressed rural transformation through commercial agricultural production, and Export

oriented agro-processing.

The Growth and Transformation Plan (2010/11-2014/15) has an overall

objective of attaining broad-based, fast and equitable economic growth over the plan

period. These are envisaged to be achieved through strategic pillars. The plan focuses

on growth sectors particularly agriculture, industry as it also focuses on social

development, infrastructure and governance. GTP and agro-logistics are closely aligned.

As GTP focuses on agriculture, agro-logistics can assist this initiative by creating a


By Mesfin Raji | Compatibility with government priorities 16

platform that will be closely linked to managing and facilitating the supply chain of the

agricultural practice, marketing, processing and credit provisions. The closest link

between GTP and agro-logistics, however, falls directly under the objectives of

Maintaining Agriculture as a Major Source of Economic Growth of GTP that stresses that

fundamentals of the strategy include the shift to produce high value crops, a special

focus on high-potential areas, facilitating the commercialization of agriculture,

supporting the development of large-scale commercial agriculture where it is feasible.

Moreover the policy aspires to create efficient and functioning local agro-logistics

transit facilities, it has a direct alignment with growth and transformation

efforts(MoFED, 2010).

2.2. Need for Integrated Approach

The regional government currently has to seek a system that highly managed

and competitive alternate marketing structure that provides multiple choices to farmers

for sale of produce along with a comprehensive solution to meet key needs of all the

stakeholders. A well integrated approach is required to establish efficient linkages

between the farmers, village cluster, producer, and the market centre. This would also

include reduction in the involvement of intermediaries in the supply chain, which will

further expand the markets for primary agricultural products and add value by vertically

integrating such services. The issues which have hampered the growth of the sector

have resulted in disadvantageous position for all the stakeholders. Such facilities

endeavour to integrate farm production with buyers by;

a) Offering access to farmers for sale of produce such as modern electronic auctioning

b) Facility for direct sale to domestic trader, exporter, processor and retail chain

network under a single roof

In addition, it also provides storage infrastructure thus offering the choice to

trade at a future date to the participants. It is envisaged to offer a one-stop-solution that

provides logistics support including transport services & cool chain support and facility

for storage (including warehouse, cold storage, ripening chamber, storage shed, etc),

facility for cleaning, grading, sorting, packaging of produce and extension support &

advisory to farmers. An integrated facility in terms of a modern Market integration

Centre with suitable logistics support would address all the issues in the sector and suit

the need of the current situation.


By Mesfin Raji | Approach & Methodology 17

2.3. Linkages with existing Marketing Channels

The project is somewhat conceptually complemented with Ethiopian

Commodity Exchange (ECX) which is engaged in similar activities but focussed more

of on specific exportable commodities. Nevertheless the vision of ECX is to transform

the Ethiopian economy by becoming a global commodity market of choice and its

mission is to connect all buyers and sellers in an efficient, reliable, and transparent

market by harnessing innovation and technology and based on continuous learning,

fairness, and commitment to excellence (ECX, 2010; Website, 2011) whereas ALMIH’s

mission is geared to serve the majority farmers in short term facilitating the

transformation of Amhara’s economy by becoming an efficient domestic agro supply

platform and in the long term to be the major agricultural input producer and supplier

agent vertically integrating itself with the supply chain. The main distinguishing feature

between the two concepts is summarized as follows;

Table 1: Distinguishing features between ALMIH and ECX Feature ALMIH ECX

Main customer focus • Restricted to Farmers/cooperatives

• Traders and no restriction

Operational rule • Listed membership • Registered membership

Major Market Orientation

• Domestic market • Export market

Scope • Regional • National Complementary Service package

• Horticulture, transportation, & Distribution of agro-input included

• None

Additional warehousing facility

• Cold room & ripening • None

During the operational phase the marketing component of ALMIH that of MIC

management will be partially outsourced with some of its activities especially those that

require international trading and electronic transactions to ECX based on the terms and

conditions set between the project sponsor and ECX. The two firms can work in parallel

within the general framework of the agro-logistics supply value chain.

3. Approach & Methodology

The following steps are the modalities that are used in preparing the pre-

feasibility project document; a) The regional economy, agricultural practice and

production size and export performance of the state was reviewed; b) The transportation


By Mesfin Raji | Market Planning and demand Analysis 18

logistics with respect to land transportation and the type of major transport agents in the

region were examined; c) The indicative locations for setting up logistics hubs were

identified based on the proposed agro-industrial potential zones and taking into account

the key issues in agriculture, and d) An approximate costing for setting up a logistics

hub has been estimated.

A flow chart indicating the approach and methodology for the Study is provided below.

Figure 11 : Flow Chart of the Approach and Methodology for the Study

4. Market Planning and demand Analysis

4.1. Situational analysis

Some of the challenges and constraints facing the agriculture production

currently in relation to logistics supply, marketing, and transportation are outlined as

follows;

Proposed agro-logistics hub

• Location analysis • Financial feasibility analysis

Desk Review:

• Primary and secondary research • Data collection and analysis • Study of similar initiatives • Study of relevant acts, policies, and

incentives in the state.

Project specific analysis:

• Development of parameters to assess attractiveness of locations for development of ALMIH

• Assessment of current status of logistics in the identified locations.

• Estimation of the area required for development of logistics hub/MIC.

• Identification of facilities to be provided • Assessment and inventory of the

existing market support infrastructure

Discussions with:

• Agriculture personnel • Representatives of farmer associations • Government agencies /Institutions • Planning consultants • practitioners

Project Pre-feasibility Report

Risk Analysis

• Key risk identification • Mitigation strategies

Assessment of Integration of Agro-logistics with market channels

Review of the Regional state’s economy, agricultural production

sizes and exports potential

Examine Market outlets and existing practices

Examine Transport Network and utilities

Development of inter-linkages of the

ALMIH



a) The need to diversify into new markets for higher value products, or add value

to current products through improved quality, niche markets, etc. and the needs

to improve information flows and develop synergy between the different actors

in the production and marketing system.

b) The agro marketing supply chain prevailing in the region lacks a systematic

approach. It cannot afford to go to distant places on account of lack of facilities,

expensive transportation and malpractices in assembling markets. This has

resulted in formation of long marketing channels, which has also proved to be

detrimental to the quality and safety of the perishable products.

c) The long chain of intermediaries between the farmer and the market, adds cost

but no value to the product. Some study indicate that the escalation in the cost of

the produce reach to an extent of 250% of the cost of production at the farm

level.

d) It has also blocked the flow of market information resulting in exploitation of

the farmers. Poor front end infrastructure such as storage facilities, improper

warehousing facilities, redundant food processing technology and the farmers’

inaccessibility to the value added services, results in wastage of 40% of the

fruits and vegetables.

e) The disadvantageous position in terms of cost and quality arises from the several

constraints that exist in the current system of marketing of fresh produce in the

region. Some of them are; High level of wastages due to lack of proper handling,

storage and transport infrastructure, Lack of grading facilities based on the

quality, Long and inefficient value chain with many intermediaries, Lack of

packaging facilities, and Lack of efficient prices discovery mechanism.

f) The above constraints have an adverse effect on key stakeholders involved in the

sector by destabilizing the system creating viz-a-viz; mismatch between demand

and supply leading to frequent gluts or short supplies, unrealistic prices in the

consumer markets, lack of adequate incentive especially aiding the producers

with technological equipments to adopt good management practices, and poor

quality of the produce reaching the end consumers.



4.2. Value Chain and Marketing strategy of the project

4.2.1. The agro-industry system

The different economic activities that result in a marketed product can be

represented as a system. The word “chain” denotes a linear sequence of mutually

dependent and primary activities related to input delivery, production, processing, and

marketing, etc. The word “chain” also emphasises that the different actors involved in

the different links of the chain are mutually dependent. A weakness of one link will

affect the price or attractiveness of the final product and hence all the actors will suffer.

There is no point in spending scarce research and development resources on improving

production on the farm, if the transportation of the product is expensive, or the

processing and marketing are inefficient.

Figure 12: The product Value chain

The “input supply chain” is the “inbound” or “backward” linkages from the

farmer back to the input retailer, the transporter/importer, and the producer of inputs

such as fertilizers, seeds, etc. On the other hand, “Value chain” or “outbound” is the

“forward” linkages that link the farmer to the consumer, via the “middle-man”,

processor, supermarket, etc.

4.2.2. Aggregation of outputs as a viable marketing strategy

The concept of project’s marketing strategy emanates from the project’s unique

features of service delivery mechanism and the overall landscape of the region is

segmented into two exclusive independent working areas for the two ALMIH projects

which will be established in West and East part of Amhara. The service package for

each project area is positioned on aggregation of output and inputs for rendering

expedient services to farmers on nominal service charges. Aggregation into agricultural

‘clusters’ hubs serves to:

• Reduce the transaction costs, taking both the market to the farming community.

Produce Stacking Transporting Marketing Processing Consumer

Input supply chain Value or market chain



• Afford access to the agricultural value chain including inputs, services, transport

and logistics, processing, retail and in some cases storage and post-harvest

management.

• Increase the flow of information to and from the farming community.

• Provide non-farm jobs and a local market for food crops.

• Create a natural medium for the transfer of skills and agronomic extension.

4.3. Materials and Input Supplies Study

The project mainly utilizes agricultural raw materials such as Agricultural and

Horticultural crops, fertilizers, and improved seeds. The potential characteristics of each

materials explored in the following sub topics.

4.3.1. Grain Crops

According to the agricultural sample survey report of (CSA, 2009), Cereals,

Pulses, and Oilseeds are the three major Grain Crops that are produced in the region

having a proportion of 80.1%, 16.1%, and 3.8% from the total production respectively.

In the same report of the year 2008/09, it was also disclosed that 0.79 million quintal of

Vegetables, 3.1 million quintal of Root Crops, 0.16 million quintal of Fruit Crops, 44.2

thousand quintal of Chat, 21.5 thousand quintal of Coffee, and 95.9 quintal of Hops

have been produced in the region. Out of the total Meher production Grain Crops

significantly account for 93.1% of the production while Root Crops and Vegetables

account for 5.1% and 1.3% of the total production. The three major crops and their

percentage under each crop category are:

Cereals - Teff (27.2%), Maize (20.4%), and Sorghum (20.1%);

Pulses – Faba beens (36.6%), Chick peas (21.1%), and Field peas (12.4%);

Oilseeds – Sesame (43.5%), Neug (35.2%), and Rape seed (8.5%);

Vegetables – Red peppers (66.8%), Green peppers (14.6%), and Ethiopian cabbage

(8.0%); Root Crops – Potatoes (62.3%), Garlic (23.2%), and onions (13.2%); and

Fruit Crops – Orange (40.2%), Papayas (23.0%), and Lemons (14.9%)

4.3.2. Agricultural Inputs

The region utilizes the great proportion of the agricultural inputs used as

compared to the volume of country’s utilization of inputs. In the same CSA report it

was revealed that in 2008/09 only 1.574 million quintal of fertilizers out of which



1,148,971 quintals of UREA+DAP (73%), 302,883 quintals of DAP (19%), and

122,179 quintals of UREA (8%) were utilized in the region. However, as compared to

the country’s level, the region’s consumption of fertilizers amount to be 48.2%, 43.6%,

and 23.1% in its UREA, UREA+DAP, and DAP application respectively and 37.4% of

all the type of fertilizers. With regard to utilization of productive seed, during the year

in 2008/09 the region has made use of 3,018,889 quintals of indigenous seed and 55,321

quintals of improved seed which has a 33.6% and 25.2% share from the country’s size

respectively. The Pesticide amount is not reported except its application on an area of

244,124 hectare of farm land. Even though, the region has an ample production

potential and market access even to the nearby Sudan, it had never reaped the

opportunity as it would have supposed to be.

Figure 13: Farm Input Utilization Practices in the period of 2003/04- 2009/10

This emphasizes the importance of agriculture and agricultural markets in

Amhara. Though Amhara enjoys a leadership position in the production of several

agricultural commodities, its share in the global market is minimal due to the lack of

competitiveness on cost and quality front.

4.3.3. The role of Farmers Cooperatives

The establishment of farmers’ cooperatives and unions played a crucial role in

removing market failures in both the credit market and in marketing of agricultural

products. As it clearly outlined in the country’s GTP stressing the essentiality of making

the agriculture marketing system remain in tune to the agricultural production and

productivity growth, and since this system is essential for accelerated agriculture

growth, focus will be made to lay down an agricultural marketing system starting at

0

200

400

600

800

1000

1200

1400

2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10

Fertilizers in qt (000') Improved seed in qt (000') Pesticides ha (000')



kebele all the way up to country level. Most importantly the document stressed the

creation of transparent, efficient and effective agricultural marketing system that

involves farmers’ cooperatives, modern output market centers and private sector will be

established and strengthened.

The data obtained in the GTP of the regional government indicate that currently

there are 5,977 cooperatives and 43 unions that are functional in the region. At the end

of the GTP period, they are expected to grow by 53.4% and 44.2% respectively.

Figure 14: Established Cooperatives and their membership during the past five years only

The Involvement of cooperatives is mainly on transacting Fertilizers which

show 82% and 60% of purchasing and selling of the overall stock respectively during

the past five years as compared to their share in Grain crop transaction. However, the

overall effect in transaction of both agricultural inputs and production shows significant

gap.

Figure 15: Marketing activities of Agricultural related cooperatives from 2005/06 - 2009/10

2005/06 2006/07 2007/08 2008/09 2009/10 No of Members (00') 0 913.89 97.38 267.90 228.25 Established Number 238 282 122 202 142

0 100 200 300 400 500 600 700 800 900

1000

Num

ber



4.4. Market characterization and demand forecasting

The agricultural sector suffers multitude problems in bringing sustainable and

dependable food security system in all part of the region. This is characterized by the

failure of achieving a comprehensive integration of the output with efficient market

outlets. Data obtained from the document of the GTP of the Amhara region shows that

currently the marketable amount of grain crops in the region is about 39.7 million

quintals which is around 35% of the annual Meher and irrigation production of 112.1

million quintals and it expected to grow by 58.9% at the end of the GTP period

(BoFED, 2010b).

4.4.1. Demand and supply factors

Currently farmers’ cooperatives/unions are the major actors in agricultural input

transaction especially in purchasing and selling of fertilizers to the farmers. However

the role that they are playing in Grain Crop transaction is almost barely existent. The

data obtained from Developmental Indicator of BoFED (2010) indicates that during the

past five years the proportion of cooperatives marketing transaction in Purchasing and

Selling of agricultural goods from the total available stock is highly irregular and is only

2.12% and 4.43% respectively. The following table and graph summarizes the situation

as follows;

Table 2: Marketing activities of cooperatives/unions from 2005/06 to 2009/10 in qt

Item Purchasing (million Qt) % Selling

(million Qt) %

Total Available Stock in the

region Grain Crops 1.05 0.4 1.03 0.4 261.30

Fertilizers 4.60 81.9 3.40 60.5 5.62

Total 5.65 2.12 4.43 1.66 266.92

Figure 16: Marketing activities (Purchasing) of cooperatives in five years in Qt

0

500

1000

1500

2000

2500

2005/06 2006/07 2007/08 2008/09 2009/10

Grain Crops (000') Fertilizers (000') DAP (000') UREA (000')



In order to keep pace with the changes on the demand side, the markets have to

evolve rapidly so that the interests of both the farmer and the buyer are taken care of.

The key interests of the farmer are:

• Realization of a higher percentage share of the consumer price.

• Presence of increased alternatives for the sale of his produce.

• Provision of better infrastructure for handling the produce.

• Establishment of a transparent and efficient price discovery system.

The key interests of the buyer are:

• Availability of graded produce.

• Availability of quality and hygienic produce.

• Establishment of a transparent and efficient price discovery system

• Presence of efficient logistics so as to minimize the wastages during transit

services.

4.4.2. Demand & Supply Forecasting

The demand for crop production and input supply which will be going to be

handled at least in the coming five years is determined from two perspectives. The first

one is sought from the region’s GTP document which is found to be optimistic and

contrasted with the second perspective which is forecasted based on the available data

documented and is found to be suitable for casual trend analysis. However, since data

for the Belg Crop production, Vegetables, Root crops, and Fruits is obtained for only

single year of 2010/11(CSA, 2011), the forecasting is carried out taking the average

increment of the other forecasted figures which is done using time series projection

method. Nothing is indicated in the GTP document about horticultural production.

The detail is shown in the table below.



Table 3: Total Supply forecast of agricultural products and inputs for the years (2010-2014)

Item (Million Qt)

Present assessed capacity

Forecasted need five

years from now

GTP baseline

2010

GTP forecasted need in 2014

(Base case scenario)

Increment in %

1 2 3 4 1 to 2 3 to 4 Meher Crop 60.7 80.05 61.91 152.42 31.9 146.2 Belg Crop 0.50 0.68 3.41 6.82 35.0 100 Irrigation Crop 51.38 53.56 51.38 100.00 4.2 94.6 Fertilizers 1.30 2.03 2.2 5.30 56.2 140.1 Improved Seed 0.05 0.07 0.13 1.82 40 1300 Vegetables 0.79 1.07 - 0 35.0 - Root Crops 3.1 4.19 - 0 35.0 - Fruit Crops 0.16 0.22 - 0 35.0 -

Total Volume 118 141.87 119.03 266.36 20.2 123.8 Productivity 14.1 18.56 15.1 37.20 31.6 146.4

The table indicate that within the next five years the total volume of crop

production and agricultural input supply will be expanded between the conservative

20.2 percent to optimistic 123.8 percent. Therefore, at present condition west part of

Amhara’s marketable potential of agricultural and horticultural produce and inputs is

28.54 millions of quintals or 2.9 million metric tonnes by volume.

Table 4: West part of Amhara's available Freight Potential

Particulars Regional Agro volume in millions of qt

West part of Amhara Utilization rate

West part of Amhara Volume in millions of qt

Marketable surplus of food items in millions of qt

% Volume Grain 112.60 67% 75.44 35 26.40 Vegetables 0.79 76% 0.60 35 0.21 Root Crops 3.10 78% 2.42 35 0.85 Fruit Crops 0.16 66% 0.11 35 0.04 Fertilizers 1.30 78% 1.01 100 1.01 Improved seeds 0.05 61% 0.03 100 0.03

Total 118.00 79.61 28.54

Based on our analysis to determine the current agro-logistics supply in the

project’s operational geographic area, we could further determine the annual supply that

could be available within the project area in five years. The following table summarizes

the calculated figures in each year.


By Mesfin Raji | Technical and technological aspects 27

Table 5: Five years Forecasted marketable freights in West part of Amhara in million qt

Particulars Yearly volume of freight under GTP & Nominal Forecasting

Year 1 Year 2 Year 3 Year 4 Year 5 GTP Forecast GTP Forecast GTP Forecas

t GTP Forecas

t GTP Forecas

t Grain 27.37 26.4 35.72 27.67 44.08 28.95 52.44 30.22 60.79 31.49 Vegetables 0.00 0.21 0.00 0.23 0.00 0.25 0.00 0.27 0.00 0.28 Root Crops 0.00 0.85 0.00 0.92 0.00 1.00 0.00 1.07 0.00 1.14 Fruit Crops 0.00 0.04 0.00 0.04 0.00 0.05 0.00 0.05 0.00 0.05 Fertilizers 1.01 1.01 1.79 1.15 2.57 1.30 3.35 1.44 4.13 1.58 Improved seeds

0.03 0.03 0.30 0.03 0.57 0.04 0.84 0.04 1.11 0.04

Total 29.17 28.54 37.81 30.05 47.22 31.57 56.63 33.08 66.03 34.59

5. Technical and technological aspects

5.1. Technical & technological requirements of the project

As it is been cited in (Bosona, 2010) the technological dimension of innovation

through the food supply chain such as advanced information and communication

technology (e.g. e-commerce) systems are increasingly becoming the backbone of

integrated supply chains (Trienekens et al., 2003). This project is designed mainly based

on the conceptual theoretical framework operating elsewhere around the world. The

specific technical requirement and technological capabilities of managing the overall

operation would rest on the level of practical knowledge that is expected to be gained

through on-site visit of similar initiatives. Therefore, it is advisable to arrange

experience sharing tour especially to India for further refinement of the pre-feasibility

study.

The technological aspect is figure out to be less complicated and requires

technicians graduated from technical and vocational schools in terms of physical

handling of operations. However, there is some speciality required in the area of

horticulture and food management which are currently started to be available in the

country’s labour market. The project’s peculiar quality that makes different from others

is its utilization of electronic platforms of Integrated Data Management Systems

(IDMS) in its value chain by linking all its inbound and outbound operations with

counterparts and speed up the service delivery time. All the PCC’s operating under

ALMIH will have direct electronic connection through wide area networking. However

hardware, software, and networking will pose special technical challenges in regional



setting despite the government’s relentless effort to expand the network to the remote

areas of the country.

5.2. Location and site Selection 5.2.1. Locations for Development of Agro-Logistics and Marketing Hub

The project intends to establish two agro-logistics hubs and its location for the

development of ALMIH is determined based on six parameters that make the location

potentially feasible. These are;

a) Population density per Sq. Km

b) Productivity in Qt/ha

c) Area of Irrigated land in ha

d) Land usage in ha (annual/temporary crop land use, permanent crop land use,

fallow land use, grazing land use, wood land use, and other land use), and

e) Agricultural input supply in Qt (Fertilizers and Improved Seeds)

Based on the region’s geographical topography the two locations were

determined by segmenting into West and East part of Amhara sub-regions.

5.2.2. Possible Locations for Development of Agro-Logistics Hub

As a starting point in determining the exact site of ALMIH in the sub-regions,

latest figures of secondary data collected by BoFED of the year 2009/10 were used as

shown in the following table.

Table 6: Location advantage of the Zonal Administrations on selected parameters

Zone Population density/km2

Productivity (Qt/ha)

Irrigated land in

ha (000')

Land usage in ha (000')

Input Supply Fertilizers

in Qt (000')

Improved seed in Qt

(000') WEST AMHARA West Gojjam 167.00 17.41 9.10 471.87 660.45 25.94 North Gonder 69.30 14.60 6.23 570.16 114.50 7.76 South Gonder 153.80 12.95 8.81 418.61 138.57 11.30 East Gojjam 162.20 16.28 14.34 473.26 559.52 22.16 Awi Nationality 121.00 12.89 30.04 227.25 161.94 9.15 EAST AMHARA

North Wello 129.70 14.50 8.79 252.08 31.58 7.07 South Wello 150.90 13.31 7.59 423.45 119.81 14.26 North Shoa 121.30 14.11 15.15 436.60 312.67 26.27 Waghimera 51.10 11.39 1.46 70.90 0.10 1.17 Oromo Nationality 115.20 13.20 4.72 52.02 1.47 0.45



Four step processes is followed in determining the two potential ALMIH sites;

1. Relative scores were calculated for each location under each parameter indicated

above. The formula utilized for calculating the score is as set out below.

Relative score for each location under each parameter (SR): (SL/SH *100)

Wherein;

SL: Value of the parameter for the location under consideration.

SH: Highest value across all the locations under consideration and for the

parameter being considered.

For example: Calculations of relative score for East Gojjam under the population

density parameter is as set out below.

i. Population density of East Gojjam zone is approximately 162.2 per Sq.Km

(SL).

ii. Highest population density amongst all the locations listed in the table above

is of West Gojjam zone and is approximately 167 per Sq.Km (SH).

iii. Relative score of East Gojjam under population density parameter

(SR) = (162.2/167*100) = 97.13.

iv. Similarly the relative score of East Gojjam under other parameters viz.

productivity, Irrigated land area, Land usage, and Input supply (fertilizers &

improved seeds) is 93.3, 47.74, 83.0, 84.72, and 84.35 respectively.

2. Suitable weightings of 25%, 25%, 15%, 15%, and 20% have been assigned to

each of the five parameter viz. population density, productivity, irrigated area

available, land usage, and input supply respectively. Further split is made for

input supply of 10% and 10% for fertilizers and improved seeds respectively.

Higher weightings have been assigned to the Population, Productivity, and

agricultural input as they are believed to be the major determinant factors for

market, production and consumption pattern and responsible for the core

activities carried out within the intended project; Less weightings have been

assigned for irrigated land available and land usage due to the coverage

proportion as compared to non-irrigated land and the incorporation of other non-

arable area. All the weightings believed to depict the potential of the selected

zone to serve the capacities envisaged for the ALMIH and also the growth in

demand in the future years.

3. A composite score is calculated for each of the identified locations based on the

formula set out below.



Composite Score (Cs) = Weightings assigned to the parameter X Relative score

under each parameter (SR). For Example: Calculation of the composite score for

East Gojjam is as set out below.

i. Relative scores of East Gojjam are 97.13, 93.3, 47.74, 83.0, 84.72, and

84.35 under the parameters of Population, Productivity, Irrigated land

area, Land usage, and Input supply (fertilizers & improved seeds)

ii. Composite score of East Gojjam; Cs = (97.13*25%+93.3*25%+47.74*15%+83.0*15%+84.72%*10%+84.35*10%) = 84.12

4. The location with highest composite score was ranked the highest. Therefore,

West Gojjam zone from West part of Amhara and North Shoa zone from East

part of Amhara are selected as the two potential locations that ALMIH will be

developed. The ranking of the locations based on the composite score calculated

for each of the locations is set out in the table below.

Table 7: Composite score of the Zones under each parameter based on suitable weightings

Zone Population density/km2

Productivity (Qt/ha)

Irrigated land in

ha (000')

Land usage in ha (000')

Input Supply Total Score

Fertilizers in Qt (000')

Improved seed in Qt (000')

Weightings 25% 25% 15% 15% 10% 10% 100%

WEST AMHARA

West Gojjam 25.00 25.00 4.54 12.41 10.00 9.87 86.83 East Gojjam 24.28 23.39 7.16 12.45 8.47 8.44 84.19 South Gonder 23.02 18.60 4.40 11.01 2.45 4.30 63.79 Awi 18.11 18.51 15.00 5.98 2.10 3.48 63.18 North Gonder 10.37 20.97 3.11 15.00 1.73 2.95 54.14 East Amhara North Shoa 18.16 20.27 7.56 11.49 4.73 10.00 72.21 South Wello 22.59 19.12 3.79 11.14 1.81 5.43 63.88 North Wello 19.42 20.83 4.39 6.63 0.48 2.69 54.44 Oromiya 17.25 18.96 2.36 1.37 0.02 0.17 40.12 Waghimera 7.65 16.35 0.73 1.87 0.00 0.45 27.04

However, despite the prevailing financial and technical limitation in establishing

the two ALMIH’s at the same period, it is advisable to implement the projects one a

time. Therefore, according to the selection requirement and the scores obtained in the

above table, West Gojjam Zone will be the prioritized and selected location for the

implementation of the pilot project.



5.2.3. Proposed site of ALMIH in West Gojjam Zone

In order to determine the specific place of the project site the same technique is

used as above except in this case some change was made in the type of parameters. The

parameters for determining the woreda upon which the project site will be developed

are;

• Population size

• Productivity of both Meher and Irrigation production in Qt/ha

• Distance of Woreda center to B/dar in Km, and

• Unutilized land area

Since Population and Productivity are the two main determinant factors that

show the project’s growth potential, the site selection is seen differently from additional

two perspectives. The project site’s ease of connectivity to road outlets both to Sudan

and Djibouti ports which was subtracted from the total composite score to give

advantage for locations nearer to Bahirdar and sufficiency of extra land for the

construction of project infrastructure and relocation of farmers in case of the displaced

preference to pursue as peasant for some time.

Hence, based on our calculations (see Appendix 4) the project site will either be

in Bahirdar Zuria Wereda or can be adjusted to second alternative of Mecha Wereda due

to the availability of the Grand Koga Irrigation project. The best alternative is to place

the project somewhere in between the intersection of the two Weredas along the main

high way.

5.2.4. Details of Agro and Horticultural produce of B/dar Zuria and Mecha weredas

Data obtained from West Gojjam Department of Agriculture indicate that the

total irrigated and Meher season production of agro and Horticulture produce in the two

woredas which are surrounding the selected project site covers 24% cultivated area and

27% in production level out of total zone’s potential(DOA, 2011). Surprisingly

however, looking at the proportion of irrigation practices from the total area of the

wereda for the two werdas as compared to the rest weredas practices in the zone shows

Bahirdar Zuria stands first by 17% utilization rate whereas Mecha stands fourth with

6.7% from thirteen weredas despite having the grand irrigation project within its



territory. The details of cultivation and production pattern of the two weredas in the year

2009/10 is summarised in the following table;

Table 8: Details of Cultivated land and Production around selected project site

Type of Crops Production of 2009/10 in Quintals

Bahirdar Zuria Wereda Mecha Wereda Total Gross prodn Meher Irrigation Meher Irrigation Meher Irrigation

Cereals 1,824,479.8 151,930.5 2,146,401.4 110,602.2 3,970,881.2 262,532.7 4,233,413.9

Teff 68,218.5 - 33,279.0 - 101,497.5 - - Finger millet 303,958.5 - 350,186.0 - 654,144.5 - -

Wheat 59,439.0 - 33,614.0 - 93,053.0 - - Barely 48,465.0 - 109,145.0 - 157,610.0 - -

Oats - - 100.0 - 100.0 - - Rice 2,835.0 - - - 2,835.0 - -

Maize 1,341,563.8 - 1,620,077.4 - 2,961,641.2 - - Pulses 173,814.3 - 57,071.5 - 230,885.8 - 230,885.8

Field peas 11,355.0 - 3,557.5 - 14,912.5 - - Hourse beans 36,937.8 - 25,749.0 - 62,686.8 - - Haricot beans 17,884.6 - - - 17,884.6 - -

Chick peas 36,018.0 - 12,320.0 - 48,338.0 - - Lentil 664.0 - 350.0 - 1,014.0 - -

Grass peas 70,955.0 - 10,010.0 - 80,965.0 - - Gibto - - 5,085.0 - 5,085.0 - -

Oilseeds 19,538.0 - 96,745.0 - 116,283.0 - 116,283.0

Niger seeds 17,805.0 - 84,315.0 - 102,120.0 - - Linseed 938.0 - 3,540.0 - 4,478.0 - - Sesame 595.0 - 8,890.0 - 9,485.0 - - Peanut 200.0 - - - 200.0 - -

Kimemakime 13,603.9 44,632.8 6,010.0 1,049.8 19,613.9 45,682.6 65,296.5 Vegetables 209,412.5 1,360,957.9 497,379.0 997,826.8 706,791.5 2,358,784.7 3,065,576.2

2,240,848.5 1,557,521.2 2,803,606.9 1,109,478.8 5,044,455.4 2,667,000.0 7,711,455.4

It is to be noted that the volume of production of the two weredas amounts

around 26.7% ,10.1%, and 7% from the Zone’s, West part of Amhara’s, and Region’s

production of all the Agricultural and Horticultural production that is harvested in

Meher and Irrigation respectively.

5.2.5. Accessibility of the selected site to the rest of West part of Amhara regions

The total space in which the project will be erected requires an area of 427,000

Sq.meter and apportioned for its facility accordingly (see Appendix 1) and since the

selected project site is located nearer to the seat of the regional government

administration, the road infrastructure of all the weredas situated in west part of Amhara

would lead them easily to the project site.

Even though the exact path and location of PCC’s should be determined by

further studying the geographic and landscape suitability for freight transportation, the



theoretical model of flow of production from each PCC to ALMIH is depicted in the

following graphic picture;

Figure 17: Hypothetical Model of Flow of goods to ALMIH from all PCCs

5.3. Options for Project Implementation

The project facilities could be developed by Government Agencies (GA) concerned

either by deployment of its own resources or under an appropriate public private

partnership (PPP) framework.

The two primary development options comprise;

Option 1: Development, Operation and Maintenance by GA

Option 2: Development, Operation and Maintenance by Private Player

Option 1: Development, Operation and Maintenance by GA.

Under this option, the following activities would need to be undertaken by GA.

a) Select a contractor to undertake development of the project facilities.

b) Hire skilled manpower for carrying out the operations and maintenance of

the developed facilities.

Option 2: Development, Operation and Maintenance by Private Player with GA playing

the role of a facilitator

In this option, development, operation and maintenance would be undertaken by a

private operator(s). The private operator(s) would need to carry out their roles and

responsibilities as per the contractual agreement signed with ANRS.



A comparative analysis of the risks associated in an event of implementation of the two

options discussed above is set out in the table below:

Options Parameters Impact

Development, Operation and

Maintenance by Government

Manpower Development, Operation and Maintenance by GA.

Skill Set ANRS would need to appoint technical consultants for developing a strategy for development of ALMIH in Amhara. ANRS would also be required to hire skilled manpower to operate and maintain the project facilities.

Service Delivery

Since payments to operational staff are not performance based and often their motivation levels are low, this could affect the level of service delivery.

Finances GA would need to mobilize finances for procurement of tools / equipment and vehicles and for development of project facilities.

Projects Risks The projects related risks such as design risk, cost over-run risk, time risks etc. and adherence to applicable laws would be retained by GA.

Development, Operation and

Maintenance by Private Player.

Manpower GA would need only supervisory staff as the private operator would be responsible for deployment of staff for providing services as envisaged.

Skill Set The onus of providing skilled manpower would be with private operator.

Service Delivery

As the payment to the operator would be made subsequent to demonstration by him of adherence to performance standards specified by GA, the service delivery levels would be high.

Finances The private operator would need to mobilize finances for procurement of tools / equipment and vehicles and for development of project facilities.

Projects Risks The projects related risks such as design risk, cost over-run risk, time risks etc. and adherence to applicable laws would be retained by private operator.

Table 9: Risks associated with the implementation options

Under Option 1, GA would not only retain all the Project related risks and be required

to raise finances for undertaking the Project, but would also need to monitor and

manage the operational staff. In contrast, if GA implements the Project under Option 2,

it would need to appoint private sector operator and recruit only sector specialists for

overseeing their activities. In this regard there are potential candidates who are a

dependable development partner and are already engaged in similar activities in the

region with good reputation like “Tiret” Endowment Company would be attracted to



take part on the project as it might help consolidate its operational activities through the

project by reducing its operational costs. Tiret under its conglomerate has an efficient

freight transport, “Tikur Abay Transport” and agricultural input distribution,

“Ambassel” firms which will give the company an equity advantage over its

competitors. In view of the local situation, and from the point of view of effective

implementation of the Project, Option 2 is more suitable for development of ALMIH in

Amhara.

5.4. Modes of Implementation

The following are the various modes of implementation under Option 2 that could be

considered for the development of the ALMIH:

a) Lease

ANRS will transfer the land to the private partner on the date of execution of

agreement for the development of ALMIH. The private partner will develop the

project facilities. Basic infrastructure and amenities like roads, drainage systems,

street lighting, water supply, power/electricity, communication networks –

telephone connections, cable and internet connectivity as per requirements of

agro-logistics industry would be provided by the private partner. In addition to

providing infrastructure requirements, the private partner could also be

responsible for maintenance and management of the common facilities for a

stipulated period of time. The private partner would be responsible for raising

finances and carrying out the construction activities.

b) Joint Venture between ANRS and a private developer

A Special Purpose Mechanism (SPM) could be created by ANRS and the private

developer under this option. The equity contribution of ANRS could be in the

form of land for development of the ALMIH.

The SPM could develop the project facilities. Basic infrastructure and amenities

like roads, drainage systems, street lighting, water supply, power/electricity,

communication networks – telephone connections, cable and internet

connectivity as per requirements of ago-logistics industry would be provided by

the SPM.

In addition to providing infrastructure requirements, SPM could also be

responsible for maintenance and management of the common facilities for a

stipulated time period. SPM would be responsible for raising finances and



carrying out the construction activities. The roles and responsibilities of the

SPM are set out below

a. Mobilisation of finances and development of envisaged facilities as per

the scope of project.

b. Develop the facilities in accordance with design and construction

requirements set out by ANRS.

c. Maintenance of common facilities for a period of stipulated time period.

d. Market the project.

e. Share the revenue with ANRS as per the agreement.

c) Concession

The private partner could develop the project facilities. Basic infrastructure and

amenities like roads, drainage systems, street lighting, water supply, power/

electricity, communication networks – telephone connections, cable and internet

connectivity as per requirements of agro-logistics industry would be provided by

the private partner. The private partner would be responsible for raising finances

and carrying out the construction activities. The ownership of the land and the

properties developed would remain with the Government throughout the

concession period.

Structure Merits Demerits

Lease • Ownership of the Land would be vested with ANRS for a stipulated period of time.

• The development risk to be borne by the private partner.

• No marketing responsibility to ANRS.

• Developer would have to pay a huge upfront payment to ANRS.

• Mortgage rights would not be exercisable by the private partner although the land acquisition cost would be borne by the private partner.

• Land acquisition cost to be borne by the private partner.

• ANRS losses ownership of the land after the project development.

• All risk to be borne by the private partner during the development of the project.

Joint Venture

• Combination of sale and lease structure.

• ANRS could realise a portion of the revenues upfront.

• ANRS loses ownership over part of the site area.

• Allocation of share a major issue. • In case of pre-termination, handover

could lead to prolonged disputes. Concession • Ownership of the property vests with ANRS at

all times. • Private partner is allowed flexibility to develop

• Time for development may increase slightly.

• All risk borne by



the area in accordance with bye-laws and in adherence to the minimum requirements set by ANRS.

• No marketing responsibility to ANRS. • The land and the facilities developed on it

would be transferred back to ANRS at the end of the concession period.

• Assured and fixed revenue stream. • Uniform quality of services. • Risk of time bound completion and revenue

risk is transferred to the private partner

private partner and may require higher returns.

• Skills required for contract management.

Table 10: Comparative study amongst the modes of implementation

Considering the issues discussed above, the requirement of upfront finances, manpower

and associated risks, it is proposed to develop the Project under a Concession

framework due to the following advantages;

• Mobilization of finances would be the responsibility of the private partner. The

entire finance required for the Project would have to be raised by the private

partner within a pre-specified time frame. Therefore, the Government would not

be responsible for raising the funds for meeting the initial capital expenditure.

• ANRS would lay down the technical specifications for the construction and

subsequent operations and maintenance of the Project, which would have to be

adhered to by the private partner. In the event that the private partner fails to

meet the technical specifications laid down by Government, ANRS would have

the option of substituting the private partner.

• The risk of time-bound completion of the Project would be passed on to the

private partner.

• Since the revenue streams from the Project would commence only after

completion of the Project, it would be in the interest of the private partner to

complete the Project as early as possible. GA may also stipulate a penalty to be

paid by the private partner in case of delay in implementation of the Project.

• The risk of over-runs in construction cost and operational expenses would be

passed on to the private partner. Since the private partner is responsible for the

implementation of the Project, any increase in cost of the Project would also be

borne by him.

5.4.1. Role and obligations of the Private Partner for development of ALMIH



The private partner would be responsible for development of project facilities which

have been categorized into seven broad activities namely;

1. Development of project facilities – core facilities, specialized infrastructure,

common utilities, roads and other utilities;

2. Procurement of equipments as envisaged for the operation of the project

facilities;

3. Procurement of trucks required for the transportation of produce from collection

centres to the MIC;

4. Operations and maintenance of the project facilities;

5. Make annuity payment to the GA on a quarterly basis;

6. Obtain necessary permits as required under Applicable Law for development

and operation and maintenance of the project facilities.

7. Pay all taxes, duties and outgoings, including utility charges relating to the

project facilities, as may be applicable.

5.4.2. Role and obligations of the ANRS for development of ALMIH

1. Provide land to the private developer free of all encumbrances;

2. Provide assistance in obtaining required information/data from the stakeholders;

3. Provide assistance to obtain all clearances.

5.4.3. Payment Terms and Mechanism

Payment terms and mechanism would primarily depend upon the viability of the

project. In case the project is not viable on the stand-alone basis, financial support

would need to be provided to the private partner by ANRS in terms of one time capital

grant or in terms of operational grant during the operational period. In case the project is

viable on stand- alone basis, private partner would share operational profits with

Government. Sharing of profits could be carried out in two ways as set out below;

a) Percentage wise sharing of profits

Private partner could share operational profits with GA at a mutually agreed percentage

sharing mechanism. Percentage sharing could be ascertained based on the investments

of the respective parties. Disadvantage of such mechanism is to develop transparency in

the fund flow during the operational period. Revenue risk is mutually shared between

the private partner and GA.

b) Fixed Annuity Payments


By Mesfin Raji | Environmental and Social impact assessment 39

In this option private partner would need to make mutually agreed fixed payments to

GA at regular intervals (say monthly or quarterly). Estimation of the fixed payments

could be ascertained based on the projected cash flows envisaged for the project.

Advantage of such mechanism is that GA could be assured of the fixed payments during

the concession period and private partner would, well in advance, be aware of the fixed

liabilities during the operational period. Revenue risk is passed on to the private partner.

6. Environmental and Social impact assessment

The Environmental impact assessment should take into account the following

points both at construction and operation phases: Measures to mitigate the adverse

environmental impacts during construction phase;

a) Site preparation

The development of site will involve the movement of top soil, removal of trees,

shrubs, soils, rocks, debris etc. The site grading operation will also involve stock

piling of backfill material. All the distorted slopes need to be stabilized suitably.

During dry weather, control of the dust nuisance created by excavation, levelling

and transportation activities will be carried out by water sprinkling. It should be

ensured that both petrol and diesel powered construction vehicles are properly

maintained to minimize smoke in the exhaust emission.

b) Sanitation

The construction work force shall be provided with sufficient sanitation facilities

in order to maintain adequate hygienic conditions. Low cost sanitation system

like septic tanks / soak pits will be provided. This will be done by provisions in

contracts with the contractors.

c) Construction equipment & waste

The project would involve lot of construction activities for infrastructural

facilities and thereby structures are likely to come up on the proposed site and

would thus involve the use of construction equipment/instruments. These at

times would require onsite maintenance and repairing. It will be ensured that

both petrol and diesel powered construction vehicles are properly maintained by

the contractors to minimize pollutant emission from exhaust. The vehicle

maintenance area will be so located that contamination of surface water bodies


By Mesfin Raji | Environmental and Social impact assessment 40

by accidental spillage is avoided. Unauthorized dumping of waste oil will be

prohibited.

d) Installation of machineries

The project would involve the use of modern machineries like drying and

ripening refrigerators and forklifts for manoeuvring stacks of pallets from place

to place that needs care of spillage of gases and falling of loads on human

beings. There should be an informative safety signs in all work areas and

premises.

e) Storage of hazardous material/dumping materials

Petrol, diesel, lubricating oil etc. will be required to be stored at site. These

materials will be stored as per stipulated safety standards. Also a lot of material

may be generated for disposal during construction activity. These, if disposed

off haphazardly can pollute the nearby water bodies adversely. They would

increase the accident incidences also. Utmost care will be taken to store these

materials at a suitable place and then disposed off at a place in consultation with

and as per the implementation guideline.

f) Site security and Safety

To ensure that the surrounding population is not exposed to these hazards, the

site will be properly secured by fencing or by construction of a boundary wall

and also guards will be posted at entry points. First aid facilities should be

created at different locations for immediate assistance in case of emergencies

and accidents. In case inflammable materials are to be kept at the site, they

should be stored and handled in accordance with guidelines of inspectorate of

safety and health of the state and central governments. Fire hydrants and

extinguishers should be located at all vulnerable sites.

Measures to mitigate the adverse environmental impacts during operation phase;

a) Operation of various collection, and disposal facilities for emission, wastewater

and solid waste.

The scrap materials generated would include packaging materials, scrap wood,

cardboard, plastics, unused metal pieces, garbage in the form of papers, cloth

fibers, polythene bags, electric components, wire, scrap metal, glass bottles,

thermocol etc. Most of the above material is useful. A special place will be


By Mesfin Raji | Financial analysis and forecast 41

designated for administering the whole of the food park area to collect these

generated Non Hazardous solid waste, which can be recycled.

b) Health facility

Medical facilities, first aid centre and health centre near the site, which would be

provided by project authorities, will help to protect the health of the project staff.

c) Green Space

An additional mitigation measure that has a broad definition in as much as it can

be used to alleviate a number of adverse impacts due to air and noise emissions

is the development of a green space around the facility. It has been proposed to

develop green belt around the compound as per the master planning guidelines.

These would not only absorb air and water pollutants but also help in arresting

noise and soil erosion and creating favourable aesthetic condition. Pollutants in

air settle on the ground and vegetation of surrounding area. Plants interact with

the pollutants, absorb them and thus remove them from the atmosphere. Plants

intercept incoming and outgoing radiation, precipitation and wind and thus have

a marked effect on the microclimate. They filter dust from the air and absorb it.

The importance of plants in reducing the pollution hazard is therefore of

considerable significance.

d) Manpower for environmental management.

It is imperative that a concrete and feasible plan be made to promote

employment to the local people with equal opportunities to people.

7. Financial analysis and forecast

The Agro-Logistics Hub is an integral mix of specialized infrastructure with

processing requirements of envisaged industry. Hence, it is imperative to understand the

various specialized infrastructure facilities required to be housed in the hub meeting the

needs of the captive market and this could be one of the single largest factor in deciding

the viability of the project. As a conscious strategy, it is proposed to establish the

ALMIH at nearby Merawi town which would propel the industrial growth in the region.

The development of the first pilot ALMIH has been spread over the period of 5 years.



7.1. Investment costs of the pilot project

The following assumptions were used in calculating the project’s initial outlay;

• The 2009/10 total marketable agricultural & horticultural produce (meher and

irrigation) of the region was 116.65 million quintals (Forecasted five years from

now = 139.77 qtls)

• West part of Amhara Share from the total Production - 67% of the total production

= 78.16 million of quintals

• Marketable surplus - 35% of the yearly marketable surplus (referenced from GTP)

= 27.35 million of quintals (Forecasted five years from now = 32.77 qtls)

• Inputs – 1.35 million quintals (Forecasted five years from now = 2.1 million qtls)

• Total size of logistics 28.7 million qtls per annum (up to 34.87 million qtls in five

years)

• Lease of land – 100 birr/Sq.meter

• Required number of vehicles [NB: All prices include transportation costs]

• Heavy trucks - 40 (uplifting capacity 40 tonnes/truck)[Unit cost 3.6million

birr]

• light trucks- 70 (uplifting capacity 20 tonnes/truck)[Unit cost 1.35million

birr]

• light trucks installed with refrigerator- 25 (uplifting capacity 20

tonnes/truck) [Unit cost 1.58 million birr]

• Station wagon – 4[Unit cost 2.0million birr]

• Four wheel drive pickups- 6[Unit cost 1.5million birr]

• Motor bicycles- 10[Unit cost 80thousand birr]

• Forklifts – 2[Unit cost 1.5million birr]

• Weighbridge 40 tone (3 meter * 12.3 meter) – 1[560,000]

• All 135 trucks can uplift 80 tonnes/week X 52 = 561,600 tonnes per annum which

is only 20% of all the logistics

• Capacity utilization of the project: 50% in the first year of operation and increase

by 5% each year.

• Escalation of prices: 5% year on year during the project’s period.

• All service charges exclude VAT (for periodic costs see Appendix 2)

The estimated break-up of the project cost is set out in the table below



Table 11: Breakup of the project Cost

No Particulars Amount in Birr 1 Civil works and land acquisition 280,500,000.00 2 Land leasing cost 42,700,000.00 3 Outdoor works 16,000,000.00 4 Site preparation and development 21,800,000.00 5 Buildings and structures 200,000,000.00 6 Machinery and Equipments 399,460,000.00 7 Working Capital 50,000,000.00 8 Contingency (5%) 36,498,000.00 Total 766,458,000.00

7.2. Projected cash flow

The details of revenues and expenses sources are as set out below

1) Rental Receipts

The operating income from rental receipts includes rentals for premises rented

for warehouse facilities, cold storage facilities, commercial space, various office

and services, etc. These will be the incomes which will be generated year after

year. Corresponding to these incomes, the expenditures will cover items like

general maintenance, power supply charges, maintenance of water supply and

distribution, general maintenance of constructed premises, major repairs of road,

water supply system, establishment expenditure for administering and

maintaining the specialized infrastructure facilities provision for business

promotion expenses, service facilities, etc.

2) Revenues from Grading and Sorting

Grading and sorting facilities are provided to the small and marginal farmers,

large hold farmers, producers etc. to provide value additions to the agro produce

and hence help market the produce better, resulting in higher revenue to the

farmers. Nominal charges are envisaged to be collected from the users for

utilization of such services.

3) Operation of Transport Fleet

Nominal charges could be collected from the small and marginal farmers/large

hold farmers/producers for transporting the produce from the collection centres

to the ALMIH and inputs back to farmers’ localities.

The revenue and expenses estimates for the first 5 years of operations are as set

out in the table below.



Table 12: Revenue and Expenses Estimates for the first 5 years of operations (Million Birr)

No Particulars Year 1 Year 2 Year 3 Year 4 Year 5 A Revenues Warehouse rentals 173.50 199.98 228.88 259.57 292.04 Sorting and grading facilities 39.38 43.31 47.25 51.19 55.13 Weigh bridge 0.16 0.17 0.19 0.20 0.22 Operation of trucks 7.09 7.80 8.51 9.21 9.92 Commercial space rentals 0.26 0.29 0.32 0.34 0.37 Cold Storage rentals 10.40 12.42 14.62 17.01 19.57 Total Revenues 230.78 263.98 299.77 337.52 377.25

B Expenses

Administrative expenses 8.69 8.69 8.69 8.69 8.69 Water supply charges 0.10 0.11 0.12 0.13 0.14 Power supply charges 0.13 0.14 0.15 0.16 0.18 Transport fleet – Fuel charges 15.06 16.57 18.07 19.58 21.09 Repairs and maintenance –

Transport fleet. 0.79 0.87 0.95 1.03 1.11

Other Maintenance Charges 1.30 1.39 1.47 1.55 1.64 Total Expenses 26.076 27.77 29.46 31.15 32.85

C Annual Net Profit 204.70 236.21 270.31 306.37 344.40 The following assumptions were used in preparing the project’s cash flows;

• The investment outlay on the project will be 766.5 million Birr. This consists of

680 million on plant and machinery and 50 million on working capital with 36.5

million contingency.

• The entire outlay (V) will be incurred at the beginning of the project. 30% of the

project is assumed to be financed with 229.9 million of equity capital (E),

• 20% of the project will be financed with 153.3 million of preference capital (P),

and the remaining 50% of the capital will be financed with 383.2 million of debt

capital (D) from bilateral/multilateral sources.

• The project is estimated to have an investment rate (Re) of return 15% and

preferred capital will carry a dividend rate (Rp) of 14%, debt capital will carry

an interest rate (Rd) of 10.5%.

• At the end of 5 years, fixed asset will fetch a net salvage value of 149.4 million

whereas net working capital will be liquidated at its book value.

• The effective tax rate (Tc) will be 30%. Plant and machinery will be depreciated

at the rate of 25% per year as per the declining book value method of

depreciation. Hence, the formula that is used in calculating the WACC is as

follows; WACC = [(E/V) x Re] + [(P/V) x Rp] + (D/V) x Rd X (1-Tc)


By Mesfin Raji | Project Risk 45

Based on the calculation, WACC will found to be 11%.

Table 13: Cash flow over the next five years (Million Birr)

No Years 0 1 2 3 4 5 1 Capital requirement (with 5%

contingency) (763.92)

2 Land leasing cost (44.80) 3 Outdoor works (16.80) 4 Site preparation and development (22.89) 5 Buildings and structures (210.00) 6 Machinery and Equipments (419.43) 7 Working Capital requirement (50.00) 8 Revenues 230.78 263.98 299.77 337.52 377.25 9 Expenses (other than deprec. & Int.) 26.07 27.76 29.45 31.14 32.84

10 Depreciation (yearly 25% at DBV) 157.36 118.02 88.51 66.39 49.79 11 PBT (8-9-10) 47.35 118.19 181.80 239.99 294.61 12 Income Tax (30%) 14.20 35.46 54.54 72.00 88.38 13 PAT (11-12) 33.14 82.73 127.26 168.00 206.23 14 Net salvage value 149.37 15 Recovery of WC 50.00 16 Initial outlay (763.92) 17 Operating cash inflow (10+13) 190.50 200.75 215.78 234.38 256.02 18 Terminal cash inflow 199.37 19 Net cash flow (16+17+18) (763.92) 190.50 200.75 215.78 234.38 455.39 20 Discounted at 11% cost of capital (763.92) 171.62 162.94 157.77 154.39 270.25 21 NPV 153.05 22 Discounted Pay Back (years) 4.07 23 IRR 17.65%

Since the project NPV is positive and IRR 17.65% is still greater than the cost of

capital 11%, it shows the Project is profitable in implementing in the Amhara region. It will recover its investment cost within the first phase of the project. This is good news

for the development of the second phase of the project in Eastern Amhara Region.

8. Project Risk The anticipated risk associated with the execution of the project that is expected

to come is listed with mitigating measures as follows;

• Use of supplementary irrigation significantly will reduce the risk of low yields

or crop failures and attracts private sector investment.


By Mesfin Raji | Social cost benefit analysis 46

• Rigorous screening of contract growers in terms of credit and husbandry

rating through community representatives will reduce the risk of side

marketing and poor farming practice

• Peer review mechanism will be used in many schemes where groups instituted

‘self policing’ and underwrote the loans of all members of the group.

• Insurance of crop inputs and in some cases the entire crop may prove a major

incentive to investors as well as farmers.

• Access to storage facilities such as grain silos might reduce the risk of price

volatility.

9. Social cost benefit analysis

9.1. Considerations

The social cost benefit analysis is carried out following the UNIDO’s five step

approach in which only two of the major steps emphasized in the report. The remaining

three steps namely; adjustment for the impact of the project on saving and investment,

adjustment for the impact of the project on income distribution, and adjustment for the

impact of the project on merit/demerit goods will be further assessed in the future

depending on the necessity that arise by the sponsor.

Since the financial profitability of project is already determined in the first step

of the UNIDO’s approach, the second step is obtaining the net benefit of the project

measured in terms of economic (efficiency) prices. Therefore, cost benefit analysis of

the project was determined using the shadow pricing of resources taking the following

factors into account; a) Choice of numeraire, b) Concept of tradability, c) Sources of

shadow prices, d) Treatment of taxes, e) Externalities, and labour.

a) Choice of numeraire

In general, based on UNIDO’s specification, numeraire is determined at;

domestic currency in Birr, constant price, and net present Consumption of the

agricultural and horticultural produce.

b) Tradability

The project utilizes both tradable and non-tradable resources in which the

tradable resources are valued at their border price. Hence, all vehicles used for

transportation and machineries which are used for cold storage, sorting and grading

were valued using the international currency USD translated in domestic currency at



market exchange rate (20 birr/USD). Whereas, the value on non-traded good such as

grain crops, vegetables, and agricultural inputs are measured in terms of what

domestic consumers are willing to pay for the service provided by the project

because still the government is striving to fulfil the country’s food self-sufficiency

level in all agricultural produces. Therefore, on the output side, since the impact of

the project is to increase the consumption of the product in the economy, the

measure of value is taken the marginal consumers’ willingness to pay. Hence, the

following price adjustment was carried out based on shadow prices;

• Warehouse fasciitis – birr 20/metric tonne

• Cold storage fasciitis – birr 25/metric tonne

• Grading and sorting facilities – birr 700/metric tonne

• Weighbridge – birr 70/truck

• Freight transportation – birr 5/km

On the input side also, since the impact of the project is to reduce the

availability of the input to other users, their willingness to pay for that input is

considered as social value. Hence, the following price adjustment was carried out

based on shadow prices;

• Power supply – birr 2/kwh

• Water supply – birr 15/cubic meter

c) Sources of shadow pricing

In calculating the social cost and benefit of the project, UNIDO approach

was used that suggests three sources of shadow pricing, depending on the impact of

the project on national economy. Therefore, from the project’s objectives point of

view the impact of the project is assumed to be mainly influences the consumption

in the economy which evidently makes our basis of shadow pricing to become the

consumer’s willingness to pay.

d) Treatment of taxes

Since the project’s operation augments domestic production significantly, no

tax was levied in calculating the social value of the project.

e) Externalities

The project is figure out to impart both benefit and negative consequences on

the locality of the project area in terms of creating job opportunities and clustering

of agro-processing plants within the vicinity of the project that may considered as a



benefit to the society around the project. However, the development of such big

project by itself needs conducive landscape and work area that can only be realized

at the expense of displacement or relocation of settlement areas. In this case some

households will definitely be affected by the measure that would be taken. Hence,

due to its complexity of valuing the benefit at this stage the negative effects just

incorporated by assuming somewhat 10% of the cost of setting up of the plant as

cost of negative externalities.

f) Labour inputs

The project is assumed to be run totally by local expertise and workforce

however takes labor away from other employments, and the shadow price of labor is

taken only for non-professionals that is assumed to be equal to what other users of

labor are willing to pay for this labor. Average wage rate;

• Field supervisors – birr 1,500/person/month

• Drivers – birr 2,000/person/month

• Other staffs – birr 1,500/person/month

At present conditions, for professionals the market is assumed relatively free and

there is no shadow price for wage in the labour market.

9.2. Determination of social value of the project

Valuation of the project from social point of view was done taking the factors

outlined under the preceding topic and contrasting the project from private and social

point of view. The details are given in the following table.


Table 14: Social cost benefit analysis of the project No

Years

Form Private Investor point of view (Million Birr) From social point of view (shadow pricing)(Million Birr) 0 1 2 3 4 5 0 1 2 3 4 5

1 One Shot Costs 2 land acquisition (44.80) 3 Civil works (249.69) (261.58) 4 Machinery and Equipments (419.43) (466.04) 5 Skilled Labour (3.00) (3.00) 6 Semi-skilled Labour (38.40) (27.30) 7 Working Capital requirement (50.00) (50.00) 8 Subtotal of One Shot Costs (805.32) (807.92) 9 Benefits/revenues 10 Warehouse facilities 173.50 199.98 228.88 259.57 292.04 347.00 399.97 457.77 519.14 584.08 11 Cold Storage facilities 10.40 12.42 14.62 17.01 19.57 17.33 20.70 24.37 28.35 32.62 12 Grading and Sorting facilities 39.38 43.31 47.25 51.19 55.13 55.13 60.64 66.15 71.66 77.18 13 Operation of freight

transportation 7.09 7.80 8.51 9.21 9.92 17.72 19.49 21.26 23.03 24.81

14 Weighbridge 0.16 0.17 0.19 0.20 0.22 0.22 0.24 0.26 0.29 0.31 15 Commercial space rent 0.26 0.29 0.32 0.34 0.37 0.26 0.29 0.32 0.34 0.37 16 Subtotal of Benefits 230.78 263.98 299.77 337.52 377.25 437.66 501.33 570.13 642.81 719.35 17 Periodic Costs 0.00 0.00 0.00 0.00 0.00 18 Power supply 0.13 0.14 0.15 0.16 0.18 0.25 0.28 0.30 0.33 0.35 19 Water supply 0.10 0.11 0.12 0.13 0.14 0.19 0.21 0.23 0.25 0.26 20 Rolling stock(Fuel) 15.06 16.57 18.07 19.58 21.09 15.06 16.57 18.07 19.58 21.09 21 Repairs and maintenance 0.79 0.87 0.95 1.03 1.11 0.79 0.87 0.95 1.03 1.11 22 Miscellaneous 5% 1.30 1.39 1.47 1.55 1.64 1.19 1.27 1.37 1.44 1.52 Subtotal of Periodic Costs 17.38 19.07 20.77 22.46 24.15 17.48 19.19 20.92 22.62 24.33



No Years Form Private Investor point of view

(Million Birr) From social point of view

(shadow pricing)(Million Birr) 0 1 2 3 4 5 0 1 2 3 4 5

23 Subtotal of Periodic Costs 17.38 19.07 20.77 22.46 24.15 17.48 19.19 20.92 22.62 24.33 24 Net Profit 213.40 244.90 279.00 315.06 353.09 420.18 482.14 549.21 620.18 695.03 25 Depreciation (yearly 25% at

DBV) 157.36 118.02 88.51 66.39 49.79

26 PBT (24-25) 56.04 126.88 190.49 248.68 303.30 420.18 482.14 549.21 620.18 695.03 27 Income Tax (30%) 16.81 38.06 57.15 74.60 90.99 28 PAT (26-27) 39.23 88.82 133.34 174.08 212.31 420.18 482.14 549.21 620.18 695.03 29 Net salvage value 149.37 30 Recovery of WC 50.00 50.00 31 Initial outlay (805.32) (807.92) 32 Operating cash inflow (25+28) 196.59 206.84 221.85 240.46 262.10 420.18 482.14 549.21 620.18 695.03 33 Terminal cash inflow 199.37 420.18 34 Net cash flow (31+32+33) (805.32) 196.59 206.84 221.85 240.46 461.47 (807.92) 420.18 482.14 549.21 620.18 1,115.21 35 Discounted at 11% cost of

capital (805.32) 177.10 167.87 162.22 158.40 273.86 (807.92) 381.98 398.46 412.63 423.59 692.46

36 NPV 134.13 1,501.20 37 Discounted Pay Back (years) 4.19 2.02 38 IRR 16.58% 58.2%

NB: The NPV and IRR of the Private shows some variation from the previous figure due to a rounding of error in the computation

By Mesfin Raji | Conclusion and recommendations 51

10. Conclusion and recommendations

The genesis of agro-logistics somewhat related to the idea of Harvard professor

Michael Porter who introduced the concept of industry “clusters” to denote the grouping

of actors involved in one industry (different firms producing one or related products,

their suppliers, buyers and supporting services, etc.) in a specific location(ICRA, n d).

Efforts to link small-scale farmers to markets face a number of constraints some

of them are: a) The need to diversify into new markets for higher value products, or add

value to current products through improved quality, niche markets. b) The need to build

economies of scale to compete with large farms and increase bargaining power with

buyers that require certain quantities, e.g. through collective action, farmer associations,

etc.; c) The risks associated with change: e.g. the change to new production systems or

to new relationships with other actors. d) The need to reorient research and extension

from a “supply-driven” mode of generating information led by researchers to a

“demand-driven” or “client-oriented” mode of service delivery. e) The need to improve

information flows and develops synergy between the different actors in the production

and marketing system.

Therefore, the conceived project’s main objectives will be met if only if there is

a robust and dependable supply value chain start to stimulate the agricultural practices.

That is what the government is planned and anticipating to transform the country’s

agrarian mode of cultivation and boost its competitiveness in the global market.


By Mesfin Raji | References 52

References

BoFED. (2009). Development Indicators of Amhara Region (2009/10). ANRS (p. 10).

BoFED. (2010a). 2009/10 Budget year Annual Statistical Bulletin.

BoFED. (2010b). Amhara National Regional State GTP (Amharic version). Working paper.

Bosona, T. G. (2010). Cluster Building and Logistics Network Integration of Local Food Supply Chain. SLU, Swedish University of Agricultural Sciences (p. 9).

CSA. (2009). Area and Production of Crops (Private Peasant Holdings, Meher season). Agricultural sample survey 2008/2009 (2001 E.C.) (Vol. 2009, pp. 27-38).

CSA. (2011). Area and Production of Belg Season Crops for Private Peasant Holdings. Agricultural sample survey 2010/11 (2003 E.C.) (Vol. V, pp. 24 & 40).

DOA, W.-G. (2011). West Gojjam Department of Agriculture 2003EC Annual report.

ECX. (2010). Rules of The Ethiopia Commodity Exchange.

ICRA. (n.d.). Agribusiness & Markets – Key Concepts. Learning Materials, 1-8.

IDCL. (2009). Development of Agri-Logistics Hub In Various Regions of Karnataka. Government of Karnataka.

IDCL. (2010). Pre-Feasibility Study for (Storage & Distribution) Logistics Architecture in Karnataka. Government of Karnataka (Vol. II).

MoFED. (2003). Brief Note on the 2003 (EFY) GDP Estimates series. Ethiopian Government (Vol. 2003, pp. 1-8).

MoFED. (2010). Ethiopia GTP English. Working paper.

Thornton, G. (2007). Setting up “ Composite Logistics Hub ”at Pawarkheda, District Hoshangabad in state of Madhya Pradesh on PPP Model. Government of Madhya Pradesh (pp. 1-76).

Website. (2011). ECX. Retrieved October 5, 2011, from www.ecx.com.et


By Mesfin Raji | Appendices 53

Appendices Appendix 1: Area Allocation of the Facilities Proposed for the ALMIH in west part of Amhara

No Particulars Unit Area

A Common facilities (Specialized Infra, Utilities and Special Amenities)

1 Auction Centre Sq.m 15,000 2 Loading, Unloading and dispatch centre Sq.m 46,000 3 Quality Testing Laboratory Sq.m 1,000 4 Admin Block Sq.m 1,500 5 Commercial Block Sq.m 15,500 6 Security Block Sq.m 500 7 Sub-Station Sq.m 1,000 8 Generator Room Sq.m 1,000 9 Weigh Bridge Room Sq.m 150 10 Cold Storage Sq.m 4,400 11 Warehouse Sq.m 160,000 12 Playing field for outdoor Games Sq.m 10,500 13 Grading and Packaging Hall Sq.m 4,700 14 Other amenities (canteen, Hotel, bank etc.) Sq.m 16,800 15 Rejected Produce Shed Sq.m 1,000 16 Truck parking Area Sq.m 15,000 17 Driver Dormitories Sq.m 5,000 18 Dispensary Sq.m 1,000 19 Fuel Station Sq.m 3,000 20 Service Station Sq.m 1,000 21 Admin Office - logistics Centre Sq.m 1,500

TOTAL A Sq.m 306,550 B Roads, foothath and Parking area Sq.m 70,225 C Open Space Sq.m 50,225

Total (A+B+C) Sq.m 427,000



Appendix 2: Assumptions for the Project

Assumption taken in calculating Revenues and expenses of the Project 1. Revenues

a) Service charges Receipts i. Warehouse facilities

• Annual total Agricultural Freight available 2,754,000 tonnes • Rentals assumed to be Birr 10 per tonnes per month.

ii. Cold storage facilities • Annual total Horticultural Freight available 110,000.0 tonnes • Rentals assumed to be Birr 15 per tonnes per month.

iii. Commercial space • Space available is to an extent of 50,000 square meter. • Lease rentals assumed to be Birr 10 per square meter per month. b) Grading and Sorting Facilities • Capacity of the sorting and grading lines: 500 tonnes per day. • Rentals: Birr 500 per metric tonne. c) Weigh Bridge • Number of trucks utilizing the facility: 20 trucks per day. • Rentals per truck: Birr 50 per truck. d) Operation of trucks • Number of trucks to be operated: 135. • Total distance travelled per annum per truck from the collection centres to the

ALMIH: approximately 50,000 kilometre • Revenues from operation of truck: Birr 2 per kilometre of distance travelled.

2. Operating Expenses a) Administrative expenses – Salary expenses • General Manager : Birr 20,000 per month • Assistant Manager (2 nos.): Birr 15,000 per month per person • Field supervisors(10 nos.): Birr 4, 000 per month per person • Driver and assistants (270 nos.): average salary of Birr 2,000 per month per

person • Others (20 nos.): average salary of Birr 3,000 per month per person b) Water Supply Charges • Quantity of water required to be supplied to the facilities: approximately 2000

cubic meter per month. • Water charges: Birr 8.2 per cubic meter. c) Power supply charges Electric consumption • Amount of electric power required to be supplied to the facilities:

approximately 20,000 kwh per month.



• Electric charges: Birr 1.0 per kwh. d) Rolling stock expenses • Total distance travelled by the transport fleet per annum: approximately

6,750,000 kilometers • Fuel mileage: 4 kilometers per litre of fuel. • Cost of fuel: Birr 16 per litre. Repairs and Maintenance cost: Rolling Stock • Approximately 5% of the cost of the rolling stock. Other maintenance cost • 5% of the project cost.


Appendix 3: Agricultural and horticultural production and supply of inputs in Amhara in the year 2009/10

Zone Cultivated Area in ha Meher Production in Qt Productivity

(Qt/ha)

Input Supply in Qt

Irrigation

Meher Total Grain Crops

Vegetables Root Crops

Fruits Total Fertilizers Improved seed

Total

West Amhara West Gojjam 9,095.0 567,549.4 576,644.4 9,214,516.0 239,754.7 538,947.3 43,385.0 10,036,603.0 17.4 660,450.0 25,940.0 686,390.0

East Gojjam 14,343.0 580,180.4 594,523.4 9,097,746.0 120,373.0 462,880.2 348.0 9,681,347.2 16.3 559,520.0 22,160.0 581,680.0

Awi 30,041.0 254,362.0 284,403.0 3,377,272.0 66,442.6 218,027.4 2,912.8 3,664,654.8 12.9 161,940.0 9,150.0 171,090.0

South Gonder 8,809.0 534,730.2 543,539.2 6,228,764.0 43,544.5 766,202.3 - 7,038,510.8 12.9 138,570.0 11,300.0 149,870.0

North Gonder 6,228.0 738,612.6 744,840.6 10,341,728.0 127,620.5 404,270.0 - 10,873,618.5 14.6 114,500.0 7,760.0 122,260.0

Sub total 68,516.0 2,675,434.5 2,743,950.5 38,260,026.0 597,735.3 2,390,327.1 46,645.7 41,294,734.1 74.1 1,634,980.0 76,310.0 1,711,290.0

East Amhara

North Shoa 15,145.0 522,856.0 538,001.0 7,108,359.0 89,661.1 374,559.3 17,995.2 7,590,574.6 14.1 312,670.0 26,270.0 338,940.0

South Wello 7,590.0 430,849.5 438,439.5 5,627,709.0 36,284.4 170,768.7 229.4 5,834,991.6 13.3 119,810.0 14,260.0 134,070.0

North Wello 8,787.0 258,094.5 266,881.5 3,698,082.0 31,804.4 140,367.2 - 3,870,253.6 14.5 31,580.0 7,070.0 38,650.0

Oromiya 4,724.0 61,564.6 66,288.6 839,381.0 30,136.2 - 5,318.9 874,836.1 13.2 1,470.0 450.0 1,920.0

Waghimera 1,460.0 103,612.2 105,072.2 1,188,346.0 - 8,003.5 - 1,196,349.5 11.4 98.0 1,170.0 1,268.0

Sub total 37,706.0 1,376,976.7 1,414,682.7 18,461,877.0 187,886.1 693,698.7 23,543.5 19,367,005.3 66.5 465,628.0 49,220.0 514,848.0

Region 106,222.0 4,052,411.3 4,158,633.3 56,721,903.0 785,621.4 3,084,025.8 70,189.2 60,661,739.4 14.1 2,100,608.0 125,530.0 2,226,138.0



Appendix 4: Selection parameters and composite scores of weredas in west Gojjam Zone

Woreda

Distance of Woreda center to B/dar in

Km

RI CI Population size RI CI

Unutilized land area

in ha RI CI

Productivity (Meher+

Irrigation) Qt/ha

RI CI Total Score

30% 15% 25% 30%

Bahir Dar Zuria 0.00 0.00 0.00 191,141 68.91 10.34 45% 62.24 15.56 50.96 88.13 26.44 52.34

Mecha 35.20 13.69 4.11 277,388 100.00 15.00 45% 62.47 15.62 46.31 80.10 24.03 50.54

Yilemana Densa 42.20 16.41 4.92 193,693 69.83 10.47 44% 60.65 15.16 53.33 92.24 27.67 48.39

Sekela 161.30 62.71 18.81 145,673 52.52 7.88 57% 79.65 19.91 57.82 100.00 30.00 38.98

South Achefer 59.30 23.06 6.92 143,830 51.85 7.78 56% 78.23 19.56 35.67 61.69 18.51 38.92

North Achefer 101.50 39.46 11.84 199,823 72.04 10.81 39% 54.55 13.64 38.20 66.07 19.82 32.42

Womberema 165.30 64.27 19.28 106,135 38.26 5.74 72% 100.00 25.00 40.09 69.34 20.80 32.26

Burie 149.60 58.16 17.45 112,295 40.48 6.07 50% 69.32 17.33 44.43 76.85 23.05 29.01

Gonji Kolela 61.80 24.03 7.21 111,974 40.37 6.06 50% 68.97 17.24 24.81 42.91 12.87 28.96

Dega Damote 257.20 100.00 30.00 159,946 57.66 8.65 65% 90.92 22.73 51.79 89.57 26.87 28.25

Quarite 228.20 88.72 26.62 120,473 43.43 6.51 49% 68.44 17.11 54.60 94.43 28.33 25.34

Jabitahenan 171.70 66.76 20.03 181,841 65.55 9.83 46% 63.28 15.82 37.24 64.42 19.32 24.95

Dembecha 253.00 98.37 29.51 119,308 43.01 6.45 51% 70.72 17.68 48.91 84.59 25.38 20.00

Max 257.20 100.00 277,388.0 100.00 72% 100.00 57.82 100.00

agro-logistics and market integration hub(almih)

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