136.

PROFILE ON MOSQUITO COIL

136-2
TABLE OF CONTENTS
PAGE

I.

I.

SUMMARY

136-3

II.

PRODUCT DESCRIPTION & APPLICATION

136-3

III.

MARKET STUDY AND PLANT CAPACITY

A. MARKET STUDY
B. PLANT CAPACITY & PRODUCTION PROGRAMME

136-4
136-4
136-8

IV.

MATERIALS AND INPUTS

A. RAW MATERIALS
B. UTILITIES

136-9
136-9
136-9

V.

TECHNOLOGY & ENGINEERING

136-10

A. TECHNOLOGY
B. ENGINEERING

136-10
136-11

VI.

MANPOWER & TRAINING REQUIREMENT

A. MANPOWER REQUIREMENT
B. TRAINING REQUIREMENT

136-15
136-15
136-16

VII.

FINANCIAL ANLYSIS
A. TOTAL INITIAL INVESTMENT COST
B. PRODUCTION COST
C. FINANCIAL EVALUATION
D. ECONOMIC BENEFITS

136-16
136-16
136-17
136-18
136-20

SUMMARY

This profile envisages the establishment of a plant for the production of mosquito coil
with a capacity of 33.77 tonnes per annum. Mosquito coils are combustible materials,
which have insecticidal and repelling properties to mosquitoes.
The major raw material required for mosquito coil production are extracted residue of
pyrethrum, saw dust and anti mould. Except saw dust the other raw materials have to be
imported.

136-3
The present demand for the proposed product is estimated at 27.41 tones

per annum.

The demand is expected to reach at 77.84 tones by the year 2018.

The total investment requirement is estimated at about Birr 4.65 million, out of which
Birr 980 thousand is required for plant and machinery. The plant will create employment
opportunities for 15 persons.
The project is financially viable with an internal rate of return (IRR) of 27.62 % and a net
present value (NPV) of Birr 4.64 million, discounted at 8.5%.
The establishment of such factory will have a foreign exchange saving effect to the
country by substituting the current imports.

II.

PRODUCT DESCRIPTION AND APPLICATION

Mosquito Coil is Coiled clay-like material which is set on top of included stands which
will serve as a biting and nuisance flying pest repellent when lit. When burning, they will
release a pleasant odor to people but one that is highly repellent to pests. They will burn
slowly and generally will last 2 or more hours per coil. They are used around decks,
patios and other areas where you want to help minimize nuisance flying insects.

III.

MARKET STUDY AND PLANT CAPACITY

A.

MARKET STUDY

1.

Past Supply and Present Demand

136-4
Mosquito coils are combustible materials, which have insecticidal and repelling
properties to mosquitoes. Currently, mosquito coils are produced in spiral forms to be
compact and handy. They have average burning time of more than 1 hour.

Originally, there used to exist a common thinking that mosquitoes were prevalent only in
marshy areas of the hot, lowland plains. This may be the case for malaria carrier
mosquitoes; but insects referred to with the general generic name also abound in such
highland areas as Addis Ababa, which were at one time considered immune from
mosquito infestations. Therefore, demand for the product, just as mosquito nets,
originates both from highland and lowland urban areas and some rural towns; particularly
among households who keep cattle, since mosquitoes are attracted by the dung heaps
these households store for fuel. Mosquitoes also larvaenete in areas, where unkempt grass
grows.

Mosquito coils are imported to the country mainly from neighboring Kenya. Despite its
substantial and frequent usage, there is no separate data entry for the importation of
mosquito coils in the Ethiopian Customs register. Inquiry at the customs has revealed
that the importation of mosquito coils is meshed inside of the import data for all
insecticides.
For the estimation of past supply and present demand, therefore, an approach tallying a
deductive assumption from total import of insecticides against demand estimates through
the consumption coefficient technique shall be applied. Table 3.1 depicts the quantity of
the imports of insecticides from 1997-2006.

Table 3.1
IMPORT OF INSECTICIDES {KG}
Year
1997

Import
1,095,458

136-5
1998
1999
2000
2001
2002
2003
2004
2005
2006
Total
Average

758,718
975,807
689,546
1,224,091
908,375
1,254,399
2,358,384
2,500,524
1,345,298
13,110,600
1,311,060

Source: Ethiopian Customs Authority annual external trade statistics, unpublished.

If the proportion of mosquito coils to insecticides is assumed to comprise only 2% of
total imports, average import of mosquito coils would be 26,221.20 kilograms. A single
mosquito coil wrapped in cellophane and currently seen being sold by peddlers weighs
50.0 grams. Average imported supply of mosquito coils from 1997-2006, in numeric
terms is thus calculated at 524,424 pieces of 50 gram, cellophane wrapped mosquito
coils.
Applying the 2.25% import increase rate of insecticides to mosquito coils, present supply
of mosquito coils is estimated at 548,288 pieces of 50 gram, cellophane wrapped
mosquito coils.
To determine present demand and the supply gap for mosquito coils, the end-use
method is applied. According to the population projection of the Central Statistical
Agency in 1994 the number of urban households in 2005 was forecasted to be 1,667,857.
At annual urban population growth rate of 2.8%, number of urban households in 2008 is
expected to be 1,762,564.
It is believed that 15% of these households belong to the high-incomes category and are
not expected to consume mosquito coils but rather other lighting fittings and effervescent
deodorizing chemicals as mosquito repellants. Households requiring mosquito coils,
provided they have developed the propensity to use them, would be 1,498,180. A

136-6
considerable segment of the urban poor are not inclined to spend money on items they
consider luxurious. This segment constitutes around 65% of the average-and-belowaverage income group. The target markets for mosquito coils are, therefore, the
remaining 35% of households, which number 524,363.
Assuming these 524,363 households consume a single 50-gram coil per month, the
discrepancy in the estimates by the two approaches is only 23,926 coils. Since some
households are likely to consume more than one coil a year, 27,414.40kg or 548,288
pieces of 50 gram, cellophane wrapped mosquito coils are considered to be the level of
present demand.
2.

Projected Demand

Malaria is the largest killer disease in sub-Saharan Africa; and mosquitoes are the agents
for the transmission of the disease from person to person. Side by side with malaria
eradication campaigns through insecticide spraying and environmental protection, the
usage of mosquito nets and mosquito repellants is spreading throughout the country. A
rapid adoption of preventive health care among the public is expected to raise the public
desire for using mosquito coils among others, For this reason, future demand for
mosquito coils is assumed to grow at 11% increase rate for the coming 10 years.
Based on the foregoing estimations and assumptions, projected demand forecast for
mosquito coils is presented in Table 3.2.
Table 3.2
DEMAND FORECAST FOR MOSQUITO COILS (KG)
Year

Projected

2009
2010
2011
2012
2013

Demand
30,431
33,778
37,494
41,618
46,196

136-7
2014
2015
2016
2017
2018

3.

51,277
56,918
63,179
70,128
77,843

Pricing & Distribution

The current selling price of a 50 gram mosquito coil among peddlers and street vendors is
Birr 1.00 to Birr 1.50. It is likely that the variety the peddlers sell could have been
smuggled into the country or could have expiated its repellant power due to prolonged
exposure to the sun. The once being sold in drug and farm stores fetch Birr 8.00 per 50gram cellophane sachet; i.e. Birr 160 / kilogram. The recommended factory gate price is
Birr 100 / kilogram.
Distribution can be handled through wholesales to pharmaceuticals and other wholesalers
who in turn, distribute it to drug stores and farm stores.
B.

PLANT CAPACITY AND PRODUCTION PROGRAMME

1.

Plant Capacity

The market study conducted on the demand of mosquito coil has shown that there is no
local producer and the country's requirement is totally met through import. Based on the
market study and growth rate of the product users the proposed plant capacity for the
envisaged plant is 33,778 kg per annum, working 300 days a year.

2.

Production Programme.

136-8
The production programme considers that for the first production year the plant will
utilize 80% of its capacity, and 90% in the second year. For the third year on ward the
plant will utilize its full capacity.

Table 3.3
PRODUCTION PROGRAMME
Sr.
No.
1
2

Production Year
1
2

Description
Mosquito coil (Kg)
Capacity utilization (%)

IV.

MATERIAL AND INPUTS

A.

RAW MATERIALS

27022
80

30400
90

3-10
33,778
100

The raw material of the mosquito coils is saw dust, anti mould and pyrethrum in which the
effective component for killing mosquitoes is pyrethrin. Ethiopia has a suitable agroclimatic
condition for growing pyrethrum plant.. The annual raw material requirement at full
capacity operation and the corresponding cost is shown in Table 4.1.
Table 4.1
RAW MATERIAL REQUIREMENT AND COST AT FULL
OPERATION CAPACITY
Description

Cost in '000 Birr

Unit of
Measure

Qty.

136-9

Extracted residue of
pyrethrum

Tonnes

108

Saw dust
Anti mould
carton

Tonnes
Kg
Pces

216
840
120,67
0

Total

B.

F.C
399.6

L.C
-

2.268
401.86
8

T.C
399.6

216
216
2.268
301.67 301.675
5
517.67 919.543
5

UTILITIES

Utilities required for manufacturing of mosquito coil include electric power and water. The
utilities requirement of the plant is given in Table 4.1.

Table 4.2
UTILITY REQUIREMENT AND COST
Description

Unit of

Qty.

Measure
Electricity
Water

kWh
m3

Total

V.

TECHNOLOGY AND ENGINEERING

A.

TECHNOLOGY

1.

Production Process

Cost in '000
Birr

55,000
17,000

26.05
55.25
81.30

136-10

Mosquito coil making comprises the following processes, preparation of the extracted
residue of pyrethrum to be thoroughly blended with pulverized sawdust and fed into the
kneader in which pigment, anti mould preservatives and water, are added to be blended.
The mixture which has been blended and kneaded thoroughly is broken to particles by the
crusher and is made as uniform as it is possible, then it is formed and cut into fixed
length, punched out into the proper shape by the mould packing machine.
The crude product which has gone through molding process is dried in drying net and
packed in small cartons boxes 14 gram each and repacked with two stands in carton that
contains 20 small cartons.

2.

Source of Technology

The technology of Mosquito coil making and machineries can be obtained from the
following address;

Coil Master Sdn. Bhd. No 26 jalan 5/3,Kawasan peridstrian, tamanselesa jaya.43300 seri
kembangan, Selangor, Malaysia.
Tel. + (6)038962 2522
3.

Environnemental Impact

To protect the dust emitted to the environment from the crushing process, extracting fan
shall be installed. The cost is estimated at Birr 25,000.

B.

ENGINEERING

136-11

1.

Machinery and equipment

The list of production machinery and equipment required for the plant is provided in Table
5.1. The total cost of plant machinery and equipment is estimated at Birr 980 thousand out
of which Birr 862 thousand will be in foreign currency.

Table 5.1
LIST OF MACHINERY AND EQUIPMENT REQUIREMENTAND COST
Cost 000

Sr.

Description

No.
2.

Qty

L.C

F.C

Total

1
2
3
4
5
6

Atomizer
Mixer
Kneader
Crusher
Extruding machine
Size cutting machine

1
2
1
2
1
1

49.56
57.82
-

94.8
94.8
49.56
112.06 112.06
57.82
137.92 137.92
103.4 103.4

Mould punching machine

181.02 181.02

Conveyor

129.3

129.3

Dust collector carts

10.62

10.62

10

Wire nets

34.48

34.48

11

Boiler

68.96

68.96

118

862

980

Grand Total
Building And Civil Works

Land
,

136-12

The total land requirement for the envisaged plant is estimated at 1000 m 2out of this 350
m2 is built-up area. 170 m2 is used for production facility, 120m2 for store and 60m2 is for
office building. Cost of building construction with at rate of Birr 2400 per m2 amounts to
Birr 840,000.
According to the Federal Legislation on the Lease Holding of Urban Land (Proclamation
No 272/2002) in principle, urban land permit by lease is on auction or negotiation basis,
however, the time and condition of applying the proclamation shall be determined by the
concerned regional or city government depending on the level of development.
The legislation has also set the maximum on lease period and the payment of lease
prices. The lease period ranges from 99 years for education, cultural research health,
sport, NGO , religious and residential area to 80 years for industry and 70 years for trade
while the lease payment period ranges from 10 years to 60 years based on the towns
grade and type of investment.
Moreover, advance payment of lease based on the type of investment ranges from 5% to
10%.The lease price is payable after the grace period annually. For those that pay the
entire amount of the lease will receive 0.5% discount from the total lease value and those
that pay in installments will be charged interest based on the prevailing interest rate of
banks. Moreover, based on the type of investment, two to seven years grace period shall
also be provided.
However, the Federal Legislation on the Lease Holding of Urban Land apart from setting
the maximum has conferred on regional and city governments the power to issue
regulations on the exact terms based on the development level of each region.
In Addis Ababa the Citys Land Administration and Development Authority is directly
responsible in dealing with matters concerning land.

However, regarding

the

manufacturing sector, industrial zone preparation is one of the strategic intervention

136-13
measures adopted by the City Administration for the promotion of the sector and all
manufacturing projects are assumed to be located in the developed industrial zones.
Regarding land allocation of industrial zones if the land requirement of the project is
blow 5000 m2 the land lease request is evaluated and decided upon by the Industrial Zone
Development and Coordination Committee of the Citys Investment Authority. However,
if the land request is above 5,000 m 2 the request is evaluated by the Citys Investment
Authority and passed

with recommendation to the Land Development and

Administration Authority for decision, while the lease price is the same for both cases.
The land lease price in the industrial zones varies from one place to the other. For
example, a land was allocated with a lease price of Birr 284 /m2 in Akakai-Kalti and Birr
341/ m2 in Lebu and recently the citys Investment Agency has proposed a lease price of
Birr 346 per m2 for all industrial zones.
Accordingly, in order to estimate the land lease cost of the project profiles it is assumed
that all manufacturing projects will be located in the industrial zones. Therefore, for this
profile, which is a manufacturing project, a land lease rate of Birr 346 per m2 is adopted.
On the other hand, some of the investment incentives arranged by the Addis Ababa City
Administration on lease payment for industrial projects are granting longer grace period
and extending the lease payment period. The criterions are creation of job opportunity,
foreign exchange saving, investment capital and land utilization tendency etc.
Accordingly, Table 5.2 shows incentives for lease payment.
Table 5.2
INCENTIVES FOR LEASE PAYMENT OF INDUSTRIAL PROJECTS

Scored Point
Above 75%
From 50 - 75%

Grace
Period
5 Years
5 Years

Payment
Completion
Period
30 Years
28 Years

Down
Payment
10%
10%

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From 25 - 49%

4 Years

25 Years

10%

For the purpose of this project profile the average i.e. five years grace period, 28 years
payment completion period and 10% down payment is used. The period of lease for
industry is 60 years.
Accordingly, the total lease cost, for a period of 60 years with cost of Birr 346 per m 2, is
estimated at Birr 20.76 million of which 10% or Birr 2,076,000 will be paid in advance.
The remaining Birr 18.68 million will be paid in equal installments with in 28 years, i.e.,
Birr 667,286 annually.

VI.

MANPOWER AND TRAINING REQUIREMENT

A.

MANPOWER REQUIREMENT

In order to run the envisaged plant efficiently, it needs 15 employees. The estimated
annual cost of manpower is Birr 183,000. The detail of which is shown in Table 6.1
Table 6.1
MANPOWER REQUIREMENT AND ESTIMATED ANNUAL LABOUR COST
Sr.

Description

Req.

Monthly

Annual Salary

No.
1
1
1
1
1
1
1
1
1

Salary (Birr)
3,000
900
1,200
1,000
600
550
600
600
1,500

(Birr)
36,000
10,800
14,400
12,000
7,200
6,600
7,200
7,200

No.
1
2
3
4
5
6
7
8
9

Plant manager
Secretary
production supervisor
Chemist
Operator
Assistant operator
Technician
Cashier
Purchaser/Sales man

10

Laborers

1,050

12,600

11

Driver

500

6,000

18,000

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12

Guard

Sub-Total

15

700

8,400
146,400

Employees benefit (25 % of basic

salary)
Total

B.

36,600
183,000

TRAINING REQUIREMENT

The training of operators and technician would be essential. It has to be arranged during
the erection and commissioning period by machinery suppliers. The cost of training is
estimated at Birr 35,000.
VII.

FINANCIAL ANALYSIS

The financial analysis of the mosquito coil project is based on the data presented in the
previous chapters and the following assumptions:Construction period

1 year

Source of finance

30 % equity
70 % loan

Tax holidays

2 years

Bank interest

8.5%

Discount cash flow

8.5%

Accounts receivable

30 days

Raw material local

30 days

Raw material foreign

90 days

Work in progress

1 days

Finished products

30 days

Cash in hand

5 days

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Accounts payable

30 days

Repair and maintenance

5% of machinery cost

A.

TOTAL INITIAL INVESTMENT COST

The total investment cost of the project including working capital is estimated at

Birr

4.65 million, of which 19 per cent will be required in foreign currency. The major
breakdown of the total initial investment cost is shown in Table 7.1.
Table 7.1
INITIAL INVESTMENT COST ( 000 Birr)
Sr.
No.

Cost Items

Local
Cost

Foreign
Cost

Total
Cost

2,076.00

2,076.00

Land lease value

Building and Civil Work

840.00

840.00

Plant Machinery and Equipment

118.00

862.00

980.00

Office Furniture and Equipment

100.00

100.00

Vehicle

450.00

450.00

Pre-production Expenditure*

0.00

Working Capital

204.66

204.66

862.00

4,650.66

Total Investment cost

3,788.66

* N.B Pre-production expenditure includes interest during construction ( Birr 181.17

thousand), training ( Birr 35 thousand) and Birr 100

thousand costs of registration,

licensing and formation of the company including legal fees, commissioning expenses,
etc.

B.

PRODUCTION COST

The annual production cost at full operation capacity is estimated at Birr 1.76
million (see Table 7.2).

The raw material cost accounts for 52.09 per cent of the

production cost. The other major components of the production cost are depreciation,

136-17
financial cost and direct labour and which account for 21.17 %, 8.99% and 4.98 %
respectively. The remaining 12.77 % is the share of utility, repair and maintenance,
labour overhead and other administration cost.

Table 7.2
ANNUAL PRODUCTION COST AT FULL CAPACITY ('000 BIRR)
Items
Raw Material and Inputs
Utilities
Maintenance and repair
Labour direct
Labour overheads
Administration Costs
Land lease cost
Total Operating Costs
Depreciation
Cost of Finance

Cost

919.54
81.30

52.09
4.61

49.00
87.84

2.78
4.98

36.60
58.56

2.07
3.32

1,232.84
373.80

69.84

158.70

8.99

1,765.34

100

21.17

Total Production Cost

C.

FINANCIAL EVALUATION

1.

Profitability

Based on the projected profit and loss statement, the project will generate a profit through
out its operation life. Annual net profit after tax will grow from Birr 864.88 thousand to

136-18
Birr 1.26 million during the life of the project. Moreover, at the end of the project life the
accumulated cash flow amounts to Birr 9.80 million.
2.

Ratios

In financial analysis financial ratios and efficiency ratios are used as an index or yardstick
for evaluating the financial position of a firm. It is also an indicator for the strength and
weakness of the firm or a project. Using the year-end balance sheet figures and other
relevant data, the most important ratios such as return on sales which is computed by
dividing net income by revenue, return on assets ( operating income divided by assets),
return on equity ( net profit divided by equity) and return on total investment ( net profit
plus interest divided by total investment) has been carried out over the period of the
project life and all the results are found to be satisfactory.
3.

Break-even Analysis

The break-even analysis establishes a relationship between operation costs and revenues.
It indicates the level at which costs and revenue are in equilibrium. To this end, the
break-even point of the project including cost of finance when it starts to operate at full
capacity ( year 3) is estimated by using income statement projection.
BE =

Fixed Cost

23%

Sales Variable Cost

4.

Payback Period

The pay back period, also called pay off period is defined as the period required to
recover the original investment outlay through the accumulated net cash flows earned by
the project. Accordingly, based on the projected cash flow it is estimated that the
projects initial investment will be fully recovered within 3 years.

136-19
5.

Internal Rate of Return

The internal rate of return (IRR) is the annualized effective compounded return rate that
can be earned on the invested capital, i.e., the yield on the investment. Put another way,
the internal rate of return for an investment is the discount rate that makes the net present
value of the investment's income stream total to zero. It is an indicator of the efficiency or
quality of an investment. A project is a good investment proposition if its IRR is greater
than the rate of return that could be earned by alternate investments or putting the money
in a bank account. Accordingly, the IRR of this porject is computed to be 27.62 %
indicating the vaiability of the project.
6.

Net Present Value

Net present value (NPV) is defined as the total present ( discounted) value of a time
series of cash flows. NPV aggregates cash flows that occur during different periods of
time during the life of a project in to a common measuring unit i.e. present value.

It is a

standard method for using the time value of money to appraise long-term projects. NPV
is an indicator of how much value an investment or project adds to the capital invested. In
principal a project is accepted if the NPV is non-negative.
Accordingly, the net present value of the project at 8.5% discount rate is found to be
Birr 4.64 million which is acceptable.
D.

ECONOMIC BENEFITS

The project can create employment for 15 persons.

In addition to supply of the

domestic needs, the project will generate Birr 1.93 million in terms of tax revenue. The
establishment of such factory will have a foreign exchange saving effect to the country by
substituting the current imports.

136-20