Mini Tannery Business Plan Summary

Charles Raphael

Ngaramtoni Mini Tannery

P.O. BOX 7292 Arusha Tel: 0755 038 771 Email: charnl@yahoo.co.uk

02nd September 2011

Table of Contents
EXECUTIVE SUMMARY...........................................................................................................3 BUSINESS DESCRIPTION.........................................................................................................3 Industry overview: ........................................................................................3 Company/ business description:.....................................................................4 Descriptions of products:...............................................................................5 Business/ company positioning......................................................................6 Company/ business pricing strategy..............................................................6 PRODUCTION PLAN/ SERVICE DESCRIPTION..................................................................7 Production and operation processes..............................................................7 Cost of products/ service development..........................................................8 Labor Requirements.......................................................................................9 Expenses and Capital Requirements..............................................................9 THE MARKET & COMPETITION.........................................................................................11 Customers...................................................................................................11 Market Size and Trends................................................................................12 Competition.................................................................................................12 Estimated Sales...........................................................................................13 MARKETING & SELLING STRATEGY/ PLAN...................................................................14 SWOT ANALYSIS...........................................................................................14 Marketing strategy.......................................................................................15 Method of Sales...........................................................................................15 Advertising and Promotion...........................................................................15 MANAGEMENT/ ORGANIZATION......................................................................................16 Description.................................................................................................. 16 Organizational Structure..............................................................................16 Ownership....................................................................................................18 Board of Directors/Board of Advisors............................................................18 Support Services..........................................................................................18 FINANCIAL PLAN....................................................................................................................18 Financial Risks.............................................................................................18 Descriptive financial plan (extracts from financial annexes).........................18 SUPPORTING DOCUMENTS/ ANNEXES.............................................................................18 Funding Requirements ................................................................................19 Cash flow statements...................................................................................20 Balance sheet..............................................................................................20 Income statement........................................................................................20

EXECUTIVE SUMMARY Livestock industry has an important role to play building a strong national economy, and in the process reducing inequalities among Tanzanians by increasing their incomes and employment opportunities, while nurturing the natural resources. A national policy is in place and several strategies are being implemented to achieve the goal, for example, MKAKATI WA KUFUFUA NA KUENDELEZA SEKTA NA VIWANDA VYA NGOZI NCHINI-The Tannery Industry Revival and Development Strategy This paper presents setting up a tannery in Arumeru District which is to produce leather from hides and skins available in the Arusha and Manyara with plenty of cattle, goats and sheep with a total herd of 3470380 units before the Ihemi operation. The installed capacity of the tannery is 390000 square feet per annum, will create permanent employment to 31 people and around 22 casual laborers. It earns net profit of Tshs 272,015,000/= in the first year. The business requires investment to a tune of Tshs 130,585,000/= of which Tshs 56,000,000/= is loan. The project implementation time is 12 months. The project includes an effluents disposal component to protect the environment. Potential customers are leather products producers in the region present and stimulated through the Company and SIDO action

BUSINESS DESCRIPTION Industry overview: In 2009, the Minister for Industry, Trade and Marketing had an ambitious need to reorganize the leather sector so that Tanzania export finished products to increase real value. She was reacting to the worsening situation of the leather industry following the global financial crisis. Tanzania is the third cattle rearing country in Africa after Ethiopia and Sudan. Yet, economic benefits from this sector are worthless and have not dribbled down the value chain. In 2007 Tanzania exported semi-processed hides worth Tshs 16 billion and finished leather products fetched 8 billion. In fact, it is wise to export raw hide and skins or semi-processed leather on the ground of added value advantage. Leather tanning industry is consequential of the livestock industry. Tanzania government should not entertain the hides and skins collected to be exported in their raw form. Additionally, the leather goods should be produced locally in order to create exports and import substitution leading to foreign exchange. The government has come up with a policy called National Livestock Policy of December 2006 outlining various strategies of developing the livestock sector, the leather industry alike. Consequent to the policy, an Integrated Hides, Skins and Leather Sector Development Strategy for Tanzania has been prepared to address a cross-section of issues related to the production, processing and marketing of quality hides and skins, processed

leather, footwear and leather products and through various strategic interventions to revamp leather sector industry in the country. This has been successful following inter-ministerial collaboration and coordination among governmental ministries, institutions, Private sector and other stakeholders. Implementation of the strategy will lead to the following key result areas; a significant improvement of both quality and collection of hides and skins, increased domestic processing and manufacturing capacities and reduce export of raw hides and skins while increasing export of value added leather products. This is in line with the vision of hides, skins and leather sector industry which states that By the year 2025, Tanzania should be able to produce high quality hides and skins all processed to finished leather, footwear and leather goods for domestic and export market while protecting the environment Leather industry is very energetic as it has the potential to create both forward and backward linkages. During 2007 the country exported hides and skins worth Tshs 8.5 billion, the hides and skins which, if were processed in the country, could save foreign exchange spent on importing leather goods worth Tshs 10.7 billion and leather worth Tshs 54 million. Investing in tanning is thus a worthwhile business enterprise having full backing of the government as it is in line with its policy. The cumulative installed capacity of operating and the ones under construction tanneries is 49 million square feet of hides and skins, while hide and skins availability is 105 million ft2. There is room for establishment of more tanneries which will utilize the 56 million square feet capacity gap. This project is only one of the many leather tanning industries which can be started. Company/ business description:

Vision statement for the company/ business Our vision is to lead promotion of lively leather industry, generating plentiful employment and incomes from diverse generated leather related industries and businesses

Our mission is to produce high quality leather enabling the livestock industry proportionately and increasingly contribute to the national GDP in a sustainable manner. Values and objectives of the company/ business We will be careful to produce what our customers deserve and value for their money. And our objective is to increase the hides and skins processing capacity by 7.0 % to produce good quality leather and promote utilization of the same.

We are in the process of establishing a company by the name of Ngaramtoni Mini-Tannery Company Ltd. Our Lawyers are formalizing registration of the company. The first Directors are Mr. E. Ngetuya and Dr A. Lolusoki. The former director is an accountant and has diverse knowledge on planning and management and the later is a qualified livestock expert. Professional qualifications and work experience of the directors constitute a sound asset for the running of this project. Brief qualifications of these Directors: Mr. E. NgetuyaMBA (Mzumbe University), CPA, BCOM- UDSM and Dr. A. Lolusoki- PhD- SUA, MSC-Veterinary Medicine (SUA), BSC-General AgricultureSUA. This project idea was conceived following a workshop organized and facilitated by Officials from the Ministry of Livestock during December 2008. The theme of the workshop was Investment potentiality in leather industry. Both directors mentioned above participated in the workshop, and at the end of the workshop agreed to bring together their experiences and knowledge/profession and conceived this project. The project is a small scale hides and skins processing undertaking to produce leather. The business earmarks to cater for the leather goods manufacturers in the Northern Highlands. The project will give priority and use both stimulational and developmental marketing in order to create and develop demand. As such the business will work closely with SIDO and LAT (Leather Association of Tanzania). SIDO is a Parastatal institution charged with the responsibility of promoting small scale industries and handcrafts in the country. Small scale leather goods manufacturing entities will contribute 90% of the market of this business and hence SIDO is the right collaborator. LAT is a voluntary association of leather manufacturing, trading and leather goods manufacturing individuals and institutions. One of the objectives of LAT is to help members further their businesses. This business will apply for LAT membership in order to benefit from LATs services. In order to reach and attend leather requirements of the many leather- products producers in the villages, the business will enter into a distribution arrangement with SIDO and TCCIA branches in the regions. The two institutions shall also render promotional services, apart from us, on behalf of our business in their respective regions. Our business shall give priority to environment protection and that our products shall conceal in them real value for the money offered by our customers. Descriptions of products:

We will produce leather through a process involving tanning of hides and skins. Leather is animal skin protein combined with tannis, small amounts of oils, dyes, finishes and moisture. Leather is used in the production of a comprehensive range of products from simple and complicated goods classified into Footwear; leather garments; leather goods like harnesses, gloves, bags, tents belts, chair etc.

Leather has the following properties:a) Mechanically, it is resistant to abrasion, flexing, deforming and stretch. b) It is comfortable when one wears, it permeates air and water vapor, has high storage capacity for perspiration, thermal insulation and suppleness, and c) Appearance-wise it is color fast, resistant to wet and dry rubbing, thus it is easy care. Business/ company positioning We will specialize in the production of leather for apparel and container and holders leather products. These are shoes, bags, belts, key holders, gloves etc. We are targeting to cater for small scale local leather goods manufacturers whom this project will stimulate and develop their demand by working in collaboration with SIDO offices in the Northern Highlands. Our leather is to be produced from locally available hides and skins, and hence our motto Be proud of your own leather, buy and promote local livestock industry. At present, our tannery will be the second tannery in the whole Northern Highlands after that Moshi. The leather found in a few shops, for example there are only two shops found at Ngaramtoni in Arusha City, is imported from Kenya. The leather is not branded or do not have any distinctive features. Company/ business pricing strategy Our leather price will be derived from our production cost plus a profit margin of between 20 and 25%. The business will rely and make use of the market-penetration pricing objective in order to capture a large share and stimulate the growth of the market. The current retail price of a square foot of leather is between Tshs 2,500/= and 2,650/=. This price is inclusive of transport element and import duty as it is imported from Kenya. Preliminary costing of our leather came up with a price of Tshs 1,800/= per square foot of leather. This gives our customer a pricing leverage of between Tshs 700/= and 850/=per square foot of leather. However, this business will offer Tshs 2050/= per square foot of finished leather. This higher price than the computed price above, but lower than the price prevailing in the market, is preferred in order to check off the impact of frequent rising costs of production inputs and thus maintain price of our leather over a longer period of time. We could not ascertain leather prices offered by the existing tanneries in the country. They sell all what they produce to leather products manufacturing industries in Dar es Salaam and export most of it.

PRODUCTION PLAN/ SERVICE DESCRIPTION

Leather production has not started. We have an idea which we intend to implement after the appraisal through this process finding it a viable business and upon having an interested financial sponsor.

Production and operation processes Leather production process involves three following steps, after wet or salted hides and skins are procured from the farmers or butcher men. i. ii. iii. Removing of undesirable constituents i.e hair, flesh, fat and some interfibrillary matters, leaving a concentrated network of high-protein collagen fibres, greatly softened and interspaced with water Tanning treating hide with agent called tannin, which displaces the water and then combines with and coats the collagen fibres. Tanning increases resistance to heat, hydrolysis and micro organisms. Finishing, obtaining proper thickness, moisture, lubrication and esthetic appeal.

There will be no sub-contracting or buying components of the end product from anywhere as the whole process do not provide. The project will be located at Ekenywa-Ngaramtoni in Arumeru-Arusha. The location is ideal for this project for various reasons. One, tanning produce bad odour as such it has to be located away from residential areas. Ekenywa area is located far away from residential premises. Two, the area has all relevant infrastructures for industrial ventures like electricity and water. Three, it is easily accessible and it is in the proximity to the market and the transportation network especially road. Hence it is nearest to the sources of the raw materials and the market of the finished product. Proximity to the sources of raw materials and market is going reduce or minimize freight costs of raw materials and finished goods. Leather industry is associated with bad odors and pollution. Effluents include proteins, hair, salt, lime sludge, acids etc. To address the pollution impact, the project will provide a component for treatment, which involves screening of hair, precipitation settling and removal of chrome, vegetable tans, proteins and filtration and aeration of the effluent.

Cost of products/ service development This project will have a maximum capacity of processing 100 pieces of hides and skins each of 20 square feet per day. No prototype leather is to be made. Raw materials requirement at this proposed capacity is given in annex 13. Hide to leather yield or conversion ratio is 65%. Thus 1300 square feet of leather will be produced per day or 390,000square feet per year when capacity utilization is 100%. It is assumed that the business operates for 300 days in a year. The annual raw materials inputs cost, when project operates at full capacity, is Tshs 217,475,000/= same as Tshs 557.628/= per square foot of produced leather. The salaries and wages annual bill projection is Tshs 53,640,000/= equal to Tshs 137.538/= per square foot of produced leather. Cost of producing one square foot of leather (excluding utilities, wear and tear and financial charges is Tshs 695.166/= The project will in the first year operate at 80% of its operations and there after at 85% and 90% of its capacity during the second and third year onwards capacity respectively. Full capacity utilization cannot be attained for following reasons: Workers need time to acquaint themselves with the functioning and operations of the project Electricity supply is not reliable. There are frequent informed and uninformed power break outs. Other unforeseen contingencies like strikes, shortage of supplies and machinery breakdown.

The projected quantity of hides and skins consumed and corresponding leather to be produced at the projected business operating capacity is shown in table 1 below. Table 1A Item/Year Capacity utilization (%) Hides and skins (ft2) Leather (ft2) Year 1 80 480,000 312,000 Year 2 85 510,000 331,500 Year 3 90 540,000 351,000

Table 1 B : Cost of raw hides and skins and proceeds from leather produced Product Capacity utilization Year 1 80% Qty(ft ) Value Tshs(000)
2

Year 2 Qty 85% Value Qty

Year 3 90% Value

Hides/skins

480,000

144,000

510,000
8

153,000

540,000

162,000

Leather

312,000

639,600

331,500

679,575

351,000

719,550

Labor Requirements The project will create employment to 31 people. Technical personnel will be given training during the project implementation period. A number of tanneries which were established during the 1970s closed down due to poor management and other various financial and economic problems. Many of the employees of these defunct companies form the labor market and are unemployed. The project will advertise for employment in the newspapers during project implementation and recruit a few qualified personnel who will in turn conduct training mentioned above. The directors have approached Mr. John Mwakabaga, who is a retrenched technician of Moshi Tannery, to take the position of production manager. Mr. Mwakabaga will also be entrusted with the task of looking for other qualified technical personnel. In order to minimize employment turnover, the business will offer an attractive remuneration and incentive package relatively good salaries and social benefits. Among the incentives to be provided are transport and housing allowance, medical care and paid for annual leave. The annual remuneration budget for the first year is Tshs 53,640,000/= Expenses and Capital Requirements Operating Expenses In order to succeed in doing this business the following expenses must be incurred per year when project operated at full capacity:Table 2: Operating Expenses Per Year Item Official Traveling Casual labor Advertisement Trade fairs Insurance Telephone Postage Transport charges Accounting/audit fees Board expenses Total Tshs pm 700,000 400,000 500,000 100,000 20,000 2,000,000 Tshs pa 8,400,000 4,800,000 6,000,000 6,000,000 1,500,000 1,200,000 240,000 24,000,000 1,500,000 2,500,000 56,140,000

Table 3: Annual Operating Expenses at Projected Capacity Utilization Particulars/year Capacity utilization (%) Official Traveling Casual labour Advertisement Trade fairs Insurance Telephone Postage and emails Transport charges Accounting and audit fees Board expenses Total Capital Requirements To start production, we need machinery, building, furniture and equipments. The list of machinery and equipments including installation charges envisaged in this project are valued at Tshs.49, 200,000/=. Cost of furniture is Tshs 6,800,000/= Building contemplated in this project according to machinery supplier quotation, including overhead tank is to cost Tshs 28,000,000/=. Cost of office equipments is Tshs 7,500,000. Thus total fixed capital initial outlay is Tshs 91,500,000/= as shown in Table 4 below: Table 4: Total Fixed Capital Initial Outlay Particulars/year Machinery and equipments Furniture and fittings Buildings Office equipments Total Year 1 49,200,000 6,800,000 28,000,000 7,500,000 91,500,000 Year 2 NIL NIL Year 3 Year 1 80 6,720,000 3,840,000 6,000,000 6,000,000 1,500,000 1,200,000 240,000 19,200,000 1,500,000 2,500,000 48,700,000 Year 2 85 7,140,000 4,080,000 5,000,000 6,000,000 1,500,000 1,200,000 240,000 20,400,000 1,500,000 2,500,000 49,560,000 Year 3 90 7,560,000 4,320,000 5,000,000 6,000,000 1,500,000 1,200,000 240,000 21,600,000 1,500,000 2,500,000 51,420,000

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Cost of Goods Other production costs which are imperative in this project are Electricity and water. Average monthly bill for these utilities is estimated at Tshs 2,500,000/= or Tshs 30,000,000/= pa. This estimate takes into account the installed motor power of the project and that 20,000 litres of water are required per day. The cost of goods produced during the first three years is shown in the table 5 below: Table 5: Cost of Goods during the First Three Years Particulars/Year Capacity utilization (%) Raw materials (annex 13) Manpower salaries and wages (annex 14) Water and electricity Overheads (Table 3) Total Year 1 80 173,980,000 53,640,000 24,000,000 48,700,000 300,320,000 Year 2 85 184,854,000 53,640,000 25,500,000 49,560,000 313,554,000 Year 3 90 195,727,000 53,640,000 27,000,000 51,420,000 327,787,000

THE MARKET & COMPETITION Customers Leather is an industrial good. Hence our customers will be manufacturers of footwear, handbags, belts and the alike. The targeted manufacturers are those working in the small scale and medium sector. This type of customers are scattered every where in the Southern Highlands and quite a number of them are in the rural areas. These and many more, which are to join this trade, following our Company SIDO action of promoting leather craft trade, will contribute 75% of our market share. The rest will be customers engaged in retailing business and leather technology training institutions. At present the few footwear producers visited in Arusha City complained of short and erratic supply of leather.

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Market Size and Trends As mentioned earlier the Government is all out to implement its livestock policy of 2006. This policy addresses the goals set in the National Strategy for Growth and Reduction of Poverty (NSGRP). One of the objectives of this policy is to promote and maximize use of other none meat and dairy products of this sector. Hides and skins treatment and production of leather and establishment of leather products producing businesses is emphasized. As such the market for leather is expected to increase by virtue of implementing this policy. Qualitatively our companys markets will cover the whole of the Southern Highlands targeting present and stimulated leather products producers, retailers and leather craft training institutions. Tailoring and footwear making and repairing are very common crafts or trades. These are everywhere in the villages and towns. Most of them are run manually, the reason for their being started easily and everywhere. A study conducted by the Leather Association of Tanzania revealed that there is one domestic shoe maker in every 1,600 people. Tanzania has a population of around 40,000,000 people and thus there are roughly 25,000 cobblers. And proportionately about 4,000 shoe makers are found in the Northern Highlands. The market size excludes customers producing other leather products like belts, bags and many others. Special efforts being undertaken by SIDO to promote leather goods producing small scale industries is likely to further increase the market size. For example, SIDO Mbeya is organizing a training session during June 2009 on leather goods manufacturing technologies. Competition At present, leather products producers in the Northern Highlands obtain leather from Kenya. Large scale Tanning Companies in Morogoro, Kibaha and Dar es Salaam export most of the leather they produce and the rest is sold to leather goods producing enterprises in Dar es Salaam and Morogoro. These producers would not pose a stiff threat to competition for the following reasons; one, they are more export oriented, two their huge investment in machinery and buildings sore up price of their leather in the prevailing situation in which they operate very much below their installed capacity. Three Leather transportation cost to this area still raises the price above ours; and four our motto Be proud of your own leather, buy and promote local livestock industry coupled with intensive marketing effort will help check competition from the existing leather producers. Hides and skins dealers pose another competition front. These dealers have built goodwill with slaughter houses and have established water tight hides and skins collection network. There are two types of hides and skin buyers. Those who buy for export motive and the ones who buy the hides for reselling. This business shall work closely with the latter hide and skins resellers. We will enter into an agreement with them to supply the raw materials.

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Estimated Sales Annual leather production at 100% capacity is 390,000 ft2. The proposed selling price will be Tshs 2,050/= per ft2, hence annual sells at full capacity is Tshs 799,500,000/=. However, the business is to operate at 80%, 85% and 90% of its installed capacity, during year one, two and three onwards respectively. The capacity gap is intended to account for delays during first year arising from time lost in gaining mastery of the machinery and for unforeseen contingencies like power blackout, machinery breakdown, etc. It is assumed that the project will sell all what it will produce and evenly throughout the year. Our business will confine itself to catering for the Northern Highlands markets with more than 2500 small scale leather products manufacturing entities. This number or the market size consists of shoe makers only. The government through SIDO is preparing to introduce production of other products. As such our customer base is expected to widen up. Realization of the sales projections greatly depend on cooperation from SIDO and TCCIA regional offices. The two institutions and particularly SIDO are closer to our customers, namely leather goods manufacturers. It is one of the SIDO objectives to assist SMEs identify sources and procure raw materials. SIDO regional offices have expressed willingness to cooperate with this business by collecting leather orders from leather manufacturers in their respective regions and submit them to us. Our business will deliver the orders to SIDO offices. Table 6: Sales and Cost Projections PRODUCT SALAES UNIT PRICE

Sales and cost projections at the proposed capacity, is given in appendix 21.

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MARKETING & SELLING STRATEGY/ PLAN SWOT ANALYSIS STREGHTHS The directors are knowledgeable of the business Part of start up capital available Security for loan assured Commitment and dedication of the Directors Networking capabilities of the Directors Entrepreneurial skills high WEAKNESSES Lack of deep technical know how

OPPORTUNITIES Government support in place Support institutions exist Market is rich and diverse Raw materials readily available Labor market exist Financing institutions willing Existence of requisite infrastructure.

THREATS Rapid changing technology Competition from substitutes like plastics Diseases affecting cattle or livestock industry Taxation regimes high Sabotage by community around

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Marketing strategy To begin with, we will start catering for the Arusha Region market and gradually move to other regions in the Northern regions. We will reach our customer through advertising in the local radio and TV networks, use SIDO regional offices and TCCIA to send message to potential leather goods manufacturers. Leaflets and brochures detailing our activities will be posted at these offices. The production capacity of 390000 ft2 of leather per year do not meet the demand for the product in the Zone, thus our marketing efforts will be focused to the Zone only in the short run. Method of Sales Leather will be sold to both retailers and end users (manufacturers). Retailers from far will place orders with us by post, email or telephone or through our representatives in the regions- SIDO and TCCIA. Orders so received will be delivered at our cost, during the first two years as an incentive, and Tshs 2,000,000/= will be set aside for this purpose. Our business will offer order soliciting, handling and delivery incentives to SIDO and TCCIA considered in the distribution chart as retailers. Advertising and Promotion As mentioned earlier, we will not relax promoting our product simply because we will be the only producers in the Zone. Instead we will pursue intensive marketing through advertisements in the local radios and TVs. Brochures and leaflets will be prepared and distributed to potential customers through SIDO and TCCIA for customers in the respective regions. We will attend trade shows both local and National. Budget for this is provided each year.

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MANAGEMENT/ ORGANIZATION

Description The overall management of the organization will be vested on the Board of Directors. The board will comprise of individuals with a diverse of professions ideal for the running of this business, like accountants, leather and allied products experts, Industrial Engineers. A six member Board is proposed at the beginning. The Board will sit quarterly and it will be responsible for formulating policy of the company, approve plan and budget of the business. The day to day functions of the business will be the domain of the General Manager. S/he will translate policy and objectives formulated by the Board into action by devising strategies of implementation, planning, controlling and other managerial function. S/He will be assisted by three functional Managers in Production, Marketing and Finance. The latter staff will be professionals in their respective functions and duties.

Organizational Structure The Companys organization structure of our business, based on functions of different staff is given in figure 1 below. The structure takes into account the basic management principals like the span of control and specialization principals.

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Board of Directors

Managing Director

Administration & Human Resource Department

Accounts & Finance Department

Professional & Production Department

Sales & Marketing Department

Employees

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Ownership A company in the name of Ngaramtoni Mini Tannery Limited is undergoing registration. It is founded by two Directors whose names and brief description: Charles Raphael- MBA (Mzumbe University); B.A (UDSM) and Fadhili Mwavika- LLB (UDSM) Board of Directors/Board of Advisors Our company or business is in the planning stage. As such there is no Board of Directors existing. However we suggested earlier we will form a board of directors comprising six members. It was further insisted that the board members will be drawn from bodies of professions which are relevant to the running and prosperity of this business. Support Services The Company will seek professional expertise whenever need arises. Accounting and auditing, legal and other professions related to leather technology development are to be sourced from professional bodies within the country. A budget for the same is provided for, categorized under accounting and auditing fees, in this document. The business has set aside Tshs 1,500,000/= for procuring professional expertise. FINANCIAL PLAN

Financial Risks External factors which can contribute to failure of our project are if Government support and purpose of improving the livestock sector ceases, the anticipated key manpower does not come-by and if the present world financial crisis persists and hit our economy. Other factors which will impact negatively on our business are if the projected sales are not realized, financial support do not come by, hide and skins dealers sabotage, SIDO and TCCIA cooperation ceases and if anticipated qualified labor turns down our offer for employment. Our business will also face financial risk if the market of leather shrinks, anticipated promotion of leather products manufacturing campaign by SIDO does not succeed. Descriptive financial plan (extracts from financial annexes) The financial statements annexed reveal that the projected generate a net profit of Tshs 4,295,000 during the first year. The liquidity of the business is unsatisfactory during the first due to the burden of the loan. The negative liquidity trend slightly improves during year two and is likely to become positive during the third year. SUPPORTING DOCUMENTS/ ANNEXES **Annexes are not counted as part of Business plan summary pages**
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Funding Requirements

Fixed capital requirement is: Machinery and equipments Building and water infrastructure Furniture Office equipments Tshs 49,200,000 28,000,000 6,800,000 7,500,000

Total

91,500,000

Production cost during the first year is Cost of goods (direct cost) 300,320,000 refer table 5

Operating expenses (indirect costs)

48,700,000 refer table 3

Total

349,020,000

To start production we require funds to meet production cost for four weeks same as Tshs 29,085,000/= termed as working capital component

The proposed funding portfolio is as below:

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ITEM

EQUITY

LOAN

TOTAL

Working capital Machinery and equipments Building Office equipments Furniture

29,085,000

29,085,000

9,200,000 12,000,000 7,500,000 6,800,000

40,000,000 16,000,000

49,200,000 28,000,000 7,500,000 6,800,000

Total

64,585,000

56,000,000

120,585,000

The project will borrow money to finance capital to be repaid in five years time. The loan is expected to attract an interest rate of 15% straight line.

Cash flow statements The business generates sufficient cash to meet any payments due. Cash on hand during the first year is Tshs 45,533,000 Balance sheet The balance sheet depicts increasing net worth of the company. Income statement The income statement given in annex 4 show that the business of the company is profitable. Net profit grow from Tshs 272,015,000 in the first year to 299,522,000 in the third year

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