, R~R IC ED 1 .rt PA-68a This report is for official use only by the Bank Group and specificaDy authorized organizations or personfL It may not be published, quoted or cited without Bank Group authorization. The Bank Group does not accept responsibility for the accuracy or completeness of the report. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION APPRAISAL OF ADDIS ABABA DAIRY DEVELOPMENT PROJECT ETHIOPIA June 15, 1971 Agriculture Projects Department CURRENCY EQUIVALENTS US$1 = Dollars (E$) 2.50 E$l = us$o.4o WEIGHTS AND MASURES Metric System 1 kilogram (kg) = 2.20 pounds (lb) 1,000 kg (1 metric ton) = 2,200 pounds 1 kilometer (km) = 0.62 mile 1 hectare (ha) = 2.47 acres 1 square kilometer (km2) = 100 ha = 0.39 sq ml = 247.11 acres 1 liter (1) = 0.26 gallon 1,000 millimeters (mm) = 39.37 inches ABBREVIATIONS iErG = Imperial Ethiopian Government DDA = Dairy Development Agency AADI = Addis Ababa Dairy Industry DBE = Development Bank of Ethiopia EIC = Ethiopian Investment Corporation AIDB = Agricultural and Industrial Development Bank GDP = Gross Domestic Product ETHIOPIA ADDIS ABABA DAIRY DEVELOPMENT PROJECT TABLE OF CONTENTS Page No. SUMMARY AND CONCLUSIONS ................... .i-ii 1. INTRODUCTION . ................ . ....................... 1 II. BACKGROUND ....... * ... .... , , , ........* . .......* 1 A. General ............. , .,. 1 Climate ............ ..........1...... Population and GDP ......................,. 2 Exports and Imports . 2 B. The Agricultural Sector . .2......... ................. 2 Contribution of Agriculture to the Economy. . 2 Land Use ........... ............. ................. 3 Crops ..., 3 Livestock . . 3 Animal Health ........... . . 4 C,. The Dairy Industry ............ 4 D. Agricultural Credit ........................, 5 LII . THE PROJECT .................... . , , , ......... . 6 A. General Description .. ..... .. ..... 6 Definition and Purpose .... .................. 6 Project Area .. .... ...... ................ 6 B. Detailed Features ...... ....... . ...... 7 On-Farm Development ........ . .. . ..... . ... 7 Milk Collection and Processing Facilities. 8 Technical Services .............. ..... 8 C. Cost Estimates .................. .................... 10 D. Proposed Financing .................................. 11 E. Procurement ................ .................. 12 F. Disbursement ..13 G. Organization and Management ..14 It. Lending Operations ..16 I. Auditing .. ......... 17 This report is based on the findings of an IDA appraisal mission to Ethiopia in April/May 1970, composed of Messrs. D. N. Sutherland and M. J. McGarry (IDA) and Messrs. K. Cheriyan (FAO/IBRD) and H. Ochs (Consultant). 2- Page No. IV. MARKETS, PRICES, PRODUCER BENEFITS AND REVENUE GENEMTION 17 Markets . . ............... * ...... 17 Prices .... 18 Producer Benefits ... . . ........ 19 Revenue Generation ....19 V. ECONOMIC BENEFITS AND JUSTIFICATION .................. 20 VI. RECOMMENDATIONS ...... .. ....... 20 ANNEXES 1. Dairy Cattle Husbandry and Disease Control 2. Credit Institutions and Agricultuwal Credit 3. Livestock Procurement, Demand and Supply of Dairy Heifers Table 1 - Project Demaon and Supply of Dairy Cattle Figure 1 - Effect of Age and Price of Heifers en Rate of Return 4. Abermossa Cross-Breeding Ranch - 800 Cows Table 1 - Herd Development PTojections 5. Private Cross-Breeding Ranch Model - 200 Cows Table 1 - Herd Development Projections Table 2 - Investment Costs *Aa Fixn= Ig Table 3 - Projections of laeoae aed Operating Costs Table 4 - Financial Proj*ctions 6. Holleta Dairy Stud Farm - 100 Cows Table 1 - Herd Development Projections Table 2 - Investment Costs and Financing Table 3 - Income Projections Table 4 - Operating Costs Projections Table 5 - Financial Projections 7. Medium Size Farm Model - 40 Cove Table 1 - Herd Development Projections Table 2 - Investments Gomas and Financing Table 3 - Projections of Inecm and Operating Costs Table 4 - Financial Projectios -3- ANNEXES (Continued) 8. Small Farm Model - 10 Cows Table 1 - Herd Development Projections Table 2 - Investment Costs and Financing Table 3 - Projections of Income and Operating Costs Table 4 - Financial Projections 9. Shola Dairy Plant - Technical Aspects Table 1 - Financial Projections Table 2 - Projections of Income and Operating Costs Table 3 - Investment Costs and Financing 10. Phasing of the Lending Program 11. Estimated Schedule of Disbursmenent of IDA Credit 12. Dairy Development Agency Table 1 - Technical and Administrative Staff Requirements Table 2 - Costs of Technical and Administrative Services Table 3 - Breakdown of Costs of Technical and Administrative Services Table 4 - Financial Projections 13. Dairy Development Agency Organization Chart 14. Milk Marketing and Prices in Addis Ababa 15. Financial Rates of Return Table 1 - Privately Owned Farms Table 2 - Holleta Dairy Stud Farm - 100 Cows 16. Economic Rate of Return MAP Ethiopia/Project Area ETHIOPIA ADDIS ABABA DAIRY DEVELOPMENT PROJECT SUMMARY AND CONCLUSIONS i. This report appraises; a Project for development of dairy produc- tion in the Addis Ababa area to supply milk to that city. Present daily milk supply to Addis Ababa, a city of about 685,000 people, varies sea- sonally between 13,000 and 25,000 liters, representing a very low per capita consumption. ii. About half the present milk supply has been marketed in recent years through the Addis Ababa Dairy Industry (AADI), a section within the Ministry of Agriculture, which operated the Shola Dairy Plant and a milk collection scheme. AADI increased its annual milk throughput from 290,000 liters in 1961 to 3,070,000 liters in 1969. iii. The Addis Ababa area is well suited ecologically to development of a dairy industry because of its temperate climate and moderate to high rainfall. Major constraints to such development in the past have been lack of adequate technical knowledge and services for dairy cattle husbandry and shortage of improved dairy cattle. iv. The Project would provide for on-farm development of approximately 240 small and 110 medium size dairy farms to carry a total of about 7,000 dairy cows; for importation and breeding of dairy cattle for these farms; for technical services to farmers; for additional facilities and organization for collection, processing and marketing of milk; and for hiring of consultant services to carry out feasibility studies and prepare a second livestock development project. v. An autonomous, Government owned agency, the Dairy Development Agency (DDA), would have the major responsibility for administration of the Project. It has taken over from the Ministry of Agriculture the assets of AADI includ- ing Shola Dairy Plant and the milk collecting centers. Onlending to farmers would be handled by the Agricultural and Industrial Development Bank (AIDB), acting as agent for the Government. vi. Proceeds of the Credit would be passed on to DDA and AIDB by the Government for approved Project purposes at an interest rate of 6-1/2% per annum for a period of 20 years, including a grace period of six years. AIDB would make sub-loans for approved Project purposes from the proceeds of the IDA Credit at an interest rate of 9-1/2% per annum for periods not exceeding 14 years, including a grace period of five years. vii. Because of the inadequacy of existing technical services within the Ministry of Agriculture, the Project would provide, through DDA, for techni- cal, veterinary and artificial insemination services to participating farmers. - 2- viii. The total costs of the Project are estimated at US$6.5 million. An IDA Credit of US$4.4 million is proposed. It would finanoe approximately US$1.0 million of local currency expenditure as well as the foreign exchange component of US$3.4 million, which is equivalent to 53% of total project costs. Government and DDA would finance about US$1.6 million equivalent and farmers about US$0.5 million equivalent. ix. The categories of Project cost are: US$2.8 million equivalent for on-farm investments, including US$1.6 million for dairy cattle prscueant; US$0.3 million equivalent for further investments in Shla Dairy Plant and milk collection centers; US$1.8 million equivalent for technical services and administrative costs of DDA; US$0.5 million equivalent for iucremental working capital for participating farmers and DDA; US$0.4 miLllion equiva- lent for carrying out feasibility studies; and US$0.6 mil;lion jLvaleat fo-r contingencies. In addition existing Government assets at an estJmted value of US$0.6 million equivalent would be taken over by D=. X. Approximately 5,500 heifers of Eurepeax dairy bxeed (principally Friesian) would be required for Project purposes, of which sa 3,900 would have to be imported. International comptitie bUWing, is not appropriate for purchase of livestock, but adequate safebArda would bwe eafuore to en- sure that due regard would be given to pricea a" qu4ty conaidzations. xi. The fiancial rates of return to participating faxasra are esti- mated at 17% to 21%. These estimates axe baau on retail mU prices of US$0.20 equivalent per liter in the initial years of the Project, de- clining to US$0.16 equivalent by year 11. This latter price is na higher than the retail milk price in most West European countries and it is con- siderably below the price in most other African cities. xii. On the basIs of a projected retail price of US$0.16i eWmalent per liter for milk, rate of returu to the econmy on the Proj-eat is eatiamted at approximately 12%. The Project woul4 hav important side bneafits,.in istro- ducing improved dairy production methoda and., establishing a. unclwo about 7,200 dairy type cattle as a ba&Is for further expansion of- daftylag. i-s Ethiopia. xiii. The Project is suitable for an IDA Credit of US$44.4 milion.. The Borrower would be the Imperial Ethiopian Government. ETHIOPIA ADDIS ABABA DAIRY DEVELOPMENT PROJECT I. INTRODUCTION 1.01 The Imperial Ethiopian Government (IEG) has requested an IDA Credit to assist the financing of a dairy development Project to increase the supply of milk to the Addis Ababa market. This would be the third IDA Credit for agricultural development in Ethiopia. The two previous credits were for the Wolamo Agricultural Development Project, 169-ET, made in Novem- ber 1969 and the Humera Agricultural Development Project, 188-ET, made in May 1970. 1.02 This Project, the Addis Ababa Dairy Development Project, would include on-farm development of about 350 dairy farms in the Addis Ababa region and improvement to the system of milk collection, transport, pro- cessing and marketing for Addis Ababa. Ancillary to these objectives, it would provide for importation and breeding of dairy cattle and for technical services to dairy farmers. An autonomous agency, the Dairy Development Agency (DDA), has been established to execute parts of the Project. 1.03 The livestock and meat industry is also one of Ethiopia's best prospects for development, provided a number of serious constraints can be overcome. In April/May 1970, a Bank Group mission visited Ethiopia to study and make recommendations on an overall strategy for livestock development, to help identify projects and to make recommendations on project prepara- tion. Funds would be provided within this credit to finance feasibility studies for future livestock development projects. 1.04 This Project was prepared initially by a project preparation committee of the IEG assisted by staff of the Permanent Mission in Eastern Africa. This report is based on the findings of an appraisal mission, com- posed of Messrs. D. N., Sutherland, M. J. McGarry (IDA), K. Cheriyan (FAO/ IBRD) and H. Ochs (consultant), which visited Ethiopia in April/May, 1970. II. BACKGROUND A. General 2 2.01 Ethiopia, with an area of about 1.18 million km , lies between latitudes 3° and 180 N in East Africa, on an elevated plateau broken by the Rift Valley, extending from the Red Sea southwest to Lake Rudolph. Climate 2.02 The high altitude more than the latitude determines climate and land use. The highlands north of the Rift Valley are about 2,000 to 3,000 m above sea level, but some mountains are higher than 4,000 m. The climate - 2 - of the highlands generally is moderate, with only small variation during the year and high rainfall, but it is hot and dry in the highlands south- east of the Rift Valley, as well as in the lowlands. The country can be divided into four climatic and ecological zones. (a) the mountain zone above 3,200 mi where high rainfall and lo temnperatures preclude cultivation; (b) a cool zone with average temperatures from 10' to 18^C, rainfall above 1,000 on and altitudes between 2,100 and 3,200 m; (c) a temperate zone with average temperatures between 16* and 20C and altitudes between 1,500 and 2,100 m; and (d) the hot zone below 1 500 m, which has an average temperature above 20 C and low rainfall. Population and GDP 2.03 The population of Ethiopia at about 25 million is increasing at approximately 2X per year. About 92% of the people ldme in mural areas but urban population is rising rapidly. During 1961-4969, GDP grew at a rate of about 4.5% per year. In 1969 it totalled US$1.5 billiou, nearly 60% of which came from agriculture. Per capita income at US$63 is one of the lowest in the world. Exports and Imports 2.04 In 1968, agriculture generated about 85% of total de,ptrts, which were valued at US$106 million. Coffee contributed about 582 of experts., and oilseeds, vegetables and hides and skins shared second place, each with about 9%. Although imports far exceed exports there has been uo serous balance of payments problem due to capital inflow. However., Ethiqpia,must diversify her exports and replace imports by domestic production ln crier to achieve a reasonable growth of the economy. B. The A&1cul.tural Sectar Contribution of agriculture to the Eoon.2y 2.05 The seooney of Ethiqpia is based UaWgely on subsistence;agricul- ture. The average farm size is estimated4at 3.3 ha, but about fi0 of *he 5 million UfarerS cultivate less than :.2 ha. Agriculture provides 90Z of emiployment. The gmas value of a UinuYnural production increased over the period 1961 to 19&9 at a rate of smgb 2X% y year,, whereas total GDP bad a growth rate of about 4.5X per "ot Muw the same period.. The growth in agriculture barely kept pace with -oulation increase. -3- Land Use 2.06 Only 8% of the total land area of Ethiopia is under cultivation while the remainder is taken up by grazing grounds (28%), open brush and scrub (25%), open woodland (3%) and areas not suitable for plant and live- stock production (36%). Crops 2.07 Ihe different ecological zones allow cultivation of numerous crops. Teff, wheat, barley, maize, sorghum, millet and pulses are grown in the cool and temperate zones. Conditions for the cultivation of coffee, tea and citrus are particularly favorable. The production of a variety of fruits and vegetables is important in view of their export potential. Use of around 1 million ha of potentially irrigable land would permit increased cultivation of industrial crops such as cotton, oilseeds, sugar cane and sugar beet and of high yielding forage crops. Livestock 2.08 With about 26 million cattle, 12 million sheep and 11 million goats and about 56% of the total land surface suitable for grazing, Ethiopia's livestock represents a major national resource. This resource, however, makes a disproportionately small contribution to national income and export earn- ings due to unsatisfactory management, seasonal shortages of feed supply and diseases. 2.09 The indigenous cattle belong to the Zebu type. Of particular im- portance are the Borana cattle in the South, which are highly valued for meat production. Under good management, the indigenous cattle show good growth characteristics but poor milking abilities (400 to 700 liters per lactation of 150 to 180 days). 2.10 Of the 26 million cattle, it is estimated that between 6 and 7 million are working oxen. Sample surveys indicate that, depending on the different regions, only 27% to 35% of the cattle population are breeding cows. A survey in Southern Ethiopia showed that two-thirds of the calves born survived one year and 60% two years. Thus, with an interval of ap- proximately 18 months between calving, the number of progeny that survived to an age of two years per 100 cows was about 40, which is considered to be low. The information derived from this survey is accepted in Ethiopia as being generally applicable to the whole country. 2.11 Grazing is generally on a communal basis in the pastoral areas. In cultivated regions, it is mostly on an individual basis. The typical herd in agricultural regions has five to 10 animals. Some farmers have no cattle and up to 80% have only a few head to provide draught power and milk for home consumption. Herds are larger in the pastoral southern provinces but the majority of herds there contain less than 20 animals. -4- 2.12 Pasture management is poor and overstocking is common. Scarce stock watering facilities are often a serious limitation to efficient exploitation of the available resources, especially in the pastoral areas. 2.13 The fodder resources are natural grassland supplemented by crop residue and stubble in the cultivated regions. Most of the r^isfall occurs during a period of three to four months, so that there are long periods of malnutrition. Feeding of hay during the dry season is practiced ow.dairy farms around the larger cities; elsewhere no hay is fed. Fodder production, preparation of silage and rotational grazing are unknown. 2.14 The large seasonal variation in fodder availability results iu a very poor growth rate of animals, Cattle are generally over five-years of age before they are ready for slaughter and have a body condition satis- factory only for the most modest standard of carcass quality. Animal Health 2.15 The major epidemic diseases of cattle, rinderpest, foot-and-mouth disease (types A, 0 and C) and contagious bovine pleuropneuaonias(CBPP), occur in Ethiopia. Effective vaccines are available for controlFof these diseases. Anthrax, blackleg and haemrrbhagc sptica4ema aleo occur spora- dically but they also can be controlled by vaccination. The tkclhborne diseases, heartwater, babesiosis and anaplamosis, have bme remcrded in the Addis Ababa area, but can be controlled by regular dipping or spraying. The most serious tick-borne disease, East Coast Fever, occurs in Ethiopia but not in the Addis Ababa region. Internal parasites, including liver fluke, are a serious problem in cattle ih the highland areas. However, they present little problem with dairy cattle that are housed. Generally, commercial dairy farmers take adequate measures to control all chows disease conditions and tick infestation, while owners of native cattle do very little in this regard. C. The _Dairy ;Idusty 2.16 Although milk is produced from-native Zebu cattle ftr home consumption throughout Ethiopia, cotmercial milk production has buen eastab- lished only in the Asmara and Addis Ababa areas. In the Asmara areaa there are about 25 commercial herds with about 3,500 improved dairy cow. There appears to be little if any scope for increasing production in this area as the market is not expanding. 2.17 In the Addis Ababa area4 a 8sytem of milk collection, prQoessing an,d marketing has been operated by the Addis Ababa Dairy Industry (AADI), a s.ction within the Ministry of Agriculture. It operated a number of mik collection centers and the Shola Datry ftont, vhich has capacity to pasteur- ize and bottle 30,000 liters of mi-lk per dafy on one shift. UNICEF assisted in the establishment of the dairy plant and the milk collection system. In connection with this Project, the plant and the collection and marketing fa- cilities have been turned over to the Dairy Development Agency (DDA). There are approximately 40 commercial farms with herds ranging from 10 to 250 im- proved dairy cows; about 30 supply milk through DDA. Around 1,250 smaller dairy farmers also supply milk to DDA. There are, in addition, an indeter- minate number of individuals owning one or two cows and selling small amounts of milk independently. Most of the commercial herds comprise cattle of the European dairy breeds and their crosses, while the herds of small farmers are practically all native cattle. Dairy cattle husbandry and disease control are discussed in more detail in Annex 1. 2.18 There are no reliable figures on actual milk supply to Addis Ababa as the amounts sold outside the DDA marketing system are not recorded. Sales by AADI increased by approximately 160% between 1965 and 1969. In 1969, AADI's daily average sales were 8,500 liters with a range from 5,900 liters in April to 11,700 liters in October. A survey in September 1969 indicated that "hawkers" were supplying about 4,000 liters per day. Sales by the large commercial farmers are estimated to average about 4,000 liters per day. Overall daily milk sales probably range from about 13,000 liters during the dry season (March-April) to 25,000 liters in the flush season (September-October). 2.19 Population of Addis Ababa is estimated at about 685,000, with an annual growth rate of 6.2%. However, only a small proportion of this popu- lation has sufficient income to be able to purchase milk regularly. DDA operates a number of retailing booths through which it sells milk in 1/2- liter bottles at a price of US$0.20 equivalent per liter (para 4.06). At this price, demand exceeds supply. Milk sold by commercial farmers and "hawkers" sells at prices well above the DDA price. Towards the end of 1970, DDA commenced marketing of reconstituted milk, made from imported skim milk powder, at a price of US$0.12 equivalent per liter. D. Agricultural Credit 2.20 Non-institutional agencies, charging high interest rates, consti- tute at present the main source of agricultural credit in Ethiopia. The major constraints to expansion of institutional credit are the predominance of holdings operated by tenant farmers who have little or no security of tenure and the absence of legal provisions for chattel mortgage. The Govern- ment has recently merged the former Development Bank of Ethiopia (DBE) and Ethiopian Investment Corporation (EIC) into one new credit institution, the Agricultural and Industrial Development Bank (AIDB), along lines proposed by a Financial Intermediaries Reorganization Commission, appointed by Government to study and report on this issue. Prior to the merger, DBE advanced medium- and long-term credit to both small and large farmers. However, it had a poor record of recovery performance and consequently a weak financial position. EIC extended credit in agriculture only to relatively large farming enter- prises. The Commercial Bank of Ethiopia (CBE), another state-owned bank, deals almost exclusively in short-term credit. Certain special agencies, - 6 - such as the Chilalu anid Wolamo Agricultural Units, functioning as part of the Ministry of Agriculture, and the FAO Fertilizer Program also deal in short-term production credit in specific areas but ttae total volume of credit advanced is low. The cooperative movement is still at a very early stage of development and, with a few exceptions, cooperatives have yet to emerge as viable institutions for channeling credit. The banking institutions in Ethiopia also have very little experience in financing livestock or dairy development. Agricultural credit is discussed in more detail in Annex 2. III. THE PROJLCT A. General Description Definition and Purpose 3.01 The objective of the Project is to increase production of milk for the Addis Ababa market. It would provide for on-farm development of approximately 240 small farms (average of 10 milking cows each), and 110 medium size dairy farms (average of 40 milking cows each) including impor- tation and breeding of dairy cattle for these farms; for establishment of about seven ranches to breed cross-bred dairy heifers, of one dairy stud farm and one farm to be used for reception of imported dairy cattle; for technical services to farmers; for additional facilities and organization for collec- tion, processing and marketing of milk; and for employment of consultants to carry out feasibility studies and prepare future livestock development proj- ects. An autonomous agency, the Dairy Development Agency (DDA), has been created to execute all aspects of the Project except on-lending to farmers, which will be handled by AIDB acting as agent for the Government, and the feasibility studies on future livestock projects. Project Area 3.02 Participating dairy farms would be located in Shoa Province with- in a radius of 120 km of Addis Ababa; ranches for breeding of dairy heifers would be located in the highland area within a radius of 250 km of Addis Ababa (see Map of Project Area). 3.03 The altitude of the Project area is in the range of 2,200 to 2,500 m. The climate, which is temperate, is quite suitable for cattle of the European dairy breeds or crosses between these breeds and native cat- tle. Average annual rainfall of the Project area is in the range of 800 to 1,200 mm. Despite the seasonal nature of rainfall, with an annual dry season of about six months, it is adequate for growth of productive pastures and crops. However, seasonal effects on livestock and milk production are signtficant. -7- B. Detailed Features On-Farm Development 3.04 An essential feature of the farm development proposals would be the use of improved cattle of the European dairy breeds or their crosses to replace native cattle, which have very low capacity for milk production. As improved type dairy cattle are in very short supply in the Project area, provision would be made for procurement of cattle of the European dairy breeds from the Asmara area and from overseas and for breeding of cross-bred dairy cattle. 3.05 Dairy Cattle Importation. In its application for finance for the Project, the IEG proposed importation of about 3,800 pregnant heifers about two years old and 200 bulls from Kenya at an estimated laaded cost of US$400 equivalent each. However, financial projections indicate that, in the case of the medium size farms, purchase of weaner heifers, aged 6-10 months, is likely to give better returns than purchase of pregnant heifers (Annex 3). This system would have the added advantage of enabling farmers to gain experience in handling exotic cattle before they come into milk. In the case of pregnant heifers, purchase from Kenya would be much cheaper than from alternative more distant sources. With weaner heifers, the advantage is much less, largely because freight is a much smaller component of total landed cost. However, Kenya may be unable to supply sufficient numbers. Herd models and financial projections are therefore based on purchase of weaner heifers at US$240 equivalent, which is considered adequate to cover the price that may have to be paid to obtain them from Western European countries. DDA would take over from the Ministry of Agriculture the Shola Dairy Farm and use it for holding imported dairy cattle for about one month to enable them to become acclimatized before being transferred to individual farmers. 3.06 Dairy Cattle Breeding. To ensure a supply of cross-bred dairy heifers, provision would be made to undertake cross-breeding between Friesian bulls and native cows on six private ranches and one Government ranch. For this purpose, the Abernossa ranch, owned by the Ministry of Agri- culture, would be transferred on lease to DDA for eight years from the start of the Project. Friesian bulls have already been introduced to the Abernossa herd for mating with Borana cows (Annex 4). The herd and financial projec- tions and investment schedule for a model cross-breeding ranch are given in Annex 5. Cross-bred heifers from these sources would not be available for sale to participating small farmers until the fourth year of the Project. DDA would also take over from the Ministry of Agriculture its dairy stud farm at Hlolleta and increase the production of Friesian stud bulls for sale to dairy farners (Annex 6). 3.07 Medium Size Farms. The average farm in this category would be de- veloped to maintain 40 milking cows of a European dairy breed. Thirty weaner heifers would be purchased in year 1 and 20 in year 2. In the herd projec- tions, fairly liberal estimates of wastage from mortality and culling have been made because of the initial inexperience of farmers in handling improved type dairy cattle. In addition, investments would be made for fencing, -8- quarters for employees, dairy buildings, water facilities, dairy and other equipment and for fodder and pasture production (Annex 7). It is expected that sub-loans will be made to approximately 10 existing and 100 new farmers in this category. 3.08 Small Farms. For the small farms, native cows would be replaced by cross-bred dairy heifers through purchase and by mating native cows to Friesian bulls by artificial insemination. From either of these sour.ces, cross-bred heifers would not come into milk production until the fourth year of the Project. Investments on small farms would be for purchase of heifers and for fencing, dairy buildings, water facilities, dairy and other equipment. Herd and financial projections for a model of a small farm are given in Annex 8. The small farms to be assisted are in existence now. 3.09 Projections for both categories of farms are based on a feeding system involving heavy use of concentrates for milk production and for rear- ing heifers. There is a good supply of fodders such as wheat bran and pro- tein-rich oilseed cakes, which are used for compounding concentrate rations for dairy cattle. At the existing price, equivalent to US$0.06 per kg, this system of feeding for milk production is profitable. In the long torir, it may be feasible to change over to a lower cost system of milk production based largely on home-grown fodders, including improved pastures, foder crops and grain crops. The eanvironment and soils are suitable for this type of production but further field studies are needed to determine suit- able local techniques for pasture and fodder production. Milk Collection and Processiug Facilities 3.10 At present there are 32 centers for collection and tranp*rt of milk to the processing plant at. Shola operated by DDA. The Project would provide for establishment of 16 new milk collection centers and replacement of eight temporary ones. The exiating facilities of the Shola Dairy Plant were constructed with the assistance of and under supervision of UNI=EF. Proposals for purchase and installation of additional equipment to izcreae, milk processing capacity of the plant from 3Q,000 liters to 5O,000 liters per day have been drawn up in consultation with the UNICI;F BegitoXul (tice for East Africa. Finance for these additios would be included in the Project. Details and estimated costs are given in Annex 9. inQ contracts under this category would be awarded without the certification of an apropm- riate UNICEF representative that they are in accordance with sound engineer- ing practices. Assurances to this eff-ect were obtained durtug negotiations. Technical Services 3.11 A Production Division would be estalhished within DDA, with responsibilities for providing technical services to participating farmers. These would include farm plan preparation and supervision, advisory services on dairy cattle husbandry, disease contrcl services and an artificial insemi- nation (A.I.) service. Provision would alan be made for construction of extra accommodation at the Holleta Dairy Stud Farm to enable DDA to con- duct short training courses for dairy farmers and dairy farm managers. Assurances were obtained during negotiations that the above services would be provided, during the life of the sub-loans to the farmers. 3.12 Because of the presence of serious infectious diseases and of cattle ticks and several serious tick-borne diseases (para 2.15), a high level of veterinary services would be provided to ensure that adequate dis- ease control measures would be enforced. As the Veterinary Division of the Ministry of Agriculture is inadequately staffed to provide the required level of service, personnel would be employed under the Project for this purpose. Assurances were obtained during negotiations that cattle on par- ticipating farms would be vaccinated at agreed intervals against rinder- pest, foot-and-mouth disease and contagious bovine pleuropneumonia and that satisfactory procedures for control of cattle ticks and tick-borne diseases would be enforced, during the life of the sub-loans to the farmers. 3.13 In the long term, the best and cheapest method of providing a supply of improved dairy cattle will be by grading up native cows by mating to bulls of European dairy breeds. To this end, an A.I. service would be provided by the Production Division of DDA for participating dairy farmers at a fee. For small dairy farmers, A.I. would be much more economical than maintaining a bull. It would also have the advantage of reducing the level of infertility in dairy herds due to infectious diseases. Semen for use in the A.I. service could be imported at low cost (about US$0.40 per dose) and local technicians could be trained as inseminators. 3.14 The Agricultural Research Institute, financed by a UNDP/SF Project, has done some research work on production of improved pastures and fodders for cattle at its field station at Holleta. An amount of US$100,000 would be provided under the Project to carry out field studies and establish demonstration plots of improved pastures and legumes within the Project area. It is proposed that a program of work in this field be organized by Government in consultation with DDA and the Agricultural Research Institute. Assurances were obtained during negotiations that approval would be obtained from IDA before funds allocated for this purpose were committed. An amount of US$30,000 equivalent would be included, as part of the technical services costs, for employment of consultants to advise DDA on milk processing and marketing. 3.15 The Bank Group livestock review and identification mission (paragraph 1.03) identified six potentially bankable sub-projects, which could possibly be incorporated into one or more comprehensive livestock development proj- ects. Based on its recommendations, an amount of US$350,000 equivalent would be included in this Credit to finance feasibility studies and prepara- tion of future projects. Assurances were obtained during negotiations that the Government would obtain IDA approval on the consultant firms and the individual consultants to be engaged for these studies and on the terms and conditions of their engagement. - 10 - C. Cost Estimates 3.16 Total Project cost is estimated at approximately US$6.5 million equivalent. This includes incremental working capital requirements during the disbursement phase, but excludes the value of existing assets to be taken over from the government by DDA. The estimates are based on prevailing prices in Ethiopia. A contingency allowance has been included in each category. In the case of imported livestock this is based solely on.an allowance for possible price increase. For a8l other catego-ries, contin- gency allowance is based on possible increases in both price and physical inputs. In view of the relative price stability in Ethiopia in recent years there appears to be no reason to allow for higher price contingency on locally procured goods than on imported goods. The foreign exchange component is approximately US$3.4 million equivalent, or 53% of total Project cost (Annex 10). 3.17 Technical services and administrative costs at US$1.8.million represent nearly one-third of total Project cost. Because of the pioneer- ing nature of this Project, a high level of technical., veterinary and A.I. services would be required. These services would be applicable in the future to a much larger development of dairylng in the Project area and in other parts of Ethiopia. In addition, the establishment of, DDA a.a8 new entity to execute the Project necessitates meeting,fairly heavy costs for administration. The major categories of Project cost are shown below: - 11 - Total Project Cost E$ 1000 US$ '000 Equivalent z /I 12 CategOrc LOCal Foreign Total Local Foreiln TOtal TPC FEC On-Farm Investment Livestock 1,535 2,395 3,930 614 958 1,572 25 61 Other 1 715 1 475 3 190 686 590 1,276 20 45 Sub-total T3Y 37 7 1,300 1,548 2,848 ZE 5 4 New Investment in Shola D5airy Plant Buildings & Equipment 254 337 590 101 135 236 4 56 Vehicles 47 111 158 19 44 63 1 70 Sub-total 40748 48T 1 79 299 5 59 Technical Services & Administrative Costs 2,020 2,595 4,615 808 1,038 1,846 29 56 Feasibility Studies 250 875 1,125 100 350 450 5 85 Total Investment Cost 5,821 7,788 13,609 2,328 3,115 5,443 83 57 Incremental Working CaPita1 1,191 - 1,191 477 - 477 8 Contingencies Price 397 502 899 159 201 360 5 56 Physical 243 263 503 97 104 201 4 52 Sub-total 640 765 1,402 256 305 561 9 54 Total Project Cost 7,652 8,553 16,205 3,061 3,420 6,481 100 53 Existing Assets Taken Over Shola Dairy Farm 95 - 95 42 - 42 - - Shola Dairy Plant 919 - 919 368 - 368 - - Holleta Dairy Stud Farm 350 - 350 140 - 140 - - Sub-total 1,364 - 1,364 550 - 550 - - /1 Total Project Cost. 7E Foreign Exchange Component. D. Proposed Financing 3.18 The estimated Project cost would be financed as follows: - 12 - (US$ '000 Equivalent) Farmers DDA AIDB Government IDA Total Category Amount Amount Amount Amount Amount % Amount On-Farm Investment Private Farms 400 - - 44 2,333 84 2,777 DDA Farms - 12 - - 59 83 71 Sub-total 400 __9 - --a 2,392 83 2,848 Shola Dalry Plant - 59 - - 240 80 299 Technical Services & Administrative Costs - 808 - - 1,038 56 1,846 Feasibility Studies - - - 100 350 77 450 Incremental Working Capital 38 - 439 - - - 477 Contingencies 48 89 44 380 561 Total Project Cost 490 968 527 144 4,400 68 6,481 % of Total Project Cost 8 15 7 2 68 100 Existing Assets Taken Over - - - 550 - - 550 3.19 The proposed IDA Credit of US$4.4 million equivalent would finance 68% of total Project cost. US$3.4 million, or 77% of the Credit, would finance foreign exchange costs while US$1.0 million or 23% would finance local currency expenditure. Assurances were obtained during negotiations that funds would be provided to DDA either through the banking system or from the Government's own budget to enable it to meet its own working capi- tal requirements. The IDA Credit would meet the estimated foreign exchange compontant of the cost of the consultant services to carry out the feasibility studies in relation to proposed future livestock development projects. E. Procurement 3.20 All purchases of dairy cattle to be financed by the Credit would be subject to the approval of the Production Manager of DDA. Purchases of dairy cattle from outside Ethiopia for Project purposes would be organized and ef- fected by DDA to fulfill firm orders by farmers taking into account price quotations from potential suppliers in at least three different countries as well as production standards and suitability for Ethiopian conditions. All importations would be subject to veterinary requirements laid down by the Director of the Veterinary Services of the IEG. In particular, all cattle would be certified free from East Coast Fever and vaccinated against foot-and- mouth disease (Types A, 0 and C), rinderpest and contagious bovine pleuro- pneumonia within the three months preceding arrival in Ethiopia. Assurances - 13 - were obtained during negotiations that procurement and importation of cattle would be carried out in accordance with the above conditions. 3.21 Any contract estimated to cost over US$20,000 equivalent for pur- chase and installation of equipment for Shola Dairy Plant and for purchase of vehicles by DDA would be subject to international competitive bidding. Goods and services required for on-farm development would be obtained by farmers through existing commercial channels, where they are readily avail- able and where there is adequate competition. Other expenditures by DDA, except for reimbursements of staff, would be made in accordance with pro- cedures to ensure a satisfactory degree of local competition. Assurances were obtained during negotiations that procurement of goods and services would be carried out in accordance with these conditions. F. Disbursement 3.22 The Credit would be used to finance: (a) 100% of long-term sub-loans to farmers for approved Proj- ect purposes in cases where such sub-loans do not exceed 90% of the total costs of the corresponding on-farm in- vestments; (b) 90% of long-term sub-loans to farmers for approved Project purposes in cases where such sub-loans exceed 90% of the total cost of the corresponding on-farm investment; (c) foreign exchange component of cost of technical and admin- istrative services of DDA and cif costs of vehicles and other equipment imported specifically for the Project; (d) 80% of cost of construction of milk collection centers and milk retailing centers and other construction for Shola Dairy Plant for approved Project purposes, and 70% of the cost of equipment procured locally for the Project; (e) 80% of expenditure for approved Project purposes on farms operated by DDA; and (f) foreign exchange expenditure for feasibility studies for the proposed livestock development projects, and 70% (the estimated foreign exchange component) of expenditure for exploratory drilling for water for purpose of these feasi- bility studies. 3.23 Disbursement of the Credit would be extended over six years as shown in the following schedule: _ 14 - Project Year Category 1 2 3 4 5 6 Total ---------------- US 000 ------------------- On-Farm Development 480 618 458 376 280 180 2,392 Shola Dairy Plant 82 34 34 57 16 17 240 Technical Services & Administrative Costs 223 250 218 141 109 97 1,038 Feasibility Studies 125 125 100 - - - 350 Contingencies 80 93 74 60 43 30 380 Total 990 1,120 884 634 448 324 4,400 For medium size farms, commitments would be made during the first four years of the Project and each subloan would normally be disbursed over three years. For small farms commitment would be made during the first three years of the Project and disbursement of individual subloans over four years. Plan- ning of total Project expenditure and of disbursement of the Credit by quarters are shown in Annexes 11 and 12. G. Organization and Mknagement 3.24 As the Project would involve fairly large-scale commercial opera- tions, it would be appropriate for it to be administered by an autonomous authority operating on a comercial basis. DDA has been set up for this pur- pose. The objectives of DDA are to develop milk production and milk market- ing in Ethiopia. It would be authorized to engage in purchase, collection, transport, processing and marketing of milk; to operate farms producing milk or breeding dairy cattle; and to provide technical, disease control and A.I. services to dairy farmers. 3.25 DDA has taken over the assets of the Addis Ababa Dairy I*dustry, namely the Shola Dairy Plant, the milk collection centers serving that plant and the equipment used in collecting, transporting, processit&g And marketing of milk. It has also taken over from the Ministry of Agricultute the Holleta Dairy Stud Farm and the Shola Dairy Farm (para 3.06). 3.26 The Board of Directors of DDA consists of the Minister for Agri- culture or his delegate as Chairman; one representative from each of the Ministries of Finance, Commerce, Industry and Tourism, National Community Development and Social Affairs; one representative each from the Municipal- ity of Addis Ababa and the Agricultural and Industrial Development Bmnk; and one representative from the milk producers. During negotiations, it was agreed that any changes in the charter of DDA, made without prior agreement of IDA, which would materially and adversely affect DDA's ability to execute ttte 1'roject, could be considered a default under the Credit Agreement. 3.27 The above organizational arrangements differ from those embodied ill the Plan of Operations between the UNICEF and the Government under which - 15 - UNICEF financed the establishment of the dairy plant and the milk collec- tion system. However, UNICEF has agreed that the new arrangements are ap- propriate for DDA's enlarged responsibilities and UNICEF and the Government have agreed that they will make appropriate amendments to their plan of operations. These amendments would be a condition of effectiveness of this credit. 3.28 The chief executive of DDA would be the General Manager. There would be a Production Division, under the direction of a Production Manager, responsible for provision of on-farm technical services, farmer training, veterinary services and an A.I. service; it would also be responsible for drawing up development plans for individual farms, which would form the basis for applications for subloans under the Project. The Processing and Market- ing Division, under the direction of the Processing and Marketing Manager, would be responsible for operation of the Shola Dairy Plant and for collec- tion, transport, processing and marketing of milk. A Financial Manager would be responsible for financial management of all aspects of DDA's operations. 3.29 The staffing requirement and organization chart proposed for DDA is presented in Annex 13. A qualified and experienced Production Manager, acceptable to IDA, would be recruited on terms and conditions acceptable to IDA. IDA would also be consulted and given time to comment on the persons to be appoinited and the terms and conditions of appointment for the posi- tions of General Hanager, Financial Manager, Processing and Marketing Man- ager, Chief Veterinary Officer, Artificial Insemination Specialist and Chief Dairy Development Officer. It would be a condition of effectiveness that appointments had been made to all of the above positions, except the positions of Artificial Insemination Specialist and Chief Dairy Develop- ment Officer. In its application, the Government-stated that a number of these positions would have to be filled by non-Ethiopians. The question of recruitment of non-Ethiopians was discussed with the Government during ap- praisal and again during negotiations. It is not expected that there will be any difficulty in this regard. It is likely that some could be supplied through bilateral aid agencies. Ethiopian counterparts would be appointed and trained to assume the duties of positions to which non-Ethiopians are appointed. Assurances on the above points were obtained during negotiations. 3.30 Assurances were obtained during negotiations that, in those cases where non-Ethiopian& are appointed to any of the positions mentioned in para- graph 3.29, DDA would be required to meet only the local costs of their em- ployment. These are approximately equivalent to those which would be in- curred if Ethiopians were employed in the same positions. The remaining costs would be met by the Government as a grant to DDA from the proceeds of the credit as a development cost. In order to avoid delay in meeting the conditions of effectiveness (para 3.29), it was agreed during negotiations that we would propose that retroactive financing be provided to enable DDA to proceed with recruitment of the Production Manager and possibly some other non-Ethiopian personnel. During negotiations it was also agreed that retro- active financinig should be proposed to enable the Government to proceed with feasibtlity studies for a second livestock development project (para 3.15) without delay. A total amount of US$100,000 equivalent is proposed as retro- active financing from January 1, 1971. - 16 - H. Lending Operations 3.31 Assurances were obtained during negotiations that procedures ac- ceptable to IDA would be established for on-lending of funds from the IDA Credit to DDA for approved Project purposes, at an interest rate of 6-1/2% per annum repayable over 20 years, including a grace period of six years, except for that portion of the costs of employment of non-Ethiopian staff, which would be provided as a grant (para 3.30). The arrangements would be ratified in a Project Financing Agreement between the Government and DDA before Credit effectiveness. Assurances were obtained during negotiations that the Government would provide an advance of not less than US$100,000 equivalent as initial working capital for DDA, before Credit effectiveness. 3.32 Due to the recent establishment of AIDB and the fact that it is still in the process of evaluation of the loans acquired from its predecessor agencies, it was decided that, at least initially, AIDB would act as an agent of the Government in making loans to participating farmers and that project funds would thereby be kept separate from AIDB's own accounts. the Govern- ment would open a Project Account in the National Bank of Ethiopia into which it would deposit quarterly in advance such amounts as are estimated to be re- quired to enable AIDB to make disbursements on sub-loans for the quarter im- mediately following. AIDB would deposit repayments of principal plus interest at 6-1/2% into the Project Account. These arrangements could be modified with the Association's approval following a satisfactory appraisal of AIDB's finan- cial prospects, in connection with a proposed Bank Group financing of AIDB, 3.33 Applications by farmers for subloans would be received initially by the Production Division of DDA. Technicians of this Division would visit the farm, assess the technical feasibility of the farmer's proposal and draw up with the farmer a farm development plan and financial projection for the per- iod of the proposed subloan. Subloans would be made only on the recommenda- tion of the Production Manager on the basis of a farm development plan ap- proved by him and following a positive recommendation on creditworthiness by a senior officer of AIDB satisfactory to IDA. AIDB would not modify the terms and conditions of the loan proposed under the farm development plan without the prior approval of the Production Manager. DDA would assiat AIDB in verifying that disbursements under dairy loans are in accordance with approved farm development plans, in providing technical and veterinary services to participating farmers, and in collecting repayments of principal and interest from the proceeds of milk sales. 3.34 It is expected that the operators in all of the medium size farms and of most of the small farms would be landowners. Mortgage would be taken on land and inmovable property as security for subloans to landowners. Provision woultd be iaade for subloans to tenant farmers only on c*ndition that (a) thsol ,otitaii turctios from one or more guarantors providing adequate security for the subloans; and (b) they enter into a written long-term lease agreement with the landowner, satisfactory to DDA. - 17 - 3.35 Long-term subloans would be made to farmers to cover purchase of dairy cattle; fencing; water facilities; dairy buildings; accommodation on the farm; equipment and tools, including milking and veterinary equipment; and fodder purchase. These subloans would be at an interest rate of 9-1/2% per annum for a period not exceeding 14 years, including a grace period of five years. Of each 9-1/2% interest payment received, DDA would receive 2% as a service charge, AIDB would retain 1% and 6-1/2% would be paid to the Government. In cases of default on sub-loans, DDA and AIDB would share equal- ly the loss of principal and the payment of interest due to the Government. The approval of IDA would be needed in cases where an individual subloan or the aggregate of subloans to an individual farmer exceeds US$50,000 equiva- lent. Assurances were obtained during negotiations that long-term subloans would be made by DDA in accordance with these conditions and those listed in paragraphs 3.32 and 3.33. 3.36 In some cases, participating farmers would need short-term loans during the first five years of their development program to cover incremental working capital requirements, as determined by the farm development plan, arising from increased operating costs, reduced net income and interest payments on long-term subloans. AIDB would provide short-term loans for this purpose on a year-to-year basis. The interest rate charged to farmers would be not more than 10-1/2% per annum. I. Auditing 3.37 Assurances were obtained during negotiations that DDA and AIDB would maintain separate accounts in respect of the Project, that these accounts would be audited annually by auditors acceptable to IDA and that the audited accounts would be submitted to IDA within four months of the close of the fi- nancial year. IV. MARKETS, PRICES, PRODUCER BENEFITS AND REVENUE GENERATION Markets 4.01 There is fairly strong evidence that the Addis Ababa market is under-supplied with milk and that demand is growing rapidly. Output of milk by AADI increased from 288,000 liters in 1961 to 3,070,000 liters in 1969 and it has been marketed without difficulty. In fact, AADI had to main- tain a system of rationing of sales through its 41 retail centers, which sell milk only from 6 a.m. to 9 a.m. daily (Annex 14). 4.02 Daily milk sales of the order of 13,000 to 25,000 liters, represent a very low per capita intake for a population of approximately 685,000 in the city. However, the percentage of the population with sufficient income to purchase whole milk is very small. The foreign population of 45,000 accounts for a very large proportion of sales. Average per capita consumption in Addis - 18 - Ababa is only about 10% of the consumption level of Nairobi and about 20% of the level of Asmara. 4.03 A feature of the present milk supply situation is the marked seasonal fluctuation in production. During the uionths preceding the wet season -- February to May -- intake at the sShola Dairy Plant is about 25% be- low average while it is about 25% above average during the flush mqpths of September to December. If productioln were maintained throughout th, year at the level of the flush months, overall consumption could be incre^a,d by about 35%. One of the objectives of technical services to farmers would be to im- prove feeding and management standards and thus reduce seasonal fluctuations. 4.04 A study by the University of Addis Ababa indicated an iiCQgo elas- ticity of demand of at least 1.0 for milk in the city. With population growth of 6.2% per year and growth of per capita income at loeat at the national level of 2%, demand for milk can be expected to grow by at le4st 6.i% annually. Taking a conservative estimate of demand at 25,OOQ liters per day, an amount marketed without difficulty in the flusb #S#Q; qf 1969, demand by 1980 would exceed 59,000 liters daily. Thus, the eptiiated in- creased supply of 31,000 liters as a result of Project investments would not exceed the increase in demand due solely to population and income growth. 4.05 In 1967, imports of milk powdgr into Ethiopia were 2,000 tons, equivalent to an average supply of 55,000 liters per day of reconstituted milk. At existing retail prices in Addis Ababa, its price is equivalent to US$0.22 to US$0.48 per liter. A large proportion of this milk powder is purchased by the higher income residents of Addis Ababa bec4use they are unable to obtain a regular supply of good quality pasteurized milk. Prices 4.06 Until late in 1970, AADI paid E$ 0.25 (US$0.10 equivalent) per liter to small farmers delivering milk to collecting centers and E$ 0.28 or E$ 0.30 (US$0.11 or US$0.12 equivalenit) per liter to large farmers, depending q4 their distance from Shola. It sold milk through its retail centers at 9$ 0.40 (US$0.16 equivalent) per liter. Of the total milk sales by DDA, proq1ly a third or more is purchased by retailers or owners of bars whq resell it at considerably higher prices. As DDA gives first priority to qg4lig tbro-gh its own retail centers, it is not able to supply regularly tp superrkets, other large retailers, hotels and hpspitals, which therefore qhtain their sup- plies direct from large cowmercial farmers at a price of E$ 0.45 (US$0.18 equivalent) per liter. 4.07 In the last quarter of 1970, AADI raised its retail selling pric,e to E$0.50 (US$0.20 equivalent) per liter. This has enabled it to Qffer ac average price of about E$U.33 (US$0.13 equivalent) per liter to suppliers. Thuh slhould attract more of the commercial producers to supply milk to the Slio4a Dalry Plant. With increasing supplies, DDA would be able to supply ow milk regularly to lhigher priced m.kts such as supermarkets and hotels. It would also be able to offer a premiu price for quality milk suitable for thlese higher priced markets. Assuragces were obtained during negotia- - 19 - tions that DDA would adopt pricing policies that would enable it to operate profitably and also offer satisfactory prices to farmers. 4.08 Financial projections for farmers, Shola Dairy Plant and DDA have been based on retail prices equivalent to US$0.20 per liter from years 1 to 6, US$0.18 per liter from years 7 to 10 and US$0.16 per liter thereafter. Producer Benefits 4.09 Farmers participating in the Project would derive substantial increases in income as shown below: Before Development Year Development 6 13 Medium Size Dairy Farm No. Milking Cows: Native 17 - - Improved - 39 39 Production of milk, Liters 8,100 88,400 103,400 Cash Balance after Debt Service, US$ 432 3,054 5,844 Small Dairy Farm No. Milking Cows: Native 4 - - Improved - 7 10 Production of Milk, Liters 1,900 8,500 17,800 Cash Balance after Debt Service, US$ 156 396 883 Cross-Breeding Ranch Herd Size (Animal Units) 231 554 558 Cross-Bred Heifers Sold - 54 54 Cash Balance after Debt Service, US$ 932 1,274 9,065 4.10 Financial rates of return are estimated at about 20% for the model of the medium size dairy farm, about 21% for the small dairy farm and about 17% for the cross-breeding ranch at retail milk prices as stated in paragraph 4.08 (Annex 15). If a retail milk price of E$0.40 per liter is assumed throughout, financial rates of return are reduced to about 15% for the large dairy farm and about 19% for the small dairy farm. Revenue Generation 4.11 Farmers would pay interest and repay their subloans out of revenue over a period of 14 years. The incremental cash balance after debt service would be positive for the medium size farm and the cross-breeding ranch from year 5 and for the small farm from year 4. By year 14, the aggregate incremental cash balance after debt service of farmers would be approximately US$0.5 million equivalent, rising to over US$0.8 million by year 17. At existing rates, income tax on small farmers would be negligible and the highest rate paid by other farmers on their projected income would be 15%. Thus, most of the extra income would be retained by farmers. It is expected that there would be considerable scope for further development of dairy production to supply the growing demand of the Addis Ababa market and it is - 20 - likely that farmers would reinvest most of the extra income generated by the Project to further increase their production. 4.12 DDA would have a positive cash balance after debt service. The cumulative cash balance to year 10 is estimated at US$3.2 million equivalent and from year 15 onwards the annual cash balance would be US$0.4 million equivalent. DDA would thus be established as a viable corporation that could contribute to financing of future investments in infrastructure for further development of the dairy industry. V. ECONOMIC BENEFITS AND JUSTIFICATION 5.01 On-farm development under the Project is expected to increase average daily milk supply through Shola Dairy Plant by approximately 19,000 liters by year 5 and 31,000 liters by year 10. In addition, it is expected that improvement to Shola Dairy Plant and the organization of milk collec- tion and marketing by DDA would stimulate further increased supplies to the Plant. Although milk price would rise over the next six years -- as it would do in any case without the Project -- development of production under the Project would lead to reduction of retail price to the equivalent of US$0.16 per liter, which is slightly lower than the retail price in most West European countries and in Nairobi and considerably lower than the re- tail price in other African cities. 5.02 The Project would establish, in the Addis Ababa area, a population of about 7,000 cows and heifers of improved dairy breeds. This would ?ro- vide a supply of dairy type heifers for further expansion of dairy production around Addis Ababa and in other parts of Ethiopia. It would eliminate the need for any further importations of dairy cattle on a large scale. 5.03 The rate of return to the economy of the Project is estimated at approximately 12%, at a retail milk price of E$0.40 (US$0.16) per liter. At a retail milk price of US$0.18 per liter, economic rate of return would be approximately 16%. These rates of return are based on a price of US$240 for weaner heifers, which is the estimated price at which they could be procured from Europe. If obtained from Kenya, they could almost certainly be delivered at lower cost, with consequent increase in the economic rate of return. VI. RECOMMENDATIONS 6.01 During negotiations, assurances were obtained that the Government would: (a) ensure that funds would be provided to DDA, either through the banking system or through the Government's own budget, - 21 - to enable DDA to meet its own working capital requirements (para 3.19); (b) establish satisfactory procedures for makiag nvailable funds from the Credit to DDA and AIDB for approved Project purposes on terms and conditions acceptable to IDA (paras 3.31 and 3.32); and (c) employ consultants acceptable to IDA, on terms and condi- tions acceptable to IDA, to carry out feasibility studies in relation to preparation of a future comprehensive live- stock development project (para 3.15). 6.02 During negotiations assurances were obtained from the Government that DDA would: (a) prior to award of contracts for purchase and installation of equipment for Shola Dairy Plant, obtain the certification of an appropriate representative of UNICEF that such con- tracts were in accordance with sound engineering practices (para 3.10); (b) provide technical, veterinary and artificial insemination services of a satisfactory standard to participating farmers during the life of sub-loans to farmers (para 3.11); (c) ensure that all cattle on participating farms are vaccinated against rinderpest, foot-and-mouth disease and contagious bovine pleuropneumonia at intervals de- termined by the Chief Veterinary Officer of DDA and that procedures laid down by the Chief Veterinary Officer are enforced for control of cattle ticks and tick-borne diseases on participating farms during the life of sub- loans to farmers (para 3.12); (d) obtain IDA approval before commitment of any funds from the Credit for carrying out field studies or establishing demonstration plots (para 3.14); (e) undertake procurement and/or importation of cattle and procurement of goods and services for Project purposes on terms and conditions acceptable to IDA (paras 3.20 and 3.21); (f) recruit a qualified and experienced Production Manager, acceptable to IDA, on terms and conditions acceptable to IDA; and consult IDA and give IDA time to comment on the persons to be appointed and terms and conditions of appointments for the positions of General Manager, Fi- nancial Manager, Processing and Marketing Manager, Chief - 22 - Veterinary Officer, Artificial Insemination Specialist and Chief Dairy Development Officer (para 3.29); (g) in cases where non-Ethiopians are appointed to any of the positions mentioned in paragraph 3.29, appoint suitably qualified Ethiopians as counterparts to be trained to assume the duties of the relevant positions (para 3.30); and (h) adopt pricing policies for the purchase and sale of milk and related products which provide adequate incentives for milk production and which allow DDA to operate profitably (para 4.07). 6.03 During negotiations assurances were obtained from the Government that AIDB would: (a) make long-term loans to farmers for on-farm development on terms and conditions satisfactory to IDA (paras 3.32 and 3.34); (b) make short-term loans to participating farmers to cover reasonable requirements of incremental working capital as determined by the farm development plan, on terms and con- ditions satisfactory to IDA (para 3.35); and (c) employ a senior officer to supervise its lending operations under the Project whose qualifications and experience were satisfactory to the Association (para 3.33). 6.04 The following would be conditions of effectiveness of the Credit in addition to the customary conditions: (a) the General Manager, Production Manager, Financial Manager, Processing and Marketing Manager and Chief Veterinary Officer had been appointed on terms and conditions acceptable to IDA (para 3.29); (b) the Government had provided DDA with initial working capital in an amount of not less than US$100,000 equivaleat on terms and conditions satisfactory to IDA (para 3.31); (c) The Government and UNICEF had amended their Plan of Opera- tions so as to be consistent with the Project (para 3.27); and (d) the senior officer of AIDB for supervision of lending opera- tlons under the Project had been appointed. 6.05 The Project is considered suitable for an IDA Credit of US$4.4 mil- lion. The Imperial Ethiopian Government would be the borrower and would carry the foreign exchange risk. May 28, 1971 ANNEX 1 Page 1 ETHIOPIA ADDIS ABABA DAIRY DEVELOPMENT PROJECT Dairy Cattle Husbandry and Disease Control 1. Of Ethiopia's cattle population of about 26 million, less than 10,000 are European-type dairy cattle, mostly Friesian. While native cattle are widely used for milk production for home consumption, Asmara and Addis Ababa are the only areas in which there are commercial dairy farms on a signi- ficant scale. The Dairy Herd 2. There are about 25 herds, with about 3,500 upgraded dairy cows in the relatively dry Asmara area. All these herds are housed and stall-fed. Operating costs are high and farmers are paid E$0.37 (US$0.15) per liter c.f milk. All milk is consumed in Asmara with the exception of the output of one dairy farm with 850 cows, which sells sterilized milk to other cities. An artificial insemination scheme commenced in the area in October 1969 and Asmara represents a potential source of dairy heifers for the Project (Annex 3). 3. In the Addis Ababa area, dairy farming has developed rapidly during the last decade following the installation of milk collecting centers and Shola Dairy Plant. At present about 40 commercial dairy farms, with 10 to 250 cows each, have a total of about 2,000 dairy-type cows, mainly upgraded Friesians. Holleta and Shola dairy farms are owned by the Govern- ment and have herds of 60 to 70 Friesian cows, respectively, originating from Kenya. Cows are usually housed and investments in cow sheds and accommo- dation are necessarily high. Labor requirements are estimated at one worker for five cows. Feeding consists of low quality hay and a fairly high ration of concentrate feed, mainly wheat bran. Green-fodder feeding is practically unknown and grazing is, as yet, of limited importance. However, excellent conditions exist for cultivation of fodder crops and for establishment of high yielding grassland. 4. Data collected from 12 commercial dairy farms indicate that in herds comprising mainly F and F Friesian x Zebu cattle, milk production is in the range of 1,400 to 1,808 liters per lactation, while it is in the 2,500--to 3,000-liter range in two larger commercial dairy herds and in the two Government farms, which have virtually pure Friesian cattle. The calving rate at 60% to 70% is low. 5. About 1,250 small farms supply milk from native cows to the milk collecting centers. Nutrition of these cows depends exclusively on pas- tures, which is reflected in a sharp drop in milk production in the dry ANNEX 1 Page 2 season. During the night, cattle are kept in corrals beside the farmers' huts, and milk sold per cow per year is estimated at 100 to 500 liters. The Environment 6, Farmers in the Project area are good herdsmen but they appear to have little knowledge of dairy farming. 7. The Project area is at an elevation of 2,200 to 2,500 m above sea level. Climate is temperate, frost is an exception and European-type dairy cattle do well under these conditions. Average rainfall at Addis Ababa is 1,070 mm per year, with a six-month dry season from October to March and, in most years, a short dry season in May to early June. Topo- graphy is undulating with numerous small water courses and mostly heavy grey black soils in valleys and red loams on hills. 8. Existing unimproved pastures provide on average about 2 tows per year of mediocre quality hay, with 6% to 8% crude protein content and 2 to 3 tons of green fodder for grazing. Very little experimental work has been done on pasture improvement. However, preliminary trials carried out at Holleta under the UNDP/SF Agricultural Research project indicate that pro- ductive rye grass-white clover pastures can be established. Crops such as oats, vetches, oats and vetches, oats and broad beans, cow pe8as, rape, fodder sorghum, green maize, berseem and Persian clover can also be grown successfully. Under irrigation, highly productive stands of alfalfa could supply green fodder during the whole year. Trials carried out in the Chilalu Agricultural Development Unit (CADU) Project indicate that a wide range of improved grasses and legumes from both tropical and temperate environments can be grown in the area of that project, where the environ- ment is similar to that of the region around Addis Ababa. Some Technical Aspects for Dairy Farm Development 9. Fodder Production and Feeding. While there are excellent pros- pects for dairying based on grass and forage, feeding for the immediate future would have to rely heavily on concentrate feed. There is at present a plentiful supply of cheap oilseed cake (principally nug cake) and milling by-products such as wheat bran. CADU produces a concentrate mixture of equal parts of aug cake and wheat bran plus bone meal and salt at E$7 (US$2.8 equivalent) per 100 kg. Project farmers would be able to buy a more balanced concentrate at a price of E$15 per 100 kg from a feed mixing plant being established by the Livestock and Meat Authority. At a milk price to the farmer of E$0.33 (US$0.13 equivalent) per liter, delivered to the collection center, the milk-to-feed-price ratio is very favorable for milk production. 10. For the future, greater emphasis should be given to the develop- ment and utilization of grasslands for dairying as this will undoubtedly lead to lower cost milk production. As a first step, fencing of Project farms to protect them from grazing by stray cattle and other livestock ANNEX 1 Page 3 will increase available pasture for the farmer's own cattle. Field trials and demonstrations proposed under the Project would have the objective of determining suitable mixtures and methods of pasture and fodder crop pro- duction as well as methods for their management and utilization, e.g., stocking rates, fertilizer application, and hay and silage making. For the immediate future, it is anticipated that most large farmers will estab- lish small areas (about 1 ha) of alfalfa under irrigation for hay and green fodder as well as grow more fodder crops without irrigation. 11. Calf Rearing. In the initial years it is expected that most far- mers will rear calves by suckling, but as they attain more skills in dairy hus- bandry they could change over to bucket rearing. Friesian-type dairy heifers would require about 400 liters of whole milk and 1,400 kg of con- centrates from birth to calving at about 28 to 30 months of age. Require- ments for cross-bred heifers would only be about two-thirds of this amount. 12. Housing. Housing provided on most commercial dairy farms in the Addis Ababa and Asmara areas now is more elaborate than is needed, compris- ing completely enclosed barns with individual stalls in which all cattle are tethered and fed. Under the Project, a cheaper system of housing would be used, involving barns with loose box stalls and an attached open area where cattle would be fed and watered. Farmers would be encouraged to graze their herds, at least during the day. Allowance in the Project is made for one man to handle 10 cows. 13, Training. Short training courses would be provided for future dairy farmers at Holleta Training Center. These courses would include practical training in milking and hygenic milk production, management of dairy cattle and pastures, production of alfalfa and other fodder crops and fodder conservation. Cattle Diseases 14. Although a number of the major infections and tick-borne diseases occur in Ethiopia, they can be controlled by vaccination or other means. The following is a brief summary of the position with regard to the major diseases of cattle: Rinderpest - This disease is endemic throughout Ethiopia but it can be controlled by vaccination. Tissue culture vaccine confers a solid immunity that lasts for a number of years. Foot-and-Mouth Disease - Types A, 0 and C occur in Ethiopia, and vaccination twice yearly with a tri-valent vaccine is needed for control. ANNEX 1 Page 4 Contagious Bovine Pleuopneuumonia (CBPP) - This disease is endemic tihrouglhout Africa. It is not as infectious as the above two diseases. Losses caused by epidemics of CBPP are much lower than in those caused by rinderpest. In Ethiopia, KH3J vaccine i8 used against this disease because it pOtduces only a mild reaction in vaccinated animals. As it cornfers an immunity that lasts omly for six months, vaccination must be carried out twice a year. haemmorhagic Septicaemia, Anthrax and Blackleg - These diseusta occur sporadically but they can be controlled by vaccination. Tick-Borne Diseases - The most serious of the tick-bofne diseases, East Coast Fever, does not occur in the Addis Ababa area even though Rhipicephalus appendiculatus, the tick which transmits it, is present. Any cattle to be introduced to the region, either from Kenya or other parts of Ethiopia, should be certified as being free froxi expo- sure to this disease for a period of at least two years. Iieartwater, a bacterial disease transmitted by the tick, Anbylomma hebraeum, occurs in the Project area. It can be controlled in cattle at pasture by spraying or dipping once weekly to control ticks. Where cattle are housed permanently, control of tick infestation presents very little problem. The common tick fevers, babesiosis and anaplasmosis, also occur. Control of babesiosis presents very little problem. Although there is no effective pro- phylaxis or treatment for anaplasmosis, it is unlikely to cause serious losses. Internal Parasites - Liver fluke, Fasciola hepatica, is a serious problem in grazed cattle in some parts of the district. It can be controlled by draining or treating swampy areas that harbor the intermediate host, which is a snail. Worm parasites are also a problem in grazed cattle. They can be controlled by a program of anthelmin- thic treatment and rotational grazing. In cattle that atr housed and hand-fed, internal parasites will not prebeht a problem. Infertility - The three major infectious diseases associated with infertility, brucellosis, vibriosis and trichoftibabiS, are almost certainly present in the Project area. Bruieellosis can be controlled by vaccination of all heifer calves. The effects of the other two diseases can be reduced to negligible proportions if an efficient artifiCial insemination service is available to dairy farmers. ANNEX 1 Page 5 Mastitis - While sporadic cases of mastitis will almost certainly occur, its effects will probably be less serious than in more highly developed dairy industries for two reasons: first, cows would not be fed or managed to attain extremely high levels of production, which predispose cows to mastitis; second, cows would be milked by hand rather than by machines, with each milker handling only eight or ten cows. 15. The effective control of all of these disease conditions will be essential to the success of the Project. As far ag the individual farmer is concerned, failure to control diseases would lead to almost certain financial failure. Measures to control all these diseases are known but it is essential that the Project make provision for its own veterninary service to the farmers. The existing veterinary service of the Ministry of Agriculture would be inadequate for the increased needs of the Project. One veterinarian should be employed within DDA to concentrate solely on disease control. He would have under his supervision about 12 veterinary assistants. Because of shortage of Ethiopian veterinaries, it would be necessary to engage an expatriate veterinarian at least for the first two years. He should have had veterinary experience in East Africa. Artificial Insemination (A.I.) 16. Development of an efficient artificial insemination service is important to the success of the Project for a number of reasons. For the small farmers, it would be completely uneconomic to purchase and maintain a bull of a breed such as Friesian. A system of joint ownership of a bull by a number of small farmers would certainly lead to spread of disease, such as vibrisosis or trichomoniasis, with consequent infertility. Simi- larly in large herds, the use of A.I. is more or less essential to the con- trol of these disease conditions. Provision of an A.I. service would give farmers access to service from proven bulls, which would be of much higher genetic standard than the bulls they could afford to purchase. 17. It is proposed that a veterinarian specializing in A.I. be em- ployed within DDA for the first two years of the Project. He would have to undertake the training of inseminaters and the organization and estab- lishment of the A.I. service in the Project area. During this two-year period, he would be expected to train an Ethiopian counterpart to take over responsibility of the A.I. service. ANNEX 2 Page 1 ETHIOPIA ADDIS ABABA DAIRY DEVELOPMENT PROJECT Credit Institutions and Agricultural Credit 1. The State Bank of Ethiopia, created by Imperial Charter in 1942 soon after the cessation of military operations in the country, carried out the dual functions of central and commercial banking till the end of 1963. At that time, by Proclamation No. 206 for regulating the banking and monetary system in Ethiopia, it was wound up and replaced by two new institutions, namely, the National Bank of Ethiopia, which would function as the central bank of the country, and the Commercial Bank of Ethiopia, which would take over all banking business with the public previously carried out by the State Bank of Ethiopia except credit mortgage activities. These were transferred to the Mortgage Company of Ethiopia, a fully owned subsidiary of the Commercial Bank of Ethiopia. The National Bank of Ethi.opia exercises powers for licensing and inspection of commercial banks. It imposes the requirements for maintenance of reserve balances and liquidity ratios and a ceiling on interest rates on deposits accepted by the banks. It also offers rediscount facilities to banks for eligible paper covering export of goods at 5% per annum and all other eligible paper at 5-1/2% per annum. No banking institution in Ethiopia has so far availed itself of the facilities for rediscounting agricultural paper. Banking Institutions in Ethiopia 2. The Commercial Bank of Ethiopia (CBE). Incorporated as a fully Government-owned share company under the Commercial Code, the Commercial Bank of Ethiopia has a paid-up share capital of E$30 million and reserves amounting to E$11 million. Its deposits amount to nearly E$300 million and it has a loan portfolio of E$228 million. Of the total loans, E$90 million is for financing exports and imports; E$48 million for financing domestic trade, including movement of agricultural produce; E$43.8 million for financ- ing industrial activities; E$22.4 million for financing agricultural produc- tion; and E$22.8 million for financing building construction and other miscel- laneous activities. The Bank's advances for agricultural production are mainly to large firms undertaking sugar cane and cotton farming. 3. The net profits of the Bank for 1968 amounted to E$6.17 million and it has maintained for some years now a dividend of 7% on its share capital. The bank had 70 branch offices at the end of 1969 and a total staff of 1,292, 66 of which belonged to the managerial and senior supervisory category. The bank organizes advanced management services and training programs for its staff at all levels. Supervisory staff are periodically sent abroad for specialized training in banking and management. The bank proposes to set up an Agricultural Credit Division very shortly. ANNEX 2 Page 2 4. Loans are sanctioned after obtaining full financial details of the borrower and an appraisal of the project. Loan committees have been set up at branch offices and at the head office to sanction loans. Small loans up to E$20,000 could be sanctioned by a Loan Committee headed by the Credit Manager and loans above this amount by a Loan Committee headed by the General Manager; loans exceeding E$1 million need to be referred to the Board of the Bank. The bank ordinarily restricts loans to 50% of the value of the security but this could be relaxed when guarantees are provided. The interest rates vary from 7-1/2% to 9-1/2%, depending on the type of loan or advance. The bank does not generally advance medium- or long-term loans but could do so if reimbursement facilities were provided. 5. The Agricultural and Industrial Development Bank (AIDB). AIDB was established in November 1970 as a state-owned share company, with a nominal equity of E$50,000 and taking over most of the assets and liabilities of the ..vw-Jefunct Dcvelopment Bank of Ethiopia (DBE) and Ethiopian Investment Cor- poration (EIC). Recent operations of these predecessor institutions are described further below because, with the formation of AIDB so recent, it is not yet possible to review AIDB's own lending program. Neither of these institutions was in a strong financial position prior to its dissolution. Arrangements have been made for the International Executive Service Corporation, New York, to provide AIDB with a senior adviser for a period of three months to make an assessment of certain assets and liabilities taken over from DBE; to assess and advise on financing and management problems facing some of the companies in which AIDB has now assumed an interest (mainly from EIC) and to advise on proper management arrangements for AIDB itself. 6. Apart from its normal operating income, arrangements have been made for AIDB to receive, for the next five years, half of the profits of the National Bank of Ethiopia, which would otherwise have gone to the Minis- try of Finance. Hlowever, AIDB's present financial situation and prospects are unclear and it is too early to complete a meaningful appraisal. No balance sheet is available. 7. The Development Bank of Ethiopia (DBE). The Development bank of Ethiopia was established in May 151 by a Charter. It was a state-owned institution with a paid-up share capital of E$11 million and a reserve for bad and doubtful debts of E$3.28 million. Apart from this, the resources of DBE consisted of loans received from USAID, IBRD and the West German Kreditanstalt fur Wiederaufbau; the amount outstanding on December 31, 1969 was E$6.476 million. The bank also received funds from the Ministry of Finance, the amount outstanding on December 31, 1969 being E$1.541 million. The bank did not offer deposit facilities. 8. From its inception, 42% of the loans advanced were for agricul- ture and 52% for industry. Of the agricultural loans, 68% was for periods of one to five years, 30% for periods exceeding five years, and 2% for periods of less than a year. No short-term agricultural loans were granted in recent years. AiINEX 2 Page 3 9. The total loans outstanding at the end of 1969 amounted to E$17.7 million (principal), of which E$8.588 million was for financing agricultural production and processing coffee. Interest outstanding on loans at the end of 1969 amounted to E$2.524 million. At the end of 1968, E$9.254 million on account of principal and interest were overdue; of this, E$3.402 million was overdue for more than two years and E$4.653 million was overdue from three firms, which have since gone into liquidation. The bank's auditors (Price, Waterhouse, Peat & Co.) have commented on the inadequacy of reserves to cover bad and doubtful debts. 10. About 50% of the agricultural loans was overdue. The bank's method of appraisal of loan applications was faulty and it did not take prompt action to proceed against defaulting borrowers in several cases, mainly due to poli- tical interference. Accounts of the bank were not maintained up-to-date and the auditors observed that delays of over a month occurred in writing up the accounts. 11. The bank charged interest at 8% on short-term agricultural loans and 7-1/2% on medium- and long-term agricultural loans. On industrial loans, the corresponding rates were 8% and 8-1/2%, respectively. Loans were sanc- tioned on the basis of satisfactory financial status of the borrower and the loan officer's recommendations. A loan committee in the bank made recom- mendations on the applications, and loans up to E$200,000 were sanctioned by the Managing Director; loans for higher amounts were referred to the Board. 12. The bank had a total staff of 130, many of whom had not received any training in banking. At the higher and middle management levels, the bank's staff did not appear to possess the necessary competence and expertise to deal with agricultural credit. 13. The Ethiopian Investment Corporation (EIC). Established as a fully Government-owned share company in August 1963, the EIC had a paid-up share capital of E$29.292 million and reserves of E$0.182 million. Apart from capital funds, the EIC's main source of funds is a credit of E$20 million, sanctioned by USAID in August 1967; a total amount of E$8.856 million had since been drawn from this credit. The EIC invested E$24.370 million in equity .capital of various Ethiopian companies and advanced E$12.894 million as loans. The auditors (Mann, Judd & Co., London) have drawn attention to the inadequacy of free reserves. 14. The Corporation had a total staff of 30 and hardly any fixed assets (less than E$100,000). The major part of its capital funds was invested in 49 different companies. Dividends received during the year amounted to only E$282,013, which represents a return of about 1.2% on the investment. 15. The net profit of EIC for the year ended July 1969 (EC 1961) amounted to E$354,651. The EIC was prohibited from paying dividends on its share capital under the loan agreement with USAID for a period of 10 years following the date of the first disbursement. ANNEX 2 Page 4 16. About 55% of the loans advanced by EIC were for agriculture, of which about 60% were to large plantations. Loans to agriculture were ad- vanced at 8-1/2%. Following an earlier Government decision to restrict LIC financing to industry and DBE financing to agriculture, the EIC restricted its business in agriculture in 1968/69 to the continuation of service to existing borrowers and to agricultural enterprises closely associated with industrial operations. 17. The Addis Ababa Bank. Established in 1964 as a share company, Addis Ababa bank has a paid-up share capital of E$5 million, of which 40% is held by the National and Grindleys Bank Ltd. and the rest by individuals. The reserves amount to E$1.6 million, deposits to E$37.2 million and loans and other advances to E$26.2 million. At the end of December 1969, the bank had 16 branch offices and a total staff of 267. 18. Of the total loans and advances, 9% was for agriculture, 41% for foreign trade, 16% for industry, 24% for local trade and the rest for build- ing construction and other miscellaneous activities. The management of the bank is handled by a Board of eight Directors, of whom two are representa- tives of the National and Grindleys Bank. 19. The net earnings after tax in 1968 amounted to E$685,982. The operating expenses formed 2.5% of total assets. The bank has been declaring a dividend of 5% since 1967. 20. The Banco di Roma. Established in 1967 as an Ethiopian share company, this bank is the successor to the branch office of the Banco di Roma (Italy), which had been operating in Asmara since before World War II. The bank has a paid-up share capital of E$4 million. The head office is in Asmara and branch offices exist in Addis Ababa, Aseb and Mitsiwa. The bank's main sources of funds are its share capital deposits. It advances short-term credits in the form of overdrafts or loans against goods to be exported. The bank does not extend credit to finance agricultural production or market- ing., 21. The Banco di Napoli. This bank, which commenced operations in Asmara as a branch office of the Banco di Napoli (Italy), has very recently been incorporated as an Ethiopian share company. Its lending activities consist of extending short- and medium-term commercial credit, mainly for export and import promotion. No advances are granted for agricultural deve- lopment. 22. The Mortgage Company of Ethiopia. Established in 1965 as a fully- owned subsidiary of the Commercial Bank of Ethiopia, the Mortgage Company of Etthiopia had, as of D)ecember 31, 1968, a paid-up share capital of E$3 million, reserves of E$0.62 million and long-term deposits of E$3.675 million. The Company's main resources are borrowings from CBE, which amounted to E$24.5 million at the end of 1968; its loans and advances amounted to E$30.73 million, mainly for financing industrial and domestic building construction as well as purchase of property and durable consumer goods. Its net profits in 1968 after provision for taxes amounted to E$482,413 and it has been declaring a dividend ANNEX 2 Page 5 of 7% on its share capital since 1967. The loans advanced are for a maximum period of five years and carry interest at 8-1/2%. The company also grants three-year special mortgage loans at 9%. The management of the company vests in a Board of five members, composed of the General Manager of CBE as Chairman, two other representatives of CBE, one representative of the National Bank of Ethiopia and the General Manager of the Mortgage Company. Agricultural Credit in Ethiopia 23. Although considerable potential exists in Ethiopia for an expanded program of agricultural credit and investment through a more intensive cultivation of the highland areas and higher land utilization by means of settlement schemes in the lowlands, expeditious.governmental action is required to remove certain major constraints in land development. 24. Of the total land area of 122 million ha, about 54% is pasture land, 11% cultivated agricultural land and the rest swamps, forests, barren land, and the like. Of an estimated population of 23.7 million (1968), about 92.3% live in rural areas, and farming population accounts for 93% of the total. Less than 1% of the rural population seeks a living as agricultural laborers. 25. A sample survey by Government in 14 provinces in recent years shows that about 60% of the holdings are of less than 2 ha, which is considered to be thie minimum economically viable size for a farm. There is also consi- derable fragmentation of holdings; nearly two-thirds of the holdings in 11 provinces were found to be in more than one parcel. In Shoa Province, to which the present Project relates, only about a third of the holdings are owner-cultivated and the rest are either entirely leased or partly owned and partly leased. The conditions of tenancy take various forms and, in the majority of cases, there is no written lease agreement. Tenant culti- vators have very little security of tenure; they present a poor credit risk for institutional financing, both on account of the absence of any security that they could offer in the form of property mortgage and on account of uncertain landlord-tenant relationships. Non-institutional agencies formed the major source of agricultural credit for tenant farmers in Ethiopia and extremely high interest rates have been reported. 26. A number of different systems of land tenure exist in Ethiopia. Ownership rights are derived by purchase, grant or inheritance of lands leased out on long-term or permanent basis by Government or the Church. On the basis of A survey carried out in Shoa Province, it is estimated that about 10% to 20% of the landholders may not have mortgageable rights on land. Title deeds of land in rural areas do not exist and ownership rights are established on the basis of tax receipts. No cadastral survey of land has as yet been carried out and recording of ownership rights is unknown. Presentation of tax receipts for a number of years is the only method of establishing ownership rights and prior encumbrance to property has to be investigated by a reference to registration of earlier mortgage deeds. AiNNEX 2 Page 6 27. The absence of any law relating to chattel mortgage makes it difficult for banks to advance short-term loans for agricultural produc- tion and marketing oni the security of standing or halrvested crops. 28. The Government lhas submitted a land reform bill to Parliament which would confer greater security of tenure cultivators and regulate the division of the produce of the land between landlord and tenant. Additional legislation is under preparation concerning cadastral survey and taxatlion of unutilizedt land. 29. Tie total credit for agricultural purposes provided by the CBE, DBE1, EIC and the Addis Ababa bank, as of the end of 1969, amounted to about E$39.5 imiillioni, of whiclh onily about E$8 million, provided by the DBE, was medium or long term; the rest, mainly to large firms or the larger culti- vators, was short term. The short-term credit requirements of small farmers are thus not met by institutional agencies and very few of them have perhaps availed of finance for capital investment needs in agriculture. 30. The important pre-conditions to any expansion in the provision of agricultural credit by banking institutions in Ethiopia are a cadastral survey of land holdings and provision for the recording of ownership rights, security of tenure for the tenant cultivators and legal provision for chattel mortgage. Special Arrangementsf_or Agricultural Credit 31. The Chilalo Agricultural Development Unit (CADU). The project administered by the Ministry of Agriculture, with technical and financial assistance from thie Swedish International Development Agency (SIDA), aims at the economnic development of Chilalo Awraja (sub-province), Arusi Province, by creating conditions favorable for intensive farming. Started in Septem- ber 1967, CADU supplies fertilizers, improved seeds, concentrates for cattle, half-breed hleifers, fencing material, and such to farmers in the area on the basis of farm plans. Tenant farmers cultivating more than 40 ha and owner-cultivators farming more than 25 ha do not get credit facilities. All other farmers are required to make a down payment of 50% of the cost of seed and payments, ranging from 25% to 75% of the cost of fertilizers, depending on the size of farm; the balance is provided as short-term loans. 32. Mledium-term credit is advanced when lheifers and fencing material are supplied. The security for the credit would be from three sources: (1) two guarantors acceptable to CADU, (2) an agreement by the borrower to market hiis produce through CADU or an agent appointed by CADU, and (3) the deposit of tax receipts by landowning farmers. The loan documents are registered in the District Office. In the case of tenant cultivators, a written lease agreement has to be entered into with the landlord under whliclh provision is made inter alia for fixation of rent and for non-termi- tit.ilon of lease, except in cases of rent default. ANNEX 2 Page 7 33. CADU provided credit to farmers in 1969/70 under reimbursement facilities from the DBE; the DBE sanctioned E$400,000 during 1969/70 for this purpose. Short-term credit is advanced by DBE at 8% and CADU extends credit to farmers at 12% per annum. There are 13 Extension Agents of two types. Grade A Extension Agents are high school graduates in agriculture who have undergone training in the Agricultural Research Institute; Grade B Extension Agents are those who have not graduated and who are given a seven- month training course by CADIJ. 34. In 1969, 800 families borrowed from CADU, and, so far in 1970, 4,000 applications have been received. The project would cover about 22,000 families in the Chilalo Awraja within a six-year period. Apart from credit, other services offered by CADU are creation and improvement of marketing facilities; development of model farms; training of farmers; and conducting studies on infrastructure, health and small industrial ventures in the area. 35. The Wolamo Sodo Project. This Project provides for an integrated attack on the problems of 6,000 subsistence farm families in the highlands, through the provision of improved roads, markets, water supplies, agricul- tural credit and extension services, as well as for the resettlement of 1,050 farm families in two new settlement areas in the neighboring lowlands. The Project would supply credit to farmers in kind, as is done in the CADU Project, but credit in cash would also be provided to farmers in the lowland areas for payment of wages to labor. 36. FAO - Freedom from hunger Campaign (FFHC). The FFHC makes funds available to the Ministry of Agriculture for supplying fertilizers on credit to selected farmers. The program commenced in 1967 with 450 farmers owning 20 ha or more who had agreed to use 1/5 ha for raising wheat, barley or teff, using fertilizers. In 1968, US$4,500 was provided by FAO under this project. The rate of interest charged to the farmer was 7%. The funds are channeled through AIDB on agency basis. The responsibility for recovery of loan rests with the Ministry of Agriculture. ANNEX 3 ETIIOPIA ADDIS ABABA DAIRY DEVELOPMENT PROJECT Livestock Procurement, Demand and Supply of Dairy Heifers 1. The estimated demand and supply of both Friesian-type and Friesian- Zebu cross-bred dairy cattle is given in Table 1. As practically all dairy- type heifers bred on dairy farms in the Project area are retained by their owners for herd build-up, provision is made in the Project to procure all heifer requirements for the Project by importation, by purchase from Asmara or by breeding on Project-assisted cross-breeding ranches. 2. Requirements of cross-bred heifers for small farmers would be met by purchase from the five private cross-breeding ranches and Abernossa and by breeding on participating farms through mating to Friesian bulls by A.l. The number of heifers available through these sources would limit the number of small farmers to be included in the Project to 240. 3. The Imperial Ethiopian Government (IEG) proposed in its applica- tion that Friesian--type in-calf heifers should be imported from Kenya, this being the cheapest potential source of supply. Estimated landed cost of in-calf heifers from Kenya is about US$400 equivalent, compared to at least US$720 equivalent from Israel, Europe or Australasia. Kenya would also be the cheapest source of supply of weaner heifers, with an estimated landed cost of US$180 equivalent, compared to about US$240 equivalent from l.urope. The accompanying chart indicates the effect of price of either in-calf heifers or weaner heifers on the financial rate of return to large dairy farms. 4. Despite the fact that most dairy farmers indicate a preference for purchase of in-calf heifers, there are a number of technical reasons favoring purchase of weaner heifers 8 to 10 months old, in the case of imports. There would be less risk of losses due to physiological stress during transport in the case of weaner heifers and they would have greater opportunity to hecome adapted to the environment and acquire resistance to various diseases before being subjected to the stresses of calving and lactation. Ilis procedure would also give farmers greater opportunity to gain experience in handling Friesian-type dairy cattle before they com- mence milk production. J. Analysis of the data on which the charts shown in Figure 1 are based indicates that Importation of weaner heifers is also likely to give better financial rates of return than importation of In-calf heifers. For example, in the case of purchase from Kenya, in-calf heifers at US$400 ANNEX 3 Page 2 give a return just below 20%1., whereas weaner heifers at US$180 would give a return of 23%. In the case of purchase from other sources, in-calf heifers at US$720 give a rate of return below 13% while weaner heifers at US$240 give a rate of return just over 20%. 6. Thus, on the basis of both technical and economic reasons, it would be preferable that weaner heifers should be imported rather than in-calf heifers. ANNEX 3 Table 1 ETHIOPIA ADIS ABAA DnRY IEVELOPMENT PROJECT Project Demand and Supply of Dairy Cattle -- - - - -- --Tear--------------------- ITEM UNIT 1 2 3 4 5 6 Demand for Breeding Friesian BDuls Holleta Dairy Stud Farm No. - - ,2 Abernossa Cross-Breeding Ranch No. 46 10 10 10 Private Cross-Breeding Ranches Nc. 33 25 8 10 10 13 Medium aise Dairy Farm NcI. -- - 40 27 20 Total No. 79 35 20 60 37 33 Supply of Breeding Friesian Bulls Holleta Dairy Stud Farm No. 11 16 40 68 67 68 Foreign Countries No. 68 19 - - - Total No. 79 35 40 68 67 68 Breeding Bulls Available for Non-Project Use No. - - 20 8 30 35 Demand for Friesian Weaner Heifers Medium Size Dairy Farms No. 1,200 1,610 1,140 1,090 460 Total No. 1,200 1,610 1,140 1,090 460 Supply of Friesian Weaner Heifers Asmara Region in North Ethiopia No. 300 410 380 370 140 Foreign Countries No. 900 1,200 760 720 320 Total No. 1,200 1,610 1,140 1,090 460 Demand for Friesian X Zebu In-Calf Heifers Small Dairy Farms No. - - - 90 588- 762 Total No. g o - 90 586 762 Supply of Friesian X Zebu In-Calt Heifers Abernosaa Cross-Breeding Ranch No. _ - 60 240 240 Private Cross-Breading Ranches No. _ - _ - 153 2614 Small Dairy Farms No. - - - 30 196 252 Total No. - - - 90 589 756 NOvember 12, 1970 ANNE-X 3 ETHIO PI A FIGURE 1 ADDIS ABABA DAIRY DEVELOPMENT PROJECT EFFECT OF AGE AND PRICE OF HEIFERS ON RATE OF RETUR N 28% 27% 26% 25% 24% FINANCIAL 23% RATE OF RETURN 22% 21% 20% 19% 18% .___ _ _- 17% 300 400 500 600 700 800 PRICE OF FRIESIAN WEANER HEIFERS IN ETHIOPIAN DOLLARS 21% 20% 19%/ 18% FINANCIAL 17% RATE OF RETURN 16% 15% _ _ _ _ _ 14% _ _ _ _ _ _ _ _ 13% 12% 1000 1250 1500 1750 2000 PRICE OF FRIESIAN IN-CALF HEIFERS IN ETHIOPIAN DOLLARS IBRD-5042(R) ADIB A8A8A DAr EIVICIFIT P3J?CT a~~~~~~~~~~~~~~~~~~~~~~~~~ DOsIiin fre r j CATEOOH7 UNIT Blefog De elon2) 1 2 3 4 5 6 7 a QLT-IRI H-r B.eOE, E_w , 1 B r B 3 B B B B 6 .B B FxB B 8 NB B PuB BHD OCMPOSITION Breedng Co No 656 - 656 - 656 - 656 - 656 - 656 - 656 - 656 - 656 _ 656 Mated Beifws No: 14 - 144 - 144 - lb4 70 lbb 282 114 282 144 282 14b 282 144 - l14 Calves Wened No. 600 - 450 150 - 600 _ 600 - 600 - 600 600 - 600 - 600 - 600 8eifws 9-21 4Months No. 291 - 21 - 218 72 291 - 291 - 291 - 291 291 - 291 - 291 Steers 9-24 Koths go. 291 - 291 - 218 73 - 291 - 291 - 291 - 291 291 - 291 - 291 Steers 24-36 Montb No. 282 - 282 - 282 - 211 71 - 82 - 82 - 82 - 82 282 - 282 Frieian Bulle No. - 12 - 48 - b8 - 48 4 48 - 15 15 - 15 - BorsiaBoll No. 36 - _ - - - - - - - 22 - 27 - 27 - 38 _ 38 Total Niber No. 2,300 12 2,114 198 1,518 793 1,011 1,371 800 1,59b 822 1,561 1,427 961 2.009 379 2.302 - 2.302 Total Animal Units go. 1,712 ,12 1,71 1,782 1,794 1,783 1,788 1,788 1,702 1,702 PUEHSES In-C&U Heifers - B3ar No. _ _ _ _ _ _ _ l144 - 144 - 144 - 144 - Broeding Baul -riesian No. - 15 4 46 - 10 _ 10 - 10 - - - 3 - 3 - Brhdm Balls -NBorm No. _- - - - _ 27 - 9 - 5 - 18 7 Total umbers No. 15 46 _ 10 _ 10 l14 10 171 - 153 3 149 3 18 - 7 MORTALITT Breadin Cg e No. 24 - 24 - 24 - 24 - 2b - 24 _ 24 - 24 - 24 - 24 Mated Heifes No. 9 - 9 - 9 - 7 2 - 9 - 9 - 9 - 9 9 - 9 Heifr m 9-24 M8ts No. 9 - 9 - 7 3 - 9 9 9 - 9 9 9 - 9 - Steers 9-24 Months No. 9 - 9 - 7 2 - 9 - 9 - 9 - 9 9 - 9 - 9 steer 24-36 Mnths No. 9 - 9 - 9 - 7 2 - 9 - 9 - 9 - 9 9 - 9 Buls No. 2 1 - 2 - 2 - 2 _ 2 1 1 1 1 1 1 1 - 1 Total Nueber. No. 63 1 60 2 56 7 38 24 21. 38 25 37 25 37 43 19 61 - 61 SALES Coll Cows No. 120 - 120 - 120 - 120 _ 120 - 120 - 120 - 120 - 120 - 120 In-Calf Cross-red Heifers No. _- - - - - - 60 - 240 - 210 210 - 240 - ated Borna Heifs No. 138 - 138 - 138 _ 67 _ _ _ _ _ 138 - 138 BTon Hia No. _ _ _N - - - - 10 - 42 4 12 _ 42 - 42 - Stesrs 24-36 gnths Uo. 282 - 282 - 282 - 282 _ 211 21 - 288 _ 282 - 282 - 82 282 Can Bulls No. 6 2 18 8 - 8 - 8 - 8 4 8 3 2 4 2 6 2 6 Breeding Blls No. - - 18 - _- - _ _ _ _ 24 - - - 13 - Total Nmbere No. 546 2 576 8 540 8 469 8 331 349 121 596 123 566 124 566 264 379 546 PFHOWCTION DILTA Effective Calving Bate, a.Hmd Cows d Heifers S 75 - 75 - 75 - 75 _ 75 - 75 - 75 - 75 - 75 - 75 b.Purshaed Cov and Heifwe S - - - - - - - 75 - 75 - 75 - 75 - 75 Conoeptlm Rate of Cross-breds S _- - - _ _ 85 - 85 - 85 - 85 - 85 - 85 COv Culing Rate S 15 15- 15 15 15 - 15 - 15 - 15 - 15 - 15 Bu2l C 1u ingRate S 15 15 15 15 15 15 15 15 15 15 15 15 15 15 15 15 15 -15 Adult Mortalit S 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 - 15 B - Bormia cattle P - hiensi-Borona cross-bred cattle AMIS AMU DM31 MKWOT MJICT Pri"" wm 2m 1 - 2 o - - - - - - - - - - - - - _, - - - - - - - - - - - - - -_ - - - - - - lbd at 7rW - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 1 2 3 4 5 6 7 8 9 10 BMaTe Df l1 cgr goy mtr z r z z z z z * z Fz z z z vZ z Z Z Fla z lxZ z - z z vz HZR ODMSITICE l Oding Cow No. 85 - 172 - 2 - 164 - 164 - 164 _ 164 - 164 - 164 - 164a - I& Mated H.±fws o 2 28 - 28 - 36 - 36 60 36 64 36 60 36 64 36 64 36 60 36 6 CalvH Wo med lo: 6 28 113 3 130 1 _0 l4 140 15 1140 12 I6 12 14 12 140 12 14 12 6a difws 9-24 Hontehl go. 29 - 30 - 54 - 2 62 - 67 7 67 7 67 6 67 6 67 6 67 6 67 St 9-24 Nmtho go. 29 _ 31 - 54 - 1 63 - 67 6 67 7 67 6 67 6 67 6 67 6 67 Ste.ru 24-36 Mctbo No. 28 _ 28 - 30 - 52 - 1 60 6 4 6 64 7 64 6 64 6 64 6 64 8t.rs 36-48Msnths No. 28 - 27 - 27 - 29 - 50 - 1 58 - 61 6 61 7 61 6 61 6 61 Frieasn Hulls No. - _ - 10 - 10 - 10 - - - n1 2 11 - 11 _1- Zebu U 1M^ No. 5 - - - - - - _ _ _ _- - - Total DbOrJ go. 297 _ 429 10 368 lhO 284 275 265 405 229 471 232 474 237 474 237 4714 236 1174 236 474 Total haMnlUnits go. 231 326 375 419 516 545 554 559 559 558 so Breg mal , - Z.ba No. - - 100 - 8 - 35 - 37 - 30 - 30 - 31 - 31 - 31 - BroodingMBalls - Frieian No. - _ _ n - 1 _ 2 - 2 - 2 - 3 - 2 - 2 - 3 - 2 Total mbus llo. _ _ 100 U 8 1 - 2 35 2 37 2 30 3 30 2 31 2 31 3 31 2 MOBOLUT Brmding Con No. 5 - 11 - 6 _ 6 - 7 - 7 - 7 - 7 - 7 - 7 - 7 - Mated Rhdtre go. 1 1 2 2 - _ 2 - 3 - 3 _ -3 3 - 3 3 eifers 9-24 Mnths No. 2 _ 2 - 3 - - 3 - 3 - 3 1 3 - 3 - 3 - 3 - 3 Stews 9-24 Hmths No. 2 _ 2 - 2 2 - 3 1 3 - 3 3 3 3 - 3 Stears 24-36 Nthe No. 1 1 - 1 2 - _ 3 - 3 _ 3 3 3 - 3 - 3 Sters 36-48 Months I. 1 _ 1 _ 1 1 - 2 _ - 2 - 3 - 3 _ 3 - 3 - 3 Balls No. _ _ _ 1 _ _ _ 1 - _ _ _ _ 1 _ _ _ _ _ 1 _ _ Total Nulbw Mo. 12 - 18 1 15 - 11 6 9 1 a 345 e 16 7 15 7 15 7 16 7 1S SUM can1lCos No. 10 _ 30 - 30 _ 30 _ 30 _ 30 - 30 - 30 - 30 - 30 - 30 - r-ClCrwn-Brad Heifses Mo. - _ _ _ _ _ - _ 1 - - 54 - - 54 - 54 Mated Zedn H1w. go. _ _ 16 - - - - - - - - - - - - Barr uiMf s No. - _ _ 9 _ 1o _ 10 _ 10 - 10 '. 10 Stews 36-48 Joths Mo. 27 - 27 - 27 - 27 29 _50 - 1 8 - 61 6 61 7 61 6 61 CU Blh 110. 1 - 5 - 1 - 1 - 1 2 - 2 - 2 - 2 - 2 - 2 Total Nubes So. 38 - 62 - 57 1 73 1 59 1 80 62 31 124 30 127 36 127 37 127 36 127 PM3WCTtM DATA *.flmebComm, oad8 . fwe o 65 - 65 _ 6 70 - 70 70 - 70 - 70 - 70 - 70 - 70 - b. 1bed a" 0 md mefws % 140 - 40 40 - 40 40 - -4 - 40 - 1_0 - 140 - 4_0 - Olho__m Iste ef Grs-br t dst S - - - - - 8- 5 - 85 - 85 - _5 - 8 85 85 Co Cuhllin Rats % 15 - 15 - 15 _ 15 _ 15 - 15 - 15 - 1s - 15 - 15 - 15 - Frikeim PAU1 0.U4gRate % - 15 - 15 - 15 --t-- 15 - 15 is S ~ - 1 - 35 Adlt ta1ty . 5 5 - _ 1S 5 5 14 1S 14 4 14 4S4 4 1S4 -1 _ 1S 1 14 Y Z .al zeb 1 q niz pal, Ceim-Za Oroeg-bid. AIIk4t 5 Table 2 ITHIOPIk ADDIS AD MMI VLOMT PROJECT Private Cross-BreeinE Rnob lodel - 200 Cous Investment Coots and Financinst I t a a Units Unit Coat Totdl Coat On-Farm Investment Fencing 9J000 Dl 0.80 7,200 Water Piping 3,000 x 2.25 6,750 Water Tank (25,0001) 1 2,000 2s000 Water Pump 1 270 270 Water Trough 2 400 800 Spray Race 1 3,000 3,000 Crush and Working Paddock 1 2,000 2,000 Small Equipmzent and Tools 500 Friesian-Breeding Bulls 11 1,000 11,000 Zebu-Breeding Females 100 80 80oo0 Contingencies (approx. 10%) 4a. h80 Total Investment 46.ooo Financinm DI)A Loan-'/ 36,800 Famer's Contribution 9200 Total Financing 1/ The Dairy Development Agency (DDA) loan is equivalent to 80% of the total investment cost. i/ The farmer's contribution is equivalent to 20% of t;he total invantmnt cost. November 12, 1970 EITIOPIA ADDIS ARBRA DAIE! DhVILPIQT PROJECT Private Cross-Breeding anch Model- 200 Cows ProjeCtions of Income and Operating Costs g Before - - - - - - - - - - - - - - - - - - - - - - - - Years - - - - - - - - - - - - - - - - - - - - _ | ITEMS * UNIT Developmnt 1 2 3 4 5 6 7 8 9 10-12 CATTLLE SALESI o Cull Cows E$ 1,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 In-Calf Cross-Bred Heifws E$ - - 17,850 18,900 18,900 16,900 18,900 18,900 Mated Zebu Heifers Ea - - - 1,280 - - - - - - - Barren Heifers ES - - - - - 540 600 600 600 600 600 Steers 36-48 Months E$ 4,860 4,860 4,860 4,860 5,220 9,000 12,650 13,115 14,195 14,375 14,195 Cull Blls ES 150 750 250 250 250 500 500 500 500 500 500 T?t,.L Cattle Sales E$ 6,010 8,610 8.uo 9,390 8,470 30,890 35,650 36.115 37.195 37,375 37,195 OPERATING IOSTS Salary for Mansger 2 E$ 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 Salaries for Labor3/ ES 1,080 1,620 1,620 1,620 1,620 2,160 2,160 2,160 2,160 2,160 2,160 Salary for Night WAtohman ES - 700 700 700 700 700 700 700 700 700 700 Feed CostW ES - 750 750 750 825 825 825 825 825 825 825 Veterinary Serflcea, Dipe and Mineral&1a ES 200 1,630 1,875 2,095 2,580 2,725 2,770 2,795 2,795 2,790 2,790 BrsedirAg Stodck -R eepacetst Zebu Fml a E $ _ 560 - 2,450 2,590 2,100 2,100 2,170 2,170 2,170 Friesian Balslt/ ES - _ 1,000 1,400 1,400 1,400 2,100 1,400 1,40o 2,100 1,400 Water Equiement ruelmdLsg Repairs Y ES - 489 563 629 774 818 831 839 839 837 837 Fencing aBuilding Mainteamce2e ES - - 750 750 750 750 750 750 750 750 750 Lend Tax ±f ES 600 600 600 600 600 600 600 600 600 600 600 Miscellaneous ES - 200 200 200 200 500 500 500 500 500 500 Total Operating Costs ES 3,680 7,789 10,41P 10,544 13,699 1I4, 661 15,136 14,269 14,539 15,232 111,532 Price Assinptions in E9: cull cow 100; in-calf cross-bred heifer 350; mated Zebu- heifer 80; barren heifer 60; fat steer- Zebu 180; fat steer- Friesian x Zebu 215; cull bull- Zebu 150; end cull bull- Fresien 250. 2/ Part-time manager. 4E540 per annum per worker. 500 kg per Friesian breeding bull per annum at E$ 15 per 100 kg. A At ES 5 per A.U.per annum. I A/ t E|$ 70 per Zebu female. / At 2$ 1,000 per Friesian bull in year 2 and at ES 700 per Friesian bull in the following years. At ES 1.50 per A.U. per annum. 2/ At 5% of investment costs. At E$ 1 per ha. ETHOPIA ADDIS ABABA DAIRY DEYLOPHET PROJECT Private Cross-Breeding Ranch Model - 200 Cows Financisli -rgactloms (E$) o2 ------ - -------------------- - ---- - ~~~~~~Years ------------ -_-__ d Before 1 2 3 4 5 6 7 8 9 10 U 12-15 ITEM Developent H Cash Inflow H Sale of Cattle 6,010 8,610 8,060 9,390 8,470 30,890 30,650 36,115 37,195 37,375 37,195 37,195 37,195 4 Short-Term Loan _- - 8,357 - - - - - - - - o Long-Term Loan - 36,800 - - - - - - - - - - - Total 6,010 45,410 8,060 9,390 16,827 30,890 30,650 36,115 37,195 37,375 37,195 37,195 37,195 Cash Outflow Investments: (a) Farmer's Contribution - 9,200 - - - - - - - - - - - (b) Long-Term Loan - 36,800 - - - - - - - - - - - Operating Cost 3J680 7,789 10.418 10.544 13.699 14.868 15,136 314,469 14.539 15,232 14.532 14,532 14,532 Total 3,680 53,789 10,418 10,544 13,699 l4,868 15,136 14,J469 14,539 15,232 14,532 14,532 14,532 Annual Cash Balance Before Debt Servics 2,330 (8,379) (2,358) (1,154) 3,128 16,022 15,514 21,646 22,656 22,143 22,663 22,663 22,663 Debt Service ntereat on Short-Term Loan , _ _ - _ _ 794 - _ _ _ _ _ _ Aaortisation of Short-Term Loan - - - 8,357 - _ _ _ _ _ _ Interest on Long-Term Loan Y - 3,128 3,128 3,128 3,128 3,128 2,346 1,564 782 - Amortization of Long-Term Loan - - - - - - 9,200 9.200 9,200 9,200 - - - Total - - 3,128 3,128 3,128 12,279 12,328 11,546 10,764 9,982 - - - Annual Cash Balance After Debt Service 2,330 (8,379) (5,486) (4,282) - 3,743 3,186 10,100 11,892 12,161 22,663 22,663 22,663 Annual Incre.ntal Cash Balance - (10,709) (7,816) (6,612) (2,330) 1,413 856 7,770 9,562 9,831 20,333 20,333 20,333 Cumulative Incremental Cash Blnce - (10,709) (18,525) (25,137) (27,467) (26,054) (25,198) (17,428) (7,866) 1,965 22,298 42,631 123,963 k Anmual Incremental Herd Value _ 17,600 6,6o0 10,280 27,950 6,285 1,090 - - - - - !/ 9.5% p.a. 2/ 8.5% p.a. on the outstanding balance. i Total term of 10 years, including 4 years of grace. Cwmlative incremental cash balance for year 15. Da nZ1W - 100c or. - - - - - - - - - - - - - - - -d of her - - - - - - - - - - - - - - - - _ OLTEOT WinT D-om- - 1 _ 2 - - 5 6 7 B.1S NU mNPOBITIC Cow No. 62 61 60 59 77 77 77 77 77 In-Calf NHifers No. 17 17 16 hi 23 23 23 23 23 Heifer Calv,. No. 20 25 33 33 43 43 43 43 43 BulU Cal. io 21 25 33 32 43 43 43 43 43 Puoh" d BulCalves No - 27 6k 54 45 45 45 h5 45 N fars 9-24 Nonthu No. 20 19 24 - - - Bulls 9-24 mnths No. 14 20 24 32 31 41 41 41 41 Purohased Bans. 9-24 Nothe go. - - 26 52 52 43 43 43. 43 Bulls Iin Suee No. 6 1 1 2 2 2 2 2_ 2 Total Numbers No. 160 195 271 305 316 317 317 317 317 Total Aniaml Unit No. 117 118 151 186 185 186 186 186 186 BIRTNS Heifer Calves No. 24 29 39 38 S0 S0 50 So S0 Bunal."a No. 24 29 39 38 S0 S0 S0 S0 50 Total Nbwe -o. 48 58 78 76 100 100 1oD 100 100 PaRcRASMS In-Colf Heifers No. Bull Calves No. - 30 60 60 So So So So So Total Nubers No. - 30 60 60 S0 S0 S0 S _ 50 MrTAlarT cow No 2 2 2 2 3 3 3 3 3 In-CaLf NHifw No. 1 1 1 2 1 2 2 2 2 N.ifr Calves No. 4 4 6 5 7 7 7 7 7 Bull Ceas No. 3 4 6 6 7 7 7 7 7 Purchasd Bn B Calves No. - 3 6 6 5 6 5 5 S Heifers 9-24 Months No. 1 1 1 - - - - - - Buls 9-24 Hmth No. 1 1 1 1 2 2 2 2 Pwrehaaed Balles9-24 KntM b No. - 1 2 2 2 2 2 2 Total Numbers No. 11 16 24 24 26 28 28 28 28 sAl '1all Cows No. 10 16 16 15 20 20 20 20 20 In-Calf Heifers No. - - - 8 6 14 14 14 14 Barren Heifers No. 2 2 2 6 3 4 4 4 4 Bulls for Breading (Own) No. 12 11 16 19 26 25 33 33 33 Bulls for Breedirs (Pordcased) No. - - - 19 42 42 36 33.1 35 Rejeoted BaU No. 2 3 10 16 16 16 16 OuV1 Bollo No. - 5 - 1 - - _ Total Nubers No, 26 37 38 78 113 121 122 122 122 MIUCTIDNB DTA COnoeptien Bate Cows 66 87 87 87 87 87 87 87 87 Conoeption Rate NHeif' % 90 90 90 90 90 90 90 90 90 Horta1iit Adult %3 3 3 3 3 3 3 3 3 Heifer CalvesI' 16 16 16 16 15 1S 16 15 15 Bull Ce1e& Ns 1S 16 16 16 15 11 16 16 16 Purehaed Bull Calve N - 10 10 10 10 10 10 10 10 Cmv Culling Rate 14 20 20 20 20 20 20 20 20 Rejected Boll ate S 16 20 20 20 20 20 20 20 20 Caloing Interval Muoth. 16 14 14 14 14 14 14 14 14 Age at irt Cal"ng Months 24-36 24-36 24-36 24-36 24-30 24-30 24-30 24-30 24-30 / This culling of bulls In Bervice will be repeated In ear 11. g/ lnoludSng stlil-births. No,ssber 12, 1970 A NNEX 6 ETOPIA ADDIS ABABA DAIRY DEVELOPMENT PRSJECT Holleta Dairy Stud Farm - 100 Cows Investment Goste andnanns Year ITEK -------------- 1 ------------------1…- Units Unit Cost Total Cost On-Farm Investment Fencing 3,000 m 0.80 2,400 Manager's Howue 1 9,600 9,600 Water Piping 1,500 ' a.25 3,375 Water Tank (40,000 1) 1 2,500 2,500 Pumping Unit 1 3,200 3,200 Water Troughs 14 400 1,600 Labor Cost for Water Installation 2,300 Large Dairy Cooler 1 900 900 Spray Race 1 3,000 3,000 Crush and Working Paddock 1 1,500 1,500 Small Equipment and Tools 3,000 Contingencies (approx. 10%) 3,625 Total Investment 37,000 Financing DDA Loan 37-000 Total Financing 37,°000 v1 Since HoUrta Dairy Stud Farm is part of the Dairy Develo1mnent Agency (DDA), thi:s is an in-ternal loan. November 12, 1970 E T H I O P I A ADDIS ABABA DTRY VSLOPMENT PRCJECr Holleta Dairy Stud Farm - 100 Cows kAeOMi Prg.jent4nIS Before ---------------------------------------------------------------------- Years --------------------------------------- ------------------------------------- rmr UNIT Development 1 2 3 4 5 6 7 8 9 10 11 12-15 lMIL SALFBL" Cows ir Milk NO. 38 40 59 58 58 75 75 75 75 75 75 75 75 Heifers in Milk " 8 16 17 i6 40 22 22 22 22 22 22 22 22 Milk Yield per COw l/sar 2,800 2,900 3,000 3,000 3,100 3,100 3,200 3,200 3,200 3,200 3,200 1,200 3,200 Milk Yield per Heifer l/ear 2,100 2,200 2,300 2,300 2,400 2,400 2,500 2,500 2,500 2,500 2,500 2,500 2,500 Total Milk "reduction - Cows 'OO 1 1,064 1,160 1,770 1,740 1,798 2,325 2,400 2,400 2,400 2,400 2,bOO 2,400 2,400 Total Milk Production - Heifers 'OO 1 168 352 391 368 960 528 550 550 550 550 550 550 55D Total Milk Prod'tiOn 'OO 1 1,232 1,512 2,161 2,108 2,758 2,853 2,950 2,950 2,950 2,950 2,950 2,950 2,950 Milk Fed Calve'0- OO 1 185 360 567 562 612 612 612 612 612 612 612 612 612 Milk for Sale 'OO 1 1,047 1,152 1,594. 1,546 2,146 2,241 2,338 2,338 2,338 2,338 2,330 2,338 2,338 Milk Price ES/i 0.28 0.33 0.33 0.33 0.33 0.33 0.33 0.30 0.30 0.30 0.30 0.25 0.25 Total Milk Sales EB 29,316 38,016 52,602 51,018 70,818 73,953 77,154 70,140 70,140 70,140 70,140 58,450 58,450 :ATTLE sBII Cuf Come 3S 1,500 2,400 2,400 2,250 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 In-calf Heifers SS - - - 6,C00 4,800 11,200 11,200 11,200 11,200 131,200 1,200 11,200 11,200 Barren Heifers E$ 240 240 240 720 360 180 480 480 480 480 480 480 Lao BElls for Breeding 3$ 8,400 7,700 11,200 26,600 h7,600 46,900 47,600 46,200 47,600 47,600 47,600 47,600 47,600 Rejected Bulls ES 240 360 480 1,200 1,920 1,920 1,920 1,920 1,920 1,920 1,920 1,920 1,920 Cull Bulls ES - i,5oo - 300 - - - 600 - - - 600 - Total Cattle Sales S$ 10,380 12,200 14,320 37,470 q7,680 63,500 64,200 63,400 64,200 64,200 64,200 64,800 64,200 Total Incme E$ 39,696 50,216 6',922 88,488 128,498 137,453 141,354 133,540 134,340 134,340 134,340 123,250 122,650 L/ All cattle on Bolleta Muiry Stud Farm are Friesians. 1 400 1 per heifer calf and 500 1 per bull calf. Price assumptions in ES, cull cow 150; in-calf heifer 800; barren heifer 120; bull for breeding 700; reJected bull 120; and cull bUll 30O. 3 T H I O P I A LDOS ARE&B MMs 01LO0MM FRJUCT Holleta 1airy Stud arm - 100 Cows ,A)erraw LAfojora0D Before 1034 UNIT Deelpment 1 2 3 4 5 6 7 8 9 10 11 12-15 OmATIO COSTS Salaries and Wages Manager U 9,600 9,600 9,600 9,600 9,600 9,600 9,600 9,600 9,600 9,600 9,600 9,60o 9,600 Clerk T3 720 720 720 720 720 720 720 720 720 720 720 720 720 oriver/Mechanic 3$ 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 Tractor Driver 3$ 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 pump operator 3$ 540 540 540 540 540 540 540 540 540 540 540 540 540 Cattl Headan -Cows 3$ 720 720 720 720 720 720 720 720 720 720 720 720 720 Cattle Headnan - Young Stock B$ - 720 720 720 720 720 720 720 720 720 720 720 720 ilgkers,1 E$ 5,400 5,400 5,400 5,400 6,480 6,480 6,480 6,480 6,480 6,480 6,480 6. MO 6,480 Other LaborV 3B 1,080 1,620 1,620 1,620 1,620 1,620 1,620 1,620 1,620 1,620 1,620 1,620 1,620 Night Watchmanl 3$ 1,080 1,080 1,080 1,080 1,080 1,080 1,080 1,080 1,080 1,060 1,080 1,080 1,080 Sub-Total E$ 22,140 23,400 23,400 21,480 24,180 24,180 24,480 24,480 24,480 24,480 24,480 24,180 24,480 Other Coate Feed CostaY 3B 12,420 15,405 26,085 29,070 33,420 34,440 35,085 32,175 32,175 32,175 32,175 32,175 32,175 Veterinary Spc,viceV/ ES - 2,925 4,065 4,575 4,740 4,755 1,799 1,755 1,799 1,799 4,755 4,755 4,755 A.I. ServicesW ,, _ 770 760 740 goo 970 970 970 970 970 970 970 970 Purchase of Friesian Boll Co .vesd. 3$ - 900 1,800 1,80 1,500 1,900 1,900 1,500 1,500 1,900 1,500 1,90 O 1,500 Vehicle hning and ReplirsY-. 15 4,000 1,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 14000 4,000 4,000 Tractor Running an4 Repairs?! Eg 7,500 7,500 7,500 7,590 7,500 7,500 7,500 7,950 7,900 7,500 7,500 7,900 7,900 Water and Repsirs~Y 3* 919 519 664 818 814 818 818 818 818 818 818 818 818 Replacement of Machinery and Bquiwnt?/ Es 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 Fencing and hilding intaene g U 3,000 3,000 3,700 3,700 3,700 3,700 3,700 3,700 3,700 3,700 3,700 3,700 3,700 Imad Tarx 3$ 220 220 220 220 220 220 220 220 220 220 220 220 220 Forap Productionl2/ !$ 900 1,000 1,200 1,200 1,900 1,500 1,500 2,000 2,000 2,0O0 2,000 2,0O0 2,000 Sub-total 6$ 38,155 46,239 59,994 63,623 68,374 69,403 70,048 67,638 67,638 67,638 67,638 67,638 67,638 Total E$ 60,295 69,639 83,394 87,023 92,854 93,883 94,528 92,118 92,118 92,118 92,118 92,118 92,118 Contingencies (approx 10%) 3$ 6,005 6,961 8,306 8,777 9,246 9,417 9,472 9,182 9,182 9,182 9,182 9,182 9,182 Total Operating Costs g$ 66,300 76,600 91,700 95,800 102,100 103,300 1041400 101,300 101,300 101,300 101,300 101,300 101,300 / The wage for a uil3mr, laborer or nightsatchman is BS%40 per anmum. / pFr details se Table 6 A- 6. 3/ Veterinary services at I1SO per acimal per annr. J/ Artificial isaination at zo10 per cow, including 2 repeat inseairstiom if necessary. 5/ At Et0 per b calfp.e 61 20,000 kn/y0sr at 1*0.2O per km. 1/ ,500C hours per year at E$5 per hour- , Cost is U$4.40 per anisa unit per arnUIR based on the following: 60 1 of water Per ani7al unit par day and water at a oest of E$0.20 per 1,000 1. P/ At 16.7% of 3*60,000, or 310,000 per annm. 10/ At 5% of cost. A it 311 per ba per amm. Fbr purchase of seed for green fodder prodcction. ETHIOPIA ADDIS ABABA DA3R!Y DEEWPM3KT PROJECT Holleta Sar tud Farm - 100 Cows FWaaal Pro-ib¢tions e --- aears a! Before 1 2 3 4 5 6 7 8 9 10 11 12-15 iTmP _ Development - Cash Inflow b4 Sale of Cattle 10,380 12,200 14,320 37,470 57,680 63,500 64,200 63,400 64,200 64,200 64,200 123,250 122,650 Sale of Nilk 29,316 38,016 52,602 51,018 70,818 73,953 77,154 70,140 70,140 70,140 70,140 58,450 58,450 Short-Term Loan _ 26,384 56,813 73,767 57,522 31,979 808 - - _- - - Lob-Tem Loan _ 37,000 - - - - - - - - - - Total 39,696 113,600 127,735 162,255 186,020 169,432 142,162 133,540 134,340 1314,340 134,340 181,700 181,100 Cash Outflow Iuveatment: Long-Term Loans 37,000 - - - - - - - - - - Operating Cost 66,300 76,600 91.700 96,900 102.100 103,300 104,000 101.300 101.300 101,300 101,300 101.300 101.300 Total 66,300 l3, 600 91,700 96,900 102,100 103,300 104,000 101,300 101,300 101,300 101,300 101,300 101,300 Annual Cash Balance Before Debt Service (26,6014) - 32,035 65,355 83,920 66,132 38,162 32,240 33,000 33,000 33,000 80,400 79,800 Debt Service Interest on Short-Term Loan 1/ - - 2,506 5,397 7,008 5,465 3,038 77 - - - - - Amortisation of Short-Term Lqan _ - 26,384 56,813 73,767 57,522 31,979 808 - - - - - Interest on Long-Term loan_/ - - 3,145 3,145 3,145 3,145 3,145 3,145 747 - - - - Amortization of Long-Term Loan 2/ - - - - - - - 28,210 8,790 - - - - Total - - 32,035 65,355 83,920 66,132 38,162 32,240 9,537 - - - - Annual Cash Balance After Debt Service (26,604) - - - - - - - 23,463 33,000 33,000 80,1400 79,800 Annual Incremental Cash Balance _ 26,604 26,60L4 26,604 26,604 26,604 26,6014 26,6014 51,067 56,6014 56,604 107,004 106,404 Cummlative Incremental Cash Balance _ 26,604 53,208 79,812 106,1416 133,020 159,624 186,228 209,691 266,295 322,899 429,903 536,30714/ Annual Incremental Herd Value _ 8,000 30,800 34,100 (1,900) 700 - - - - _ I/ 9.5% p.a. 2 8.5% p.a. on the outstanding balance. / Total term of 8 years, including 6 years of grace. c GCui lati-e incremental cash balance for year 15. ETBIOPIA 6338 _ABABA DAJ3 NOW TNJ~ -4 N T,d.ea - - - - -N--1-6-16 - - - - - - - -bd of Ye - - - - - - - - - - - - - - HeTfeRD . C.Y . . , C. I S. i'. M. C. B. C. 3 4 5 - RNRD NOSITrOI Retire C .ttl e Com. No. - 20 - - 2 1 2 2 3 3 3 Tn-Caif Heirer No. S - - - _ 1 - - 1 N - 9 9 Boll Cc 16 - 16 - . - - - - - - Heifer 9-24 Montho No. 7 T - Streg l N. 13 - - - - - - 1 1 1 1 o -l o No. 2 - - - - - - - - 9 9 9 S Sub-Totl No. 63 _3 4f _ 1 _ 9 _ 9 _9 ftroSim Type Cattle cm l i No. __ 22 31 25 26 32 31 31 31 In_Colf H*tfer No. __. 25 _ 17 - e 11, 0 9 9 9 Heifer Calve. No. 9 _ 9 _ 10 16 12 17 18 20 18 18 Bull Cal"ve No - - - - 9 1 1 6 1 2 Heir r 9-24 M-teh. o 10 15 _ _3 F oriin Bullo No. 8 _ 8 - 8 2 3 1 1 1 1 1' 1 Sub-Totel No. 25 4 0 57 61 56 SS 59 Tot l NNob r - . 63 73 49 57 61 56 59 59 59 59 TrH Animl its No. 47 57 31 41 41 41 41 41 41 41 Heif. C.lve No. 9 - 1 9 13 20 13 17 20 20 20 20 Bol Calve. No. 9 - 9 9 12 6 16 20 20 20 20 eTotal N91 bero _ No. 18 18 - 18 25 39 31 33 40 40 40 40 PURCHASES Po2 6. 1 He Mfrhl No. _ 30 1 20 1- - 3 Sleare = 7aNo. 1 -1 -- - -_ - - - - otal Nw-bera No. . - _ 30 _ 20 - 8 - _ _ Cows No. 1 _ 1 21 1 6 1 6 7 1 2 1 tn-Calf Heifes No. 1 _ 1 _ . _ 10 - 6 Htarr ir e(o ) H o. 1 . 1 _ 1 3 4 3 2 2 2 2 2 ittll e 9-2 No. I _ 1 _ 1 1 2 2 1 1 1 1 1 Heifers 9-2C Maltv No. I _ 1 _ 1 _ _ 1 Bullha No. - . _ 2 _ 1fer Ster. No. - Totl Numbers No. 1 5 _ 6 2 4 6 8 8 3 4 5 6 5 C.ol Bt- o No. 4 - 4 - 24 2 6 5 6 7 8 7 8 In-Cr Hifdt No. 1 _ _ _ 6 _ _10 5 6 6 6 Harr n Heifers (OCrn) No. 1 _ 1 10 1 2 2 2 2 2 bacrren Helf ,s (Purch..ed) No. - -- 3 - 2 rc.tle 9024 H1 0ths No . _ _ _ 15 _ HetSfr Celv,at N - - - 8 Cull Calve Nc.. 8 11 17 14 15 19 19 11 19 Bung N o . - _ 2 _ - . - - - - - 1-3 - St"r/ No. 5 - 20 _attle. Total Nbire No. 11 - 27 3 62 15 23 20 33 3 35 35 35 i/RDUCTION DATA Cmoneption R t* CouS S 75 _75 - - 87 87 87 87 87 87 87 87 Gonoepticn Rate -Heifers % 85 - fiS 9° 90S 90 - 90 90 90 90 90 xortality, Heifer C.valv/ % 30 10 - ;0 20 20 20 10 10 10 10 10 1ka Caivey S 1C _ 10 _10 10 10 10 5 5 5 5 5 Cow CUintg Rate %i 1S _ _ _ 10 1S 17 17 17 20 20 20 Calstrg Interva t Noth. 18 18 _- - 34A 14 14 14 14 14 314 JLg at First Caving Nonths 30-36 - 30.36 -_ 24-30 24-36 24-36 24-36 24-36 24-36 24-36 24-36 I/ N. C. Natin Catte.. L/ E. C. - uNpopa Type Cattle. I/ A Friesiano bull in purohased med mototr sold In year. 8 nd 12. V looluding still-births . Noomeb*r 12, 1970 NrHIOPIA AMIS A3BARA DAIRr DEVELOPWNT PROJECT Medium Size Far Model - 40 Cows Inveatments Obsts and Financing Total Units Unit Cost Tota Goat Units Unit CoCta2 Total Cost Coat _ -- On-Farm Investment Fencing 1,300 in 0.80 1,040 2,700 a 0.80 2,160 3,200 Covahad 250 M 30 7,500 Manager's House 50 m2 60 3,000 - 3,000 Water Piping 1,000 m 2.15 2,150 - 2,150 Water Trough 1 200 200 _ _ 200 Water Pump 1 270 270 _ - 270 Spray Pump 1 80 80 - - 80 Milk Cows (30 1) - 12 60 720 720 Milk Buckets - 8 15 120 120 Nilk Filter - 1 50 50 50 Surface Cooler _ - 1 180 180 180 Cart 1 780 780 - 780 Small Equmaent and Tools - 100 _ 100 200 Establishebnt of Alfalfa V 1 ha 245 245 - 245 Friesian Reifer,s 170-190 kg Yf 30 600 18,000 20 600 12,000 - 30,000 Contingencies (approximately 10%) 3,635 1,340 330 5.305 Total Investment 37,000 15,500 1,500 54,000 DDL Loan 3/ 26,200 15,500 1.500 143,200 Farmar's Contribution - 10.800 - 10.800 Total Financing 37,000 15,500 1,500 54,000 V The cost of establiiing 1 ha of alfalfa was based on the foflowing assumptions: (a) soil preparation cost E$ 52 per ha; (b) fertilizer cost for establishmnut of 1 ha E$ 73; and (c) seed cost E$ 120 per ha. 2/ The ag of Friesian beifers weighing 170 to 190 kg should be aproxintotely 9 months. The ry Development Agency (DDi) loan is equivalent to 80% o te totl investment ost. 4The farmsra contribution is equivalent to 20% of the total inrestment cost, but it is made entirely in the first year. ADDIS ABA ]DI DEMLOP1E41T P30JECT lNr Rie sa .'Iadel - 10 Gows Prje zt_oso ns, nd0ffEVet iF i3~~~~~~~~~~~~~~~~~efore ----------------------------------------------------------------- Years --------------------------------------------------------------------__:=-___ rrcK UPNIT Devel- i 2 3 h 5 6 7 8 9 10 U 12 13-15 R ~~~~~~~~~~~~opment MILK sALES Cows in k - T.t.1 No. 13 12 12 21 30 24 26 31 30 30 30 30 30 3D Csw in Milk - atwve No. 13 12 12 - - - - - - - - - - Cows in Milk - Friesisn No. - - - 21 3r 2!1 26 31 30 30 30 30 30 3D Heifers in Yilk -Total No. 4 5 29 16 - 8 13 8 9 9 9 9 9 Y H.eifsrs in MilkH ive No 4 5 5 - - - - - - - - Heifers in Milk -Friesian No. - - 24 16 _ 8 13 8 9 9 9 9 9 9 Milk Yield per Cow - N3tiv 1/year 500 5°° 500 - - - - - - - - - - - Xilk Yield per Cow - Friesian 1/year - - - 2,400 2,400 2,500 2,500 2,600 2,600 2,700 2,700 2,800 2,800 2,800 NIlk Tied per Heifer - IAtive 1/year 400 400 400 - - - - - _ - - - - - KIlk Yield per Heifer - Friesian 1/year - - 1,800 1.8_O - 1,800 1,800 1,900 2,000 2,100 2,100 2,200 2,200 2,200 Total Klk Pr.dictiqo '00 1 81 80 512 792 720 744 884 958 960 999 999 1,038 1,038 1,038 Milk Fed to 0alves '00 1 32 32 72 64 48 60 72 72 72 72 72 72 72 72 Milk for Ssle '001 49 48 440 728 672 681 812 886 888 927 927 966 966 966 Milk P rice 16/1 0.29 0.33 0.33 0.23 0.33 0.33 0.33 0.30 0.30 0.30 0.30 0.25 0.25 0.25 TotAl Milk Sales 5* 1,421 1,584 14,520 24,021 22,176 22,572 26,796 26,580 26,640 27,810 27,810 21,150 24,150 24,150 CATTLg SAjM/ Cull Ow ES 240 240 1,740 900 750 900 1,090 1,200 1,050 1,200 1,200 1,200 1,200 1,200 Di-Golf Heifere 3* 70 - 420 - - 8,000 4,000 4,800 4,600 4,o800 ,800 4,800 1,800 1,80 Barren Hafers E$ 60 420 240 - 120 240 240 240 240 240 240 2420 240 9-24 Ibath Old Young Zattla 3$ - - 600 - - - - - - - - - - Retlve Calms 320 - - - - - - - - - Friesian Boll Calves 3$ - - 330 510 420 450 570 570 570 570 570 570 570 570 G1U1 Ball a/Steer. 3 750 3,00o - - - - - - 300 - - - 300 - Total Cattle Sales 3$ 1,120 3,660 3,650 1,l1O 1,290 9,590 9,860 6,810 6,960 6,810 6,810 6,810 7,110 6,810 Total Innome ZS 2,541 5,244 18,170 25,431 23,466 32,162 32,656 33,390 33,600 34,620 34,620 3D,960 31,260 3D,960 ORLITM 000TS Salar7 for Na ger Zt - 3,500 3,500 3,500 3,500 3,500 3,500 3,900 3,500 3,500 3,900 3,500 3,500 3,500 Salaries for Jbo:;/ 3$ 1,200 1,800 1,800 2,400 2,400 2,400 2,400 2,400 3,000 3,000 3,000 3,O00 3,000 3,000 Feed COtsV 3$ - 2,940 5,250 4,995 5,280 5,115 5,685 5,490 5,733 6,030 6,030 6,315 6,315 6,315 Veterinary Irvice5/ Z$ - 375 735 855 915 840 885 885 885 885 885 885 885 885 A.I. Servie 3 _ 280 133 370 300 320 390 390 380 390 390 390 390 390 ?archase/P.eplaceaant of a Btl Ut - - - - 700 - - - 700 - - - 700 - I,ard Ta ES 60 60 60 60 60 60 60 60 60 60 60 60 60 60 Fwage Production / 3E - no 220 333 440 550 880 880 1,100 1,100 1,100 1,100 1,100 1,100 Mieellanesoe including Repairs and HaintAnce Z$ 200 400 400 S00 600 700 900 1,100 1,100 1,100 1,100 1,1M0 1,100 1,100 Total Operating Ocets 5S 1,460 9,465 12,395 13,010 14,195 13,105 11,700 14,705 16,455 16,065 16,065 16,350 17,050 16,350 / 200 1 per native calf and 400 1 per Friesian heifer calf. 2/ Price easeuptione int 3ES ntive coil sow 60; Friesian cull cow 150; native in-calf heifer 70; Friesian in-calf heifer 800; ntive tarren heifer 60; Friesian barren heifer 120; 9-24 wantbB old rative cattle 40; native clf 20; Friesian bull calf 30; native call bull! steer 150 and Friesian coll bull 300. 2 One farm worker at %*$0 per annu.. For details ame Table S Annex ?7. Veterinary services at IS per anil per ca ms. Artificial inaemination at 3*10 per cow or heifer, including 2 repeat insesiamtons if necessary. A/Jt Ea per ha.w P rce assumptions for the establishmnt of 1 ha of mate and vetchea or broad beans or passa (a) soil preparatlon and sowing , 3*25.00 (b) 100 kg of iasonieso-ho.phate Zt3836.50 (c) 50 kg of Or. E, 18.50 (d) Seed , 3*30.00 TOTAL ESI10.00 ADDIS ABLBA DAIRY DEVBLPMENT PROJECT editm Size Farm Model - 40 Cows Financias Pro'ections - ~~~~~~~~~~~~~~~~----------------------------------------------------- Years ------------------------__________-- ___________-_ Before 1 2 3 4 5 6 7 8 1' ii 12 13-15 a ITEM - Developsent ' Cash Inflow Sale of Cattle 1,120 3,660 3,650 1,4iO 1,2Su 5,590 5,866 6,810 6,960 6,810 6,810 6,810 7,110 6,810 H Sale of Milk 1,421 1,584 1L,52G 24,G24 22,176 22,572 26,716 26,58u 26,640 27,810 27,810 24,7,50 24,150 24,150 '° Short-Term Loan - 13,0U0 11,768 5,688 1,053 - - - - - _ _ _ _ ° Long-Term Loan - 26,2uu 15,500 1,506 - - - - - _ - _ _ Total 2,541 44,444 45,438 32,022 24,51> 32,162 32,656 33,390 33,600 34,620 34,62G 30,960 31,260 30,560 Cash Outflow Investment: (a) Farmer's Contribution - 10,800 - - - - - - - - - - - (b) Long-Term Loan - 26,200 15,500 1,50J - _ - - - - Operating Cost 1,460 9,465 12,395 13,010 14,195 13,485 14,700 14,705 16,455 16.065 16,065 16,350 17,050 16,350 Total 1,460 46,465 27,895 14,510 14,195 13,485 14,700 14,705 16,455 16j065 16,06. 16,350 17,050 16,350 Annual Cash Balance Before Debt Service 1,081 (2,021) 17,543 17,512 10,324 18,677 17,956 18,685 17,145 18,555 18,555 14,610 14,210 14,610 Debt Service Interest on Short-Term Loan 1/ - - 1,235 1,118 483 100 - - - - - - - - Amortization of Short-Term Loan - - 13,000 11,768 5,o88 1,U53 - _ - - - - - - Intereat on Long-Term Loan V - - 2,227 3,545 3,672 3,672 3,060 2,448 1,836 1,224 612 - - - Amortization of Long-Term Loan 3/ - - - - - 7,200 7,200 7,2Gu 7,200 7,200 7,200 - - - Total - - _6,462 16,431 >,243 12,025 lu,26u ,648 9,036 8,424 7,812 - _ _ Annual Cash Balance After Debt Service 1,081 (2,021) 1,681 i,081 1,081 6,652 7,726 9,037 8,109 10,131 13,743 14,610 14,210 14,610 Annual Incramental Cash Balance (3,102) - - - 5,571 6,645 7,556 7,.A8 9,05- ,,662 13,529 13,129 13,529 Cumulative Incremental Cash Balancea - (3,1u2) (3,102) (3,1u2) (3,102) 2,46j 9,114 17,070 24,098 33,148 42,810 56,339 69,468 110,055 4/ Annual Incremental Herd Value - 18,140 14,890 (500) 3,000 1,700 70O0 - - - - - - - 1/ 9.5% p.a. 2/ 8.5% p.a. on the outstanding balance. 2/ Total tarm of 10 years including 4 years of grace. 4/ Cumulative incremental cash balance for year 15. 1r AWI3 ABfB3 DAt DKZ T MWET small ram - 10 GUIe_ Before - - - - - - --- d of lear - - - - - - - - - - - - - - - - - - - - - - - - - - - - _ cT T nlllTT Deoerlnt 1 2 3 4 5 6 7 8 9 i9 11 12 13 14 15 N Native Stoek H1EDKFo8TO 1 Cowe No. 5 4 4 5 1 - - - - - - - - _ n Io-Salf Reifera so. 1 2 2 1 S Calves go. 3 2 - - - - - - - - - - - - - Heifers 9-24 bonths No. 2 2 2 - - - - - - - - - _- _ Bulla go. 1 - - - - - - - - - - - _ _ Osme No. 2 2 2 2 2 2 2 2 2 7 2 2 2 2 2 2 Sb-Total *o. 14 12 10 8 3 2 2 2 2 2 2 2 2 2 2 2 Ir,Ved Stock cowo Wo. - - - - 4 5 5 5 S 5 6 8 a B 8 a Tn-CalfStfHr No. - - - ? 2 2 2 2 ? 4 2 2 2 2 2 Heifer Calvea No. - , 2 2 3 3 3 2 3 2 3 4 4 4 4 4 Hifars 9-24 llotb No. - - 2 2 2 3 3 2 3 - - - - Sub-Total No. - - 2 4 U 12 13 12 12 12 13 14 1I4 14k 14 14 Tota aN*ers go. 14 _ 12 12 12 14 lk 15 1k 14_ 14 15 16 16 16 16 16 Total IM-1 A D ts go. 11 10 10 10 1 1 12 12 1U 12 12 12 12 12 12 12 Totl Nxbere go. 4 6 6 6 7 7 L7 7 7 7 10 10 10 10 10 In-Calf Beaifws -Friesian x Zebu go. - - - _ 4 - _ _ _ _ _ _ _ O,x_ __ __u _ ___ Jo. - - 1 _ . - 1 1 - - 1 1 _- - 1 1 - total N,ubw - No. I _ - 4 1 1 - 1 1 - - 1 1 MMALI?7 Co" No. - - 1 - - - - 1 - - I - 1 - 1 - In-Calf Heifer, No. _ - - - - - I1 Calves No. 1 1 1 2 1 1 1 1 1 1 1 2 1 2 1 2 Hdier 9-24 Hoct.s No. - 1 - - - 1 - - - - - - - - - Total uNmbwe No. 1 2 2 2 1 2 1 1 1 1 2 3 2 2 2 Oall am. No. 1 2 1 1 51/ 2 2 1 2 2 1 2 1 2 1 2 fn-talf Heifer, No. - - _ - - - - - - 1 1 1 2 1 DBrren eifere No. - - - 1 - - - - 1 1 - 1 - 1 Bull Cy, Nogo. 1 3 2 2 3 3 k 3 4 3 k5 4 5 4 C0ue Bu1le/0xw Ko. 1 1 1 - - 1 1 - - 1 1 - - 1 1 - Total. umbers No. 2 4 5 4 7 6 6 5 6 7 6 7 7 9 9 8 DUCT1M0 DATA COcaptio Rate of Co- f 80 80 80 SO 80 85 85 85 85 85 87 87 87 87 87 87 Omnceptim Rate of Hfers % 90 90 90 90 90 90 90 90 90 90 90 90 90 9p 90 90 mortalitY Adult %5 5 5 3 3 3 3 3 3 3 3 3 3 3 3 3 Heifer Calve.4 B 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 BSu Calves e S 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 Covw Glling Rate S 17 17 17 17 17 17 17 17 17 17 17 20 20 20 20 20 Barren Heifer Rat. t 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 la Calving Interval Kmoth, 18 14 14 14 14 14 14 14 14 14 14 14 14 14 14 1k 1: 1/ Foor of these are in-calf. ob p Includn ati3-1-irtba. E TH I O P I A ADDIS ABRAA DAIR! DFVELODPIMT PROJECT Small Farm Model - 10 Cows Investment Costs and Financing 0 1o2 3 Total C DITE Units Unit=oTota Cost Units Unit Cost Total Cost Units UJnit Cost Total Cost Units Unit Cost Total Cost Cost On-Fann Investment gf Fencing 700 m 0.80 560 _ - 1400 m 0.80 1,120 1,680 Cowshed 1/ - - 0.25 600 150 0.75 600 450 600 Watering Facilities / 1,100 - - - 1,100 Spray PMp - 1 30 30 -30 Milk Cans (10 1) _ _- 6 25 150 150 Milking Buckets - - - 3 ?5 45 45 Small Equipment and Tools - - - 100 100 In-Calf Half-bred Heifers - - - 4 35C 1,400 1,400 Contingencies (approx. 10 ) 140 - 20 335 495 Total Investment 1,800 _ 200 3,600 5,600 Finan¢ing DDA Loan3/ 1,500 200 3,300 5,000 Famner's Contribution 300 _ 300 600 1/ Cowshed size is 4 x 11 meters. 2/ For piping, water tank, water pump and trough. 3/ The Dairy Der'elopment Agency (DDA) loan is equivalent to 90% of the total investment cost. C dYIlioptA IIS 61AR6 DUN DE8OP1OT PEOJMOT S11 ._0 MedeI - 10 3o. Pro ectiopa of Ioneo and Coerating G00te ° Se~~~~ ~ ~~~~~~~~~~~~for- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -Yr _- - -_ - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -_ - IlMIT U3NiT D-n:lp=ot 1 2 4 b 5 6 7 8 S 10 11 12 13 '4 15 °MI-LK SiLES Coec ir. ilk- Thal MN. 3 3 3 4 2 5 5 4 5 5 5 6 7 S 7 8 Go. i NMilk -MatA.c Ih. 3 3 3 4 2 1 - - - Co- i. Nilk-F1 No. - - - - - 4 5 4 3 2 1 - - - _ Coe in ilk - F2 N.. - - - 2 3 4 5 4 2 1 C"e ir ylk - 73/1l Mc. - - -- - - - 1 3 6 6 8 Heifere iD Milk- T4t.i No. 1 1 2 2 4 2 2 2 2 2 4 2 2 2 2 lfeir ir. tlk -ati-e No. 1 1 2 2 - -- - - - - - - ' Heifelr i. Milk - F1 No. - - - - 4 2 2 - Heifer. ir. ilkk 2 18o. . - - - - _ _ 2 2 2 1 1 _ _ _ _ Eeifere in lilk -F3/F4 No. - - - 3 _ _ _ _ _ _ 1 2 2 2 Milk Yield per Cow - ti I/ar, ;0 500 S0 500 500 500 Soo - - - - _ Milk Tield per Cow.. P -1ye 1 200 1,300 1,300 1,403 16C i400 Milk Yield per Cov - F2 l/yeax _ - , , 1,400 1,500 1,602 1,600 1,700 1 ,00 1,700 Yilk Tield per Cow - FF4 -/y. _ _ ,- , 1,800 1,00 1900 2,00 2,0DO Milk Yield per Heifer - Native l/yer 400 400 400 420 - Milk Yield per Heifer - F1 - 900 goo 1,000 - Milk Yield par Hefer- 2 Or -- _ - - - - 1,100 1,100 1,200 1 200 1, -- Milk Yield per Reifer- 73/74 - - - - - - - - - - 1,100 I o 1,500 1,600 1,600 Total Milk Produotiot '01 19 19 23 28 46 71 85 74 92 97 104 152 155 178 169 182 Nilk Pad toCelre./ '00 1 6 4 8 8 12 122 12. 8 12 8 12 16 16 t6 16 16 Milk fr hore Coe,eaptioe '001 3 3 3 3 4 4 4 4 4 4 6 6 6 6 6 6 Milk for Sale '00 1 10 12 12 17 30 55 69 62 76 85 86 130 133 156 167 170 ilUk Priee 2$/j. 0.25 0.33 0.33 0.33 0.33 0.33 0.33 0.30 0.30 0.30 0.30 0.25 0.25 0.25 0.25 0.25 Total Milk Sale, 9$ 250 396 396 561 990 1,815 2,277 1,860 2,260 2,550 2,580 3,250 3,325 3,900 3,675 4,250 CArTs ASLAS 2/ Ctll COYS B$ 60 120 60 60 60 180 240 120 240 240 120 2f0 120 240 120 240 Native In-cal.f Breding Co - - - - 480 - - - In-Ceif Heifero k' _ _ _ - - _ _ _ _ _ _ 350 350 350 700 350 BerrenHeitere H5 i - $ 60 - - - - 80 - 80 - I 80 80 Bull C;al a s$ - 50 75 50 50 75 75 100 75 100 75 100 125 100 125 100 CMll B411,/Oaeo E$ 150 150 150 - - 150 150 - - 150 150 - - 150 150 - Total Cattle Sale. E$ 210 320 285 170 590 405 465 220 395 490 425 690 595 920 1,095 770 Total Inco=5 $ 460 716 681 731 1,580 2,220 2,742 2,080 2,675 3,040 3,005 3,940 3,920 4,820 4,770 5,020 OPERATING COSUO Feed Cots1/ V E- - 60 120 240 285 368 345 435 653 765 870 938 1.05 1103 1.200 Veteriaary- S-rviec 2$ - 20 40 110 120 130 120 120 120 130 146 160 140 130 140 A.I. Service 5/ 5$ _ 60 70 70 110 90 90 80 100 90 120 130 120 ¶60 130 160 Replaceet o? Oe 6/ s$ - - 150 - - 150 i5o - - 150 150 - - 150 150 Led T- I/ 8$ 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 Mi.cellan.oooc 8 50 5E 50 50 80 80 80 80 100 100 100 i5o 150 150 150 150 Total Operating C.ota 1* 70 130 370 300 560 745 838 645 775 1,133 1,285 1,310 1,368 1,695 1,693 1,650 1/200 1 .per etie calf and 400 1 per ieproved heifer calf. /P.1rioe amepti..o On i $: ea.tle eul1 eeu, . 60; improved cull -ou 1201 native in-calf brooding coo- 120; in-ealf orcee-bred heifer - 350; otiee beaven heifer - 60; ijproed berren heifer - 80; Obuclf - 251 ed .011 bIa1/o= - 150. ],or bet~1 ileec Tble S Racer 8 wo eiclery terrieh*t SS 0 pr ieprftd tcital per r. frOitf l tt1iase ation at 11$ l0 per cow or heifer, including 2 repeat lest:dnations if aceesary. _ wriee t t2en pr cxc -1150. tAt 4 Iperb.. EThOPIA AMDIS ARARA DAIRY DVELPXMNT POJECT ,Sm,ll Farm Model - 10 Cows Financila Projiections (Se) --------------- Years -…------------------------------…-_________________________ ram Before 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Development Cash Inflow Sale of Cattle 210 320 285 170 590 405 465 220 395 490 425 690 595 920 1,095 770 I. Sale of Milk 250 396 396 561 990 1,815 2,277 1,860 2,280 2,550 2,580 3,250 3,325 3,900 3,695 4,250 '1 Short-Term Loan - - - - - - - - - - - - Log-rarm Loan - 1,800 - 200 3.600 - - - - - _ - - - - - Total 460 2,516 913 1,297 5,180 2,220 2,742 2,080 2,675 3,040 3,005 3,940 3,920 4,820 4,790 5,020 Cash Outflow Investments Long-Term Loan - 1,800 - 200 3,600 - - - - - - - Opeeating Cost 70 130 370 300 560 745 838 645 775 11133 1,285 1.310 1.368 1.695 1,693 1,650 Total 70 1,930 370 500 4,160 745 838 645 775 1,133 1,285 1,310 1,368 1,695 1,693 1,650 Annual Cash Balance Before Debt Service 390 586 543 797 1,020 1,475 1,904 1,435 1,900 1,907 1,720 2,630 2,552 3,125 3,097 3,370 Debt Service Intereat on Short-Term Loan - _ _ 22 35 - - - - - - Amortization of Short-Term n 232 366- - - - - Interest on Long-Term Loan _ _ _ 153 153 170 476 439 398 354 306 255 199 138 72 - Amortization of Long-Term Loan 3/ _ - - - - 439 476 517 561 609 660 716 777 845 - Total _ _ 153 407 571 915 915 915 915 915 915 915 915 917 - - Annual Cash Balance After Debt Service 390 586 390 390 449 560 989 520 985 992 805 1,715 1,637 2,208 3,097 3,370 Annual Incremental Cash Balance - 196 - - 59 170 599 130 595 602 415 1,325 1,247 1,818 2,707 2,980 Cumulative Incremental Cash Balance 196 196 196 255 425 1,024 2,154 1,749 2,351 2,766 4,091 5,338 7,156 9,863 12,843W Annual Incrasental Herd Value _ (190) 140 230 1,810 20 200 (100) (100) 100 700 200 - - - VY 9.5% p.a. 2/ 8.5% p.a. on the outstanding balance. 3/ Total term of 10 years including 4 yeara of grace. / Cumulative cash balance for year 15. C. MANEX 9 ETHIOPIA ADDIS ABABA DAIRY DEVELOPMENT PROJECT Shola DaiPlant - Technical Aspects 1. The present value of Shola Dairy Plant is estimated at E$900,000, comprising buildings, E$300,000: machinery and equipment, E$400,000; and vehicles, E$200,000. Buildings have been financed by Government loan; UNICEF has financed machinery, equipment and vehicles; and UNICEF and FAO have provided scholarships and technical advisors. Table 1 shows the amortization of the UNICEF loans, to be repaid in milk supplied to selected groups of beneficiaries (such aa schools and hospitals) over a 10-year period, and projections of income and operating expenses of the Plant. 2. Shola's daily throughput in the peak season is expected to exceed its 30,000-liter capability by Project years 4 or 5. Additional investments are required and proposed for financing under this Project. These investments (Table 2) have been determined in consultation with the UNICEF Regional Office for East Africa. 3. Machinery and equipment would represent more than half of the proposed investments. Particularly important would be the installation of a stand-by generator because of power breakdowns that occur occa- sionally. In year 1 and in year 4, another 10,000-liter milk storage tank would be needed, and in year 4 an additional bottling line. A bigger milk separator would replace the old one in year 2 and a small plastic bag filling unit would allow packaging of cream and other fresh milk products. In year 5, the installation of an automatic butter wrapping machine would be necessary. Equipment for extending milk stores and some small installations for cheese production are needed for storage and pro- cessing of an expected increase of unsold milk. Capital necessary for small milk plant equipment would be E$8,000 in years 1, 2 and 3 and E$12,000 in years 4, 5 and 6. More flexible distribution of milk and other dairy pro- ducts would be made possible by installation of eight refrigeration units in selected selling centers. 4. Shola Dairy Plant lies about 5 km outside the capital. Therefore, housing for five key technicians near the plant would be required, espec- ially for those working on double shift during the night. Shola needs about 300 m of water Ser day, which at present comes from the public supply at E$0.50 per m . To be independent of this fairly expensive and often insufficient supply, the financing of a water supply for the plant ANNEX 9 Page 2 is justified, especially as it would greatly reduce costs. In the course of expanding milk collection and distrlbution, the number of collecting and selling centers should be raised as proposed. During the Project's duration, eight additional milk trucks and three minibuses would be purchased. Replacement costs for vehicles are included in Shola's opera- ting costs. 5. Projection of income and operating costs of the Plant are shown in Table 3. EIHIOPIA ADDIS ABABA DAIRY DEVELOPMENT PROJECT Shola Dairy Plant Financial Prections _ _______ Years- ---…- …~~~ ~~~ Before 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Cash Inflow Sale of Yilk and Butter 1,563 2,888 3,851 4,814 6,161 7,124 8,087 8,196 8,893 9,416 9,765 9,061 9,373 9,686 9,998 10,311 Long-Term Loan from ADDC 1/ - 279 110 109 198 56 57 - - - _ _ - - - _ Total 1,563 3,167 3,961 4.923 6,359 7,180 8,144 8,196 8,893 9.416 9,765 9,061 9,373 9,686 9,998 10,311 Cash Outflow Investment: Long-Term Loan - 279 110 109 198 56 57 - - - - - - - - - Payment to Farmers for Milk 986 1,807 2,409 3,011 3,8514 4,457 5,059 5,147 5,585 5,913 6,132 5,293 5,475 5,658 5,840 6,023 Operating Costs 442 611 813 961 1,191 1,353 1,530 1,831 1,962 2,059 2.12lL 2,188 2.253 2.316 2.379 2j Total 1,428 2,697 3,332 4,081 5,243 5,866 6,646 6,981 7,547 7,972 8,256 7,481 7,728 7,974 8,219 8,467 Annual Cash Balance Before Debt Service 135 470 629 842 1,116 1,314 1,498 1,215 1,346 1,4414 1,509 1,580 1,645 1,712 1,779 1,844 Debt Service I. On Borrowings Before Takeover by DDA: (a) UNICEF Loa Interest - 92 82 73 64 55 46 36 27 18 9 - Amortization 115 115 115 115 115 115 115 115 115 110 - (b) GoversuIne/Loan Interest - 28 25 22 20 17 114 11 8 6 3 - _ _ _ _ _ Amortisation 35 35 35 35 35 35 35 35 35 35 - II. On Borrowingsa r5er Takeover by L0A: Interest _ - - 24 33 42 59 64 60 45 30 15 Amortization of Long-Ter Joan-4/ - - - - - - 109 175 175 175 175 - - - - - Total 270 257 269 267 264 269 370 420 394 362 190 - - - Annual Cash Balance After Debt Service (135) 213 360 575 852 1,045 1,128 795 952 1,082 1,319 1,580 1,645 1,.;2 1,779 1,844 Annual Incremental Cash Balance - 348 495 710 987 1,180 1,263 930 1,087 1,217 1,454 1,715 1,780 1,847 1,914 1,979 Cumulative Incremental Cash Balance - 348 843 1,553 2,540 3,720 4,983 5,913 7,000 8,217 9,671 11,386 13,166 15,013 16,927 18,906 1/ Shola Dairy Plant is part of the Dairy Development Agency (DDA), therefore, this is an internal loan. 2/ 8.0% p.a. on outstanding balance. '5/ 8.5% p.a. on outstanding balance. JT/ Total term of 10 years including 5 years of grace. IT Noveemher 12, 1970 E T 0 I O P I A ADDIS ABAEtA nIR1 fLV9.OPM! PFRWT Shola DLiry Plsat Pr,,3oti0 of 1nS s, l d Op-tigx Costs X 2dore ~ ~~~~~~~~~~~~~~~~~ --------------_-----------___-------_------___------------------------------_-- Y- -------------- --------------.----------------------------------------------______ _____:_ £ ITEM UIIIT Dpopeat 1 2 3 4 5 6 7 8 9 1 11 12 13 14 15 - SAL3 OF DIMU PRODUCTS ,. lfk Th,ghpt por y 000 1 10 15 20 25 32 37 42 47 51 54 56 '3 60 62 64 66 J IYlk R8t,tl Prtcn 8$ par 1 0.40 0.50 0.50 0.50 0.50 0.50 0.50 0.45 0.45 0.45 0.45 j.40 0.40 0.40 0.40 0.40 0 S..8 of c 1 MI/ 000 Et 1,453 2,724 3,632 4,540 5,811 6,719 7,627 7,681 8,335 8,825 9.152 8.26 8,716 9,007 9,297 9,588 51,, of 14ttmr- '000 38 l1 164 219 27h 350 405 460 515 558 591 613 635 657 679 701 723 9ctsl Tn0,G. '000 E5 1,563 2,888 3,851 4,814 6,161 7,124 8,087 8,196 8,893 9,46 9,765 9,061 9,373 e'.6 9,998 10,311 OP2RJTINO COSTS L'rlect Cost of Pr s1rg1 000 PS 146 219 292 365 467 540 613 686 745 788 818 847 876 905 934 964 Tranwport of 'Om Z $000 91 137 183 228 292 338 383 429 465 493 511 529 548 566 584 602 Yffrkstig Co.teg' a 000 8$ 55 82 110 137 175 203 230 257 279 296 307 .8 329 339 350 361 Ad.instratire Ios *rd Sa.riesw 8000 F$ 54 60 65 70 75 75 75 75 75 75 75 75 75 75 75 75 Printing, 8tationary, Tsep6o,pc 000 E$ 8 9 9 10 10 10 10 10 10 10 10 10 10 10 10 10 Rsplacesst of CfirT Pla5 snd Lbsbor tory Yadinscey and lquisetsf '000 E3 - - - - - - - 130 130 130 130 130 130 130 130 130 Raplacoent of Mlk Trcks'7/ 000 E$ 48 48 80 64 64 64 80 80 80 80 SO 80 80 80 80 80 Contt.gendna (approx 10%)E/ :000 E$ 40 56 74 87 108 123 139 167 178 187 193 199 205 2.. 216 222 Sob-Total '000 E$ 442 611 813 961 1,191 1,353 1,530 1,834 1,962 2,059 2,124 2,188 2,253 2,316 2,379 2,444 Payent to Fa-cer, for Milk 0ooo E$ 986 1,807 2,409 3,011 3,854 4,457 5,059 5,147 5,585 5,913 6,132 5,293 5,475 5,658 5,840 6,023 70tal Op-rotlig Costs 000 Z$ 1,428 2,418 3,222 3,972 5,045 5,810 6,589 6,981 7,547 7,972 8,256 7,481 7,728 7,974 8,219 8,467 I/ At s 6 per 4. 2-/ Process..g cost, ocldiog dcp-oooation, is 8$ n.04 per 1 of m:Lk. 3/ fronport cost, escludlo deprsdato23,n, is 8$ '^^5 p-r 1 of nilk. / 9$ 60.015 pcr 1 of rilk. I/ Includes cis]k. of milk -c1o1.tiag cnnters. 6/ Appro-stcly 10% of diry plant and loborotory -.chios,7 and npipae-t. 7 At s$ 16,0-0 per mlk t-ock. / Iaclodes s,intemnice of buildings and silk coIlectitg centers. ANNEX 9 Table 3 ADDBS ARABA fA DSEV7LOPMENT PROJET Total ITEM Unit!Cost 1 2 3 4 5 6 Cost Milk throuihput per Day ('000 1) 15 20 25 32 37 42 Investment (a) BdreadConstructionl (a) ea8 (5) 40 - - - - - (5) 40 New Milk Collecting Centers 5 (8) 40 (4) 20 (4) 20 , (16) 80 Replacement of TeMporary Centers 5 (4) 20 4) 20 , , _ _ (8) 40 Milk Selling Oanters 0.6 (5) 3 5 3 ( (5) 3 - (5) 3 (20) 12 Water (borehole) 18 (1) 18 - - (1) 18 Sub-Total 121 43 20 3 - 3 190 Refrigeration Units or Selected Selling Centers 6 (2) 12 (2) 12 (2) 12 (2) 12 - - (8) 48 Laboratory Bquipment 1 1 1 1 1 1 1 6 Milk Plant Equipsent 8 8 8 12 12 12 60 milk Storage Tank (10,000 1) 25 (1) 25 - - (1) 25 - - (2) 50 Stand-by Eleotric Generator 40 (1) 40 - - - (l1 40 Milk Separator 9 - (i) W - _ _ (1 9 Plastic Bag Filling Unit 3 - (1) 3 - _ _ _ (1) 3 Conversim Parte for Peateurising Machii 2 _ (1) 2 - - - - (1) 2 Bottling Line 105 _ - - (1)105 - (1)1o5 Automatio Butter Wrapping Machine 16 - - - - (1) 16 _ (1) 16 Equipsent for Extending the Milk Store 10 - (1) 10 - - - (1) 10 Cbheee Vat 3 - - - - - (1) 3 (1) 3 Air-Condition for Cheoee Store 1 _ _ - (1) 1 (1) 1 Xilk Can. (50 1) 0.03 (160) 5 (200) 6 (200) 6 (200) 6 (200) 6 (200) 6 (1160) 35 Sub-Total 91 41 37 161 35 23 388 (o) Vehioles (R°uoks 16 (2) 32 (1) 16 (2) 32 (1) 16 (1) 16 (1) 16 (8)128 Minibus 10 (1) 10 (1) 10 - - (1) 10 (3) 30 Sub-Total 42 16 42 16 16 26 158 Sub-Total 254 100 99 180 51 52 7S6 Contingencies (anproximatelyr 10%) 25 10 10 18 5 5 73 Total Investment 279 110 109 198 56 57 809 Financingz- DDA Loan 279 110 109 198 56 57 809 .1/ In the bodcy of the Table the figures in brackets represent the number of units of the item in question purchased in that year. j/ The Dairy Development Agency (DUa) Loan is equivalent to 100% of the total investment cost. Noveber 12, 1970 ffBOPIA ADDIS ABABA DlIu DEVIIORW P10JET Phasing of the Len,ding Prw.m Phasine of Investmernt and Finncing Number and Phasing of Loan Ca,.tments (E$ 1000) - - - - - - - - Teare - - - - -- - -Years - - - - - - - - - - - - - - - ITEM 1 2 3 4 5 6 Total 1 2 3 4 5 6 Total Inveutment Snall Dairy Farms 27 176 232 74 378 457 1,344 15 98 127 - - - 2I0 Medium Size Dairy Farms 1,480 1,619 1,218 1,201 387 35 5,940 40 27 20 2 _ 110 Private Cross-Breeding Ranches 138 92 - _- - 230 3 2 - - - - 5 Honleta Dairy Stud Fam, 37 - - - - - 37 1 - I _ - _ 1 DDA Investment in Abermossa 250 - - - - - 250 1 _ _ _ _ _ 1 Shola Dairy Plant 279 110 109 198 56 57 809 1 _- - I S&b-Total 2,211 1,997 1,559 1,473 821 549 8,610 61 127 147 23 - - 358 Costa of Technical Adini4strative Services g9o 1,020 960 790 710 690 5,080 n.a. n.a. n.a. n.a. n.a. n.a. n.a. Total 3,121 3,017 2,519 2,263 1,531 1,239 13,690 61 127 147 23 _ _ 358 Financing of Investment Farirs 460 10 216 248 - - 1,234 DDA 347 372 403 412 Y 423 52 Goverzment 200 - - - 200 IBED/mA. 2,11h 2,412 1,931 .1,612 1,119 816 10,004 Total 3,121 3,017 2,519 2,263 1,531 1,239 13,690 The Government contribution to investment of E$ 200,000 is a loan in kind ( cattle ) to DDA for cattle for Abernossa Cross-Breeding Ranch. 10 n.a.- not applicable. %o.ver 12, 1970 ANNEX 11 ETHIOPIA ADDIS ABABA DAIRY DEVELMPMENT PROJECT Estimated Schedule of Disbursement of IDA ---edit - - - - Estimated - - - - Amount Balance Project End of Disbursed of Credit Year Quarter ---- US$OOO --------- 1 0 0 h,400 1 150 4,250 2 400 4,ooo 3 690 3,710 4 990 3,410 2 1 1,270 3,130 2 1,550 2,850 3 1,830 2,570 4 2,110 2,290 3 1 2,331 2,069 2 2,552 1,848 3 2,773 1,627 4 29994 1,406 14 1 3,153 1,248 2 3,311 1,090 3 3,470 932 4 3,628 772 5 1 3,740 660 2 3,852 548 3 3,964 436 4 14,076 324 6 1 4,157 243 2 14238 162 3 4,319 81 4 4,hoo 0 November 12, 1970 ADDIS ABAPA DAli! 3VWEHDEW PROJECT Dairy Develovaent nauey (MA) Tecbnical and Administrative Staff Nauqdrents --- -- --Years - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - o 1 2 3 4 5 6 FH CATE3ORY Nuer Wit Cost Nwmber lunit Ue*t NwAber Unit Coat Number Unit Coet Number Unit Cost Number unit Cost (0 E$) (000 E$) (000 S$) (000) .) (000 E$) (ooE Es) Oenral Manater 1 25 1 25 1 25 1 25 1 25 1 25 Lowyer 1 12 1 12 1 12 1 12 1 12 1 12 PRWOCTIIN DIVISION Production Nanager / 1 100 1 100 1 100 1 100 1 100 1 100 Asistant Production Nanager - - - - - - 1 12 1 12 1 .12 Ve. a'd (Disease cOirnol) Y 1 80 1 80 1 80 - - - - - - eterinaran (Disease Control) - - 1 12 1 14 1 14 1 14 1 14 Artificial 1 80 1 80 - - - - - Artificial Insenation 1 7 1 7 1 8 1 8 1 8 1 8 specialit 2 Dary Devel)pmst 0fficarS - 1 80 1 80 1 80 DuiryDevelpAmt, cfioer 2 8 2 8 3 8 3 8 3 10 3 10 Veter?ne7 Assiatsats 1 7 2 7 3 7 3 7 4 8 4 8 Dairy tendon Officers - - 1 7 2 7 4 7 5 8 6 8 Principal, Farmers' Training Center 1 7 1 7 1 7 1 7 1 7 1 7 Inseminatore 2 3 4 3 7 4 7 4 7 4 7 4 FINANCIAL DIVISION Financial mnager I 1 100 1 100 1 100 - - Finan.rial uager _- - - - 1 1 5 1 15 Assistant Financial Manager 1 12 1 12 1 12 - - - - - Chef Accountant 1 12 1 12 1 12 1 12 1 12 1 12 Loan officers 2 7 3 7 3 7 3 A8 3 8 3 8 Accouts Clerke 3 5 4 5 4 5 4 6 4 6 4 6 PEOCESI & NLFINO DIMSION Processing & Nartting Manager 1 15 1 15 1 15 1 15 1 15 1 15 MISC]IANEOUS Drivers 4 2 4 2 4 2 4 2 4 2 4 2 Mewermployees 5 3 7 3 8 3 10 3 10 3 10 3 1/ ept for the Marketing & Processing Manager all staff of Shola Dairy Plant and Holleta Dairy Stad Farn are excluded frmn this table. IntaernatonaJ.y recruited personnel. ITa1OPIA ADDIS ADA DM1 fLIOPST PRojECT 1Rir Dovekpment Agency (DDA) Coeta Of Tebhial and ksraIstrative Services 1/ - - - years- - - - - - - - - - - - - - - - - - - - - - - - - -r- Years- - - - - - - - - - - - CA7StoRr 1 2 3 4 5 6 Total 1 2 3 4 5 6 Total E0s W( US I000 Equi)v. Foreian zc143nae Costs DDA Technical and Ajsinis- trative staffrr/ 349.o 446.0 374.0 162.0 90.0 90.0 1,511.0 139.6 178.4 149.6 64.8 36.o 36.o 604.4 Travol 25.0 25.0 5.0 - - - 55.o 10.0 10.0 2.0 - - - 22.0 TranD ort Vehicles 3/ 63.0C/ 18.0 10.0 14.0 - -- 1o5.o 25.2 7.2 4.0 5.6 - - 42.0 opernting Ccats of Transport Vehicloo _W 32.0 43.0 47.0 63.0 63.0 6g o 31t 10.8 17.2 1B.8 25.2 25.2 25.2 124.4 Tehoica. Egqtdpment 15.0 9.0 6.o 6.o 6.0 6.0 : 6.0 3.c 2.4 2.4 2.4 2.4 19.2 Offico Eqcisment 15.0 5.0 - - -- - 20.0 6.o 2.0 - .- - - 8.0 Semen and Liquid Nitrogen 14.4 33-3 52.0 59.2 63,8 66.5 289.0 5.7 13.3 20.8 23. 25.5 26.6 115.6 Training Center Equipmect 5.0 - - - - - 5.0 2.0 - - - - - 2.0 Offiac E ,2enMA 5.- 5.0 5.0 5.0 5.0 5.0 30.0 2.0 2.0 2.0 2.0 2.0 2.0 12.0 Field Studies5/ 15.0 40.0 40.0 40.0 4o.o 15.0 190.0 6.o 16.0 16-o 16.^ 16.0 6.0 76.0 Contingencioal>approX. 10%) 61.6 60.7 48.5 38.3 29.8 22.1 261.0 24.7 24.3 19.4 15.3 11.9 8.8 104.4 subtotal 600.0 685.0 587.5 387.5 297.6 267.6 2,825.0 240.0 274.0 235.o 155.0 119.0 107.0 1,130.0 Local Cofst DDA Technical apd Admifla-3 1;atit7e Staff 21 185.o 243.0 278.0 302.0 323.0 331.0 t1662.0 74.0 97.2 111.2 120.8 129.2 132.4 664.8 Transport Vehicles 27.0 7.0 5.0 6.o - - 45.0 10.8 2.8 2.0 2.4 - - 18.0 Operating Cocts of Transport 4 Vebiolon 12.0 13.0 17.0 13.0 13.0 13.0 81.0 .8 5.2 6.8 5.2 5.2 5.2 32.4 Teebnical EquLpment 5.0 3.0 2.0 2.0 2.0 2.0 16.o 2.0 1.2 0.8 0.8 0.8 0.8 6.4 Offico Nqtzp±nt 15.0 5-0 - - - - 20.0 6.o 2.0 _- - - 8.0 Semen and Liquid Nitrogen 1.6 3.7 3.0 3.7 4.2 4.8 21.0 o.6 1.5 1.2 1 .5 1.7 1.9 8.4 ~Triing Center Equipmeat 7.0 - - - - - 7.0 2.8 - - - - - 2.8 Offioc Expenses 5.0 5-0 5.0 5.0 5.0 5.0 30.0 2.0 2.0 2.0 2.0 2.0 2.0 12.0 Rent for DTilding 15.0 15-0 15.0 15.0 15.0 15.0 90.0 6.o 6.o 6.o 6.o 6.o 6.o 36.0 Field Sgudics 10.0 10.0 10.0 10.0 10.0 10.0 60.0 4.0 4.o 4.o 4.o 4.o 4.o 2o.0 Contingencies (approx. 10%) 27.4 30.3 37.5 45.7 40.2 41.9 223.0 11.0 12.1 15.0 18.3 16.1 16.7 89.2 Subtotal 310.0 335.0 372.5 402.4 112.4 122.6 2,255.0 164.o 134.0 149.0 161.0 165.0 169.0 902.0 Total Coots 910.0 1,020.0 960.0 790.0 710.0 6so.o 5,080.0 364.o 408.0 384.0 316.0 284.0 276.0 2,032.0 y/ Holleta Dairy Stud Farm and Shola Dairy Plant arm excluded from this table. 2/ Irncludig p25,000 in year 1 and E$ 50,000 in each of the years 2 a2Wd 3 for technieal serrices :v rdlc marketing and processing. J Purch1c of 7 jeeps and 4 sall cars in year 1, 2 jeeps and 1 small car in year 2, 1 jeep and 1 siall car in year 3, and 1 jeep and 2 small cars in year 4. / AssuAing 20,000 km per jeep per annus 0 200 per km, and 40,000 km per small car per annum S 100 per km. / 3acntia.137 research on grassland and forage crop production. r ° Exeluding the salary of the Marketing and processing Manager, which is included under Shola Dairy Plant. ANNEX 3 Table3 ETHIOPIA ADDIS ABABA DAIRY DEVELOPMENT PROJECT Dairy Development Agency (DDA) Breakdown of Costs of Technical and Administrative Services DDA Veterinary 4ad Technical CATEGORY Administration A.I. Services Services Total - -E$!OOO - - - - - - - - - -- Salaries 545 801 1,827 3,173 Travel 5 15 35 55 Vehicles 5 45 100 lo Vehicle Operating Costs 6 130 256 392 Technical Equipment - 22 42 64 Office Equipment ho - _ 40 Semen and Liquid Nitrogen 310 _ 310 Training Center Expenses - - 12 12 Office Expenses 60 - - 60 Rent for Buildings 90 - _ 90 Field Trials and Demonstrations - - 250 250 Contingencies 79 140 265 48 Total 830 1,463 2,787 5,080 November 12, 1970 ANNU 12 EMKIOPIA T%b'i 4 ADDIS ABABA DAIR D1UWLFAMT FBtU ! D irY D.velopt Ageacy (DDA) piretal F!deetl ----------------------------------------------------______________ ProAv: Y - -----------~- ~------------------------------- ------------------------------ 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 CASH ii1W Prar JDA Credit fo, De,el.o.nt of DDA Fa 90 78-- - - -_-_ . _ - _ - - _ _ _ Sh.l. Dairy Plnt 279 110 109 198 56 57 _ _ _ _ _ _ _ _ _ _ _ _ _ Adeini.t0.ti-o/T.,hnIcal Servmic Cost 298 315 282 P32 213 182 Fo,.I,v C00t. of 0.1.-00. c i/ 302 372 306 1I5 85 85 S9b-Tatal 969 865 697 595 354 324 5oflnmlt Lo-.0 to P-rchute Ab..Do... Cattl, 200 -- - - - - - - - - 10n. for Workirg CapttOl 189 145 112…- - - - - - - - - - Soroic. Ch-,g. -. D.iry L-,a by AIDS t 2%: - 25 5i 84 106 122 129 123 114 102 88 74 59 44 30 18 19 4 1 Inet fro- Arti1ia.l In-1n -t-on 9-rojo. 13 32 48 55 60 64 62 63 65 67 69 75 75 75 75 75 75 75 75 75 OcteflOary bor40,ic 23 53 79 108 128 142 146 145 145 145 146 148 150 150 150 150 150 150 150 150 Cottle 001., eo bberno,,a 74 64 57 98 153 137 137 333 C.lh SOopl0. f00.: Ho11.t ralry Stud F-a _ _ _ _ 23 33 33 80 80 80 80 80 80 00 80 80 80 Shol. Dairy naDt 470 629 942 1,116 1,314 1.498 1.215 i.346 1.444 1.509 1.580 1.645 1,712 1,779 1.884 1,884 1,84 1,884 11884 1.884 T.t.1 C6.h Inflo. 1,937 1,813 1,993 2,046 2,115 2,287 1,689 2,033 1,801 1,856 1,963 2,722 2,076 2,128 2,219 2,207 2,208 2,193 2,190 2,189 CASE OUTFWW OnoestIteot or 'IDA P- 90 78 - - _ - _ _ _ _ Ahol. 2nlry PIant 279 110 129 198 56 37 _ _ _ _ _ _ _ - _ _ _ _ _ _ Qora-lr, C..,. Adi,lnior0-tleTerob.10 08-D-eo 910 1,020 960 0 7 7o 690 6670 67 640 670 670 670 740 740 740 740 740 740 740 740 Ab.rno--. P-1, 95 55 52 66 6 1 60 49 _ _ - - _ _ _ _ _ _ _ 8ub_tot.1 1,374 1,263 1,121 1,254 831 788 730 ng 640 670 670 670 740 740 740 740 740 740 740 740 Debt Seroice nt re, t.00: Pu.dM C,0, tDA C-rdit, -. e 1/2% - 43 75 101 129 146 162 159 153 145 135 123 110 96 82 68 55 41 27 14 Ioee fror Wo-ling Capltel at 9 1/2% - 18 i4 11…- - - - _ _ _ _ _ _ I-.0, to Purcha-e Abe-tosa Cat ]r*t6 /29 - 13 13 13 13 13 13 13 - - - - - - - - - Repoynefl ar: fPnd, frr IDA Credit ---48 85 119 157 184 211 211 210 211 210 211 211 210 211 Loan. fr. Wo-king Capital - 189 145 112 … …… L-a. to Paroahe Alorno- o C.ttle - 0 …- - - - - - - - - - Total C--h Outflo. 1,374 1,525 1,368 1,291 943 949 953 976 1,112 972 989 1,004 1,061 1,046 1,033 1,018 1,006 992 977 965 C-ah B2l-D:, 400Cr 2f40 SD-rtio 563 288 525 755 1,172 1,340 736 1,057 689 884 974 1,718 1,015 1,092 1,186 1,189 1,202 1,201 1,213 1,224 Coot of Loppinig-p -op.trlate tpocielit. .alrDo -ad other cnolr ,.t. .re Cot repaid by ADDC to 0G-.ene*t. Jar- 15, 1971 ETHIOPIA ADD!S ABABA DAIRY DEVELOPMENT PROJECT DAIRY DEVELOPMENT AGENCY ORGANIZATION CHART BOARD OF DIRECTORS GENERAL MANAGER FNNIAL DIVISION llPRODUCTION DIVISION |IRCESNG 3. MARKETING DIVISION F~ ~~~~O -N J m a FARMIIA TEHIA aNTX 8 2MK4Ir - z z 3< ANNEX 14 ETHIOPIA ADDIS ABABA DAIRY DEVELOPMENT PROJECT Milk Marketing and Prices in Addis AbaIba 1. At the end of 1968, the population of Addis Ababa was estimated at about 685,000. of whoin.i about 45,000 were foreigners, Q,' being European. Population growth over the period 1961 to 1968 was estimated at 6.2% per annum, with natural growth accounting for 2.2% and immigration 4.0%. This rate of growth is expected to continue for some years. Milk uSIppl ___y 2. Milk is supplied to the Addis Ababa market through three channels: (a) the Dairy Development Agency (DDA), an autonomous agency which has taken over the assets of the Addis Ababa Dairy Industry (AADI), a section of the Ministry of Agriculture, which operated a milk collection,processing and marketing system; (b) approximately 10 large dairy farms that sell milk direct to consumers and retailers; and (c) at least 400 hawkers selling small quantities of milk. 3. AADI was established in 1966 and it took over a milk plant with a capacity of 10,000 liters per day, built in 1962 with UNICEF assistance. Again with UNICEF aid, the Shola Dairy Plant was completed in 1969 with a capacity to pasteurize and bottle 30,000 liters of milk per day. 4. A system of milk collection has been built up since 1961 within a radius of 130 kmi of Addls Ababa on three main roads. Development of this system is shown in the following table: No. of Collecting Total Milk Average Milk per Center Year Centers _terj/day) _ (liters/day) 1961 5 155 31 1962 6 590 98 1963 15 1,140 76 1964 16 2,400 150 1965 15 2,025 135 1966 24 1,850 77 1967 29 3,020 104 1968 32 4,060 127 1969 32 4,350 136 ANNEX 14 Page 2 5. In addition to milk from these centers, DDA po>zahabes daily an average of about 4,000 liters of milk from about 30 large dairy farms and 500 to 1,200 liters, which is delivered to the Shola Plant by the Chilalu Agricultural Development Unit. Growth in milk througlput of the system now operated by DDA is shown below: Milk Year ('000 liters) IncreaLe, % 1961 288 - 1962 466 61.8 1963 669 43.6 1964 1,081 61.6 1965 1,168 8.0 1966 1,236 5.8 1967 1,854 50.0 1968 2,481 33.8 1969 3,070 23.7 6. In 1969 value of sales of dairy production by AADI were: pasteurized milk, E$1,077,000 (US$430,800); butter, E$146,000 (US$58,400); cheese, E$10,000 (US$4,000); and cream and yoghurt, E$4,000 (US$2,400). The bulk of the butter and cream is derived from the reduction of fat content of milk to 3%. Unsold milk. which represents a very small pro- portion of intake, is converted into cheese. 7. As can be seen from the following figures, AADI experienced sharp seasonal fluctuations in milk supply: 1967 1968 1969 -'000 liters … Total Milk Collections 1,853.6 2,480.6 3,069.9 Average Milk per day 5.1 6.9 8.5 Average Milk per day: Lowest Month 3.2 (Feb.) 4.9 (May) 5.9 (April) flighest Month 7.9 (Oct.) 9.5 (Sept.) 11.7 (Oct.) 8. No reliable data are available on output and sales of the 10 large commercial farmers selling milk outside the AADI/DDA system. However, the manager of AADI estimated that in 1969 their sales totaled about 3,300 liters per day with a range from 50 liters for the smallest producer to 900 liters each for the two largest. ANNEX 14 Page 3 9. In a study on the Addis Ababa market for dairy products, dated October 1969, the Batelle Advisory Group Technical Agency carried out a survey of marketing of milk by hawkers in September 1969. The survey covered 399 hawkers who purchased milk from about 1,500 farmers for sale in Addis Ababa. Total milk sales were 4,050 liters per day, of which 3,180 liters were purchased from farmers and 870 liters were produced by the hawkers' own cows. Milk Prices 10. Until late 1970, AADI paid small dairy farmers E$0.25 (US$0.10) per liter for milk delivered to collecting centers. To the larger dairy farmers, it paid E$0.28 to E$0.30 per liter, depending on the distance from the Plant and method of delivery. It retailed milk at E$0.40 per liter through 41 selling booths in the city. It has one selling center, equipped with refrigeration, that operates throughout the day. The remaining centers operate only from 6 a.m. to 9 a.m. daily. Demand for milk from MADI at E$0.40 per liter exceeded supply and a system of rationing to individual consumers was imposed. However, it is estimated that one-third of AADI's sales was to retailers and owners of milk bars, through which milk is resold at much higher prices. 11. The prices obtained by the large commercial farmers selling outside the AADI/DDA system are generally in the range of E$0.45 to E$0.50 per liter. These farmers supply supermarkets and hotels, which have a regular demand for milk for resale to the higher income groups. In the supermarkets, unpasteurized fresh milk sells at E$0.75 per liter, sterilized milk from Asmara at E$1.30 per liter and ultra-high temperature milk from Kenya at E$1.60 per liter. AADI was unable to capture any part of these markets because it did not have sufficient milk to guarantee supply in addition to supplying its own selling booths. The Batelle survey found that the average price paid by hawkers to farmers was E$0.25 per liter while selling price was E$0.40 per liter. 12. In late 1970, AADI increased the retail price of its milk from E$0.40 to E$0.50 per liter and its average price to producers from E$0.28 to E$0.33 per liter. At this price, it is expected that DDA will be able to induce more commercial farmers to sell to it rather than delivering their milk to Addis Ababa. At the same time that it increased the retail price of whole milk, AADI commenced selling reconstituted milk, made from imported milk powder at a price of E$0.28 per liter. Demand for Milk and Dairy Products 13. Although milk throughput of the AADI milk collection and market- ing system has increased more than tenfold from 1961 to 1969, there has been no difficulty in marketing virtually all of the milk available. Large queues at AADI's selling booths and the fact that it has had to impose ANIJX 14 Page 4 rationing of its output indicate that larger quantities z!Ji1A be,eold at present prices. Average jals f01om Saptmber -though Deaember 1969 were of the order of 11 ,400 liters by A4DI and total sAles were probably a.4out 25,000 liters per day. 14. In addition to fresh milk sales, ;here are fairly large sales of milk powder. Imp.orts to ftbiopia were just .under 2,000 tons ln 1967, the last year for dbich figures could be obtained. At a convewsin rate of 6 liters of renonsAttute.d ntlk -per kg -of powder, this waould be aquivalent to an average of about 55,000 liters per day, casting E$0.55 to E.$1 .20 per liter at re-tail prices charFgad li Addis Ababa. A large :proportSnfl f this -milk powder is purchased by fo=Uzers s1xth 4h ;iucomes U74,ug u;Adi Ababa because they are unable *So btab A ,a V4Ar Aupply .of p4e;tetgrized milk. ADDIS A.UL MD¢II 231 P XOJES'l Ploeial Rate, of Retem ta Frivately Osod rez,,tt ITUS 01#TU 1 2 3 4 5 6 _9 _ O 11 12 13 14 IS Med:k= sine fta 1 1oe ~-W 1g40 3 unoweuntal Milk r1s1ao '001 (1) 391 67T 623 635 7e3 837 ' e, E' 91e r7 917 917 917 917 !nD antal llk 3$e^. 2 (33) 12,903 22,407 20,559 20,955 25,172 25,110 05,179 06j ll4 26,3340 22Z925 22 925 22,925 22,925 22,925 Xoarzeuntal Cattlett Slam $ 2,540 2,530 290 170 8,4Wo 4.740 5,6so 5, 91i ,jrc 5,690 5,690 5,690 5,690 5,69o 31,120)] ktb-Total E3 2,507 15,433 22,697 20,729 29,1425 29,919 30,800 31,010 32,30Y 32,030 28,615 28,915 28,615 28,615 54a,045 etaotmnt cos1ts I , r10 I i2 - 15- 0 Ilnravutol 09.rfttiog Coat, 14 8,c5 10,935 21,550 12,735 12,025 13,210 13,2145 114,995 14,605 14,605 1l4,890 15,590 14,890 1,890 14,890 Dmtersst on Short-Term Dobt as - 1,235 l,118 483 l00 - --- Sub-Ttol 0$ lt5,005 27,670 314,168 13,218 12,125 13,210 13,2145 30,99r 11 r 6c5 14,605 214,890 15,590 14,890 114,890 14,9 Not loremntal Cash -Flor 3$ (142,498) (12,237) 8,529 7,511 17,300 16,709 17,555 16,015 17,4.25 17,1A25 13,725 13,325 13,725 13,725 39,155 2lneWnial Rate of Return, 20.1% gM11 an,r Dairy Devei.aopmet odel=- 10 Covw ,o,,,fits imoremsntal lilk4 Prod.,ctio,, '00 1 2 2 7 20 45 59 52 66 75 76 120 123 146 137 160 Inr.,msotal 0l81k Production B$ 66 66 231 660 1,1485 1,947 1,560 1,980 2,250 2,280 3,000 3,075 3,650 3,425 I4,000 Cormuntal. Cattle Sai.or F7 110 75 (35) 380 195 255 10 15 280 215 480 385 710 885 3,6701/ Sub-Total B3 176 11,1 196 1,0140 1,68O 2,202 1,570 2,165 2,530 2,495 3,1480 3,460 4,360 4,310 7,670 Cotat, InVeSt,UOlt Cost00 E 1,89G - 200 3,600 - - - - - - - - - - Inoreeu,tal Oaprating Costa 3$ 60 300 230 490 675 768 575 705 1,063 1,215 1,2140 1,290 1,625 1,623 1,580 Intrest on Short-Too, ioOt 06 r 22 35 - - - - - - - - Sub-Total El 1,860 300 452 4,125 675 768 575 705 1,03 1,215 1,240 1,298 1,625 1,623 1,580 let Inoretntal Cash Flow 8* (1,684) (159) (256) (3,085) 1,005 1,434 995 1,460 1,1467 1,280 2,240 2,162 2,735 2,687 6,090 rinaniLel Rate of Return, 213% Privte Croae-Brradit, Rawnh Iodel - 200 One. Deftite Iuoraeoetal Cattle Sales 3* 2,600 2,050 3,380 2,460 24,S80 29,640 30,105 31,185 31,365 31,165 31,185 100,870)] - Costs Invest,ennt Cost, Ns 146,000 - - - - - - - - _ - - Inoremental OpratingC Costs Fs 14,109 6,738 6,864 10,019 11,188 31,456 10,789 10,859 11,552 10,852 10,852 10,852 Interest on Short-T.rm2 Debt 3 - - - - 7914 Sb- Sub-Tota,l i. 50,109 6,738 6,864 10,019 11,982 11,456 10,789 10,859 11,552 10f,852 10,852 10,852 - It t 2*orommtal Otb_r'_ 3$ (147,509) (4,668) (3,144) (7,559) 12,898 18,184 19,316 20,326 1,8013 20,333 20,333 90,018 - PinanoflAl Rat. of Rt-, ] DCludst incrano.tal had ioaloo. November 12, 1970 ROp A A.D522 kAB&B .I3DY MLq0f21r I92D EMrT Holleta Daix7 Stuid2 - 100 God cixaCial P.,ktp of ReatIa ! - ~~ ~~ ~ ~ ~ ~~ ~ ~ ~~ ~ ~ ~ ~~ ~ ~ ~~ ~ ~ ~ - - - - - -e r t - - - - *- -- - - - - - - - - - - _e r a 2' r 7 _ M 2 3 4 9 ID 1 __3 1' Benefits Incrernta1 Milk Sales '00 1 105 547 499 1,099 1,194 1,291 1,291 1,291 1,291 1,291 1,291 1,291 1,251 1,291 L5C! ° Incrematal Milk Oales X$ 3,1465 18,051 16,467 36,267 39,402 1h2,603 38,730 38,730 38,730 38,730 32,275 32,275 32,275 32,275 38.2;t Incremental Cattle Sales B$ 1,820 3,9140 27,090 J47,300 53,120 53,820 53,020 53,820 53,820 53,820 54,120 53,820 53,820 53,820 103 iht_ Sub-Total 13 5,285 21,991 43,557 83,567 92,522 96,423 91,750 92,550 92,550 92,550 86,695 86,095 86,095 86,o95 135,9715 Coats Ineeatemnt Costs 2$ 37,000 - - - - - - - - - - - - - Incremental Operating Costs Z$ 9,200 24,300 29,500 34,700 35,900 36,600 33,900 33,900 33,900 33,900 33,900 33,900 33,900 33,900 33, 9-C0 Interest on Short-Term Debt 9$ - 2,506 5,397 7,008 5,465 3,038 77 - - - - - - - Sub-Total E$ h46,200 26,806 34,897 41,708 I41,365 39,638 33,977 33,900 33,900 33,900 33,900 33,9x7 33,900 33,900 33,!oe N!t Tncruiaital Cash low E$ (40,915) (4,815) 8,660 41,859 51,157 56,785 57,773 58,650 58,650 58,650 52,795 5?3195 ;2,19195 ,,l5195 : Financial Rate of Return: 53.2% 1/ Includes incremental hard value. ETHIO?IA ADDIS ABABA DAIRY' DEVELORET PROJECT Econoemic Rate Of Returs (13 'Q300 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Years - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - InEM 1 2 3 4 5 6 7 8 9 10 11 12 13 114 15.19 20 I Evestmenrts vSmall Dairy Farms 27 176 232 74 378 457 - - _ _ _ _ _ _ Medium Sise Dairy Farms 1,480 1,619 1,218 1,201 387 35 - - - - - - - - _ H, Private Cross-Breeding Ranches 138 92 - - - - - - - _ - _ _ _ 14° Holleta Dairy Stud Farm 37 - ° Abernossa Cross-Breeding Ranch 250 - - - - Shola Dairy Plant 279 110 109 198 56 Sub-Total 2,all 1,997 1,559 1,473 821 549 - - - - - - - - - Costs of Technical and Administrative Services 910 1,020 960 790 710 690 670 670 640 670_ 670 670 740 7ho 740 740 Sub-Total 910 1,020 960 790 710 690 670 670 640 670 670 670 740 740 740 740 Incremental Operating Costs Snall Dairy Farms 1 10 40 68 87 140 170 164 158 212 273 295 309 ct 389 389 HediumSize DairyFarms 320 654 917 1,224 1,307 1,373 1,420 1,498 1,558 1,583 1,627 1,654 1,650 1,652 1,654 1,654 Private Cross-Breeding Ranches 12 28 34 44 54 57 55 54 56 56 54 54 - - - - olloteta Dairy Stmad?ara 9 24 30 35 36 37 3h 34 34 34 34 34 34 34 34 314 Abernossa Cross-Breeding Ranch 95 55 52 66 65 61 60 49 - - - - - Shola Dairy Plant L' 1 167 367 498 643 791 976 1025 1,083 1,132 1,169 1,228 1,291 1,318 1,337 1,337 Sab-Total 438 938 1,440 1,935 2,192 2,459 2,715 2,824 2,889 3,017 3,157 3,265 3,284 3,352 3,411s 3,414 Total Incremental Ccots Including Investmets 3,559 3,955 3 9 4,198 3.723 8 3,385 3.494 3529 3,687 3,827 3 4,024 h4,92 4,154 4,154 Incremental Cattle Bales Ssall Dir Farsia 2 12 21 12 w6 71 50 36 24 54 64 80 109 132 132 932 Medium Stie Dairy Farns 102 170 131 124 4y, 428 529 677 608 629 629 638 634 632 632 3,430 Private Cross-Breeding Ranches 8 11 14 14 80 139 150 154 156 156 156 504 - - - Holleta Dair Stud Farm 2 4 27 47 53 54 53 54 54 54 54 54 54 54 54 1004 Abernossa Cross-Breeding Fanch 74 64 57 98 153 137 137 333 - - - - - - - Sub-Total 188 261 250 295 729 829 919 1,254 842 893 904 1,276 797 817 817 4,465 Incremental Milk Salets 2/ 4 655 1,550 2,136 2,780 3,395 3,787 4,036 4,302 4,521 4,692 4,950 5,230 5,3 5,1461 5,461 Earnings froam Artificial Insemination and VetersaryServices 36 85 127 163 188 206 208 208 210 212 215 223 225 225 225 225 Total Increrental Income 228 10o01 1,927 594 3,697 4,430 4,914 51498 5,354 626 5.811 649 652 1 0,151 Balance (3,331) (2,9514) (2,032) (1,614) (26) 732 1,529 2,004 t,825 1,939 1,984 2,514 2,226 2,316 2,249 5,9?7 Economic Fate of Return ll. D Etoluding payments made for milk to farmers br ShoIa Dairy Plant. 2/ includes incremwntal herd values. r/ Calculatton is based on. a wholesale price cf rd2k of Z-$ 0.40 per liter, whtch is an estimite cf the price at cuich recon5t4tuted ghole aillk cculd be sald in Addia Abato. the ekbj miLk pc-vier is imported from NE-, Zealand. j/ Figure in parentbosis are negative. To Goiom To Asn,oro \Gebre G.r.che * 6 _ _ Fs---> /i~~~~~~~~~~~~~~~~~~~~~~~~~ebre Birbon i60 4*5 t | Asr-sr! 0' > sm,R,|\3t As,nor.o0 Or~ t~d S U D a N g ". 'i4 -120 / ) -2 Addis Abory 00?Ar. \ E T H I O P I A \f _6- '< , e > e > ETHIOPIA ._. / ,r E k S \- j20 MALIA ADDIS ABABA DAIRY A . * ,.DEVELOPMENT PROJECT Holetx Orairy A A ABABA EPermanent & Proposed Milk Collecting Centers A r