Iodized Salt Production Project

Project Proposal on Iodized Salt Production Factory

Executive Summary

• Project Location: Northeastern Ethiopia, Afar region estate.
• Promoter: Mr. Abdulsemed Negash, January 2022.
• The project aims to establish an iodized table salt production factory in the Afar region, Ethiopia.
• Afar Region is selected due to its salt production area.
• Iodized table salt is table salt fortified with iodine to prevent iodine deficiency.
• Investment: Birr 350.4 million.
• Land: 10,000 square meters for the industry and 50,000 square meters for quarry production.
• Plant Capacity: 40 tons per hour.
• Annual Production Capacity: 72,000 metric tons of iodized salt.
• Main Objectives:
  • Produce standard and quality iodized salt.
  • Distribute at wholesale prices.
  • Generate foreign currency through exports.
  • Fulfill Ethiopian household demand.
• Profitability:
  • The project will generate a profit from the first year.
  • Average annual net profit after tax is Birr 160.5 million.
  • Cash flow shows a substantial surplus from the first year.
  • Financial Internal Rate of Return (FIRR) is 34.1% before tax, with a Net Present Value (NPV) of Birr 1.27 billion at a 35% discount rate.
• Socio-economic Benefits:
  • Creates 135 permanent jobs.
  • Generates tax revenue for the government.
  • Provides quality salt for local and international customers.
• Conclusion: The project is operationally profitable, viable, and has significant socio-economic benefits.

Introduction

• Investment in Ethiopia:
  • Ethiopia is becoming more investment-friendly.
  • The government encourages private sector engagement.
  • Ethiopia, with a population of 110 million, offers a significant domestic market.
  • Ethiopia is a member of the Common Market for Eastern and Southern Africa (COMESA), offering preferential tariff rates.
  • Private investment is encouraged to drive economic development.
• Introduction about Iodized Table Salt:
  • Iodized salt is table salt mixed with iodine salts.
  • Iodine ingestion prevents iodine deficiency.
  • Iodine deficiency affects two billion people globally and is a leading cause of intellectual and developmental disabilities.
  • Iodine deficiency causes thyroid gland problems like endemic goitre.
  • Iodine is a micronutrient present in some foods, especially near sea coasts, but rare in the Earth's crust.
  • Iodine is added to salt to provide the necessary amount for humans.
  • Opened iodized salt packages can lose iodine content in high temperature and humidity.
  • Inorganic compounds used as iodide sources: potassium iodate, potassium iodide, sodium iodate, and sodium iodide.
  • These compounds supply iodine for the biosynthesis of thyroxine (T4) and triiodothyronine (T3) hormones.
  • Animals also benefit from iodine supplements.
  • Salt is an effective vehicle for distributing iodine because it is universally consumed in predictable amounts.
• Iodine and Uses:
  • Iodine is essential for normal physiologic function.
  • It is a critical component of thyroid hormones, necessary for controlling metabolic rate, growth, and neuronal function.
  • WHO recommended intake:
    • 150 $μg$/day for adults and adolescents.
    • 200 $μg$/day for pregnant and lactating women.
    • 120 $μg$/day for children 6–12 years.
    • 90 $μg$/day for children 0–59 months.
  • Iodine deficiency leads to insufficient hormone production, affecting muscle, heart, liver, kidney, thyroid gland, and brain.
  • Iodine deficiency disorders (IDD) include mental retardation, nervous system defects, goiter, growth retardation, and increased childhood mortality.
  • Iodine deficiency affects 2.2 billion people globally.
• Ambition of Creating the Iodized Salt Project:
  • High demand for iodized table salt exists, but supply is limited.
  • There is a service gap due to limited quality and affordable options.
  • Iodized salt manufacturing is widely accepted in Ethiopia due to population increase.
• Project Objective:
  • Maximize return on invested capital.
  • Raise the importance of the sector to national economic development.
  • Provide quality and affordable iodized table salt locally and for export.
  • Effectively use local inputs.
  • Provide employment.
  • Increase government revenue through taxes.
• Mission:
  • Expand quality and low price iodized table salt availability.
  • Prove economic independence is achievable with opportunity.
• Goals:
  • Create employment for 135 permanent and 200 casual workers.
  • Achieve quality iodized table salt production for society.
  • Link market between salt quarry farmers.
• Promoter Background:
  • Mr. Abdulsemed Negash is a diaspora investor with business management experience.
  • He possesses vast knowledge and skills, good reputation with banks and financial organizations.

Project Location and Justification

• Project Area: Afar region, northeastern Ethiopia.
• Demographics:
  • 2017 projection: population of 1,812,002 (991,000 men and 821,002 women).
  • 2007 Census: population of 1,390,273 (775,117 men and 615,156 women).
  • Area: 96,707 square kilometers; density of 14.38 people per square kilometer.
  • Average of 5.6 persons per household.
  • Predominantly Afar speakers (89.96%).
• Land Features: Afar Depression, Erta Ale volcano, Awash National Park, Hadar and Aramis areas.
• Environment:
  • Afar Depression is a plate tectonic triple junction.
  • Continuous volcanism results in major minerals: potash, sulfur, salt, bentonite, and gypsum.
  • Promising geothermal energy sources and hot springs.
  • Wildlife includes African wild ass, Grevy's zebra, wild fox, cheetah, and ostrich.
• Agriculture:
  • Farmers have 327,370 cattle, 196,390 sheep, 483,780 goats, 99,830 camels, and 38,320 poultry (2005 estimates).
• Regional Instability: Instability due to tensions between Ethiopia and Eritrea.
• Fossil Finds:
  • Discovery of "Lucy" (Australopithecus afarensis) in Hadar (1973–74).
  • Discovery of a 3.8 million-year-old bipedal hominid skeleton (2005).
  • Discovery of a significantly complete cranium in Gawis (2006).
  • Discovery of "Ardi" (Ardipithecus ramidus) skeleton (2009).
  • Oldest direct evidence of stone tool manufacture (2010).
    *Discovery of hominid jawbone (2013).
    *Discovery of hominin jawbone and teeth in Afar region (2015), named "Australopithecus deyiremeda", living around 3.5–3.3 million years ago.

Market Study

• General Review:
  • Increasing global demand for iodized table salt.
  • Approximately 70% of households worldwide used iodized salt by 2000.
  • Universal salt iodization has been effective at reducing iodine deficiency.
  • In Ethiopia, iodine deficiency disorders remain a significant issue.
• Past Supply and Present Demand:
  • Salt is essential to human health.
  • The country's requirement of salt has been met both from local production and import.
  • Local supply comes mainly from Afdera in the Afar Regional state, and cooperatives in Somali and Oromiya Regional States.
  • However, the locally produced salt does not have the required iodine content.
• Factors of Market Achievement:
  • Promotion of local iodized table salt is critical.
  • Many stakeholders do not provide the best service due to shortages of workers, logistics, and budget.
  • The sector suffers from a lack of finance, raw materials, and production technology.
• Demand and Supply Analysis:
  • Estimated consumption of iodized table salt per capita is 10 grams per day or 3.65-4 kg per year.
  • Table 4.2: projected demand for table salt (tonnes)

• Plant Capacity and Production Program:
  • The plant will have an annual production capacity of 72,000 tons of table salt.
  • Production capacity is based on 300 working days per annum and 8-hour shifts.
• Pricing Analysis:
  • Currently, 1 kg of iodized pack salt sells for 20 birr, but the promoter wants to distribute at a wholesale price of 800 birr per quintal (100kg).
• Marketing Promotion and Strategy:
  • Major strategies include consistently rendering quality product to its customers.
    *Advertising through different means.
    *Keeping the quality of its products and consistently improving.
    *Using professional and well-experienced employees.
    *Customer focused and committed to Quality.
• Competitors Overview:
  • There are few standard and fair-price businesses for the iodized salt factory.
  • The promoter will frequently conduct competitor research.

Technical Study

• Production Process:
  • Common salt or sodium chloride (NaCl) is produced for human consumption.
  • The iodine content is around 70-100 mg per kilogram of salt.
  • The production involves crushing and mixing.
  • Three methods used to produce salt: solar, evaporation, and rock mining.
• Solar Evaporation Method:
  • Oldest method of salt production.
  • Capturing salt water in shallow ponds where the sun evaporates most of the water.
  • Concentrated brine precipitates the salt, which is gathered by mechanical harvesting machines.
• Rock Salt Mining Method:
  • Underground mining.
• Vacuum Evaporation Method:
  • Evaporation of salt brine by steam heat in large commercial evaporators, called vacuum pans.
  • Yields a very high purity salt, fine in texture.
• Inputs/Raw Materials and Utilities:
  • Table 5.1. Raw material item and estimated cost

*Electricity is the major utility required, as it uses a power source for heavy-duty crushing machines installed in the plant. The estimated cost of electricity is Birr 2.2 million and Birr 105,000 birr for water

• Table 5.2. Utilities and other Requirement and Cost
• Vehicles fuel and generator Naphtha Lamp sum 300,000
• Total Cost 2,655,000
• Machinery and Equipment:
  • Iodizing machine is used for mixing salt and iodine dosing method.
  • Table 5.3. List of machinery and equipment of the project

• Land, Building and Civil Work:
  • The overall land require to the salt production project is 60,000 square meters, of which 10,000-meter square land used for salt processing factory and 50,000-meter square Land for slat harvesting area(query)
    *Table 5.4. Description of Land use plan

• Environmental Impact Assessment: The project will protect and conserve the natural environment.
• Implementation Schedule:
  • The actual implementation of the iodized salt is planned to begin on May 2022.
    Implementation schedule
    | Description (Months) Gregorian Calendar | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 | 13 |
    | ----------- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
    | Acquisition of Investment Land (May 2022) | x | | | | | | | | | | | |
    | Opening & Processing of L/C | | x | x | x | | | | | | | | |
    | Building Construction | | | | x | x | x | x | x | x | | | |
    | Delivery of Plant machinery and Clearing | | | | | | x | x | x | x | x | | |
    | Installation and Commissioning | | | | | | | | | x | x | x | x |
    | Recruitment of manpower arranging for other works | | | | | | | | x | x | x | x | x |

Organizations and Management

• Organizational Structure: The organizational structure of the project is designed by including all the necessary personal under the right division.
• Management: The owner will be responsible for the overall project planning, co-ordination and implementation.
• Manpower Requirement:Manpower :The project will provide 135 permanent employees (35 skilled & 100 unskilled) and 300 casual skilled and unskilled workers.
  manpower Requirement:

• Training Requirement: Operators, chemists, mechanics & electricians need a two weeks training during erection, commissioning period on the production process.

Financial Study

• Classified Investment Cost:

• Fixed investment cost estimated at birr 111.3 million.
  *About fixed investment cost of the project, the land lease, building and civil works cost, machinery and equipment cost, and office furniture costs fuel costs will be required as to working and operating cost a brief illustration will be given as to utilities, salary expense, maintenance cost and depreciation cost and the other related costs
  Fixed costs that include Land development, Building and civil work, machinery equipment and vehicles and office furniture were estimated at birr 111.3 million.which is 31.8 % of the total project
• Operational cost costs: cost of material and labor inputs, fuel and lubricants, repair and maintenance, employee salary and benefits, insurance, office supplies and other miscellaneous expenses

The straight-line method has been used to depreciate Fixed cost table 7.14 Deprecation of Assets . 10 % per Amount Birr
Table 7.13.Summary of project Annual production costs
Sales revenue is assumed to increase by 5% annually
Projected cash flow statement
n the above table shoes that NPV at 30% and 35 % discount rate is 1.5 and 1.2 billion respectively, this figure is positive value or NPV>0 it is indicate that accepted the project until 30 % and 35 % of discount rate

Conclusion:
The Project is found to be operationally profitable & has significant socio-economic benefits. According to the projected income statement, the envisaged project starts earning profit from the first year of production.