Project Profile - Lyantonde Animal Feed Mill

PROJECT PROFILE: LYANTONDE COMPOUND ANIMAL FEED PROCESSING PLANT

1. EXECUTIVE SUMMARY

There is a very strong need for a commercial feed mill in Lyantonde District (South Western Uganda) by SKY & LAKES , given the large herd sizes of livestock (sheep, goats, dairy cattle, etc.), and poultry, and the lack of nutritional feed to service this need. A feed mill in South Western Uganda could also service much of the domestic market of Western and Central Uganda livestock producers while also being strategically positioned to export quality and price-competitive compound animal feeds to the Rwanda and North Western Tanzania export markets that are well within its definitive market catchment area given the large amount of grains available in the region, road access, etc. This profile envisages the establishment of a plant in Lyantonde District with a rated capacity of up to30,000 metric tonnes of compound livestock feeds per annum working on 8 Hours single shift. The plant will be operated in double shifts. This feed will be supplemented to livestock in addition to green fodder ad libitum (Freely available to animals) for high production. Different formulae may be used to prepare compound feed such as calf fattening formula, dairy animal formula, commercial layer feed, commercial broiler feed, etc. to facilitate the customers nationwide. The present demand for the proposed product is in South Western Uganda is estimated to be 80,000tonnes per annum. The demand is projected to reach 120,000tonnes by the year 2016. It is also worth noting that the domestic market for feeds is weak, with supplies of uneven quality both of ingredients and finished products. There are large variations in prices of some ingredients resulting in escalating costs of production. This problem applies to the domestic food market generally, due to low production and low levels of incomes. While some manufacturers of animal feeds have identified regional markets, specifically Rwanda and Kenya, issues of quality and limited capacity hampers full utilisation of this market. The project will create direct employment opportunities for 42 persons. The rationale for establishment of a new feed mill in Lyantonde district by SKY & LAKES with a rated output capacity of 30,000 MT per annum would thus be based on 1


the premise that it would be in position to immediately plug the widening gaps in quality consistency and volume dimensions given that this area is right in the middle of Uganda’s south western cattle corridor and corridor and proximal to one of the major road networks in Uganda that would facilitate quick product movement and delivery to domestic and export markets. The total investment cost of the project is estimated at USD 652,784, out of which USD 255,390 is for plant machinery and equipment.The civil works and installation of plant is estimated to complete in 08 months. The project is expected to be financed partly through the project promoter’s own equity contribution totaling to USD 333,662 (51.11% of Total Project Cost) and external funding (e.g. by NAADS) amounting to USD 319,157 (48.89% of Total Project Cost). The project is financially viable with an Internal Rate of Return (IRR) of 26.9%, which is strong and a net present value (NPV) of USD 127,023, discounted at 20%. In short, it is this Profile’s Profile ’s recommendation that a mill of this type in South Western Ugandan, and in particular in Lyantonde area, would be feasible, viable and profitable.

2


the premise that it would be in position to immediately plug the widening gaps in quality consistency and volume dimensions given that this area is right in the middle of Uganda’s south western cattle corridor and corridor and proximal to one of the major road networks in Uganda that would facilitate quick product movement and delivery to domestic and export markets. The total investment cost of the project is estimated at USD 652,784, out of which USD 255,390 is for plant machinery and equipment.The civil works and installation of plant is estimated to complete in 08 months. The project is expected to be financed partly through the project promoter’s own equity contribution totaling to USD 333,662 (51.11% of Total Project Cost) and external funding (e.g. by NAADS) amounting to USD 319,157 (48.89% of Total Project Cost). The project is financially viable with an Internal Rate of Return (IRR) of 26.9%, which is strong and a net present value (NPV) of USD 127,023, discounted at 20%. In short, it is this Profile’s Profile ’s recommendation that a mill of this type in South Western Ugandan, and in particular in Lyantonde area, would be feasible, viable and profitable.

2


2. BACKGROUND: NATIONAL ANIMAL FEEDS INDUSTRY 2.1

Overview of the Agriculture Sector

Agriculture is the largest economic sector, accounting for 22.9% of Gross Domestic Product (GDP) in 2011 at current prices and 65.6% of employment. Most industries and services in the country are based on this sector and approximately 48% of total merchandise exports consist of Agricultural products. Food accounts for 57.78% of agricultural GDP of which 56% is from subsistence. Food production contributed 12.5% to GDP in Financial Year 2011/12. It is estimated that only one third of total food produced is marketed. While the country is endowed with some of the best agricultural land in the region, with a relatively favourable climate, only 5 million hectares out of the 18 million hectares of arable land is under cultivation. Agricultural production grew by an average of2.4% in 2009/10 and 0.9% in 2010/11. 2.2

Overview of the Livestock sub-sector

Data from the 2012 Statistical Abstract by Uganda Bureau of Statistics (UBOS) shows that livestock production contributes about 17% to 19% to agricultural GDP equivalent to about 3.89% to 4.35% of total GDP. Livestock production grew by about 3% per annum between 2010 and 2011 for cattle, sheep and goatswhile pigs and poultry numbers increased by 3.5 percent and 10.0 percent respectively in the same period. Current estimated livestock population consists of 12.47 million cattle (of which 93.29% are indigenous breeds and only 6.71% are improved or exotic), 13.66 million goats, 3.72 million sheep, 3.55 million pigs, 47.52 million poultry, 408,000 rabbits and 56,562equidae (Donkeys, Camels and Horses). It is estimated that mixed farming smallholders and pastoralists own over 90% of the national cattle herd and almost all the small ruminants, pigs and poultry producing the bulk of the meat and milk. These production units are characterized by low output per animal and unit area, slow growth rates and small mature sizes. Livestock production from intensive systems of production accounts for only 10% of total livestock production. This system is characterized by high input-high output production, utilizing high yielding germ plasm. It is mainly peri-urban based and uses compounded animal feeds to supplement supplement rations.

3


2.3

Constraints in the Livestock sub-sector

Livestock productivity is still very low whether measured in animal units or unit factor of production. Comparative performance figures for cattle and goat breeds are much lower than for exotic temperate breeds (MAAIF, 1997). This has been attributed to the following factors: 











Prevalence of animal diseases, limiting increase in numbers and improvement in production. Inadequate nutrition reducing livestock productivity. The legume content of pastures is very low and both digestibility and protein content are below requirements for high levels of animal production. Water scarcity in the semi-arid areas. Currently, the capacity of the natural and man-made reservoirs to supply total livestock water demand is only 30%. (DWD, 2001). Inadequate supporting infrastructure such as poor road network, lack of storage and processing facilities, quarantine stations, diagnostic and analytical laboratory facilities, holding grounds. Lack of information, knowledge and skills concerning better methods of animal husbandry, soil conservation and pest and diseases control, marketing opportunities, pricing and processing is a major constraint. Lack of capital, limited financial management skills and failure to access financial services limits investment and thus improvement in livestock production, processing and marketing. 2.4

The Animal Feeds Industry in Uganda

As noted above, one of the constraints limiting production is poor nutrition. For optimum production, especially improved breeds, there is a need to supplement the conventional feed resources with compounded feeds. While animal feed production has increased from 32,000 MT in 1993 to the current production of 80,000 MT, the present capacity utilization is still low at around 40 -45% of installed capacity. Most feed factories are located in and around Kampala and Jinja far from areas of high cereal and other input production. Since most inputs and poultry feeds themselves are bulky, transport makes the final products expensive. The output of feed mills varies considerably from season to season, resulting in irregular supplies and prices for farmers. Quality is inconsistent between various manufacturers and also within the same company from season to season. Generally, there is a lack of technically 4


qualified staff in feed processing and laboratory facilities for regular quality monitoring. The feed regulatory act has not yet been enacted by parliament. Poultry feeds account for nearly 80% of all feeds, followed by dairy feeds (20%). Feeds of other types include Hog meal, Rabbit pellets and Hound meal, Vitamins and mineral premixes are imported from Europe and Kenya and the other ingredients are obtained from local suppliers. Several feed millers provide the farmers with already mixed feeds. However, because of the lack of sufficient regulatory policies, there have been issues with quality and most farmers have therefore resorted to buying the ingredients and mixing the feeds themselves. This is also usually a cheaper option. Besides the commercial feed factories there are several up-and-coming small-scale feed producers which are not mechanised but nonetheless play a large role in supplying feed to the various categories of poultry farmers. Table 1 below shows the major feed mills producing poultry feeds for commercial purposes. Table 1: List of Commercial Feed Factories in Uganda Name Installed Capacity Creda Africa 40 tons/wk Liberty Trading Co. Ltd. 200 tons/wk Formula Feeds 40 tons/wk Catholic Secretariat 42 tons/wk Engano Millers Ltd. 60,000 MT/annum Bulemezi Farm Enterprises Ltd. 32 tons/day Ugachick Poultry Breeders 10 MT/hour Kagodo Farm 45 tons/day Hill Top 1.5 MT/hour

Present Production Not known Closed 15 tons per week 6 tons/wk 1,100 MT/annum 5 tons/day 6 – 7 MT/hour 20 – 22 tons/day 1.5 MT/hour

2.4.1 Opportunities in the Animal Feeds Industry 2.4.1.1

Agro-ecological conditions

Given Uganda's good climate and the generally favourable balance of natural resources, there is considerable potential for increased livestock production. This potential can be harnessed by adopting, on a national scale, proper livestock management systems on 5


natural pastures and forages, coupled with supplementary feeding using agroindustrial by-products that can be availed by a developed animal feeds industry. 2.4.1.2

Agro-industrial by-products

Survey findings indicate that there is an enormous potential for production of feed ingredients. Production of cereal grains and legume seed is increasing. However, the quantity of the ingredients available is reduced by the demand for human requirements for the same items. Fermentation by-products such as native beer residues and brewer's grains are produced in large amounts in Uganda. Potential feed ingredients include maize, sorghum, cassava, sweet potatoes, cottonseed cake, soyabean, sunflower, fish, lake shells, bone ash, blood meal and bananas among others. This can give rise to considerable amounts of agro-processing by-products, which can be used for the manufacture of animal feeds. Uganda is well adapted to the production of soybeans, sunflower and groundnuts although the volumes are not adequate presently to support large scale processing of feeds. Cottonseed meal is readily available and the quantity appears to be adequate to support the formulation of mixed feeds. The major energy feed supplies are maize bran, bagasse and molasses. The sources of protein include cottonseed cake, sunflower cake and soybean meal. 2.4.2 Constraints in the Animal Feeds Industry 2.4.2.1

Lack of raw materials

Some of the constraints to efficient use of agro-industrial by products include bulkiness and high costs of transportation and, therefore, their use is limited to feeding livestock only in a given locality. Besides, there are several competing uses for some of them, which include mulching, alcohol brewing, direct human consumption and fuel. 2.4.2.2

Seasonal variation in availability

Output of raw materials varies from season to season. This leads to inconsistency in quality and quantity of animal feeds between firms and also within the same firm. 2.4.2.3

Weak market

The domestic market for feeds is weak, with supplies of uneven quality both of ingredients and finished products. There are large variations in prices of some 6


ingredients resulting in escalating costs of production. This problem applies to the domestic food market generally, due to low production and low levels of incomes. While some manufacturers of animal feeds have identified regional markets, specifically Rwanda and Kenya, issues of quality and limited capacity hampers full utilization of this market. 2.4.2.4

Non supportive supportive financial financial market market

The financial market does not adequately cater for the livestock sub-sector. Poultry and dairy farmers have limited access to credit facilities, and this prevents significant expansion of the feed business. All major feed manufacturers do not have arrangements where farmers can be supplied with inputs (feeds) on credit. Many farmers have desires to increase their output but are constrained by lack of capital or favourable terms of input supply. 2.4.2.5

Lack of knowledge knowledge and and skills

Lack of information, knowledge and skills concerning good manufacturing practice in the production of animal feeds is a constraint. Most of the feed manufacturers, especially the small holders lack basic training in animal nutrition and feed milling technology. This has led to poor quality feeds on the market. Several farmers have resorted to on-farm mixing to reduce costs of production. Others have abandoned farming altogether. This is further compounded by lack of quality extension services to empower farmers to demand for quality feeds. Besides, there are no regulations under which defaulting manufacturers can be put to task. 2.4.2.6

Science and technology development

An effective national science and technology development programme can reduce the country's dependency on a limited number of feed ingredient sources. There is currently very research in alternative sources of feed ingredients or in feed processing technology. Skilled manpower in this field is lacking although Makerere University Faculties of Agriculture and Veterinary Medicine have specialized laboratories in feed analysis, which occasionally assist manufacturers. These institutions have however focused more on teaching and less on applied research.

7


2.4.2.7

Inadequate Inadequate institutional institutional support support services services

There are many public and private sector entities that can assist feed manufacturers in obtaining information, solving technical problems, and improving their operations. Many of these services are, however, diffused and sometimes duplicated across agencies. At present there is no policy and institutional arrangement for regulation and guiding of the animal feeds industry. Other institutions which feed processors might depend upon for information like the Uganda Investment Authority, Uganda Manufacturers Association, Uganda Revenue Authority and Institutions of higher learning need to be coordinated to enable them to play their roles effectively.

8


3. PROJECT INTRODUCTION & BACKGROUND ASPECTS 3.1

Background

The effort to modernize and promote accelerated economic growth in livestock and livestockproductsmarkets requires a solid business development approach. The objective of acommercial feed mill is to strengthen the capacity of farmers to increase production of raw cropsand legumes, develop nutritionally balanced feed rations, and promote the efficient use andincrease of animal production inputs. These inputs are necessary for nutritionally balancing feedrations that become an integral part of the commercial feed mill program. These rations will alsoincrease production for specific livestock and poultry production markets, control productioncosts and maximize product competitiveness. competitiveness. A key factor in this process is transforming the animal feed sector in Uganda into a sectorthat is based on the commercial production and efficient utilization of high quality, balancedrations. On the feed production side, the feed mill owner is required to provide high quality,balanced rations on a continual basis at competitive prices. For the livestock and poultryproducers, they need to know how to use these rations efficiently in order to increase, not onlytheir productivity, but also their profitability. Thefeed mill will be able to utilize the by-products from the oil, cotton, and flour milling sectorsalong with whole grain production of maize and grain sorghum. The objective of the project is therefore to establish a new animal compound feed manufacturing facility,capable of producing both ruminant feed (feed for cattle) and monogastric feed (feed for pigs andchicken) on two separate production lines (dualistic concept), in an efficient and cost effective way, capable of addressing all the current deficiencies. The new planned SKY & LAKES feed mill will be a specialized manufacturing unit, using the mostadvanced feed milling technology and equipment. Current intentions are that Buhler equipment willbe used; and the plant will have the ability to produce both ruminant feed, as well as monogastric (poultry) feeds, on two separate lines (dualistic concept). The production capacity of the monogastric line will be sufficient to supply in the total future broiler feed needs of Namibia.

9


3.2

Introduction

Uganda’s economy is mostly agrarian with a limited industrial base. The trend for concentrate feeding to livestock is changing from the conventional concentrate feeding to a formulated compound feed. Nowadays, compound feed is used by many livestock and dairy farmers to get the maximum potential in terms of milk and meat. Livestock production is gaining a significant momentum in Uganda's agriculture sector and is playing a vital role in national economy. At present, livestock is contributing about 17% to 19%to the agricultural sector which is equivalent to about 3.89% to 4.35% of total GDP. In rural economy the role of livestock, may be assessed by the fact that 21.2 million Ugandans are engaged in livestock farming, having 2 to 3 cattle and 4 to 5 sheep/goats per family and around 35% of the income source is being derived from livestock only. In view of the share and importance of Livestock, the role of balanced animal feed in animal productivity is critical. Out of the given options to make nutritionally balanced feed available according to their body needs, mechanized feed mills are imperative. An animal feed mill is an agro-based project in which locally available feed resources rich in protein and carbohydrate are mixed according to nutritional formula. 3.3

Project Scope

This Project Profile carries out an integrated financial, economic, stakeholder and risk investment appraisal of the proposed animal feed plant with annual production capacity of 30,000 tons. The plant will be capable of mixing high-quality feed for cattle, pigs, broilers, egg-layers and game animals. The inputs for animal feed include, but not limited to: maize and its by-products, corn silage, wheat bran, molasses, sorghum, fiber, feedlime, cotton seed, sunflower oilcake, soya oilcake, fish meal, urea and possibly other ingredients. The compound animal feed is expected to sell mostly to the local animal breeders, and probably also to the export markets of Rwanda and Tanzania. The export of feed may be feasible to the neighboring countries if the product’s price is competitive. The possibility for exporting the feed to other countries within the East African Community (EAC) is under close consideration, but this opportunity must be further explored before making any quantitative projections. 10


There are many feed ingredients locally available in South Western Uganda, but some of them have to be purchased from other regions or neighboring districts. Thus, such ingredients as maize, sunflower oilcake, soya oilcake, fish meal, and urea will have to be sourced elsewhere outside of Lyantonde District. SKY & LAKES will import all the animal feed processing equipment and technology from abroad – preferably India, China or Switzerland along with the requisition of technical assistance in form of training and skills transfer from the suppliers.

The foreign investor has purchased the land and initiated the transfer of the equipment from the home country. The delivery of equipment and its on-site installation is expected to take 12 months or so. Thus, it is expected that the plant will start operation in the second half of 2014. It will take another 3 yearsto reach its full capacity of 30,000 tons, if market conditions allow this. SKY & LAKES is planning to finance, build, operate and own the whole enterprise. Since the project qualifies for a grant from NAADS as it imparts significant social impacts and community development benefits to the livestock farmers in South Western Uganda, it will proposes to solicit partial project funding from Government (NAADS), not exceeding USD 320,000 (48.89% of Total Project Cost) to cover the costs of plant equipment and machinery and start-up working capital ( Ref. Table 17). This enterprise will also enjoy the other incentives available for start-up companies in Uganda through the acquisition of an Investment License from the Uganda Investment Authority (UIA). The expected lifespan of the project is 10 years from the commencement of operation.

With the increased demand for livestock products for domestic consumption as well as export, the farmers have realizedthat quality animals can only be maintained through proper feeding and management. The proportion of crossbred animals or improved strains of birds has increased in Uganda over the years. This has necessitated higher demand for balanced concentrate feed. Presently, various milk co-operative unions, poultry production enterprises and private companies are supplying both cattle and poultry feeds of different qualities and forms (mash/ pellets/ crumbles) to the farmers. Large-sized poultry farm/dairy farm owners, hatcheries and cooperative poultry units normally manufacture their own feed by installing the necessary mini-plant and machinery on their farm. Some of the farmers are still feeding broken grains, cakes, salt,etc. to dairy animals by mixing the preparations at home.

11


All indications are that feed production in Uganda cannot keep pace with the growth in various species of farm animals and poultry. To meet the growing demand of processed and complete feeds for different types of domestic animals, the unconventional feeds should also be used in the rations through proper processing for removal of antinutritional factors. Thus, it indicates that there is a good scope for setting up feed processing plants of different capacities for production of various quality feeds. 3.4

Need Rationale

In order to enhance productivity and profitability of dairy and livestock production systems, availability of balanced feed around the year is imperative. In view of the high competition between crops for human consumption and animal fodder, it is forecasted that THE gap between the supply and demand for balanced feed for livestock and dairy animals would further widen, resulting in poor performance of these value chains. Commercially prepared animal feed from various crop residues, therefore comes as the most viable option to bridge the widening supply demand gap. On the demand side, lack of awareness has been a limiting factor with small and medium farmers, who have been using traditional feed ingredients like cotton seed cake, rice polish, and maize bran until recently. With increasing awareness on the part of small farmers that balanced compound feed has on their profitability, more and more farmers are ready to switch to commercially prepared feed, subject to availability of the same around the year. The demand for compound feed is increasing day by day with the increase in awareness among farmers A recent study: Utilization of Market Crop Wastes as Animal Feed in Urban and PeriUrban Livestock Production in Uganda by Constantine Katongole et al suggests that with the increasing awareness, demand for commercially prepared balanced, compound feed is increasing; however consumption is constrained in several areas, due to limited availability. Cost of feed due to high transportation costs involved over long distances, and consistent availability has been cited as the main factors. Various research studies verify that significant (more than 20%) productivity increase is achievable with the compound feed use. With the establishment of medium-sized commercial feed mills in the private sector, availability of consistent quality balanced compound feed may be improved, alleviating a major constraint limiting productivity and profitability of the value chain. At present only 6-7 large mills are preparing compound feed for the poultry industry and dairy and livestock cattle, out of an installed base of over 60small and large feed 12


mills. Generally, mixed compound feeds are prepared by some of the medium/largescale livestock farmers in Uganda. However due to inconsistent quality and formulation of home-made compound feeds, the desired positive impact on milk production is not achieved. The fluctuating prices of various feed ingredients tempt farmers to change formulation every now and then, resulting in inconsistent quality of feed. Justification for the Animal Feeds Plant

1. According to the Meat Production Master Plan Study (MPMPS) and the Dairy Master Plan Study (DMPS), Uganda has a deficit in the per capita consumption of livestock products despite the largely untapped potential for increasing livestock production. These studies identify animal nutrition as one of the limiting factors to utilization of this potential and recommend the formulation of policies and strategies in the animal feeds industry as well as the pasture and range resources to address these constraints. 2. Animal feeds account for 70% of production costs and, therefore, have a significant effect on the farmers' production costs and profits. Presently, zero grazing and intensive units of dairy, poultry and piggery based on compounded animal feeds play a vital role in ensuring increased supplies of milk, meat and eggs to the urban populations. They are also a source of livelihood to poor periurban populations especially among the disadvantaged sections of societies like women and youth. 3. The plane of nutrition has significant influence on the infection rate and disease resistance of animals. Inadequate feeding and insufficiency in feed quality are responsible in part for the low livestock and poultry performance in Uganda. 4. There is scope for promoting the Animal Feeds Industry within the framework of the Plan for Modernization of Agriculture (PMA). The Animal Feeds Industry provides opportunities for stimulating agro-industrial investments, value addition, reducing post-harvest losses and increasing shelf life of agricultural products. It lends itself to scientific applications and can contribute to accelerated agricultural modernization. It is, therefore, imperative that the animal feeds plant of this scale be established in Lyantonde District and placed on a higher priority in agricultural development within the framework of private sector promotion and development.

13


3.5

Goals & Objectives

The livestock sub-sector objective is "to contribute towards maximization of the potential of Uganda's livestock sub-sector on a sustainable yield basis within the framework of sound environmental management limits". The SKY & LAKES contribution to improved animal nutrition will be achieved through improved production and utilization of compounded animal feeds and forage. The broad objectives of the proposed animal feeds plant are therefore to: Goal: To facilitate the availability of high quality animal feed in reach of small, medium and large livestock owners to enhance productivity and ensure better health of livestock.

The objectives of mixed feed manufacturing are to: 1. Produce feed that is safe for animal use; 2. Produce feed that ensures that the food product arising thereof is safe to the human consumer; 3. Produce feed that meets the nutritional requirement of the animal; and 4. Make a profit through the feed manufacturing endeavour. The specific objectives are:  









To stimulate increased feed production and availability; To ensure the production and sale of quality animal feeds on the market and protect end users against improperly formulated, contaminated, decomposed and deceptively packaged or labeled feeds; To put in place strategies for reducing production costs and ensure that the proposed animal feeds manufacturing plant caters for its interests as well as those of livestock farmers with regard to feed prices and profitability; To stimulate and build capacity for the development of the animal feeds industry through the start-up and successful operation of an animal feeds manufacturing enterprise; To provide income generation, employment and animal feed business development; and Reduction in the production cost of milk, meat and poultry products through improved productivity.

14


3.6

Benefits & Beneficiaries

The successful start-up and operation of the proposed animal feeds manufacturing plant is expected to result into the following benefits: 1. Increased and improved availability of quality animal feeds on the market. 2. Improved animal nutrition, increased production and productivity and consequently increased returns on investment in livestock farming. 3. Increased incomes, food security and improved welfare of the farmers. 4. Increased contribution of livestock to the national economy. B. Beneficiaries Direct beneficiaries would be: Dairy Farmers (small, medium and large scale) Beef Cattle Framers (small, medium and large scale) Poultry Farmers Piggery Farmers Traders Community based enterprise groups all over Uganda. Dairy & livestock sector by improving value chain and productivity enhancement       

With the establishment of one medium scale feed mill (100 MT/day production), it serves around 50,000 milking animals. There is an estimation of increase in milk production by 20 % by offering compound feed to these animals.

15


4. PROPOSED INITIATIVE 4.1

Importance of Feed in Livestock Sector

The success of livestock farming is largely dependent on the continuous supply of good quality nutritious feeds at competitive price. Feed alone constitute about 60-70 per cent of total cost of production of livestock products. Therefore, it needs more attention though other factors are also important for remunerative return from livestock enterprises. The farmers used to feed the crop residues to the cattle and poultry birds, however, sheep and goat are normally maintained on grazing/browsing with supplementary feeding of broken grains/other by-products. Therefore, feeding of balanced concentrate feed to these animals was not common, because of low productivity and low remunerative prices for the livestock products. Improved poultry is fed only with concentrated feed. The requirement of food of animal origin like milk, meat and eggs is increasing at a faster rate due to increased awareness about the significance of protective proteins for the maintenance of human health. Farmers in Uganda have realized its importance and started rearing good quality and highly productive animals/birds under stall-fed conditions. 4.2

Important Livestock Species

The livestock and poultry production industries are well developed in Uganda. The different livestock species kept in Uganda include poultry, cattle, sheep, goats, donkeys, horses, pigs, rabbits and rats. The poultry species includes indigenous and imported chickens, guinea fowls, turkeys, ducks and geese. Majority of the ruminants (cattle, sheep and goats) are supplied with fodder feeds harvested from rangelands and grazing reserves. Cattle production systems are a mixture of commercial ranching and pastoral systems, with a good proportion of cattle being maintained in transhumance and agro-pastoral systems. Most other livestock resources are reared under the traditional extensive systems. Also over 90 percent of the country’s pig and rabbit production is managed under traditional husbandry systems. Poultry outnumber all other species of livestock in Uganda. Poultry are found throughout Nigeria even though ducks, guinea fowls and pigeons are commonly kept, chickens are by far the most common. More than 90 percent of these birds are commercial layers and broilers kept under intensive systems and are primarily meant for profit-making. Eggs, broiler birds and spent layers are sold for different prices depending on time of the year and bargaining power of the buyer. Large numbers of birds are reared intensively on commercial basis. A few of the birds (Local breeds) are 16


kept under traditional system of management. The commercial birds receive vaccinations against diseases of veterinary importance. The local breeds do not receive any veterinary services or treatment except when there is a disease outbreak. They are mostly fed on grains like sorghum, millet maize and food remnants and scavenge around the neighborhood for survival. 4.3

Challenges Regarding Feed

It has been reported that apart from the higher crude fibre values and low crude protein observed in some commercial livestock feeds, the finished feed and feed ingredients were adulterated with sand, sawdust, and other. More than 80 percent of feed manufacturers in Uganda buy grains and oil cakes from distant source locations and therefore incur costs in transporting them to their manufacturing premises. The company pays the contractor for grains, transport, his labour, profit, and interest on the money he borrowed and possibly kickbacks, which are all billed into his invoice. This is in addition to exorbitant prices paid for vitamins and trace minerals due to the low currency exchange value of the Uganda Shilling vis-à-vis the US Dollar. Also there is the cost of bags for the feed, bagging, sewing the bag and transportation. The further away the feed moves from the manufacturer, the more expensive it becomes to the farmer. Much of the impurities and existence of unwanted particles depends on how the ingredients are handled before it arrives at the Feed mill. The presence of broken bottles, metal objects, stones and sand are major problems confronting the feed mill industry in Uganda. Also poor methods of processing and storage lead to infestation by insects of feed ingredients, mould growth and rodent attack. The problem of storing grains for long-term use without regular checking of the moisture content is very rampant in Uganda. Most grains are stored on bare floors without pallets and under very poor conditions and high temperatures too. 4.4

Clarifying Activities for the Commercial Feed Mill

The SKY & LAKES proposed commercial feed mill activities that should be implemented include but are not limited to: a. Develop and execute training for feed mill personnel in business development, management, feed formulation capacity and the management/inventory of raw material.

17


b. Develop training programs for other smaller scale animal feed producers to educate and promote productionand animal husbandry skills. c. Provide technical assistance for the development of product quality standards and their monitoring in the marketplaces in collaboration with public, private institutions and NGO’s. d. Develop and disseminate information related to the availability of animal feed and feeding techniques to the livestock producers. The communications goal would be to reach a large audience of producers through feed demonstration units that are strategically located throughout the major livestock producing areas. Utilizing radio and television networks as well as other outreach communication programs to not only educate producers but also to generate awareness about the feed mill and its operations. e. Promote and strengthen partnerships between the SKY & LAKES proposed commercial feed mill and local financial institutions. These partnerships can provide support for the development and implementation of business plans and facilitates dialogue between the company and public sector authorities regarding the regulatory and policy issues that may affect the feed mill’s operations. f. Generate higher rates of return for producers. For example, the feed mill will provide greater financial return for the livestock producers providing a higher rate of gain in less time than the Ugandan livestock producers are currently doing. The meat will be more tender, edible and to the palate. This type of increase/benefit can also be realized within other animal sectors such as poultry, dairy, beef and lambs.

18


5. PROPOSED PARTNERSHIPS

Public/private sector partnerships allow for the establishment of livestock farming enterprises around the concentrate animal feeds manufacturing units (i.e. the proposed SKY & LAKES compound animal feed mill at Lyantonde). This development reinforces farmer input/product market access and investment capital inflows. The concentrate animal feeds manufacturing plant will mill high quality animal feeds and supply to them to the livestock at market competitive prices, source raw materials from grain producers in the area at strong and stable market prices; train crop and livestock farmers alike in better farming practices like pre- and post-harvest handling of grains and good animal and poultry rearing practices in partnership with the district agricultural and veterinary offices of NAADS; provide logistics and marketing for crop and livestock farmers products through proactive and mutually beneficial linkage partnerships; and partner with public institutions to provide essential services to farmers as one way of attaining production of quality and sustainable quantities of livestock products to exploit the market opportunity, and for farmers to become effective players in the market. The major outputs/benefits expected to emerge out of such a partnership include linkage to markets and value-added concentrate animal feed processing infrastructure; training of the members to enable them acquire the desired quality standards for crop and livestock products such that they can successful exploit the market and marketing opportunity provided by the concentrate animal feed mill/plant; building the productive capacity of the members such that they can be able to address constraints to production, processing and marketing of their crop and livestock products; identification and availability of modern/improved technology within the local grain and livestock value chains such that they can use it to produce and sell high-quality crop and livestock products on the market – and in the process earn better household incomes that will significantly improve their livelihoods; facilitate increased and sustainable animal feeds production and availability that will improve the nutrition of animals and increased productivity of farm animals; provide assurance of quality animal feeds that will protect the farmers and their animals against improperly formulated, contaminated and deceptively packaged feeds; reduce costs of animal feeds that will increase the profitability of the enterprises for the feed producers and farmers alike; and build capacity for production of quality animal feeds will ensure sustainability in supply and maintenance of required standards for the domestic as well as export markets.

19


6. COMPANY SET UP & OWNERSHIP 6.1

Overview of the Enterprise

SKY & LAKES – the business firm that is proposing to establish and operate the animal compound feeds manufacturing plant is a Ugandan-incorporated company with its Head Office based in Kampala and land holdings in Lyantonde District of South Western Uganda. SKY & LAKES proposes to use the opportunity of a strong market for animal feeds in South Western Uganda and the absence of an integrated animal feeds industry in the area to providing our customers with professional services and high quality animal feed products. In doing so, SKY & LAKES aspires to offer only the best feed and products in the industry – that has hitherto been lacking in this area of Uganda that is renowned for its strong tradition of livestock farming. SKY & LAKES will also offer its customers the option of custom made animal feed. The SKY & LAKES mill will enable the enterprise to provide high levels of quality products that will always be fresh and available. SKY &LAKES' primary focus will be on keeping its customers satisfied. Professional and reliable service, competitive pricing, and a knowledgeable staff will provide for continued growth in the years to come.

The focus of SKY & LAKES will be on the core animal feed products, its sales and promotions will put strong emphasison its history and reputation for quality and customer service. Even though SKY & LAKES’ is spearheaded by its owners who have the time, energy, interest and knowledge to invest in an already successful business with a string of other smoothly running agro-based and trading enterprises, its greatest asset will be their commitment and pride in protecting and growing the proposed business. 6.2

Company Legal Status

SKY & LAKES is a privately-held (limited liability company) Ugandan-registered company that was founded in ---------------------. The company’s authorized share capital is UG Shs. -------------- made up of ----------- Ordinary Shares of UG Shs. ------------ each. The company has ---- shareholders that are enterprising individuals who have various other business interests and responsibilities. The shareholding structure of SKY & LAKES is indicated below:

20


The Shareholders Shareholder

Shares held

[%age]

1.

Mr. Ambrose Mutafungwa

----

-----%

2.

Mr. Emma Barigye Kiremire

----

-----%

3.

Dr./Mr./Mrs/Miss --------------

----

-----%

4.

Dr./Mr./Mrs/Miss --------------

-----

-----%

5.

Dr./Mr./Mrs/Miss --------------

----

-----%

21


7. PRODUCT DESCRIPTION AND APPLICATION

The essence of the feed production business is the mixing of various ingredients into different types of feed with specific nutrition content. Thus, the availability of raw materials is a crucial factor for the survival of a feed plant. The amount of raw materials available for local feed production depends on the crop yields and human consumption of feed ingredients. The availability of local raw materials determines the amount of imported ingredients to be imported from abroad or other regions of Uganda. Internationally over 500 raw materials are specified by their nutritional values for possible use in animal feed. However, the actual mix of ingredients used in the feed production will depend on the availability and price of the ingredients, season of the year, and foreign exchange rate, as well as other factors. The feed ingredients are close substitutes, their prices tend to be correlated in their movements, and the analysts agree that maize prices directly affect the prices of many other feed ingredients. In turn, the domestic maize prices in Uganda are directly determined by world prices. In years where there is a maize surplus the domestic prices will be derived from the prices of maize exports. During years of shortages the maize price will automatically switch to import (CIF) parity. In other words, the feed ingredients are largely ―tradable‖ commodities, with their prices heavily influenced by the international factors. Table 2: Main Products POULTRY FEEDS LAYER FEEDS

ANIMAL FEEDS DAIRY CATTLE

Layers Mash Growers Mash Chick Mash BROILER FEEDS First Grow Broiler Starter Mash First Grow Broiler Finisher Mash First Grow Broiler Finisher Pellets

Standard Dairy Meal High Yield Dairy Meal Calf Pellets PIGS Sow &Weaner Meal Pig Finishing Meal







 











RABBITS Rabbit Pellets 

22


8. ORGANISATION & MANAGEMENT OF THE COMPANY 8.1

Personnel Plan

Manpower required and the corresponding labour costs are indicated in Table 3. Table 3: Manpower Requirement and Labour Cost Sr. Description No.

Requirement (Number)

Salary (per month)

Total Salary

1

Plant Manager

1

2,000

2,000

2

Livestock Specialist

1

1,500

1,500

3

Accounts Officer

1

1,200

1,200

4

Maintenance Engineer

1

1,200

1,200

5

Sales Officers/Feed Technicians

4

1,000

4,000

6

Chemists

2

1,000

2,000

7

Floor Supervisors

3

800

2,400

8

Mill Operators (MOAs)

4

800

3,200

9

Stores Supervisor

1

800

800

10 Assistant Accountants

1

800

800

11 Electrical Supervisor

1

800

800

12 Mechanical Supervisor

1

800

800

13 Skilled workers

21

500

10,500

42

---

31,200

Total

Incentives and Perks (30% of the salary) Total monthly payments 8.2

9,360 40,560

Production Team

The mill’s production team will include a Feed Mill manager, Livestock Specialist and mill assistants. The Feed Mill manager will bear the ultimate responsibility for the monitoring and manufacturing process; handling products and materials; and ensuring that volume, cost standards, quality parameters of feed production, environmental, and safety requirements are achieved. The Livestock Specialist will have technical responsibility for ingredient selection, feed formulation (i.e. mixing appropriate ingredients and quantities for specific livestock species), feed processing and quality assurance. This individual will train the mill operations assistants in these areas. The mill operations assistants will assist the Feed Mill Manager and Livestock Specialist 23


throughout the production process. They will have responsibility for mixing feed ingredients, collecting produced feed, packaging, storage, and other functions. 8.2.1 Technical Labour Force a. Requirements for operating the feed mill will be a General Manager/Plant Manager, a Livestock Specialist and a Maintenance Engineer. Three to four welltrained technicians will support the management team. These technicians should possess strong mechanical aptitudes in their specific areas of responsibility. Those areas include: 1) Grain Storage and Handling Facility, 2) Bulk and bag receiving areas for grain, feed by-products, and vitamin/minerals, 3) Hammer milling section and mixing area, and 4) Bagging and Warehousing. b. General labour personnel will support each one of these areas. Each area would have a minimum of two labourers with the exception of the bagging and warehousing sector, which would have six to eight general labourers. 8.2.2 Marketing/Training Program a. The marketing program must have four well-trained feed technicians that are not only technically strong but also strong in sales and marketing. They will be required to set up the feed demonstration units for the different sectors of livestock, provide extension type training to livestock producers, organize workshops for livestock producers and potential feed distributors throughout Uganda. b. The trained feed technicians will also work with select groups and existing organizations in training and distribution. They will assist in setting up company owned feed distributors in strategic locations within the marketing grid. c. Feed technicians will also be responsible for working with outlets and other successful agricultural distributors of seed and chemicals. 8.3

Collection of Raw Materials

The proximity of the mill to some of the major grain markets in South Western Uganda gives it access to procure and transport the raw materials to the mill at minimum cost. Most of the major grains producing areas of South Western Uganda are located within a radius of 150 kms to the proposed location of the mill in 24


Lyantonde District. Grains and oil seed products will also be procured from thesemarkets while vitamin and mineral premix (though imported) are also on sale in Kampala – which is only 200 kms away. Transport cost of these ingredients is approximately USD 3.20/ 100kgs. 8.4

Production Schedule

Total tons = 30,000 Layer feed = 0.45 x 6 = 2.7 days Broiler feed = 0.25 x 6 = 1.5days Cattle feed = 0.3 x 6 = 1.8 days Monday, Tuesday and Wednesday will be devoted to producing Layer and Broiler feeds, Thursday for cattle feed while Friday and Saturday will be used for the following activities: stock balance, writing of weekly reports, evaluation, planning for the next week and general sanitation of the mill. 8.5

Distribution of Finished Product

The farm truck will deliver finished feed to distribution centres in town. The mill can also have a shop in Lyantonde town to break the monopoly of middle men. In these shops livestock farmers can buy the products, or purchase directly at the farm gate and payment will be on cash and carry basis. The feed may be packed in different colours for ease of identification within the mill and between selling points and for storage purposes. 8.6

Record Keeping

Below is the inventory for monitoring raw materials brought in and finished products leaving the farm. Every ingredient is to have a card. Regular checks of material quality and quantities to ensure prompt action. Raw Materials Date

Raw material

Quantity in stock

Finished Products

Record sheet of finished products 25

Quantity used

Balance


Type of feed: Layers mash Minimum amount to be kept in store: 10 tons Production date

Tons in store

Expected sales

To be produced Actual sales

1/5/2013

8

11

13

8.7

15

Corporate Book Keeping

We will also be contracting an external accountant/auditor (CPA) to handle the corporate book keeping and business accounts. We value and understand how important proper accounting and reporting of all sales activities are to the successful growth of a company. It is through development of this accuracy that true business growth will be verified and available for the continued security of this well-established family business. 8.8

Health & Safety Standards

The proposed SKY & LAKES commercial feed mill will take several safety measures. In addition to providing workers with safety and hygiene equipment and tools, the proposed SKY & LAKES commercial feed mill will supply its workers with and train them in the proper use of protective clothing including uniforms, masks, boots, and gloves. The company will provide animal feed safety system training to its managers, technical staff, feedmill workers, and selected livestock producers. Finally, the proposed SKY & LAKES commercial feed millwill design and implement a Hazard Analysis Critical Control Point (HACCP) system and train its employees in the system. 8.9

Management and Marketing

The proposed SKY & LAKES commercial feed mill will improve its internal systems by adopting a Manual of Procedures for various activities within the commercial feed mill enterprise.

26


9. BUSINESS STRATEGY & IMPLEMENTATION Emphasize customer service

The proposed SKY & LAKES commercial feed mill will differentiate itself from its competitors with CUSTOMER SERVICE! The enterprise will establish its business as a clear and viable alternative for its target market, from the scores of competitors known for "do-it yourself," "no we don't offer that product," and "no delivery available." Customer service is paramount in this kind of business and the company’s business plan. The management team will accomplish this goal by training employees and by providing encouragement. The management team of the SKY & LAKES commercial feed millbelieves that an employee who is happy at work will enjoy working. It is always easier to please customers with staff that cares, a facility that is clean and equipment that is kept in proper working order. The proposed SKY & LAKES commercial feed millwill also work toward establishing community involvement programs that will demonstrate how the business can contribute to a better quality of community life through its Corporate Social Responsibility (CSR) program. Community project groups such as Vocational and Technical Training Colleges, Secondary Schools, churches, and other groups will be welcomed for tours of the facilities and will be shown how the facility can be used to help raise funds for their needs. Build a relationship-oriented business

Build long-term relationships with customers, not single-visit deals. Become their "feed dealer of choice." Teach them the value of the relationship. Focus on target markets

The proposed SKY & LAKES commercial feed mill needs to focus its offerings on specific key market segmentsthat it should own. The enterprise will definitely want to be able to sell to smart, quality conscious customers.

27


9.1

Competitive Edge

The proposed SKY & LAKES commercial feed mill will institute one of the most sought-after competitive edges in the industry. The company will have its own individual feed mill that can produce any animal feed requested. All it will need are a few ingredients and some time to make its own specialty custom feeds. The proposed SKY & LAKES commercial feed millwill be built and wired with a 3phase electrical system (industrial strength) and the best equipment on the market today. While other feed stores dream of having access to their own mill; this is where the proposed SKY & LAKES commercial feed millwill make most of its money. Instead of having to be the middle man and purchase a large inventory of generic feeds, the commercial feed mill will custom-blend and produce its own feed to keep the costs down. When the proposed SKY & LAKES commercial feed mill can produce and market feed that costs it nearly 80% less than it costs to purchase a generic feed, it can afford to keep its shelf prices lower than its competitors. Let's face it, lower prices + higher quality feed = money in the bank.

The owners of the proposed SKY & LAKES commercial feed mill will market its products to new customers in various strategic ways. This will aid in bringing in more customers...and will also aid in spreading the word that the company is expanding its business. We expect most of the customers to come from within a radius of 100 kms of the commercial feed mill plant near Lyantonde Town. Through delivery, we will be able to offer our products and services to anyone willing to pay for it. The proposed SKY & LAKES commercial feed mill’s next competitive edge is that it will be running its delivery truck on a daily basis (once we implement delivery and obtain the necessary business). Most of the other local feed millers do not deliver or only deliver within a short distance from their location. Again, this will serve the SKY & LAKES commercial feed millcustomers with a higher quality feed, high level of professional service, and be willing to take it to their door. The proposed SKY & LAKES commercial feed mill’s strongest competitive edge is that its project promoters have long-standing personal relationships and have worked together for a long time that they have become like part of one family while also their knowledge of the feed industry runs deep. With the resources available, the energy the key project promoters can contribute to the growth of the enterprise, the raw talent for

28


business and their deep understanding of customer service, the potential to grow this already exciting business is tremendous. 9.2

Marketing Strategy

The proposed SKY & LAKES commercial feed mill will implement the following Marketing Strategies in the following order: 1. Direct Marketing: we will personally market (sell face to face) our products to various feed stores, livestock farms (both public and private concerns), livestock co-operative societies and district farm institutions. 2. Customer Referral: we will provide customer incentives for direct referrals, in the form of price discounts. 3. Website Marketing: we will implement our web plan and review the outcome to determine the efficiency it has on our customer base. 4. Event Marketing: we will visit area livestock events (within 300 miles) to hand out flyers, business cards, and product catalogs, and to meet potential customers face to face.

Through marketing our products in these ways, we project that the proposed SKY & LAKES commercial feed millwill almost double its business within the first 2 years of its inception.

29


10. PROJECT PROFILE 10.1

Land and Location

The proposed location for the SKY & LAKES animal feed mill processing plant will be in Lyantonde District on property belonging to the main project promoter – Mr. Ambrose Mutafungwa which is located at a distance of only 7 kms from the main Kampala – Mbarara highway route to South Western Uganda and quite near to Lyantonde Town itself. Four (4) criteria have been considered in the choice of this location for the animal feed mill plant:1. Lyantonde District is the place where the SKY & LAKES project promoters happen to possess a substantial land acreage holding that will be ideal for location of the animal feed mill plant. 2. Positioning the animal feeds plant in this area is quite ideal in terms being proximal to central and western Uganda where there is contemporary high product demand for poultry and cattle feed products respectively. 3. The location of the livestock feed plant in Lyantonde District will also enable it to easily and directly source for raw material ingredients such as maize grain from Western Uganda and the high protein-rich silver cyprinid fish from the nearby Lake Victoria that is an important ingredient in the production of animal feeds in Uganda. 4. The livestock feed plant will be close to one of the major highways in Uganda linking Kampala to Western Uganda and is immediate neighbours of Tanzania to the south, DR Congo to the west, and Rwanda to the South West that will greatly assist in the quick distribution and movement of products to these export strategic markets. 5. The feed mill will be the mechanism for developing a sustainable and profitablemarket for corn (maize), wheat, and other grain and oils seed crops for the local and regional farmers. Total land requirement for the envisaged plant is 7 acres (28,000 m 2), of which 2,929 m2 is earmarked for processing plant building area, storage for raw material and finished product and office-cum-laboratory space. The totalexpenditure for land and site development is estimated at USD 17,670. Expenses for this item are displayed in Table 4 below.

30


Table 4: Details of Expenses on Land and Site Development S.No. Particulars

Quantity

1

Land

2

Land and site development Land levelling 70,000 Barbed wire 850 fencing

i) ii)

7

iii)

Internal roads

iv)

Gate

v)

Security cabin

300,000 50 30

Specifications

Unit Cost USD

Unit

acres

845

/acre

5,915

Cubic feet

0.03

/cuft

2,158

r.mts.

2.54

/r.mts.

Lumpsum r.mts. Sq.mts.

5,072 16.90 50.72

Lumpsum r.mts. /Sq.mts.

Sub-Total

10.2

Total Cost (USD)

2,160 5,072 845 1,520 17,670

Civil Structures

The total cost of building and civil works is USD 236,420. Details of expenses for this budget item are shown in Table 5 below. Table 5: Expense Budget for Civil Structures S.No. Particulars

i)

ii) iii) iv) v) vi) vii)

(viii)

Raw material and finished feed godown Machinery Hall Office cum laboratory Generator and switch room Canteen and change room Garage for vehicles ResidentialQtrs

Quantity

Specifications

Unit Cost USD Unit

Total Cost (USD)

2,354

Sq.mts.

59.00

/Sq.mts.

138,890

250

Sq.mts.

118.00

/Sq.mts.

325

Sq.mts.

63.70

/Sq.mts.

29,500 20,700

90

Sq.mts.

50.00

/Sq.mts.

4,500

200

Sq.mts.

50.00

/Sq.mts.

10,000

80

Sq.mts.

35.00

/Sq.mts.

2,800

a. Manager (one)

80

Sq.mts.

59.00

/Sq.mts.

b. Supervisor (3)

150

Sq.mts.

54.00

/Sq.mts.

c. Labourers (10)

150

Sq.mts.

34.07

/Sq.mts.

Architect Fees

0.5

% of civil-cum landdev’t costs

Sub-Total 31

4,720 8,100 5,110 12,100 236,420


10.3

Materials and Inputs

10.3.1 Materials The main raw materials are Cottonseed cake, Maize grain, Corn gluten, Rice Polish, Wheat straw, Rice bran, Molasses, Urea, Salt, DCP and Vegetable Oil. All the ingredients of grain are locally available at low prices but some vitamins other ingredients will need to be imported. Raw material required for the production of 1 metric ton ofvarious types of livestock feed, at full operation capacity and the corresponding costs are shown in Tables 6 – 9 below. Table 6: Commercial Layer Feed Formulations to Produce 1 MT (1,000 kgs) Sr. Ingredient No.

Commercial Layer Feed Chick

Cost

1 2 3 4 5 6

7 8 9 10 11 12

13 14

Maize Rice Polish Sorghum Rice bran DEO Rice Polish DEO Groundnut cake DEO Soyabean meal Sunflower meal/extract Limestone powder Di-calcium Phosphate Salt Pure Poultry Mineral Mixture Shell Grit/ Marble Grit Vitamin and

(USD/ Kg) 0.08 0.07 0.07 0.08 0.05

Grower Layer Proportion Value Proportion Value Proportion Value (Kg)

511.90 50.00 0.00 50.00 0.00

(USD)

(Kg)

40.952 3.5 0 4

319.30 50.00 60.00 100.00 124.10

0 0.13

50.00

90.00

230.00

0.02

0.07 0.03

5.00 30.00

0.51

0.00 6.00

20.00

10.00 1.9 0.35

5.00 30.00

32

0.4 10.00

1.9 0.35

4.00 30.00

0.9 0.00

0 3.06

6.3

0.1

0.9 0.02

90.00

5.00

10.00

15.4

8.4

0.1 0.19

16.9 110.00

120.00

5.00

6.00

31.32 3.5 2.8 4.8 0

11.2

3.5

(USD)

130.00

80.00

50.00

391.50 50.00 40.00 60.00 0.00

11.7

32.2 0.07

25.544 3.5 4.2 8

(Kg)

6.205

6.5 0.14

(USD)

1.9 0.28

0.9 50.00

0 3.06

13.00

1 6.63

PROJECT PROFILE: LYANTONDE COMPOUND ANIMAL FEED PROCESSING PLANT Probiotics Mix 3.04 15 D.-L. 1.50 0.40 1.20 Methionine 4.56 1.216 3.648 2.36 16 L.-Lysine 0.60 1.416 0.20 0.472 0.30 0.708 Total(Kg) 1,000.00 1,000.00 1,000.00 102.94 86.75 96.49

Table 7: Commercial Broiler Feed Formulations to Produce 1 MT (1,000 kgs) Sr. Ingredient No.

Commercial Broiler Feed Starter

Finisher

Cost

Proportion

Value

Proportion

Value

(USD/ Kg)

(Kg)

(USD)

(Kg)

(USD)

1

Maize

0.08

512.00

40.96

573.00

45.84

2

Rice Polish

0.07

50.00

3.5

0.00

0

3

Sorghum

0.07

0.00

0

30.00

2.1

4

Rice bran

0.08

0.00

0

20.00

1.6

5

DEO Rice Polish

0.05

0.00

0

0.00

0

6

DEO Groundnut cake

0.13

70.00

9.1

60.00

7.8

7

DEO Soyabean meal

0.14

280.00

39.2

235.00

32.9

8

Sunflower meal/extract

0.07

30.00

2.1

25.00

1.75

9

Limestone powder

0.02

5.00

0.1

5.00

0.1

10 Di-calcium Phosphate

0.19

10.00

1.9

10.00

1.9

11 Salt Pure

0.07

4.00

0.28

4.00

0.28

12 Poultry Mineral Mixture

0.03

30.00

0.9

30.00

0.9

13 Shell Grit/Marble Grit

0.02

0.00

0

0.00

0

14 Vitamin & Probiotics Mix

0.51

7.00

3.57

6.00

3.06

15 D.-L. Methionine

3.04

1.50

4.56

1.50

4.56

16 L.-Lysine

2.36

0.50

1.18

0.50

1.18

1,000.00

107.40

1,000.00

104.00

Total(Kg)

33


Table 8: Commercial Cattle Feed Formulations to Produce 1 MT (1,000 kgs) Sr. Feed Ingredient No.

Cost (USD/Kg)

Proportion (Kg)

Value (USD)

1

De-oiled Cakes (cotton seed, sunflower, corngluten, etc.)

0.14

150

21.00

2

Cereals (maize, sorghum, broken rice, etc.)

0.08

100

8.00

3

De-oiled rice bran

0.05

470

23.50

4

Tapioca Products

0.05

100

5.00

5

Salt

0.07

20

1.40

6

Mineral (bone ash, lime, etc.)

0.17

20

3.40

7

Molasses

0.08

120

9.60

8

Urea

0.07

20

1.40

1,000

73.30

Total

Table 9: Weighted Average Cost of Raw Materials Weighted average cost of raw materials

Cost (USD/Ton)

Proportion (Ton)

Value (USD)

Broiler - Starter - Finisher

107.40 104.00

0.125 0.125

13.43 13.00

Layer - Chick - Grower - Layer

102.94 86.75 96.49

0.050 0.100 0.300

5.15 8.68 28.95

Cattle - Feed

73.30

0.300

21.99

1,000

91.20

Total

10.3.2 Utilities Utilities required by the animal feed plant are electricity, steam and water for processing and sanitation.Annual utilities requirement of the plant and corresponding cost are indicated in Table 10. Table 10: Annual Utilities Requirement and Cost No. Description Quantity 1 Electricity (KwH) 26,494 2 Water (M3) 2,914 3 Steam (Kg) 3,608 Total

34

Cost in USD

4,769 3,287 19,447 27,503


Availability of Electrical Power a. The existence of an electrical substation near Lyantonde Town will have a major impact on establishing the commercial feed mill in this area along with several of the supporting agribusinesses such as a poultry processing unit and dairy processing facility. b. The feed mill does not have a high power requirement, but requires a dependable and consistent supply. The newly upgraded electrical substation near Lyantonde will provide the necessary primary power. c. This animal feed plant will have a stand-by generator to serve as a secondary/back-up power supply only. 10.4

Technology and Engineering

10.4.1 Technology 10.4.1.1 Production Process The feed manufacturing process can be explained as follows: A. Procurement and Logistics of Raw Materials In order to obtain the most suitable and cost effective raw materials, quotations are obtained from various commodity suppliers. After quotations and contracts are agreed and import documents have been gathered and approved, delivery will be negotiated. Raw materials will be transported from the supplier to SKY & LAKES animal feeds factory by road. The incoming raw materials will be verified against the product order and contract. Physical incoming inspection will be conducted during offloading. Samples will be taken and sent to the local laboratory for analysis and retained for traceability. Once approved, the raw material will be used by the factory to manufacture thevarious feed products. B. Technical & Feed Formulation A technical team of highly qualified post-graduate animal nutritionists will be responsible to improve current products and develop new ones, by applying the latest results from local and international research studies. Technology exchange and knowhow agreements with international feed companies will ensure that the latest technology and research data is applied.

The latest simulation models will be used to optimize the utilization of nutrients within the feeds under different environmental conditions. The in - house nutritionists will also 35


optimize the use ofdifferent biotechnological products in commercial operations. The technical team will further continuously research the use of such products. The use of consumer friendly natural growth enhancers will also be researched. Strong emphasis will be placed on identifying alternative raw materials to improve production efficiency and to reduce raw material cost. Alternative raw materials will continuously be evaluated in different commercial operations and the inclusion finetuned to achieve the required results. Controlled studies will also be performed in collaboration with research or academic institutes to obtain data on newly developed products. C. Product Development and Formulation Customer’s needs will be established and defined by field personnel and marketing research during customer related activities. Using the FORMAT software programme, these needs will be used to develop new product specifications. FORMAT is a linear programming software program that enables nutritionists to develop ―least cost‖ feed formulations. FORMAT will also be used to determine composition, nutrient levels, and required raw materials.

Where a complete new diet formulation for specific species is required, a set of scientifically determined nutrient specifications will be used as the matrix to formulate the feed. To be able to formulate and develop a new product professional B.Sc. (Agric) animal scientists will conduct the relevant research and will set the standards of the new formula. The animal nutritionists will load all relevant ―Input Data‖ e.g. batch sizes and costs into FORMAT to calculate the most cost effective formulation with the available raw materials. A technical manufacturing capability study will then be done to establish the suitability of factory equipment for the planned formulation. The final formulae will then be exported to the factory PLC software for manufacturing, where after a trial batch will first be produced for testing, visual inspection, analysis, validation and review. Only once all these functions are completed, the product will be manufactured. The marketing department will determine the requirements for the packaging material and labeling of new products or extension of existing products. After this the product will be registered and the new product and NFF number will be placed on labels before sale. Customer complaints and suggestions will be reviewed for improvement.

36


D. Raw Material Intake The production process will begin with the receiving of raw materials. The feed manufacturing process will involve the use of up to 30 different raw materials. About 70% of all raw materials will be handled in bulk. The intention is to route all micro ingredient components to the mixers via a micro dosing system. Strict quality control will be applied throughout the process. Raw materials will be weighed, sampled, tested and only then allocated to dedicated proportioning bins. Figure 1: Example of raw materials

E. Proportioning & Weighing During the proportioning & weighing processes, the various raw materials will be discharged from dosing bins into scales. The scales will control and weigh the amount of raw material that is required per the recipe via the PLC system. All the scales will simultaneously discharge the raw materials to go onto grinding. F. Particle Reduction Process The grinding process is a crucial process, as different animals require different feed particle sizes to enable the animals to absorb the maximum amount of nutrients from the feed. There will be separate hammer mills that will grind the various raw materials to ensure the correct particles size for each type of animal. The proposed installation will also make use of a post grinding system, which means that all raw materials will be added together, where after they will be sieved and only the particles that are not fine enough will be ground accordingly. G. Homogenizing The homogenizing process will make use of two independent mixers, a separate mixer for eachline: the ruminant line (for cattle feed), and for the monogastric line (for poultry 37


& pig feeds). The reason for the two lines is that Namibia is exporting red meat to the EU, and no growth hormones are allowed in such exported products. The two different lines will ensure that these requirements are met. The ground particles will be discharged into the mixer, at the same time the micro ingredients will be added by means of a micro dosing system. After 20 seconds of mixing any liquids that might be needed will be added. The feed will then be mixed for 90 seconds and then be discharged to continue the process of either packing or pelleting. Figure 2: Example of a finished product

H. Liquid Addition Different liquids will be added at two different stages, namely in the mixer, and also in the homogenizer where the bulk of the liquid will be added. Different types of liquids will be added, e.g. to enhance taste (molasses), for preservation, improving energy levels (by adding a fat coating on pellets), etc. I. Pelleting During the pelleting process the feed is conditioned by means of steam, to enable the required chemical process of the glutonisation of starch to take place. This chemical process will ensure a good pellet quality when the feed is compressed and shaped through a die by means of rollers. After the product is pressed through the aperture of the die, a blade will cut the pellets to ensure a more or less equal pellet length. This process will need to happen at high temperatures, for two reasons. The first reason is to trigger the glutonisation process, and the second reason is for bio – security reasons (salmonella control).

Cooling after the pelleting process is essential to ensure that no condensation takes place before the product is packed. Any moisture due to condensation will result in mould formation, which can negatively affect feed performance and animal growth. 38


Figure 3: Example of a feed pellet

J. Bagging Finished product pellets or mash will be packed into poly-propylene bags at the required mass.The bags will be sealed by a stitching machine and a ticket with vital traceability and otherproduction information is added. The bags will then be packed onto pallets and moved to the ―on hold ―quality area before they will be released to the distribution area for despatch. K. Quality Control The quality system will consist of a fully integrated quality control programme managed by a specialized Quality Control Manager. The quality programme is an integrated ISO 9001:2001, as well as an ISO 22 000 system.

The mill will be continuously audited in different quality related issues. Biological (e.g. salmonella, gizzard erosion, and pathogens), chemical (e.g. mycotoxins), physical (e.g. moisture, contaminants, particle size, colour, odour, texture, etc.) and nutrient analysis will be performed onall raw materials before they are off-loaded. These analyses will be undertaken continuously to ensure that the raw material specifications are consistent and also for updating the formulationmatrix. Only good quality raw materials from accredited suppliers will be used. All finished products are first analyzed for various nutrients by Near Infrared Technology (NIR).

39


Figure 4: Typical Animal Feed Compounding Activity Raw materialintak

Silo and bin storage

Grinder

Bagged materials

Liquid tanks

Blending bins

Grinder

Main mixer (Molasses, dry products)

Steam conditioning

Extruder Blending

Cooler Fat coater Store and pack meal or pellets in bulk totes or bagged

10.4.1.2

Source of Technology

The required machinery and equipment will be imported from India, Peoples Republic of China or Switzerland.

40


10.4.2 Engineering The required plant machinery and equipment are listed in Table 11. Total cost is estimated at USD 255,390, out of which USD 231,890 (90.8%) is in foreign currency. The required machinery and equipment are supplied as a set. Table 11: Indicative List and Budget of Machinery and Equipment S.No. Particulars A.

i) ii) iii iv) v) vi) vii) viii) ix) x) B. i) ii)

iii) C.

i) ii)

D.

i)

Quantity

Plant and Machinery Intake and 1 grinding section Mixing section 1 Bagging and 1 services Electricals 1 Steel structures 1 Erection and Lumpsum commissioning Hopper speed controland hopper Lumpsum & misc. equipment Transportation, Lumpsum insurance, etc. 1 Boiler 1 Pellet Mill Sub-Total Miscellaneous Fixed Assets Lab equipments Lumpsum Weighing machine Lumpsum Office furniture Lumpsum and computers Sub-Total Electricals

Specifications

Unit Cost USD

Total Cost (USD)

Unit

11,300

/unit

11,300

3,580

/unit

3,580

5,240

/unit

5,240

2,530 4,580

/unit /unit

2,530 4,580

--

1,460

Lumpsum

1,460

--

2,780

Lumpsum

2,780

--

11,300

/unit

11,300

4,780 28,330

/unit /unit

4,780 28,330 75,880

---

12,520 12,520

Lumpsum Lumpsum

12,520 12,520

--

12,530

Lumpsum

12,530 37,570

Generator 1 125 KVA Transformer and accessories and Lumpsum -external lighting Sub-Total Water Supply System Undergroundwater lane, well, pump, Lumpsum -filtration plant, etc. Sub-Total TOTAL

41

8,350

/unit

25,050

Lumpsum

8,350 25,050 33,400

41,750

Lumpsum

41,750 41,750 255,390


11. MARKETING AND BUSINESS PROSPECTS

The size of this sector is still growing. Most of the animal feed mills have been set up around Kampala where they enjoy better market-access and raw material sourcing opportunities rather than in the traditional livestock rearing areas where the livestock are kept in abundance. Feed is a major cost (about 70%) in livestock and dairy farming. The processing and manufacturing of feed along with the efficient use of feed by cattle and poultry in Uganda also contribute to the cost of feed. Lyantonde District is a relatively poor district with average income levels that are estimated to be at par or slightly lower than the rest of country. The regional South Western Ugandan economy is mostly agrarian with a limited industrial base. The Agriculture sector of Uganda contributes 22.9% of GDP and out of this; the Livestock sub-sector alone contributes between 4% to 5% of the annual GDP. The demand for compound animal feed is increasing day by day with the increase in awareness among livestock farmers. No animal feeds mill is operating in the surrounding areas of the project, therefore it is obvious that the project shall yield better results. The trend for concentrate feeding to livestock is changing from the conventionalconcentrate feeding to a formulated compound feed. Nowadays, compound animal feed is used bymany livestock and dairy farmers to get the maximum potential in terms of milk and meat.Compound animal feed is very beneficial as it provides all essential nutrients to theanimal. 11.1

Marketing Channels

Compound animal feed is used in all classes of livestock throughout the year that the demand never gets affected with seasons. So the proposed business can be started at any time of the year. At the commencement of the proposed business, it is important that the entrepreneur must have good knowledge of the production and have contacts with the farmers. The following are some of the target clients for a manufacturer of compound feed. Dairy farmers Calf fattening farmers Sheep farmers Goat farmers Piggery farmers Poultry farmers      

The price of compound feed per kg should be lower than that of simple cakes so that farmers can find affordable and economical. The cheaper the product, the more will be 42


its use in livestock feeding. To avoid risk of price fluctuations, the feed ingredients should be stored in season of availability. The suggested marketing pattern should be as follows: Manufacture

Wholesaler

Retailer

End User

11.2

Pricing and Distribution

The price of processed animal feed depends upon the availability and value of raw materials. In this profile, the weighted average ex-factory sales price of compound animal feed to be produced by the project under consideration is estimated to be USD 312 per tonne (Please refer to Section 16: TECHNO-ECONOMIC PARAMETERS ). For the envisaged project, it is recommended either to distribute the product directly to end-users wherever they are accessible or by establishing a small distributing store or using commissioned agents at strategic locations.

43


12. SOCIO-ECONOMIC IMPACTS, DEVELOPMENT INNOVATIVE FEATURES OF THE PROJECT

BENEFITS

&

The proposed SKY & LAKES compound animal feed mill will create significant social

impact for high numbers of rural smallholder farmers—by working with a targeted 3,000 farmers in South Western Uganda, and eventually rolling out to cover 10,000 farmers through a gradual expansion program in the next three years. The primary benefit will be in transportation cost savings for farmers. By delivering feeds to and buying eggs directly from clients, SKY & LAKES’ core poultry business model will provide automatic access to markets and eliminate the need for farmers to travel, often considerable distances, to buy and sell these products. Furthermore, farmers face significant risk of egg breakages during transport, resulting in lost revenues. SKY & LAKES will introduce storage containers and vehicles that are specially equipped to handle eggs with minimal breakage. The proposed SKY & LAKES compound animal feed mill will also introduce and

operate a Farm Gate Purchase of Eggs Scheme that will enable poultry farmers especially to access distant markets and sell their eggs (and culled birds) without having to leave their farms. This is crucial as poultry farming in Uganda has several social knock-on effects such as its enhancement of gender equity. Women control about 70 percent of poultry production. The scheme will thus contribute to poverty alleviation and the upward mobility of farmers as they will be able toget good prices for their produce, technical support, and high quality animal feed. An additional area of impact will draw on SKY & LAKES’ unique position as both a supplier of farmers’ inputs and buyer of their outputs. By providing consistently high quality animal feeds, SKY & LAKES will enable its farmers to realize higher egg productivity—the company estimates a 15% increase over earlier production rates. This will contribute to a significant increase in each farmer’s annual revenue, and will be the largest component of the social impact. The higher quality feeds, along with the training that SKY & LAKES will provide on animal health best practices, will also contribute to improved animal health, which will lead to fewer deaths of livestock. As a result, farmers will have more livestock available to be sold for meat, further increasing annual revenues per farmer. Poultry and poultry products are also an important pillar of food security. Additionally, the proposed SKY & LAKES compound animal feed mill will contribute directly and indirectly to job and wealth creation. Directly, 42 people will work in the plant and as field officers. Indirectly, each livestock/poultry farmer will have at least three people 44


assisting him/her on his/her farm. As SKY & LAKES proposes to work directly with about 3,000 farmers, this will translate to the creation of over 9,000 secondary jobs. Furthermore, other jobs will be created for those who provide medicine for the livestock as well as those individuals fabricating the feed and water troughs that farmers use for their livestock. SKY & LAKES will also forge a proactive relationship with one of the local banks with a strong orientation to rural farming in Uganda to assist in the establishment of bank accounts for its producers. These accounts will be intended to facilitate SKY & LAKES’ farmer payments after livestock product collections as well as enhance the creditworthiness of the farmers. This support is particularly valuable as lack of credit has been identified as one of the key constraints to the growth of the animal feeds industry in Uganda.

45


13. SCHEDULE OF IMPLEMENTATION

The following detailed milestone Gantt Chart shown identifies the primary tracking points for the proposed SKY & LAKES compound animal feedmill initial company takeover, for our growth and our development process. The proposed implementation period for this project is 12 months and includes various project set-up activities which are graphically presented in Figure 5 below.

46

PROJECT PROFILE: LYANTONDE COMPOUND ANIMAL FEED PROCESSING PLANT Figure 5: Project Implementation Milestones

Period Commence Operations Commissioning of Plant (*) Full Staffing (2) Hiring Key Executives (2) Arrangements for Animal Feeds Plant Input Supplies (1) Procure Project Office Stationery and or Equipment (1) Animal Feeds Plant & Equipment: Installation (1) Animal Feeds Plant & Equipment: Shipment & Delivery (3) Animal Feeds Plant & Equipment: Identification of Equipment Suppliers/Opening of LCs and Order of Equipment (1) Civil Infrastructure/Site Development (8) Incorporation & Licensing (1) Seed Financing (1)

Months Duration ∞ * 2 months 2 months

1

2

3

4

5

6

7

8

9

10

11

12

13

14

1 month 1 month

1 month 3 months

1 month

8 months 1 month 1 month

47


14. SWOT ANALYSIS

Before making the decision to promote the proposed compound animal feed mill in Lyantonde District, SKY & LAKES made a careful analysis of the associated risk factors. The SWOT analysis made has been of great help in analyzing those factors which have played an important role in making the decision to invest in this project. 14.1 



Strengths

Investment in dairy and livestock sector is increasing day by day and quality feed is a pre requisite in profitable dairy and livestock farming. Compound animal feed formulation produced according to modern techniques with proper utilization of locally available cheaper feedstuffs leads to success in poultry, dairy and livestock farming hence for feed business too. 14.2

Weaknesses

15


14. SWOT ANALYSIS

Before making the decision to promote the proposed compound animal feed mill in Lyantonde District, SKY & LAKES made a careful analysis of the associated risk factors. The SWOT analysis made has been of great help in analyzing those factors which have played an important role in making the decision to invest in this project. 14.1 



Investment in dairy and livestock sector is increasing day by day and quality feed is a pre requisite in profitable dairy and livestock farming. Compound animal feed formulation produced according to modern techniques with proper utilization of locally available cheaper feedstuffs leads to success in poultry, dairy and livestock farming hence for feed business too. 14.2





 







Weaknesses

Limited availability of protein sources of standard quality due to low or static production, processing technology, variable composition and adulteration. Comparatively poor nutrient composition of indigenous feed ingredients due to differences in varieties and use of improper soil fertilizers. Improper use of pesticides, the residues of which result in poor feed utilization. Lack of proper storage facility. Due to this fact various agricultural products when produced under quite high moisture content, thus liable to be affected with insect damage, auto-oxidation and fungal contamination. Lack of nutritional data of indigenous fed ingredients particularly for amino acids, energy, vitamins, minerals and by pass protein value especially in high producing cattle/buffalo. Improper storage, transfer, grading, feed milling and mixing of feed ingredients may also affect the quality of feed. Compound animal feedcannot be produced economically on a small scale. The cost of labour for each batch and cost of overhead keep on decreasing with the increasing production. 14.3



Strengths

Opportunities

The annual growth rate in livestock population of Uganda was 3 percent (Uganda Census of Agriculture & Livestock, 2008/09) due to which there is demand for compound animal feed. The increased productivity would require 48






better feed utilization and increase in overall feed availability both from fodder crops and formulated compound feed. The agro industrial by products can be better utilized in formulated compound feed. In order to meet the rapidly increasing demand for the various kinds of livestock products (Milk & meats), the better rations with improved feed formula are needed to get more meat and milk, for the same feed supplies. By increasing livestock numbers, rather than their average weight, the feed requirements are much larger. 14.4









 

Threats

Implementation of WTO (World Trade Organization). Open and competitive commodity pricing. There is no feed ingredient quality control program as improper storage, transfer, grading, feed milling and mixing of feed ingredients may also affect the quality of feed. The prices of different feedstuffs vary throughout the year. Improper storage of raw material can affect its nutritional value. There is limited availability of protein sources of standard quality due to low or static production, processing technology, variable composition and adulteration. Lack of proper labeling on product. Lack of awareness among dairy and livestock farmers to use compound animal feed for the high production of their animals is a constant threat for feed mill business as well.

49


15. MEASURES OF SUCCESS FOR THE COMMERCIAL FEED MILL

1. Volume of quality animal feed produced and utilized. 2. Number of business plans developed and submitted and approved by financial institutions. 3. Number of policy issues advocated. For example, feed tag (ingredient analysis) certification for all commercial feeds domestic and imported. 4. Number of producers who have access to quality feed. 5. Number of sustainable livestock and poultry feed enterprises created. 6. Number of AI (Artificial Insemination) programs for herd improvement in dairy, sheep, beef cattle and goats. 7. Number of incubators/hatchery’s coming on-line for poultry sector.

50


16. PROJECT FINANCIALS 16.1

Operational Data

The plant is expected to attain 70% capacity in the first year, thereby increasing the capacity by 10 % per annum. The detail of operating capacity is worked out is given belowin Table 12. Table 12: Evolution of Compound Animal Feed Production Year 1* Year 2 Year 3 Capacity 70% 80% 90% Commercial Broiler Feeds 2,625 6,000 6,750 (MT) Commercial Layer (MT) Cattle Feed (MT)

Feeds

Year 4 100% 7,500

Year 5 100% 7,500

4,725

10,800

12,150

13,500

13,500

3,150

7,200

8,100

9,000

9,000

10,500 24,000 *First Year production is for 6 months only.

27,000

30,000

30,000

Total Animal Compound Feed Production (MT)

16.2

Project Capital Costs

The fixed capital cost on the initial fixed assets is estimated as follows: Table 13:Project Capital Costs Investment Item Land and Site Development Civil Structures Plant and Machinery Miscellaneous Fixed Assets Vehicles Electricals Water Supply System Fixed Assets Preliminary & Pre-Operative Expenses (2.5%) Project Capital Cost Margin Money (25%) TOTAL PROJECT COST

51

Cost in USD

17,670 236,420 75,880 37,570 66,800 33,400 41,750 509,490 12,737 522,227 130,557 652,784


16.3

Working Capital

Initial working capital to the amount of USD 130,557 will be required for the project. Table 14: Initial Working Capital Disbursements Description First Three Months Expenses Admin and Marketing Expenses Inventories Raw Material Miscellaneous Expenses Cash balance required Total 16.4

Amount in USD 3,627 1,950 119,880 1,070 4,030 130,557

Overhead Costs

The following Overheads are assumed to occur in the first year of production. Table 15: Overhead Costs Description Admin and Marketing salaries Travel and conveyance Utilities Miscellaneous expenses Total

Amount in USD 29,900 3,840 17,970 340 52,040

52


16.5

Project Financing

Table 16: Project Financing (In USD) Investment Item Equity Financing (USD) Land and Site Development 17,670 Civil Structures 236,420 Plant and Machinery 0 Miscellaneous Fixed Assets 0 Vehicles 66,800 Electricals 0 Water Supply System 0 Fixed Assets 320,890 Preliminary & Pre-Operative Expenses (2.5%) 12,737 Project Capital Cost 333,627 Margin Money (25%) 0 TOTAL PROJECT COST 333,627 Percentage Ratio 51.11% 16.6

External Financing (USD) 0 0 75,880 37,570 0 33,400 41,750 188,600

Total Financing (USD) 17,670 236,420 75,880 37,570 66,800 33,400 41,750 509,490

0

12,737 522,227 130,557 652,784 100.00%

188,600 130,557 319,157 48.89%

Project Viability

Table 17: Project Returns (In USD) IRR (Internal rate of Return) Payback Period NPV @ 20%

% Years USD

53

26.9% 3 127,023


17. TECHNO-ECONOMIC PARAMETERS Table 18: Techno-Economic Parameters S. No. Particulars

No.

1

Capacity of the plant ( MT / 2 shifts per day )

2

No. of operating shifts per day

100 2

(8hrs/shift) 3

4

No. of working days in a year First year

150

Second year

300

Capacity utilization (%) First year

70%

Second year

80%

Third year

90%

Fourth year

100%

5

Wastage of raw material (%)

1.00

6

Raw material consumption (MT)

7

First year

10,605

Second year

24,240

Third year

27,270

Fourth year

30,300

Average cost of Raw materials

91.20

(USD per MT) 8

Power and fuel

2.67

(USD per MT of raw material consumed) 9

Cost of packing materials (USD per MT feed manufactured) 54

5.09


10

Wages (USD per MT of feed manufactured)

11

Factory overheads

0.65 17,970

(USD per year) 12

Repairs and maintenance

1,350

(USD per year) 13

Administrative overheads

18,560

(USD per year) 14

Selling and distribution overheads

15,180

(USD per year) 15

Salaries, incentives and perks (USD/Month) with 5% increase per year

16

Product mix (%)

17

18

40,560

Comm. broiler - starter

12.50

Comm. broiler - finisher

12.50

Commercial Layer - Chick mash

5.00

Commercial Layer - Grower mash

10.00

Commercial Layer - Layer mash

30.00

Cattle Feed

30.00

Quantity of feed manufactured(MT) First year

10,500

Second year

24,000

Third year

27,000

Fourth year

30,000

Sale price of feed (USD per MT) Commercial broiler – starter (mash)

376

Commercial broiler – finisher (mash)

376

55


Commercial Layer - Chick mash

323

Commercial Layer - Growers mash

257

Commercial Layer - Layers mash

281

Cattle feed - pellets

306

Weighted average sale price of feed (USD/MT )

312

19

Sale of Gunny bags (USD per bag)

0.2

20

No. of gunny bags per ton of raw material

13.33

21

Depreciation (WDM) - % : Buildings

10.00

Machinery

25.00

Vehicles

33.00

22

Income tax rate ( % )

30.00

23

Interest rate on term loan (%)

15.5

24

Interest rate on working capital loan (%)

18

25

Repayment period (No. of quarters)

28

26

Moratorium (No. of quarters)

4

56


18. PROJECT FINANCIAL AND ECONOMIC SUSTANABILITY

Establishing the proposed SKY & LAKES compound animal feed mill in the Lyantonde area will have the double-edged effect of assuring grain produce farmers in the area of a strong buyer willing and able to pay competitive prices for their produce while also assuring livestock farmers in the area of high quality livestock feed at affordable prices that can boost their livestock farming activities and thus strengthen the local economy to provide a reliable and solid market for the animal feed products put out by the mill. At the same time, the proposed compound animal feed mill will benefit from the reduction in production costs of animal feeds that will ultimately spill over to the livestock farmers in South Western Uganda. An established and stable market price for the livestock feeds produced by the plant will encourage more farmers to get into livestock farming activities on the strength of affordable and readily accessible quality feed inputs that will expand the market catchment for the mill products. Forward contract market agreements with marketing agencies would ensure the marketability of the value-added animal feed products achieving the budgeted sales targets. The project will also create economic and financial sustainability through its farm gate purchase scheme of delivering feeds to and buying eggs directly from clients thus saving the farmers the risk of losses associated with moving distances in search of markets. By initially linking with 3,000 livestock farmers and facilitating them with low cost and high quality animal feeds, the project will also be able to generate an additional revenue stream to sustain and grow the enterprise from the sale of their produce on the market. The biggest sustainability benefit however is being able to create an enduring linkage base with livestock farmers in South Western Uganda through the proposed cooperative development synergy with the livestock farmers that will put it in a unique position as both a supplier of farmers’ inputs and buyer of their outputs. Creating value for stakeholders through sustainable economic growth and development encompasses a number of elements. In generating economic value for shareholders and other stakeholders, SKY & LAKES provides a quality and affordable animal feed product to the Ugandan nation and creates jobs both within the business and along the supply chain in the formal and informal sectors. SKY & LAKESis therefore committed to doing business through fair commercial competitive practices and to trading with customers and suppliers that subscribe to the same high ethical business practices.

57


19. POTENTIAL ENVIRONMENTAL IMPACTS & THEIR MITIGATION 19.1

Key Environmental, Health and Safety Risk/Liability Issues

Product Contamination Animal feed can become contaminated through: 





Receipt of contaminated raw materials e.g. chemical residues, pathogenic bacteria such as salmonella, antibiotic residues and debris such as metal, wood, or stones; Poor storage conditions e.g. raised moisture levels promoting insect, mould and bacterial growth; Poor hygiene standards within the processing operations, e.g. unclean machines, unhygienic handling.

A system of feed traceability is required through the feed chain. Dust and Aerosols Dust may arise from storage, handling and drying activities; aerosols typically arise from the use of compressed air and high-pressure water for cleaning. 





Workers may inhale or ingest dust and aerosols exposing them to biological and microbial hazards which present a risk of occupational lung disease. When combined with high levels of humidity they may give rise to skin irritation or allergic reactions. A dust cloud of any flammable material (such as grain) will explode where: o The concentration of dust in air falls within the explosive limits; and A source of ignition is present. o The most common locations for fire and explosion are in driers, grinding mills and hot work on plant. The grinding operation may generate considerable quantities of heat and dust and the temperatures of raw materials may rise by 10 - 20°C.

58


Dust emissions can be controlled by enclosing processing and transport equipment, which also reduces product losses, and the installation of extraction equipment. Storage Bulk storage facilities will be used for the storage of raw ingredients, finished product, chemicals used in the production process and for cleansing and disinfection, and fuel oils for energy production. These storage facilities should be provided with satisfactory containment (concrete walls/bunds, recessed drainage gullies connected to effluent treatment areas) to prevent spills reaching the wider environment. The storage facilities should be secure to prevent pest invasion, be waterproof and well ventilated. Alarms may be fitted to detect leakages. All outdoor bulk storage of dusty, or potentially dusty materials should be in silos and ventilation/extraction equipment used to minimize dust generation. Bulk storage facilities should be fitted with alarms to prevent overfilling. Processed feed should be stored separately to unprocessed materials to prevent cross-contamination. Solid Wastes Feed can be transported loose or in reusable containers for bulk delivery or in bags filled directly from mixers or holding bins. Wastes may arise through the packaging process in the form of incorrectly packaged feed and packaging offcuts. Some waste feed products may be capable of being recycled into the feed production process but others may contain substances, which prohibit this disposal route, and these wastes must be isolated, identified and disposed of in accordance with local regulations and not used as feed. Water supply Water of a suitable drinking quality for animals (i.e. free from contaminants and sediment) is required for: 



Steam conditioning during the pelleting operation if the mill has a steam conditioner; Addition to the mixer to raise the moisture content of the meal to a level suitable for pelleting.

59


Water will also be used for cleaning and disinfecting machinery. Water may be obtained from a mains supply or by abstraction from rivers or boreholes.Where water abstraction takes place it is typical for abstraction or water use permits to detail volumes of water abstraction allowed as over abstraction can impact local communities. Where ever changes take place in product volumes this should be reflected in the permit. Energy Processing operations may consume energy as: 



Thermal energy in the form of steam and hot water used for processing, cleaning, sterilizing; Electricity for machinery operation, lighting and production of compressed air.

Energy usage has a direct correlation to the operating costs of the company and energy generation and consumption may be regulated or taxes/levies applied to reduce energy use and associated emissions of gases such as carbon dioxide. Manual Handling and Repetitive Work Lifting, repetitive work and posture injuries occur as a result of lifting and carrying heavy or awkward shaped items such as sacks, lifting of boxes and manoeuvring carts/manual forklifts within the plant. Repetitive tasks such as the operation of machines can lead to musculoskeletal injuries. Collision In a busy manufacturing environment it is common to have injuries where people are struck by moving or falling objects such as crates, boxes, equipment, conveyors and forklift trucks.

60


19.2

Other Environmental, Health and Safety Risk/Liability Issues

Wastewater Treatment Operations producing prepared meals may produce wastewater with a high organic content. However, other operations producing compound animal feed generate practically no significant quantities of wastewater. Wastewater will arise primarily from cleaning, surface water runoff and steam condensate. These present a significant risk if allowed to enter a watercourse without treatment as they may contain: 

Powdered

organic

material,

e.g.



Medicinal additives;



Cleaning products;



Solvent and oils used in equipment operation;



Oils, fats and molasses from blended products.

grain,

protein

meal;

Animal feed plants normally discharge to the municipal wastewater treatment system but some onsite pre-treatment may also be required. Waste water discharge from animal feed processing will typically require a permit. Odour Odour can be an issue particularly where products are mixed with fats or molasses. Environmental permits may place requirements on the design and height of chimneys and vents to maximize dispersion. Noise The noise generated by equipment such as hammer mills, grinders, ventilation, banging equipment, and manoeuvring trucks can be a nuisance if the site is located close to residential areas and other sensitive receptors.

61


Packaging Companies operating with the European Union (either as a manufacturer or as a supplier into European Union countries will be subject to the European Union Packaging and Packaging Waste Directive (94/62/EC), which aims to reduce the amount of packing that is being introduced into waste streams.

Confined Spaces Storage silos are dangerous confined spaces and entry to them must be strictly controlled and avoided wherever possible. Noise Noise induced hearing loss can occur from working in noisy areas, e.g. hammer mills, grinders. Machinery All equipment should have safety guarding and workers should be issued with appropriate personal protective equipment to protect against unavoidable sharp items and edges. Particular attention should be paid to conveyors, mills, mixers, rotary valves, pelleting presses and packaging machinery. Slips, Trips and Falls Slippery floors and surfaces caused by oil deposits present a high risk of slips, trips and falls where spills have not been cleared up or effective cleaning has not taken place. Hazardous materials Cleaning and disinfecting process areas and some food preservation processes use materials that if inappropriately used and stored could result in chemical contact burns, inhalation of harmful/toxic fumes or ingestion of harmful substances. 19.3 

Key Social, Labour, and Community Risk/Liability Issues

Trucks delivering bulky raw materials may cause traffic congestion or excessive noise; 62

PROJECT PROFILE: LYANTONDE COMPOUND ANIMAL FEED PROCESSING PLANT 

Dust can be a nuisance to the surrounding locality. 19.4

Improvements

Environmental Improvements 







Reduce dust emissions by: Enclosing and sealing plant and equipment to prevent escape and o accumulation of dust; Use of doors/plastic strip curtains on building access points; o Redesigning processes to reduce free-fall distances and speed of movement for o grain and other dry products; o Installing windbreaks and covers in outside handling areas; Replace any external bulk storage areas with silos, fitted with alarms to o prevent overfilling; Install a centralized piped vacuum cleaning systems; o Installation of dust extractors e.g. cyclones and fabric filters; o Improving ventilation within buildings; o Maintaining a slight negative pressure within storage vessels such as bins and o silos; o Install dust monitoring equipment at the most sensitive points; Reduce the risk of fire and explosion by: Reducing dust emissions as above; o Improved removal of metal, stones and glass which can cause sparking; o Locate equipment within a lightweight building so that the roof and wall o cladding panels can act as explosion relief; Consider locating grinding equipment in a separate building; o o Fit silos and bins with extraction systems to reduce the risk of explosion; Reduce spoil and loss by: Weather proofing windows, doors and other openings against pests and o water; o Controlling moisture content in grain storage; Monitor product losses during processing operations;

63

PROJECT PROFILE: LYANTONDE COMPOUND ANIMAL FEED PROCESSING PLANT 









Ensure organic waste is collected and stored separately from other waste to enable composting and/or use for soil amendment, or use in energy production; Regular inspection should be carried out of all bulk containment on site to prevent leakage and product loss; Provision of secondary spill containment for storage and process vessels; Good housekeeping should be maintained at all times all areas. The adoption of good cleaning and working practices as a routine will reduce odour emissions and improve hygiene standards; Upgrade exhaust stack heights from cooking processes to minimize air pollution and nuisance to the local community.

Health and Safety Improvements 

Provision of personal protective equipment (PPE) that is fit for the task to prevent injury and maintain hygiene standards. Staff should be trained in the correct selection, use and maintenance of PPE. PPE should be inspected regularly and maintained or replaced as necessary;



Train workers in correct use of machinery and safety devices;



Redesign manual processes to avoid heavy lifting/repetitive activities;







Install mechanical lifting aids where possible and rotate work tasks to reduce repetitive activities; Separation of people from moving equipment; Ensure that the process layout reduces opportunities for process activities to o cross paths; o Installation of safeguards on moving parts of conveyor belts and packaging machinery to reduce risk of entrapment of employees; Install walkways to separate people from vehicle movements to reduce risk of o collision; Walking and working surfaces should be kept clean and dry. Restrict access to areas being cleaned or where spillages have occurred. Floor cleaning should be 64


scheduled for a time when work is not in progress or has finished for the day and the floor should be dried as much as possible; 





To reduce the risk of noise exposure isolate noisy equipment and rotate tasks to minimize time spent in a noisy area over an eight hour period and provide personal protective equipment where people have to enter noisy areas; Ensure all electrical equipment in wet areas is safe; Redesign processes where practicable to remove dust and aerosol generating activities.

Community Health and Safety Improvements 



Implement a quality control plan including: o Sampling procedures and frequencies; Analysis methods; o Destination of non-compliant product; o Records and samples of the ingredients used and of each product batch; o Product traceability systems that facilitate tracing of products once released for sale. 19.5

Action Plans

Dependent on the individual business, select appropriate improvements from the list above to include in the action plan. As a minimum any business should be required to have the following in place:     

 

Operational procedures to manage environmental, health and safety risks; Monitoring programmes; Improvement objectives, targets and project plans; Training for personnel; Regular inspections, checks and audits with records to demonstrate achievement of the required level of performance against legal requirements and improvement action; Emergency plans for environment, health and safety accidents; Management review/demonstrated involvement in environment, health and safety management. 65


20. MONITORING AND EVALUATION MECHANISMS

The proposed SKY & LAKES compound animal feed mill in the Lyantonde area will establish a Monitoring and Evaluation (M&E) system, satisfactory to NAADS, within six months of project effectiveness and manage the system during project implementation. The design will take into account the lessons learned from the M&E activities undertaken during the implementation of the concentrate animal feeds manufacturing plant. The M&E system will be connected and inter-linked at all levels and will consider the effects/impacts of project investments on all project beneficiaries and key stakeholders. The project’s M&E activities will include the following: (i) participatory monitoring and evaluation (M&E) by the beneficiaries; (ii) routine reporting by the project to the government and NAADS; and (iii) surveys, impact evaluations and reviews.

66

Project Profile - Lyantonde Animal Feed Mill

Recommend Documents