BUSINESS PLAN - Heart for · PDF fileBUSINESS PLAN. 2 CONTENTS Introduction ... educated business individuals from Kenya and Swaziland, ... fish farming, dairy farming, food

A HEART FOR AFRICA INITIATIVE - SWAZILAND

BUSINESS PLAN

2

CONTENTS

Introduction

Acronyms

Industry Analysis

Internal Analysis

Project Implications

Financial Analysis

Strategic Control

Appendix

Customer Analysis

Competitor Analysis

External Analysis

Executive SummaryVisionMission StatementValuesFundamental Purpose

Size and growthPower of buyersPower of suppliersThreat of substitutesThreat of entrantsNature of rivalry among competitorsDistribution channelsCosts

Marketing, finance and accounting skills and resourcesProduction/operations/technical skills and resourcesSWOT analysisAssetsAnalysis of internal skills and resourcesValue chain analysisStrategy identification Development of strategies to achieve objectivesKey targetsPersons responsibleMajor risks and countermeasures

Economic factorsSocial implications

Project budget descriptionCorn productionFish productionVegetable prodction

Project Canaan BudgetCorn Production Cost - Figure 2.1Fish Production: Cost & Profitability Analysis - Figure 3.1Fish Production: Cost & Profitability Analysis - Figure 3.2Fish Production Cash Flow - Figure 3.3Range analysis of projected fish productionVegetable Production: Cost & Profitability Analysis - Figure 3.4Vegetable Production: Cost & Profitability Analysis - Figure 3.5Cash Flow for vegetable production - Figure 3.6Contour MapGreen Houses Layout

Reporting requirementsReview process and period

Customer Need Analysis

Environmental analysis: major trends and issuesRegulatory trends – basic informationEconomic trends and issuesSocial cultural trends and issuesTechnological trends and issuesRegional trends and issues

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Written by: Kaleli Mulli edited by: Wayne Clark, Howard Hodel and Carl Watry.

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Investment Opportunities 35.

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AIDS Acquired Immune Deficiency Syndrome

ASAL Arid and Semi-arid Land

CPP Crop Protection Products

EUREP GAP European Union’s Good Agricultural Practices

FPE Free Primary Education

GLOBAL GAP Global Good Agricultural Practices

GDP Gross Domestic Product

HACCAP Hazard Analysis Critical Control Points

HFA Heart for Africa

HIV Human Immunodeficiency Virus

IPM Integrated Pest Management

IDA International Development Association

IFAD International Fund for Agricultural Development

IT Information Technology

ISO International Standards Organization

MYOB Mind Your Own Business Accounting Software

NAMboard National Agriculture and Marketing Board

NGOs Non-Governmental Organizations

PEST Political Economic Socio-cultural Technological

PC Project Canaan

PRSAP Poverty Reduction Strategy and Action Plan

R & D Research and Design

SACU Southern African Customs Union

SAGE Accounting Software

SIDA Swedish International Development Corporation Agency

SHIES Swaziland Household Income and Expenditure Survey

SNL Swaziland National Land

SWOT Strengths Weaknesses Opportunities Threats

TDL Title Deed Land

UNESCO United Nations Education, Scientific and Cultural Organization

UNICEF United Nations International Education Children fund

UNDP United Nations Development Program

USAID United States Agency for International Development

USCB United States Census Bureau

VCA Value Chain Analysis

WFP World Food Programme

ACRONYMS

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EXECUTIVE SUMMARY

ost of Africa is in a well-documented crisis relating to poverty, war, lack of development, lack of education and disease, most notably the HIV/AIDS pandemic. Most Africans have only a fourth grade education and 314 million Africans live on less than $1 a day. It is documented that 6,400 people die daily from AIDS in sub-Saharan Africa. Every 14 seconds a child is orphaned by AIDS leaving 11 million AIDS orphans in sub-Saharan Africa. One of Africa’s smallest nations is in many ways in the worst trouble. Swaziland has an area of only 6,700 sq. mi. and is about the size of New Jersey. It is almost entirely contained within the north east quadrant of the Republic of South Africa, sharing one small part of its border with Mozambique. Swaziland is a predominantly Christian country, with a stable government for over 100 years, and is the last independent monarchy in Africa. It has one tribe of people, one language and has never known war. It ought to be one of the garden spots of Africa, but this tiny nation is dying. In 2005, the population of Swaziland was 1.1 million people. Today its population has fallen to 950,000 and continues to decline predominantly due to AIDS. Swaziland’s documented AIDS rate is 42.6% but practitioners on the ground believe is it closer to 56%. As the parents die of HIV/AIDS, the orphans and vulnerable children (OVC’s) are being cared for by grandmothers (or Gogos) or by older children in the family. It is estimated that there are 200,000 + orphans in the country with eight thousand (8,000) more Swazi children becoming orphaned each month. It is reported that there are over 15,000 orphan-headed households in Swaziland with some caregivers as young as 10 years old.

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Capital

largest City

OffiCial languages

area

CurrenCy

MOttO

Lobamba (Royal & Legislative)

Mbabane (Administrative)

Mbabane

English, siSwati

17,364 KM2 or 6,704 sq. mi.

Lilangeni

“Siyinqaba” (SiSwati)

Swaziland

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The largest single need in Swaziland (as in much of Africa) is food. Even when people band together to create homes for the OVC’s, they still struggle to provide enough food. Many people from the West have responded by creating new children’s homes, supporting indigenous homes and/or sending aid in one form or another--all good efforts, but that is still not enough. At Heart for Africa (HFA) our response is Project Canaan, a 2,500 acre tract of land which will be home to a very large farm providing food and the income necessary to sustain our partner OVC homes. In addition, this multi-use property will involve childrens homes and schools for OVC’s, training centers

and a medical clinic.

The farm is expected to consist of over 500 acres of ground crops, 20-25 acres of greenhouses, a large, multi-pond fish farm, an ISO approved export facility and a much needed dairy farm and processing plant. The dairy farm alone would have a major impact on the country. Swaziland consumes over 15 million gallons of milk annually but produces only 2 million gallons internally, requiring them to import 13 million gallons of milk each year. The government encourages milk production because the current processing plants are already at maximum capacity. Heart for Africa a 501(c) 3 registered charity, initially established Project Canaan (PC) to provide financial assistance for its supported orphan homes. HFA’s leaders are former founders and owners of one of the largest marketing firms in Canada in the 1980’s. HFA partners with already existing but fragile children’s homes in Africa and supports them by providing child sponsorship, building home infrastructures, and providing food, clothing and shelter to indigent children and planting gardens in rural homes among many other activities. More can be learned about HFA on its website, www.heartforafrica.org.

...over 500 acres of ground crops...“

EXECUTIVE SUMMARY

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... feed starving children“

INTRODUCTION

HFA is developing Project Canaan in partnership with successful business people from North America, who are working in collaboration with talented, experienced and educated business individuals from Kenya and Swaziland, to create a unique, tailor-made organization that meets the needs of African children living in abject poverty in Africa and to address food scarcity and nutritional deficiency in a region where HIV/AIDS has destroyed many lives. Project Canaan’s agricultural operations in Swaziland will provide food for the children’s homes that HFA supports. Excess produce will be sold to pay farm operating expenses with excess income used to subsidize other essential costs such as children’s medical care, education material, staff salaries in the homes and more. It is the stated goal of Project Canaan to assist HFA homes to become self-sustaining.

Project Canaan objectives:

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Provide vocational training opportunities for our mature children.

Provide stable employment for people in the community.

Improve the quality of agri-business in the country through greenhouse hydroponics, fish farming, dairy farming, food processing and marketing and ISO approved exportation.

Provide a medical clinic to care for our OVC’s and the people in the community.

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Feed a significant number of starving Swazi Children.

Improve the nutritional health of those children.

Provide a school for the education of children both among our OVC’s and in the community.

Provide a safe and secure home environment for orphaned and vulnerable children (OVC’s).

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Others have gone before us and proven this model can and will work. Project Canaan will emulate a successful project in Kenya called Mully Children’s Family (MCF) that has carried out sustainable agriculture for more than 15 years, and has a proven track record in hydroponics, fish farming, animal husbandry, outdoor vegetable production, and poultry farming. MCF is a charitable, Christian organization that rescues, rehabilitates, educates and offers basic and secondary support to over 2,000 children residing in its homes. The emulation of this mature MCF model is essential to our plan so that “reinventing the wheel” will not be necessary at Project Canaan.

Project Canaan will have multiple approaches to farming utilizing both outdoor and greenhouse crop production, fish farming, the raising of poultry, and milk production. PC will establish a tree propagation unit to produce seedlings that will at a certain stage be distributed throughout the country at cost in areas where deforestation has taken place. Replanting trees and large shrubbery will sustain a suitable micro climate that furnishing suitable conditions for farming wherever they are utilized, thereby increasing Swaziland’s crop production. The plan will also involve the production of fruit, utilizing both commercial and indigenous trees. These plants will be irrigated during the dry seasons. The land has a very good supply of sub-surface water and is ideally suited for the construction of coffer dams and large lakes to capture and store massive amounts of rain water in season for year round use. Finally, Project Canaan will greatly enhance the well being of the community at large through the provision of food, jobs, medical care, education and training. As such, it is being welcomed by the community, the local Rotary groups, churches, businesses and governmental leaders.

...Sustainable agriculture at MCF Kenya

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INTRODUCTION

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Vision

Mission Statement

Values

Fundamental Purpose

A Swaziland free of hunger and malnutrition with an emphasis on the well-being of orphans and vulnerable children.

To be a premier organization committed to providing and promoting leadership in sustainable agriculture, and advanced crop and animal production.

As a premier regional organization working on developmental issues, Project Canaan is committed to upholding the following values in its activities:

1. IntegrIty

Embrace a culture of honesty, sincerity with our staff, customers, suppliers and donors.

2.InnovatIon

Actively engage in designing and developing novel methods of efficient and useful agricultural technologies and activities.

3.accountabIlIty

Have responsible and ethical working and reporting systems.

4.envIronmental frIendlIness

Be environmentally conscious and promote sustainable conservation activities that will enhance biodiversity within the project.

To give hope to vulnerable children in Africa who are poverty-stricken and orphaned (especially by HIV/AIDS) through the provision of nutritious food, security, shelter, education and medical care, and to improve the lives of the rural poor by providing employment through sustainable agriculture.

INTRODUCTION

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EXTERNAL ANALYSIS

Environmental analysis: major trends and issues(This is treated in detail below)

Regulatory trends and issues – basic informationThe Agricultural Acts of the Parliament and traditional tribal laws in Swaziland constitute the principle land use statutes covering, among other things, soil conservation and agriculture land use. The traditional laws and regulations’ main jurisdiction is over the community owned Swazi National Land (SNL), but the Acts of Parliament also cover privately owned Title Deed Land (TDL). The Minister responsible for agriculture and for the conservation of soils, the protection of dams/water catchments, the prevention of soil erosion and the protection of soil fertility, may after consultation with the Prime Minister, make decisions pertaining to the regulation and/or control of clearing of land for cultivation, grazing or watering of livestock and/or the clearing of vegetation. There are Acts of Parliament that provide for the establishment, development and sustainable management, including conservation and national utilization of forest resources for the socio-economic development in the country. Copies of the Acts of Parliament can technically be purchased from the Ministry, though access to the Acts is usually a challenge as it is not a common practice for the public to acquire them.

Economic trends and issuesGDP growth per capita slowed between 1994 and 2004 to an average of 0.3% from 3.6% per annum from the previous decade. HIV/AIDS, drought, reduced foreign investment and increased unemployment, were major contributing factors to the slowdown. With an annual income of US$ 1,350 per family in 2003, Swaziland has had a lower-middle income economy (IFAD, 2006). However, this per capita income has been and is still skewed by the extreme wealth at the top of the society. The country presently has an unemployment rate that is variously quoted between 55 and 70% depending on the source, but everyone agrees it is substantial. Swaziland has a relatively open free market economy and is a participant in international markets. Public operators play a major role in the economy, while the private sector is subject to market forces and global international trends. In Manzini province (wherein lies Project Canaan), most of the inhabitants live by subsistence farming. The growing of maize and dry beans is widespread, though it is not sufficient to provide adequate food or proper nutrition for the entire population. Economic activities such as retailing, fruit farming, labor services in farms, have been established by inhabitants over the recent past at Malkerns, Ezulwini and to a lesser extent at Sidvokodvo localities. Sidvokodvo (pronounced sta goit’) is the location of Project Canaan. Farmers’ willingness to conserve, maintain, or improve natural resources is critically affected by the cost relative to the monetary return involved in that undertaking.

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EXTERNAL ANALYSIS

...Sidvokodvo, Swaziland. Location of Project Canaan

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That is, a direct inter-linkage between resource and revenue needs to be visible to the farmers for them to appreciate the resource. Degradation of resources considered of marginal economic importance (for instance, high value resources such as water & trees) is not likely to be a concern, much less a priority for local farmers. For instance, they will over-harvest the trees for their personal use with no regard for the overall impact to the environment and with little consideration of “ownership.” (There is active tree poaching activity in Swaziland.) If this degradation is important to other groups, education, coupled with the use of subsidies or other external incentives, may be needed to encourage investment. Regulations may also be used, but without a supportive incentive structure, may be difficult or costly to enforce. Swaziland must find ways to bring the desperately poor people into the economy through the creation of jobs and other assistance if they are going to encourage personal investment. Project Canaan will aid in this effort by providing hundreds of jobs over time. Swaziland is ranked 147 out of 172 countries in terms of human development indicators, with an index of 0.498 (UNDP, 2006). This reflected a steady decline from the peak of 0.624 in 1990 and a long term slide from 0.530 in 1975. The country has also dropped 47 places in terms of GDP since 1990, according to the United Nations Development program’s rating.

Socio-cultural trends and issuesSwaziland’s population was 1.1 million in 2003, but according to both Swazi governmental and independent sources such as the USCB and the Canadian government had dropped to 950,000 by the end of 2008 due to the HIV/AIDS pandemic. The population density of 64 persons per km2 in 2003 fell to 56 persons per km2 in 2008 due to the negative population growth rate. Nearly 76% of this population lives in rural areas. There has been a drastic decline of key social indicators over the past five years. Average life expectancy is now said to be 29 years as opposed to 32.5 years in 2006. These are the lowest statistics in the world. It is a clear reflection of the HIV/AIDS incidence of the country, which, in percentage terms, is the highest in the world.

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A 1997 survey classified over half the population as living in poverty, with three quarters of the poor being found in rural areas. The absolute poorest inhabit the marginal (mostly arid) lands found mainly in the north, while others live in areas with high and medium potential for agriculture.

Technological trends and issuesAgricultural technology is at its infancy in Swaziland. There are a number of modern agricultural methods, however, employed in various parts of the country, mostly in the privately-owned TDL. The most popular of the methods is sprinkler irrigation, which is the mechanical conveyance of water through rotating devices that spread water onto the crops. Drip irrigation is also utilized, varying from simple elevated water tank feeding water, to drip lines applying water directly on the crops, to more modern irrigation systems that carry out automated water application programs to supply both water and fertilizers to the plants (fertigation).

According to the government survey of pregnant women, 42.6% were HIV positive in 2004, and 56% in 2005 (IFAD, 2006). It is estimated that there are 200,000+ orphans and many NGO’s and church leaders claim that more than one half of the total population are OVC’s. The change in life expectancy from 60 years in 2000 to 29 in 2008 was completely unexpected. Eventually, adult Swazis outside of the Royal family could be an “endangered species” and this country could soon become a country of orphaned children raising children. Despite a previously relatively high per capita GDP for an African country, income distribution has always been skewed. According to the Swaziland Household Income and Expenditure Survey (SHIES) of 2001 (the latest data made public), the richest 20% consumed 56.4% of the national income compared to 4.3% for the poorest 20%. It appears that this extreme disparity has only widened since then.

...70% of the Swazi population lives in extreme poverty

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EXTERNAL ANALYSIS

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Sprinklers provide water for sugar cane, pineapples and other crops in Swaziland. To a lesser extent, farmers use drip irrigation on citrus and vegetable farms in selected areas of the country. The community-owned SNL represents 70% of all land and is predominantly covered with subsistence farming, which consists mainly of growing maize, a dietary staple that has little nutritional food value. New designs to better utilize water in farming will be unavoidable to counter the effects of drought that has periodically affected the country in past years. Project Canaan will eventually adopt a computerized, efficient water conveyance irrigation system.

Regional trends and issuesSwaziland is a member of the South African Customs Union (SACU), which is the regional trade organization whose main objectives are to promote cross border competition among member states, enhance economic development of the members and promotes the integration of member states into the global economy through trade and investment initiatives (SACU annual report, 2007). Within its structure, SACU has a relatively new Agricultural Liaison Committee, which is charged formulating Agricultural policy and conducting policy audits. There is currently no information available to the public on the results of the policy audits.

South Africa is the largest of the member states of SACU, though its agricultural sector contributes only 6% to the national GDP. Swaziland is party to a number of other regional and international trade agreements that have proved to be of enormous benefit to new and existing investors.

EXTERNAL ANALYSIS

...sprinklers in use for irrigation purposes“ “

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International MarketsSADC Free Trade Area

COMESA (Common Market for Eastern & Southern Africa)

EPA (Economic Partnership Agreement)

AGOA (Africa Growth & Opportunities Act)

SACU-MERCOSOUR

Southern African Development Community - an association of 14 Southern African states whose objective is to sustain regional collaboration in order to promote economic growth and improve general conditions.The Common Market for Eastern and Southern Africa - represents 20 countries and aims to promote cooperation between the member states in all areas of economic activity.

General Systems of Preferences (G.S.P.) - under the G.S.P. Swaziland enjoys preferential market access and quota free entry to the U.S.A.African Growth and Opportunity Act (AGOA) : Duty and quota free access to the USA market for more than 6,500 products. Other international links include membership of:

African Development Bank

The Commonwealth of Nations

International Monetary Fund

African Union

The World Bank

World Trade Organisation

International Labour Organisation Swaziland is also a member of the United Nations.

EXTERNAL ANALYSIS

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INDUSTRY ANALYSIS

he main goals of Project Canaan are altruistic more than financial. We want to feed hungry children in significant numbers and improve the quality of life economically and socially in the Swazi community. Excess farm product will be sold and marketed in order to raise funds for other needs in our OVC homes. We intend to make our children’s homes as self-sustaining as possible to minimize or eliminate the need for outside donations. The market analysis found herein is done to describe the opportunity to raise money through agribusiness, but the reader should understand that raising money is not our primary goal.

Size and growthThe size and growth rate of an industry are important as they indicate the number and size of competitors the industry can accommodate. A big industry can normally support many competitors without much conflict, as each competitor has a share, and competitors can therefore choose certain market segments to operate in. A growing industry is likely to experience severe competition, as new entrants are attracted by the opportunity to profit. Project Canaan will operate in a comparatively small, growing agricultural industry that is mainly in the sugarcane and timber sub-industries. Horticultural activities will, therefore, provide an opportunity for Project Canaan to become a market leader in Swaziland for highly needed produce both locally and internationally. The horticulture business has over the past few years been growing at a minimal rate, due to competition from a more developed production system in KwaZulu-Natal province in neighboring South Africa.

Power of buyersThere are many potential buyers of our agricultural products and their purchasing power varies significantly. The aim is to have a diverse buyer base that is able to purchase the products at competitive market prices. There are large markets in South Africa that buy produce in large quantities, and then supply them to supermarkets throughout the country, especially in Gauteng province. Gauteng province when ranked as a state would be the fifth largest economy in Africa with an average per capita income exceeding $5,000. Gauteng can be likened to the State of California (USA), in terms of contribution to the national income. These same chains also control most of the food outlets in Swaziland. The European Union is a major buyer of fresh produce from African countries. Large supermarkets such as Tesco purchase considerable amounts of produce from Africa. The European markets especially those of the Netherlands, United Kingdom, Germany and France have well developed channels to buy agricultural produce from around the world. The largest flower auction in the world is held at Alsermeer, Netherlands. The population of the other three mentioned countries is over 150 million inhabitants, with per capita income exceeding $20,000. It is a big market.

Power of suppliersSome farm equipment is available from dealers within Swaziland, but many of the fixed assets will probably be imported from neighboring South Africa and other countries such as Israel, the United States, and Italy, which specialize in certain types of equipment. The aim is to purchase high quality equipment with long life that can

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be easily be serviced within the country. As for supplies such as seeds and fertilizers, there are suppliers like Mayseeds and Hygrotech from South Africa that have reliable bases in Manzini. Vegtech and Amiran are possible suppliers of greenhouses to PC. Azrom, Ltd is a supplier of greenhouses from Israel. Amiran is the retailer and assembler of Azrom greenhouses, which are more competitively priced than its greenhouse counterpart, Vegtech, from South Africa. The purchase of local manufactured or second hand greenhouses is also possible for Project Canaan.

Threat of substitutesIn a free market, substitute goods may be of great concern. To counter substitutes, an array of varied vegetable and animal products need to be produced at Project Canaan. One of the main threats that substitute products have on other products is price. With efficient, high volume production processes, pricing of goods will be at competitive levels. The danger of substitute products is that they reduce the normal profits of an industry. Substitute products that deserve the most attention strategically are those that are firstly, subject to trends, hence improving their price-performance trade-off with the industry’s produce, and secondly, those which are produced by industries earning high profit.

Threats of entrantsThe barriers to entry are the obstacles that a firm must overcome to enter the industry. The barriers can be tangible or intangible. Tangible barriers include capital requirements, technological know-how, resources, and legal regulation in an industry. The intangible barriers include reputation of existing firms, the loyalty of consumers to existing brands, and access to managerial skills required for successful operation in the industry. Farming entrepreneurs are normally interested in venturing into businesses that give high returns. In most cases it follows that the higher the returns, the higher the risk and investment costs, creating risk-averseness. Due to the high investment involved in such a project, the threat of entrants is minimal in Swaziland. One of the most challenging aspects of entering a marketplace is finding a reliable market for produce. This limits the number of people wanting to engage in advanced agriculture. Project Canaan’s has laid out strategies of countering both tangible and intangible barriers by utilizing technology to produce high quality products in a highly efficient manner. This will give us an advantage in the industry.

Nature of rivalry among competitorsIndustries that possess high numbers of rivals in most instances exhibit strong and unfavorable competition. In the case of Project Canaan, there are few significant competitors within the agricultural industry in Swaziland, and since the technology that will be used will be superior, Project Canaan will be able to lead in the market place. Project Canaan will need to be alert by having a strong market intelligence team and by being a learning organization. We will need to have a research and development team in order to maintain leadership in the industry.

INDUSTRY ANALYSIS

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INDUSTRY ANALYSIS

Distribution ChannelsProper consideration of distribution channels is vital to our success, because it leads to acquiring customers who are looking for convenience and speedy delivery of agricultural products. The distribution channel can be a source of competitive advantage when the channels used give a cost or pricing advantage over our competitors. In our business, internet and e-commerce may also be convenient distribution channels, with our own transport vehicles used to transport products to large local consumers or to airports for export. Farmers the world over are known to work in difficult circumstances, provide essential products while earning meager income due to the activities of “middle-men.” PC will endeavor to eliminate any form of middlemen who might interfere with our competitive advantage. Those that will be part of the distribution chain will only be as deemed necessary for the existence of the farm. We will also need to become processors as well as producers. Success will require careful balancing of costs and benefits across distribution channels related to convenience, speed and reliability. Project Canaan intends to supply its excess product to the following markets:

Local supermarkets in Swaziland

Local hotels in Swaziland

Supermarkets in South Africa, Europe, America & Asia

International hotel chains Produce grown through this project will require a ready market. More information about the above channels will need to be obtained regularly since these products are, perishable and product availability is typically seasonal, and demand change.

CostsAnalyzing the cost basis of any industry is crucial to success. The cost structure of products and the industry will determine the prices which consumers will be charged. Customers are keen on price, and when they buy a service or product, they are buying it for its value. If consumers perceive it to be of high value, then will they be willing to part with extra monies to possess it. There are those consumers who will be willing to pay more for a product due to its innovativeness, packaging style or simply because of its uniqueness. And these high margin product opportunities will be studied when considering niche markets. Producing agricultural products requires considerable cost accumulation prior to delivery and payment of the final product. Expenses will be generated as a result of purchasing seeds, transporting various planting materials, irrigating and fertilizing crops, insuring through the Crop Protection Products (CPP) application, paying wages and transporting crops to market. These costs will be offset by having all products priced in a range that is affordable to the consumers and also that covers all the costs incurred in the production and transportation process.

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Therefore, in considering industry cost, Project Canaan shall be very concerned with all the relevant costs, which include operations, processing, marketing, selling and distribution, administration, and R & D costs within the horticulture, fish and dairy industries. All these will form our cost profile and will need to be monitored frequently with an aim of keeping them at minimal levels. If costs can be kept at low levels through economies of scale, innovation, and efficiency, the profit margins are going to improve and Project Canaan would then enjoy higher net incomes, and hence higher returns on investment. A cost-profitability analysis has been carried out in the budget process to determine the most appropriate price per unit product.

...greenhouse hydroponics“

INDUSTRY ANALYSIS

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ustomer attraction, customer satisfaction, and customer retention are key to any business survival. For us to be able to identify the changing needs of our customers, we will need to do the following:

Customer Need AnalysisDiscovering the unmet needs of different groups of customers requires explicit knowledge of the market place. Markets are very diverse in location, composition, culture, tastes and many other variables. The needs of customers are varied depending on their lifestyle, social-cultural, and economic factors. It is thus important to identify segments of specific need within the industry and to satisfy the needs of each segment. Each segment needs to be identified, described and understood to predict the behavior of buyers and pricing power in that segment. It will be important to discover what drives the purchase decision of customers in a given segment. This will enable us to develop key resources and skills that will be used to create a sustainable competitive advantage in each market segments. Some high-end consumers will spend more on products that are grown under more sophisticated or natural conditions. Production of food products using hydroponic, organic farming and ISO certified conditions can bring a premium price from those consumers. The socio-cultural nature of consumer groups can be seen through acceptance of certain food products as opposed to others. Some cultures perceive consumption of fish as being more nutritious than beef. Nutrition matters, but cultural perceptions play a big role also. For instance, in the Swaziland beef is less valued and less expensive than other meats.

CCUSTOMER ANALYSIS

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nalysis of competition enables an organization to assess whether or not it can compete successfully within a given market with given profit opportunities and threats. To have a competitive edge, every organization should conduct a thorough analysis of competitors in order to identify those with whom it wishes to compete and to determine the best ways to outperform them. Competitors fall into two categories – direct and indirect competitors. Substitute products that would become future competitors should also be analyzed as they will also form part of our competition. Information about competitors in Swaziland is very limited. Most of the competitors are on the privately-owned TDL farms that usually protect information. Farm implement suppliers, the Ministry of Agriculture and the NAM Board indicate that the farms that are involved in horticulture are small to medium scale, and have not invested a significant amount of assets in their production process. This gives Project Canaan an advantage in the horticulture industry in Swaziland. It is imperative that competitors are taken seriously and that continuous surveying of competitor activity is carried out regularly. As much as we anticipate being market leaders in Swaziland, competition can also be found from outside of the country. Since Project Canaan will be engaged in an open and liberal market, competition will eventually develop from neighboring countries, especially South Africa. Therefore, mechanisms to counter such competition will need to be developed by offering products to the market that are high quality in production, packaging, delivery and product pricing.

ACOMPETITORS ANALYSIS

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INTERNAL ANALYSIS

Marketing, finance and accounting skills and resourcesProject Canaan will need to allocate at least 1% of its total capital cost to marketing in the first 2 years of operation. The marketing department will be composed of qualified and creative individuals whose versatility aligns with changing consumer needs. The finance department will be composed of intelligent, academically qualified persons that have experience and a proven track record of work excellence. Project Canaan shall use a computerized system which utilizes accounting software, such as SAGE or MYOB, which will interface well with the HFA accounting software. International accounting standards shall be used in the department, strengthening the organization’s credibility.

Production/operations/technical skills and resourcesThe production process at Project Canaan will be well coordinated in various fields. Growing of crops will be carried out both in soil and also through the use of hydroponics. The organization will have well trained operators to run the irrigation systems involved in hydroponics. There will, on site, be an electrician, an agronomist, and a crop protection supervisor who have the technical and operational skills necessary to carry out production processes. These persons will be trained by the Farm Director who is knowledgeable on the issues. Further training will be sourced from reputable trainers from Swaziland, South Africa, Kenya and other regions according to need.

SWOT AnalysisA SWOT analysis is a matrix representation of comparisons of four aspects concerning the internal and external factors that affect the farm’s prowess. Figure 1.2 represents the SWOT Analysis.

AssetsThere are a number of physical assets that will be used to support this project. These are as represented in the budget under financial analysis. Acquisition of assets will be a gradual process based on donations and has been planned in phases of three years and further partitioned in annual quarters.

Analysis of internal skills and resourcesProject Canaan has the advantage of board members that are well established in diverse businesses and collectively bring a robust knowledge in the management of large projects. The Corporate Project Manager has over 20 years of high level administrative experience in a very competitive industry and practical experience in different business settings. He has managed multi-million dollar projects over the past years that give him an advantage in administering Project Canaan. Additionally, the Farm Director has a wealth of experience in agriculture, with a Bachelor of Science in agriculture, a double Masters degree in Finance and Strategic Management and other related courses spanning the past 10 years.

21Figure 1.2.1

INTERNAL ANALYSIS

SWOT ANALYSIS

PROJECT CANAAN

STRENGTHS WEAKNESSES

1

Project Canaan is run by individuals who have been engaged in significantly large businesses enterprises, and members of the board are from diverse yet significant business entities.

The project requires high capital start up costs.

2The Project Manager has over 20 years wealth of experience in administration of multi-million dollar projects in leading companies in the Unites States.

There is no similar project in Swaziland that PC can emulate, at the anticipated scope.

3

The Farm Director has ‘hands on’ experience in managing over 400 acres of farm land with hands on experience on hydroponics, fish farming, advanced irrigation systems, designing and supervision of dams, among other agronomical and technical issues.

There is limited agricultural information on horticulture in Swaziland from relevant bodies.

4PC will develop the state of the art irrigation, green house, hydroponics, and other farming systems that will give it a competitive edge in the farming business.

Lack of a detailed research and development program that is designated to explore markets.

5There is a clear strategy on the establishment of the project and difficult for rivals to copy.

6There will be a significant cost advantage due to high volumes of produce that will be produced and thus optimize on economies of scale.

7The President, Project Manager and the Farm Director are creative and entrepreneurially alert team of managers able to manage strategic changes.

8PC will have several product lines (managed on portfolio basis), that will diversify it outputs and risks.

22

INTERNAL ANALYSIS

SWOT ANALYSIS

PROJECT CANAAN

OPPORTUNITIES THREATS

1Seek fast market growth by formulating an integrated strategic plan focusing on highly qualified human capital, and aggressive marketing.

There is increased trend of labour strikes in neighbouring South Africa that may affect the labour force in Swaziland.

2Many large corporations in the United States have incorporated CSR in their manifesto, creating an avenue for large funding for PC.

Change in climatic conditions and natural disasters such as hail, may lead to low production.

3There is a large demand for food (vegetables, cereals, milk, meat) in Swaziland that is not met by the current local suppliers.

Changes in government policies may lead to unfavourable working climate.

4The Swaziland government has acknowledged the need for more food production and thus an opportunity for large scale production.

Exchange rate fluctuations may lead to uneven cash flows.

5

Expand core business by exploiting new markets segments that may include partnering with Swazi government, and also other corporate entities to supply produce in Royal hotels, European Union, USA, Taiwan and other growing economies.

There is a likelihood of increase in industry rivals from both local and foreign entrants due to its lucrative nature.

6

Venture into niche markets (new market segments) for high quality produce in neighbouring South Africa such as exclusive hotels due to the availability of financially endowed individuals, corporate and other organizations.

An increase in labour costs due to direct influence from neighbouring South Africa’s labour strikes on wage increment.

7Establish an Agri-business tour & seminar facility that will generate subsequent income to PC.

8Diversify in to new business that is agriculture related such as floriculture, winery and export to foreign, international markets.

Figure 1.2.2

23

Value chain analysisThe term value chain describes a way of looking at a business as a chain of activities that transform inputs into outputs that customer’s value. Value Chain Analysis (VCA) is a process of understanding the value creation through examination of primary activities and support activities in a business set up. The primary activities are divided into inbound logistics, operations, out-bound logistics, marketing with sales and service, while support activities include general administration, human resource management, research, technology, and system development and procurement. The VCA of different activities within the farm is as represented below:

INTERNAL ANALYSIS

S

UPP

OR

T A

CTI

VITI

ES

InfrastructureObtain funding to carry out accounting and payroll functions, and perform other administrative tasks for each activity.

Human Resource Management

Develop efficient delivery systems for propagation materials, fingerlings, and other farm inputs.

Supervise planting, spraying, animal feeding, irrigation, structures maintenance workers

Formulate cost effective production processes that farm personnel will use.

Supervise advertising and sales personnel

Facilitate high levels of employee motivation and job satisfaction, with proper training & supervision.

Technology Development

Transport all farm inputs using reliable means.

Carry out planting using hydroponics, & cage fish farming.

Carry out transportation of produce using insulated & refrigerated trucks.

Use modern selling methods e.g. Online sales

Carry out fish pond, processing plants, irrigation equipment & green house maintenance procedures

Procurement

Purchase farm machinery, irrigation system, purchase Green house construction materials.

Buy seeds and other materials for propagation, fish fingerlings, dairy cows and AI material.

(Same as inbound logistics)

Hire advertising agency; buy media time in TV, Newspaper and leading Magazines

Buy planting troughs, growing medium, farm tools for farm attendance & maintenance

PR

IMA

RY A

CTI

VITI

ES

Transport of high quality seeds, tissues cultures, fish fingerlings, dairy AI to farm

Carry out planting using planter & tractor. Stock fish & dairy.Use GLOBAL –GAP standard to create check & balances in operations

Store farm produce in cold rooms to maintain high quality.Carry out efficient delivery of produce by refrigerated trucks.

Conduct efficient market research, advertise PC produce.Develop PC as a brand name that is reputable & respected.

Have product traceability systems that cater for customer complains & respond promptly. Solicit customer input on product improvement

Inbound Logistics

Operations Outbound Logistics

Marketing/ Sales Service

24

INTERNAL ANALYSIS

roject Canaan will focus on four geographical markets, Southern Africa, Europe, Asia and America, where products of specified segments will be dealt with. The main products will be fresh vegetables, fruits, milk and fish.

The highest priority consumer of these products will be the children residing in the HFA-sponsored children’s homes. Other consumers will be largely supermarkets and hotels with high capacities to maintain continuous purchase at competitive prices.

Strategy identification – major strategies include:Use technological and innovation capabilities to develop and expand

our core businesses

Make use of financial and natural resources, core competencies and

competitive capabilities to widen market segments.

Exploit varied market segments to reduce the rising labor cost in the

region.

Develop marketing skills to take advantage of the fast market growth.

Develop R & D to exploit new markets.

Maintain a distinctive strategy that is hard for rivals to copy in order

to reduce domestic and foreign competition.

Improve on the organization’s systems in order to keep costs down.

Clarify corporate direction to reduce negative economic factors.

Develop reliable distribution channels so as to reduce our cost.

Development of strategies to achieve objectivesOut of the above strategies, we then proceed in selecting the viable tactics which will enable us to achieve our objectives fully. The following are the major tactics which have been selected for proposal to the management:

Use technological and innovation capabilities to expand our core businesses. The key results areas here are innovation and high quality products. Technology will assist in achieving this. The adaptation of state of the art hydroponics systems will enable the project to have a competitive edge over its producers. It will be a key strength that may facilitate an exponential growth in production, product quality and profit margins. Fish farming in cages as opposed to normal ponds is a technology that will help in meeting the income targets.

Make use of our resources, core competencies and competitive capabilities to widen new market segments. These will give the business a competitive advantage over the competitors. The business will commit its resources in the key operation areas for better results.

P

5.6.

8.9.

7.

1.

2.

4.

3.

1.

2.

25

Exploit different market segments to reduce the rising labor cost in the region. The horticulture and fish business has unexploited markets, hence this strategy will enable the business to identify these markets, to determine their needs and then to come up with the needed products. As the business enjoys economies of scale, the marginal cost per unit will be reduced resulting in a reduction in the cost of labor and other costs. Labor costs in Southern Africa are steadily rising and have clearly been influenced by the industrial strikes in SA over the past months. How and or when this will effect Swaziland is uncertain.

Develop marketing skills to take advantage of the fast market growth. In order for the business to expand, promotion and marketing will need to be done aggressively. This strategy will lead to market growth, and hence, more customers, increased profit and value creation, which will lead to increased rate of return to shareholders.

Maintain a distinctive strategy that is hard for rivals to copy in order to reduce domestic and foreign competition.

Key targets – key performance targets include:Have a fully operational fish farming, outdoor farming and

hydroponics system in three years.

Earn net profit of $812,262 from fish farming after the first year of

project completion.

Earn annual net profit of $802,309 from crop cultivation and the sale

of vegetables farming 90 acres, by the 5th year.

Increase revenue by 5% per annum.

Reduce costs by 5% per annum.

Venture into other products such as mushroom, grapes, olives, fruit

tree farming, milk and milk products through dairy farming that are

not part of the short term business plan, after careful analysis.

Employ up to 800 people by the third year of operation.

5.

4.

3.

5.6.

7.

1.

2.

4.

3.

Persons responsibleLine managers will eventually be responsible for each of the operations. During the first year of the project, the Corporate Project Manager and Farm Director will be directly responsible for most activities within Project Canaan. Thereafter, with direction from the Project Director, each line manager will be given targets to achieve, and this will be reviewed on a monthly basis. For the managers to achieve their targets, they will need to be supported, empowered and be held accountable and responsible for their functions. Those who excel will be rewarded accordingly.

INTERNAL ANALYSIS

26

INTERNAL ANALYSIS

1 Strategic Objective Strategy Justification Performance Indicators

Person responsible

Establish 36 hectares of outdoor vegetable and cereal farming.

Establish 36 hectares of outdoor vegetable and cereal farming.

Is the most efficient way to be able to achieve the target

a) Measure planted area in acreage. b) Farm records of work activities.

Project Manager together with Farm Director

2 Establish 26 fish farms to produce fish all year round.

Construct fish ponds of required dimensions and stock them.

Is the most practical way to achieve target

a) Carry out a site au-dit to assess presence of ponds b) Carry out sampling at the fish ponds to assess presence & numbers of fish.

Project Manager together with Farm Director

3 Produce 520 tons annually of exportable fish by 2012

Build modern fish cage ponds with proper aeration, and a pro-cessing unit to handle produce.

High produce requires large processing facil-ity that is HACCAP certified.

a) Presence of 26 cage ponds stocked at densities of 50 fish per cubic metre. b) Presence of a HACCAP certified processing plant

Farm Director in asso-ciation with the Project Manager

4 Produce 576 tons of exportable vegetables annually, from the 36 hectares of farm land by the year 2012.

Establish an elaborate & efficient irrigation mechanisms, hydro-ponics system, with supporting infrastruc-ture that include a sorting facility with cold rooms, refrigerated tracks for transporta-tion of fresh produce.

To facilitate high pro-duction and mainte-nance of high quality vegetables.

a) Measure amount of produced annually through farm record.b) Carry out an as-sessment of presence of required infrastruc-ture.

Farm Directorin association with the Project Manager

5 Project Canaan to be a respectable & reputable brand name in Southern Africa by 2014.

Have systematic, inter-nationally accredited procedures to offer consumers high quality products, & aggressive marketing and sales activities.

Consumer satisfaction, product knowledge & internationally ac-credited procedures are directly related to development of a brand name.

a) Amount of products demanded b) Percentage of produce rejected by consumers.c) Recognition by con-sumer or media as a leading market player in industry.

Marketing officer in association with the Project Manager & Farm Director

6 To directly encourage activities that prevents soil erosion.

Plant trees, carry out soil conservation trainings to all farm employees

Soil conservation fa-cilitates better environ-mental conservation.

a) Number of success-ful trainings carried outb) Number of soil conservation struc-tures such as terraces, gabions constructedc) Number of trees planted within a year.

Farm Director with en-vironment supervisor.

Formulation of Strategic Objectives

27

1.

2.

3.

Major risks and countermeasuresThe major risks to this business are: climatic changes like drought, government policies, human activities, diseases, foreign currency fluctuations, technology etc. The management will have to be alert to identify and group these measure risks and will come up with ways of mitigating the risks where possible.

The major risks to this business are as follows:

Climatic changes Changes in climate may have adverse implication on the project especially when drought is experienced. This will imply lower precipitation and, therefore, inadequate water supply for crops, less water availability for fish farming and even adverse effects on milk production. To counter this risk, Project Canaan will invest in large water reservoirs within its property that will facilitate significant rain water harvesting that is sufficient for the project. Secondly, there are boreholes already drilled to provide sub-surface water, especially for domestic and animal use. Thirdly, an environmental conservation program, where trees will be planted to create a water catchment, will be established.

Natural disastersThe area in which the farm is located is prone to frequent bush fires. This is a risk that may cause a high amount of damage. Workers will be trained in fire fighting techniques and equipped with water tankers known as “bowsers.” Project Canaan personnel will assist neighbors in fire fighting and receive reciprocal assistance from its neighbors. This is already the accepted practice in the area. Counter measures have been taken to create fire breaks throughout the farm. There may be disease outbreaks that could cause serious harm to the crops. To counter this, Integrated Pest Management (IPM) shall be used so as to control both pests and diseases using biological, chemical and field hygiene practices.

Exchange rate riskThe volatility of cash flow of the project may be determined by the currency in which trading of produce is carried out. It should be noted that exchange rate fluctuations do not necessarily imply adverse cash flow variance. To counter this, the base currency that will be used to trade, especially with international markets has to be that which is not experiencing frequent and adverse fluctuations. Hedging of monies should be done using appropriate instruments which the Corporate Project Manager will approve.

Country riskThis risk is a combination of potential governmental or state related risks, which include changes in government policies, introduction of taxes on non-for profit organizations, increase of value added taxes and importation restrictions. (There is presently no property taxation on farms in Swaziland.) This conglomerate of risks can only be anticipated and appropriate counter measures carried out, which in most cases would not be controllable by Project Canaan. The management will have to be alert to identify and group these probable risks and come up with ways of mitigating the risks where possible.

4.

INTERNAL ANALYSIS

28

The economic impact identified includes the proposed employment in Project Ca-naan’s farm among other things as elaborated below;

Economic FactorsEmploymentProject Canaan will create employment for a wide range of people within Swaziland and also outside of the country. There will be the management team, the supervision team, and the general work force that will work directly on the farm.

A second category of employment will be created outside the farm, which includes; Government inspection personnel for phyto-sanitation of products, the export clearing personnel, the retail market dealers within Swaziland, the export handling personnel within Swaziland and those that are outside of Swaziland.

Ideally, there will be approximately one hundred people employed in the first year of Project Canaan’s inception, and the numbers are expected to triple in the second year and be maintained at that level. By the third year of operation, Project Canaan hopes to employ eight hundred people in both permanent and casual positions.

Improved household welfareThe project’s employees will support their households, relatives, friends and busi-nesses, triggering improved living standards. The unemployment rate in the region currently is very serious that the one hundred employee figure is very significant. According to statistics provided by IFAD, the unemployment rate is about 70% in the rural areas. This generally implies that the support ratio for every employed person is one to three.

Assuming a conservative composition of four children per family, Project Canaan will therefore be directly supporting approximately seven thousand, two hundred (7200) children, women and men through the employment of eight hundred people in the third year of operation.

TradeThe enhanced purchasing power of the employees will support the small service businesses near their places of residence and work. The vegetable and fruit hawkers, shopkeepers, tailors, barbers, hairdressers, home technicians, market vendors and many other people will benefit from these workers.

Social ImplicationsFood provisionProject Canaan’s proposed farming activities that include vegetables and fruit produc-tion, fish farming and dairy, will provide a food industry that will adequately provide nutrients source of vitamins, proteins, carbohydrate improving health and food secu-rity at the farm itself, the community, the children’s homes supported by HFA and to the consumers from all the regions that are going to purchase farm products.

1.

2.

3.

1.

PROJECT IMPLICATIONS

29

Area developmentThe area around Project Canaan will develop due to increased disposable income from employment at the farm. This will trigger more beneficial spending in the local area. This will lead to development of support infrastructure and activities as small holder businesses are set up to offer goods and services to the population employed at Project Canaan and their dependants.

Environmental implicationsReduction of harmful effects caused by soil effusion, desertification, and depletion of watersheds will be planned out in the day to day activity plan of the farm. It will improve the area’s aesthetic look through the increase of plant cover. The proposed project will assist in the creation of the area micro-climate that is expected to increase precipitation, improve on the area humidity and irregular temperatures experienced. This phenomenon will minimally help in the management of global warming experi-enced all over the world.

Biomass energyThe establishment of the fast growing trees will help in the provision of wood and charcoal fuel at Project Canaan and at all sites where the trees will be transplanted across the country. The biomass energy production will thereby benefit the environ-ment and increase its sustainability while conserving the environment.

Air quality The proposed project will help in the improvement of air quality. The numerous plants and trees will have the capacity of filtering gases that are detrimental to other forms of lives once they exceed the recommended concentrations. These gases are essen-tial to the biological processes of the trees hence reducing their concentration to the environment, for example carbon dioxide.

Biological diversityThe abundance of micro and macro organisms will be enhanced by the establishment of the proposed project. The planting of vegetables, fruits and trees will help in the creation of an ecosystem for several organisms. Pollination insects, soil barrowing organisms, will increase in numbers. This will assist in the enrichment of the area biological diversity.

5.

6.

2.

4.

3.

PROJECT IMPLICATIONS

30

The associated financial plan has been created to identify the total quantity of funds required to undertake each phase at Project Canaan, in other words, the budget. The total cost of labor, equipment and materials is calculated and an expense schedule is defined which will enable the project manager to measure the forecast spending versus the actual spending throughout the project. This detailed financial planning process is an extremely important activity within this project, as the different compo-nents will expect the final solution to have been delivered within the allocated budget.

The level of resource required in undertaking each of the activities and tasks listed within the project plan have been indicated within the budgets stated below. Some generic resources have already been allocated in the project plan.

The following are the budgets that have been calculated within this financial plan:

Project Budget Design OverviewThis is the grand budget of all assets that will be required for the project. It lists down all the assets and some inputs that will enable the establishment and success of the project.

The budget is sub-divided into three phases. It is important to have the project in phases to spread risk and investment capital. A detailed budget has been developed and attached. This budget has been referred to as ‘Project Canaan Budget’. The total budget is $ 13,714,952.

Corn ProductionThis budget is for the first year of production and it represents farming in 12 hectares of the 36 hectares that are to be farmed. (See Appendix)

Fish productionThe analysis of fish production has also been categorized into two with a third part indicating the cash flow from one of the production methods.

Normal stocking is when fish are reared in open ponds at normal population of about five fish per cubic meter. The total exportable quantity is 80,000 kilograms, while the income expected is $62,600 per annum, with profitability per kilogram of $0.78. (Figure 3.1)

Caged farming is where fish will be reared in cages at higher stocking rate of up to 50 fish per cubic meter. The total exportable quantity is 520,000 kilograms, while the income expected is $812,262 per annum, with profitability per kilogram of $1.56. (Figure 3.2)

A cash flow extrapolated from cage farming has been carried out through a period of 5 years. The cumulative cash flow is $4,122,081.38. A break-even point of 1 year, 6 months has been projected. (Figure 3.3)

2.

3.

a.

b.

c.

1.

FINANCIAL ANALYSIS

31

0Year 5 Year 4 Year 3 Year 2 Year 1

Note 1 Depreciation of specific assets is as stated below: 2 Machinery & equipment 12% 3 Motor vehice 25% 4 Water supply 12.5% 5 Land & buildings Nil 6 The tax on non-profit making organization may be applied at 0%, and 30% for profit organizations 7 A 5% annual increase in revenue and 5% decrease in expenses is expected. 8 The value of depreciasion will be dependent on the assets invested.

Depreciation

NIAT

Taxes @ 30%

NIBT

Depreciation

IBDT

Revenue

Abbreviations IBDT - Income Before Depreciation and Taxes NIBT - Net Income Before Taxes NIAT - Net Income After Taxes

Graph 3.3LEGEND

Fish Production: COST AND PROFITABILITY ANALYSIS

Total cash inflow $4,122,081.38 Total Project Cost $1,212,766.40 Break even point on Investment 1 year, 6 months

Am

ount

in $

2,500,000

2,000,000

1,500,000

1,000,000

500,000

Expenses (excluding depreciation)

FINANCIAL ANALYSIS

32

FINANCIAL ANALYSIS

Vegetables French beans productionThe French beans stated production is a representation of production of high yielding vegetables with similar pricing regimes. This analysis comes in three parts;

Unpacked produce, which will be sold in open crates with no value added processes carried out within the farm. The expected produce is 576,000 kg for export, earning $220,378 per annum with a profitability of $0.38 per every kilogram sold. (Figure 3.4)

Packed produce, which will be sold in different sizes of pallets (e.g. 250 grams, 500grams) which is a value added processes carried out within the farm. The expect-ed produce is 576,000 kg for export, earning $913,328 per annum with a profitability of $1.59 per every kilogram sold. (Figure 3.5)

A cash flow of packed produce has been carried out through a period of 5 years. The cumulative cash flow is $3,658,699.62. A break-even point of 2 years has been projected. (Figure 3.6)

b.

c.

a.

4.

33

Note 1 Depreciation of specific assets is as stated below: 1.1 Machinery&equipment12% 1.2 Motorvehice25% 1.3 Watersupply12.5% 1.4 Land&buildingsNil2 The tax on non-profit making organization can be applied at 0% and 30% for profit making corporations 3 A 5% annual increase in revenue and expenses is predicted4 A 5% annual decrease in expenses is expected

Depreciation

NIAT

Taxes @ 30%

NIBT

Depreciation

IBDT

Revenue


Graph 3.6LEGEND

Cash Inflows for vegetable production

Total cash inflow $3,658,699.62 Total Project Cost $1,470,738.00 Break even point on Investment 2 years

Am

ount

in $

2,500,000

2,000,000

1,500,000

1,000,000

500,000

0

Year 5 Year 4 Year 3 Year 2 Year 1

Expenses (excluding depreciation)

FINANCIAL ANALYSIS

34

Reporting requirementsReporting of the project will be required on quarterly basis. The main aspects of reporting are to be focused on the objectives of the project, project progress and potential strategic changes that need to be adopted in the medium term.

Reporting will be in two forms, narrative reports, and financial reports that will be presented in both written and oral means.

Review process and periodReview of project progress and performance will be carried out on quarterly basis. The fiscal year will begin 1st of October and end 30th of September each year. The reviews will therefore be carried out on the first week of January, April, July and October.

The reviews will include the Board of Directors and the Farm Director. The process will involve an overview of activities, figures of sales and revenues and direction of progress of Project Canaan. Review may be carried out on round table basis or through suitable long distance communications, though there is greater need for face to face briefing to avoid cross-purpose and facilitate clear reporting and direct inqui-ries of the reports.

STRATEGIC CONTROL

35

INVESTMENT OPPORTUNITIES

Project Canaan Investment Opportunity #136 hectares (90 acres) of Unpackaged Vegetables in 2010Project Canaan wishes to plant, harvest and sell 90 acres of outdoor production unpackaged vegetables in 2010. This project will cost $475,000 to operate and is ex-pected to yield 8, 760 kg of food for our orphans and vulnerable children, 576,000 kg for sale locally and an additional $220,000 US in profits to be used to handle ongoing expenses in the homes and on the farm.

Project Canaan Investment Opportunity #236 hectares (90 acres) of Packaged Vegetables in 2011Project Canaan wishes to plant, harvest and sell 90 acres of outdoor production packaged vegetables in 2010. This project will cost $1,109,680 to operate and is expected to yield 8, 760 kg of food for our orphans and vulnerable children, 576,000 kg for export and an additional $913,000 US in profits to be used to handle ongoing expenses in the homes and on the farm.

Project Canaan Investment Opportunity #326 Ponds of Fish Farming in 2010Project Canaan wishes to build 26 ponds of 1600 sm each to grow, harvest and sell fish locally. This project will cost $250,000 to operate and is expected to produce 1950 kg of a significant, high protein food source for our orphans and vulnerable children, 80,000 kg to sell locally and abroad, and additionally to net $63,000 US in profits to be used to handle ongoing expenses in the homes and on the farm.

Project Canaan Investment Opportunity #426 Ponds of Cage Fish Farming in 2011Project Canaan wishes to utilize the previously built 26 ponds of 1600 sm each to grow, harvest and sell fish using a cage fishing format. This project will cost $1,144,000 to operate and is expected to produce 8,760 kg of a significant, high protein food source for our orphans and vulnerable children, 520,000 kg to sell lo-cally and abroad, and additionally to net $812,262 US in profits to be used to handle ongoing expenses in the homes and on the farm.

36

INVESTMENT OPPORTUNITIES

Capital Cost For Donor Assistance

Small Nursery Greenhouse

Outside Showers (volunteers and chem. sprayers)

Farm toolsWelding machineBench + viceClampsCompressorsLeversPry barsMiscellaneous toolsWeather stationWeather stationFire Bowzer to move water aroundBooster water pumpTotal Farm tools:

Irrigation EquipmentPump house & fertilizer storage buildingPumps & Ancillary equipmentPiping underground main & sub linesDrip lines for 90 acres orOverhead sprinklersConnectors and componentsTotal Irrigation Equipment

Fish FarmingPond Construction 1600 sm x 26 pondsProcessing Plant (pre-fab processing room), includes freezing equipmentOuter structure for Processing Plant, includes epoxy flooringWaste handling tank to clean effluentOxygenating pump & equipment for pondsFingerling HatcheryMechanized Fish cages and supportsFish netsTotal Fish Farming:

Green Houses per 1 hectare/2.47 acres (includes labor)

Food Processing House/Offices 20x60=1200

Vehicles4x4 Flat bed truck3 ton refrigerated vegetable truck3 ton refrigerated fish truck9 tone refrigerated trackTotal Vehicles:

Office EquipmentSatellite dish for internet/data/voice connectivityDesktop computers/printers (2 each)LaptopFax machineRouterWalkie talkies 3 pairsStationeryTotal Office Equipment:

Odds and endsKnapsack SprayersProtective clothing for sprayersWork clothing for employeesTotal Odds and ends:

Dams26 million gallon dam13 million gallon dam23 million gallon cofferdamWater recycling damPipe works from main dam to reservoirTotal Dams:

$8,064.00

$3,360.00

$896.00$504.00$280.00$952.00$168.00$336.00$784.00

$5,600.00$5,600.00$1,120.00

$560.00$16,800.00

$56,000.00$235,200.00$145,600.00$120,960.00$89,600.00$28,000.00

$675,360.00

$347,200.00

$153,440.00

$134,400.00$12,320.00$17,808.00$42,560.00

$117,264.00$4,368.00

$829,360.00

$548,800.00

$494,928.00

$52,640.00$59,696.00$63,840.00

$147,840.00$324,016.00

$8,960.00$4,480.00$2,016.00$1,120.00

$336.00$896.00$448.00

$18,256.00

$2,688.00$1,792.00$4,480.00

$8,960.00

$403,200.00$212,800.00$78,400.00$44,800.00$44,800.00

$784,000.00

37

APPENDIX

APPENDIX

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R 7

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Prep

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1,92

8,90

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2,13

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0

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(Mar

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6,55

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l Per

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2

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201

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4,46

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7,61

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124

150

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ly B

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t

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ND

Oct

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-11

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Year

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ly B

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42

Figure 2.1

CORN PRODUCTION COST Out Door productionFor the period: October 2009 to April 2010 SITE: Sidvokodvo, SWAZILANDACREAGE: 12 hectares/30 acres

PRICE (USD) AMOUNT (USD) PRODUCTION COSTS Fertilizers and Manure 3,100.00 Chemicals 670.00 Seeds 1,590.00 Casual Wages 3,240.00 SUB TOTAL 8,600.00 OTHER COSTS Sacks 1,800.00 Transportation to Market 500.00 Tractor fuel 2,350.00 Tractor maintainance 500.00 Marketing 850.00 Overheads 400.00 SUB TOTAL 6,400.00

TOTAL COSTS 15,000.00

APPENDIX

43

Fish Production: COST AND PROFITABILITY ANALYSIS26 Fish Ponds1600 sq.M eachFor the period: October 2010 to September 2011Normal stocking (5 per cubic meter)INCOME ON SALES QUANTITY (KG) PRICE (R) PRICE (USD) AMOUNT (USD)Sales on export 80,000.00 31.45 3.70 296,000.00 Consumption by HFA orphanages 1,950.00 31.45 3.70 7,215.00 TOTAL INCOME 303,215.00

PRODUCTION COSTS Manure 14,600.00 Feeds 113,000.00 Fingerlings purchase 40,000.00 Harvesting Wages 5,760.00 RUNNING COSTS Regular employees 3,890.00 Guarding 1,945.00 Veterinary services & medicine 6,400.00 Road Transportation 9,120.00 Truck maintainance 2,100.00 Marketing 2,000.00 Pond maintainance 5,300.00 Electricity 3,200.00 Packaging 28,000.00 Overheads 3,000.00 Insurance and selective permits 2,300.00 TOTAL COSTS 240,615.00

EXCESS OF INCOME OVER COSTS 62,600.00 Profitability per kg of fish $0.78

Profitabily as % of Selling price 21.15%

Figure 3.1

APPENDIX

44

Fish Production: COST AND PROFITABILITY ANALYSIS26 Fish Ponds1600 sq.M eachFor the period: October 2010 to September 2011Cage StockingINCOME ON SALES QUANTITY (KG) PRICE (R) PRICE (USD) AMOUNT (USD)Sales on export 520,000.00 31.40 3.70 1,924,000.00 Consumption by HFA orphanages 8,760.00 6.80 3.70 32,412.00 TOTAL INCOME 1,956,412.00

PRODUCTION COSTS Manure 14,600.00 Feeds 113,000.00 Fingerlings purchase 390,000.00 Harvesting Wages 11,520.00 RUNNING COSTS Regular employees 97,300.00 Supervisors 6,000.00 Guarding 15,560.00 Veterinary services & medicine 12,800.00 Pond maintainance 14,000.00 Electricity 6,400.00 Road Transportation 54,720.00 Freight 210,000.00 Packaging material 150,000.00 Air machinery & Truck maintainance

15,700.00

Marketing 24,000.00 Overheads 6,250.00 Insurance and selective permits 2,300.00 TOTAL COSTS 1,144,150.00

EXCESS OF INCOME OVER COSTS 812,262.00 Profitability per kg of fish $1.56

Profitabily as % of Selling price 42.22%

Figure 3.2

APPENDIX

45

Fish Production Cash Flow26 Fish Ponds1600 sq.M eachFor the period: October 2010 to September 2011Cage Stocking

Starting year

Year 1 Year 2 Year 3 Year 4 Year 5

Revenue - 1956412.00 2054232.60 2156944.23 2264791.44 2378031.01 Expenses (excluding depreciation)

- (1144150.00) (1086942.50) (1032595.38) (980965.61) (931917.33)

IBDT - 812262.00 967290.10 1124348.86 1283825.84 1446113.69 Depreciation - (118928.70) (118928.70) (118928.70) (118928.70) (118928.70) NIBT - 693333.30 848361.40 1005420.16 1164897.14 1327184.99 Taxes @ 30% - (207999.99) (254508.42) (301626.05) (349469.14) (398155.50) NIAT - 485333.31 593852.98 703794.11 815427.99 929029.49 Depreciation - 118928.70 118928.70 118928.70 118928.70 118928.70 Cash inflow - 604262.01 712781.68 822722.81 934356.69 1047958.19

Total cash inflow $4,122,081.38 Total Project Cost $1,212,766.40 Break even point on Investment 1 year, 6 months

Figure 3.3

Note 1 Depreciation of specific assets is as stated below: 2 Machinery & equipment 12% 3 Motor vehice 25% 4 Water supply 12.5% 5 Land & buildings Nil 6 The tax on non-profit making organization may be applied at 0%, and 30% for profit organizations 7 A 5% annual increase in revenue and 5% decrease in expenses is expected. 8 The value of depreciasion will be dependent on the assets invested.


APPENDIX

46

APPENDIX

Range analysis of projected fish production, Project Canaan October 2010 to September 2011

Varying kilograms per cubic meter yield 12.33 12.83 13.33 13.83

Cost($) per cubic meter and per kilogram at varying yields

PRODUCTION COSTS in US$ Manure 0.37 0.37 0.37 0.37 Feeds 2.90 2.90 2.90 2.90 Fingerlings purchase 10.00 10.00 10.00 10.00 Harvesting wages 0.30 0.30 0.30 0.30 Total production costs per M3 13.57 13.57 13.57 13.57 Total production costs per kg 1.10 1.06 1.02 0.98

Running costs 1,144,150.00 1,144,150.00 1,144,150.00 1,144,150.00

Total costs per M3 29.34 29.34 29.34 29.34 Total costs per Kg 2.38 2.29 2.20 2.12

Returns per Cubic Meter above Total costs Price ($ per Kg): 2.70 1,298,349.00 1,350,999.00 1,403,649.00 1,456,299.00 3.20 1,538,784.00 1,601,184.00 1,663,584.00 1,725,984.00 3.70 1,779,219.00 1,851,369.00 1,923,519.00 1,995,669.00 4.20 2,019,654.00 2,101,554.00 2,183,454.00 2,265,354.00

Net Income per varying prices and costs Price ($ per Kg): 2.70 153,878.40 205,151.70 259,935.00 312,834.60 3.20 394,313.40 455,336.70 519,870.00 582,519.60 3.70 634,748.40 705,521.70 779,805.00 852,204.60 4.20 875,183.40 955,706.70 1,039,740.00 1,121,889.60

47

Vegetable Production: COST AND PROFITABILITY ANALYSIS36 Hectares of Outdoor ProductionFor the period: October 2010 to September 2011Sold unpackedINCOME ON SALES QUANTITY (KG) PRICE (R) PRICE (USD) AMOUNT (USD)Sales on export 576,000.00 13.60 1.20 691,200.00 Consumption by HFA orphanages 8,760.00 6.80 0.80 7,008.00 TOTAL INCOME 698,208.00

PRODUCTION COSTS Fertilizer 46,350.00 Chemicals 71,000.00 Seeds 86,400.00 Harvesting Wages 115,200.00 RUNNING COSTS Regular employees 38,900.00 Supervisors 48,000.00 Electricity 2,600.00 Road Transportation 43,680.00 Machinery & truck maintainance 9,200.00 Marketing 3,000.00 Overheads 6,500.00 Insurance and selective permits 7,000.00 TOTAL COSTS 477,830.00

EXCESS OF INCOME OVER COSTS 220,378.00 Profitability per kg $0.38

Figure 3.4

APPENDIX

48

APPENDIX

Vegetable Production: COST AND PROFITABILITY ANALYSIS36 Hectares of Outdoor ProductionFor the period: October 2010 to September 2011Sold when packagedINCOME ON SALES QUANTITY (KG) PRICE (R) PRICE (USD) AMOUNT (USD)Sales on export 576,000.00 28.00 3.50 2,016,000.00 Consumption by HFA orphanages 8,760.00 6.40 0.80 7,008.00 TOTAL INCOME 2,023,008.00

PRODUCTION COSTS Fertilizer 46,350.00 Chemicals 71,000.00 Seeds 86,400.00 Harvesting Wages 115,200.00 RUNNING COSTS Regular employees 136,150.00 Supervisors 120,000.00 Electricity 4,200.00 Road Transportation 43,680.00 Freight 201,600.00 Packaging material 230,400.00 Machinery & truck maintainance 9,200.00 Marketing 24,000.00 Overheads 9,500.00 Insurance and selective permits 12,000.00 TOTAL COSTS 1,109,680.00

EXCESS OF INCOME OVER COSTS 913,328.00 Profitability per kg $1.59

Profitability as % of selling price 45.30%

Figure 3.5

49

Cash Flow for vegetable production36 hectares of out door productionFor the period: October 2010 to September 2011Based on extrapolated data from the cost & profitability analysis

Year 1 Year 2 Year 3 Year 4 Year 5 Revenue 2,023,008.00 2,124,158.40 2,230,366.32 2,341,884.64 2,458,978.87 Expenses (excluding depreciation)

(1,109,680.00)

(1,165,164.00)

(1,223,422.20)

(1,284,593.31)

(1,348,822.98)

IBDT 913,328.00 958,994.40 1,006,944.12 1,057,291.33 1,110,155.89 Depreciation (Approximated) (84,000.00) (84,000.00) (84,000.00) (84,000.00) (84,000.00) NIBT 829,328.00 874,994.40 922,944.12 973,291.33 1,026,155.89 Taxes @ 30% (248,798.40) (262,498.32) (276,883.24) (291,987.40) (307,846.77) NIAT 580,529.60 612,496.08 646,060.88 681,303.93 718,309.12 Depreciation (Approximated) 84,000.00 84,000.00 84,000.00 84,000.00 84,000.00 Cash inflow 664,529.60 696,496.08 730,060.88 765,303.93 802,309.12

Total cash inflow $3,658,699.62 Total Project Cost $1,470,738.00 Break even point on Investment 2 years

Figure 3.6


Note 1 Depreciation of specific assets is as stated below: 1.1 Machinery&equipment12% 1.2 Motorvehice25% 1.3 Watersupply12.5% 1.4 Land&buildingsNil2 The tax on non-profit making organization can be applied at 0% and 30% for profit making corporations 3 A 5% annual increase in revenue and expenses is predicted4 A 5% annual decrease in expenses is expected

APPENDIX

50

APPENDIX

Contour Map

51Green Houses Layout

APPENDIX

Heart for Africa is a faith-based not-for-profit 501(c) 3 organization working to bring HOPE to Africa in the areas of Hunger, Orphans, Poverty and Education.

www.heartforafrica.org

BUSINESS PLAN - Heart for · PDF fileBUSINESS PLAN. 2 CONTENTS Introduction ... educated business individuals from Kenya and Swaziland, ... fish farming, dairy farming, food

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