Project

Profile On

Establishing Soap factory implemented

in injibara city adminstration

Gataye beyene fekadu

Phone: 0912665280

November 2023

Injibara
 Table of Content

1. EXECUTIVE SUMMARY................................................................................4
2. INTRODUCTION..........................................................................................5
3. BACKGROUND............................................................................................6
3.1. Location................................................................................................6
3.2. Population............................................................................................6
3.3. Topography..........................................................................................6
3.4. Climate.................................................................................................7
3.5. Economy..............................................................................................7
3.6. Agriculture............................................................................................7
3.7. Governance..........................................................................................8
3.8. Infrastructure.......................................................................................8
4. POLICY ENVIRONMENT...............................................................................8
4.1. Overall Economic Policy.......................................................................8
4.2. Industrial Development Policy..............................................................9
4.3. Investment Incentives........................................................................10
5. PROJECT RATIONAL..................................................................................10
5.1. The Administration Commitment.......................................................10
5.2. Competitive & Comparative Advantages of the Administration.........11
6. PROJECT OBJECTIVES...............................................................................12
8. MARKET SITUATION..................................................................................14
9. RAW MATERIAL & UTILITIES.....................................................................17
9.1. Raw & Auxiliary Material....................................................................17
9.2. Utilities...............................................................................................18
10. TECHNOLOGY AND ENGINEERING.........................................................19
10.1. Technology......................................................................................19
10.2. Engineering.....................................................................................24
11. MANPOWER & TRAINING REQUIREMENT...............................................25
12. TOTAL INVESTMENT AND OPERATING COST.........................................26
13. ENVIRONMENTAL IMPLICATIONS...........................................................26
14. ANNEXES...............................................................................................28
14.1. Annex 1. Soap Making Equipment...................................................28
14.2. Annex 2. Detergent Production Equipment.....................................32
14.3. Annex 3. Utility Equipment..............................................................33
 1. EXECUTIVE SUMMARY

This profile envisages the establishment of a plant for the production of

500kg/h of loundary ,bath and toilt soap per day in Amhara’s Regional
State, in injibara town.

The total investment requirement is estimated at Birr 50 million out of

which 26.7% is in foreign currency.

The plant will create employment opportunities for 100 [Link] has
back ward leakage with oil factory and exoprt 60%of its product to aboard
to earn hard currency and remaining 40 %is available in local markets to
meet high demand of soap our society .

The project is financially viable with an internal rate of return (IRR) of

41.2% and a net present value (NPV) of Birr 2.0 million at 18 % discount
rate.
2. INTRODUCTION

Today soap is an integral part to our society; they function as cleaning

products by safely and effectively removing dirty, germs and other
contaminants, and thus promote a hygienic lifestyle and thus we find it hard
to imagine a time when people were kept sweet- smelling by the action of
perfume rather than soap.

The markets for the products are expected to grow at rates ranging from
under 4% to around 4.5%. These are very modest rates considering that the
lifestyles not only of urbanites, but even of well-off rural folks are changing
at a very high pace. With regard to raw material, almost all raw materials are
available in sufficient amount locally; however, they lack proper
management starting from where they generate, transport and store until
they used for consumption.

This project is a very feasible project in terms of all dimension issues-

market, production simplicity, low investment cost, raw material availability
and location. Besides these, the Administration prepared an industrial zone
to provide land for committed the-would be investors and also there exists
sufficient industrial related services for incoming and outgoing materials.
Thus the Administration would advise those investors to invest in seeing the
comparative and competitive advantage of the Administration.
 .

3. PROJECT OBJECTIVES

3.1. General Objectives

The general objectives is to undertake massive investment in the

manufacturing sector in bringing structural transformation of the economy
and thereby to achieve the vision of the country i.e. becoming middle income
country by 2025.

3.2. Specific Objectives

 To produce toilet, laundry, and body soap;

 To providing high quality soap with fair price.

[Link] DESCRIPTION AND APPLICATION

Soap, a product with a 5,000 year history, remains an essential ingredient
in modern living, used daily for medicinal and laundry purposes, for
household cleansing and personal hygiene. Until fairly recently its
production remained a primitive art, its manufacture being essentially the
treatment of fat with alkali, a chemical process which is the same whether
production is done in a backyard or in a factory.

The simplicity of the process has led to its worldwide practice as a small
business operation. Large factory operations are exclusively based on the
modern continuous process, which produces soap in only 15 minutes but
requires machinery that is expensive, and demands close production
control, a very large output is required to be economical.

Soap can still be effectively manufactured by the traditional batching

method, which is a week-long, slow, open-vessel process that requires
supervision to ensure a good product, but can be undertaken by relatively
unskilled operators. Initial startup operations typically employ the batch
process until the economies of production are developed and the market
demand requires investment in the more expensive continuous process.

Though the batch process requires very little training and skill to produce a
crude soap, higher qualities are easy to achieve with closer control. Digital
timing and sensor technologies are cheap and increasingly accessible and
will introduce sophistication in the areas of temperature control and
timing.

The main ingredients are fat, alkalis and fuel. Fat can be obtained from
numerous animal and vegetable sources, including animal carcasses and
vegetable oils.

Soaps are compounds formed by the reaction of bases with fats, chemically
known as fatty acid esters. The three most important fatty acid esters:
Palmitin, Stearin and Olein. They are found in lard, tallow, olive oil,
cottonseed oil, and other animal and vegetable fats or oils. Soap is usually
made by the reaction of animal fat or vegetable oil with sodium hydroxide.
The process of treating fats with bases or alkalies is called ‘Saponification’.
Vegetable oils, with unsaturated carbon chains, produce soft soaps. Animal
fats yield hard soaps. Coconut oils with shorter carbon chains yield soaps
that are more soluble in water. Soaps are salts particularly sodium or
potassium of long chain fatty acids. These carboxylic acids are derived from
fatty oils. The principal active cleaning agent is sodium carboxylate.

[Link] SITUATION

According to the market research conducted by central statistics. the

leading soap producer company in Ethiopia, currently there is a high demand
all kind of soap products in Ethiopia while the supply is very low. There is a
gap of 94,000 tons between demand and supply.

5. 1 Market Potential

A variety of soap are available in the domestic market, there has been
always a tough competition for marketing them. However, with the
advancement of the life style, the demand for soap is rapidly increasing and
there exists a very good scope for setting up unit for manufacture of
detergent powder and soap.
Soap are necessity for urban households so much so that its demand is
mainly associated with urbanization. The country’s requirement for soap and
detergent has been met through both domestic production and import. Table
-1 shows the supply of the product from domestic production and imports
during 1997-2004. During the period under reference, total supply averaged
at 37,529 tones, of which 14,206 tones constituted domestic production and
the remaining 23,323 tones imports. Thus, domestic production, on the
average, accounted for 38 percent of the country's requirement for laundry
soap, toilet and bath soap indicating much of the demand for the product
(62%) is still met through imports.
Assuming supply was driven by demand, the average annual supply of soap
for the period under reference, which constitutes domestic production and
imports, is considered as the effective demand for the product for the year
2004. Since the consumption of soap is mainly associated with the urban
population, the demand for the product is assumed to grow at the rate of 4%
that corresponds to the annual growth rate of the urban population. The
present demand for soap (i.e., for 2006) is thus estimated at 40,592 tones.

Table 1. SUPPLY OF SOAP (TONNES)

Year Domestic Import Total Market share

Production Supply Domestic
2007 12908 204 3332 0.39
17 5
2008 9787 164 2625 0.37
71 8
2009 13135 210 3421 0.37
81 6
2010 17194 212 3848 0.45
87 1
2011 14766 268 4157 0.36
11 7
2012 19249 272 4649 0.41
49 8
2013 11632 277 3947 0.30
15 0
2014 14975 255 4053 0.37
57 2
Avera 14206 233 375 0.38
ge 23 29

Table 2. Country Urban Population &

Growth rate

Urban Total Growth

Year Population Growt Averag rate
h e

2013 13,093,359 520,5 12,833, 0.04

84 067 (4%)
 2012 12,572,775 452,8 12,346, 0.04
77 337 (4%)
2010 12,119,898
Source: CSA, 2007 census
5.2 Projected Demand

Assumption for calculating individual soap and detergent consumption:

 The yearly urban population growth is assumed by 4% , taking the
year 2013& 2010 as a reference year.
 The individual consumption of laundry soap and bath soap per month
and per year

o 4 laundry soap of 200gm per month

o 4 bath soap of 150gm per month

Table. Individual Monthly and yearly consumption of detergent and soap

Total
Mont Yearl Required Total
No Product Types hly y DD per Required
dema Dema gram/yea DD per
nd nd r Kg/year
1 Laundry soap (Bar) - 4 48 9600 9.6
200gm
2 Bath soap (Bar) - 150gm 4 48 7200 7.2

Table: Projected Demand of Soap

Projected Toilt Laundry Bath soap dd/year

Year Urban soapd Soap
Populati d/yea dd/yea
on r r
2009 12,119,898
2010 12,572,775
2011 13,093,359
2012 13,617,093 32,681.02 130,724.10 98,043.07
2013 14,161,777 33,988.27 135,953.06 101,964.80
2014 14,728,248 35,347.80 141,391.18 106,043.39
2015 15,317,378 36,761.71 147,046.83 110,285.12
2016 15,930,073 38,232.18 152,928.70 114,696.53
2017 16,567,276 39,761.46 159,045.85 119,284.39
2018 17,229,967 41,351.92 165,407.69 124,055.76
2019 17,919,166 43,006.00 172,023.99 129,017.99
 2020 18,635,933 44,726.24 178,904.95 134,178.71
Source: Own Projection

[Link] CAPACITY AND PRODUCTION PROGRAM

6.1. Plant Capacity

The range of feasible capacities is wide which depends on the availability

of local resources and finishing technology as well as the potential market.
This plant is assumed to produce about 200 kg of soap per hours .A bar of
soap weighs about 150 gm.

[Link] Program

The production program of the plant is assumed to start at 70% in the first
year, 80 % in the second year, 90 % in the third year and 100 % in the
fourth year and there after.

[Link] MATERIAL & UTILITIES

7.2 .Raw & Auxiliary Material

1. Fat and Oil: All animal and vegetable oils and fats intended for soap-
making should be as free as possible from unsaponifiable matter, of a
good colour and appearance, and in a sweet, fresh condition. The
unsaponifiable matter naturally present as cholesterol, or phytosterol,
ranges in the various oils and fats from 0.2 to 2.0 per cent. All oils and
fats contain more or less free acidity; but excess of acidity, though it
may be due to the decomposition of the glyceride, and does not always
denote rancidity, is undesirable in soap-making material. Rancidity of
fats and oils is entirely due to oxidation, in addition to free acid,
aldehydes and ketones being formed, and it has been proposed to
estimate rancidity by determining the amount of these latter produced.

Typical qualities raw material most suitable for soap-making which

are available in the country :
  Livestock tallow
 Cotton Seed Oil
 Sesame Oil
 Waste Fats.—Under this classification may be included marrow
fat, skin greases, bone fats, animal grease, melted stuff from
hotel and restaurant refuse, and similar fatty products
2. Alkali (Caustic and Carbonated):

Caustic soda (sodium hydrate):It is available in the market in a

liquid form as 90° Tw. and other degrees of dilution, and also in a solid
form in various grades as 60°, 70°, 76- 77°, 77-78°. These degrees
represent the percentage of sodium oxide (Na 2O) present plus the 1
per cent. The highest grade, containing as it does more available
caustic soda and less impurities, is much more advantageous in use.

Carbonate of soda or soda ash: This is pure sodium carbonate

containing salt (NaCl). There is a factory which produces this product in
the country.
3. Water.: Water intended for use in soap-making should be as soft as
possible. If the water supply is hard, it should be treated chemically;
the softening agents may be lime and soda ash together, soda ash
alone, or caustic soda. There are many excellent plants in vogue for
water softening, which are based on similar principles and merely vary
in mechanical arrangement. The advantages accruing from the
softening of hard water intended for steam-raising are sufficiently
established and need not be detailed [Link] all materiused for
in this plant are locally avliabile in Ethiopia

No Type of Raw & Auxiliary Cost in birr

Material
1 Fat and Oil: Animal & Vegetable 1,500,000
2 Alkali (Caustic and carbonate) 3500,000
3 Sodium silicate and miscellaneous 1500,000
chemicals
4 Soft Water 1000,000
 Total cost 7.5 million

7.2 Utilities

Utilities required by the plant consist of electricity for lighting purposes and
for running production equipment and water is required for production,
drinking and general purposes. It is obvious that the amhara regional
government has chosen injibara Administration as the western industrial
corridor of the country. Owing to these the Amhara regional government in
addition to the existing power substation, which is located at the city, new
power substation at area will established which has the capacity to supply
sufficient electric power to entertain the coming 10 years industrial power
demand in the area.

With regard to the water, injibara is endowed with abundant ground water
potential; and the Administration now has implementing the 2 nd phase water
supply scheme in consideration of the future house hold and industrial water
demand and thus at municipal level there exists a potential to

supply sufficient water to the industry; besides this if needed any investors
can have his own water supply source by digging well in his investment area.
Generally, electricity and water is no longer a bottleneck for any investors in
the Administration.

annual consumption cost of utlity of envisageted plant is estimated at birr

617,323millions .

Table 4.2: utilities requirement and cost at installed capacity

No Description Unit Qty/year Unit cost Total Cost

(Birr) (Birr)
1 Electricity KWh 1,056,000 0.5 511,420

2 Furnace oil Kg 3,866 16.53 63,903

 3 Water M3 28,000 1.5 42,000

4 Total 617,323

[Link] AND ENGINEERING

8.1Technology

a) Soap Production Process

Soaps are the product of the reaction between a fat and sodium hydroxide. Soap
is produced industrially in four basic steps. This article lists different steps
because in the industrial processes

described each of these is done over several process steps, but in principle it
could be done in the three steps outlined here.

Step 1 - Saponification

A mixture of tallow (animal fat) and coconut oil is mixed with sodium
hydroxide and heated. The soap produced is the salt of a long chain
carboxylic acid.

Step 2 - Glycerine removal

Glycerine is more valuable than soap, so most of it is removed. Some is left

in the soap to help make it soft and smooth. Soap is not very soluble in salt
water, whereas lycerine is, so salt is added to the wet soap causing it to
separate out into soap and glycerine in saltwater.

Step 3 - Soap purification

Any remaining sodium hydroxide is neutralized with a weak acid such as

citric acid and two thirds of the remaining water removed.

Step 4 – Finishing
 Additives such as preservatives, colour and perfume are added and mixed in
with the soap and it is shaped into bars for sale. Detergents are similar in
structure and function to soap, and for most uses they are more efficient
than soap and so are more commonly used. In addition to the actual
’detergent’ molecule, detergents usually incorporate a variety of other
ingredients that act as water softeners, free-flowing agents etc.

b) Soap Quality

T. F. M or total fatty matter is a measure for identifying the amount of fatty

matter present in soaps. TFM of a sample of soap can be determined as
follows. A known weight of the soap is dissolved in water and the solution is
treated with dilute sulphuric acid. The soap decomposes to sodium suplphate
and fatty acids. The fatty acids so formed can be estimated. From this TFM
can be calculated.

9 Engineering
9.1 Machinery and equipment

The total cost of machinery and equipment is estimated at Birr 22 million.

. Table 5.1 shows the list of machinery and equipment required by the
envisaged plant.

No Material Qty
Type
Qx-600 mixer machinery 3
1 Trio miller machinery 3
2 Double screw vacuum plodder 3
machinery
3 Electron soap cutter machine 3
4 Vacuum pump 3
6 Packaging Equipment 3
Total cost of machinery 22,000,000 birr
including equipment is
 10 Land, Building and Civil Works Cost

The plant requires a total of 10,000 m2 area of land out of which 6500 m2
is built-up area which includes Processing area, raw material stock area,
offices etc. Assuming construction rate of Birr 8500 per m2. The total
investment cost for building and civil works includung land lease is
estimated at Birr 18 million.

According to the Federal Legislation on the Lease Holding of Urban Land

(Proclamation No 721/2004) in principle, urban land permit by lease is on
auction or negotiation basis, however, the time and condition of applying
the proclamation shall be determined by the concerned regional or city
government depending on the level of development.
The legislation has also set the maximum on lease period and the payment
of lease prices. The lease period ranges from 99 years for education,
cultural research health, sport, NGO , religious and residential area to 80
years for industry and 70 years for trade while the lease payment period
ranges from 10 years to 60 years based on the towns grade and type of
investment.

Moreover, advance payment of lease based on the type of investment

ranges from 5% to 10%.The lease price is payable after the grace period
annually. For those that pay the entire amount of the lease will receive
0.5% discount from the total lease value and those that pay in installments
will be charged interest based on the prevailing interest rate of banks.
Moreover, based on the type of investment, two to seven years grace
period shall also be provided.
However, the Federal Legislation on the Lease Holding of Urban Land apart
from setting the maximum has conferred on regional and city governments
the power to issue regulations on the exact terms based on the
development level of each [Link] also

[Link] & TRAINING REQUIREMENT

MANPOWER AND TRAINING REQUIREMENT

The plant requires 100 workers, and their annual expenditure, including fringe
benefits, is estimated at Birr 179,280. For details see Table 6.1 below.
 Table 6.1
MANPOWER REQUIREMENT AND ANNUAL LABOUR COST

Sr. Description Req. Salary, Birr

No. No. Monthly Annu
al
1. Plant manager 1 12,500 30,000
2. Secretary 2 4700 8,400
3. Accountant 2 9000 10,800
4. Clerk 2 5500 6,000
5. Technician Operator 24 8,400 28,800
6. Assistant operators 24 5,800 21,600
7. Maintenance engineer 6 10,000 12,000
8. Store keeper 4 3500 6,000
9. Purchaser/sales man 14 5900 10,800
10. Driver 4 6000 5,400
11. Guard 4 5600 7,200
12. Cleaner 11 3200 2,400
Sub-Total 100 12,450 149,400
Employee benefit (20% - - 29,880
BS)
Total - 179,280

TRAINING REQUIREMENT

The production operators will be trained on the operation and maintenance of

machinery for about two weeks during commissioning by the expert of
machinery supplier. The total cost of training is estimated at Birr 20,000.

FINANCIAL ANALYSIS

The financial analysis of the biscuit project is based on the data presented in the
previous chapters and the following assumptions:-

Construction period 1 year

Source of finance 80 % equity 20 %
loan
Tax holidays 3 years
Bank interest 12.5%
Discount cash flow 12.5%
Accounts receivable 30 days
Raw material local 30days
Raw material, import 90days
Work in progress 2 days
Finished products 30 days
Cash in hand 5 days
Accounts payable 30 days

TOTAL INITIAL INVESTMENT COST

The total investment cost of the project including working capital is estimated
at Birr 50 million, of which 31 per cent will be required in foreign currency.

The major breakdown of the total initial investment cost is shown in Table 7.1.
Table 7.1
INITIAL INVESTMENT COST

Sr. Total Cost

Cost Items (‘000 Birr)
No.
1 Land lease value 3000.0
2 Building and Civil Work 10,000
3 Plant Machinery and Equipment 27,000.0
4 Office Furniture and Equipment 1000.0
5 Vehicle 5000.0
6 Pre-production Expenditure* 1000.
7 Working Capital 3000.
Total Investment cost 50,000.00
Foreign Share 31
[Link] EVALUATION

[Link]

Based on the projected profit and loss statement, the project will generate
a profit through out its operation life. Annual net profit after tax will grow
from Birr 244 thousand to Birr 4.66 million during the life of the project.
Moreover, at the end of the project life the accumulated net cash flow
amounts to Birr 33.85 million.

[Link]

In financial analysis financial ratios and efficiency ratios are used as an

index or yardstick for evaluating the financial position of a firm. It is also
an indicator for the strength and weakness of the firm or a project. Using
the year-end balance sheet figures and other relevant data, the most
important ratios such as return on sales which is computed by dividing net
income by revenue, return on assets (operating income divided by assets),
return on equity (net profit divided by
equity) and return on total investment (net profit plus interest divided by
total investment) has been carried out over the period of the project life
and all the results are found to be satisfactory.

[Link]-even Analysis

The break-even analysis establishes a relationship between operation costs

and revenues. It indicates the level at which costs and revenue are in
equilibrium. To this end, the break-even point for capacity utilization and
sales value estimated by using income statement projection are computed
as followed.

Break Even Sales Value = Fixed Cost + Financial cost

Variable Margin ratio (%)

Break Even Capacity utilization = Break even Sales Value X 100 = 65 %

Sales revenue
[Link]-back Period

The pay-back period, also called pay – off period is defined as the period
required for recovering the original investment outlay through the
accumulated net cash flows earned by the project. Accordingly, based on
the projected cash flow it is estimated that the project’s initial investment
will be fully recovered within 6 years.
[Link] Rate of Return

The internal rate of return (IRR) is the annualized effective compounded

return rate that can be earned on the invested capital, i.e., the yield on the
investment. Put another way, the internal rate of return for an investment
is the discount rate that makes the net present value of the investment's
income stream total to zero. It is an indicator of the efficiency or quality of
an investment. A project is a good investment proposition if its IRR is
greater than the rate of return that could be earned by alternate
investments or putting the money in a bank account. Accordingly, the IRR
of this project is computed to be 18.31%indicating the viability of the
project.

E. Net Present Value

Net present value (NPV) is defined as the total present (discounted) value
of a time series of cash flows. NPV aggregates cash flows that occur during
different periods of time during the life of a project in to a common
measuring unit i.e. present value. It is a standard method for using the
time value of money to appraise long-term projects. NPV is an indicator of
how much value an investment or project adds to the capital invested. In
principle, a project is accepted if the NPV is non-negative.
Accordingly, the net present value of the project at 10% discount rate is
found to be Birr 11.28 million which is acceptable. For detail discounted
cash flow see Appendix 7.A.5.

Environmental protection and safety

Environmental issues associated with the operational phase of soap production and
processing primarily include the following:

Solid waste and by-products

Water consumption and management

Energy consumption and management

Solid waste and by-products

Soap processing activities generate significant quantities of organic solid waste, residues and by-products,
the amount of waste generated depends on the quality of the raw materials and on process efficiency.
Wastes, residues, and by-products may be used for producing commercially viable by-products or for
energy generation. Recommended techniques for minimizing the volume of solid waste and by-products
for disposal include the following:
Reduce product losses through better production/storage control (e.g., monitor and adjust air
humidity to prevent product losses caused by the formation of molds on edible materials).
Collect residues from the raw material preparation phase for conditioning (drying) and
reprocessing (grinding) to yield by-products (e.g., animal feed).
Return waste and residues to fields to assist in soil nutrient management; for example, EFBs
from oil palm plantations with tree trimmings are a valuable soil amendment and/or can be
composted with vegetable oil wastewater effluent.
Water consumption and management

soap facilities require significant amounts of water for crude oil production (cooling water),
chemical neutralization processes, and subsequent washing and deodorization. General
recommendations to reduce water consumption, especially where it may be a limited natural
resource. Sector-specific recommendations to reduce water consumption, optimize water use
efficiency, and reduce subsequent wastewater volumes include the following:

When economically viable, consider the use of physical refining instead of chemical
refining to reduce water consumption.
Replace water-based conveyor systems by mechanical systems
Use dry clean up techniques before rinsing floors.
Apply cleaning chemicals using the correct dose and application method.
Properly treat and discharge cleaning solutions

Energy consumption and management

soap processing facilities use energy to heat water and produce steam both for process
applications and cleaning processes. Other common energy consumption systems include
refrigeration and compressed air. Sector-specific recommendations include the following:

Improve uniformity of feed to stabilize and reduce energy requirements. Increase efficiency
of air removal in sterilization vessels to improve heat transfer.

Identify and implement opportunities for process heat exchange

Where feasible, use anaerobic digestion for wastewater treatment and capture methane for
heat and / or power production.

Social benefit of the project

The envisaged project possesses wide range of benefits that help promote the socio-
economic goals and objectives stated in the strategic plan of the amhara Regional State. It
also boosts the inter- sectorial linkage between the agricultural and industrial sector. At the
same time, therefore, it helps diversify the economic activity of the region. The other major
benefits are listed as follows:
[Link] and Income Generation

the proposed project is expected to create employment opportunity to several citizens of the region.
That is, it will provide permanent employment to 100 professionals as well as support stuffs.
Consequently the project creates income of Birr 139.68 thousands per year. This would be one of the
commendable accomplishments of the project.

[Link] IMPLICATIONS
Soap is designed as a product to be used once then flushed down the drain,
so as expected the environmental implications of their manufacture are not
nearly so great as many other chemical processes. There are two main areas
of concern: the safe transport and containment of the raw materials, and the
minimization of losses during manufacture.
16. ANNEXES