Technical Proposal to Conduct a Business Opportunity Study for the Industrial Processing and Marketing

of Animal Feed

Submitted to Addis Ababa Chambers of Commerce and Sectoral associations (AACCSA)

Submitted by: MAE Consulting PLC.

May 2021

Addis Ababa
Background Information
The feed sub-sector is central for all livestock commodities and is a key pillar of livestock
growth and transformation from various perspectives. From economic point of view, about 70%
of the cost of animal production is feed and suggesting economic feasibility of animal agriculture
is mainly a function of quantity or quality of nutrients and the science of feeding. Thus feed is a
point of convergence and a critical commodity for which all livestock species compete and it is a
major pillar towards ensuring economic, social and environmental goals of livestock production.
The supply of processed animal feed stuffs is very limited in Ethiopia.
According to the Ethiopian Animal Feed Industry Association, there are a total of 32 privately
owned feed processing plants and 28 farmers union’s animal feed manufacturers currently
operating in the country. Moreover, majority of them are working below their designated owning
to several reasons including: low supply of raw materials, lack of commercial orientations by the
farmers, poor awareness about processed feeds utilization by livestock producers, lack of tax
exemptions and double taxations for individual feed ingredients in the compound feed mixtures.
Consequently, most feed processing plants are primarily producing for their own consumptions
with very limited supply to the market.
Study by Birhanu, et al. 2014 indicated that only five manufacturers that are congregated in and
around Addis Ababa were producing feed for sale with an average annual feed production of
about 8,997 metric tons.
Availability of supplementary feeds (both conventional and nonconventional types) per se is not
the only challenge to the development of livestock industry in general and the dairy industry in
particular, but also quality of the feeds is equally important.
Comments on the terms of reference
The terms of reference is clear. But it is good if prepared in silos for each of the assignments
since the objectives and expectations for each of the product varies.
Understanding of the assignment
With a prime objective of a feasibility study informed investor attraction and retention, the
assignment desires to generate a comprehensive pre-feasibility study that unveils the options and
alternative windows of opportunity in the animal feed industry. To this end, it wants to reveal
current market and price trends, technology, investors’ appetite, users\feed consumers’
perceptions, policy and regulations, competitiveness and competition, inter-firm cooperation, and
supply chain integration.
Methodology of the feasibility\opportunity study
The consultant examines the feasibility of the animal feed processing and marketing across
technical, financial, technological, economic, and environmental dimensions. Hence, it explores
windows of opportunity in terms of cost, availability, and quality. Therefore, it is decided to
follow two phased approach to exact this assignment. Phase one will be pre-occupied with the
constraint and opportunity analysis of the animal feed sector by looking in to the supply chain
and value chain assessing the status quo of important elements and validate existing gaps in the
sector. Therefore, we assess and evaluate the following parameters of the sector to seek windows
of opportunity and seize when it opens. The variables of status quo assessment (both supply
chain and value chain) include:
 Animal feed landscape (forage, compound\concentrated feed, cultivated fodder and
collected fodders, green fodder, dry fodder, cut grasses, weeds and rogues, leaves of some
trees and banana trunk)
 Access and availability of commercial dairy feeds, natural forages, cultivated fodder and
crop by-products
 Actors and stakeholders in the sector crop feed producers, vendor, wholesaler, retailer and
dairy farmers, livestock keepers and physical addresses of animal feed producers & feed
operators information
 Feed producers concentration areas/locations and issue of under-served areas
 Manufacturers’ priority (feed for poultry, small ruminants, dairy cattle, etc.)
 Level of consumption of inputs (maize knob, wheat barn, etc.) by feed manufacturing
 Feed delivery (in bulk for reconstitution or re-packaging at retail)
 Consumer points and distance of feed stores from agro-vet stores
 Availability\access of Feed conservation and storage like hay barns
 Ownership of feed stores and pooling of warehousing space
 Feed manufacturing technology and know-how in feed milling
 Scale and origin of key feed manufacturing machineries feed weighing machines and
mixers, small/medium millers
  Feed analysis facilities like laboratories and nutritional quality
 Feed transportation costs
 Seasonal feed prices (dry seasons &wet seasons)
 Feed sales price in urban and rural areas
 Existing financial institutions
 Policies and regulations governing feed industry
Based upon the above parameters, the consultant will develop constraints and opportunity
analysis with demystified seize-able windows of opportunity.
The next phase is to develop a pre-feasibility document that is informed by the constraints and
opportunity report of phase one.
The pre-feasibility study will make a deep-dive investigations using industry analysis in terms
of:
 Cost analysis (machinery, erection & installation, furniture and fixture, engineering, etc.)
 Market analysis (demand and supply in the past three years, target markets, etc.)
 Technical analysis (list of machinery both at local and from import)
 Personnel (types and number of staffs required, profession level and associated
remuneration)
 Economic analysis in terms of payback period, net present value, and benefit-cost ratio
 Financial statement comprising five years forecast of sales, cash flow, and balance sheet
and income statements.
 Necessary assumptions for revenue, operating, and cost of sales
Tools for data collection
The consultant will gather both qualitative and quantitative data from secondary and primary
sources. We conduct desk research, key informant interviews, and animal feed facility visits to
access valid data.
Desk research:
The consultant will make investigations of relevant documents including national animal feed
strategy, technical papers and assessments by NGOs, technical and specifications available at
repositories of private feed producers and manufacturers, market assessment reports of the feed
sellers and buyers, university theses and dissertations.
Key Informant Interviews
The consultant will make an in-depth face-to-face interview with selected representatives of
actors in the animal feed sector in order to get insight the current information on the animal feed
industry\sector like cost and prices, technology, equipment, investment appetite, machinery
import and local availability, demand and supply trends, collective actions around the sector, and
competitiveness about the sector.
Interviews will be conducted with ministry of agriculture, federal and regional livestock
agencies, Ethiopian food and pharmaceutical authority, environmental authority, federal and
regional pastoral development offices, selected government and private laboratories and food
nutrition analysis facilities, selected feed producers and manufacturers\suppliers including feed
farm owners\farmers, Ethiopian agricultural research institution like at Bishoftu feed
demonstration site, selected fodder collectors\individual sellers, selected abattoirs\slaughters and
dairy farmers, poultry groups or farmers, small ruminant groups\shoat\sheep-goat associations,
NGO programs supporting value chain like USAID, SNV, Agri Pro-Focus, etc.
Hence, four interview guides shall be developed
 Interview guide for government sectors
 Interview guide for private actors (abattoirs and dairy, poultry, shoat)
 Interview guide for feed manufacturers\suppliers or producers
 Interview guide for NGOs
Facility visits
The consultant will undertake selected visits of feed millers and mixers of animal feed
manufacturers requesting their consent. This is very important in developing the pre-feasibility
report since it helps to inform recent machinery costs, preference, and understand the value chain
and supply chain work flows.
Analysis of the study
We use content, thematic, & domain analysis (economic, institutional,
technological, etc.) for qualitative data and descriptive as well as comparison pivot
tables for qualitative data.
Deliverables
The consultant will deliver the following deliverable outputs in sequence
Inception report with clear methodological grid, data collection tools, work-plan,
and research team assigned roles and composition, interview protocols\guides
Constraints and Opportunities Analysis report----phase 1
Pre-feasibility report--------------------------------------phase 2
Proposed structure of the pre-feasibility report:
The consultant decided to adjourn developing the contents since it is pretty during
the inception report after being informed through consultation with AACCSA.
Quality assurance
The consultant will manage quality at all steps of the study from data gathering to
analysis and report writing. This is done through multiple briefings of each task
with the study team, cross-checking and back-checking of data and data
respondents including recall to them. Data analysis will be tested for reliability and
validity, and also triangulated across sources and methods.
Study ethics:
We follow the ethical guidelines for research available at AACCSA, or any
associated or affiliated organization recommended by AACCSA.
Work-plan
The consultant will assign three highly experienced professionals of various
disciplines to accomplish this assignment. Hence, the following table describes the
position, and man-days allotted for main tasks of the work.
Task Total
Team Animal Economist
Leade Scientist
r
Inception report 3 3 3 9
Desk review 2 4 4 10
Key Informant Interview and 3 3 3 9
facility visits
Constraints and opportunities 2 2 2 6
report
Draft Pre-feasibility report 5 2 5 12
Final Pre-feasibility report 5 0 5 10
Total number of man-days 20 14 22 56