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To establish consultative and professional service arrangement between ADA and KHD, Bahir Dar, Ethiopia

Memorandum of Understanding Between Amhara Development Association and KHD

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Memorandum of Understanding between Amhara Development Association and Kiflemariam Horticulture Development on Improvement Plan of Tis Aba‐Lima Fruit and Vegetables Development Farm 1. PARTIES

The parties to this Memorandum of Understanding hereinafter referred to as the “MOU,” are the Amhara Development Association, hereinafter referred to as “ADA,” and Kiflemariam Horticulture Development hereinafter referred to as “KHD.”

Description of names and titles: terms such as Tis Aba-Lima Fruit and Vegetable Development Farm, hereinafter referred to as the “Farm”, and Business and Service Plan of the Farm, hereinafter referred to as the “Business Plan”.

2. PURPOSE AND SCOPE

The purpose of this MOU is to establish consultative and professional service arrangement between the ADA and KHD and together, the Parties to conduct the preparation and the subsequent implementation of the Business Plan of the Farm. The arrangement ultimately allows the full utilization of the Farm’s spacio-temporal features to the best of its production and service rendering potential in well organized way. In general terms the Business Plan will clearly define the activities, services, and projected costs and incomes of the farm for the coming 10 years. The Business Plan will indicate the vision, mission, strategy, goals, and objectives of the farm. It will also identify and plan the specific produces and services that the farm is going to be specialized. For more information the detail contents of the Farm’s Business Plan is attached herewith as Annex-1.

On top of this, this MOU supports a variety of activities to be implemented before and during the course of the accomplishment of the Business Plan including:

Conducting diagnostic survey on cost of inputs, raw materials, and marketing aspects of the farms services and produces which will be used as input during the preparation of the business plan (4 days).


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Provision of on Farm Training on: ‘Establishment & Management of Medium Scale Plant Nursery (7 days)’; ‘Fruit & Vegetable Crops Production & Management (10 days)’; and ‘Propagation of Horticultural Crops (6 days)’.

Providing technical support when the medium scale plant nursery site is established, in 3 travels (each travel with 4 days stay i.e., totally for 12 days); and

Providing technical support during the implementation of the whole business plan for 12 months in 6 travels (one travel on every other month bases and at each travel with 4 days stay i.e., totally for 24 days). For more information the detail contents of the round trips and number of duty and travel days are indicated in Annex-2 new.

This MOU represents a non-binding expression of intent between the Parties to work together to upgrade the performance of the farm to its production and service potential. WHEREAS ADA and KHD are desirous to enter into a MOU between them, setting out the terms, conditions, and services to be provided by such collaboration.

In due course, the purpose and scope of this MOU is intended to: • Improve the farm’s productivity; • Introduce modern farm management practices; • Introduce better facility management; • Improve farm manpower; and • Ultimately transform the farm to modern production and training center in

the way that it will be exemplar to similar activities in the local community in particular and the region at large.

3. BACKGROUND

Tis Aba-Lima Vegetable and Fruit Development Farm is located in Amhara Region, South Wollo Zone, Ambassel Woreda, Kebele 03. The farm is located 453 km away from Addis Ababa, or 415 km from Bahir Dar, or 51 km north of Dessie. The farm has an area of 17.5 hectare of land. According to the information obtained from the farm, the farm was established by a zealous individual named Girazmach Zereey Behit in 1937 E.C. This 65 years old farm has been managed by a number of owners such as, by the founder and his family (1937-1967 E.C.), producers cooperative (1967-1983 E.C.), Administration Office of Ambasel (1983-1989 E.C.), and finally by ADA (1989 E.C. to date).


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Initially, the farm was organized relatively with modern facilities and management structures. During its heyday, the existence of the farm by itself motivated the nearby farmers to engage in fruit and vegetable production activities. It has been a source of planting material of certain horticultural crops. The farm also functioned as training center for the ANRS farming community. Moreover, the farm has been a source of fresh fruits and vegetables that had been marketed in Dessie and Addis Ababa markets. However, due to a number of reasons the performance of the farm has incessantly been reduced to the level it could not recover its running costs.

Cognizant of this, ADA is currently looking for the possibility of upgrading the farm to modern integrated farm and service provision center through its restructuring program specifically designed to it.

3.1. KHD

Ethiopia has a wide range of edaphic and climatic conditions that permit the production of tropical and subtropical fruit crops. Temperate crops can also be grown in the highlands. Irrigation can be provided from rivers and fresh water lakes throughout the year. In additions to the growing demand in the local market, the neighboring Arab countries and winter season export to Europe are potential markets for the expansion of the horticulture industry in the country. Despite of these, exports of fresh horticultural produces are currently negligible due to quality and other related problems.

Be aware of the dire needs of the sector for improvement, KHD was established in 2OO8 and since October 2009 it is conducting mushroom production and marketing activities at its farm in Zenzelima Kebele, Bahir Dar. The enterprise is a pioneer organization in mushroom production and marketing in the Amhara Region.

On top of this, KHD is engaged in the following services to contribute its bit for the improvement of horticultural produces and services in Ethiopia.

Services being provided include:

• Mushroom and spawn production; • Grafted fruit tree seedling production; • Vegetable production; and • Fattened holiday sheep production.


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Short-term trainings being available include:

• The production, postharvest handling, utilization, and marketing of fresh mushrooms;

• Planning, establishment and management fruit and vegetable farms; • Planning, establishment, and management of small & large scale commercial

plant nursery businesses; • Techniques of vegetative propagation of major horticultural crops; and • Postharvest handling and processing of major horticultural crops.

3.2. ADA

The ADA has been established as non-government and non-profit association on 28 May 1992 to deal its part on the issues of rehabilitation, economic recovery, and development in the Amhara Region following the advent of peace and stability in Ethiopia. Its program mission is to catalyze development endeavors of the people in the region envisaged to see the people of the region being free from poverty and backwardness, and be exemplary development actor in making this vision a reality.

3.3. COLLABORATIVE OBJECTIVES AND ACKNOWLEDGEMENTS

KHD had conducted a preliminary project appraisal at the Farm from 14 to 16 September 2010 to identify the potentials and constraints of the farm and be able to visualize the intervention areas for future improvement works. The findings of the study were reported to ADA in the fortnight week of the trip to the farm. Following the presentation of the findings of the study to directors of ADA on 29 October 2010, both ADA and KHD recognized that the development of farm Business Plan that will serve as a roadmap and a planning tool is incontrovertible.

The parties understand that the development of the Business Plan and its subsequent implementation will allow the introduction of improved varieties and production methods of fruit and vegetable crops at local and regional level, improve the performance of the farm, reduce cost of production, reorganize the farm and unleash its potential to be center of Excellency in certain training areas, and build the farm as improved agricultural technology transfer center. As a nutshell, the Business Plan and its ensuing implementation paves the way to reorganize and restructure the farm as income generating center while providing specific services to the community.

Thus, the performance improvement of the farm creates job opportunity for local society, be a source of improved methods of production and planting materials, increases food production and diversification, and plays a role in the improvement


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of the GDP of the country, and ultimately contributes its part to realize the vision of ADA; the fight against poverty.

4. RESPONSIBILITIES UNDER THIS MOU

4.1. KHD HEREBY AGREES TO PROVIDE THE FOLLOWING SERVICES IN RESPECT OF THE AGREEMENT:

• Prepare detailed Farm Business Plan (1 month) as outlined at for Annex-1; • Prepare training manuals (1 month) and provide on farm theoretical and

practical trainings on three training topics as outlined at Annex-2; • Provide technical support during the establishment of “Medium scale plant

nursery site” at the farm for 12 days at 3 different travels; and • Provide technical support during the implementation of the Business Plan for

15 months (24 days arranged at 6 different travels on every other or two months bases).

4.2. ADA HEREBY AGREES TO PROVIDE THE FOLLOWING FINANCIAL AND MATERIAL RESOURCES IN RESPECT OF THE AGREEMENT:

I. Pay KHD 50% of the total sum it requested i.e., pay KHD Birr 88,950.00 (Eighty eight thousand and nine hundred fifty) out of the requested original sum Birr 177,900.00 (one hundred seventy seven thousand and nine hundred). While the calculated half Birr 88,950.00 will be considered as the support of KHD contributed to ADA to support its development activities. In return, ADA will write letter of recognition to KHD for the support it provided. Please, see description of cost items attached herewith as Annex-2. Conditions and payment arrangements are outlined from “a” to “c” as follows:

a. Birr 18,450.00 (eighteen thousand and four hundred fifty) is a payment for Farm Business Plan Preparation. And its payment arrangement will be as follows: o Birr 10,000.00 (ten thousand) will be paid immediately after the

agreement has been signed; and Birr 8,450.00 (eight thousand and four hundred fifty) will be paid up on submission and approval of the Farm Business Plan.

b. Birr 31,800.00 (thirty one thousand and eight hundred) is payable for the preparation of training manuals and to offer 3 trainings that will be conducted at farm level (description of cost items is attached at Annex-2). And its payment arrangement will be as follows:


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o Birr 18,200.00 (eighteen thousand and two hundred) will be paid upon the submission of the training manuals and Birr 13,600.00 (thirteen thousand and six hundred) at the end of the training sessions.

c. Birr 38,700.00 (thirty eight thousand and seven hundred) will be payable for the technical support that will be provided throughout the establishment of the nursery site and trial production; implementation of the business plan (see Activity plan, Annex-3 attached herewith). And its payment arrangement will be as follows: o Birr 7,200.00 (seven thousand and two hundred) will be paid when the

nursery site is established and Birr 13,710.00 (thirteen thousand seven hundred and ten) will be paid in four installments within the remaining 11 months period of the implementation of the business plan, and the remaining 20% of the total payment i.e. Birr 17,790.00 (seventeen thousand seven hundred and ninety) will be paid at the end of the agreement period.

II. Provide vehicle and driver and cover the cost of the driver, fuel and maintenance for a minimum of 13 round trips to and from South and North Wollo more specifically to and from Dessie during the preparation and implementation of the business plan and if need arises, for the quest of improved planting materials and market surveys;

III. Cover the cost of training inputs, transportation, stationery & printing, lunch & entertainment expenses during the training period; and

IV. Timely procure the manpower, equipments, furniture, tools, machines, and raw materials which will be described in the business plan (in type and quantity) during the implementation of the farm business plan under discussion.

5. CONTACT DETAILS Amhara Development Association (ADA) Bahir Dar, Ethiopia Telephone: +251-582-201008 Fax: +251-582-201088 E-mail: [email protected]

Kiflemariam Horticulture Development (KHD) P. O. Box: 341, Bahir Dar, Ethiopia Cell phone: +251918053883 E-mail: [email protected] Website: http://kmyb.yolasite.com/


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6. TERMS AND CONDITIONS

This MOU covers the time period from the beginning of the agreement signed and stays for 18 months. KHD will request ADA for payment release as per the payment arrangement listed under sub-title “4.2” sub-section “I” from “a” to “c”. Payment is expected within 2 days of the request. ADA will not request any type of invoice nor reimbursements for the series of payments that it made to KHD.

7. TIME PERIOD

This MOU shall be effective upon the signature of ADA and KHD authorized officials. It shall be in force from the beginning of the agreement signed and stays for 18 months. The undersigned hereby agree to this MOU and thereby, authorize its execution.

Signature and Dates

____________________________ ____________________________

Amhara Development Association Kiflemariam Horticulture Development

(ADA) (KHD)


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ANNEX1: CHECK LIST FOR THE DEVELOPMENT OF BUSINESS AND SERVICE PLAN: ADA TIS ABALIMA FARM

EXECUTIVE SUMMARY

1. DESCRIPTION OF THE PROJECT 1.1. ADA AND FARM PROFILE 1.2. VISION, MISSION, GOALS AND OBJECTIVES OF ADA AND THE FARM (PROJECT)

2. INDUSTRY (SWOT) ANALYSIS 2.1. STRENGTHS 2.2. WEAKNESS

2.3. OPPORTUNITIES 2.4. THREATS

3. MARKETING PLAN 3.1. PRODUCT DESCRIPTION

3.1.1. Fruit and vegetable crops 3.1.2. Improved and known variety nursery stocks 3.1.3. Fattened beef 3.1.4. Trainings to be provided

3.2. LOCATION 3.3. MARKET AREA FOR ALL PROSPECTIVE PRODUCES AND SERVICES

3.4. TARGET CUSTOMERS FOR PRODUCES AND SERVICES 3.5. PRODUCT DEMAND FOR PRODUCES AND SERVICES 3.6. PRICING OF PRODUCES AND SERVICES 3.7. SALES FORECAST FOR 10 YEARS OF PRODUCES AND SERVICES 3.8. MARKETING STRATEGY

3.8.1. Promotional measures 3.8.2. Marketing budget

4. PRODUCTION AND SERVICE PLAN 4.1. PRODUCTION PROCESS

4.1.1. Fate of existing old fruit trees and rejuvenation plan 4.1.2. Production of fruit and vegetable crops


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4.1.3. Production of improved and known variety nursery stocks 4.1.4. Production of fattened beef 4.1.5. The how of trainings will be organized and addressed

4.2. FARM RESTRUCTURING PLAN 4.2.1. Farm layout for all produces and services

4.3. PRODUCTION CAPACITY AND PROGRAM 4.3.1. Production capacity 4.3.2. Production program 4.3.3. Training provision program

4.4. FIXED INVESTMENTS 4.5. FARM LOCATION AND SITE 4.6. RAW MATERIALS REQUIREMENT, AVAILABILITY, AND COST 4.7. LABOR REQUIREMENT, AVAILABILITY, AND COST 4.8. FARM OVERHEAD EXPENSES 4.9. PRODUCTION COSTS

5. ORGANIZATION AND MANAGEMENT 5.1. FORM OF ORGANIZATION 5.2. ORGANIZATIONAL STRUCTURE 5.3. KEY PERSONNEL QUALIFICATION AND EXPERIENCE 5.4. PREOPERATING ACTIVITIES AND EXPENSES

5.4.1. Pre-operating activities 5.4.2. Pre-operating expenses 5.4.3. Gant chart

5.5. OFFICE EQUIPMENTS AND FURNITURE 5.6. ADMINISTRATIVE OVERHEAD COSTS 5.7. ADMINISTRATIVE HUMAN REQUIREMENTS

6. FINANCIAL PLAN 6.1. BASIC FINANCIAL ASSUMPTION 6.2. INITIAL INVESTMENT COST 6.3. TOTAL ANNUAL PRODUCTION/ OPERATING COSTS 6.4. SOURCE OF FINANCE 6.5. PROJECTED FINANCIAL STATEMENT


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6.5.1. Projected profit and loss statement 6.5.2. Projected cash flow

6.6. Project appraisal 6.6.1. Return on initial investment (ROI) 6.6.2. Return on owner’s (ADA’s) investment (ROOI) 6.6.3. Pay Back Period 6.6.4. Net present value (NPV) 6.6.5. Internal rate of return (IRR) 6.6.6. Break even point (BEP) 6.6.7. Sensitivity and risk analysis

7. SOCIAL, ECONOMICAL, AND ENVIRONMENTAL ASPECTS OF THE PROJECT (FARM)

8. FUTURE PLAN (IF ANY)


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Annex-2: cost break down for the consultative services provided by Kiflemariam Horticulture Development

S.No, Description Unit Quantity Unit cost

Total cost

Remark

Round trips

Days on duty + days on travel

0 Diagnostic survey in South & North Wollo Days 4 0 0 1 4

1 Business & service plan development

1.1 Fruit and vegetable production and management 1

6750 6,750

1.2 Nursery site establishment and management 1 4750 4,750

1.3 Livestock fattening and marketing 1 3200 3,200

1.4 Development of training components

offered at the farm 1 3750 3,750

Sub‐total 18,450

2 Trainings to be offered at Farm level

2.1 Training on Establishment & Management of Medium Scale Nursery

1 7

2.1.1 Manual preparation (theoretical & practical) Pages 60 87.5 5,250

2.1.2 Training (theoretical & practical) Hours 40 100 4,000

Sub‐total 9,250

2.2 Training on fruit & vegetable crops production & management

1 10



Sub‐total 15,150

2.3 Training on propagation of horticultural crops

1 6



Sub‐total 7,400

3 Technical support during the

implementation of the business plan

3.1 Establishment of medium scale nursery site

(3 trips x 4 days) Days 12 600 7,200 3 12

3.2 Technical support during trial production Month 15 2100 31,500 6 24

Sub‐total 38,700

Total 88,950 13 63

Annex 3: Activity Plan

S.No, Activities Year 2011 Year 2012

Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun July

0 Diagnostic survey in South & Noth Wollo

1 Preparation, submission, presentation, & approval of farm business & service plan

2 Approval of requested fund for the

implementation of the farm business plan

3 Preparation and submission of 3 training manuals

4 Implementation of farm business and

service plan

4.1 Re‐organizing the farm manpower

4.2 Procurement of training materials

4.3 On‐farm training of trainees

4.4 Laying out the farm and locating each farm activity areas

4.5 Establishing nursery site

4.6 Procurement of farm tools, equipments, furniture, etc

4.7 Installation of farm production tools

4.8 Procurement of farm raw materials

4.9 Land preparation

5 Trial production

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