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UGANDA GRAIN DEALERS LTD.

BUSINESS PLAN CORPORATE


DOCUMENT
1.0 EXECUTIVE SUMMARY
1.1

Business Concept

Uganda Grain Dealers Ltd. is proposing a maize mill to service the


Kawempe-Tula peri-urban area within Kawempe Division in the northern
outskirts of Kampala city. Uganda Grain Dealers Ltd.willbuy maize and
produce maize meal with bran as a by-product. The proposed dry milled
maize plant will have an operational output capacity of 360 metric tonnes
per annum (or 1 metric tonne per day).
1.2

Financial Features

Uganda Grain Dealers Ltd estimates processing 360 tons of maize


annually to produce 7,200 bags of posho (of 50 kgs each). Peak sales season
is December through March. First year expenses are estimated at UGX
334.84 million with gross sales of UGX 372.96 million. Startup expenses are
estimated UGX 54 million.
1.3

Industry Analysis & Marketing Plan

Posho, a fine flour made from ground corn, is an important part of the East
African diet, and somost rural farmers grow a considerable amount of maize
to process into posho. This results in ahigh demand for corn grinders.
However, because of the high costs associated with purchasinga grinder, the
number of grinders is limited, especially in most of the rural and peri-urban
areas of Uganda. Within these areas, most of the corn grinders are separated
by distances ranging between 6 to 10 kms that renders them barely
adequate to service the corn-grinding needs of most of the local residents
who depend on posho for a large part of their staple diet. This creates a
perfect opportunity for a grindingbusiness if enough corn is grown and
processed within these areas to turn a profit. After an analysis of the
Kawempe-Tula peri-urban area, including those that would grind their corn in
the area, it was decided that there was enough demand for posho and corn
grinding services in the area to turn a profit if a corn grinder were built.
1.4

Management

Uganda Grain Dealers Ltd. will benefit from an experienced


entrepreneurial-based management team. J. Kahafu Enterprises Limited,
a local trading company engaged in the trade of fast moving consumer
goods holds the majority shares in Uganda Grain Dealers Ltd., and is
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responsible for strategic corporate and financial planning. Ms. Neema
Grace and Mr. Honward Kabateraine, are long term residents of Kampala
with a firm knowledge of the local economy and experience in agricultural
management and project infrastructure development, will run the day-to-day
operations. Mr. Cranmer Tayebwa, a Kampala-based advocate and legal
consultant, brings to the table years of milling industry expertise and
industry connections. Ownership interest is allocated at 45% to J. Kahafu
Enterprises Limited, 10% to Ms. Neema Grace, 10% to Mr.
HonwardKabateraine, and 10% to Mr. Cranmer Tayebwa.
1.5

Partnerships

Uganda Grain Dealers Ltd. will strive to form mutually beneficial


partnerships with local farmers and grain traders. The farmers and grain
traders will receive more favourable prices for their crops while Uganda
Grain Dealers Ltd. saves significantly on transportation costs.
1.6

Financial Plan

The corn grinding project would require a loan of UGX 30 million. This
business is projected tohave a Return on Investment (ROI) of 17.48% the first
year and 23.32% in the second year. Similarrates continue into the future.
Projections show that the business should be turning greatprofits after one
year and loan repayments are projected to be met without much strain on
thebusiness or owner.
1.7

Loan Information

Uganda Grain Dealers Ltd. is seeking UGX 30 million in short-term


commercial loan funding. Uganda Grain Dealers Ltd. will leverage this
funding with UGX 40 million of in-kind contributions in the form of capital,
land, labor and expertise. It is proposed that the loan of UGX 30 million will
pay for the equipment, and part of the working capital costs. The loan will be
for a period of two years at 21 percent interest, with a grace period of six (6)
months in the first year and a monthly payment of UGX 2.5 million per
month during Month 7 Month 12, and a further monthly payment of UGX
1.25 million in the second year of the project with payments being made
every first and third Monday of each month. Loan funding will greatly reduce
the financial start-up burdens and provide for a much quicker path to
profitability.
1.8

Economic Impact
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With current high maize meal prices and frequent shortages, Uganda Grain
Dealers Ltd. will provide a cheaper product and assure year round availability.
Local farmers and grain traders will also save costs by delivering their crops to a
local mill. Similarly, more local land owners would be able to farm with a local mill
that can buy their product. This will stimulate the local economy and increase cash
flow within the domestic agricultural economy.

2.0

PROJECT PROFILE

The proposed project is for setting up a Maize Flour Mill. The Mill will be
established the Kawempe-Tula peri-urban area of Kawempe Division of
Kampala city. The document highlights marketing, management, business
operations and financial aspects required for the establishment of successful
maize milling business venture. The unit will be using modern automated
machinery for all the processes, ensuring quality check throughout the
production process. After processing, the flour will be packed in standard 50
kg-sized packages. The unit will produce premium quality flour to be sold in
the local market, competing with existing brands.
2.1

Project Brief

This document describes the investment opportunity for setting up a Maize


Flour Mill. The said plant will have total installed maize crushing capacity of
360 Tons per year.
2.2

Market Entry Timing

As such there is no specific time required for the entry time in this sector. As
the need for maize flour is increasing day by day due to the increase in
population, investment can be made any time during the year.
2.3

Opportunity Rationale

Agriculture sector contributes 23.1% of the total GDP for Uganda (2013).
However, the rapid rate of population growth in Uganda coupled with
climate-change-induced weather changes, have greatly burdened the
agriculture sector as its productivity is not able to meet the current food
requirements. Lack of infrastructure and a fast-growing population have also
increased demand of food items, which havea direct impact on public &
private sector Flour Mills. Uganda is a medium-density populated country,
which creates a great demand for Maize Flour, whereby big investment
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opportunity exists in this sector. Introduction of latest technology, hygienic
processing and professional staff will also contribute to the popularity and
success of private sector Flour mill. Investment in the private sector can,
therefore, exploit this opportunity and provide good products within easy
access.
2.4

Business Legal Status

The legal structure of Uganda Grain Dealers Ltd. is that of a limited


liability company, the details of which are provided in Section 3.1.5.
2.5 Project Capacity
The proposed project will have the total output capacity of 360,000 kgs of
maize flour per year; the maize flour plant will start milling at 100% of its
installed milling output capacity in the first year of business being a smallscale agro- industrial enterprise.
2.6

Working Time

As per the nature of business recommended timings would be 10 hrs per


day, and 30 days per month. This will be executed in a single shift for smooth
operations of tasks/obligations.
2.7

Project Investment

The Total Initial Cost of the Project is worked out in Table 1 as follows:
Table 1: Project Cost Summary in UGX
S.
Project
Investment Share
No. Component

1.
2.
3.
4.
5.

Existing
Milling
Plant
Structure
Plant
Machinery
and
Equipment
Prelim. & Pre-op. Expenses
Working Capital
TOTAL PROJECT FUNDING

14.29%
51.43%
5.71%
28.57%
100.00
%
4

Project
Promoter
(Equity)

Shortterm
Debt/Loa
n
Financing

Total

10,000,00
10,000,00
0
0
0
16,000,00
20,000,00
36,000,00
0
0
0
4,000,000
0
4,000,000
10,000,00
10,000,00
20,000,00
0
0
0
40,000,00 30,000,00 70,000,00
0
0
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6.
%age of Total Project
57.14%
42.86%
Funding
2.8

100.00%

Project Location

The maize milling plant will be based in the Kawempe-Tula peri-urban


industrial area of Kawempe that is located in the northern outskirts of
Kampala city. This area is convenient because it can easily be accessed by
farmers and grain traders alike with maize grain-laden trucks especially
coming from the Masindi and Central Uganda maize-production areas. The
Kawempe-Tula area is also well-served with basic infrastructure like good
access roads, power connections, as well as water and sewerage disposal
lines.

2.9

Key Success Factors

The commercial viability of the proposed Maize Flour Mill depends on the
following Factors:
Utmost care should be taken while selecting maize. Only the best
quality maize should be used.
Waste Production should be kept at minimum and production process
need to be monitored very carefully.
Advance sale orders can ensure the success of the business.
It is recommended to estimate the maize requirements for the year
and this should be contracted for in advance with the suppliers to
secure the drastic fluctuations in the prices of maize.
Quality maintenance will play an important role as it is evident from
the behavior of the general consumers that they are more specific
towards health issues than ever before.
Cost Accounting system should be strengthened so as to monitor the
entire process and determine the reasons for major variances in the
process such as Material, Labor and Factory Overhead Variances.
Location of the project is of prime importance.
Selection of technical / skilled staff would be very crucial decision to be
made by the management.
Continuous efforts should be made for up-gradation of the technology.
2.10 SWOT Analysis
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The SWOT Analysis that has inspired and driven Uganda Grain Dealers
Ltd. to consider investing in this maize flour milling project is summarized in
Table 2 below:
Table 2: SWOT Analysis for the Maize Milling Project
Strengths
Weaknesses
Continuous
availability
of
raw Strict controls over labour efficiency
material, i.e. high quality maize
need to be observed to reduce the
grain.
waste production to a minimum
Fully automated plant, hence less
level.

Expected
loss at the initial stages of
labour involved.
Availability of low cost labour.
the operation as a result of sales
Product affordable to all income
return from the distributors.
Inexperienced technical staff as
groups.
Wide range of target market.
compared to the units currently in
operation.
Opportunities
Threats
Changes in the current eating habits Already established businesses in
of the people.
same industry.
A large number of people that are not Fluctuation in the price of maize.
brand loyal can be targeted through Quality of the flour is to be monitored
very closely as people are more
marketing campaign.
About 40% of the Maize Flour Market
directed towards health and safety
share comprises of un-branded flour
issues.
competition
and
high
this share can be gained through Strong
promotional
activity
by
the
heavy marketing campaign.
Export opportunity.
competitors.

UGANDA GRAIN DEALERS LTD. BUSINESS PLAN CORPORATE


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3.0

BUSINESS PROFILE
3.1

The Business
3.1.1 Goals and Objectives

Mission Statement Uganda Grain Dealers Ltd. will produce maize flour
(posho) in the Kawempe-Tula area of northern Kampalas suburbs in order to
reduce the retail price of maize flour in this northern suburb of Kampala
district.
Vision Statement- Uganda Grain Dealers Ltd. will strive to stimulate and
support long term economic growth and increased cash flow in the northerly
Kawempe area of Kampala District.
0-3 month goals This is the start-up period where the milling
infrastructure will be built. This includes building of facilities, ordering and
installation of a maize mill, installation of electricity hookups, procuring
maize sources, and the training of staff on operations and maintenance. Full
operation will start during the 2015 first harvesting season.
2 year goals With positive cash flow Uganda Grain Dealers Ltd. will turn
its focus on growth through community involvement. Uganda Grain
Dealers Ltd. will work with non-farming local property owners to encourage
commerce and thus gaining additional maize sources.
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3.1.2 Long Term Goals
Uganda Grain Dealers Ltd. would like to accomplish the following goals:
1. Capture wider profit margins of a value added corn product versus
lower profit margins of raw commodity maize. Regardless of whether or
not the business is organized under a cooperative format where
producers have the ability to be shareholders, or under a corporate
structure (i.e. limited liability corporation), the goal of the value added
venture which utilizes maize as the primary input is to provide
alternative markets for producers of corn and greater market access
for producers.
2. Increase net income of investors and provide a long term return on
investment sufficiently larger than what is expected for alternative
investments.
3. Establish a strong customer base through emphasis on customer
service and relationship building. This will provide the opportunity to
secure long term demand for milled maize flour production.
4. Provide a reputable product that will successfully compete in the
Ugandan maize flour industry and satisfy customer needs and
expectations.
Uganda Grain Dealers Ltd. will use the following objectives to accomplish
the stated goals:
1. The investing company will pool their collective strengths in a manner
that will achieve the optimal outcome and put aside individual interests
that may conflict with the greater good that is to be achieved
collectively.
2. Provide a total maize flour product for the customer that incorporates a
superior level of service and quality. This can be achieved by constant
sampling and testing of the product from the production line, and
constant contact with the customers to assess their changing needs.
3. Hire individuals for key positions who have sufficient knowledge and
experience in the maize flour industry. These people will help to
establish relationships in the maize flour industry, and will further help
to achieve the goals of the venture and build with its customers a
partnership to achieve their complementary goals.
Uganda Grain Dealers Ltd. can use the following strengths to accomplish
its vision and goals.
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1. The group of investors has strong financing capabilities and borrowing
ability.
2. Many investors in the company have management skills from off-farm
jobs both in agri-business and non-agribusiness industries. These skills
include personnel management skills, project management skills, and
some financial management skills.
3. Uganda Grain Dealers Ltd. has a close partnership with an industry
insider, who can provide detailed and valuable information about the
maize flour market and customers.
3.1.3 Products and Service
Uganda Grain Dealers Ltd. will purchase maize and produce maize meal
(posho). Maize grain will be purchased from local and commercial farmers in
any quantities. The maize is typically received bagged in 50kg bags. Maize
will be stored until processed. Once processed, the meal will be bagged in
50kg bags and transported for sale. The grade of the meal is determined by
the finished products fineness. Finer meal is typically used for porridge with
a runny consistency while coarse meal is used for a firm and pasty type
porridge. Finer meal (called Breakfast Posho) is generally more expensive but
ultimately preferred.
3.1.4 Type of Business
Uganda Grain Dealers Ltd. is a newly established company, registered in
December 2012. Uganda Grain Dealers Ltd., is a corporation with four
shareholders who all serve as the board of directors. During operation the
mill will require 4 to 8 labourers respectively during the off and peak seasons
to run at capacity. These workers will be hired and trained prior to the
completion of the facility. The facility will be located at Kawempe-Tula of
Kawempe Division in Kampala district. The mill is expected to be fully
operational for the 2015 harvesting season.
Sales will be divided roughly 50% / 50% between wholesale and retail.
3.1.5 Company Ownership & Legal Status

Uganda Grain Dealers Ltd. is a company incorporated at the Registrar of


Companies through the foresight and vision of its four founding directors.
Uganda Grain Dealers Ltd. was incorporated in the Republic of Uganda on
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11th December 2012. Though relatively new, the directors realize their
Company's vast potential market and opportunity for growth given
implementation of the appropriate strategies, aided by the necessary
finances.

3.1.6 The Shareholders


Shareholder
[%age]

Shares

1. J. Kahafu Enterprises Limited


45%

held

(UGShs)

2,250,000

2. Ms. Neema Grace


10%

500,000

3. Mr. Cranmer Tayebwa


10%

500,000

4. Mr. Honward Kabateraine


500,000
10%
3.2

The Industry
3.2.1 Competition

There are two categories of maize mills in Uganda: small scale mills that only
serve their immediate communities and large scale mills that sell their
product throughout Uganda.
The large scale milling companies are able to spend significantly on
marketing and enjoy customer brand recognition. They are located in areas
of established infrastructure and have strong relationships with maize
producers, grain traders and outlets.
Large scale milling companies do however struggle to serve remote locations
due to transportation costs. They also process such high volumes that quality
is often neglected. Smaller outlets are typically ignored and customer
support is virtually non-existent.
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Competitive Advantage
As the only small scale maize mill within the Kawempe-Tula area, Uganda
Grain Dealers Ltd. willoffer the following advantages over competitors:
Location Uganda Grain Dealers Ltd. will be able to facilitate frequent
deliveries assuring constant availability. Being local also saves transportation
costs.
Product Quality There is currently no quality control enforcement in
Uganda. Larger mills do occasionally produce poor quality meal due to
negligence or simply as a result of processing large volumes of product.
Given the manageable size of the Uganda Grain Dealers Ltd. mill, such
quality control can be performed regularly as needed without any difficulties.
Local Knowledge Traditional maize marketing channels in Uganda
consists of: Producer Grain Trader Milling Agent Retailer Consumer.
With Uganda Grain Dealers Ltds close ties with local businesses, the
company will be able to buy maize without the use of grain traders as well as
sell roughly 50% of the product independent of retailers.

3.2.2 By-Product Market


A maize mill produces bran as a by-product. Not fit for human consumption,
maize bran is a nutritious component of livestock feeds and is even used by
some farmers as a complete replacement for expensive livestock feeds.
Maize bran currently sells for UGX 200, which is around 6-10% of the price of
the same weight in posho. The demand for this product is always high in
Uganda as animal feeds are very expensive and there are many livestock
farmers. Within Kawempe area alone there are several small and medium
scale poultry farmers that currently drive to more distant poultry feed mills
within Kampala district in order to buy maize bran which considerably adds
to the cost of their livestock farming enterprises.
3.2.3 Industry Dynamics
Sales Fluctuations
Seasonal Fluctuations - Throughout rural Uganda people plant small areas of
maize around their huts to supply most of their needs. After drying and
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cleaning the maize they grind it into a meal by hand or with small diesel
powered milling units called hammer mills. This practice effectively removes
these sustenance farmers from the commercial maize meal demand.
However, every year between December and May there is again a sharp
increase in demand for commercially milled maize as these sustenance
farmers once again start relying on commercial meal. This is due to the
following two reasons:

Sustenance farmers do not have access to adequate storage facilities


for their maize. If there is a big surplus of maize during the rainy
season most or all of it might spoil because of rain and high humidity.

Many sustenance farmers simply did not grow enough.

The demand for commercial meal once again drops in May every year when
people again start harvesting their own crops. During the peak months of
December through May most milling companies look at producing twice as
much maize meal per month as they would during the rest of the year.
Annual Fluctuations - The milling industry in Uganda has enjoyed a very
stable environment over the last few years. The main reasons for this
stability are:

Uganda has one of the most stable and favourable natural climates in
Eastern Africa for growing maize. Droughts and occasional floods along
some parts of Uganda do however occur which can impact national
maize production negatively. On average however, Uganda has been
producing more and more maize every year for the last eight years.

During times of less maize production, and even in times of shortages,


maize allocated for human consumption receives priority above other
maize consuming business sectors like stock feed production,
breweries and of course exports. Prices do increase but are simply
reflected in higher maize meal (posho) pricing. This leaves the milling
operators largely unaffected by less availability of maize.

Population Growth and Migration


It can be accepted that over 80% of Ugandans now consume posho as their
staple or secondary diet. The nationwide market for maize meal sales can
therefore be directly connected with population figures and growth rates. The
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current estimated population of Uganda is 35,918,915 and grows with 3.24%
annually.
Although it is difficult to correlate this fact without the proper censuses,
Uganda Grain Dealers Ltd. is confident that the population of Kawempe
Division area is constantly on the increase. This is evident in the rapid
expansion of housing areas, new businesses and various hotels and
restaurants. New businesses generate employment and a steady flow of
villagers from rural areas. In these towns however, people are no longer able
to farm their own crop and they solely rely on commercial posho.

4.0

MARKET STUDY

Maize was introduced in Uganda in 1861 and has since become a major part
of the farming system, ranking third in importance among the main cereal
crops (finger millet, sorghum and maize) grown in the country (USAID, 2010).
Much of the production of maize aims to supply export markets in the region,
mostly especially Kenya and recently Southern Sudan, which are in chronic
maize deficits. The maize sub-sector is estimated to provide a livelihood for
about 3 million Ugandan farm households, close to 1,000 traders and over 20
exporters (UBoS, 2011). Therefore, maize is a growing source of household
income and foreign exchange through exports. Providing more support to the
maize industry is therefore a key part of Ugandas strategy to strengthen its
positioning in regional and world markets.
4.1

Production
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Ugandas small-scale farmers have traditionally cultivated maize for food and
for income generation. It forms an important part of the farming system,
particularly in Eastern Uganda. Maize is widely grown in Uganda. The main
production agro-ecological zones are in the west, east, north and southeast
Uganda (NRI/IITA, 2002) with the Eastern region accounting for over 50
percent of annual production (USAID, 2010). The crop is cultivated on about
1.5 million hectares of land. In terms of area planted, maize is the third most
cultivated crop after banana and beans. In some regions of the country, the
crop has now become a staple food, replacing crops like sorghum, millet,
cassava and banana. Maize is presently considered a major source of income
in the districts of Kapchorwa, Mbale, Iganga, Masindi and Kasese (Figure 1),
with about 7595 percent of the household harvest being sold to earn money
(NRI/IITA, 2002).
Whilst production is influenced by climate patterns, farmers planting
intentions, in excess of subsistence requirements, are largely influenced by
price levels and overall output tends to fluctuate accordingly. The country
has a potential of producing up to 7.5 million metric tons utilizing the current
area under maize by utilizing improved varieties and crop management
technology (AATF/NARO, 2010). However, this is never achieved largely due
to various production constraints including low soil fertility, lack of improved
maize varieties, erratic rainfall patterns and drought stress during some
seasons. Maize production is generally characterized by low yields, which
result in high unit costs and thus low returns. Regardless of the farm sizes,
Ugandas maize yield levels are low and are generally between 1.0 and 1.8
metric tons/ hectare. Crop failure due to drought can cause losses of up to 80
percent. The magnitude of the problem is high in districts such as Kasese
where losses can reach catastrophic levels. Other drought-prone regions
include eastern, northeastern and northern Uganda.
Figure 1: Map of Uganda illustrating flow of maize

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Figure 2: Maize area and production trends in Uganda (1990-2012)
Production ('000 tonnes)

Area Harvested ('000 Ha)

3000
2500
2000
1500
1000
500
0

Source: FAOSTAT (2012).


Over the last two decades (1990-2012), both maize area and production in
Uganda increased dramatically (Figure 2). Harvested area increased from
about 0.4 million hectares in 1990 to 0.65 million hectare in 2001 reaching
1.094 million hectares in 2012 (FAOSTAT, 2013). Similarly, production more
than doubled during the same period, i.e., from 0.602 million tons in to 2.734
million tons in 2012. Clearly, most of the production increase is the result of
area expansion rather than yield improvement as crop yield stagnated at
around 1.5 t/ha in recent years (FAOSTAT, 2012).
4.2

Consumption

While maize has been grown for a long time in Uganda, nonetheless, unlike
in neighboring countries (Kenya, Tanzania, etc.), it does not form a major part
of the populations traditional diet, but is grown primarily for income
generation, rather than for food security. However, the growing cost of
traditional staple foods (such as cooking bananas locally called Matooke) has
had the impact of increasing maize consumption, especially in urban areas.
Kampala alone accounts for about 50percent of formal trade in maize
(USAID, 2010).
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The domestic market for maize in Uganda is estimated at 350,000 - 400,000
metric tons per annum1 (NRI/IITA, 2002). In 2007, domestic consumption
remained at 400,000 MT out of a national availability of approximately
638,000 MT (USAID, 2008). Maize is consumed in various forms grilled or
whole, as a cake [Posho, or Ugali], or as porridge especially in urban
centers. Over 70 percent of the maize is consumed as food, and about
10percent is used as animal feeds (maize bran). There is also increasing
demand for value-added products (maize flour, poultry feeds, etc) especially
in urban centers where maize is gaining importance both as a major food
item and for income generation.
4.3

Marketing and Trade

Ugandas maize export market is mainly regional, comprising of markets


within Eastern and Southern Africa, the Democratic Republic of Congo and
Southern Sudan. Exports of maize to Kenya alone more than doubled from
2004 to 2008 (MAAIF, 2010). Ugandas export potential for maize is
estimated between 200,000 and 250,000 MT per year (USAID, 2010).
Nonetheless, the country has only managed to formally export half of this
amount, reflecting a low level of penetration into the regional markets due to
the poor rural road network, and limited business exposure (USAID, 2010).
Maize is sold across borders through Mutukula for Tanzania, Busia for Kenya,
and Gatuna for Rwanda (Figure 1). The challenge for the cross-border trade,
however, has been the increasing informal (unofficial) cross-border trade
with neighboring countries for difficulty of controlling both quantity and
quality of commodity flow. Of all the five neighboring countries, Kenya
dominates the informal export destinations followed by DRC, Southern
Sudan, Rwanda and Tanzania.
There has been a vibrant cross-border trade in maize with these regional
markets. According to USAID (2010), internal procurement and trade in
maize along Ugandas eastern and southern borders with Kenya and Rwanda,
respectively, remains brisk, as high demand for maize in the neighboring
countries increased the follow of maize from production centers in Uganda.
Trade in maize to these markets is entirely informal. Consequently there are
no accurate data on volume and values of exports to these countries.
Official figures indicate that in 2008 alone, maize is estimated to have
generated over USD 18.5 million in export earnings from an estimated
66,671 tons (MAAIF, 2011). Table 2 presents maize production, import and
export of Uganda (2004-2010). The data on exports of maize reported mainly
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reflects the formal export. According to this data, Uganda exported 812percent of its maize production between 2004 and 2010. However,
informal (unofficial) maize exports appear to far exceeding the formal
(official) exports through. According to Bank of Uganda (2011), the value of
informal maize grain and flour exports to neighboring countries in 2009 and
2010 were estimated at USD 36.67 and 45.83 million, respectively. In
contrast, the value of formal maize grain exports in the same years were
USD 29.07 and 38.21 million, respectively (MAAIF, 2010).
Table 3: Maize production, import and
2004
2005
2006
Production (000 1,080.0 1,237.0 1,258.0
MT)
0
0
3
Imports (000 MT) 153.03 78.79
59.53
Formal Exports 89.32
90.36
118.49
(000 MT)
Formal
exports 8.27%
7.31%
9.42%
as
a
%
of
production

export of
2007
1,261.8
0
42.54
107.08
8.48%

Uganda
2008
2,314.9
1
N/A
66.67

(2004-2010)
2009
2010
2,354.6 2,373.5
6
0
N/A
N/A
94.44
166.25

2.88%

4.01%

7.00%

N/A = data not available.


Source: FAOSTAT, 2011 and MAAIF (2011).

Data obtained from FAOSTAT (2012) indicates that formal imports of maize
have been declining since 2004. The same conclusion is also reported by
USAID (2010). Imports of maize have been high in seasons of low harvest
(e.g., 2004) especially on account of variations in rainfall patterns. By and
large, however, Uganda has always been self-sufficient in maize production
and has not been dependent on imports.
4.4

Description of the Value Chain and Processing

Due to the importance of maize in Uganda, several studies of marketing,


transaction costs and value chain analysis are available including USAID
(2010), NRI/IITA (2002), World Bank (2009) and PMA (2009). The description
provided here is mainly based on USAID (2010) which focused on market
assessment of staple foods in Uganda, World Bank (2009) and PMA (2009).
According to these studies, the transactions involved in the marketing of
maize are complex but the main channels for the commodity flow include (i)
from farmer (farm gate) to agents/traders/village markets in rural areas; (ii)
from rural markets to secondary markets in regional towns such as Iganga,
Bugiri and Sironko; (iii) from urban markets to major buying centers outside
the district and (iv) the export market. Each one of these channels involves a
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number of key players. Figure 3 depicts the typical maize supply chain in
Uganda.
Rural agents are the main buyers of all maize traded in the sub-counties
(smaller administrative units in the districts). Their main function is to buy
and/or assemble maize from the numerous scattered farmers, often located
in inaccessible rural areas. They find market for the maize (often the urban
traders and processors) when they have accumulated sufficient quantities.
The urban traders and processors arrange transport to collect the maize
either directly from the farmers whom they pay on a cash basis, or from the
collection points of the agents. Since the agents live in the rural areas, they
are a reliable linkage between the farmers and urban traders and
processors/millers.
Urban traders are found in major urban centers in producing districts. Their
main activities include networking with rural agents, serving as a market
outlet for farmers, and collecting maize grain before selling it to the various
clients, including institutions and processors, located in the districts. Urban
traders are also sources of bagging materials (sacks) used by farmers as well
as market information in their areas of operation. Urban traders sell their
maize mostly to millers.
Maize grown and traded undergoes some level of value addition conversion
of maize grain into flour and a variety of other by-products, such as bran and
germ. The principle players in this value chain are the processors/millers,
grouped into three categories, namely: small-scale millers, medium-scale
millers and large-scale millers. Majority of the processors/millers fall under
the small-scale category and they are scattered in various rural trading
centers in the districts, carrying out primarily customized milling. Processing
costs range from UgSh 50 to 100 per kg, depending on the location.
The medium-scale processors are based in the main town centers the
district capitals and offer both contract and trade-based milling services to
institutions and urban traders. The medium-scale millers first hull the maize
to remove bran and then produce No.1 flour, which is not very nutritious.
The medium-scale millers charge a price of UgSh 70-100 per kg for milling.
For every 100 kg of maize grain, about 70-73 kg of No.1 maize flour is
produced. The millers sell the No. 1 flour at UgSh 1,000-1,400 to wholesalers
and retailers. The normal price of maize bran is UgSh 200 per kg to poultry
and animal farmers and manufacturers of feed meals. The medium-scale
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millers make a profit of UgSh132-420 per kg or about 11-35 percent of the
price of the flour.
Large-scale processors are only found in Kampala. They buy their maize from
urban traders and large-scale traders from the western, central and eastern
regions. They sell more than three quarters (75 percent) of their maize
products to the World Food Programme (WFP) for export and distribution to
war displaced people in Northern Uganda. The processors carry out activities
such as cleaning, de-stoning, drying, fumigating and milling into flour.
Transport costs are the major marketing cost and, therefore, are key in
determining the prices offered to farmers by rural traders. The relative share
of transportation cost in total marketing costs averages 84 percent in
Uganda (World Bank, 2009). These costs are quite high because a maize bag
often goes through a number of markets before reaching the final consumer
in large cities and thus requires loading and unloading at each intermediate
stop. For sales, maize is brought from farm to primary markets mainly by
traders but sometimes by farmers themselves. The common mode of
transportation on this route is either bicycle or carts. In Uganda, a 10 MT
truck is the mostly common mode of transportation beginning already from
the rural market, while some traders use trucks with a capacity of between
24 and 32 metric tons (World Bank, 2009). Average distances between
market pairs are short and the average distance between secondary and
wholesale markets is about 80 km in Uganda (from Jinja to Kampala).
A number of large scale traders and exporters of maize have emerged over
the years. The main ones include: (i) the World Food Programme, (ii) the
Uganda Grain Traders (UGT), (iii) the Masindi Seed and Grain Growers
Association (MSGGA), and (iv) the Uganda National Farmers Federation
(UNFFE).
The informal export market to Kenya is uncontrolled and involves the sale of
low and variable quality maize. This constrains the penetration of the formal
Kenya market represented by large millers. Furthermore, Uganda lacks an
authoritative price determination point, e.g., a central commodity exchange
or futures market, national maize quality standards, and a legal and
regulatory framework covering grain warehousing and handling operations
(NRI/IITA, 2002). These deficiencies, together with inadequate finance to
enable the development of an efficient warehouse receipt financing system,
constrain the holding of stocks, essential for the exploitation of export
marketing opportunities in particular (NRI/IITA, 2002).
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Most farmers sell most of their maize at low prices to traders who in turn sell
to exporters (PMA, 2009). Further, PMA analysis of the trend of maize farm
prices indicates that, on average, there has not been any significant increase
in the deflated national average farm price received by farmers during the
period 1970-2005 (PMA, 2009). At the end of the chain are large scale
traders/processors, large scale distributors and exporters, and big millers.
They rent or have big warehouses and modern cleaning and drying
equipment, own transport facilities such as pick-up, trucks, Lorries and
trailers. They engage in maize cleaning, consolidation and bulking and sell
maize to relief agencies, or export to regional markets.
Ugandan maize exporters appear to receive profitable prices for their exports
in most of the years (Figure 3). With the exception of 2008/09, the export
price of maize exceeds wholesale price in Kampala considerably in most of
the years. In 2008/09, export prices were slightly below the whole sale
market prices. This does not necessarily mean the exporters are selling at
loss as maize exported was probably purchased earlier at lower wholesale
prices. It is to be noted that export prices reported here are the average unit
value of exports to all countries. In contrast, trade data from Kenya Ministry
of Agriculture indicate much lower average value of maize imports from
Uganda. Wholesale maize prices in Uganda, especially in Kampala, are well
often above the world market prices, except few very short periods when
they were below the world market prices (World Bank, 2011).
Figure 3: Wholesale prices and export unit value (USD per ton) of
maize in Uganda

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wholesale price

export price

350
300
250
200

price

150
100
50
0
2005

2006

2007

2008

2009

2010

2011

Source: Whole sale price data from www.ratin.net. Export prices calculated from
data from MAAIF (2011).

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Table 4: SWOT Analysis of Ugandas Maize Supply Chain
Strengths
Weaknesses
Production of two crops
Production is done by small scale
farmers who are scattered
Still producing organic maize
No high inputs (use of poor
Production of white maize
technologies)
Ample land for expansion
Proximity to a major market (Kenya) Use of poor technology for production
No large scale storage facilities and
Formation of UGT
poor infrastructure to move the
products
The supply chain is not integrated
Limited value addition
Poor quality of maize produced
Timely delivery is constrained by
poor infrastructure and storage
Opportunities
Threats
Growing demand for maize
Stiff competition
Emergency of commercial farmers
Unstable world prices
Large scale grain traders have Lack of quality standards
formed a company
enforcement
Goodwill
and
support
by
the High unit costs
government
Lack of post-harvest facilities
Near to the Kenyan and relief agency
markets i.e. incurs less transport
costs
Delivery to the Kenyan and relief
markets is timely
Maize still remains the major relief
food used by relief agencies

23

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Figure 4: A Typical Maize Marketing Chain

Commercial
Farmers

Subsistence
Farmers

Organized Farmer
Groups

Rural Traders/Agents

Urban Traders

Large Scale Traders

Busia/Suam Cross
Border Markets

Uganda Grain
Traders

Relief
Agencies/WFP

Formal Trade
Regional Exports

Millers

Wholesalers
Market
Vendors

Animal Feed
Blenders

Supermarkets
Retailers

Bold Lines Maize Grain


Broken Lines Maize Flour
Rectangle Producers
Ovals Traders
Shadowed

Final
Consumers

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Feed
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The Millers: Millers can be categorized as small and medium scale millers
and mainly carry out contract based milling for institutions, traders and
direct consumers. Some millers also involve themselves in maize grain
trading, especially at peak harvest season. They mainly operate locally
fabricated hammer mills that are often poorly maintained, which results into
poor quality flour and outturns. For the millers who carry out trade based
milling, they procure the maize grain either through rural agents or directly
from urban traders. Trade-based millers mainly sell the flour to general retail
traders, wholesalers and institutions. Milling operations are affected by
electricity fluctuations and high tariffs as well as availability of maize grain.
Maize Milling and Consumption
Two maize milling channels were observed during the study:
Contract-based maize milling: This is where a client is charge a specific
fee for milling his/her maize grain. It is the most dominant form of maize
milling in Iganga, Kapchorwa, Masindi, Mbale, Jinja and Busia districts. These
contract based maize millers normally use hammer mills that are not well
maintained leading to low returns and poor quality flour. Most of the millers
in the market report operating at 30%-50% of the installed capacity of their
mills. The quantity of maize milled is mainly determined by the availability of
power and the demand for maize flour. On average, the contract millers
reported milling between 1,900kgs-10,000kgs a day depending on the
capacity of the mill. The competition amongst the contract-based millers is
so stiff that their profits are so low. The demand for flour among the different
buyers differs significantly; the traders and wholesalers prefer super grade
'hodari', institutions prefer second grade 'nylon', while direct consumers
demand for third grade 'safi'. Besides, the demand for animal feeds has been
growing rapidly resulting into increased usage of bran.
Trade-based maize milling: is more common in urban centres. It has builtin costs of purchasing of the maize grain, transporting, grain storage, milling,
packaging, storage of maize flour and marketing.

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Table 5: SWOT Analysis of Maize Millers


Strengths
Weaknesses
Existence of value-addition through Inadequate working capital.
milling.
Poor quality maize flour.
Primarily carry out contract-based Have poor milling machines.
milling.
Limited knowledge on value-addition.
They are widespread and located Inadequate storage facilities that
near the farmers.
undermine bulking and stocking.
Unpredictable electricity supplies.
Opportunities
Threats
Increasing demand for flour.
Unreliable and seasonality of maize
supplies affects capacity utilization.
Maize can be processed into various
Stiff competition.
products and by-products.
High energy costs.
Limited
integration
with
other
participants.

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5.0

MARKETING PLAN
5.1

Product Use and Benefit

Uganda Grain Dealers Ltd. Mill will be filling a need within the Kawempe
Division of Kampala district that has a high inherent and unmet consumptive
demand for maize flour and other milled maize grain products. Uganda
Grain Dealers Ltd. will provide a lower priced product as it will be locally
produced. Uganda Grain Dealers Ltd. will also ensure a high quality
product with consistent availability.
5.2

Price Point

Posho Grade 1 currently retails at UgSh 1,400 per kg in Kampala. This price is
on average between UgSh 100 to 200 more than retail prices in other
upcountry towns of Uganda due to the added transportation costs. As a local
Kawempe-based mill Uganda Grain Dealers Ltd. will provide posho to this
market without the transportation surcharges allowing for a retail price of
UgSh 1,200 per kg. Uganda Grain Dealers Ltd. will also offer a wholesale
price of UgSh116,000 per 50 kg bag allowing for a price discount of about
UgSh 50 per kg on the retail price. At this price point with a quality product
market acceptance is assured.
5.3

Sales Channels

Sales are divided roughly 50% / 50% between wholesale and retail. All retail
sales and wholesale sales will be mostly cash sales except for a few large
accounts with outlets who will receive net 30 days payment terms.
5.4

Marketing

Uganda Grain Dealers Ltd. will use both mass media advertising
(especially the print and electronic media) to promote its product and also
through direct sales calls to businesses and retails outlets. Maize flour is fast
becoming an increasingly important food item of consumption and product of
importance and word of mouth advertising will account for a large portion of
the general publics product awareness. By providing a quality product at a
cheaper price, Uganda Grain Dealers Ltd.is virtually removing all barriers
to product acceptance.
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6.0

TECHNOLOGY & ENGINEERING


6.1

Technology

Production Process
A great advantage of machine milling over pounding is that the relatively
hard and tough peels and embryos are thoroughly broken up and
incorporated in the meal, together with the starch. The starch provides
calories for energy but the peels and embryos supply oil and protein, giving
almost balanced human food, after cooking. This whole meal does not keep
well due to the oil in the embryos going rancid, so a farmer has to go fairly
frequently to the mill with his maize.
Machine mills can separate out the peels and embryos which are valuable
concentrates for stock-feeding (bran); the fairly pure starch then keeps for
longer periods but it has little nutritional value. In view of the deteriorating
relation of food production to population in Africa, it is desirable that maize
mills should produce whole meal. Milled maize is becoming popular and is
being produced in increasing quantities. It can replace the white maize meal
preferred by the higher income groups.
The commonest forms of power mills are hammer mills and plate mills. They
are single-stage; a stator with an internal power-driven rotor which pulverizes
the grains of maize, the meal escaping through a fine steel or brass screen.
The loss, as flour dust, is low, under 1 per cent, a notable improvement on
hand pounding.
Roller mills are manufactured mainly for the production of fine corn-flour. The
peels and embryos are discarded and used for stock feed.
Grinding maize is a two step process that requires two different machines.
The first machine, called a decorticator (huller), is to remove the shell of the
corn. The second machine is the grinder that grinds the previously shelled
maize into fine flour for making posho. Both of these machines require a
mechanical drive, the most popular being an electric motor. It is therefore
necessary that each one the two pieces (i.e. the huller and the grinder) have
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a separate electric motor to make the entire maize milling process speedy
and more efficient.
With much of equity capital already invested in the existing mill plant
infrastructure and other vital pieces of maize-milling equipment displayed in
Table 6below, Uganda Grain Dealers Ltd. needs to access additional
finance to acquire the two additional motors need for the purpose of running
both the huller and maize grinder.
6.2

Engineering

Machinery & Equipment


The production machinery and equipment required by the plant is shown in
Table 6. The total cost of machinery and equipment is estimated at UGX 36
million, out of which UGX 20 million will be in form of short-term debt
financing.
Table 6:
Sr. No.
1
2
3
4
5
6
7
8
9
10
11

Machinery and Equipment Requirement


Description
Qty. (No.)
Decorticator (Huller)
1
Screen separator
1
Spiral separator
1
Grader (sorter)
1
Hydrator
1
Grain polisher
1
Screw conveyor
3
Intake hopper
1
Weigher
2
Grinder with in-mount sieve
1
Collecting Hopper
1

6.3

Quality Control

In order to ensure proper quality, Uganda Grain Dealers Ltd. will take
proper precautions including: making sure not to grind un-dried corn flour;
sifting all corn to remove all rubbish before processing; cleaning the
premises every day; and ensuring that workers are clean, wash hands
regularly, and wear aprons; and packing flour in clean material. The manager
will supervise and inspect quality daily and address any issues that arise.

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7.0

DESCRIPTION OF PRODUCT AND BUSINESS OPERATIONS


7.1

Product Manufacture/Service Provision

Maize milling is the process where dried maize kernels are refined to posho.
The maize milling process is a mechanical process and consists of cleaning,
grinding and sieving operations. After each sieving operations, product of a
particular quality is drawn and the residue is recycled for further grinding or
milling.
Equipment / Facilities: The production of maize meal requires a maize mill.
The mill is constructed of various parts each responsible for performing
functions such as sorting, cleaning, conveying, conditioning, grinding,
crushing, purifying, and bagging. The mill will be housed in a building that
contains all of its operations. Roughly 150m 2 is required for the milling
equipment with another 50m2 for surrounding working space. A building with
an additional 50m2 is required as temporary storage for the daily finished
maize meal product prior to being delivered.
Raw Materials: The principal raw material required by the envisaged plant
is maize. In view of high nutritional value, it is desirable that maize mills
should produce whole meal flour. Water is also required for use in the wetmilling process. Maize is purchased a various quantities bagged in 50kg
bags. Uganda Grain Dealers Ltd. will give all local farmers first priority
before purchasing from commercial growers. Water will be pumped in
Kampala water supply system. The pre-processed maize will be stored in a
building at the site with adequate floor dimensions and capable of containing
up to 150 tons of maize. A water tank is also required to maintain 200L of
water per day for the mills operations.
The major auxiliary materials required by the plant are 50 kg polypropylene
bags and sewing thread which are locally available. The detailed list and cost
of raw material and auxiliary materials is depicted in the Table 7 below. The
total monthly cost of raw material and auxiliary materials is estimated at
UGX 18.76 million.
Table 7: Monthly Raw and Auxiliary Materials and their Costs
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Sr.
Raw &
Unit of
Quantity
Unit Cost Total Cost
No.
Auxiliary
Measure
Required
(UGX)
(UGX)
material
1
Maize
Tonnes
30
600 18,000,000
2
PP bag (50 kgs)
Pieces
600
1,000
600,000
3
Sewing thread
Reel
2.5
64,000
160,000
Total 18,760,00
0
Utilities: The major utilities required by the plant are electricity, water and
lubricants. The estimated annual cost of utilities at 100% capacity utilization
rate and the corresponding costs are given in Table 8. The total cost of
utilities is estimated at UgSh 1 million per month.
Table
Sr.
No.
1
2
3

8: Monthly Utilities Requirements and Estimated Costs


Description
Unit of
Quantity
Unit Cost Total Cost
Measure
Required
(UGX)
(UGX)
Electricity
kWH
594
450
267,300
Water
m3
215.18
3,089
664,700
Lubricants
Kg.
4
17,000
68,000
Total 1,000,000

Quality Control: In order to ensure proper quality, Uganda Grain Dealers


Ltd. will take proper precautions including: making sure not to grind un-dried
corn flour; sifting all corn to remove all rubbish before processing; cleaning
the premises every day; and ensuring that workers are clean, wash hands
regularly, and wear aprons; and packing flour in clean material. The manager
will supervise and inspect quality daily and address any issues that arise.
7.2

Operational Plan
7.2.1 Current Status

Uganda Grain Dealers Ltd. is a newly established company, registered in


December 2012 to meet the inherent maize demand within the Kawempe
Division area of Kampala District. In order to produce quality posho by the
2015 harvesting season, Uganda Grain Dealers Ltd. will erect a facility for
a maize mill with surrounding infrastructure during the 2 months following
funding. Uganda Grain Dealers Ltd. has completed detailed financial,
operational and business startup planning.
Post funding, Uganda Grain Dealers Ltd. is ready to proceed with the
following start-up activities:
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Ordering 2 maize mill motors and additional equipment
Securing contracts for raw material procurement
Installation of electricity and mill plant
Milling operations

7.2.2 Startup Costs


There are several startup costs that are due to infrastructure development.
These costs are one-time expenditures totaling UGX 54,000,000 and include:
UGX 20,000,000 The maize mill (acquisition of two additional motors)
UGX 10,000,000 The maize mill (purchase of additional assorted
maize mill equipment)
UGX 6,000,000 Additional buildings development to house the mill
and processed maize meal
UGX 4,000,000 - Storage buildings for pre-processed maize
UGX 4,000,000 Preliminary and pre-operating expenses
UGX 10,000,000 Working capital
(All costs include labour, transportation, and fees where appropriate).
7.2.3 Workforce
Post start-up, during normal operation the mill will require 2 to 6 labourers
respectively during the off and peak seasons to run at capacity. Operations
management will consist of overseeing milling operations, labour,
maintenance, quality control and product delivery. Financial management will
consist of sales, marketing and administration. Workers will be trained on
location and will be responsible for running the mill.
7.2.4 Business Capacity
The mill will have a throughput capacity of 100 kgs of maize flour per hour.
The down time on a mill is about 15% with 10% idle time. A ten hour milling
period will result in roughly 1.0 ton of maize flour per day.
7.3

Critical Risk Factors


7.3.1 Market Risks

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There are a few areas of risk within the corn grinding industry. First and
foremost is drought. Drought causes significant decreases in demand for
corn grinding because there is little to grind. Conversely, in times of plentiful
rain harvest yields are higher but demand for grinding may fluctuate due to
favorable matooke (an alternative food) prices in the area. In both cases on
can help mitigate the losses by gathering grain at times of plenty and selling
it at times of scarcity.
7.3.2 Operational Risks
Fuel can become expensive, especially in times of political instability in
Kenya because most oil is imported through the eastern border. Although the
cost to mill the corn will increase as fuel prices increase, it is believed that
most, if not all, of the cost can be passed on to the customers in a higher
price because the transportation costs to take the corn elsewhere will rise
with the fuel costs as well.
An additional risk is that the machines will break down and create expenses
and/or downtime. This will be addressed by ensuring the maintenance
procedures are followed correctly and timely. In addition to proper
maintenance, the company should have the most common failure spare
parts on hand (many spares are included with the engine, but as parts are
used they will be replaced before failure so downtime is cut down).

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8.0

ORGANIZATION AND MANAGEMENT

Organization: Uganda Grain Dealers Ltd, is a corporation with four


shareholders who all serve as the board of directors. Ownership interest is
allocated at 45% to J. Kahafu Enterprises Limited, 10% to Ms. Neema
Grace, 10% to Mr. Honward Kabateraine, and 10% to Mr. Cranmer
Tayebwa.
Management: The board of directors / shareholders will jointly plan long
term strategy and day to day operations will be run by the maize mill plant
Supervisor. Operations management will consist of overseeing milling
operations, labour, maintenance, quality control and product delivery.
Financial management will consist of sales, marketing and administration.
Technical Expertise: a Miller with technical expertise in the milling process
will be appointed.
Human Resources: Human resource requirements for a maize mill are
minimal. Laborers will upload and download the bags of maize and maize
meal, monitor the mill during operation, clean the mill and surrounding areas
and seal the bags of processed maize meal. Typical wages for local labour is
around UgSh. 10,000 per day.
Manpower Requirement:The total manpower requirement of the plant is 9
persons. Details of manpower requirement and estimated annual labour cost
including fringe benefit are shown in Table 9. The total annual cost of labour
(including Employee Benefits) is estimated at UGX 4,080,000 (Year 1) and
increasing at 5% per annum.
Table 9: Manpower Requirement and Estimated Annual Labour Cost
Sr.
Description
No. of
Salary (UGX)
No.
Persons
Monthly
Annual
1
Plant Supervisor
1
800,000
9,600,000
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2
Plant Operators
2
800,000
9,600,000
3
Accountant
1
600,000
7,200,000
4
Clerk/Store Keeper
1
400,000
4,800,000
5
Cleaning Workers
2
400,000
4,800,000
6
Guards
2
400,000
4,800,000
9
40,800,00
Sub-Total
3,400,000
0
Employee Benefits (20% of Basic
_
680,000
8,160,000
Salary)
_
48,960,00
TOTAL
4,080,000
0
The duties of unskilled labourers will be as follows:
Loading & unloading of raw materials and finished products.
Feeding the machines with raw materials.
The duties of skilled labourers:
Operating the machinery.
Maintenance of machinery.

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9.0

FINANCIAL ANALYSIS
9.1

Overview

In comparison to other business models a maize mill financial model is


relatively straight forward. Maize is purchased, and maize meal is sold.
Uganda Grain Dealers Ltd. will be able to sell 50% of its product at retail
and the remainder at wholesale.
The total project cost for establishing and operating the maize milling plant is
UgSh 70 million. A total of UgSh 40 million is in-kind contribution in the form
of existing parts of the maize milling plant and housing structure at
Kawempe-Tula and preliminary and pre-operating expenses by Uganda
Grain Dealers Ltd. The requested UgSh 30 million short-term loanfunding
will mostly be allocated towards the acquisition of two (2) mill motors and
working capital costs that will provide the much-needed inventory capital as
well as operational cash flow.
Startup costs total UgSh 54 million. Capital going towards inventory is UgSh
40 million while operating expenses for the first year are estimated at UgSh
325.680 million or UgSh 27.14 million per month. Gross sales are estimated
at UgSh 377.280 million for the first year with an annual growth rate of 5%.
As the entire industry is mostly a cash industry, Uganda Grain Dealers
Ltd. will pay all accounts in cash never carrying any debt. Uganda Grain
Dealers Ltd. also expects all sales except for a few large accounts to be
cash. These accounts will be net 30 days.
The financial model has been formatted to align with the annual agricultural
season with the start of the year in March and ending in February of the
following year. Uganda Grain Dealers Ltd. is further anticipating being
able to sell virtually all inventory prior to new acquisitions in the new year.
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9.2

Production Cost

The annual production cost at full operation capacity is estimated at UgShs


335.82 million (see Annexures 1.1 and 1.2). The material and utility cost
accounts for 70.61 per cent, while repair and maintenance take 0.36 per cent
of the production cost in Year 1 and 71.51 per cent and 0.36 per cent
respectively for Year 2. Table 10 below provides the details.

Table 10: Annual Production Cost at Full Capacity (In UGX)


Item/Year
Year 1
Year 2
Cost
%
Cost
%
225,120,0
236,376,0
Raw materials
00
67.04
00
67.89
48,960,00
51,408,00
Salaries & wages
0
14.58
0
14.77
12,000,00
12,600,00
Utilities
0
3.57
0
3.62
Repairs & Maintenance
1,200,000
0.36
1,260,000
0.36
Postage & Stationery
600,000
0.18
630,000
0.18
Telephone Charges
1,200,000
0.36
1,260,000
0.36
Advertisement &
Publicity
1,800,000
0.54
1,890,000
0.54
31,200,00
32,760,00
Transport Charges
0
9.29
0
9.41
Other Miscellaneous Exps
2,400,000
0.71
2,520,000
0.72
Consumable Stores
1,200,000
0.36
1,260,000
0.36
Cost of Finance
5,644,000
1.68
1,708,000
0.49
Depreciation
4,500,000
1.34
4,500,000
1.29
Total Production Cost
335,824,0
348,172,0
00
100.00
00
100.00
9.3

Financial Evaluation
9.3.1 Profitability

According to the projected income statement, the project will start


generating profit in the first year of operation. Important ratios such as profit
to total sales, net profit to equity (Return on equity) and net profit plus

37

UGANDA GRAIN DEALERS LTD. BUSINESS PLAN CORPORATE


DOCUMENT
interest on total investment (return on total investment) show an increasing
trend during the life-time of the project.
The income statements and the other indicators of profitability show that the
project is viable (Refer to Annexures 3.1 and 3.2).
9.3.2 Break-even Analysis
The maize milling projects commercial break-even level (profitability breakeven) in Project Year 2 is calculated below:

Table 11: Break-Even Analysis in Project Year 2 (In UGX)


Items
Variable
Fixed Cost
Cost
Raw materials
236,376,000
0
Salaries & wages
38,556,000
12,852,000
Utilities
9,450,000
3,150,000
Repairs & Maintenance
840,000
420,000
Advertisement & Publicity
1,260,000
630,000
Transport Charges
21,840,000
10,920,000
Postage & Stationery
472,500
157,500
Telephone Charges
945,000
315,000
Other Miscellaneous Exp
1,890,000
630,000
Consumable Stores
840,000
420,000
Depreciation
0
4,500,000
Financial Expenses
0
1,708,000
312,469,50
TOTAL
0 35,702,500
Sales Value of Production
Break-even Sales =

Break-even Sales =

Total Cost
236,376,000
51,408,000
12,600,000
1,260,000
1,890,000
32,760,000
630,000
1,260,000
2,520,000
1,260,000
4,500,000
1,708,000
348,172,00
0

= UGX396,144,000

35,702,500
1 312,469,500
396,144,000
UGX 169,027,973
38

35,702,500 35,702,500
1 0.79
0.21

UGANDA GRAIN DEALERS LTD. BUSINESS PLAN CORPORATE


DOCUMENT
Capacity utilization required to Break-even = UGX 169,027,973 x 100 =
42.67%
UGX 396,144,000
Margin of Safety = 100% 40.24% = 57.33%
9.4

Projected Income Statement,


Statement of Cash Flows

Balance

Sheet,

and

Please see Annexures 1.1 4.2 on pages 40 47 for all financial


projections.
9.5

Economic Benefits

The project can create employment for 9 persons. In addition to supply of the
domestic needs, the project will generate a total UgSh 20.528 million in
terms of aggregate tax for Year 1 and Year 2.
10.0 LOAN INFORMATION
10.1 Financial Needs
As noted in the capital requirements section the immediate total capital
required for the project amounts to UGX 54 million. Included in this is the
equipment necessary for milling maize (grinder, huller, and engine), the
building construction that will house the machinery, and other necessary
start-up costs.
Uganda Grain Dealers Ltd. has already acquired and installed the basic
maize mill equipment at its Kawempe-Tula site like: the huller, grinder, intake
hopper and collecting hopper and weigher, but needs an additional loan of
UgSh 20 million to finance the purchase and installation of addition mill
equipment including 2 mill motors to run both the grinder and the huller,
plus the screen and spiral separators, grader, a hydrator that is used in the
wet-milling process, grain polisher and a screw conveyor. All the listed
require mill equipment will be sourced from reputable maize mill equipment
suppliers in Kampala like Agro Sokoni, Magric (U) Ltd., etc. that not only offer
a one year warranty but can also guarantee supply of standard-priced spare
parts and after-sales servicing.
Additional costs for the equipment include transportation from the mill
equipment sellers sales outlets in Kampala and installation costs. The cost of
39

UGANDA GRAIN DEALERS LTD. BUSINESS PLAN CORPORATE


DOCUMENT
transportation is estimated at UgSh 100,000. Installation costs are set at
UgSh 500,000 for labour.
The remaining UgSh 10 million will be used to supplement additional working
capital costs that would include the purchase and transportation of raw
materials to the maize mill, and making initial payment for utilities and
consumable stores, plus financing the start-up maize mill plant overheads
and sales and marketing expenses. These costs mainly consist of small but
necessary items toget the business up and running.
10.2 Loan Logistics
Because the requisite loan of the project is being solicited from a commercial
bank, the following is a breakdown of the logistics.
Loan Period: While it may be possible for the loan to be repaid within a year
of business, it could cause significant undue burden on both the business
and the owner. Therefore, it is proposed that the loan be repaid within a two
year period with monthly payments of UgSh 2.5 million in months 7 12 of
Year 1 to decrease payment size. A Grace Period for six months and
covering the very first months of the project is also proposed to allow the
maize milling project to establish its operational capacity and make an entry
into the maize flour market before it can develop the competitive capacity to
repay its commercial debts. The repayment of the loan is structured in such
a format that the business could have recovered half of its commercial loan
by the end of Year 1 (i.e. UgSh 15 million) leaving with less pressure and
ample room to pay monthly loan principal repayments of UgSh 1.25 million in
Year 2 that also total to another UgSh 15 million by the years end. Loan
repayments will be made once every month. Please refer to Annexures 2.1
and 2.2 on Projected Cash flow Tables for Year 1 and Year 2, and Annexures
3.1 and 3.2 on Projected Income Statements for Year 1 and Year 2 for
details.
Interest Rate: While a 21 percent interest rate may seem high by US
standards, a few items must be taken into consideration, mainly being able
to pay for the loan servicing and keeping ahead of the relatively high
inflation in Uganda. According to the www.indexmundi.com Uganda Economy
Profile 2014, Uganda had an estimated 14 percent inflation in 2012.
Therefore, at 20 percent the loan will stay ahead of inflation and is a
reasonable rate relative to other financial institutions in the area.
40

UGANDA GRAIN DEALERS LTD. BUSINESS PLAN CORPORATE


DOCUMENT
Collateral: The loan will not contain traditional collateral as far as deeds to
land or buildings, but the equipment will be held as collateral until the final
payment is made at which time Uganda Grain Dealers Ltd. will own the
entire business and equipment.

11.0 FINANCIAL STATEMENTS


BASIS AND PRESUMPTIONS: 1. It is presumed that the unit will run on a single shift of 10 hours per
day and 360 working days per annum.
2. The following extraction rates are presumed :
a) Posho Grade 1:72%
b) Posho Grade 2:16%
c) Bran: 12%
Extraction rates are only suggested. Thee miller can change according to
demand, maize quality & climatic conditions.
3. Labour wages have been taken as per market rates.
4. Different varieties of maize may be blended for producing desired end
product.
41

UGANDA GRAIN DEALERS LTD. BUSINESS PLAN CORPORATE


DOCUMENT
5. The rate of interest has been taken at 21% on an average for the shortterm commercial loan.
6. Monthly interest payments are calculated on a reducing balance basis.
7. The loan has a Grace Period of six (6) months with repayments
commencing in Month 7 of Year 1.
8. The rates quoted in respect of Machinery/equipment raw materials are
those prevailing at the time of preparation of the Business Plan report
and are likely to vary from place to place and supplier to supplier and
necessary changes are to be made as and when required.
9. Annual operating costs are presumed to increase at a rate of 5% per
annum.
10.
Annual sales prices for the products are also presumed to grow
at a rate of 5% per annum.

42

UGANDA GRAIN DEALERS LTD. BUSINESS PLAN CORPORATE DOCUMENT


Annexure 1.1: Monthly Production Cost Estimates for Year 1 (In UGX)
ACCOUNT HEAD
1

10

11

12

TOTAL

18,760,0
00
4,080,00
0
1,000,00
0

18,760,0
00
4,080,00
0
1,000,00
0

18,760,0
00
4,080,00
0
1,000,00
0

18,760,0
00
4,080,00
0
1,000,00
0

18,760,0
00
4,080,00
0
1,000,00
0

18,760,0
00
4,080,00
0
1,000,00
0

18,760,0
00
4,080,00
0
1,000,00
0

18,760,0
00
4,080,00
0
1,000,00
0

18,760,0
00
4,080,00
0
1,000,00
0

18,760,0
00
4,080,00
0
1,000,00
0

18,760,0
00
4,080,00
0
1,000,00
0

18,760,0
00
4,080,00
0
1,000,00
0

100,000

100,000

100,000

100,000

100,000

100,000

100,000

100,000

100,000

100,000

100,000

100,000

225,120,
000
48,960,0
00
12,000,0
00
1,200,00
0

50,000

50,000

50,000

50,000

50,000

50,000

50,000

50,000

50,000

50,000

50,000

50,000

100,000

100,000

100,000

100,000

100,000

100,000

100,000

100,000

100,000

100,000

100,000

100,000

150,000
2,600,00
0

150,000
2,600,00
0

150,000
2,600,00
0

150,000
2,600,00
0

150,000
2,600,00
0

150,000
2,600,00
0

150,000
2,600,00
0

150,000
2,600,00
0

150,000
2,600,00
0

150,000
2,600,00
0

150,000
2,600,00
0

150,000
2,600,00
0

Other Miscellaneous Exp

200,000

200,000

200,000

200,000

200,000

200,000

200,000

200,000

200,000

200,000

200,000

200,000

Consumable Stores

100,000
27,140,
000

100,000
27,140,
000

100,000
27,140,
000

100,000
27,140,
000

100,000
27,140,
000

100,000
27,140,
000

100,000
27,140,
000

100,000
27,140,
000

100,000
27,140,
000

100,000
27,140,
000

100,000
27,140,
000

100,000
27,140,
000

525,000

525,000

525,000

525,000

525,000

525,000

525,000

481,000

438,000

394,000

350,000

306,000

Total Financial Costs

375,000
900,00
0

375,000
900,00
0

375,000
900,00
0

375,000
900,00
0

375,000
900,00
0

375,000
900,00
0

375,000
900,00
0

375,000
856,00
0

375,000
813,00
0

375,000
769,00
0

375,000
725,00
0

375,000
681,00
0

5,644,00
0
4,500,00
0
10,144,0
00

Total Production
Costs

28,040,
000

28,040,
000

28,040,
000

28,040,
000

28,040,
000

28,040,
000

28,040,
000

27,996,
000

27,953,
000

27,909,
000

27,865,
000

27,821,
000

335,824,
000

MONTH
Operating Costs
(UGX)
Raw materials
Salaries & wages
Utilities
Repairs & Maintenance
Postage & Stationery
Telephone Charges
Advertisement &
Publicity
Transport Charges

Cost of Sales

600,000
1,200,00
0
1,800,00
0
31,200,0
00
2,400,00
0
1,200,00
0
325,680,
000

Financial Costs (US$)


Interest on Short Term
Loan

Depreciation

43

UGANDA GRAIN DEALERS LTD. BUSINESS PLAN CORPORATE DOCUMENT

Annexure 1.2: Monthly Production Cost Estimates for Year 2 (In UGX)
ACCOUNT HEAD
13

14

15

16

17

18

19

20

21

22

23

24

TOTAL

19,698,0
00
4,284,00
0
1,050,00
0

19,698,0
00
4,284,00
0
1,050,00
0

19,698,0
00
4,284,00
0
1,050,00
0

19,698,0
00
4,284,00
0
1,050,00
0

19,698,0
00
4,284,00
0
1,050,00
0

19,698,0
00
4,284,00
0
1,050,00
0

19,698,0
00
4,284,00
0
1,050,00
0

19,698,0
00
4,284,00
0
1,050,00
0

19,698,0
00
4,284,00
0
1,050,00
0

19,698,0
00
4,284,00
0
1,050,00
0

19,698,0
00
4,284,00
0
1,050,00
0

19,698,0
00
4,284,00
0
1,050,00
0

105,000

105,000

105,000

105,000

105,000

105,000

105,000

105,000

105,000

105,000

105,000

105,000

236,376,
000
51,408,0
00
12,600,0
00
1,260,00
0

52,500

52,500

52,500

52,500

52,500

52,500

52,500

52,500

52,500

52,500

52,500

52,500

105,000

105,000

105,000

105,000

105,000

105,000

105,000

105,000

105,000

105,000

105,000

105,000

157,500
2,730,00
0

157,500
2,730,00
0

157,500
2,730,00
0

157,500
2,730,00
0

157,500
2,730,00
0

157,500
2,730,00
0

157,500
2,730,00
0

157,500
2,730,00
0

157,500
2,730,00
0

157,500
2,730,00
0

157,500
2,730,00
0

157,500
2,730,00
0

Other Miscellaneous Exp

210,000

210,000

210,000

210,000

210,000

210,000

210,000

210,000

210,000

210,000

210,000

210,000

Consumable Stores

105,000
28,497,
000

105,000
28,497,
000

105,000
28,497,
000

105,000
28,497,
000

105,000
28,497,
000

105,000
28,497,
000

105,000
28,497,
000

105,000
28,497,
000

105,000
28,497,
000

105,000
28,497,
000

105,000
28,497,
000

105,000
28,497,
000

263,000

241,000

219,000

197,000

175,000

153,000

131,000

109,000

88,000

66,000

44,000

22,000

375,000
638,00
0

375,000
616,00
0

375,000
594,00
0

375,000
572,00
0

375,000
550,00
0

375,000
528,00
0

375,000
506,00
0

375,000
484,00
0

375,000
463,00
0

375,000
441,00
0

375,000
419,00
0

375,000
397,00
0

MONTH
Operating Costs
(UGX)
Raw materials
Salaries & wages
Utilities
Repairs & Maintenance
Postage & Stationery
Telephone Charges
Advertisement &
Publicity
Transport Charges

Cost of Sales

630,000
1,260,00
0
1,890,00
0
32,760,0
00
2,520,00
0
1,260,00
0
341,964,
000

Financial Costs (US$)


Interest on Short Term
Loan

Depreciation
Total Financial Costs

44

1,708,00
0
4,500,00
0
6,208,00
0

UGANDA GRAIN DEALERS LTD. BUSINESS PLAN CORPORATE DOCUMENT


Total Production
Costs

29,135,
000

29,113,
000

29,091,
000

29,069,
000

29,047,
000

29,025,
000

29,003,
000

28,981,
000

28,960,
000

28,938,
000

28,916,
000

28,894,
000

348,172,
000

Annexure 2.1: Projected Cash flow Table for Year 1 (In UGX)
Period
Month

10

11

12

54,000,000

31,440,000

31,440,000

31,440,000

31,440,000

31,440,000

31,440,000

31,440,000

31,440,000

31,440,000

31,440,000

31,440,000

31,440,000

31,440,000

31,440,000

31,440,000

31,440,000

31,440,000

31,440,000

31,440,000

31,440,000

31,440,000

31,440,000

31,440,000

31,440,000

-54,000,000

-37,368,097

-37,368,097

-37,368,097

-37,368,097

-37,368,097

-37,368,097

-39,868,097

-39,824,097

-39,781,098

-39,737,098

-39,693,098

-48,935,898

-54,000,000

-9,569,764

-9,569,764

-9,569,764

-9,569,764

-9,569,764

-9,569,764

-9,569,764

-9,569,764

-9,569,764

-9,569,764

-9,569,764

-9,569,764

-27,140,000

-27,140,000

-27,140,000

-27,140,000

-27,140,000

-27,140,000

-27,140,000

-27,140,000

-27,140,000

-27,140,000

-27,140,000

-27,140,000

a) Interest

-525,000

-525,000

-525,000

-525,000

-525,000

-525,000

-525,000

-481,000

-438,000

-394,000

-350,000

-306,000

b) Repayments

-2,500,000

-2,500,000

-2,500,000

-2,500,000

-2,500,000

-2,500,000

4. Corporate tax

-9,286,800

5. Dividends 4% on equity

-133,333

-133,333

-133,333

-133,333

-133,333

-133,333

-133,333

-133,333

-133,334

-133,334

-133,334

-133,334

Costs (US Dollars)


A. Cash inflow
1. Financial resources
total
2. Sales revenue total

B. Cash outflow

54,000,000

1. Total assets schedule


including replacements
2. Operating Costs (Cost of
Sales)
3. Debt Service

45

UGANDA GRAIN DEALERS LTD. BUSINESS PLAN CORPORATE DOCUMENT


C. Surplus / deficit

-5,928,097

-5,928,097

-5,928,097

-5,928,097

-5,928,097

-5,928,097

-8,428,097

-8,384,097

-8,341,098

-8,297,098

-8,253,098

-17,495,898

D. Cumulative cash
balance

-5,928,097

-11,856,194

-17,784,291

-23,712,388

-29,640,484

-35,568,581

-43,996,678

-52,380,775

-60,721,873

-69,018,971

-77,272,069

-94,767,967

Annexure 2.2: Projected Cash flow Table for Year 2 (In UGX)
Period
Month

13

14

15

16

17

18

19

20

21

22

23

24

Total

33,012,000

33,012,000

33,012,000

33,012,000

33,012,000

33,012,000

33,012,000

33,012,000

33,012,000

33,012,000

33,012,000

33,012,000

396,144,000

2. Sales revenue total

33,012,000

33,012,000

33,012,000

33,012,000

33,012,000

33,012,000

33,012,000

33,012,000

33,012,000

33,012,000

33,012,000

33,012,000

396,144,000

B. Cash outflow

-30,607,168

-30,585,168

-30,563,168

-30,541,168

-30,519,168

-30,497,168

-30,475,168

-30,453,168

-30,432,169

-30,410,169

-30,388,169

-41,607,769

-377,079,617

-463,835

-463,835

-463,835

-463,835

-463,835

-463,835

-463,835

-463,835

-463,835

-463,835

-463,835

-463,835

-5,566,017

-28,497,000

-28,497,000

-28,497,000

-28,497,000

-28,497,000

-28,497,000

-28,497,000

-28,497,000

-28,497,000

-28,497,000

-28,497,000

-28,497,000

-341,964,000

-263,000

-241,000

-219,000

-197,000

-175,000

-153,000

-131,000

-109,000

-88,000

-66,000

-44,000

-22,000

-1,708,000

-1,250,000

-1,250,000

-1,250,000

-1,250,000

-1,250,000

-1,250,000

-1,250,000

-1,250,000

-1,250,000

-1,250,000

-1,250,000

-1,250,000

-15,000,000

-11,241,600

-11,241,600

-133,333

-133,333

-133,333

-133,333

-133,333

-133,333

-133,333

-133,333

-133,334

-133,334

-133,334

-133,334

-1,600,000

Costs (US Dollars)


A. Cash inflow
1. Financial resources
total

1. Total assets schedule


including replacements
2. Operating Costs (Cost of
Sales)
3. Debt Service
a) Interest
b) Repayments

4. Corporate tax
5. Dividends 4% on equity

46

UGANDA GRAIN DEALERS LTD. BUSINESS PLAN CORPORATE DOCUMENT


C. Surplus / deficit

2,404,832

2,426,832

2,448,832

2,470,832

2,492,832

2,514,832

2,536,832

2,558,832

2,579,831

2,601,831

2,623,831

-8,595,769

D. Cumulative cash
balance

2,404,832

4,831,665

7,280,497

9,751,329

12,244,161

14,758,994

17,295,826

19,854,658

22,434,490

25,036,321

27,660,152

19,064,383

19,064,383

Annexure 3.1: Projected Income Statement for Year 1 (In UGX)


1

10

11

12

Total

Raw Materials

31,440,0
00
18,760,0
00

31,440,0
00
18,760,0
00

31,440,0
00
18,760,0
00

31,440,0
00
18,760,0
00

31,440,0
00
18,760,0
00

31,440,0
00
18,760,0
00

31,440,0
00
18,760,0
00

31,440,0
00
18,760,0
00

31,440,0
00
18,760,0
00

31,440,0
00
18,760,0
00

31,440,0
00
18,760,0
00

31,440,0
00
18,760,0
00

377,280,
000
225,120,
000

GROSS PROFIT

12,680,0
00

12,680,0
00

12,680,0
00

12,680,0
00

12,680,0
00

12,680,0
00

12,680,0
00

12,680,0
00

12,680,0
00

12,680,0
00

12,680,0
00

12,680,0
00

152,160,
000

(excl. Raw Materials)

8,380,00
0

8,380,00
0

8,380,00
0

8,380,00
0

8,380,00
0

8,380,00
0

8,380,00
0

8,380,00
0

8,380,00
0

8,380,00
0

8,380,00
0

8,380,00
0

100,560,
000

OPERATING PROFIT

4,300,00
0

4,300,00
0

4,300,00
0

4,300,00
0

4,300,00
0

4,300,00
0

4,300,00
0

4,300,00
0

4,300,00
0

4,300,00
0

4,300,00
0

4,300,00
0

51,600,0
00

525,000

525,000

525,000

525,000

525,000

525,000

525,000

481,000

438,000

394,000

350,000

306,000

5,644,00
0

2,500,00
0

2,500,00
0

2,500,00
0

2,500,00
0

2,500,00
0

2,500,00
0

15,000,0
00

3,775,00
0

3,775,00
0

3,775,00
0

3,775,00
0

3,775,00
0

3,775,00
0

1,275,00
0

1,319,00
0

1,362,00
0

1,406,00
0

1,450,00
0

1,494,00
0

30,956,0
00

Month
Sales

Less: Operating Costs

Less: Accrued interest on


Medium-Term Loan (@ 21%
p.a.)

Less: Annual
Repayments
NET PROFIT BEFORE TAX

47

UGANDA GRAIN DEALERS LTD. BUSINESS PLAN CORPORATE DOCUMENT


0

9,286,80
0

9,286,80
0

NET PROFIT

3,775,00
0

3,775,00
0

3,775,00
0

3,775,00
0

3,775,00
0

3,775,00
0

1,275,00
0

1,319,00
0

1,362,00
0

1,406,00
0

1,450,00
0

7,792,80
0

21,669,2
00

Accumulated Net Profit


(Loss)

3,775,00
0

7,550,00
0

11,325,0
00

15,100,0
00

18,875,0
00

22,650,0
00

23,925,0
00

25,244,0
00

26,606,0
00

28,012,0
00

29,462,0
00

21,669,2
00

Net Profit Margin

0.120

0.120

0.085

0.085

0.085

0.085

0.041

0.042

0.043

0.045

0.046

-0.248

Gross Profit Margin

0.403

0.403

0.403

0.403

0.403

0.403

0.403

0.403

0.403

0.403

0.403

0.403

5.39%

5.39%

5.39%

5.39%

5.39%

5.39%

1.82%

1.88%

1.95%

2.01%

2.07%

-11.13%

0.137

0.137

0.137

0.137

0.137

0.137

0.137

0.137

0.137

0.137

0.137

0.137

Corporation Tax 30%

Rate of Return on
Investment

Operating Profit Margin

Annexure 3.2: Projected Income Statement for Year 2 (In UGX)


1

10

11

12

Total

Raw Materials

33,012,0
00
19,698,0
00

33,012,0
00
19,698,0
00

33,012,0
00
19,698,0
00

33,012,0
00
19,698,0
00

33,012,0
00
19,698,0
00

33,012,0
00
19,698,0
00

33,012,0
00
19,698,0
00

33,012,0
00
19,698,0
00

33,012,0
00
19,698,0
00

33,012,0
00
19,698,0
00

33,012,0
00
19,698,0
00

33,012,0
00
19,698,0
00

396,144,
000
236,376,
000

GROSS PROFIT

13,314,0
00

13,314,0
00

13,314,0
00

13,314,0
00

13,314,0
00

13,314,0
00

13,314,0
00

13,314,0
00

13,314,0
00

13,314,0
00

13,314,0
00

13,314,0
00

159,768,
000

(excl. Raw Materials)

8,799,00
0

8,799,00
0

8,799,00
0

8,799,00
0

8,799,00
0

8,799,00
0

8,799,00
0

8,799,00
0

8,799,00
0

8,799,00
0

8,799,00
0

8,799,00
0

105,588,
000

OPERATING PROFIT

4,515,00
0

4,515,00
0

4,515,00
0

4,515,00
0

4,515,00
0

4,515,00
0

4,515,00
0

4,515,00
0

4,515,00
0

4,515,00
0

4,515,00
0

4,515,00
0

54,180,0
00

263,000

241,000

219,000

197,000

175,000

153,000

131,000

109,000

88,000

66,000

44,000

22,000

1,708,00
0

1,250,00
0

1,250,00
0

1,250,00
0

1,250,00
0

1,250,00
0

1,250,00
0

1,250,00
0

1,250,00
0

1,250,00
0

1,250,00
0

1,250,00
0

1,250,00
0

15,000,0
00

Month
Sales

Less: Operating Costs

Less: Accrued interest on


Medium-Term Loan (@ 21%
p.a.)

Less: Annual
Repayments

48

UGANDA GRAIN DEALERS LTD. BUSINESS PLAN CORPORATE DOCUMENT


3,002,00
0

3,024,00
0

3,046,00
0

3,068,00
0

3,090,00
0

3,112,00
0

3,134,00
0

3,156,00
0

3,177,00
0

3,199,00
0

3,221,00
0

3,243,00
0

37,472,0
00

11,241,6
00

11,241,6
00

NET PROFIT

3,002,00
0

3,024,00
0

3,046,00
0

3,068,00
0

3,090,00
0

3,112,00
0

3,134,00
0

3,156,00
0

3,177,00
0

3,199,00
0

3,221,00
0

7,998,60
0

26,230,4
00

Accumulated Net Profit


(Loss)

3,002,00
0

6,026,00
0

9,072,00
0

12,140,0
00

15,230,0
00

18,342,0
00

21,476,0
00

24,632,0
00

27,809,0
00

31,008,0
00

34,229,0
00

26,230,4
00

Net Profit Margin

0.091

0.092

0.092

0.093

0.094

0.094

0.095

0.096

0.096

0.097

0.098

-0.242

Gross Profit Margin

0.403

0.403

0.403

0.403

0.403

0.403

0.403

0.403

0.403

0.403

0.403

0.403

4.29%

4.32%

4.35%

4.38%

4.41%

4.45%

4.48%

4.51%

4.54%

4.57%

4.60%

-11.43%

0.137

0.137

0.137

0.137

0.137

0.137

0.137

0.137

0.137

0.137

0.137

0.137

NET PROFIT BEFORE TAX


Corporation Tax 30%

Rate of Return on
Investment

Operating Profit Margin

Annexure 4.1: Projected Balance Sheet for Year 1 (In UGX)


CAPITAL EMPLOYED:

MNTH.
0

MNTH.
1

MNTH.
2

MNTH.
3

MNTH.
4

MNTH.
5

MNTH.
6

MNTH.
7

MNTH.
8

MNTH.
9

MNTH.1
0

MNTH.1
1

MNTH.1
2

Share Capital

5,000,000

5,000,000

5,000,000

5,000,000

5,000,000

5,000,000

5,000,000

5,000,000

5,000,000

5,000,000

5,000,000

5,000,000

Retained Earnings
Shareholder's
Equity/Deficit

3,775,000

7,550,000

11,325,000

15,100,000

18,875,000

22,650,000

23,925,000

25,244,000

26,606,000

28,012,000

29,462,000

21,669,200

8,775,000

12,550,000

16,325,000

20,100,000

23,875,000

27,650,000

28,925,000

30,244,000

31,606,000

33,012,000

34,462,000

26,669,200

30,000,000

30,000,000

30,000,000

30,000,000

30,000,000

30,000,000

27,500,000

25,000,000

22,500,000

20,000,000

17,500,000

15,000,000

38,775,000

42,550,000

46,325,000

50,100,000

53,875,000

57,650,000

56,425,000

55,244,000

54,106,000

53,012,000

51,962,000

41,669,200

10,000,000

9,958,333

9,916,667

9,875,000

9,833,333

9,791,667

9,750,000

9,708,333

9,666,667

9,625,000

9,583,333

9,541,667

9,500,000

40,000,000

39,666,667

39,333,333

39,000,000

38,666,667

38,333,333

38,000,000

37,666,667

37,333,333

37,000,000

36,666,667

36,333,333

36,000,000

Testing Equipment

Miscellaneous Fixed Assets

Vehicles

Long-Term Liabilities

EMPLOYMENT OF CAPITAL:

Plant Buildings
Production Plant Equip. &
Machinery

49

UGANDA GRAIN DEALERS LTD. BUSINESS PLAN CORPORATE DOCUMENT


LONG-TERM ASSETS:

50,000,000

49,625,000

49,250,000

48,875,000

48,500,000

48,125,000

47,750,000

47,375,000

47,000,000

46,625,000

46,250,000

45,875,000

45,500,000

CURRENT ASSETS:

-8,645,000

-4,495,000

-345,000

3,805,000

7,955,000

12,105,000

11,255,000

10,405,000

9,599,000

8,836,000

8,117,000

-1,844,800

Accounts Receivable

2,261,667

2,261,667

2,261,667

2,261,667

2,261,667

2,261,667

2,261,667

2,261,667

2,261,667

2,261,667

2,261,667

2,261,667

Stock (Inventory)

6,981,000

6,981,000

6,981,000

6,981,000

6,981,000

6,981,000

6,981,000

6,981,000

6,981,000

6,981,000

6,981,000

6,981,000

327,097

327,097

327,097

327,097

327,097

327,097

327,097

327,097

327,097

327,097

327,097

327,097

-18,214,764

-14,064,764

-9,914,764

-5,764,764

-1,614,764

2,535,236

1,685,236

835,236

29,236

-733,764

-1,452,764

-11,414,564

CURRENT LIABILITIES:

2,205,000

2,205,000

2,205,000

2,205,000

2,205,000

2,205,000

2,205,000

2,161,000

2,118,000

2,074,000

2,030,000

1,986,000

Accounts Payable

1,680,000

1,680,000

1,680,000

1,680,000

1,680,000

1,680,000

1,680,000

1,680,000

1,680,000

1,680,000

1,680,000

1,680,000

525,000

525,000

525,000

525,000

525,000

525,000

525,000

481,000

438,000

394,000

350,000

306,000

NET CURRENT ASSETS:

-10,850,000

-6,700,000

-2,550,000

1,600,000

5,750,000

9,900,000

9,050,000

8,244,000

7,481,000

6,762,000

6,087,000

-3,830,800

TOTAL CAPITAL

38,775,000

42,550,000

46,325,000

50,100,000

53,875,000

57,650,000

56,425,000

55,244,000

54,106,000

53,012,000

51,962,000

41,669,200

MNTH.1
9

MNTH.2
0

MNTH.2
1

MNTH.2
2

MNTH.2
3

Bank Balance and Cash


Other Current Assets

Current Portion of Long-term


Liabilities

Annexure 4.2: Projected Balance Sheet for Year 2 (In UGX)


CAPITAL EMPLOYED:
Share Capital

MNTH.1
3

MNTH.1
4

MNTH.1
5

MNTH.1
6

MNTH.1
7

MNTH.1
8

MNTH.2
4

5,000,000

5,000,000

5,000,000

5,000,000

5,000,000

5,000,000

5,000,000

5,000,000

5,000,000

5,000,000

5,000,000

5,000,000

Retained Earnings
Shareholder's
Equity/Deficit

24,671,200

27,695,200

30,741,200

33,809,200

36,899,200

40,011,200

43,145,200

46,301,200

49,478,200

52,677,200

55,898,200

47,899,600

29,671,200

32,695,200

35,741,200

38,809,200

41,899,200

45,011,200

48,145,200

51,301,200

54,478,200

57,677,200

60,898,200

52,899,600

Long-Term Liabilities

13,750,000

12,500,000

11,250,000

10,000,000

8,750,000

7,500,000

6,250,000

5,000,000

3,750,000

2,500,000

1,250,000

43,421,200

45,195,200

46,991,200

48,809,200

50,649,200

52,511,200

54,395,200

56,301,200

58,228,200

60,177,200

62,148,200

52,899,600

9,458,333

9,416,667

9,375,000

9,333,333

9,291,667

9,250,000

9,208,333

9,166,667

9,125,000

9,083,333

9,041,667

9,000,000

35,666,667

35,333,333

35,000,000

34,666,667

34,333,333

34,000,000

33,666,667

33,333,333

33,000,000

32,666,667

32,333,333

32,000,000

Testing Equipment

Miscellaneous Fixed Assets

Vehicles

EMPLOYMENT OF CAPITAL:

Plant Buildings
Production Plant Equip. &
Machinery

50

UGANDA GRAIN DEALERS LTD. BUSINESS PLAN CORPORATE DOCUMENT


LONG-TERM ASSETS:

45,125,000

44,750,000

44,375,000

44,000,000

43,625,000

43,250,000

42,875,000

42,500,000

42,125,000

41,750,000

41,375,000

41,000,000

CURRENT ASSETS:

699,450

2,826,450

4,975,450

7,146,450

9,339,450

11,554,450

13,791,450

16,050,450

18,331,450

20,633,450

22,957,450

14,061,850

Accounts Receivable

2,374,750

2,374,750

2,374,750

2,374,750

2,374,750

2,374,750

2,374,750

2,374,750

2,374,750

2,374,750

2,374,750

2,374,750

Stock (Inventory)

7,330,050

7,330,050

7,330,050

7,330,050

7,330,050

7,330,050

7,330,050

7,330,050

7,330,050

7,330,050

7,330,050

7,330,050

Bank Balance and Cash

328,799

328,799

328,799

328,799

328,799

328,799

328,799

328,799

328,799

328,799

328,799

328,799

Other Current Assets

-9,334,149

-7,207,149

-5,058,149

-2,887,149

-694,149

1,520,851

3,757,851

6,016,851

8,297,851

10,599,851

12,923,851

4,028,251

CURRENT LIABILITIES:

2,403,250

2,381,250

2,359,250

2,337,250

2,315,250

2,293,250

2,271,250

2,249,250

2,228,250

2,206,250

2,184,250

2,162,250

Accounts Payable

2,140,250

2,140,250

2,140,250

2,140,250

2,140,250

2,140,250

2,140,250

2,140,250

2,140,250

2,140,250

2,140,250

2,140,250

263,000

241,000

219,000

197,000

175,000

153,000

131,000

109,000

88,000

66,000

44,000

22,000

NET CURRENT ASSETS:

-1,703,800

445,200

2,616,200

4,809,200

7,024,200

9,261,200

11,520,200

13,801,200

16,103,200

18,427,200

20,773,200

11,899,600

TOTAL CAPITAL

43,421,200

45,195,200

46,991,200

48,809,200

50,649,200

52,511,200

54,395,200

56,301,200

58,228,200

60,177,200

62,148,200

52,899,600

Current Portion of Long-term


Liabilities

51

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