Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
F E A S I B I L I T Y S T U D Y.
Done By:
J.K.A. Koech / R. Koech,Weldon Korir.
P.O. Box 27, Kericho
20200.
Cell: 0722 668 755; 0722 407 200
e-mail: joelkoech@yahoo.com
December 2010
TABLE OF CONTENTS.
EXECUTIVE SUMMARY......................................................................................................4
1.
Background......................................................................................................................5
2.
3.
4.
5.
Legislation........................................................................................................................9
6.
Management...................................................................................................................10
6.1 Human resource.....................................................................................................10
6.2 Management structure:...........................................................................................11
6.3 Responsibilities and Authorities of Key personnel................................................13
7.
Current production........................................................................................................13
7.1. Current availability of the product:.....................................................................13
7.2.
7.3.
8.
Current Consumption...................................................................................................15
9.
General:...................................................................................................................15
9.2
10.
10.1.
Branded tea:........................................................................................................17
10.2.
10.3.
Emerging markets...............................................................................................17
11.
Pricing Structures......................................................................................................18
12.
Distribution:...............................................................................................................19
13.
Production..................................................................................................................19
13.1.
Product:...............................................................................................................19
13.2.
14.
14.1.
Production Plan..........................................................................................................22
14.2.
Tea Processing....................................................................................................23
15.
Financial Evaluation.................................................................................................27
16.
Economic Evaluation.................................................................................................28
17.
18.
Implementation Schedule..........................................................................................29
1. EXECUTIVE SUMMARY.
1. Tet tea Factory Company limited intends to invest in
the establishment of a tea Factory in Kimulot Division
of Bomet County.
2. Total estimated value of the investment is Kshs. 209,
444,000 (Two hundred and nine million four hundred
and forty four thousand shillings).
3. The project will be financed by Equity contribution
from shareholders, promoters and financier/strategic
partner as identified by the directors of Tet Tea
Factory Company limited.
4. The feasibility study reveals that the project will bring
in profits in the first year of operation and continues
to be profitable even after the sixth year of operation.
5. The project has good economic benefits to its
shareholders and the community around the location
of the project. This includes a direct employment of
75
people
and
sustainable
cooperate
tax
remittance.
6. The returns on both the Equity and the Investment
are quite good and sustained by a good flow of cash.
8.
equipments and
materials necessary for immediate
implementation of the project.
9.
2. Background.
(a)The Tet Tea Factory Company Limited, a company limited by shares, was founded in
2009.Her directors, shareholders and promoters have been involved in tea farming,
fabrication, assembly and maintenance of tea Machinery in various tea factories in East
Africa for over thirty years. The directors of Tet Tea Factory Company limited would
like to invest in tea manufacturing facility, value adding of tea and in the marketing of
finished products in both local and international markets.
(b)The government encourages investment in tea sub-sector since Tea processing,
packaging and marketing was liberalized in 1992. This liberalization meant opening the
tea sector to various investments at various sections of the tea sector. However certain
regulatory procedures issued by the Tea Board of Kenya (TBK) as stipulated in the Tea
Act, must be met before and during operations in any investment on Tea. These
regulations covers various categories in Tea handling such as in Planting,
Manufacturing, Value addition, Marketing, Tea Estate management, Warehousing,
research Etc. While fulfilling the regulations required by the Tea Act, Tet Tea Factory
Company Limited would like to use this window of opportunity to invest in a tea
manufacturing factory.
(c)Tet Tea factory company limited directors, shareholders and sponsors has a rich
background on tea operations and would like to use their experience for further
development in tea operations by investing in a manufacturing factory. This project will
entail the building of a factory, acquisition and assembly of state of the art tea
manufacturing machines and facilitating the purchase of green leaf from the sponsors
and Suppliers of green leaf for conversion to black tea and specialty tea products.
5
(d)This project appraisal examine in details the viability and feasibility of Tet Tea Factory
companys vision setting up of a tea processing factory to be located in Konoin district
in the Bomet County in Rift valley province.
Tet Tea Factory Company Limited: This is a company limited by shares and
incorporated in Kenya under the company Act (Cap.486). It is run by a board of
Directors elected periodically. (See appendix 11 certificate of incorporation).
ii)
Small scale Tea farmers: These are the suppliers of the raw materials to the factory.
They have also been offered shareholding in Tet Tea Factory limited.
iii)
Financier/strategic partner: Tet Tea Factory Company Limited has invited a strategic
partner to fill the shortfall in the financing of the project. The engagement will be based
on agreed Equity contribution.
iv)
Other shareholders:
These are drawn from the general public who may not necessarily be suppliers of green
leaf. Their input will be based on purchase of shares.
b) Sponsors Equity: The entire investment will be financed by Equity contribution from the
sponsors as in (a) above. It is estimated that the total cost of the factory will be
Kshs.209, 444,000.
Mr. Metet Kipkoech Kenneth, 33, Chairman of the Board of Directors, Tet Tea Co.
Ltd.
Kenneth is a graduate of Maseno University in Bachelor of Science in Horticulture.
He worked with M/S Sulmac, a horticulture firm in Naivasha in Kenya before venturing
in to private agri-business.
He is result oriented personality, easily accessible and a team builder. He currently
manages family tea and real Estates.
He is also a chairman of small scale tea farmers supplying green leaf to Williamson Tea
Company in Kericho. He is the current lead trainer for Utz, Fair trade and Rain Forest
certification of small scale tea farmers. He will be a big asset to Tet Tea Factory Company
limited in harmonizing Tea quality procedures and welfare of the community with
international standards.
Mr. Didar S Hunjan, 67vice-Chairman of the Company
Didar is a Mechanical Engineer by profession. He has over 30 years of experience in tea
having worked with African Highlands Produce Company Ltd. (now James Finlay (K)
Ltd.) in their tea plantations and factories. He has been mainly involved in the research
and development of new inventions of tea machineries especially tea sorting machines.
He is all round trained on tea production and quality control. He is a co-founder of
Tealand group of companies. His wealth of experience in tea machinery will be of great
value to Tet Tea Factory.
Mrs. Bornice Soi, 56
She is a teacher by profession and a devoted tea farmer. She has a lot of interest in real
estate development and owns a well established real estate in the heart of Kericho town
and in local trading centers in Konoin District.
She has been a district representative in the Bomas Constitutional reform commission.
She sits in various community based committees and licensing Boards in the district. She
is the contributor of the parcel of land where the proposed Tet Tea Factory company
limited will be built on.
Mr. Kirpal S Hunjan, 66
Mr. K S Hunjan is a Mechanical Engineer with a lot of experience in structural design
and fabrication. His experience in structural works will be useful to Tet Tea Factory in
building designs and in the erection of structural works and subsequent maintenance.
7
Tet Tea Factory Company limited has contracted the following team of three individuals to
provide advisory services. They will also coordinate the project starting from the feasibility
study until six months after the commissioning of the project.
(a) Rehmi K. Koech: Is a certified public accountant, has a bachelor of commerce from
Nairobi University currently pursuing the final year in MBA in the same university. He has
worked in management position with National housing corperation, Industrial commerce
Development Corporation (ICDC), Kenya National Trading Corporation (KNTC) and now
works with Kenya Institute of public policy Research Authority (KIPPRA). He specializes in
Auditing. He has been a national chairman of Rotary club among many other public
engagements.
b) Weldon Korir: is a certified public accountant with many years of service with Unilever
limited. On retirement with Unilever, he has been engaged in private business which includes
tea farming and service provision to Multinational tea companies in Kericho. Weldon has a
rich background in management and control of accounts. Some of the major assignments has
been in sales collections marketing strategies, construction of unit accounts, setting and
managing Financial controls, Executive reporting, appraisal of new projects and their
implementations and evaluation.
(c) Joel K.A.Koech: A career manager of over 32 years working with Tea. On completion of
E.A.A.C.E (passed with 3p and 1s), Joel was employed as a management trainee with the
then Brooke Bond (K) Ltd (now Unilever Tea Kenya ltd.). He rose through the ranks to be
senior manager both in field and factory operations. A few of the areas he worked extensible
includes:
provinces..
Rehabilitation of Small scale tea farms in Bahati, Nakuru.
9
6. Legislation.
1. Tea Act (Cap 343) and Tea (Licensing, Registration and Trade) Regulations,
2008.This act generates the several regulatory requirements in detail in the Tea sub sector of
the Kenyan economy.
The directors and shareholders of Tet Tea Factory Company Limited
10
are confident that they will satisfy all the requirements and demands of the Act and
be able to obtain the various licenses from the Tea board of Kenya for the intended
investment. A standard form C is attached as appendix 12.
2. National environmental management Authority (NEMA):
Tet Tea Factory directors have an elaborate policy on environment, attached as
appendix 13.
However, an independent impact assessment and certification by NEMA is part of the
requirement by the Tea Act. Tet Tea Factory Company limited has therefore engaged
the services of GREANEIA consultants for this purpose.
3. Other legislation:
These include licenses from the county government, Water companies, Kenya Power
and lighting. The process of acquiring these required documents is already on- going.
Water Resource Management Association of Lake Victoria Basin will process the
water abstraction permit once the mandatory conditions have been satisfied.
See appendix 14.
The Kenya Power and Lighting Company limited Western Kenya Region have
confirmed their willingness to connect electricity to the factory once the construction
starts. A copy of their response to our application is attached as appendix15.
4. Quality certification:
Tet Tea Factory Company intends to produce a world class product which is good
and safe to the consumer. The directors have already drawn a product Quality and
consumer safety policy, attached as appendix 16.
However, Tet Tea factory will commit all the necessary resources to obtain Quality
Certifications such as Kenya Bureau of standards, ISO, Rain forest Alliance, Fair
Trade, Utz etc. The process of acquisition of each relevant certification would
commence once production starts. One director of Tet Tea Factory limited is already
involved in Rain Forest Alliance, UTZ and Fair Trade in anticipation of Tet Tea
factory using his expertise as soon as Production starts.
7.
Management.
11
(a)Human Resource.
(i)Employment creation: The project is expected to create 75 direct employment
opportunities with a multiplier effect of over 20 to give over 1000 indirect
opportunities for inhabitants of the area. Konoin and the greater Kericho districts has
plenty of experienced and professional workforce in tea processing in want of
immediate employment and Tet Tea Factory would like to tap into this available
human resource.
(ii)Placing: This Investment in a factory demands that the positions of both
management and directorship will be occupied by persons of high integrity and
professionalism. Tet Tea Factory Company Limited are already aware of this
prerequisite and will therefore put up rigorous engagement procedures for recruiting
and placing of staff in both management and directorship. Additionally strict controls
procedures and modern professional management systems will be instituted to govern
this investment accountably and more so transparently.
(iii) Management Information system: Placed human resource would require a
comprehensive computerized management system as operational assistance.
The directors of Tet Tea Factory Company Limited are keen in putting in place
modern management information systems for use in running, monitoring, controlling
and evaluating every aspect of this investment instantly and periodically. This will
include the installation of security surveillance cover.
.
(i)
12
Human r
Factory
unit
Factory
manager 1
Manager 1
Accountant
(1)
Production
Factory
assistants(3)
Engineer (1)
Purchasing
Assistant
Assistant
Clerk (1)
(1)
(1)
G e n e r a l
Section
Personnel
Heads (10)
Transport
Technical
Data Entry
Store
Sales
Assistant (3)
Clerk (4)
Clerk (1)
Clerk (1)
F a c t o r y
W o r k f o r c e (43)
Unit Manager
Total factory employees = 73
and
administration
matters
that
include
facilitation
of
8. Production:
i)
14
The major Tea producing areas include former districts of Kericho, Nakuru, Nandi,
Kisii, Nyamira, Kiambu, Kirinyaga, Nyeri, Muranga, Meru, Tharaka, Nithi,
Nyambene, Mt Elgon, Bomet, Vihiga, Tranzoia and now Transmara.
ii)
15
9. Consumption.
(a)
Local consumption: The production of tea in 2010 stood at total of three hundred
and ninety eight and a half (398.5) million Kgs. Local consumption was a mere
18.7 million kilogram of tea. This works out to below 0.5 Kgs. of tea per each
head of forty million Kenyans Most of the tea drank locally are in loose packets
or tea bags. Specialty tea products are still majorly underdeveloped. Tet Tea
Factory Company Limited would like to explore windows of opportunity for
(b)
last years
first
line producers. This will bring the benefit of maximization of product quality, pricing,
identity, and traceability. Moreover, most consumers of commodity products
worldwide have rising awareness on social responsibilities and would like to
participate directly in the social development of the communities producing products.
Tet Tea Factory Company Limited would develop and identify themselves with these
group of end users of tea.
the Tet Tea Factory Company Limited expects to enter into this high premium
flavored tea market.
It is should be noted that very small amount of tea are value added at the
country of
origin before exporting. This robs the farmer (primary producer) the premium price
that is associated with value addition. Tet Tea Factory Company Limited plans to add
value to part of its Tea products before releasing to the market. It is anticipated that
packeted teas, flavored teas and ready to drink Teas will with time be produced by Tet
Tea Factory limited.
3. Emerging markets
The United States, Canada and Australasia despite their big purchasing power are
not major tea consumer but tea is beginning to gain popularity. It should be noted
that there is a growing Diaspora population emigrants from tea drinking and
growing regions that could assist in the introduction of Tea drinking in these
countries. It is gratifying to note that our Tea Board of Kenya has also identified this
window of opportunity for marketing Kenyan Tea as in their TEA NEWS issue of
October / December 2010. High premium markets such as North Americas Japan
and Australasia are still lowly developed and yet there is a considerable influx of
immigrants from tea drinking countries to these areas. Tet Tea Factory Company
Limited would develop marketing channels for its range of product in these areas.
This would take the engagement of the population Diaspora to jump start the
marketing operations in those regions..
(b)The Middle East and the entire Muslim world is a very important market for
Kenyan Tea and its potential is yet to be optimized. The Far East- Japan, China, and
Russia have a big potential, which is yet to be explored by the tea producers in
Kenya.
19
20
13. Distribution:
The black tea will be distributed through the following Outlets:
i) Retailers:
This will be to the supermarket chains both locally or internationally: This will gather
for the bulk of the value added Teas. The supermarket chains are currently spreading
their influences across the country and their direct collaboration with producers is
being developed. This is an area the Tet Tea Factory Company Limited would like to
maximize on.
ii) Directly sales to consumers
This is locally referred to as factory gate sales which will ensure speedy delivery to
individual consumers. Tet Tea factory company limited will establish a sale
distribution system locally..
21
(iii)
Mombasa Auction:
This would take substantial volume of loose teas from Tet Tea factory Company
Limited.
22
(c)It is situated within two hundred meter distance from a developed market
centre supplied with water, 3-phase electric power supply.
(d)An all- weather trunk road passes at the edge of the factory site and has
been planned and committed by the government of Kenya for tarmacking soon.
The existing tarmac road is only 8 kilometers from the proposed factory site.
(e)The Kimulot Market next to the factory site is currently a divisional
administration centre and its security detail is only 50m from the proposed
factory gate.
iii) Source of raw materials
Specific quality of green tea leaves will be purchased from the small holder tea
farmers in the catchment area of the factory (not more than 10 Kilometers from the
factory).These are the sponsors and also shareholders of Tet Tea Factory Company
Limited. These growers have already applied to supply green leaf to Tet tea factory
as soon as it starts manufacture.
Tet tea factory has already opened a register for those applications. Their total area
under Tea is 980.3 acres which is well above the mandatory 512.5 acres.(250h.a).
However, a supply contract agreement will be entered into between each farmer
and Tet tea factory Company limited. There will also be an affirmed affidavit by the
farmer confirming commitment to support Tet Tea Factory Company Limited.
These will only be affected once Tea Board of Kenya grants a manufacturing
license to Tet Tea Factory Company limited.
23
Serial
Name
Acres
ID No.
100
1760232
Cherogony Investments
96
80
3849531
150
3846967
Julius C Ngeno
50
0737065
Joseph K Sang
50
3848249
No.
24
Sammy Chepkwony
50
12915456
Ker/Kim/249
Annah C Chepkwony
20
3848650
Ker/Kim/208
Stephen A Nyigei
30
3858035
Ker/Kim/339
10
Peter C Serem
30
0866058
Ker/Kim/1102,
Ker/Kim/1103
11
30
7062158
Ker/Kim/263
12
15
8660291
Ker/Kim/114
13
20
3876920
14
Christopher Langat
30
3848253
Ker/Kim/1005
15
Zephania Kirui
15
0473938
16
Jonah Rono
10
Ker/Kim/356
17
Samuel Soi
0866319
Ker/Kim/753
18
Jonathan Mutai
3861499
Ker/Kim/966
19
Sofia Koech
13
3951363
Ker/Kim/372
20
8109025
Ker/Kim/331
21
Elijah C Koskei
0322521
Ker/Kim/303
22
Peter Keinoi
0851101
Ker/Kim/859
23
0739162
Ker/Kim/627
24
James K Siele
16
3851587
25
15
3876939
Ker/Kim/4
26
18
3848540
Ker/Kim/76, 79
27
Simion Kitur
3850051
Ker/Kim/879
28
10
12922146
Ker/Kim/715
29
7482116
Ker/Kim/49
30
Kenneth Mutai
22374907
Ker/Kim/667
31
Richard Korir
9434308
Ker/Kim/ 1186
32
Rusi C Langat
11
1760103
Ker/Kim/73, 736, 23
33
Daniel Barchok
3849312
Ker/Kim/837
34
1773422
Ker/Kim/154
35
Samuel K Rono
2.5
1760372
Ker/Kim/1156, 972
36
Vincent Langat
20245964
Ker/Kim/239
25
37
0322565
Ker/Kim/510
38
Joseph Yegon
0604147
Ker/Kim/24
39
10.5
0868912
Ker/Kim/504
40
12.32
3848835
Ker/Kim/122
41
Stanley Kiptonui
1761313
Ker/Kim/113
42
3848182
Ker/Kim/742
43
Benson Kirui
7374061
Ker/Kim/81
TOTAL
980.32
26
sources of heat energy, in line with innovation in the energy sec rtor,
that are convenient and cost effective. In particular, use of briquettes made from
agricultural wastes e.g. bagasse or tea waste will be evaluated.
Furnace oil, coal or electricity are not cost effective but a standby facility will be installed
for use in dare emergency only.
.
ii) Energy source for machinery and lighting needs: The prime mover for machines will
be electric energy sourced from Kenya Power and Lighting Company. However, there
will be a standby generator to gather for unexpected power interruptions.
Maceration process is the stage where semi permeable membrane in the leaf is ruptured
and distorted allowing the juice and the sap to be mixed in the presence of oxygen. This
commences the chemical changes necessary for black tea production through the process
of oxidation. The green leaf color changes to golden brown. There are many systems of
maceration of green leaf depending on the targeted end product. Tet Tea Factory limited
plans to initially invest in one line of modern CTC macerating machines. This will be
followed later with other types of machines. These CTC machines are readily available
ex stock from our strategic partner in Kericho.
The fermentation is the most distinguishing quality factor in black tea processing. It is at
this stage that most important properties of tea qualities of tea are produced. The leaf is
kept here for about 90-120 minutes under strict temperature controls between 18-26 0 C.
At the end of this duration, the fermented leaf attains a bright copper brown color. The
28
Process demands machinery that allow free flow and abundant oxygen to reach every
particle of macerated leaf in the allowed fermenting time. There are several types of
fermenting equipment but the most preferred for consistent quality is Continues
Fermenting System. Tet Tea Company plans to install a modern Continuous Fermenting
System commonly referred to as Intelligent Continuous Fermenting System.
This is the stage where heat energy is used to dry Tea with a moisture content of 65%
reduced to below 3%.Drying stops fermentation, preserves tea quality and reduces its
mass among many other chemical changes. Drying process takes an average of 20
minutes.
Heat energy is derived from burning firewood in the Boiler furnace in the boiler house.
Heat energy boils water in the boiler drum and water boils to generate steam which is
channeled through steam pipes and fittings into the drier radiators. The dryer fans draw air
from the atmosphere through the radiators where the air is heated and blown through the
perforated bed of the dryer and into contact with fermented leaf. The steam in the radiator
looses heat energy and turns back to condensate. The condensate returns back to the
Boiler drum and the circle begins again.
There are several system of drying available in the market but Tet Tea Factory Limited
have picked one for installation from the market leader in drying machinery fabrication.
This has been picked for efficiency and the Quality of the product it produces.
Tet Tea Factory limited has also identified an efficient Boiler for importation and
installation. Firewood will be sourced from among the farmers living close to the factory
location and Tet Tea factory limited has plans to supplement or diversify use of firewood
in drying into other alternative source of energy like briquettes made from farm waste.
Separated black tea, referred to as primary grades, is conveyed into a fibro screen with
layers of different sieves with various holes sizes. The fibro screen separates granular
sizes into grades as below and their percentages:
Broken Pekoes (BP 1)
10 %
60 %
20 %
Dust 1 (D)
5%
2%
Dust (D)
2%
1%
All sorting machines are readily available in Kericho for immediate purchase and
installation by Tet Tea Factory Company Limited.
The biggest percentage of tea will be packed in large consignment for sale and Export .It
is therefore necessary to store made tea in large quantities before packing.
Properly designed bins will be installed in Tet TEA factory for storing particularly the
primary grades which constitute over 95% of the total production.
Secondary grades of tea are normally floor bulked before packing for the market.
30
a)
b)
Cash flow Analysis: Proceeds from sales are realized within three months of each
production and this will well sustain the cash requirement for the project. The
cash requirement will only be a challenge in the first three months of operations
and this will be provided for in the initial working capital. (see appendix 10).
31
c)
d)
e)
The proposed unit will create direct permanent employment for at least 75
ii)
iii)
iv)
v)
vi)
taxes for the good of the country and the local community.
Tet Tea factory limited would like to develop a win win opportunities in the
community it is operating in.
32
(i)
(ii)
(iii)
(iv)
33
Fluctuations in Exchange rates: Apart from local sales, all teas are sold in
foreign currencies and predominantly in U.S.Dollar. A strong Kenya shillings
will Impact negatively on Export sales whereas a weak shilling will bring
more cash volumes into the business.
The above has sensitivity as at 5% change but adverse effect will be more profound at
10% negative change. The Directors of Tet Tea factory company limited fully
understand these challenges and have program in place to success fully face up to
these challenges.
Mr. Metet Kipkoech Kenneth, 31, Chairman of the Board of Directors, Tet Tea Co. Ltd.
He is the anchor management lead operations coordinator of the nucleus tea farm of 80
acres to subscribe its tea green leaf production to the proposed Tet Tea Factory Complex.
Kenneth is a graduate of Maseno University and did B.Sc. in Horticulture. Thereafter, he
worked with M/S Sulmac, a horticulture firm in Naivasha in Kenya before venturing in to
private agri-business
Mr. Didar S Hunjan, 65, Vice-Chairman of the Company
Didar is a Mechanical Engineer by profession. He has over 30 years of experience in tea
having worked with African Highlands Produce Company Ltd. (now James Finlay (K)
Ltd.) in their tea plantations and factories. He has been mainly involved in the research
and development of new varieties of tea machineries. He is all round trained on tea
production and quality control
Mrs. Bornice Soi, 54
34
She is an astute educationist and a devoted farmer. She is also an established and
respected business lady based in Kericho with substantial interests in real estate and
agriculture
Mr. Kirpal S Hunjan, 64
Mr. K S Hunjan is a Mechanical Engineer and has been involved majorly in the design
and fabrication of tea and coffee machinery but more widely on tea
Mr. Robert Cheruiyot Metet, 31
Robert is a Quantity Surveyor/Management by profession and will be an asset in the key
elements of the design and contract management of the project
Mr. Inderjit S Hunjan, 59
Inderjit is a British citizen and a Mechanical Engineer by profession. He has gained
substantial experience in tea machineries relating to the design, fabrication, quality
control and installation.
TO
The managing Director ,
Tea Board of Kenya,
Tea Board House,
Naivasha Road-off Ngong Road,
P.O.Box 20064-00200,
NAIROBI -KENYA.
12th March 2011.
Dear Madam,
REF:
factory.
35
36
SORTATION
Fibre Extraction
True Grades
PACKING
Packing Wts
PF1/PD in
Paper sacks
37
DRYING
2.5 3.5 % M. C
Temperature
QA AND DESPATCH
M.C
Density Checks
Documentation
CUTTING
V Profile
Roller Changing
FERMENTATION
Time
Temperature