59. PROFILE ON PRODUCTION SUGAR
TABLE OF CONTENTS
I. SUMMARY 59-3
II. PRODUCT DESCRIPTION & APPLICATION 59-3
III. MARKET STUDY AND PLANT CAPACITY 59-4
A. MARKET STUDY 59-4
B. PLANT CAPACITY & PRODUCTION PROGRAMME 59-6
IV. RAW MATERIALS AND INPUTS 59-7
A. RAW & AUXILIARY MATERIALS 59-7
B. UTILITIES 59-8
V. TECHNOLOGY & ENGINEERING 59-10
A. TECHNOLOGY 59-10
B. ENGINEERING 59-13
VI. MANPOWER & TRAINING REQUIREMENT 59-14
A. MANPOWER REQUIREMENT 59-14
B. TRAINING REQUIREMENT 59-16
VII. FINANCIAL ANALYSIS 59-16
A. TOTAL INITIAL INVESTMENT COST 59-16
B. PRODUCTION COST 59-17
C. FINANCIAL EVALUATION 59-18
D. ECONOMIC BENEFITS 59-19
This profile envisages the establishment of a plant for the production of suger from beet
with a capacity of 8,000 tonnes per annum.
The present demand for the proposed product is estimated at 10,818 tonnes per annum.
The demand is expected to reach at 21,280 tonnes by the year 2017.
The plant will create employment opportunities for 337 persons.
The total investment requirement is estimated at about Birr 187.99 million, out of
which Birr 90 million is required for plant and machinery.
The project is financially viable with an internal rate of return (IRR) of 15 % and a net
present value (NPV) of Birr 60.18 million discounted at 8.5%.
II PRODUCT DESCRIPTION AND APPLICATION
Sugar, or sucrose, is a carbohydrate that occurs naturally in every fruit and vegetable in
the plant kingdom. It is the major product of photosynthesis, the process by which plants
transform the sugar energy into food. Sugar occurs in greatest quantities in sugar cane
and sugar beets from which it is separated for commercial use.
There is no difference in the sugar produced from either cane or beet. The sugar beet
grows best in a temperate climate and stores its sugar in its white root. Sugar from both
sources is produced by nature in the same fashion as all green plants produce sugar-as a
means of storing the sun's energy.
Sugar from beet root is a resource based product that will substitute import as well as
have export potential.
III. MARKET STUDY AND PLANT CAPACITY
A. MARKET STUDY
1. Past supply and Present Demand
Sugar production is the country is made from sugar cane in all factories namely,
Metehara, Wonji-Shoa and Fincha. As a result sugar from sweet potato and beet root to
the county is supplied only from import. Import of sugar by type for the past three years
is shown below.
IMPORT OF SUGAR BY TYPE (TON)
Year Cane Sugar Cane or beet Beet Sugar Total
2004 17,495 36,282 - 53,777
2005 31,083 6,525 151 37,759
2006 49,002 3,405 - 52,407
Total 97,580 46,212 151 143,943
Source:- Customs Authority.
As could be seen from Table 3.1 the total amount of sugar imported to the country in the
past three years was around 144 thousand tons. Of the total amount 97,580 tons or 68%
is cane sugar while the remaining 46,363 tons or 32% is registered as cone or beet sugar.
The annual average of cane or beet sugar is about 15,454 tons. Assuming 70% of the
imported sugar under the title cane or beet sugar belongs to pure beet sugar the quantity
amounts to 10,818 tons. This amount is assumed to reflect the current unsatisfied
effective demand for beet sugar in the country.
2. Demand Projection
The main factors that influence the demand for sugar are population, income,
consumption habit and the growth of the service and the manufacturing sector mainly
catering institutions like hotels, restaurants and bars as well as the food and beverage
industries. Urban population growth rate in Ethiopia is 4% per annum. A substantial
amount of the rural population is also expected to consume sugar as a result of higher
income and change in the consumption habit. The agricultural sector has been growing
more than 10% in the past recent years and will have a positive impact on income and
increased purchasing power of the rural population. The industrial sector has been also
growing by about 7%. The combined effect of the above factors is assumed to increase
demand for beet sugar by about 7% per annum. The demand projected on the basis of the
above argument is shown in Table 3.2.
PROJECTED DEMAND FOR BEET SUGAR (TON)
Demand for beet sugar will increase from 11,575 tons in the year 2008 to 15,173 tons and
21,280 tons by the year 2012 and 2017 respectively
3. Pricing and Distribution
Based on the average producers price Birr 4700 per ton is taken for sales revenue
The product can be distributed by selecting competent distributors in various parts of the
B. PLANT CAPACITY AND PRODUCTION PROGRAMME
1. Plant Capacity
The market study reveals that there is high demand for sugar both in local and
international market. So, the factors for determining capacity are availability of raw
material and minimum economies of scale for the sugar plant.
The minimum economic of scale for plantation white sugar production from sugar beet is
8,000 tones per annum.
2. Production Programme
The sugar plant will be set into operation for 270 days per year, working in three shifts (8
hours each) per day. Production will start at 75% of full capacity during the first year and
then rise to 85% and full capacity (100%) in the second and third year of operation,
IV. MATERIALS AND INPUTS
A. RAW AND AUXILIARY MATERIALS
The main raw material is sugar beet, which is a temperate climate biennial root crop. It
produces sugar during the first year of growth in order to see it over the winter and then
flowers and seeds in the second year. It is therefore sown in spring and harvested in the
first autumn/early winter. As for sugar cane, there are many cultivars available to the beet
farmer. The beet stores the sucrose in the bulbous root, which bears a strong resemblance
to a fat parsnip.
SNNPRS is believed to have suitable soil and weather conditions for growing sweet
potato and sugar beet. Establishment of sugar industry needs to be integrated with the
development of sugar beet farming. Essera Woreda of Dawuro zone and Ofa woreda of
Wolaita zone has suitable agro ecology for growing sweet potato and beet root. In
addition to this they have a number of perennial rivers which could be used for irrigation
as well as cultivable land. In this profile it is assumed that out-growers handle sugar beet
Table 4.1 indicates the annual raw material requirement at full capacity operation of the
plant and the cost estimates.
ANNUAL RAW MATERIALS REQUIREMENT
AT FULL CAPACITY PRODUCTION
Sr. Cost ('000 Birr)
No. Description Qty. FC LC TC
1 Sugar beet 20,000 MT - 9,000 9,000
2 Industrial & laboratory Chemicals - 300 100 400
3 Materials and Supplies - 1250 250 1500
4 Packing Materials (pp bags 50 kg) 65,000 - 144.95 145
TOTAL 1,550 9,495 11,045
Electrical Power: One of the big differences between a beet sugar factory and its cane
sugar counterpart is with respect to energy. Both factories need steam and electricity to
run and both have co-generation stations where high pressure steam is used to drive
turbines which produce the electrical power and create the low pressure steam needed by
the process. However the beet factory does not have a suitable by-product to use as fuel
for the boilers, it has to burn a fossil fuel such as coal, oil or gas. This is partly because
the pulp will not burn properly and partly because the animal feed business has been built
from the availability of the pulp.
The annual expenditure on utilities is estimated at Birr 16,048,310.The total amount of
utilities required and their cost is shown in Table 4.2
ANNUAL REQUIREMENTS OF UTILITIES
Item Annual Unit Estimated Cost
No. Utilities UOM Consumption Cost (Birr ‘OOO)
F.C L.C T.C
1 Electricity Kwh 350,000 0.4736 - 165.76 165.76
2 Water M3 300,000 2 - 600 600
4 Furnace oil M3 2000 5.41 - 10.82 10.82
Grand Total - 776.58 776.58
V. TECHNOLOGY AND ENGINEERING
1. Process Description
White beet sugar is made from the beets in a single process, rather than the two steps
involved with cane sugar.
A typical sugar content for mature beets is 17% by weight but the value depends on the
variety and it does vary from year to year and location to location.
The main process description of the envisaged plant is as follows:
The beets are harvested in the autumn and early winter by digging them out of the
ground. They are usually transported to the factory by large trucks because the transport
distances involved are greater than in the cane industry. This is a direct result of sugar
beet being a rotational crop which requires nearly 4 times the land area of the equivalent
cane crop which is grown in mono-culture. Because the beets have come from the ground
they are much dirtier than sugar cane and have to be thoroughly washed and separated
from any remaining beet leaves, stones and other trash material before processing.
The processing starts by slicing the beets into thin chips. This process increases the
surface area of the beet to make it easier to extract the sugar. The extraction takes place in
a diffuser where the beet is kept in contact with hot water for about an hour. Diffusion is
the process by which the colour and flavour of tea comes out of the tea leaves in a teapot
but a typical diffuser weighs several hundred tons when full of beet and extraction water.
The diffuser is a large horizontal or vertical agitated tank in which the beets slices slowly
work their way from one end to the other and the water is moved in the opposite
direction. This is called counter-current flow and as the water goes it becomes a stronger
and stronger sugar solution usually called juice. Of course it also collects a lot of other
chemicals from the flesh of the sugar beet.
The exhausted beet slices from the diffuser are still very wet and the water in them still
holds some useful sugar. They are therefore pressed in screw presses to squeeze as much
juice as possible out of them. This juice is used as part of the water in the diffuser and the
pressed beet, by now a pulp, is sent to drying plant where it is turned into pellets which
form an important constituent of some animal feeds.
The juice must now be cleaned up before it can be used for sugar production. This is done
by a process known as carbonatation where small clumps of chalk are grown in the juice.
The clumps, as they form, collect a lot of the non-sugars so that by filtering out the chalk
one also takes out the non-sugars. Once this is done the sugar liquor is ready for sugar
production except that it is very dilute.
The next stage of the process is therefore to evaporate the juice in a multi-stage
evaporator. This technique is used because it is an efficient way of using steam and it also
creates another, lower grade steam which can be used to drive the crystallization process.
For this last stage, the syrup is placed into a very large pan, typically holding 60 tons or
more of sugar syrup. In the pan even more water is boiled off until conditions are right
for sugar crystals to grow. In the factory the workers usually have to add some sugar dust
to initiate crystal formation. Once the crystals have grown the resulting mixture of
crystals and mother liquor is spun in centrifuges to separate the two, rather like washing
is spin-dried. The crystals are then given a final dry with hot air before being packed
and/or stored ready for dispatch.
The final sugar is white and ready for use, whether in the kitchen or by an industrial user
such as a soft drink manufacturer. As for raw sugar production, because one cannot get
all the sugar out of the juice, there is a sweet by-product made: beet molasses. This is
usually turned into a cattle food or is sent to a fermentation plant such as a distillery
where alcohol is made. It does not have the same quality smell and taste as cane molasses
so cannot be used for rum production.
The Effluent (waste water) from sugar factory contains organic materials, which will
have to be contained and treated prior to disposal to the environment. The objective of
treatment of such effluent is to reduce the biological and chemical oxygen demands to
allowable levels. This can be achieved by carrying out primary clarification, aeration,
fuel clarification and sludge drying. The sludge so obtained can be used as organic
2. Source of Technology
The address of machinery supplier is given below:-
National Heavy Engineering Pvt . ltd
Pune Bombay Road
E-mail: Sales firstname.lastname@example.org
1. Machinery And Equipment
Machinery and equipment required for the production of sugar are presented in Table 5.1.
The total cost of plant machinery and equipment is estimated at about Birr 90 million, out
of which Birr 80 million is required in foreign currency. Due to the nature of the
technology the machinery and equipment are supplied as a package and turnkey project.
LIST OF MACHINERY AND EQUIPMENT
1 Beet weighment
2 Beet unloading
3 Beet preparation (Sets of sharp knives)
4 Juice extraction plant (Diffuser and screw press)
5 Pressed beet dryer
6 Juice treatment section
7 Clarification and filtration
8 Multi stage evaporators
9 Vacuum Pans
10 Centrifugal machines
11 Sugar handling and bagging
12 Vapor Condensing plant
13 Steam Generation and distribution plant
14 Power Generation and distribution plant
15 Power evacuation system
16 Bagasse handling system
18 Fabrication workshop
20 Plant water system
21 Fire fighting system
22 Piping, insulation and cladding, Chutes, gutters and structures
23 Sugar Store
24 Beet Molasses Store
25 Heating, Ventilation, and Air conditioning
26 Auxiliary Equipment and Various tanks
27 Effluent treatment plant
2. Land, Building and Civil Works
The total land requirement is 50,000 square meters. This includes space required by
plant, administration building, auxiliary facilities, etc, and open space for waste treatment
plant, open storage for can sugar, molasses storage area, and other utilities. The space
requirement by the plant is estimated at 24,000 square meters the cost of land at a lease
rate of Birr 1 per m2 for 95 years is about Birr 50,000. The total cost estimate of building
and civil works at unit cost of Birr 2800 per m2 is about Birr 84.0 million. Therefore, the
total cost estimate of land, building and civil works is about Birr 84,050,000.
3. Proposed Location
According to the resource potential study of the region; Ofa and Essera.
Woredas have the required agro ecology for production of sweet potato and beet
root. In addition to this these two woredas has a number of perennial rivers and
cultivable land for growing the raw material Based on the availability of raw
material, infrastructure, utility, market out let and presence of four perennial rivers
such as: Urula, Girba, Mensa, Zega and Gassa in the woreda which have high
potential for irrigation development, Gessuba town of Ofa woreda, is selected and
recommended to be the location of the envisaged plant.
VI. MANPOWER AND TRAINING REQUIREMENT
A. MANPOWER REQUIREMENT
The envisaged sugar plant requires production manpower specialized in the areas of
chemical (process) engineering, mechanical and electrical engineering, chemists,
production operators, mechanics and electricians. The details of manpower required for
accomplishing plant production and administrative functions are presented in Table 6.1.
MANPOWER REQUIREMENT AND ANNUAL LABOUR COST
Sr. Monthly Annual
No. Description Qty. Salary (Birr) Salary (Birr)
1 Plant Manager 1 4,500 54000
2 Executive Secretary 1 1,200 14400
3 Legal service head 1 3600 43200
4 Planning and programming service hear 1 3600 43200
5 Quality Control Service Head 1 3,600 43200
6 Audit service head 1 3600 43200
7 Telephone operator 1 850 10200
8 Administration Department 1 3,500 42000
9 Finance Department 1 3,500 42000
10 Technical Department 1 3900 46800
11 Production Department 1 3900 46800
12 Workshop head 1 3900 46800
13 Secretary 4 3,200 38400
14 Chemical Engineer 3 6,000 7200
15 Mechanical Engineer 3 6,000 7200
16 Electrical Engineer 2 6,000 7200
17 Chemists 3 5700 68400
18 Administrative Personnel 1 1800 21600
19 Sales Head 1 1500 18000
20 Purchase Head 1 1500 18000
21 Market Research and Promotion Division Head 1 2500 30000
22 Medical director 1 2800 33600
23 Nurse 3 4500 54000
24 Pharmacy keeper 2 1900 22800
25 Cleaners 6 1800 21600
26 Clerks 5 4500 54000
27 Production Operators 30 30,000 360000
28 Technologist 2 2000 24000
29 Lab Technician 10 9000 108000
30 Mechanics fitters 10 8500 102000
31 Welders 9 8100 97200
32 Helper to welder 9 4950 59400
33 Grease man 4 2400 28800
34 Power plant operators 27 6300 75600
35 Semi-Skilled Laborers 70 35000 420000
36 Unskilled Laborers 90 27000 324000
37 Messengers 4 1200 14400
38 Drivers 4 2000 24000
39 Guards 20 7000 84000
Sub Total - 2,599,200
BENEFITS (25% OF SUB-TOTAL BENEFITS (25%
OF SUB-TOTAL) - 519840
TOTAL 337 0 3,119,040
B. TRAINING REQUIREMENT
Trainings is required for production operators, engineers, chemists and technicians.
Three months training needs to be planned and executed overseas in the country of
technology supplier. The total cost of training is estimated at about Birr 500,000 out of
which Birr 500,000 is required in foreign currency.
VII. FINANCIAL ANALYSIS
The financial analysis of the beet sugar project is based on the data presented in the
previous chapters and the following assumptions:-
Construction period 1 year
Source of finance 30 % equity
70 % loan
Tax holidays years
Bank interest 8%
Discount cash flow 8.5%
Accounts receivable 30 days
Raw material local 30 days
Work in progress 2 days
Finished products 30 days
Cash in hand 5 days
Accounts payable 30 days
A. TOTAL INITIAL INVESTMENT COST
The total investment cost of the project including working capital is estimated at Birr
187.99 million, of which 57 per cent will be required in foreign currency.
The major breakdown of the total initial investment cost is shown in Table 7.1.
INITIAL INVESTMENT COST
Sr. Total Cost
No. Cost Items (‘000 Birr)
1 Land lease value 50.0
2 Building and Civil Work 84,000.0
3 Plant Machinery and Equipment 90,000.0
4 Office Furniture and Equipment 200.0
5 Vehicle 500.0
6 Pre-production Expenditure* 11,139.8
7 Working Capital 2,109.5
Total Investment cost 187,999.3
Foreign Share 57
* N.B Pre-production expenditure includes interest during construction ( Birr 10.63 million ) training
(Birr 400 thousand ) and Birr 100 thousand costs of registration, licensing and formation of the company
including legal fees, commissioning expenses, etc.
B. PRODUCTION COST
The annual production cost at full operation capacity is estimated at Birr 32.57 million
(see Table 7.2). The material and utility cost accounts for 36.29 per cent, while repair
and maintenance take 1.54 per cent of the production cost.
ANNUAL PRODUCTION COST AT FULL CAPACITY ('000 BIRR)
Items Cost %
Raw Material and Inputs 11,045.00 33.91
Utilities 776.58 2.38
Maintenance and repair 500 1.54
Labour direct 1271.42 3.90
Factory overheads 523.81 1.61
Administration Costs 1047.62 3.22
Total Operating Costs 15,164.43 46.56
Depreciation 8920 27.38
Cost of Finance 8488.33 26.06
Total Production Cost 32,572.76 100
C. FINANCIAL EVALUATION
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 interest on total investment (return on total
investment) show an increasing trend during the life-time of the project.
The income statement and the other indicators of profitability show that the project is
2. Break-even Analysis
The break-even point of the project including cost of finance when it starts to operate at
full capacity ( year 3) is estimated by using income statement projection.
BE = Fixed Cost = 59 %
Sales – Variable Cost
3. Pay Back Period
The investment cost and income statement projection are used to project the pay-back
period. The project’s initial investment will be fully recovered within 6 years.
4. Internal Rate of Return and Net Present Value
Based on the cash flow statement, the calculated IRR of the project is 15 % and the net
present value at 8.5% discount rate is Birr 60.18 million.
D. ECONOMIC BENEFITS
The project can create employment for 337 persons. In addition to supply of the
domestic needs, the project will generate Birr 45.80 million in terms of tax revenue. The
establishment of the sugar plant will have a foreign currency saving and earning effect by
substituting current import and exporting the product.