Packaging Plant Investment Proposal

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Gambia Investment & Export Promotion Agency (2013)

Pre-Feasibility Study

ESTABLISHMENT OF A PACKAGING

PLANT IN THE GAMBIA
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Contents

Introduction

1. COUNTRY BRIEF

1.1 Background

1.2 Economy

1.3 Geography

1.4 People

1.5 Why invest in The Gambia?

2. METHODOLGY

2.1 Sampling and Data collection Methods

2.2 Sampled Priority sectors relevant to packaging

2.3 Assumptions

3. RESULTS

3.1 Marketing Feasibility

3.1.1 Demand for Packaging Materials

3.1.2 Source Markets for Packaging Materials

3.1.3 Importance of Product Packaging

3.2 Financial Feasibility

3.3 Technical Feasibility

3.3.1 Processing Facility Location

3.3.2 Packaging and other Processing Inputs

i. Functions performed by packaging ii. Factors Influencing the Choice of Packages for Products

iii. Importance of Information in Product Labels iv. Factors Determining the Ideal Material for Packaging Products v. Types of Packages used for Products in The Gambia

4. Direct and indirect benefits of a Packaging Center in The Gambia

5. Available Investment Incentives

Appendix

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INTRODUCTION

This pre-feasibility study was conducted with the objective of obtaining relevant baseline

information that is necessary to determine the commercial viability of a proposed plant for

packaging materials in The Gambia. The proposal consists of two components: (i) manufacturing

outfit for processing packaging materials and (ii) service center for packaging export products.

The pre-feasibility of the proposed enterprise is assessed in three core areas namely marketing,

financial, and technical feasibility.

A market opportunity was identified for the domestic production of good quality packaging

materials in The Gambia to be sold to a variety of individual and enterprise producers of made in

The Gambia products. Analysis of the financial feasibility of the proposed enterprise revealed

that total expenditure on packaging for 15 of the 29 surveyed enterprises is estimated at over

GMD21.6 million for the year ended 2012. In addition, most of the respondents projected their

packaging expenditure to increase by at least 5% annually in the next five years. Therefore, since

this analysis is based on 15 respondents packaging expenditure for 2012, the enterprise is

assumed, all things being equal, to have a projected income of GMD35.6 million over the longer

term. However, the above analysis does not sufficiently capture the ventures financial viability

as its related cost implications. Hence, it is advised that a proper feasibility study be conducted to

provide more relevant and update cost-benefit analysis on the project.

The strategic location of The Gambia will provide easy access to regional and international

source markets for the importation of raw materials as well as facilitate the efficient distribution

of excess production output from such operations. In addition, transport costs associated with the

distribution of the final packaging product within the country are not expected to have significant

impact on profitability.

Taking the net social benefit of the proposed enterprise into consideration, it can be concluded

that the investment will be socially rewarding. Surrounding communities would benefit in a

number of direct and indirect ways from the establishment of the proposed enterprise.

Based on the framework set out in this pre-feasibility study, it can be concluded that the

proposed packaging plant in The Gambia will be feasible and profitable if located closer to

centers of commerce such as Kanifing Municipal Council and West Coast Region. Furthermore,

results of this pre-feasibility study will depend upon the assumptions that conditions in the

macroeconomic, social, technological, legal, regulatory and ecological environments would

remain relatively stable. However, if any of these assumptions were to differ substantially from

actual circumstances, feasibility of the proposed packaging enterprise in The Gambia could

differ from current results.

GIEPA would like to thank all the business concerns that participated in providing information

without which this pre-feasibility study would not have been a success.

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1. COUNTRY BRIEF

1.1 Background

Gained independence in 1965

Government type Republic

Capital Banjul

Mixed legal system of English common law, Islamic law, and customary law

1.2 Economy

GDP in Purchasing Power Parity (PPP) is US$3.553 billion (2011est.)

GDP real growth rate is -4.3% (2011 est.)

GDP per capita in PPP terms is US$529 (2011 est.)

Economy comprises of Agriculture, Industry, and Service sectors

Agriculture accounts for 19% of GDP: Industry 13%; & Service 62%, Other 6%

(2011 est.)

1.3 Geography

Situated in West Africa along the Atlantic Ocean bordering with Senegal

Total land area of 11,295 square kilometers

1,295 square kilometers of water bodies with 80 kilometers coastline

Exclusive fishing zone of 200 nautical miles with continental shelf

1.4 People

Population size of 1.8 million (est.)

0-14 year age group accounts for 40.5% of the population

15-64 year age group accounts for 56.9% of the population

56 years and over accounts for 3.1%

Annual population growth rate is about 2.344%

Literacy, defined as those of age 15 and over who can read and write

40.1% of the population is literate

47.8% literacy rate for males

32.8% literacy rate for females

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Why invest in The Gambia?

The investment climate remains positive as evidenced by the stable political and macroeconomic

environment. The country has open and liberal trade policies with a commitment to improving

public service delivery. The country has a comparatively well educated and cheap labor force

competitive to any country in the sub-region. As a member of the Economic Community of

West African State (ECOWAS), The Gambia is an economic gateway providing access to an

ECOWAS market of over 300 million consumers.

Being a developing country, the Gambia also has its fair share of challenges. Principal among

these are:

A small open economy with low domestic demand given its population size.

Endowment with a narrow natural resource base.

An undiversified export base

Low domestic savings

Heavy reliance on agriculture for employment

Growth volatility given reliance on a few real sector activities and terms of trade

vulnerabilities.

In view of the Governments desire to make the Gambia the Gateway to West Africa, efforts

continue in earnest to improve the business environment in order to reduce cost of doing

business. The government is keen to make The Gambia a leading agro-industrial nation and

therefore is committed to providing incentives to increase agricultural productivity and

investment. The Gambia is attractive to foreign direct investment for a number of reasons. These

include:

Stable political environment: Has a stable democracy with legal system premised on

English law.

Sound macro-economic policies: Have macroeconomic policies with the principal

objective of ensuring price stability and prudent government expenditure.

Capital Accounts: Has a liberal business environment with provision for 100% foreign

investment ownership and allow for profit repatriation.

Access to ECOWAS Market: Is easily accessible to the markets of all the member states

of the ECOWAS with a market of about 300 million people.

Physical infrastructure: Has a relatively developed seaport, airport and road networks

capable of meeting the transportation needs of businesses. Telecommunication facilities

in The Gambia are excellent with more private service provides offering telephone,

internet and other telecommunication services.

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Labor force: Currently has an educated human resource base, both skilled and unskilled

labour, with relatively cheap wage rates.

Warm and friendly people: Gambia is internationally acclaimed for her hospitality to

investors and tourists.

2 METHODOLGY

This pre-feasibility study is conducted with the objective of obtaining relevant baseline

information that is necessary to determine the commercial viability of a proposed plant for

packaging materials in The Gambia. The proposal consists of two components: (i) manufacturing

outfit for processing packaging materials and (ii) service center for packaging export products.

2.1 Sampling and Data Collection Methods

A simple random sampling method was used du ring selection of data sources for this study. It

took into consideration key enterprises in The Gambia and their packaging requirements to serve

as useful baseline information. Data used in this study was obtained through the administration

of survey questionnaires on indentified respondents with relevance to packaging. A critical

output from the study would be an indication of the viability of a plant for packaging materials in

The Gambia. If viable, the results from this study can be used to compile a comprehensive

business plan for such a venture.

2.2 Sampled Productive Sectors Relevant to Packaging

A total of 29 enterprises were surveyed cutting across different priority sectors of the economy.

Being the largest consumers of packaging materials and services, manufacturing and agricultural

sectors constituted seventy-five percent of survey respondents as shown on figure 1 below:

Figure 1:

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2.3 Assumptions

The results of this pre-feasibility study will depend upon the assumptions that conditions in the

macroeconomic, social, technological, legal, regulatory and ecological environments would

remain relatively stable. However, if any of these assumptions were to differ substantially from

actual circumstances, feasibility of the proposed packaging enterprise in The Gambia could

differ from current results.

.

3 RESULTS

3.1 Marketing Feasibility

3.1.1 Demand for Packaging Materials

The main users of packaging materials and services in The Gambia include manufacturing outfits,

fruit, vegetable and beverage producers, fishing companies, supermarkets, hotels, and retail

shops. This snap-shot survey was conducted to determine the packaging material requirements of

a variety of business entities in the country. In total, 29 entities consented to participate in the

survey. Results revealed that all of the 29 surveyed respondents are currently producing products

for the domestic market which reflects the existing market demand for packaging products. This

market reality is further buttressed by the fact that ten out of the total are engaged in exporting to

foreign markets, such as Senegal, Guinea Bissau, Mali, the USA and Europe.

3.1.2 Source Markets for Packaging Materials

The analysis has shown that less than half of the surveyed respondents are currently purchasing

their packaging materials from local market dealers. This indicates that a significant volume of

packaging materials are regularly purchased and imported from third countries which clearly

reflects the supply-side constraints of such products in The Gambia and the need to establish such

an investment in The Gambia. Key source markets for these imported materials were found to be

Senegal, Lebanon, Germany, India, Morocco, Nigeria, Spain, Holland, Bangladesh, Philippines

Sierra Leone, China, UK, USA and Italy.

3.1.3 Importance of Product Packaging With regards to the importance of product packaging, the survey revealed that respondents valued

the preservation of the product more than any other factor. This is followed by its protection and

containment. As shown in figure 2 below, most of the respondents considered preservation,

protection and containment of the product to be very important in packaging. On the other hand, a

considerable number of respondents also opined that environmental protection and information

transmission are the least important to product packaging.

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Figure 2: Important factors for Product Packaging

Note: Factors Ranking: Extremely Important = 5 to Less Important = 1

3.2 Financial Feasibility

The total expenditure on packaging for 15 of 29 surveyed respondent enterprises is estimated at a

little over GMD21.6 million for the year ended 2012. In addition, most of the respondents

projected their packaging expenditure to increase by at least 5% annually in the next five years.

The following enterprises listed below indicated the composition of their packaging expenditure

to total annual cost.

Table 1: Composition of Packaging Expenditure to Total Cost (%)

No Sector/subsector

Number of

Respondents

Packaging %

Total Cost

a. Food Processing 1 40%

b. Paint Manufacturing 1 30%

c. Dairy Farming 1 14%

d. Soap Manufacturing 2 10%

e. Beverage and soft drinks Manufacturing 1 2%

f. Cement Manufacturing Not Available

g. Commercial Honey Production Not Available

h. Water Processing and Packaging Not Available

i. Poultry Farming Not Available

j. Cashew Processing and Packaging Not Available

k. Sea Food Processing and Packaging Not Available

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Since this analysis is based on only half of the surveyed respondents packaging expenditure for

2012, the enterprise is assumed, all things being equal, to have a projected income of GMD35.6

million over the longer term. However, the above analysis does not sufficiently capture the

ventures financial viability as its related cost implications are not fully covered. Therefore, it is

advised that a proper feasibility study be conducted to provide more relevant and update cost-

benefit analysis on the project.

3.3 Technical Feasibility 3.3.1 Processing Facility Location

When choosing the location of a processing facility various factors need to be taken into account.

These include:

Access to raw materials

Access to the market

Labour supply at the processing facility location

Infrastructure at the processing facility location

After giving due consideration to the criteria as set out above, the following have been confirmed

as available:

Due to The Gambias geographical proximity to regional and European source

markets, transportation of raw materials is not expected to pose any challenge.

There is adequate supply of skilled labor, although training is expected in the area of

new technologies.

Land is available and can be acquired for commercial purposes through leaseholds.

All utility services like water, electricity and telecoms are available.

There is access to transport infrastructure (road, sea, and airport).

3.3.2 Packaging and Other Processing Inputs

i. Functions performed by packaging Packaging performs many special important functions as an integral part of a final product.

These functions are:

It protects the quality of the product

It provides consumers with convenience

It conveys a certain image

It provides information with regards to the product

It adds value to a product through differentiation

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ii. Factors Influencing the Choice of Packages for Products

For a packaging investment enterprise to compete in local and regional target markets, careful

consideration must be giving to choices of consumers. The results of this study revealed that

choice of type of packaging in The Gambia depends largely on a number of factors. These

includes marketing, quality assurance, regulatory requirements, products physical and structural

design, weight and value, as well as user friendliness (i.e. ease of opening and reading labels).

This is true because there are strict regulatory requirements in packaging goods, especially food

items and hazardous products in almost all jurisdictions. Other factors determining the choice of

packages by manufacturers and distributors are the cost associated to package graphic design,

logistics, and products self life as shown in figure 3 below:

Figure 3: Factors Influencing the Choice of Packages for Products

Note: Factor Ranking: Extremely Important = 5 to Less Important = 1

i. Importance of Information in Product Labels

On average, most of the respondents agreed that all elements listed on figure 4 are important

information required on product labels. However, the degree of importance attached to Special

Handling Instructions appears lower than all other information requirements on packages.

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Figure 4: Importance of information on Product Labels

Note: Factor Ranking: Extremely Important = 5 to Less Important = 1

ii. Factors Determining the Ideal Material for Packaging Products

The factors that can influence consumer choice for an ideal material to be used in product

packaging include cost, strength and durability, regulatory requirements and weight. However,

ease of recycling was considered by many to be the least important as shown in figure 5 below.

Notwithstanding, it deserves due attention because government environmental regulations would

sanction anyone found wanting as a result of irresponsible waste management practices.

Figure 5: Factors determining the ideal material for packaging products


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iii. Types of Packages for Products in The Gambia

Results from figure 6 below indicated that on average the different types of packages frequently

used for products in The Gambia consist of boxes/cartons, Jute bags/sacks, bottles and crates.

However, it should born in mind that other types such as trays, buckets, wrappers, pouches,

barrels, drums and cans, baskets, jars and jugs are also used by enterprises and households in the

country.

Figure 6: Types of Packages for Products in The Gambia


4 Direct and Indirect benefits of a Packaging Plant in The Gambia

The direct benefits of a packaging material processing and service center in The Gambia would

include creation of employment opportunities for the youths, income generation on the part of

enterprises through value addition for domestic consumption coupled with potential increase in

export activity for made-in-The Gambia products to international markets. The indirect benefits

of the enterprise are expected to contribute to poverty reduction and sustainable environmental

management.

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5 Available Investment Incentives

Investment incentives are offered by the Gambia Government and administered by the Gambia

Investment and Export Promotion Agency (GIEPA). Minimum investment of Two Hundred and

Fifty Thousand US Dollars (USD250, 000) in priority sectors (Manufacturing is a priority sector)

qualify for a Special Investment Certificate (SIC) for a period of 5 years. Investments located in

a priority geographical area get an additional 3 years. Holders of a SIC qualify for the following:

A ten percent (10%) corporate or turnover tax concession for five (5) years.

Exemption from withholding tax on dividend payments.

Import Sales Tax Waiver on importation of capital equipment, construction materials,

and spare parts for a period of 5 years from date of signing an investment agreement.

Import Sales Tax Waiver on importation of raw and intermediate inputs for a period of

5 years from the date of commencement of operations.

Further to the above incentives, investors operating within a priority investment area that

continually export at least 80% of their products can be granted an Export Processing Zones

License (EPZL). In addition to the above benefits (under SIC), EPZL holders are entitled to the

below benefits, which in addition to the benefits (under SIC) are tenable for a period of 10 years:

Export duty waivers

Municipal Tax waivers

An investment enterprise located outside the export processing zone that exports at least 30% of

its output is entitled to the following incentives and facilities provided by the Agency:

Ten percent concession on the Corporate Tax rate for 5 Years

EPZ Licenses entitling investors to the above benefits are, however, renewable on a yearly basis

under circumstances of evidence of compliance with the agreed indications of employment

creation, export thresholds, and general EPZ protocol and statutes.

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APPENDIX

Table 1: List of Survey Respondents

NO

NAME OF RESPONDENT ENTERPRISE

NO

NAME OF RESPONDENT ENTERPRISE

1. Fine Beverages 2. Junetta Gambia Ltd.

3. Chellarms Ltd. 4. Jaya Selina Gambia Ltd.

5. Gacem Ltd. 6. Naan Water Co. Ltd.

7. Gambega Ltd. 8. Tinnin Paints Ltd.

9. Kombo Dairy Farm 10. Hydara Foam Manufacturing Ltd.

11. TeeFarms Ltd. 12. The Atlantic Sea Food Ltd.

13. Jawneh & Family Ent. Ltd. 14. International Pelican Seafood

15. Cashew Gam Co. Ltd. 16. Ndey's Exotic Food Production

17. Gambia Horticultural Ent. Ltd. 18. Jals Healthy Food

19. Radville Farms Ltd. 20. Le Parisienne

21. The Colony of Bees Service Center (Gambia) 22. GPPC

23. Jorjo Organics 24. Gam Juice Ltd.

25. Sankung Sillah & Sons Ltd. 26. Banjul Breweries Ltd.

27. Denton Ent. Ltd. 28. Moukhtara Holding Ltd

29. M.A. Karafi Farm Foods 30.

Table 2: Importance of Product Packaging

Factors\Ranking (Extremely Important - 5 to Less

Important -1) Average Score

Preservation of the product 4.39

Protection of the product from the environment 4.32

Containment of the product 4.25

Protection of the environment from the product 4.00

Information transmission 3.68

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Table 4: Factors Influencing the Choice of Packages for Products

Factors\Ranking (Extremely Important - 5 to Less Important -1) Average Score

Marketing 4.25

Quality Assurance/Preservation 4.14

Regulatory Requirement 4.07

Product physical and structural design 3.71

The human factor (ease of carrying, storing etc) 3.71

The Environment 3.71

Logistics 3.68

Graphic Design 3.64

Product weight 3.61

Self life 3.57

End Use 3.57

Product Value 3.50

Weather (moisture or other adverse conditions) 3.39

Table 5: Importance of Information in Product Labels


Company and/or Brand Name 4.29

Product Name 4.00

Net weight, count and/or volume. 3.64

Size and grade. 3.50

Country or region of origin. 3.39

Expiry/Best Before Date 3.25

Recommended storage temperature. 3.07

Name/Address of packer or shipper. 3.00

Names of chemicals/pesticides used 3.00

Special handling instructions. 2.96

Table 6: Factors Determining the Ideal Material for Packaging Products


Costs 4.50

Strength and Durability 4.18

Regulatory Requirement 4.07

Weight 3.39

Inalterable 2.79

Ease of Recycling 2.32

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Table 7: Types of Packages for Products in The Gambia

Factor Ranking: Extremely Important 5 to Less Important -1) Average Score

Boxes/Cartons 3.11

Bags and Sacks 2.54

Bottles 2.36

Crates 2.25

Trays 2.00

Buckets 1.93

Wrappers 1.93

Pouches 1.89

Barrels, Drums and Cans 1.86

Baskets 1.68

Jars and Jugs 1.54

Envelopes 1.46

Pots 1.46

Nets 1.36

Aerosols 1.04

Packaging Plant Investment Proposal

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