FEASIBILTY STUDY FOR THE DEVELOPMENT FUNDING AND

MANAGEMENT OF AN ALOE PROCESSING PLANT IN LIMPOPO –

PHASE 4

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 TABLE OF CONTENTS

TOPIC PAGE

Executive Summary 3

Chapter 1 – Aloe & Aloe Commercial Uses 5

1.1 – Aloe Ferox 5

1.2 – Aloe Vera 5

1.3 – Aloe Commercial Uses 6

1.4 – Aloe Commercial Budget 7

Master Budget 9

Summary, Recommendations & Conclusions 18

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 EXECUTIVE SUMMARY

Phase 4 of The Feasibility study for the Development, Funding and Management of an Aloe
processing plant in Limpopo Province entails the uses of Aloe Ferox and Aloe Vera, both
Locally and Globally. This will give the reader a full and comprehensive understanding of the
market that exists for this commodity and the products produced from the plant.

Phase 3 of the feasibility concentrated heavily on the benefits of cultivating a crop such as
Aloe. It took into account the employment that could be created, alleviation of poverty,
promotion of food security, the benefits to the environment, possible secondary and
tertiary development opportunities and its benefits towards developing a new industry in
South Africa.

Whilst all of these factors play an important role in the development of Limpopo Province
and South Africa as a whole and its adherence to the mandates set out by The South African
Government, it is of vital importance to ascertain if the establishment of an Aloe Processing
Plant for either Sap, Gels or Nectar production is economically viable and feasible.

Subsequent to Phase 3 additional research has been conducted and some new information
has been obtained from global experts that will have an added influence on the feasibility of
this project and for these reasons Phase 4 will detail the findings.

Phase 3 gave a basic indication of the funds that will be required to start up a venture such
as this. It did not however give a full budget and synopsis of the costs associated with the
crops development and processing over its 8 year life span.

Phase 4 will be regarded as the Master Budget that will detail all costing associated with
establishing and operating this project over the 8 year life span of the Aloe plant.

A Summary, Recommendations and Conclusions section will complete the feasibility study
and will tie in with those made in Phase 3 of the study.

It is however important to note that whilst reasonably large amounts of Aloe is produced in
areas such as South America there is very little produced in South Africa at present. Over
and above this, global production has only recently shown an increase in demand and whilst
a market definitely exists for Aloe by-products the economics behind producing it is very
important.

Internationally there are a number of producers with thousands of hectares of established

plantations. Various Companies, Regions and Countries that produce Aloe will all have their
own production costs and Income and Expenditure tables however in order for us to create
a costing analysis we cannot use their figures as their input costs will vary greatly.

For these reasons alone we will only be able to project the figures associated with
production of the crop in South Africa.

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It should therefore be noted that whilst we have made every endeavour to create a
workable and real commercial budget certain assumptions and projections have been made.
The figures detailed in the commercial or master budget are up to date figures of all input
costs and should be regarded true and current.

Phase 4 of the Feasibility study will relate closely to Phases 2 and 3 and will be regarded as a
culmination of the previous Phases. Over and above this the Recommendations, Summary
and Conclusions made in Phase 3 of the feasibility remain as is and unchanged but Phase 4
will add to them thus covering all aspects of the Feasibility study into the development,
funding and management of an Aloe processing facility in Limpopo.

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CHAPTER 1

ALOE & ALOE COMMERCIAL USES

Trade and Investment Limpopo requested Measured Farming Consultants to conduct a

Feasibility study into the Development, Funding and Management of an Aloe processing
Plant in Limpopo Province. Three different Aloe species were identified by Trade and
Investment Limpopo and MFC had to assess the viability of each. The species were Aloe
Marlothii, Aloe Ferox and Aloe Vera.

Of the 3 species Aloe Marlothii was deemed non-viable due to its random chemical
composition and its inability to generate a consistent production of by-products for
production and marketing purposes. Phase 3 of the feasibility details these findings.

Therefore for the purposes of the feasibility study and specifically Phase 4 we will only
concentrate on the economic viability of Aloe Ferox and Aloe Vera.

Phase 2 of the feasibility study gives detailed descriptions into the uses of Aloe and
specifically Aloe Ferox however the following which has been obtained from Wikipedia is
served as a refresher to Phase 2.

1.1 – Aloe Ferox

Aloe Ferox can grow to 10 feet (3.0 m) in height, and can be found on rocky hills, in grassy
fynbos and on the edges of the Karoo. The plants may differ physically from area to area
due to local conditions. Its leaves are thick and fleshy, arranged in rosettes, and have
reddish-brown spines on the margins with smaller spines on the upper and lower surfaces.
Its flowers are orange or red, and stand between 2 and 4 feet (0.61 and 1.2 m) above the
leaves.

Aloe Ferox plants are propagated mainly from seed and head cuttings, with plants sowed
with approximately one meter separations. From seed, it takes about 4 to 5 years for the
plants to reach the first harvest. At the time of harvest, each leaf weighs about 1.5 kg to 2
kg. Aloe Ferox prefers dry-tropical climates, open areas, sandy-loamy soils, full sun, and
moderate watering with a good drainage system.

1.2 - Aloe Vera

Aloe Vera is a species of succulent plant that probably originated in northern Africa. The
species does not have any naturally occurring populations, although closely related aloes do
occur in northern Africa. The species is frequently cited as being used in herbal medicine
since the beginning of the first century AD. Extracts from Aloe Vera are widely used in the
cosmetics and alternative medicine industries, being marketed as variously having
rejuvenating, healing or soothing properties. There is, however, little scientific evidence of
the effectiveness or safety of Aloe Vera extracts for either cosmetic or medicinal purposes,

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and what positive evidence is available is frequently contradicted by other studies. Medical
uses of Aloe Vera are being investigated as well.

Aloe Vera is a stemless or very short-stemmed succulent plant growing to 60–100 cm (24–
39 in) tall, spreading by offsets. The leaves are thick and fleshy, green to grey-green, with
some varieties showing white flecks on the upper and lower stem surfaces. The margin of
the leaf is serrated and has small white teeth. The flowers are produced in summer on a
spike up to 90 cm (35 in) tall, each flower being pendulous, with a yellow tubular corolla 2–3
cm (0.8–1.2 in) long. Like other Aloe species, Aloe Vera forms arbuscular mycorrhiza, a
symbiosis that allows the plant better access to mineral nutrients in soil.

1.3 – Aloe Commercial Uses

There are numerous benefits of Aloe with Aloe Vera being regarded as the cultivar with the
most health benefits. Some, but not all benefits are listed in the following points so as to
give the reader an indication of the Health and nutritional viability of this crop.

 High levels of Vitamins D, A, C, B-1,2,6,12 and Minerals such as Calcium, Sodium,

Potassium, manganese, Magnesium, Copper, Zink content as well as anti-oxidants
such as Selenium.
 Aloe sap and gel inhibits the secretion of hydrochloric acid in the stomach thus
reducing the effect of painful Stomach ulcers.
 Aloe acts as a mild laxative.
 Aloe Vera sap is used to treat burns and scalds.
 Aloe sap is mostly used in the commercial cosmetic market for the treatment of
tropical skin conditions such as Sunburn and insect bites.
 Aloe (especially Aloe Vera) juice reduces acidity and Ph. levels in the body and thus
alleviates heartburn. It has also been found to alleviate inflammation in the digestive
tract thus reducing the effects of Crohn’s disease.
 Aloe Vera reduces fever and plays an active part in reducing the effects of viruses
such as Influenza and Measles.
 Many varieties of Aloe are used to accelerate the healing process with ailments such
as Canker sores, ulcers, burns, Herpes and Hives.
 Medical practitioners often recommend the use of Aloe gel for the treatment of
minor cuts, abrasions, and scratches as it aids in new tissue formation.
 Additional ailments such as cold sores, fever blisters, inflamed joints, boils, allergic

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 reactions, insect bites and eczema can be treated with Aloe gels and sap.
 The cosmetic industry makes use of large quantities in their products for assisting
with wrinkles and hair and scalp treatments.

1.4 – Aloe Commercial Budget

The following Commercial or Master Budgets detail the input costs associated with
Establishment of the project, cultivating the crop over an 8 year cycle and eventual
commercial processing of the crop. Income and Expenditures and break even points are also
detailed (Table 1).

Much of the information detailed in the tables will relate to Chapter 7, “Financial
projections and Funding requirements” of Phase 3 on Page 31. The figures listed in the
commercial budget are both assumptions and actual 2012 production figures drawn up by
Measured Farming Consultants through extensive research of the local and global industry.
We have listed industry averages instead of highs and lows. The figures may vary somewhat
according to produce grade, Market demand, geographical location, labour costs, fuel etc.
The figures detailed are what we believe to be a true reflection of the input costs associated
with cultivating Aloe on a 15 Hectare farm as discussed in Phase 3.

In addition to this we have made certain educated assumptions relating to Aloe cultivation
for the production of Sap/Gel and these are detailed below:

 10 000 Plants per hectare.

 Area of Cultivation = 15 Hectares (as per Phase 3 Assumptions).
 Total Aloes planted = 150 000 plants
 Cost of new plants – R3 per Plant (Negotiated)
 Time to first harvest – 3 years.
 Harvesting cycle per plant = 4 times per year
 Leaves harvested per cycle per plant = 3
 Leaves harvested per annum per plant = 12
 Approximate Aloe leaf weight = 1 Kilogram.
 Grams of Aloe Fillet per Leaf = 500grams
 Price of Gel delivered to Processing unit = R10 + VAT (R11.40)
 Industry average Aloe Cultivation requires 1.5 people per hectare per Annum
 Aloin content per Aloe Ferox Leaf = up to 20 %
 Aloin content per Aloe Vera Leaf = up to 5%
 Aloe gel/Fillet content per leaf = 80%

Please take note that the figures below do not take into account interest which would
probably be at a rate of Prime (currently 8.5%) plus at least 3% therefore totaling 11.5%.

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The figures below are the present prices for Inputs, Aloe Gel and Plants and an annual
escalation in price has not been catered for.

Picture 1 – Aloe Plantation

Picture 2 – Aloe Leaf & Gel

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MFC

14-Nov-12 ALOE budget 8 year cycle 14-Nov-12

08:14 08:14 AM

Trade & Investment Limpopo

INCOME BUDGET Year One to Year Eight

Year 1 2 3 4 5 6 7 8 9 10 11 12 TOTAL

----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----

Assumptions. 10000 plants per Ha 6 Litres Gel per Plant per Hectare

Harvest from year 3 Ha 15 estate assumed

12 Leaves harvested/year/Plant R11.40 per litre Gel delivered

Income Gel AMOUNT 10260000 10260000 10260000 10260000 10260000 51300000

PRICE

VALUE 0 0 0 0 0 0 0 0 0

INCOME OTHER AMOUNT

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 PRICE

VALUE 0 0 0 0 0 0 0 0 0 0 0 0 0

----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----

TOTAL VALUE 0 0 0 10260000 10260000 10260000 10260000 10260000 0 0 0 0 51300000

51300000

Trade & Investment Limpopo

PRODUCTION EXPENSES EXPENDITURE BUDGET ALOE budget 8 year cycle

Year 1 2 3 4 5 6 7 8 9 10 11 12 TOTAL

----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----

AIRCRAFT HIRE 0

ANIMAL SUNDRIES 0

BOARD LEVIES 0

COAL 0

COMMISSON SALES 300000 300000 300000 300000 300000 300000 1800000

CONTRACTORS 220000 220000

CROP INSURANCE 0

CROP PROTECTION 0

ELECT CHARGES 175000 175000 175000 175000 175000 175000 175000 175000 1400000

FARM TOOLS 8000 8000 8000 24000

FEED ADDITIVES 0

FEED CONCENTRATES 0

FEED HAY 0

FENCING 65000 65000

FERTILISERS 6000 6000 6000 6000 6000 6000 6000 6000 48000

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FUELS H.F.O. 0

FUELS DIESEL 210000 210000 210000 210000 210000 210000 210000 210000 1680000

FUELS PETROL 18000 18000 18000 18000 18000 18000 18000 18000 144000

HERBICIDES 5000 5000 5000 5000 5000 5000 5000 5000 40000

LAB ANALYSIS 30000 30000 30000 30000 30000 30000 180000

LABOUR U.I.F. 4200 4200 4200 4200 4200 4200 4200 4200 33600

LABOUR W.C.A. 840 840 840 840 840 840 840 840 6720

LABOUR WAGES 420000 420000 420000 420000 420000 420000 420000 420000 3360000

LIME 0

LUG BOXES 0

MAINT BUILDINGS 30000 30000 30000 30000 30000 30000 30000 210000

MAINT ELECT 12000 12000 12000 12000 12000 12000 12000 12000 96000

MAINT FEEDMILL 0

MAINT IRRIGATION 6000 6000 6000 6000 6000 6000 36000

MAINT LIVESTOCK EQPT 0

MAINT PROCESSING 320000 320000

MAINT VEHICLES 8000 12000 12000 12000 12000 12000 12000 80000

MAINT WATER 2000 2000 2000 2000 2000 2000 2000 2000 16000

MAINT WORKSHOP 0

MARKETING COMM. 0

MARKETING EXPORT 110000 110000

MARKETING LOCAL 60000 60000 60000 60000 60000 60000 360000

MEDICINES 6000 1500 1500 1500 1500 1500 1500 1500 16500

MEMBERSHIP SAFA 0

NEW PROJECTS 0

PACKING MATERIAL 72000 72000 72000 72000 72000 360000

PACKING SUNDRIES 0

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PEST CONTROL 5000 5000 5000 5000 5000 5000 5000 5000 40000

PEST CONTROL AIR 0

PLANTS SEE UNDER CAPITAL 0

PROTECTIVE CLOTHING 6000 6000 6000 6000 6000 6000 6000 6000 48000

RATIONS 0

RENTS 0

ROYALTIES 0

SEEDS 0

TRANSPORT HIRE 62000 62000

TRELLISING 0

VETERINARY FEES 0

WATER CHARGES 16000 16000 16000 16000 26000 26000 26000 26000 168000

WELFARE 6000 6000 6000 6000 6000 6000 6000 6000 48000

----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----

TOTAL EXPENSES PROD 0 1247040 925540 1325540 1405540 1407540 1727540 1525540 1407540 0 0 0 0 10971820

10971820

EXPENSES ADMIN. 1 2 3 4 5 6 7 8 9 10 11 12 TOTAL

----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----

ACCOMMODATION 5000 5000 10000

ADVERTISING 80000 80000 80000 80000 320000

AUDIT 4500 4500 4500 4500 4500 4500 4500 4500 36000

BANK CHARGES 9600 9600 9600 9600 9600 9600 9600 9600 76800

CAR HIRE 0

CONSULTANCY 55000 60000 75000 190000

DEPRECIATION 0

DIRECTORS FEES 0

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DIV LEVIES SALARIES 0.2 0

DIV LEVIES TURNOVER 0.4 0

DONATIONS 0

ESTATE MAINT 12000 12000 12000 12000 12000 12000 72000

HIRE PURCHASE 0

INSURANCE 60000 75000 90000 110000 110000 110000 110000 110000 775000

INTEREST BANK 0

INTEREST CREDITORS 0

INTEREST OWNERS 0

LEASES 14000 14000

LEGAL 0

LICENSES 3000 3000 3000 3000 3000 3000 3000 3000 24000

MANAGEMENT CHARGES 0

MAPPING 0

MEALS 0

OFFICE EQPT. 14000 8000 22000

OFFICE SUNDRIES 800 800 800 800 800 800 800 800 6400

PHOTOS 1200 2000 3200

RADIO MAINT 0

REGISTRATION FEES 2500 2500 2500 2500 2500 2500 15000

RENTS BLGS 0

RENTS others 0.01 0

SALARIES 460000 460000 460000 460000 460000 460000 460000 460000 3680000

SECRETARIAL FEES 0.015 0

SECURITY 0

STAFF MEDICAL 0

STAFF SALARIES 0

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STAFF U.I.F. 4600 1250 1250 1250 1250 1250 1250 1250 13350

STAFF W.C.A. 0

STAFF WELFARE 8000 2000 2000 2000 2000 2000 2000 2000 22000

STATIONERY/PRINTING 2400 2400 2400 2400 2400 2400 2400 2400 19200

SUBSCRIPTIONS 0

TELEPHONE/POST 9600 9600 9600 9600 9600 9600 9600 9600 76800

TRAINING 15000 15000

TRANSPORT 0

TRAVEL 0

VEHICLE/AIR HIRE 0

----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----

TOTAL EXPENSES ADMIN 651700 648150 612650 770650 619650 697650 617650 772650 0 0 0 0 5390750

5390750

EXPENSES CAPITAL 1 2 3 4 5 6 7 8 9 10 11 12 TOTAL

----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----

BUILDINGS 3800000 3800000

COMMUNICATIONS 0

ELECTRICAL 22000 22000

ESTATE 0

FEEDMILL 0

FURNITURE 12000 12000

IRRIGATION 56000 56000

LAND DEVELOPMENT 280000 280000

LIVESTOCK BEEF 0

GAME 0

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 SHEEP 0

PACKHOUSE 0

PLANTS 450000 450000 450000 450000 450000 2250000

PROCESSING 4500000 4500000

WATERWORKS 12000 12000

WORKSHOP IMPLEMENTS 40000 40000

TRACTORS 280000 280000

VEHICLES 135000 135000 270000

----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----

TOTAL EXPENSES CAP 1241000 3846000 4500000 0 450000 585000 450000 450000 0 0 0 0 11522000

11522000

EXPENSES PRODUCTION 1247040 925540 1325540 1405540 1407540 1727540 1525540 1407540 0 0 0 0 10971820

ADMIN 651700 648150 612650 770650 619650 697650 617650 772650 0 0 0 0 5390750

CAPITAL 1241000 3846000 4500000 0 450000 585000 450000 450000 0 0 0 0 11522000

EXPENSES PRODUCTION +ADMIN 1898740 1573690 1938190 2176190 2027190 2425190 2143190 2180190 0 0 0 0 16362570

PROD+ADMIN+CAPITAL 3139740 5419690 6438190 2176190 2477190 3010190 2593190 2630190 0 0 0 0 27884570

INCOME/SALES 0 0 0 10260000 10260000 10260000 10260000 10260000 0 0 0 0 51300000

% OF SALES BY MONTH 0 0 0 20 20 20 20 20 0 0 0 0 100

SALES - PROD+ADMIN

BY MONTH -1898740 -1573690 -1938190 8083810 8232810 7834810 8116810 8079810 0 0 0 0 34937430

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 TO DATE -1898740 -3472430 -5410620 2673190 10906000 18740810 26857620 34937430 34937430 3E+07 3E+07 34937430

SALES - P+A+C

BY MONTH -3139740 -5419690 -6438190 8083810 7782810 7249810 7666810 7629810 0 23415430

TO DATE -3139740 -8559430 -14997620 -6913810 869000 8118810 15785620 23415430 23415430

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The Commercial Master budget in the preceding pages gives a fully comprehensive
itemization of all the input costs associated with the production of Aloe for Gel. Every
conceivable input has been listed and where necessary included so as to give the reader and
Investor a full analysis of the costs of developing this industry

To reiterate we have not taken into account aspects such as Interest on finance or funding
and have detailed a zero % interest increase annually. It is almost guaranteed that interest
will be charged by the funding institutions and we do not believe that interest rates will be
at less than the current prime Rate.

In addition and in order to keep this budget as simple and as user friendly as possible we
have mostly not itemized increases in costs of inputs and consumables over the 8 year
period. All input costs have remained constant.

Considering that Aloe Gel is harvested from the leaves and that the average commercial life
span of an Aloe Plant is 8 years we have worked off this as a norm. After year 8 the Aloe
plants will have reached full maturity and will begin to die off thus requiring the project to
re-establish plantations for the next generation

We however recommend that the plantations are planted on a rolling cycle where various
lands will mature at different times thus allowing for a consistent harvest over many years
and thus a consistent income and cash flows.

As Aloe will start producing an income in year 4 as per the commercial budget above and
will show good returns we feel this crop has viability.

If the above assumptions are to be regarded as a benchmark for Aloe Gel production income
of R10 260 000 would be realized in year 4. Whilst this is deemed to be a relatively large
amount of capital it is unfortunately offset by the first 3 years of production and input costs
totalling R14 997 620 in year 3 therefore initially making a loss.

However as is the case in most new Agricultural ventures there will be loses incurred in the
first few years of start-up due to these inception costs. In the case of this feasibility study we
see that a profit will start to be generated from Year 5 of R869 000. In the following years
this profit margin will increase substantially due to the reduction on start-up and initial
input costs.

The figures above show an initial loss however the subsequent years of capital and profit
generation offset these losses and for this reason we feel the introduction of Aloe farming
and processing in Limpopo Province has merit and is economically viable.

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SUMMARY, RECOMMENDATIONS AND CONCLUSION

Trade and Investment Limpopo enlisted the services of Measured Farming Consultants (Pty)
Ltd to conduct a Feasibility Study into the Development, Funding and Management of an
Aloe processing facility in Limpopo Province.

We have now fully completed the feasibility study found in Phases 1, 2, 3 and 4 and our
Summary, Recommendation and Conclusion are detailed below.

Phase 1 detailed the timelines associated with conducting the study. Phase 2 detailed the
morphology, description, geographical prevalence and other aspects related to its
cultivation. Phase 3 detailed benefits of establishing a crop such as this from a food security,
poverty alleviation, Job creation and upskillement aspect with a small concentration on the
costs associated with start-up requirements. Phases 1, 2 and 3 showed the crop to be
feasible from a point of view of these aspects in relation to The South Africa Government
and Development agencies mandates of Rural Development and upliftment.

If it is the objective of Limpopo Province and Governmental departments such as The

Department of Rural Development and Land Reform or Department of Agriculture, Forestry
and Fisheries to create a project where individuals can be employed, poverty alleviated and
people upskilled, with little concentration on economics and the viability thereof, this
project is deemed feasible and viable.

However as it is Trade and Investment Limpopo’s objective to develop economically viable

projects in Limpopo Province where investors, both Local and Foreign, are attracted it is of
great importance to show potential stakeholders the Economic viability of an Investment
opportunity.

The above Commercial Master Budgets have detailed all input costs associated with the
development of a crop such as this concentrating on Aloe Gel. As can be seen from these
Commercial budgets the Development, Funding and Management of an Aloe processing
plant and indeed farm in Limpopo Province for commercial production is economically
viable and feasible.

Over and above The South African Governments focus on Rural Development this proposed
project also shows the economic viability of the crop thus fulfilling both requirements
associated Government objectives and that of Investors.

The proposed Aloe facility will provide investment opportunity to both local and
international investors and stakeholders and for this reason it is our recommendation that
Trade and Investment Limpopo pursue this venture as it is guaranteed to provide investors
with a sustainable and profitable business where their capital can grow and their initial
investment will develop so as to allow for further development and business opportunities
in the future.

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We believe Aloe Production and Processing to be a new and exciting Agricultural activity
that is globally on the increase both in production and sales. In addition we believe that if
South Africa and especially Limpopo Province can establish a project such as this in the near
future they can become one of the global market leaders in the production of Aloe and the
sale of its by-products.

In conclusion the production of Aloe for Gels and Sap is deemed to be economically viable.

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DISCLAIMER

This document and its contents have been compiled by Measured Farming Consultants (Pty)
Ltd for the purposes of creating a Feasibility Study pertaining to Aloe production. Anyone
who uses this information does so at his/her own risk. The views expressed in this document
are those of Measured Farming Consultants (Pty) Ltd, unless otherwise stated. Measured
Farming Consultants (Pty) Ltd accepts no liability that can be incurred resulting from the use
of this information.

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