INTERNATIONAL BUSINESS EXPANSION PLAN

Assessing the Feasibility of Sugar and Ethanol Operations in Ghana

ADNAN ANWARNICHOLAS BIANCHI

JENSON DUNNFAISAL RAZA

ARTHUR URATANI

STRT 571-45 INTERNATIONAL BUSINESS ENVIRONMENT

SNAPSHOT OF GHANA

Population 23,387,000Area 238,535 km2

GDP $35.8 billionGDP per capita $1,500Currency Ghanaian Cedi (GHS)Tropical climate Wet and Dry season

28% of population live below international poverty line ($1.25/day)

Agriculture accounts for 37% of GDP with the sector employing 56% of workforce

Two-party democratic system Independent central bank (Bank of Ghana)

ADVANTAGE: GHANAGhana Economic Free Zone Incentives• 0% tax rate for agriculture/industrial

plant, machinery and equipment imported for investment purposes

• Low upfront capital investment costs• 100% ownership of share by any investor• 0% tax on profits for 10 years; no greater

than 8% thereafter• Guaranteed protection against

expropriation

Political Factors• Two dominant but moderate political parties• Central tendency acts as strong deterrent to

radical policy change• Relatively low perception of corruption for a

developing country

Monetary Policy• International Monetary Fund (IMF) oversight• Inflation targeting framework• Fiscal austerity measures

Geography• Close proximity to Europe• Coastal country• Ideal climate for sugarcane cultivation

OPPORTUNITY: EUROPE

• The European Union (EU) has set a mandatory target of 20% biofuel incorporation by 2020

• Increasing disparity between biofuel demand and supply in EU member states

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European Union Biofuel Consumption vs. Production

Difference Between Consumption and Production of BiofuelsTotal Biofuels ConsumptionTotal Biofuels Production

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European Union Biofuel Consumption vs. Production

Difference Between Consumption and Production of BiofuelsTotal Biofuels ConsumptionTotal Biofuels Production

BIOMASS ACTION PLAN (EU) Further promotion of renewable

energy sources Security of supply and

sustainable energy in Europe Preparation for the large scale

use of bio-fuels Heightened cooperation with

developing countries in the sustainable production of bio-fuels

TAKE A CLOSER LOOK

PRODUCTS

Sugar – to serve Ghana’s demand• $530 million in sugar imports over the last

five years• Upward trending regional demand of 2.3%

per year• Energy Self-Sufficient: Sugar Byproduct

(bagasse) can be burned as fuel

Ethanol – to serve Europe’s demand• Growing demand in Europe

Imports originating in Brazil totaled approx. 400 million gallons in ‘08

Ghana – the perfect fit• Abundance of affordable labor• Food industry tax incentives• Savannah Accelerated Development

Authority (SADA) have acquired thousands of hectares of land for varied agricultural initiatives including sugarcane

• Government incentives for export-oriented industry

• Low transportation costs to target market

CARGILL CAPABILITIES AND EXPERTISE

• 138,000 employees in 68 countries• Net earnings of $3.33 billion (FY ‘09)• Other revenues of $116.6 billion (FY ‘09)• Fourth largest biofuel producer in U.S.• Dedicated branch (Cargill Sugar) focused on sugar

and ethanol opportunities• Environmentally certified with the International

Organization for Standardization (IOS)

RELEVANT EXPERIENCE Sugar processing and ethanol production in Brazil Footprint in Europe (biodiesel capabilities) Existing operations in Ghana

STRATEGY

Greenfield Investment• 65,000 acres (43,000 acres for ethanol, 22,000 acres for sugar)• [Domestic Market Seeking] Full capacity of 352,000 metric tons

of sugar per year (using average yield of 16 metric tons per acre)• [Cost Reducing / Resource Seeking] Full capacity of 26 million

gallons of ethanol per year for export

EconomicSocialEnvironmental

SUSTAINABILITY

DRAWBACKS AND RISKS

THE SUGARCANE TRAP Tradeoff between food and fuel Limited arable land and water supply Heightens fears of corporate greed

TAKE A CLOSER LOOK

Product Price Stability - future ethanol vs. petroleum prices

Currency Risk – government activities suggest stabilization

Energy Reliance – growing resistance to dependence on foreign fuels

Corruption Risk – prior history, lack of transparency controls

Sugar Prices