Download - INTERNATIONAL BUSINESS EXPANSION PLAN
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
(20)
-
20
40
60
80
100
(50)
-
50
100
150
200
250
2004 2005 2006 2007 2008
Thou
sand
Bar
rels
Per D
ay
Thou
sand
Bar
rels
Per D
ay
European Union Biofuel Consumption vs. Production
Difference Between Consumption and Production of BiofuelsTotal Biofuels ConsumptionTotal Biofuels Production
(20)
-
20
40
60
80
100
(50)
-
50
100
150
200
250
2004 2005 2006 2007 2008
Thou
sand
Bar
rels
Per D
ay
Thou
sand
Bar
rels
Per D
ay
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