DOCUMENT OF INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENTINTERNATIONAL DEVELOPMENT ASSOCIATION

Not For Public Use

Report No. PA-100a

GHANA

APPRAISAL REPORT OF THE

SUGAR REHABILITATION PROJECT

November 15, 1972

This report was prepared for official use only by the Bank Group. It may not be published, quotedor cited without Bank Group authorization. The Bank Group does not accept responsibility for theaccuracy or completeness of the report.

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aWRRENCY EQUIVALENTS -

Before December 1971

US$1 NO 1.02Nt 1 100 New Pesewas (NP) - US$0.98Nt 1 million e US$980,000

After February 5, 1972 Devaluation

US$1 - C 1.28Cedi () 100 Pesewas (P) - US$0.78¢ 1 million - US$780,000

WEIGHTS AND MEASURES

1 acre (ac) - 0.405 hectares (hi)1 mile (mi) - 1.61 kilometers (km)1 inch (in) - 25.64 millimeters (mmA1 cubic foot (cu ft) - 0.03 cubic meters tm )1 pound (lb) - 453.6 grams1 hundredweight (cwt) - 112 pounds1 long ton = 2,240 lb - 1.016 metric ton1 metric ton - 2,205 lb - 0.984 long ton1 gallon = 3.79 liters

ABBREVIATIONS

ACE - Associated Consulting EngineersADB = Agricultural Development BankGIHOC - Ghana Industrial Holding CorporationGNTC - Ghana National Trading CompanyGHASEL - Ghana Sugar Estates, Ltd.GWSC - Ghana Water and Sewage CorporationHVA - International Trading Company of Amsterdam, Ltd.

1/ The symbol NO is used to designate pre-devaluation valueswhile the symbol C designates the present value of thecurrency.

GHANA

SUGAR REHABILITATION PROJECT

Table of Contents

Page No.

SUMMARY AND CONCLUSIONS ....... ............................. i

I. INTROIDJCTION ......................................... 1

II. COUNTRY BACKGROUND ..................... 2

A. General ................................ 2B. Sugar Consumption and Marketing ............... 3C. Institutions ...................... 4

III. PROJECT BACKGROUND .................................... 6

A. General . ..............-. ...... 0---.-....... 6B. Climate, Soils, Pests and Diseases ............. 7C. Water Supply and Irrigation Facilities ............ 8D. Infrastructure ..................... 9E. Present Production . ............................... 9

IV. THE PROJECT ................. , 9

A. Description ....... ................... 9B. Detailed Features ................................. 11

V. COST ESTIMATES AND FINANCIAL ARRANGEMENTS ............. 13

A. Project Costs .................................. 13B. Proposed Financing ................................ 15C. Procurement and Disbursement ....... ............... 16D. Accounts and Audits ............. .................. 17

VI. ORGANIZATION AND MANAGEMENT ......... .................. 18

A. Industry Structure .............. .................. 18B. Management, Staff and Labor ....... ................ 18C. Cane Farmers ...................................... 20

This report is based on the findings of an appraisal mission to Ghana inApril/May 1971 composed of Messrs. A. R. Whyte and P. Grosjean (IDA), andR. Koolhaas, J. Stegers, C. Drayer, C. Willett, A. Arben, B. Campbell andC. Campbell (Consultants), and of a reappraisal mission in July 1972 com-posed of Messrs. P. Grosjean, S. Thillairajah (IDA), and H. Naber (Con-sultant).

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Page No.

VII. PRODUCTION, PRICES, GHASEL FINANCIAL RESULTS,FARM INCOME AND GOVERNMENT REVENUES ..... ............ 22

A. Production ........... ............................. 22B. Market and Prices ....... ........................... 23C. QHASEL Financial Results ...... .................... 24D. Farmer Income ........ ............................. 26

E. Government Revenues ....... ........................ 26

VIII. ECONOMIC EVALUATION ........ ........................... 26

IX. AGREEMENTS REACHED AND RECOMMENDATIONS .... ............ 27

AkNEXES

1. Marketing

Table 1: Price Structure of Imported SugarTable 2: Estimates of Consumption 1961-70

2. Ghana Industrial Holding Corporation

Table 1: Operating DivisionsTable 2: Sugar Division Profit and Loss AccountsTable 3: Sugar Division Balance Sheets

3. The Agricultural Development Bank

Appendix: Technical Assistance to ADB/Terms of ReferenceTable 1: Balance SheetsTable 2: Profit and Loss AccountsTable 3: Loans per Sector

4. Agricultural Details

Table 1: Agricultural Program Summary

Table 2: Total Yields

5. Field Engineering, Irrigation and Roads

Table: Asutsuare Irrigation and Drainage/Capital andOperating Cost Summary

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6. Factory Details

Table 1: Asutsuare Factory/Estimates of Production,Downtime and Crushed Cane

Table 2: Asutsuare Factory CostsTable 3: Komenda Factory/Estimates of Production,

Downtime and Crushed CaneTable 4: Komenda Factory CostsChart A: Asutsuare Factory - Existing Flow SchemeChart B: Asutsuare Factory - Future Flow SchemeChart C: Komenda Factory - Existing Flow SchemeChart D: Komenda Factory - Future Flow Scheme

7. Housing

Table: Schedule of Additional Housing and MiscellaneousBuildings Required and Estimated Costs

8. Feasibility Study of Further Expansion/Draft Terms of Reference

9. Project Costs

Table 1: Project Costs/AsutsuareTable 2: Project Costs/KomendaTable 3: Field Development Costs per Acre

10. Project Financing

Table 1: Financing PlanTable 2: Phasing of IDA DisbursementsTable 3: Disbursement Schedule

11. Sugar Industry Organization and Management

Appendix 1: HVA - Internationaal N.V.Appendix 2: Staff EstablishmentTable: Summary of Staff and LaborSugar Industry Organization Chart 6253

12. Farm Budget

Table 1: Cane Farmers - Per Acre CostTable 2: Cash Flow of a 25-Acre Sugar Cane Farm

13. GHASEL Financial Statements

Table 1: Income and Expenditure Statements - AsutsuareTable 2: Income and Expenditure Statements - KomendaTable 3: Consolidated Income StatementAppendix to Table 3: Assumptions for Income and Expenditure

Statements

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Table 4: Sources and Applications of FundsTable 5: Balance SheetsTable 6: Financial Rate of Return

14. Economic Rate of Return Calculation

Table 1: Economic Rate of Return/AsutsuareTable 2: Economic Rate of Return/KomendaTable 3: Sensitivity Analysis

Map 1: Estate Locations- IBRD 3500Map 2: Asutsuare Estate IBRD 3507MaLp 3: Komenda Est-ate IBRD 3511

GHANA

SUGAR REHABILITATION PROJECT

SUMMARY AND CONCLUSIONS

The Ghana sugar industry was started under the First Republic; itconsists of two factories at Asutsuare and Komenda, which began operationsin 1967. The two factories have their own plantations and also buy cane fromfarmers. Development of the plantations and of the factories - which weresupplied, erected and financed by Poland (Asutsuare) and Czechoslovakia(Komenda) - was badly planned and executed and management to date has beeninadequate. However, agricultural conditions for cane growing are good atAsutsuare and reasonable at Komenda, and the technical problems at thefactories can be rectified.

ii. The project appraised in this report aims at establishing theindustry on a viable basis through expanding cane production to meet factorycapacities; rehabilitating field and factory machinery and equipment; provid-ing efficient management together with training of Ghanaian personnel; es-tablishing a sound organizational structure for the industry; and strengthen-ing the operations of the Agricultural Development Bank generally, as wellas these involving sugar farmers in particular, through technical assistance.The project also includes a feasibility study of future expansion. The pro-ject would be carried out over six years, 1972/73 to 1977/78.

iii. Project costs are estimated at US$24.8 M. The foreign exchangecosts of US$16.1 M would be financed by an IDA credit of US$15.6 M and equitycontributions from HVA-Internationaal NV(HVA), the firm which would managethe project, of US$0.5 M. Local currency costs would be financed by Govern-ment loans, out of earnings of the Industry, and by farmers.

iv. A new company, Ghana Sugar Estates Limited (GHASEL), has been foimedto take over the present sugar undertakings which are run as divisions ofthe Ghana Industrial Holdings Corporation (GIHOC). Funds on-lent to GHASELwould be at 7.25% interest and be repaid over 20 years including a graceperiod of six years. An agreement has been concluded between Government,GIHOC, GHASEL and HVA providing for management of GHASEL by HVA for a mini-mum of five years.

v. The overall economic rate of return is estimated at about 20%, andthe financial rate of return to GHASEL at about 8%. The project would makea significant contribution to the economy through net foreign exchange savingsof about US$5.2 M annually as from 1978/79. The project would also provideor continue to provide employment for some 6,700 estate and farm workers andtransform a present cash drain on Government into a profitable industry.

vi. The project would be suitable for an IDA Credit of US$15.6 M.

GHANA

SUGAR REHABILITATION PROJECT

I. INTRODUCTION

1.01 The Ghana Government has requested IDA assistance to help financerehabilitation of the Ghanaian sugar industry. The industry comprises twosugar-producing units, one at Asutsuare and one at Komenda (see Map 1), eachwith plantations and factories; Asutsuare produces refined sugar and Komendamill-white sugar. The Asutsuare factony was built by Cekop of Poland andthe Komenda factory by Techno-Export of Czechoslovakia.

1.02 The industry was badly pianned and executed and its management hasbeen inadequate. Its problems have been many, including inadequate cane sup-plies, lack of irrigation, inefficient cane harvesting and transport, andfrequent factory breakdowns. As a result, factory efficiency has been verylow, production has fallen far short of capacity and financial losses navebeen great.

1.03 However, since agricultural conditions for sugar growing aregood at Asutsuare and acceptable at Komenda and since the cane supply andfactory problems can be rectified with strong management and funds, itis possible to produce sugar at a reasonable cost, and create a viable in-dustry. The proposed project would provide the necessary framework andingredients but at the same time it is essential that Government and thelabor unions are prepared to accept measures to relate wages to productivity.

1.04 This project was first appraised in April/May 1971 and negotiationsfor a Bank Loan and an IDA Credit totalling US$15.6 M were concluded inDecember 1971. Following the change of Government in January 1972, finaliza-tion of the Agreements and Board presentation were postponed till tne newGovernment had formulated economic and balance of payments policies to befollowed by Ghana. A reappraisal mission was sent to Ghana in July 1972to update the original appraisal report and incorporate the various modifica-tions resulting from time lapse and changes in project conditions.

1.05 This report is based on the findings of a Bank appraisal missionin April/May 1971 consisting of Messrs. A.R. Whyte and P. Grosjean (Bank);and R. Koolhaas, J. Stegers, C. Drayer, C. Willett, A. Arben, B. Campbelland C. Campbell (Consultants), and of a reappraisal mission in July 1972consisting of Messrs. P. Grosjean, S. Thillairajah (Bank) and H. Naber(Consultant). Both missions took into account the findings of a number ofprevious studies including "An Evaluation of the Sugar Industry of Ghana"prepared by Hawaiian Agronomics, Inc., an "Evaluation Report of the StateSugar Products Corporation" by the National Investment Bank, and "An OperationalPlan for the Rehabilitation of the Ghana Sugar Industry" prepared in June1968 by Tate and Lyle Technical Services, Ltd. and Bookers Agricultural andTechnical Services, Ltd.

1.06 The proposed IDA Credit would be the third for agriculture inGhana; credits for the Fisheries Project (163-CH) and the Eastern Region

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Cocoa Project (205-GH) were made in 1969 and 1970. The Fisheries Project, towhich IDA's contribution is US$1.3 M, provides credit to fishermen for con-struction of medium-size purse seine fishing vessels. For various reasons in-cluding boat construction cost increases, and other circumstances affectingthe profitability of the boats, the project had to be recast. The Governmenthas suggested the allocation of about $420,000 remaining in the Credit Accountfor use in deep sea fishing. IDA is also contributing US$8.5 million towardthe cost of replanting and rehabilitating 87,000 acres of cocoa farms. Progressof the project which started in early 1971 is satisfactory although the rehabilita-tion component of the project currently is not being carried out due to changesin the policy concerning cocoa pest control made by the last Government. Thismatter is under discussion with Government and it is hoped that it will beresolved in the near future.

II. COUNTRY BAuKGROUND

A. General

2.01 Between 1960 and 1970, Ghana's population grew from 6.7 million to8.6 million at an average annual rate of 2.4%. The annual rate of increasefor the next 10 years is projected at 2.7-3%. The average population densityis 93 inhabitants per sq mile, but two-thirds of the population live in thesouLthern rain forest and coastal areas, and of these 1.2 million in the maincities of Accra, Kumasi, Sekondi, Takoradi and Tema. Total population in townsof over 5,000 inhabitants was 2.5 million in 1970 or nearly 30% of totalpopulation compared to 23% in 1960; this growth is mainly due to migrationfrcm rural areas by young people seeking better prospects than the stagnatingagricultural sector can provide. It is estimated by Government that the pro-portion of the labor force in agriculture has decreased by about 15%; this iscausing local labor shortages in the traditional agricultural sector wherewages are low and, since industrial development has been limited, serious urbanunemployment.

2.C2 In 1970, GNP at current market prices totalled US$2,h77 M equivalent,and the average annual increase in real terms in the period 1960-70 was 2.6%.With a population increase of 2.4 per year, GNP per capita in 1970 was about

US4i259, equivalent to US*139 at 1960 prices, and representing only about 99% ofthe 1960 level. The economy is based on the production and export of a limitednumber of agricultural and mineral commodities, mainly cocoa, aluminum, timberand gold. Agriculture including forestry and fishing provides the living for about60 of the population and contributes about 40% of GNP. The cocoa industryaccounted for about 63% of total exports in 1970, timber and aluminum 10% andgold 7%.

2.03 Outside the agricultural sector, the development problems facingGhana include an unsatisfactory level of public investment, urban unemploy-ment, a heavy reliance on erratic returns from cocoa exports, overdependence ofthe industrial sector on imported goods, and low savings compared to privateand public consumption. Despite an impressive recovery since 1966,

Ghana's balance of payments position is still weak and is expected to remainso for some time. Partly because of the heavy debt burden, the managementof its balance of payments without jeopardizing the long-term objectives ofeconomic development is the major problem facing Ghana. In the short runthe present Government faces very difficult budgetary and foreign exchangesituations, to cope with which the economy has been placed on an "economicwar-footing". Imports are being severely restricted to priority goods andthe overall level reduced by about one-third in value terms. Measures arealso being taken to limit the size of the budget deficit. The exchangerate has been changed twice, in December 1971 and in February 1972, and thecurrent rate is C 1.28 to the dollar. However the effective devaluationrate is t 1.35 to the dollar, taking into account the effects of the Smith-sonian Agreement on the currencies of Ghana's main trading partners.

2.04 Performance of the agricultural sector since 1960 has not beensatisfactory. Heavy Government investment in large capital-intensive buttechnically unsound and ill-managed State farms in the early sixties disruptedthe traditional system of food production, and while these enterprises havesince been largely abandoned, agricultural production has failed to keep pacewith the increase in food demand and Ghana is now importing basic foods andother farm-originating commodities that could be produced locally. Diversify-ing exports out of cocoa will be a slow process but the agricultural sectorcould significantly contribute to improving Ghana's balance of payments byproducing efficiently a range of agricultural commodities presently importedsuch as sugar, rice, maize, vegetable oils, cotton and livestock products.The proposed project would contribute to this strategy by replacing asignificant part of sugar imports, and the Bank is assisting Ghana to prepareprojects for the increased domestic production of other commodities.

B. Sugar Consumption and Marketing

Consumption

2.05 Sugar consumption and marketing are discussed in Annex 1. Annualsugar consumption has increased steadily reaching 93,800 tons in 1970 equiva-lent to an annual consumption per capita of about 10 kg. Since the two localfactories have contributed very little to total supply, imports of sugar arca significant burden on Ghana's balance of payments, costing about ¢ 7 Mannually from 1961 to 1969, 9 16 M in 1970 when import controls were removedand imports jumped to 115,000 tons, and some 0 9.2 M in 1971 when controlswere reintroduced and imports amounted to 50,000 tons. Consumption is tobe restricted to the estimated essential level of 50,000 tons in 1972.

Present Marketing System

2.06 Since the Cedi devaluation in early 1972, the distribution of sugarin Ghana hlas been the responsibility of the Essential Commodities Committee(ECC), established under the Commissioner for Trade. The Ghana National Trading

Corporation (GNTC) acting as ECC's agents, buys all sugar produced by Asut-suare and Komenda and also imports the supplement required to satisfy demand.

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2.07 Government has agreed with GIHOC that the Asutsuare and Komendafactories should receive a sugar price adequate to cover cost of productionaLnd also allow a reasonable profit margin. The prices so agreed for 1972are 0 21.53/cwt for Asutsuare and V 13.63/cwt for Komenda. GNTC buys sugarfrom Asutsuare and Komenda at the lower prices that prevailed before devalua-tion, i.e. t 10.25/cwt (USe 7.1/lb) for Asutsuare refined sugar and f 9.75/cwt(USi 6.7/lb) for Komenda mill-white sugar. The difference between the Govern-ient and GNTC prices represents a subsidy which is paid by Government andwhich will be discontinued when consumers adjust to post-devaluation condi-tions.

Alcohol

2.08 Alcohol produced at the Asutsuare distillery has virtually replacedimports of crude alcohol. In 1969-1971, an annual average of about 200,000gallons of 960 alcohol was produced and sold at 4 3.0 per gallon to the StateDistilleries Corporation. In the past much sugar has been used for the pro-duction of "akpeteshie", a local alcoholic drink, which is made mainly inrural areas. Production of akpeteshie is legal but unregulated and officialstatistics of akpeteshie production are not available. It was estimated,hDwever, that in 1970 about 18,000 tons of granulated sugar were used forthis purpose. Molasses, a by-product of sugar production, can be used forthe production of akpeteshie and currently its use for this purpose is beingsponsored under the impetus of severely restricted sugar supplies. Molassescan be used also for the production of food yeast for human and animal con-sumption; the production methods are well known but the economics of produc-ing this high protein material in Ghana have yet to be evaluated.

C. Institutions

Ghana Industrial Holding Corporation (GIHOC)

2.09 GIHOC was established in 1968 to take over 19 state corporationsincluding the Sugar Corporation and is responsible for the two sugar units.G:[IOC's constitution, objectives and operations are described in Annex 2.Briefly, GIHOC has had to fulfill the role of a conglomerate with widelyd:isparate activities, many of which were badly conceived, and has had to doso with meagre management, staff and financial resources. It is not surprising,therefore, that its performance, at least as regards the Sugar ProductsDivision, has not been good and that it has been unable to exercise effectivemanagement guidance and control.

2.10 Sugar Products Division. The history of the Sugar Products Divisionis also described in Annex 2. Construction of Asutsuare and Komenda factoriesWlas begun in 1963 and they were commissioned in 1967. The Polish and CzechGovernments have continued to provide some technical staff and there are nowthree technicians left at Asutsuare and three at Komenda. In 1968 GIHOCappointed Associated Consulting Engineers, Ltd. (ACE) of Pakistan to manageKc,menda and in 1969 they also took over management at Asutsuare. ACE,

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faced with difficult problems and constrained by lack of finance, lack ofpolicy direction from GIHOC, and shortage of technical staff and labor, hasnot performed well at Asutsuare. It has done better at Komenda but, theretoo, the efficiency of operations is well below standard. Financial manage-ment and accounting, which ACE was not required to provide, have been totallyinadequate at both locations. The ACE contract terminated on June 30, 1972 andno attempt was made by GIIIOC to extend it; consequently ACE staff vacatedtheir posts in July 1972 after handing over to GIHOC management. GIHOChurriedly filled the ACE vacancies by promoting inexperienced people from thelower ranks of the Sugar Division and other industries. Only two or perhapsthree of the recent appointees have the capacity to cope with their newresponsibilities, and without strong management the future of the industryis very dubious.

2.11 Because of the lack of complete and up-to-date accounts, it is notpossible to determine the extent of the Sugar Division's losses but theseprobably amounted to about 0 7 M by the end of 1971. It is also impossibleto estimate precisely the total investment in the factories but this is pro-bably about 0 15 M. Production has been extremely low. Only 1,200 tons atAsutsuare and 5,100 tons at Komenda was produced in 1970 and the increase ofproduction in 1971 to 8,200 tons and 10,500 tons respectively was mainly dueto refining of imported raw sugar. The cost of production has been veryhigh - about t 285/ton at Komenda and substantially higher at Asutsuarewhere production up to 1970 was only 6% of available capacity.

2.12 Future Organization and Management. The proposed future organizationand management of the industry is described in Chapter VI. In view of GIHOC'slimited management resources, the need for cohesive management of the twoestates, and the desirability of direct Government participation in the industry,Government has formed a new company, Ghana Sugar Estates Limited (GHASEL);QHASEL's shares would be held directly by Government with outside minorityparticipation. GHASEL will be managed for a minimun period of 5 years byHVA Internationaal, N.V. (HVA), a Dutch company well experienced in the sugarindustry.

The Agricultural Development Bank (ADB)

2.13 The two factories receive cane supplies from their own estates andfrom farmers growing cane under contract to the factory. Agricultural creditto these farmers is provided by ADB which is the main source of agriculturalcredit in Ghana; details of ADB are at Annex 3. Up to March 1972, ADB hadapproved 239 loans to sugar cane growers representing a total amount oft 3.29 M or 20% of ADB's total lending. ADB's financial situation and debtrecovery were recognized as being unsatisfactory when the Cocoa Project wasappraised and led to the special credit arrangements for the project describedin Annex 3. ADB's performance since then has not improved and at the end ofMarch 1972, loan principal reimbursed was only about 40% of the principal due.Overdue loans include some loans which were granted by the Bank of Ghana forpolitical reasons and taken over by ADB when it was established. These loanstotal about 0 555,000; 0 215,000 of this was written off in 1971 and authorityhas been given to write off the balance of 0 340,000 in 1972. Formal

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confirmation of these arrangements by Government would be a condition ofeffectiveness. Loan recovery could be improved through tighter appraisalof applications and through mDre efficient control and follow-up of individu-al loans. Technical assistance is recommended to introduce these improvements,the cost of which is provided under the project and would be financed by theproposed IDA Credit. During negotiations, assurances were obtained that twocredit specialists with terms of reference acceptable to IDA (see Annex 3and its Appendix) would be appointed to assist ADB, in particular to ensurethat all future ADB credit programs are viable. Assurances were also obtainedthat the specialists' recommendations would be implemented following ADB andIDA approval.

Farmers' Associations

2.14 In Asutsuare, 29 cane grower cooperatives have been registered butthese so-called "societies" are more family groups than true cooperativesocieties. In 1971 there were 106 cooperative societies registered inKomenda. These cooperatives are grouped in the Pra River Cooperative SugarCane Farmers Union whose main function is to represent its members' interestin negotiations with the sugar factory. Though on a small scale, performanceof the Union and societies in Komenda has been quite satisfactory. In April1971, the Ghana Sugar Cane Planters' Association was formed to represent allcane farmers.

III. PROJECT BACKGROUND

A. General

3.01 The project areas are shown in Map 1 and the layout of each estatein Maps 2 and 3. Asutsuare is about 40 mi northeast of Accra on the VoltaRiver below Akosombo dam which was partly financed by the Bank in 1962(loan 310-GH). Government acquired title to 18,730 acres under the StateLands (Akuse-Asutsuare Sugar Project) Instrument 1969, and of this about4,100 acres are now planted to cane. While there should be no difficultyin transferring effective title to GHASEL, such transfer for at least fiftyyears, unencumbered by any land claims, would be conditions of effectivenessof the credit. Some 250 farmers grow cane for sale to the factory onabout 5,200 acres; of which about 1,350 acres are over 20 mi from the factoryand incur excessive transport costs. The topography of both estate andfarmers' land is suitable for cane, being level or gently undulating.

3.02 Komenda is about 120 mi west of Accra on the coast. The estateland consists of 5,705 acres; 3,250 acres are already planted to cane and1,250 ha would be developed under the project. The land is rented from thelocal chiefs but a notice is being prepared under the Land AdministrationActF 1962 making the area available to GRASEL for an indefinite period. Theissue of such notice in favor of GHASEL would be a condition of effectivenessof the credit and assurances were obtained during negotiations that GHASEL

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would enjoy full rights to the land for at least fifty years. Some 280farmers cultivate about 3,500 acres, of which about 200 acres are over 20 mifrom the factory.

3.03 Individual farmers' cane acreages vary greatly from 2 to over 300acres. Holdings are smaller at Komenda, where farms smaller than 25 acres,account for 40% of total acreage, against 16% at Asutsuare. Most farmershold their land on the traditional usufruct system, paying rent of 4 1.00to 4 2.00/acre to the local chief. This system has its shortcomings butprovides adequate security of tenure.

3.04 The Asutsuare area is sparsely populated with about 6,000 people.Because of lack of housing in the area, both estate and farmers have haddifficulty in recruiting and retaining the unskilled labor required foragricultural work. The provision of housing for estate workers under theproject should eliminate the estate's labor problems. The limitation ofcredit to new farmers at a maximum of 25 acres proposed for the project(para 6.16) should eventually reduce the need for non-family labor, as aholding of 25 acres can be managed by a typical family of four adult equiva-lents. Assurances were obtained during negotiations that Government wouldassist CHASEL in recruiting labor from other parts of Ghana and, should theneed arise, from neighboring countries.

3.05 Komenda is a settled township of some 7,000 people and the totalpopulation in the Cape Coast district is some 250,000; thus the labor supplyis better. -

B. Climate, Soils, Pests and Diseases

3.06 Climate. Cane growth and sucrose content depend vitally on rain-fall, sunshine and temperature. Annex 5 details these requirements and theconditions at Asutsuare and Komenda. Both places are generally suitablefor cane growing. At Asutsuare estate cane will be irrigated to improveyields, safeguard against abnormally dry years, and provide flexibility inthe planting cycle. Paragraphs 3.09 and 3.10 describe the irrigation worksto be provided at Asutsuare and the problems of the Komenda irrigationsystem. Most cane farms are in the 50"-60" rainbelt, but recently somefarms totalling about 1,500 acres have been established in more marginalrainfall areas (40"-50") south of Asutsuare. Under the project, GIIASELmanagement would be required to establish the viability of proposed newcane farms (paras 6.16 and 6.17) as a condition of ADB loans.

3.07 Soils. The tropical black earths and alluvial soils at Asutsuareare well suited to cane growing but the former especially need carefulmanagement to ensure adequate drainage. The Komenda soils are generallyless fertile than at Asutsuare but good crops have been grown there in thepast and should be better in future with more experienced management.

3.08 Pests and diseases do not present a serious problem at eitherestate. Stem borer and red rot have occurred at Asutsuare but these can

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be controlled by sound management, principally by preventing over-ripeningcf cane. Previous studies have indicated a risk of nematode infestationat Yomenda but at present there is no evidence to suggest that this is-a serious concern.

C. Water Supply and Irrigation Facilities

3.09 The existing and proposed water supply and irrigation systems arediscussed in Annex 6. Asutsuare estate borders the Volta River so that thereare abundant water supplies. The irrigation system was designed by SirWilliam Halcrow Partners about five years ago but because of continuousproblems and delayt in completing the pumping station, no significant quan-tity of water has been delivered to the estate. Hitherto, the Ministry ofAgriculture has been responsible for the pumping station and main canal andin June 1969 the Ministry placed orders for five 30-cusec pumps from Kirlos-kar of India which were delivered in 1972. The design and capacity of thepunping station was reviewed by HVA, the company that will manage GHASEL,and found satis factory after the Ministry of Agriculture incorporated inits plans some modifications proposed by HVA experts. The pumping stationis expected to be operational in December 1972 and fully commissioned bymLd-1973 after a six-month trial period, well in advance of CIASEL require-,mnts for its own irrigation program. The pumping station is also to servetlhe UNDP/FAO Pilot Rice Irrigation scheme and the total capacity was designedaccordingly. Assurances were obtained during negotiations that the pumpingstation and main canal would be efficiently maintained so as to ensure thetimely delivery of water requirements and that if, in the opinion of IDA,following an independent consultant's study, the Ministry of Agriculture failsto do so, responsibility for operating the system would be transferred toGIASEL.

3.10 Water for the factory and housing at Komenda is provided by a 24-micanal from the River Pra; the canal was intended also to provide estatei7rrigation through a sprinkler system. The Ministry of Agriculture isresponsible for the main supply canal and the Ghana Water and SewageCorporation (GWSC) for the treatment plant. A contract was let in 1967 forthe high price of about US$3 M, for a complete sprinkler irrigation systeminicluding pumping stations, but the contractor went into liquidation andthe work was not completed. A contract was let in March 1970 to anothercompany to complete the installation. This has not been finished; partlythis is due to the uniavailability of spare parts, but there are seriousdoubts about the quality of the work done so far. In view of the foregoingthe extremely high cost of installing and maintaining an efficient sprinklersystem, and the lack of any data on the yields under irrigation at Komenda,it: is proposed to include only a pilot irrigation scheme under the project.Further irrigation work would not be undertaken until the system had beenthoroughly tested and the results measured.

3.11 Factory and domestic water supplies at Komenda have been unreliable,and the CWSC pumping station and equipment are in urgent need of overhaul.Assurances were obtained that Government would ensure that the water supply

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system is put in sound working order and adequately maintained by the Ministryof Agriculture and GWSC.

D. Infrastructure

3.12 General transportation services are good at Komenda but morelimited at Asutsuare. Both estates are well served by roads. Power atKomenda is supplied from the national grid and Asutsuare will shortly beconnected to the main power supply from Akosombo. Telecommunications aredeficient at both estates and the project includes provision for radiolinks. Health facilities for Komenda are reasonably good with clinics atthe factory and close by, and a 300-bed hospital at Cape Coast; Asutsuarehas access to a 40-bed hospital at Akuse six miles away, but serious caseshave to be sent to Akosombo, Tema or Accra; provision is made under theproject for improving and enlarging the factory clinic.

E. Present Production

3.13 Present cane yields and production, factory efficiency and sugarand by-products production are discussed in Annexes 4 and 6. Due to higherproportions of ratoon 1/ cane and poor cultivation practices yields havedropped from 25 tons/acre in 1966 to 10 tons/acre at Asutsuare and from 29tons/acre to 19 tons/acre at Komenda. Under the project, average yields areexpected to increase to 31 tons/acre at Asutsuare because of irrigation, andto increase slightly to 21 tons/acre in Komenda where irrigation would beonly on a pilot scale (see para 7.01). The recovery of sugar from cane isabysmally low at Asutsuare at less than 4% and is only about 6% at Komendacompared to a norm elsewhere of 9-10%. The low recovery is due to manyfactors, mainly intermittent cane supply and factory inefficiency and shouldimprove to 9% under the Project (para 7.02).

IV. THE PROJECT

A. Description

4.01 Objectives. The objectives of the project would be to increaseGhana's sugar production and make the industry efficient and economic, thusreducing imports and eliminating the present heavy losses sustained indomestic production. The project also provides for a study to determinethe feasibility of further expansion, and technical assistance for strength-ening ADB.

1/ The planting cycle lasts four years with three ratoon crops (regrowthof stubble) following the plant cane crop.

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4.02 Definition. The project would be carried out from 1972/73 through1977/78 and would comprise:

(a) Asutsuare

(i) Expansion of estate cane acreage from about 4,100 toabout 6,400 and farmers' cane from about 5,200 to about7,575 acres;

(ii) Replanting of some 4,100 acres of estate cane and some5,200 acres of farmers' cane;

(iii) Irrigation works for all estate cane;

(iv) Rehabilitation, modification and additions to canetra^sport and field equipment; cane yard; mill;refinery; workshops and laboratory;

(v) Completion of partly-built houses and provision of newhousing and training, health and social facilities formanagement, staff and labor;

(vi) Provision of vehicles for management and staff; and

(vii) Provision of extension services by GHASEL and seasonaland medium-term (four year) credit to farmers throughADB.

(b) Komenda

(i) Expansion of estate cane acreage from about 3,250 toabout 4,500 and farmers' cane from about 3,500 toabout 5,000 acres;

(ii) Replanting of some 3,250 acres of estate cane and 3,500acres of farmers' cane;

(iii) Pilot scheme for irrigating some 600 acres of estatecane;

(iv) Rehabilitation, modification and additions to canetransport and field equipment; cane yard; mill; work-shops; and laboratory;

(v) Completion of existing houses and provision of newhousing and training, health and social facilities formanagement, staff and labor;

(vi) Provision of vehicles for management and staff; and

(vii) Provision of extension services by GHASEL and seasonaland medium-term (four year) credit to farmers throughADB.

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(c) Study to determine the feasibility of further expansion atAsutsuare, Komenda, or elsewhere, taking into account futureconsumption and quality requirements, and by-product utili-zation.

(d) Technical Assistance to ADB in implementing improved creditaccounting and control; reviewing its present financialposition; and advising on credit policies and procedures.

4.03 Ghana Sugar Estates Limited (GHASEL) was formed in November 1971to take over the existing undertakings at Asutsuare and Komenda. HVA, aDutch management company, has been appointed to manage GHASEL for at leastfive years, to train Ghanaian personnel on-the-job and overseas, and toprovide back-up services.

B. Detailed Features

4.04 Field Development Program. The field development program is basedon achieving as rapidly as practical cane deliveries of 2,500 tons/ day atAsutsuare and 1,000 tons/day at Komenda, these being the quantities requiredto meet factory capacities (para 4.10). The development schedule, which isdetailed in Annex 4, assumes that farmers at Asutsuare would add progressively1,000 acres in 1972/73, 1,000 acres in 1973/74, and 375 acres in 1975, bring-ing their total to 7,575 acres; and that at Komenda they would add 1,500 acresin the three years 1972/73 to 1974/75, bringing the total acreage of farmers'cane to 5,000. The balance of the cane supplies would be met by increasingthe acreage of estate cane at Asutsuare by 2,300 acres and at Komenda by1,250 acres over the years 1973/74 to 1976/77 and introducing irrigation.The replanting program would be carried out over the years 1972/73 to 1977/78.

4.05 Hitherto farmer demand for more cane acreage has been strong andapplications have already been made for the assumed 1972/73 expansion. how-ever, the demand probably is due partly to the excessively easy credit facilitiesavailable up to now and, although some farmers are self-financed (16% atAsutsuare and 32% at Komenda), the tighter credit facilities proposed for thefuture may reduce farmer enthusiasm. Should this happen, the slack would betaken up at Asutsuare by expanding estate acreage, and at Komenda throughacquisition of additional estate land. Assurances were obtained duringnegotiations that Government would cause to be made available sufficientadditional estate land suitable for cane growing if this were requiredto meet factory capacities.

4.06 Cane Cultivation. Field preparation, cane planting, and cultivationat Asutsuare have been unsatisfactory both for estate and farmer cane. Thefaults include inadequate tillage and drainage; poor germination; poor weedcontrol and haphazard fertilizer use. Annex 4 details the problems and setsout the practices to be followed in future. Practices at Komenda are betterbut weed control, drainage and fertilizer application need to be improved.Varieties at Asutsuare and Komenda are satisfactory but only one main varietyis used at Komenda. Cane trials would be instituted at both estates to testnew imported varieties under local conditions.

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4.07 Irrigation. All estate cane at Asutsuare would be irrigated asdescribed in Annex 5, and provision is made in project costs for modificationsto the main pumping station, overhead irrigation equipment for Inspectorate 1and for additional pumping equipment and works on Inspectorates 2 through 6where mainly furrow irrigation would be used. However, the actual irrigationsystem and pumping equipment and specifications cannot be determined untilEurther studies have been carried out by the new management.

4.08 In view of the serious doubts over the Komenda irrigation system(para 3.10), only one pumping station would be operated initially on a trialbasis for irrigating about 600 acres. If this proves satisfactory and theiincreased yields justify the capital and recurrent costs, and if additionalcane is required to supply the factory, irrigation would be extended.

4.09 Cane Handling and Transport. Present cane cutting, loading andtransport methods are highly inefficient. Output per man is very low at lesst;han half a ton a day cut and loaded (2 - 3 tons elsewhere in the world), andutilization of transport equipment is poor. Future methods are described inAnnex 5. Besides improvements in equipment and organization, two importantinnovations would be made: mechanical loaders would be used, and payment tocutters would be on a piece-work rather than the present daily basis. Theseven cane loaders - crawler tractors fitted with front end loaders - wouldbe used on the two estates and would relieve acute operational bottleneckcaused by stacking cane trailers by hand. In addition, the project providesfor two cane-receiving stations in farmer cane areas at Asutsuare. The roadsserving the project areas and the estates are good and the only additionsrequired are about 14 mi of minor roads at Asutsuare and 4 mi at Komenda.Details are at Annex 5.

4.10 Factories. The present processes, and the improvements, modifica-tions and additions under the project to cane yards, mills and processingplants, are detailed in Annex 6. They are designed for an annual outputof about 30,000 tons of refined sugar at Asutsuare, assuming a crushingseason of 130 working days, and of about 15,000 tons a year at Komenda ofmill white, assuming a crushing season of 163 working days.

4.11 Expenditure and production forecasts for Asutsuare are based onthe assumption that the new equipment would be installed in time for the1973/74 crushing season.

4.12 Planned expenditure at Asutsuare is based on replacement of muchof the present milling and refining equipment which is unsatisfactory; thedistillery, which distills at present alcohol from Asutsuare and Komendamolasses, needs little expenditure. Planned expenditure at Komenda has beenkept to a minimum as existing equipment is basically sound and it is assumedthat Government would release foreign exchange for spares from Czechoslovakia.Assurances were obtained during negotiations that foreign exchange would bemade available or other measures taken to allow import of spares promptly asrequired. The alternative to continuing with the present equipment would beto replace it with that from Western suppliers; this would be prohibitivelyexpensive.

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4.13 Housing and Social Infrastructure. There are 23 completed housesat Asutsuare for management and staff together with a 48-room hostel. Dueto lack of funds, a further 30 units at Asutsuare and 26 houses at Komendahave not been completed. For Asutsuare the project provides for completionof 30 junior staff houses and a clinic; and construction of 11 new seniorstaff and 64 new junior staff houses, a club, a training center, rest house,and a hostel for apprentices. Junior staff houses will also be constructedat Komenda and labor housing will be constructed at Asutsuare and Komenda.Details are at Annex 7.

4.14 Studies. By June 30, 1974, a study should be completed on thefeasibility of further expansion either at Asutsuare or Komenda, or possiblyestablishing a new complex elsewhere. The study should include an assessmentof the domestic market requirements for sugar and by-products and recommenda-tions for utilization of by-products. Assurances were obtained during nego-tiations that Government would engage a firm acceptable to IDA on conditionsand with terms of reference acceptable to IDA to carry out such a study.Draft terms of reference are at Annex 8.

4.15 Research. Applied research is badly needed. The Asutsuare agrono-mist to be provided by the management firm would be responsible for programsof varietal selection from clones imported from sugar cane breeding stationsin other countries, plant nutrition based on field trials and soil and foliaranalysis, and for determining the consumptive water requirements of cane atAsutsuare and Komenda. He would also be required to screen herbicides andinsecticides for use on the plantation and initiate programs for their usecommercially. In specialized areas, such as entomology and plant pathology,he would make use of the back-up services of the management firm or theMinistry of Agriculture as the need arose.

V. COST ESTIMATES AND FINANCIAL ARRANGEMENTS

A. Project Costs

5.01 Total project costs for the six year period 1972/73 through 1977/78are estimated to be 0 31.7 million (US$24.8 million) of which the foreignexchange component is ¢ 20.6 million (US$16.1 million) or 65%. A summary ofproject cost estimates is given in the following table; details are given inAnnex 9.

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SUMMARY OF PROJECr COST ESTIMATES(1972/73 - 1977/78)

ForeignLocal Foreign Total Local Foreign Total Exchange----- ~ '000----- ----- US$ '000…-----

ASUTSUAREAgricultural Devel-opment:Fertilizer Subsidy 75 - 75 59 - 59 -Estate 1,287 2,800 4,087 1,005 2,188 3,193 69Farmers 404 669 1,073 316 522 838 62

Subtotal 1,766 3,469 5,235 1,380 2,710 4,090 66

Factory 535 3,265 3,800 418 2,551 2,969 86Buildings & Equipment 1,440 1,617 3,057 1,125 1,263 2,388 53MIanagement & Training 1,750 4,272 6,022 1,367 3,338 4,705 71Incremental WorkingCapital 1,250 - 1,250 977 - 977 -

TOTAL 6,741 12,623 19,364 5,267 9,862 15,129 65

K'MENDAAgricultural Devel-opment:Fertilizer Subsidy 50 - 50 39 - 39 -Estate 266 1,188 1,454 208 928 1,136 83Farmers 268 443 711 209 346 555 62

Subtotal 584 1,631 2,215 456 1,274 1,730 74

Factory 215 1,354 1,569 168 1,058 1,226 86Buildings & Equipment 563 748 1,311 440 584 1,024 57Management & Training 992 1,166 2,158 775 911 1,686 54Incremental WorkingCapital 650 - 650 508 - 508 -

TOTAL 3,004 4 7,903 2,347 3,827 6,174 62

OCCNTINGENCIESAsutsuare 931 2,087 3,018 727 1,631 2,358 71Komenda 382 749 1,131 298 585 883 66

TOTAL 1,313 2,836 4,149 1,025 _2216 3,241 69Others

Industry ExpansionStudy 7 58 65 6 45 51 88

Technical Assistanceto ADB 58 192 250 45 150 195 77

TOTAL 65 250 315 51 195 246 79

TOTAL PROJECTCOSTS 11,123 20,608 31,731 8,690 16,100 24,790 65

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5.02 Agricultural Development includes the costs of new and replantedareas up to harvest; management includes full fees and expatriate staffsalaries for the six years of development at the end of which the Asutsuarefactory in addition to Komenda would be in full production; administrationcomprises housing, vehicles, and office equipment. Price contingencies areprovided at 6% per annum (compounded) from 1973/74 through 1977/78. A flat5% on all project costs has also been included as a physical contingency.The total provision for contingencies amounts to 15% of project costs; thisis considered adequate in view of the fact that some 65% of expenditure wouldbe incurred in the first three years. Project costs exclude import dutiesand surcharge on capital goods as assurances were obtained during negotiationsthat the project would be exempt from such levies during the project period.Project costs, however, include a provision of 0 1.4 M (US$1.1 M) for incometax payable on expatriate management staff salaries, and during negotiationsassurances were obtained that if this is not sufficient, any additionalincome tax liabilities would be transferred to GHASEL and paid as and whenGHASEL's financial position permits.

B. Proposed Financing

5.03 The project would be financed as follows; details are at Annex 11.

US$ M

IDA Credit 15.600

GHASEL - self-generated funds 1.542

IVA Equity 0.500

Government 6.922

Farmers 0.226

Total 24.790

5.04 The foreign exchange costs of US$16.1 M would be financed by theproposed IDA Credit of US$15.6 M and by cash equity contributions by HVAtotalling US$0.5 M. HVA's equity subscription would be contributed to GHASELover three years, in one installment of US$200,000 and two of US$150,000.The IDA funds on-lent to GHASEL by Government and amounting to US$14.4 M(O 18.5 M) would bear interest at 7.25% per annum and be for a term of 20years including 6 years grace. IDA funds used to finance farmer creditsUS$0.87 M (¢ 1.1 M) would be onlent by Government to ADB in installments atan interest rate of 6-1/2% per annum and each installment would be repayableover six years; onlending to farmers by ADB would be at a minimum of 9%per annum (see para 6.16). A condition of effectiveness of the Credit wouldbe the conclusion of appropriate relending agreements between Govermnent,GHASEL and ADB satisfactory to IDA.

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5.05 GHASEL's local currency costs of C 10.7 M would be met by long-term Government loans totalling C 8.2 M, which would be lent concurrentlywith and on the same terms as the on-lent IDA funds, and in addition byself-generated funds of C 2.5 M. Short-term loans in a sum of t 3 M wouldbe required by GHASEL in the first two years to meet operating deficitsand this would be repaid together with interest at 7-1/4% per annum beforethe end of the project disbursement period. The remaining local currencycosts would be met by Government and farmers.

5.06 Thus total Government loans to GHASEL would amount to e 29.7 Mconsisting of long-term loans amounting to C 8.2 M, short-term loans C 3 M,and IDA funds onlent ¢ 18.5 M.

5.07 Existing assets at Asutsuare and Konenda to be valuecd beforeJune 30, 1973 would be transferred to GHASEL when the IDA Credit becameeffective (Vesting Day) in exchange for equity shares up to a maximum ofC 9.5 M to be held by Government. Should the value of the net assets exceedC 9.5 M, which seems unlikely, the excess would be satisfied by the issue ofdeferred shares which would not have voting rights nor rank for dividendsunitil ordinary shares had been paid C 4/share in any financial year. Assurancesto this effect were obtained during negotiations. Should, however, thevaluation fall short of t 9.5 M, Government would contribute cash for theshortfall so as to maintain its equity participation at C 9.5 M. It wouldbe a condition of effectiveness of the IDA Credit that existing assets atAsutsuare and Komenda had been transferred to GLIASEL and that their valua-tion, to be completed by June 30, 1973, would have started to be implemented.

5.08 It is proposed that IDA should finance retroactively project costsincurred for QHASEL including HVA management costs and for ADB technicalassistance that would be incurred prior to signature of the IDA credit. Itis estimated that such retroactive financing would amount to US$300,000.

C. Procurement and Disbursement

5.09 Procurement of equipment and materials totalling about US$8.2 Mwcould be by international competitive bidding; these would comprise factoryeq[uipment US$3.5 M; field and administrative vehicles and equipmentUS$3.7 M; and fertilizer US$1.0 M. Civil works procurement totallingUS$5.7 M, comprising irrigation US$0.8 M, factories US$1.4 M, and housingUS$3.5 M would be by international tender, but local firms, which includesubsidiaries of overseas companies, are expected to win most of the contracts.Any items below US$5,000 would not be subject to tender. Management andTechnical Assistance costs would amount to US$7.6 M. The balance of US$3.3 Mrepresents planting and replanting and other local currency costs. Ghanais not a party to any preferential tariff agreement.

5.10 Estimates of disbursements are at Annex 10. The credit would bedisbursed against:

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(a) cif costs of factory, field and administrative equipment,fertilizer and vehicles - US$6.637 M. If items are procuredlocally disbursements would be against 80% of the cost;

(b) 100% of management fees - US$1.68 M;

(c) 55% of expatriate salaries and expenses - US$2.565 M;

(d) 55% of civil works on factory, irrigation and housing -US$2.211 M;

(e) 60% of ADB credit to farmers for new planting and replantingexcluding fertilizer covered under (a) above - US$0.596 M;and

(f) foreign exchange costs of the expansion study - US$0.045 Mand technical assistance to ADB - US$0.150 M.

An unallocated amount of US$1,716 M would meet contingencies on the aboveitems. Disbursement would be against import documentation or certificatessubmitted by GHASEL Managing Director, ADB Managing Director, or the Ministryof Industries (for the study) as appropriate. For disbursements made againstcertified expenditures, documentation would not be submitted for review asa matter of course but would be retained by the respective entities forinspections by IDA supervision missions. Any undisbursed IDA funds due tocost savings would be cancelled.

D. Accounts and Audits

5.11 Project staffing provides for adequate accounting staff for GHASELunder an expatriate financial controller. Assurances were obtained thatGRASEL accounts would be audited by an independent firm of auditors accept-able to IDA, and submitted to IDA no later than four months after the closeof GHASEL's financial year, which is assumed to run from October 1 toSeptember 30.

5.12 ADB's accounts are presently audited by Amorin, Agyeman, Ayew & Co.,a firm of chartered accountants in Accra. Assurances were obtained duringnegotiations that ADB's accounts, audited by a firm satisfactory to IDA,would be submitted to IDA within four months of the close of ADB's financialyear.

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VI. ORGANIZATION AND MANAGEMENT

A. Industry Structure

6.01 GfASEL was formed on November 17, 1971 to take over the existingsugar divisions of GIHOC and to manage the industry in future. A summaryof GHASEL's Regulations, which have been approved by IDA, are at Annex 11.

6.02 A Sugar Industry Committee would be established by Govermnent tomonitor the industry, and to advise Government among other issues on:

(a) the cane price paid to farmers and quality grading andpremium systems;

(b) the price paid to CHASEL for sugar and premiums anddiscounts for different qualities; and

(c) all matters affecting the sugar industry, includingduties on sugar and alcohol.

6.03 The Committee would consist of representatives from the Ministriesof Finance, Agriculture and Trade, and Industries, the Ghana Sugar CaneP:Lanters' Association, GHASEL, ADB and two other members outside Governmentnominated by the Minister responsible for Industries. The Committee wouldhave power to co-opt, but co-opted members would not vote. The Minister ofIndustries would appoint a full time Secretary for the Committee. TheClairman would be the Minister responsible for Industries or his representa-t;ive. During negotiations assurances were obtained that such a Committeewould be established with membership and terms of reference satisfactoryto IDA. The establishment of the Committee would be a condition ofeffectiveness.

B. Management, Staff and Labor

6.04 GHASEL's Board of Directors would consist of seven members (Annex11). The Chairman is the Commissioner for Industries, and the ManagingD,irector will be nominated by HVA. Assurances were obtained during negotia-tiLons that, during the first 10 years of the project, appointments to thepost of Managing Director and Financial Controller, the latter is not on theBoard, would be subject to IDA approval.

6 05 Government, GIHOC, GHASEL and HVA have concluded a Managementand Subscription Agreement, approved by IDA which provides for managementof GaASEL by HVA for a period of five years, and subscription by HVA ofUS$500,000 to GHASEL's share capital. Details of the agreement, includingthe services, staff and facilities to be provided by HVA together with achart of the Industry organization, are at Annex 11. Information about HVA

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and its experience in the sugar industry is given in Annex 11, Appendix 2.Under the Agreement HVA will take over full management on the EffectiveDate until when GIHOC will manage the two estates. Meanwhile, HVA willproceed with design and ordering of equipment, and such matters as staffrecruitment and will advise GIHOC/GHASEL on estate operations generally. Acondition of credit effectiveness would be submission by GHASEL to IDA ofa Program of Work for the project development period; HVA have undertakento prepare such a program.

6.06 The large number of expatriates required to manage GHASEL - 28 atAsutsuare and 12 at Komenda besides the Managing Director and FinancialController - is dictated by the high degree of managerial and technicalskills needed in a sugar industry. There are no Ghanaians with experienceof an efficient sugar industry and, due to the past poor management andlack of training, those now employed are not qualified to fill more seniorposts. The cost of expatraite staff is very high but is essential if theindustry is to be made viable and Ghanaians trained to manage it.

6.07 HVA's managment fee has been fixed for a period of five yearsafter which the contract will be renegotiated. The fee will cover the costof HVA services including all charges on account of the Managing Directorand the cost other than expenses of visiting experts. The fee for theperiod till July 1, 1973 will be on an agreed cost plus basis; thereafter,the renumeration will comprise three elements: a fixed fee of US$200,000in the first year reducing to US$100,000 in the fifth year, plus a percentageof the value of sugar production and, from the third year, a percentage ofnet profit. Total remuneration is estimated at about US$300,000 per year. Inaddition, HVA will receive a fee of 4% of the value of specialized equipmentfor which procurement is handled by the HVA head office - this is includedin project costs.

6.08 Training. Training policies and procedures would follow HVA'sestablished methods, which have proved successful in Ethiopia and Tanzania.They would be aimed at the replacement of expatriates by local staff, andsemi-annual reports on progress would be supplied to GHASEL's Board. ATraining Manager would be responsible for programs and would be assisted bytwo Shop Floor Training Officers for factory and transport, and field engi-neering.

6.09 Training would be distinguished between "staff" and "nonstaff".Staff training would be implemented by on-job training of suitably qualifiedpersonnel (B.Sc. or B.A. degree level) followed by study assignmentsabroad, including periods of work in sugar industries elsewhere, for periodsof up to nine months. Nonstaff training would be conducted at a TrainingCenter and would include up-grading courses for artisans; practicalcourses for school graduates; training courses to provide qualified foremen;and advanced training courses for promotion to staff. Syllabi in useelsewhere by IIVA would be made available to GHASEL.

6.10 Labor The existing agreement (Annex 11) between GIHOC and itslabor is unsuitable for an agricultural industry and has contributed to low

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productivity and management problems. The agreement would not be assumedby CHASEL and QIASEL's management would have powers to negotiate a newagreement.

C. Cane Farmers

6.11 Government has encouraged the development of cane farming, andGlana's cane farmers play an important part in the industry, at presentproviding over 50% of cane supplies. Credit has been readily available butlaxly administered, and cane prices have been reasonably remunerative, withthe factory providing free transport within a 20-mile radius. On the otherhand, extension services have been inadequate through lack of personneland vehicles, and farmers have received little technical assistance. As aconsequence cane farming has a far from adequate technical and financialbase and requires rationalization if it is not to collapse. Under the projectsiteps to rationalize cane farming would be introduced.

6.12 Land Clearing and Preparation. Hitherto farmers have obtainedmichinery and tractor services from the Mechanization Division of the Minis-try of Agriculture at subsidized rates and from private contractors whoseactivities are growing. The Ministry plans to phase out the MechanizationDLvision. To stabilize contractors' charges, which are now high, GHASELwould provide a part of the land preparation services required. The projectincludes two heavy tractors and implements for this purpose which would becapable of preparing about 400 acres a year.

6.13 Cane Transport. Management would introduce a scheme wherebyfarmers within five miles of the factory or of a cane receiving station to beestablished under the project would become responsible for delivering canethemselves and would be compensated accordingly. These measures would reducethe present high cost of cane transport to the factory.

6.,14 Cane Farmers' Payment. At present GIHOC pays farmers a flat priceof ¢ 7.20 a ton less a transport charge of t 0.04/ton/mile, which probablyis well below cost, for distances over 20 miles. GIHOC contracts withfarmers to purchase their cane on a cutting and delivering schedule, determinedbr the estate, and proceeds are paid to farmers, cooperatives or ADB as thecase may be when the farm acreage has been fully cut and delivered. Consider-ation is being given to increasing the price to between t 8.00 and ¢ 10.00and at the same time charging t 0.04/ton/mile for all transport whateverthe distance. Report calculations assume a net average price to the farmero,E t 8.50/ton, i.e., a gross price of t 9.00, less transport costs for 12.5mLles haul to factory. As shown in Annex 12 this price ensures a reasonablyefficient farmer an adequate income, and it is not believed that a higherprice is presently justified. In future, cane and ex-factory prices willbe based on recommendations of the Sugar Committee (para 6.03). Assuranceswere obtained during negotiations that IDA would be informed of any changein cane producer prices.

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6.15 Extension Services. Extension services would continue to beprovided by the estates and would be improved under the project by theaddition of two senior officers to assist the Cane Farming Liaison Officer.Extension agents would be provided with transport and would be responsiblefor dissemination of technical information to farmers; ensuring that canecultivation standards are maintained and improved, that only authorizedvarieties are planted; and organizing, with the assistance of the PlantationAgronomist, field trips to the plantation where fertilizer use, weed control,etc. would be demonstrated. The Plantation Agronomist would visit and adviseany farmers with technical problems. Both the estates and cane farmershave had difficulties in obtaining fertilizers. Up to the present time theonly fertilizer available has been that supplied by the Ministry of Agricul-ture under its fertilizer subsidy scheme. Most of these fertilizers havebeen supplied under bilateral aid and supplies had been restricted. Duringnegotiations assurances were obtained from Government that GMASEL would beresponsible for importing its own and canefarmers' fertilizer requirements.

Credit

6.16 The present position on credits to sugar farmers is highly unsatis-factory. The poor debt recovery (55% of principal due actually reimbursed)is due to the inefficiency of the industry, to ADB's lax lending proceduresand to ADB's lack of effective control. In order to ensure that credit ismade available only to viable farmers and that it is properly disbursed andadministered, ADB would finance the establishment of 25 acres of cane or lessonly and 20% annual increases up to a maximum of 20 acres in any one yearthereafter. The loan would bear interest of at least 9% per annum withreimbursement over 4 years and would cover the cost of 80% of land clearing,seedlings, fertilizers and 80% of the manpower required for harvesting.Maintenance operations to be carried out by the farm family would not befinanced by the loan but during the first year of development the farmerswould be entitled to an allowance of up to 0 12.00/acre to be disbursed intwo equal installments, the first after land clearance and the second aftercompletion of weeding. Agreement on interest rate was reached during nego-tiations, and at the same time assurances were obtained that, except as IDAshall otherwise agree, those procedures, as detailed in Annex 3, paragraph25, would apply to all future sugar credits according to individual loanagreements with farmers, the form of which would be approved by IDA. As-surances were also obtained that ADB would keep records satisfactory to IDAof sugar credits, separating those made before from those made after signa-ture of the credit. It would be a condition of effectiveness that ADB andGRASEL had entered into an agreement satisfactory to IDA, guaranteeing thepurchase of sugar cane from ADB's borrowers, specifying the technicalassistance and services to be provided by GHASEL to ADB's borrowers, andorganizing the loan recovery administration.

6.17 With the above arrangements, together with payments for cane beingmade to ADB rather than to farmers, the improved factory efficiency underthe project, and improvement in ADB's administration (see para 2.13),it is expected that administration and repayment of sugar credits would be

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satisfactory. To ensure that the cane farming sector is properly supported,however, assurances were obtained during negotiations that by i'ovember 1,1973, CHASEL and ADB would have made a full study of the sector and prepareddetailed proposals for the support and future development of the sector,and that these proposals, if acceptable to IDA, would be implemented. Ifall the farmers taking part in the planned outgrowers' acreage expansionwere to borrow from ADB, ADB development loans to farmers would amount toC1.8 M over the period 1972/73 - 1977/78. This amount would represent 86%of the total cost to the farmers and IDA would finance 70% or C 1.28 M ofthese ADB loans.

VII. PRODUCrION, PRICES, GSC FINANCIAL RESULTS,FARM INCOME AND GOVERNMENT REVENUES

A. Production

7.01 For report calculations it is estimated that average annual caneyields per acre at Asutsuare will increase from the 1971/72 levels of 10 tonsand 15 tons for estate and farmers respectively to 31 tons and 20 tons by1978/79. At Komenda in the same period, only a small increase in estateyields is forecast, from 19 to 21 tons, and farmers yields are expected tofall from 21 tons at present to 17 tons reflecting the decrease which willoccur in the proportion of plant cane. These yield estimates are conservativeand should be exceeded as higher yielding varieties are introduced as aresult of the cane trials to be conducted under the project. By 1978/79, theGhana industry's average annual yield for estates and outgrowers should be21.1 tons cane/acre comparing with average yields in 1968/69 for Africa -25.3 tons, Latin America 19.9 tons, Far East 18.8 tons, Australia 32.3 tons,and the Philippines 19.9 tons 1/.

7.02 Total cane supplies are estimated to increase from 178,500 tons in1971/72 to 486,000 tons in 1978/79; sugar production from 10,800 tons to43,700 tons as a result of an improvement in sugar recovery to 9%; and alcoholproduction from 250,000 gallons to 676,000 gallons. The sugar recovery rateis conservative and compares with 10-11% achieved by other producers.

7.03 Estimated total domestic sugar production in 1977/78 of 43,700 tonscompares with demand estimates for 1978 of 145,000 tons of which87,000 tons would be in the form of granulated sugar which the two estatesproduce (Annex 1).

1/ FAO Production Yearbook, 1970.

- 23 -

B. Market and Prices

World Market

7.04 As outlined by the Bank Economics Department (see EC/0/72-104 ofAugust 31, 1972) the conditions of the international sugar market havesignificantly changed in the early 1970's as compared to the situation whichprevailed in the 1960's. Most of the fifties and sixties were characterizedby an excess of production over consumption, sugar surpluses, and low pricesresulting in low returns on 4nvestment. Consequently existing investmentswere neglected and no significant new investments made. As a result, itis believed now that production will lag behind consunption over the nextdecade and that in order to meet annual consumption requirements estimatedat 101 million tons in 1981-83, the world sugar industry needs to expandits capacity by some 30 million tons. As a result of declining world sugarsurpluses annual average prices on the free world market have alreadyincreased from US43.2/lb in 1969 to USg4.5 in 1971 and the price in thefirst half of 1972 averaged US47.7/lb. The Bank's Economics Departmentforecasts that in 1981/83 a price range of USJ6.0 to 7.5/lb of raw sugarfob Carribean is likely to materialize. More details on the world marketfor sugar are given in Annex 1. The International Sugar Organization hasbeen informed of the project and has commented that it expects worldconsumption in 1975 to be some 5.5%, and world production some 3.3%higher than the Bank Economics Department estimates.

7.05 For the economic analysis of the project, it is assumed that overthe project life the Ghana import price for sugar would be equivalent toUSg6.0/lb (US$132/ton) of raw sugar fob Carribean ports in terms ofconstant 1972 dollars corresponding to a Ghana import price of USg8.3/lb(US$183/ton) of refined white sugar.

Domestic Prices

7.06 GHASEL should be able to operate profitably at an average ex-factoryprice of 0 250/ton which would be equivalent to an Accra warehouse cost of0 260/ton. During the early years of the project at least a price advantageof about 2.5% for local over imported sugar probably would be needed toinduce Ghanaian traders to buy local rather than imported sugar if presentsugar import restrictions are lifted. At a projected world price ofUSU6.00/lb (See Annex 1, Table 1) the warehouse cost of imported sugarwould be ¢ 242/ton without the present import duty of 0 44.80/ton, or0 286.80 with duty. Consequently, the present import duty which is lowcompared with several other African countries would be more than adequateto protect the local industry.

7.07 The present duty of 0 44.80 per ton is equivalent to 20% of seforecast cost of imported sugar. It would appear that the duty cou.L> 'oereduced to 12% and still be adequate to protect the industry. An importduty at the latter level is not considered excessive in view of Governmenc'slegitimate development aspirations and even more important in the light of

- 24 -

the Government's policy of effecting a reduction in the import level througha system of import licenses. As described in para 8.01, in view of theimblance between domestic and international costs and prices, the economiccost of imported sugar is possibly 30% higher than its local cash cost; thisis more than the minimum level of protection needed by the industry. Govern-ment does not intend to change the present duty structure, but has statedthat should it not operate satisfactorily it would take alternative measuresincluding either import licensing on a temporary basis or establishing aGovernment monopoly of sugar through a Sugar Board following an arrangementsimilar to the present Essential Connmodities Comnmittee. Assurances wereobtained that Government would consult with IDA before adopting such measures.

7.08 GIHOC now sells its 960 alcohol at 03.00 per gallon to the State Dis-tilleries Corporation. It has been assumed that the increased productionresulting from the project would be absorbed by the local market at a lowerprice of ¢2.00/gallon which is used in the financial analysis. For theeconomic analysis, it is assumed that total project production growing atsome 10% per annum over the next 10 years up to 673,000 gallons in 1981/82-will be absorbed by the State Distilleries Corporation and the expandinglocal chemical industry. Therefore in project economic analysis an importsubstitution price of US$1.40/gallon has been used, equivalent to the currentinternational price of alcohol.

C. GHASEI Financial Results

7.09 Statements of GHASEL's projected income and expenditures, balancesheets, sources and application of funds, together with calculation of:financial rates of return for GHASEL are given in Annex 13. The statementsare based on the assumptions given in the appendix to Table 3.

7.10 Income and Expenditure. The Asutsuare Statement shows a loss(before interest) in 1972/73 of 41.78 M changing to a profit of about t1 M:Ln 1975/76 and increasing to $2.14 X by 1977/78. The Komenda Statementshows a loss in 1972/73 of O306,000 changing into a profit of ¢3 68,000:Ln 1974./75 and increasing to over p600,000 in 1978/79. Management salaries,together with relevant income tax (see para 5.02) and oncost have beenapportioned between capital and revenue in the proportion which annualproduction bears to full production capacity of the factories. The amountSo capitalized has been amortized at 5% per annum. It is assumed thatGHASEL would be exempt from duty an fuel oil and assurances to this effectwere obtained during negotiations. GHASEL also could be exempt from incometax on profits for a maximum period of 8 years but no liabilities wouldaccrue during the first 15 years or so because of accumulated tax lossesthat would be available. The Consolidated Income Statement shows a smallret surplus after interest for the first time in 1976/77 and this surplusreaches the )2 M mark in 1981/82. The return on capital employed beforeinterest is estimated to be about 6% in 1975/76, steadily rising to over 10%

- 25 -

in 1978/79. The internal financial rate of return, assuming V 9.5 M to bethe estimated value of existing assets to be vested in GRASEL (see para 5.07),would be 4.3%. Both Asutsuare and Komenda estates have been incurring con-tinuous losses and except for the proposed investments would continue tomake substantial financial losses in future. It is practical therefore toconsider the existing assets to be vested in GRASEL as sunk costs in whichcase the internal financial rate of return would be about 8%.

7.11 Sources and Application of Funds. GRASEL would be obliged toresort to short-term borrowings from Government in order to meet cashdeficits resulting from the heavy losses anticipated in 1972/73 and 1973/74.These short-term borrowings estimated to total 0 3 M could be repaid in fullfrom funds generated during 1975/76 and 1976/77. The long-term loan of4 8.2 M from Government would be required in addition to 0 18.5 onlent fromthe IDA Credit proceeds (see para 5.06). Some 0 1.7 M out of the 4 8.2 M

could be repaid to Government in 1977/78. Thereafter GHASEL would be in aposition to meet an annual debt service commitment of ¢ 3.4 M towards debtservice until 1987/88 when the annual payments would be reduced to 0 1.7 M.By 1991/92 GHASEL would have liquidated all its indebtedness to Governmentin addition to accumulating a revenue surplus of about 0 4 M. The annualcash surplus from 1991/92 could be in the range of 4 1.75 M.

7.12 The projected balance sheets have been prepared on the assumptionthat the existing assets of Asutsuare and Komenda would be vested in GHASELin exchange for equity at a value of ¢ 9.5 M (see para 5.07). The debt/equityratio during the first ten years would be considered high by commercialstandards. However, the high proportion of debts is justifiable in view ofthe fact that the Government loans are to be liquidated in annual installmen.s,and the debt service coverage of 1.5 to 2.0 times (see Annex 13, Table 4)after the project disbursement period is adequate. Assurances were obtainedduring negotiations that GHASEL without prior approval of IDA would neitherincur debts during the project period in excess of the long-term and short-term loans totalling 0 29.7 M (US$23.2 1O (see para 5.06) estimated to berequired to finance the project nor thereafter unless debt service chargL.on long-term debts, including those now proposed, would be covered at least1.5 times by net cash earnings, and on short-term debts would not exceed20% of gross profits.

7.13 GHASEL's financial position would be affected by two main factol-i:the ex-factory price for sugar, which would depend largely on the efficiencyof its operations, and the prices paid to farmers for cane which to someextent are beyond GHASEL's control. In order to ensure that GHASEL would beable to maintain a sound financial position and meet debt service charges,assurances were obtained during negotiations that Government and GHASEL wouldseek to maintain an annual return on capital employed (including valuationof existing assets) of not less than 8% after 1977/78 and, without limitingthe technical and financial efficiency obligations of GHASEL, the prices

for GHASEL's products would be adjusted to achieve such return. The returnwould be derived by relating net income after depreciation and taxes onprofits (if any), but before interest, to the value of net fixed assets inoperation plus net current assets (excluding cash) at the beginning of theyear.

- 26 -

D. Farmer Income

7.14 Under the project farmers growing 25 acres of sugar with ADBassistance would be required to contribute about 4 360 or 14% to developmentcosts in the first year and over the next four years would average a netincome after debt service of about t 1,850 (Annex 12, Table 2). Debtservice would be adequately covered by gross income twice. Assuming thatChe farm family consists of six persons, annual income per capita wouldbe about 0 310 (US$242) which compares with an average income in the ruralsector of about 0 190 in 1970 (US$148).

E. Government Revenues

7.15 It is difficult to assess the impact of the project on Governmentfinances as the levels of import duties with and without the project cannotbe forecast. However, it is assumed that as a consequence of the projectCovernment would lose the import duties and charges on 36,700 tons of sugarannually amounting to 0 1.6 million. On the other hand, the current loss ofabout 0 2 M annually incurred in maintaining the industry would be replaced byCHASEL surpluses of 4 2.0 M (after interest) which together with additionalincome taxes on salaries, wages and local excise duties on sugar and alcoholof some 0 1.0 million would result in a net gain to Government of about 0 3.4 Ma year (excluding interest receipts). If it is assumed that Government wereto shut down Asutsuare as an alternative to its rehabilitation, the net gainwould be reduced to about 0 1.7 million.

VIII. ECONOMIC EVALUATION

8.01 The major benefit of the project would be the expansion of sugarproduction in Ghana, at an economic cost, with resulting substantial netforeign exchange savings on sugar imports estimated at some US$5.2 M annuallyas from 1978/79. The economic rate of return on the project as a whole isestimated at about 20%; for Asutsuare it would be 17% and for Komenda 31%(for details see Annex 14). The calculation for Asutsuare assumes that pastinvestment is a sunk cost and has no market value, that without the project,production would cease and takes into account all future costs and benefitsof project production; the calculation for Komenda is based on comparing thecosts of rehabilitation with the incremental benefits generated by suchrehabilitation. Other important assumptions are:

(a) an import price of refined sugar of USJ8.3/lb over theproject life (para 7.05);

(b) an opportunity cost of labor of 0 0.75 per man-day againstan official minimum wage cost of 0 1.00 (Annex 14, para 6);

(c) an import substitution price for alcohol equivalent toUS$1.40 per gallon (see para 7.08); and

- 27 -

(d) a shadow rate for foreign exchange of 0 1.70 per US$compared to the official rate of 4 1.28 (Annex 14,para 7).

The sensitivity analysis of the rate of return related to cost increasesand price variations given at Annex 14 shows that even if costs were toincrease by 10% and 20% over the project life, the rate of return forAsutsuare would still be 14% and 11% and that for Komenda 27% and 23%.These are satisfactory returns, particularly if account is taken of theconservative yield and sugar recovery assumptions.

8.02 The project would ensure the employment of about 5,000 workersnow engaged in the industry of whom the 3,000 now working in Asutsuarewould lose their job were not the project carried out, and permit theemployment of an additional 1,700 workers. The cost of providing the newjob opportunities and of protecting present jobs would be about US$2,400per capita. Other benefits would be the strengthening and expansion of ADBand the conversion of the sugar industry with its present cash deficit into aprofit earning industry. The project would also set a pattern for irrigationprojects in Ghana and provide a basis for future expansion of the sugarindustry.

IX. AGREEMENTS REACIED AND RECOM1ENDATIONS

9.01 During credit negotiations, agreement was reached on the followingprincipal points:

(a) credit specialists with terms of reference acceptable toIDA would be appointed to ADB and their recommendationsenforced (para 2.13);

(b) GHASEL would enjoy full rights to Asutsuare and KomendaEstates during the period of the credit (paras 3.01 and3.02);

(c) Government would take any steps necessary to facilitaterecruitment of labor (para 3.04);

(d) the Komenda water supply system would be put in soundworking order and adequately maintained (para 3.11);

(e) if in IDA's opinion, following an independent consultant'sstudy, the Asutsuare pumping station and main irrigationcanal were not satisfactorily maintained by the Ministry ofAgriculture the operation of the system would be transferredto GHASEL (para 3.09);

- 28 -

(f) additional estate land would be made available ifrequired at Asutsuare and Komenda (para 4.05);

(g) foreign exchange would be made available for procurementof spares from Czechoslovakia or other measures taken toallow import of spares promptly as required (para 4.12);

(h) a firm of consultants would be engaged on terms satis-factory to IDA to carry out a study of future expansion(para 4.14);

(i) the project would be exempted from duties and surchargeduring the project period (para 5.02);

(j) a fair value for existing assets would be determined andthe assets would be transferred to GHASEL in the form ofequity (paras 5.07 and 6.01);

(k) CIUASEL's accounts would be audited by an independent firmacceptable to IDA and submitted to IDA not later than fourmonths after thlose of GiASEL's financial year (para 5.11);

(1) ADB's audited accounts, audited by a firm satisfactory to IDAwould be submitted to IDA within four months of the close ofits financial year (para 5.12);

(n) appointments to the posts of M4anaging Director and FinancialController of GHASEL would be subject to IDA approval (para 6.04);

(n) IDA would be informed of any change in farmers' cane prices(para 6.14);

(o) GRASEL would be responsible for importing its own and canefarmers' fertilizer requirements (para 6.15);

(p) ADB's credit procedures for sugar farmers would be as describedin para 6.16 and Annex 3, para 25;

(q) GHASEL and ADB would make a full study of the cane farmingsector by November, 1973, and prepare detailed proposals forthe support and further development of the sector and theseproposals, if acceptable to IDA, would be implemented (para 6.17);

(r) a Sugar Industry Committee would be formed with membership andterms of reference satisfactory to IDA (para 6.03);

(s) GIIASEL would be exempted from duties on fuel oil (para 7.12),Government and GHASEL would seek to maintain an annual rate ofreturn on capital employed of not less than 8% (para 7.13); and

- 29 -

(t) GHASEL will not incur debt during the project period withoutIDA approval and thereafter unless debt service coverage is1.5 times (para 7.12).

9.02 Conditions of effectiveness would be:

(a) ADB's unrecoverable debts have been written off (para 2.13);

(b) transfer to GHASEL of effective title to Asutsuare, issue ofa Notice issued designating the Komenda estate area in favorof GHASEL and settlement of compensation at Asutsuare(paras 3.01 and 3.02);

(c) conclusion of relending agreements between Government and ADBand Government and GHASEL satisfactory to IDA (paras 5.02and 5.04);

(d) transfer to GRASEL of existing assets in Asutsuare and Komendaand steps taken for their valuation (para 5.07);

(e) submission of a Program of Work by GHASEL (para 6.05);

(f) conclusion of an agreement satisfactory to IDA between ADBand GHASEL for purchase of farmers' cane (para 6.16); and

(g) establishment of the Sugar Industry Committee (para 6.03).

9.03 With these assurances, the project would be suitable for anIDA Credit of US$15.6 M on standard terms.

October 30, 1972

ANIEX 1Page 1

GHANA

SUGAR REHABILITATION PROJECT

SUGAR MARKET AND MARKETING

A. Sugar World Market Outlook

1. The Bank Economics Department forecasts that from 1971/73 to1981/83 world sugar consumption will increase from about 75.0 to about100 million tons. To meet the greater demand, production capacity willneed to be increased by 30 million tons over the same period at an estimatedcost of about US$4 billion.

2. Out of a total international trade of about 19.2 million tons in1975 about 65% will probably move under special arrangements involving theUnited States, United Kingdom, Caribbean, and centrally planned countries.The remaining trade will be under the so-called "free world market". Duringthe 1960's prices on the special markets were much higher than "free worldmarket" prices, but during the 1970's this margin decreased as a consequenceof price increases on the "free world market". This market is organizedby the 1968 International Sugar Agreement, which is due for renewal in 1973,It is probable that the new agreement would provide for higher sugar pricesthan those of the current agreement, which aims to keep prices in the rangeof US03.25 to 5.25/lb for raw sugar (fob Caribbean ports). Average pricesincreased from USJ3.1/lb in 1969 to US47.7/lb by the first half of 1972as a result of a decline in world sugar surpluses. In late 1971 theInternational Sugar Organization lifted export restrictions when worldmarket prices exceeded the US45.25/lb ceiling under the agreement. But,early in 1972 quotations for raw sugar were over US48/lb and exporterswere therefore asked to offer all stocks held under special reserve arrange--ments for prompt delivery. Working stocks, estimated normally at 25% ofannual consumption, were reduced to some 19% by the end of August 1972.

3. Since sugar production will lag behind demand over the next decade,it is expected that prices on the free market will be significantly higherover the next 10 years than the prices that prevailed in the later 1960's.In April 1972 the Bank Economics Department forecasted a 1975 price ofUS45.5/lb for raw sugar (fob Caribbean ports), and a 1980 price of US45.8/lb.These forecasts are now considered low and a price in 1980 of US46 toUSO7.5/lb is considered more likely. A price cif Ghana of USU8.3/lb forrefined sugar, equivalent to a fob Caribbean port price of USJ6/lb in realterm is therefore used in the project's economic analysis (see Table 1).

ANNEX 1Page 2

B. The Market for Sugar in Ghana

Consumption

4. Total demand for sugar in Ghana is made up by the retail trade,Dmnufacturers, and distillers, for which consumption in 1970 is summarizedbelow: 1/

1970Long tons % of total

Retail trade 52.6 56

Manufacturers 24.0 25

Distillers 18.2 19

94.8 100

5. Consumption increased from about 33,000 tons in 1963 to about95,000 tons in 1970. Annual per capita consumption increased during thesame period from 9.9 lb to 23.3 lb in 1970. This increase was achieveddespite the rising trend in price since 1967, and per capita consumptionis now at about the average level for Africa (23.6 lb in 1970). It isstill however some 17.6 lb below world per capita consumption estimated at40.6 lb.

6. The following table summarizes the consumption forecasts for thenext 15 years:

1975 1980 1985Demand from Low High Low High Low High

-- '-----------'000 long tons-------------------

Retail trade 70.7 78.4 91.7 118.3 118.6 175.2

Manufacturers 32.3 33.8 45.2 49.7 63.5 73.0

Distillers 20.1 21.1 22.2 24.5 24.5 28.3

Total 123.1 133.3 159.1 192.5 206.6 276.5

Out of whichgranulated sugarwould be 73.1 80.0 95.0 116.0 124.0 166.0

1/ Institute of Statistical, Social and Economic Research (ISSER), LegonUniversity, "Structure and Prospects of the Sugar Industry in Ghana.Volume I: Demand for and Supply of Sugar in Ghana with Projectionsof Demand" by C. O'Loughlin, S. L. Mabey and K. Asiedu-Safaro. Tech-nical Publication Series No. 21, Legon, 1972.

ANNEX 1Page 3

Consumption estimates for the retail trade are based on an annual populationgrowth rate of between 2.5% and 3%, a GDP growth rate varying between 3% and6% for different regions of Ghana, and an income elasticity of demand forsugar of between 0.65 and 2.0. Manufacturers' demand is expected to increaseat 7 to 8% per annum, and the demand from distillers at 2 to 3% per annum.

7. The project under consideration in this report would bring GHASEL'scapacity to some 45,000 tons per annum in 1978, i.e. less than one-third oftotal country requirements. Thus GHASEL's production will have to besupplemented either by imports or by further local production, possibly oflower grade sugar for uses that do not require white sugar.

Imports

8. Most of Ghana's sugar requirements are met by imports; the averageannual production during 1966-71 from the two local sugar factories was only4,000 tons. Imports increased steadily from 1963 to 1970 and were 115,000tons in 1970 (Table 2), representing NJ 16 million in foreign exchangeexpenditure in that year. In 1971, imports fell to some 50,000 tons valuedat about 0 9.2 million. Although annual sugar imports normally fluctuate,1970 imports were unusually large. They were nearly twice those of 1969and 1971 and probably resulted from the removal of all sugar import licensingin March 1970. Total usage of these exceptionally large imports has not beencompletely determined. Part was traded normally but importers also built upstocks.

9. Imports were on "restricted license" until January 1, 1969 andfrom then until March 1970 on "open general license" subject to "commitmentforms" an arrangement similar to restricted license in its practical effect.Since March 1970 sugar has been imported freely subject only to an importduty and levy. In February 1971, imports of sugar were again restrictedand became the sole responsibility of the Essential Commodities Committee(ECC) (para 13).

10. Most imports in recent years have been from the USSR, EasternEuropean countries, France, and Britain. Although in 1971 there were noformal restrictions on obtaining foreign exchange for sugar imports, delaysin converting local currency into foreign currency through the bankingsystem were a constraint on importing. These difficulties were less forsugar from Eastern Europena countries and the USSR, with which there weregovernment-to-government exchange clearing arrangements.

11. Government charges an import tax on all sugar of 0 0.01/lb and,since August 1970, an additional 0 0.01/lb has been levied to finance localsugar industry development. Only part of this levy has been made availableto the industry so far. These two charges combined are well below importduties charged by other African sugar producing countries as indicatedbelow:

ANNEX 1Page 4

Duty (USi1b)

Ghana 1.6

Nigeria 4.7

Kenya 2.8

Uganda 3.2

Tanzania 2.9

The Essential Commodity Committee (ECC)

12. After the 1972 devaluation, Government launched a consumer subsi-

dization scheme to avoid abrupt price increases on eleven imported basic

commodities including sugar. ECC was established under the Commissionerfor Trade with a monopoly for trading in these eleven commodities. The

Ghana Trade Corporation (GNTC) is ECC's agent. It orders and delivers the

goods to trade and retail houses.

13. ECC was allocated C 17 million (about US$13 million) in foreign

exchange to purchase up to 32,000 tons of sugar in 1972. From January to

June GNTC placed four orders for 18,625 tons of refined sugar for an average

price of $320/ton or US414.3/lb. This sugar is sold at a wholesale price

of C 11.46/cwt or US47.98/lb. After including GNTC operating costs of about

C 5.50/ton - this price represents a subsidy of about 50% of the cost of

imported sugar.

14. Locally produced sugar is bought from GIHOC at pre-devaluation

price levels (¢ 10.25/cwt at Asutsuare and C 9.75/cwt at Komenda) and

delivered to GNTC. Government undertake to pay GIHOC the difference between

the above selling price and mutually agreed production costs, including a

5% profit margin, of ¢ 20.51/cwt (US414.2/lb) at Asutsuare and C 13.63/cwt(USd9.4/lb) at Komenda. From January to June 1972 the Asutsuare and Komenda

estates each produced and sold about 7,000 tons of sugar, requiring on

average a 55% subsidy worth about C 7.5/cwt.

15. It is estimated therefore, that for the first half of 1972,

Government paid or will have to pay about C 5 million on sugar subsidies

of which about C 3 million (US$2.34 million) was foreign exchange. If

maintained at this level, subsidies would represent a significant strain

on Government resources. Government officials believe, however, that ECCwill gradually hand over the trade of essential commodities to established

marketing channels and prices will be allowed to adjust to free market

conditions.

Pricing Policy

16. Government controls the maximum price at which sugar and other

basic foodstuffs may be sold. Apart from these price regulations, thelocal trade in sugar is carried out freely by a number of competing

concerns.

ANNEX 1Page 5

17. The maximum controlled wholesale price of sugar was reduced by33% in October 1967 and then increased by 23% in November 1969. The lowerprice contributed to the increased consumption in 1968 and 1969 comparedwith earlier years. The freeing of import controls may have contributedto a further increase in consumption in 1970.

18. The Price Control Orders specify retail and wholesale prices.Most granulated sugar leaves regular commercial channels in wholesalequantities, and when it is not used for manufacturing purposes (includingdistilling), it is sold by small traders in hand-packaged quantities tothe final retailer. Prices supplied by the Central Bureau of Statisticsfor the cost of living index indicate that the retail price control onsugar is ineffective.

C. GHASEL Marketing Policy

19. GHASEL would manufacture white sugar of a quality adequate forgeneral manufacturing purposes. HVA would advise the GEASEL Board and,through it, Government if it considers that any manufacturer is seekingto impose unreasonable quality requirements for locally produced sugar.

20. Asutsuare would make a high quality refined sugar while Komendawould continue to make a mill white sugar, although of a higher qualitythan at present. No final decision would be taken on the pricing formulafor mill white and refined sugar in Ghana until rehabilitation of bothfactories is complete and experience has been obtained of the marketdemand for each type. Calculations in this report assume ex-factoryprices at Asutsuare of C 256 per ton for refined sugar and at Komenda'sof C 243 per ton for white sugar. This represents a discount of 5% forKomenda sugar and an average ex-factory price of C 250 per ton for bothfactories.

21. To establish and maintain a sound marketing policy, GHASEL would:

(a) appoint a competent Ghanaian executive with commercial experienceto be responsible for its sugar sales policy; and

(b) negotiate block contracts with the large sugar merchants for asubstantial proportion of total production. These merchantswould be entitled to a discount in return for accepting sugarduring the crop season, thus reducing factory stocks.

22. A justification for some form of local industry protection isgiven in para 7.07 of the report. After considering various ways of pro-tecting the local industry, it appears that a fixed duty system would besatisfactory, provided that Government:

ANNEX 1Page 6

(a) undertakes to adjust this duty as necessary to provide adequateprotection to the local sugar industry; and

(b) establishes as soon as possible a Sugar Industry Committeeas a channel for consultation between GHASEL, the Government,and other organizations interested in the sugar industry.

GHANA

SUGAR REHABILITATION PROJECT

PRICE STRUCTURE OF IMPORTED SUGAR

Forecastedprice

April 19 7 Jan-June 1972 1975 - 1980USj6/lb 1/m.ton USi/lb 17/m.ton USO/lb J/m.ton

World market price, N.Y. 4.53 101.89 7.75 218.74 6.0 170.00Refining margin 1.00 22.49 ( ;/ 1.3 36.58Sea freight and insurance 0.90 20.24 (6 _1.__ 1.0 28.12

CIF Tema 6.43 144.62 14.30 403.60 8.3 234.70

Port handling and inland freight 0.23 5.36 0.19 5.40 0.27 7.30

Accra warehouse cost of imported sugar 6.66 149.98 1h.49 409.00 8.57 242.00

Duty on imported sugar 1.96 44.08 1.56 44.08 0.87 24.50 3/Accra warehouse cost of imported sugar with duty 2B7 I-94.06 16. 453. m 9.44 266.50Accra warehouse cost of domestic sugar 8.09 181.95 12.40 350.00 9.21 260.00

Government subsidy on imported sugar 2/ - - 6.50 183.71 -- ni - on domestic sugar - - 4.41 124.41 - -

Wholesale price AccraImported sugar 10.03 225.59 7.99 225.59 10.20 287.82 4/Domestic sugar 10.03 225.59 7.99 225.59 9.95 280.8h I/

Imported sugar cost as a percentage ofdomestic sugar cost 106.7 130.0 102.5

1/ Calculated difference between average raw sugar prices on the world market in January-June 1972 andaverage CIF costs in Tema for actual contracts.

2/ Net of import duty.3/ Set to raise imported sugar wholesale price at 2.5% above domestic sugar wholesale price. C xT/ 8% above warehouse costs. H eAugust 22, 1972

ANNEX 1Table 2

GHANA

SUGAR REHABILITATION PROJECT

Estimate of Consumption 1961-70Import, Production and Reported Consumption 1961-70

GranulatedSales of of totalhome Available for available

Imports produced consumption Reported forCube Granulated granulated Granulated Total consumption consumption--------------------…long tons '000----------------------

1961 20 35 - 35 55 63* 641962 20 40 - 40 60 59* 671963 11 23 - 23 34 33 681964 18 22 - 22 40 38* 551965 20 36 - 36 56 58 641966 29 28 1 29 58 62 501967 30 29 3 32 62 62 5219.58 27 59 - 59 86 69 671959 29 38 3 41 70 71* 591970 45 70 6 76 121 95** 631971 25 25 15 40 65 n.a. 62

* Reported consumption figures marked * are estimated by the Inter-national Sugar Organization (ISO); others are reported by theGhana authorities to the ISO.

** ISSER study, see para 4.

Sources: Imports: Customs statistics with corrections for 1961 and 1966given in "Evaluation Report: State Sugar Products Corporation",National Investment Bank, Accra - September 1967.

Sales: GIHOC statistics.

Reported Consumption: International Sugar Organization YearBooks, converted from metric tons raw value.

ANNEX 2Page 1

GHANA

SUGAR REHABILITATION PROJECT

GHANA INDUSTRIAL HOLDING CORPORATION (GIHOC)

A. The Corporation

Constitution and Objects

1. GIHOC was established on July 1, 1968 under NLC Decree 207, lateramended by Act of Parliament dated January 15, 1971. Its objects are theestablishment and operation of profitable manufacturing and commercialenterprises, and it can be nominated by Government to hold shares or otherinterests of Government. GIHOC is required to conduct its affairs onsound commercial lines to ensure that its revenues are sufficient toproduce a reasonable return o the fair value of its total assets plusworking capital: a reasonable return is defined as including sufficientnet operating income to meet interest payments and loan repayments to theextent they exceed depreciation; to finance a reasonable proportion ofexpansion; to provide reserves; and to make reasonable payments to theConsolidated Fund.

Management and Organization

2. GIHOC's governing body is a Board consisting of a Chairman, notless than three nor more than seven Directors, and a Managing Director, allof whom before the January 1972 coup were appointed for renewable terms ofthree years by the President on advice of the Prime Minister and have sincebeen appointed by the NRC. Board members are required to be qualified orexperienced in industry, trade, finance, science or administration, andmust include experts in business administration, commerce, and engineeringor law. All members of the present Board are Ghanaian.

3. GIHOC's organization consists of headquarters management andstaff in Accra and 17 operating divisions listed in Table I. GIHOC hasa subsidiary advertising company and a 40% interest in a textile company.GIHOC employs about 9,500 people. The Sugar Division accounts for approxi-mately one third of employees.

Operations

4. Initially GIHOC took over 19 state corporations. The State CocoaProducts Corporation was subsequently handed over to the Cocoa MarketingBoard; the Sheet Metal Works Corporation sold; and the Textile ManufacturingCorporation floated off as a limited liability company with GIHOC holding

ANNEX 2Page 2

40% of the shares. A new division (Pharmaceuticals) was added later. GIROC'spolicy is to float other divisions off into companies when appropriate, andit plans to do so with the Distilleries Division.

5. GIHOC is a conglomerate with more than the usual problems facingthat type of enterprise. Its activities did not grow naturally but werethruist on it; they are widely disparate; management skill are in shortsup-ply particularly in planning, marketing and finance; and its overallobj,ectives are ill-defined. It has been severely criticized in Ghana andby outside observers, and while it has admittedly faced a difficult task,its performance has not been good.

B. The Sugar Products Division

6. When GIHOC was formed it took over the State Sugar Corporationconsisting of the two estates at Asutsuare and Komenda. The Asutsuarefacitory was erected under a contract with Cepok of Poland and commissionedin 1967. Management was first supplied by Techno-Export of Czechoslovakia.When the Czech General Manager left in 1967 a Pakistan firm, AssociatedConsulting Engineers (ACE), were asked to take over management and in 1968a contract was signed with ACE to continue management for three crop seasons,i.e,, until mid-1971. The ACE contract was renewed for a further year tillmid--1972. Meanwhile, some Czech technical personnel remained and three arenow employed directly by GIHOC under an arrangement with the Czech Government.In 1969, ACE were asked to take over Asutsuare also for a period of three years.

7. The agreements with ACE required ACE to provide a General Manager,a Sugar Technologist and an Agronomist at each factory, plus a visitingdistilleries expert for four months at Asutsuare and a liaison officer.ACE were also required to provide overall guidance from their head office,establish a training program, and submit reports. The fee, which coveredthe ACE staff salaries, was 0 18,500 per month (o 9,500 for Asutsuare and0 9,000 for Komenda) and ACE staff were also provided with housing andtrarLsport.

8. The many problems that the sugar industry has faced are dealtwith in the technical annexes. They include low cane supplies, poor canequality, inefficient cane transport and handling, inappropriate and out-of-date mill design and equipment, labor shortages and troubles at Asutsuare,inadequate housing and facilities at Asutsuare, and difficulties with farmers.Many of these problems proved to be beyond ACE's powers and GIHOC has beenunable to help. However, while the position at Asutsuare has remained bad,production and efficiency at Komenda have improved.

ANNEX 2Page 3

9. ACE were not required to provide financial services and GITIOC didnot institute any form of cost accounting. The financial accounts of theSugar Division are long overdue and the auditors have had to prepare thefinal statements. Audited accounts for 1969 were not completed until HIay1971 and the audit of 1970 accounts was not completed by July 1972. Theaudited profit and loss account for 1969 and the provisional account for1970 and 1971 are at Table 2 but they exclude depreciation on the Asutsuarefactory, the value of which has not been determined; but which is probablyof the order of No 0.5 million, thus increasing the Asutsuare losses bythis amount. The balance sheets for the two estates for 1969, 1970 and 1971are at Table 3.

10. Due to lack of cost accounts, it is not possible to determineaccurately the unit costs of production, but in 1970 and 1971 it was about0 285/ton at Komenda and substantially higher at Asutsuare. The excessiveproduction cost at Asutsuare was due primarily to the very low production,only about 6% of capacity.

ANNEX 2Table 1

QiANA

SUGAR REHARILITATION PROJECT

Ghana Industrial Holding Corporation (GIHOC)

Operating Divisions

SteelworksMetal IndustriesMeat ProductsPaper ConversionGlass ManufacturingMarble WorksFiber Bat ManufacturingPaintsPharmaceuticalSugar - Asutsuare

KomendaVegetable Oil MillsElectronicsBrick and TileDistilleriesBoatyardsCanneryFootwear

GHANA

SUGAR REHABILITATION PROJECT

Ghana Industrial Holding Corporation (GIHOC)Sugar Division Profit and Loss Accounts

(O '000)

1969 1970 1971Asutsuare Komenda Asutsuare Komenda Asutsuare Komenda---- audited --------- --------unaudited --------- --------provisional-------

Production,Sugar - tons 314 2,333 2,510 5,107 8,187 10,510Molasses - tons - 3,235 - 3,753 3,771 4,785

Alcohol - gallons '000 174 - 273 - 144 _

Sales:

Sugar - tons 246 2,333 435 5,375 9,768 12,000Molasses - tons - 3,235 - 3,753 - 4,800

Alcohol - gallons '000 192 - 209 - 138 -

Income:

Sugar 34 415 77 901 1,716 2,242Molasses - 188 - 287 - 252

Alcohol 398 - 606 - 477 -Other 38 3 32 14 18 26

Total 470 606 715 1,202 2,211 2.520

Expenditure:Labor and Raw Material Cost 775 514 899 631 945 923Variable Expenses 419 227 442 665 962 540

Variable Cost of Production 1,194 741 1,341 1,296 1,907 1,463

Finished roods -(Increase) Decrease (74) (392) (350) (177) (403) S46

Cost of Sales 1,120 349 991 1,119 1,504 1,909

Cross Profit (Loss) (650) 257 (276) 83 707 611

Factory and Office Administration 517 656 547 411 566 470Finance Charges 5 11 148 18 154 7Agricultural Development 178 - - - - -

Loss on Farm Account 162 350 302 335 464 N/AAdjustment in Respect of Previous Years - - 20 22 - 35Depreciation 15 175 24 256 122 260

Total 877 1,192 1,041 1,042 1,306 772

NET LOSS (1,527) (935) (1.317) (959) (599) (161)

September 26, 1972

,( x

GHANA

SUGAR REHABILITATION PROJECT

Ghana Industrial Holding Corporation (GIHOC)

Sugar Division Balance Sheets

( '000)

December 31, 1969 December 31, 1970 December 31, 1971

Asutsuare Komenda Asutsuare Komenda Asutsuare Komenda(Audited) (Un-audited) (Provisional)

Fixed Assets

Cost 2,359 I/ 3,376 2,847 3,547 3,078 1/ 3,581Less Depreciation 902 496 1.006 750 1.125 1,010

Subtotal 1,457 2,880 1,841 2,797 1,953 2,571

Current Assets

Inventories 667 917 4,522 2,201 3,223 589Receivables, etc. 222 357 978 461 2,421 1,145Cash 101 394 25 37 294 157

Subtotal 990 1,668 5,525 2,699 5,938 1,891

Current Liabilities

Payables, etc. 1,483 1,944 1,477 1,835 1,951 2,190GIHOC Head Office a/c 1.265 1,359 1.265 3,375 1.422 2,147

Subtotal 2,748 3,303 2,742 5,210 3,373 4,337

Net Current Assets (1,758) (1,635) 2,783 (2,511) 2,565 (2,446)

Accumulated Revenue Deficit 2,436 1,228 3,773 2,371 2,348

Total Assets (including debt balances) 2,135 2,473 8,397 2,473 8,889 2,473

Represented by

CIHOC - Capital Account 1,813 2,473 8,075 2,473 8,200 2,473Government Grant 322 - 322 - 689 -

2,135 2,473 8.397 2,473 8,889 2.473

1/ Excludes factory buildings and machinery for which a value has not been determined.

September 26, 1972

ANNEX 3Page 1

GHANA

SUGAR REHABILITATION PROJECT

THE AGRICULTURAL DEVELOPMENT BANK

Introduction

1. In April 1964, the Bank of Ghana established a Rural Credit De-partment to study the problems of agricultural credit and to preparelegislation, plans and procedures for the establishment of an agriculturalcredit bank. In April 1965, Parliament passed an Act (Act 286) to incorporatethe Agricultural Credit and Cooperative Bank. The new bank started itsoperations in August 1965, taking over the assets and liabilities of theRural Credit Department of the Bank of Ghana. In April 1967, the initialAct was amended by a Decree of the National Liberation Council (Decree 182),and the bank's name changed to the Agricultural Development Bank (ADB).

Functions and Objectives

2. ADB w-as established to provide credit facilities for developmentand modernization of agriculture and allied industries. To achieve thispurpose, ADB may either enter into loan agreements with individuals, coop-eratives and companies, or subscribe a part of the share capital of newventures. The bank is also empowered to initiate or participate in trainingand research facilities aimed at promoting agricultural development.

3. The bank may mobilize funds by accepting deposits on saving ac-counts and transact business normally confined to commercial banks. WithGovernment approval and guarantee, the bank may also raise loans from inter-national financial organizations or foreign financial institutions.

Organization, Capital and Management

4. ADB's authorized share capital is 0 30 M and the paid-up capitalat December 31, 1971 was 0 13.25 M. Although it is open to public subscriptionGovernment and the Bank of Ghana are the only shareholders. The Bank ofGhana's contribution amounting to 0 3.5 M was made available in cashwhile Government provided 0 3.78 M in 3% savings bonds and 0 5.97 M incash. There is no fixed schedule for the paying-in capital and the twoshareholders agree each year with ADB the amount to be paid in during thefollowing financial year.

5. The bank's operations are controlled by a Board of seven Directorsrepresenting the Ministries of Finance and Agriculture, the Bank of Ghana,and the Department of Cooperatives. The Chairman of the Board is also thefull-time managing Director of the bank; he is assisted by an Executive

ANNEX 3Page 2

Director who is also a member of the Board. Under an agreement between theGovernment and USAID, terminated in September 1970, ADB was advised by anAmerican expert in agricultural credit.

6. The day-to-day activities of the bank are under the control of theManaging Director, who is appointed by Gover nent for a five-year period.The bank retains the services of independent auditors: Amorin, Agyeman,Ayew and Co., chartered accountants with an office in Accra.

7. There are 3 main departments in the bank-the Loans Department, theFinance Department and the Administrative Department, which in turn are splitinto various divisions. Each department is under a Director responsible tothe Managing Director.

8. Besides its headquarters in Accra, ADB has opened four branches inKumasi, Koforidua, Tamale and Hohoe, and ten Farm Credit Service Offices tosupervise projects financed by ADB.

9. The staff of ADB totals about 200 of whom about 60 are qualifiedprofessionals with university or post-secondary school diplomas, some withdegrees degrees either in Great Britain, USSR, USA or Germany. Althoughmany of the professionals have graduated in agriculture, only a few haveadequate practical experience, and consequently the technical appraisalof agricultural projects is weak. Under the sponsorship of USAID threestaff members were sent to the United States for further training.

Activities and Performance

10. ADB has more than tripled its total lending since September 1969.The total number of 351 approved loans at that time amounting to ¢ 4.7 Mhas increased to 1,551 loans in March 1972 representing an approved totalof 0 17 M out of which ¢ 13 M was actually disbursed. The breakdown of theloans among different types of operations is summarized below and detailedin Table 3.

Number of Approved Amounts % of TotalLoans (O '000) Amounts

1969 1972 1969 1972 1969 1972

Food Crops 137 676 733 4,387 16 26Fisheries 29 46 698 1,125 15 7Industrial Crops 48 234 1,092 4,687 23 28Sugar 83 239 844 3,291 18 20Agro-business,Livestock andOthers 54 356 1,294 3,159 28 19

Total 351 1,551 4,661 16,649 100 100

% Increase +342% +257%

ANNEX 3Page 3

Terms and conditions of the loans are based on the type of activity and varybetween 6 months for food crops to 7 years for cattle and 10 years for oilpalm. Interest rates up to February 1972 varieh between 7% and 9% per annum.The rate depended not only on the type of operation, but also on borrowers'security. For sugar cane farms, loans are made for four years and theinterest charged was 9% per annum. The new Government has decreed that allADB loans for agriculture, effective February 5, 1972, should be chargedinterest at a concession rate of 6%0 per annum. This decree could causeproblems for ADB as it is obliged to pay 7-1/2% per annum on saving deposits,and the Bank of Ghana Discount Rate is 8%. All agricultural loans grantedafter February 5, 1972 were met out of Bank of Ghana loans made availablefrom a special fund for which ADB is charged an interest rate of 3% perannum. During 1972 no loans were granted to sugar cane farmers. TheGovernment is considering the exclusion of the sugar industry from thisconcessionary interest rate of 6%.

11. ADB's loan administration and debt recovery record is not asimpressive as its recent expansion. As of March 31, 1972, the total amountof principal actually recovered represented only 40% of the principal dueat the same time (see Table 3). For some loans, debt service does not evencover the interest charge and the balance now due exceeds the original loan.In 1970, only 68% of interest due on all loans was actually collected; butin 1971, the interest recovery rate improved to 81%. Some of the reasonsfor the poor debt collection record are beyond ADB's control and stem fromthe social and legal structure of Ghanaian society. They include the absenceof formal land ownership and the consequent impossibility of securing loanswith land titles. Legislation on debt default is complicated and difficultto enforce even with court decisions favorable to lenders. But the mainreason for poor debt recovery is the lack of a proper loan recording systeminside ADB, including establishment of a reimbursement schedule for eachloan, separate recording of principal and interest repayments, and con-tinuous up-dating of individual loan positions. These shortcomings werediscussed during the appraisal in 1969 of the Eastern Region Cocoa Project(see Report PA-43a, Annex 6) and were to be put in effect by a USAID expertwho assisted ADB at that time, but who unfortunately resigned prematurely.

12. The 40% figure quoted above as representing the level of ADB'sdebt recovery is also due to the time of the year at which it was established,i.e. end of March. Many annuities on ADB's loans are paid in block at theend of the cropping season and it is possible that a debt recovery percentagecalculated at the end of September would be higher. Part of ADB's poor debtrecovery is also due to loans estimated at about 0 550,000 granted by theBank of Ghana under the First Republic, and taken over by ADB when it wasestablished in 1965 (see para 1). Such loans, mainly for fisheries, werepolitically oriented and are being written off.

13. In order to strengthen its credit management generally andespecially its accounting system, ADB has entered into an agreement withBerenschot Bosboom, who are experienced credit management reorganizationconsultants. These will provide 2 of their experts to ADB. A specialistin loan accounting procedures will first establish and then run for about

ANNEX 3Page 4

nine months a proper system of loan accounting and reporting. The otherexpert will review credit policies and procedures. Both experts will assistADB to establish financing plan to either reschedule or write off itsoverdue loans. Terms of reference for these experts are at Appendix 1.

'14. In early 1968, ADB began accepting funds on current and depositaccounts and that activity has been increasing steadily as slhown in theJ'ollowing table:

1968 1969 1970 31st March 1972No. Amount No. Amount No. Amount No. Amount

CurrentAccounts 117 55,763 366 154,695 513 278,943 1,182 328,360

SavingsAccounts 195 7,637 622 40,832 1,318 88,857 2,200 219,742

Total 312 63,400 988 195,527 1,831 367,800 3,382 548,102

' Increase - - +216% +208% +85% +88% +84% +49,

Interest of 3-1/2% per annum was paid on savings deposits until August 1971whereafter the rate was increased to 7-1/2% per annum. Most of the savingsdeposits monies were used to purchase Government bonds.

15. ADB provides credit for the Fisheries Project (163-GII) and theEastern Region Cocoa Project (205-Gil). The Fisheries Project, costingUS$2.3 M, provides credit to fishermen for construction of 40 medium-sizeseine fishing vessels. Because of changed circumstances affecting the costand design of boats and tlheir profitability, the number to be constructedhias been reduced to 10. IDA's contribution of US$1.3 M covers the foreignexchange component of vessel construction and a fishing port feasibilitystudy, and is being made available, together with Government's contribution,tc eligible borrowers through ADB. Discussions are in progress as to thepossible uses to which the amount of the Credit freed by the reduction inthe number of boats might be put; this would involve amending the Credit.

16. After approving the creditworthiness of an applicant, ADB receivesfrom the borrower a down payment of e 5,000 1/ representing some 10% 1/ ofthe total cost of a vessel. ADB then credits the borrower's account withanother 0 44,000 1/ and the Boatyard Division of GIHOC draws from this accountthe expenses it incurs in the construction of the borrower's vessel. TheBoatyard Division will later collect debts on ADB's behalf through the mediumof a hire-purchase type arrangement.

17, Government on-lends IDA funds and its own contribution to ADB at6-1/2%. ADB charges the borrower 9%, pays 1-1/2% to the Boat yard Divisionfor its services, and bears the credit risk from the remaining 1%. Loanswill be repaid in six years with a one-year period of grace; this is wellwithin the expected vessel life of 10 to 12 years.

1/ These amounts differ from those stated in the appraisal report (seepara 18) and have been agreed upon by IDA.

ANNEX 3Page 5

18. Progress on the Fisheries Project was held up initially because ofdisagreement between GIHOC and potential buyers on the design and cost ofboats, which led eventually to the decision to build only 10 boats with some-what different equipment originally envisaged. The first five boats havenow been completed and disbursement is being requested. In view of the slowstart on the project, the Closing Date will have to be extended by a year toDecember 31, 1973. Further details on the fisheries projects are given inIBRD-IDA Report PA-7a of September 8, 1969, "Fisheries Project -- Ghana" andthe President's Memorandum on the Sugar Rehabilitation Project (to be issued).

19. In the Eastern Region Cocoa Project (205-GH), ADB has secondedloan officers to the Project Unit established within the Ministry of Agri-culture to appraise the creditworthiness of cooperative members whose farmsare to be rehabilitated or replanted under the Project. After approvalof borrowers by ADB's Board, farm inputs are provided by the Project Unitand financed by a loan from ADB. Cooperatives deduct reimbursements fromcocoa sale proceeds. The Ghana Cooperative Marketing Association, the apexorganization of the cocoa marketing cooperatives, guarantees individualloan reimbursement.

20. Credit 205-GH was signed in June 1970 and became effective onMarch 12, 1971. Project organization started in November 1970 and consistedmainly in establishing the Project Unit and organizing farmers in newcooperatives where required. Granting of loans commenced with the firstrehabilitation campaign in mid-1971. Details of the Eastern Region CocoaProject are given in Appraisal Report PA-43a, dated June 3, 1970.

Sugar Credits

21. With a total of 239 approved loans amounting to ¢ 3.29 M ADB has20% of its loan portfolio in the sugar cane business (see Table 3). Averagesize of the loans is about ¢ 13,200 but varies significantly between Komenda(O 7,500) and Asutsuare (¢ 16,500) where sugar cane farms financed by ADBare larger than in the Komenda area. The size of loans varies between¢ 2,000 for small private farmers and more than ¢ 80,000 for small-sizecompanies planting 400 to 500 acres.

22. Under the present arrangements, applications for loans areaddressed to ADB, which obtains from GIHOC Sugar Division a guarantee thatthe cane harvested by the applicant would be purchased by the factories ata fixed price (O 6.50/ton of cane in 1970/71 and 4 7.20 in 1971/72). ADBrelies mainly on GIHOC's extension officer to ensure that field location,quality of land and applicant's technical capacity are satisfactory. ADBundertakes to finance 80% of the first year costs including land preparationand first year seasonal inputs. Practically, however, ADB has been openinga credit line to its borrower and disbursing against 100% of the first yearcost, including daily payment for the farmer's own work. At harvest time,GIHOC takes delivery of cane and after completion of cutting pays en blocthe cane proceeds into the farmer's account with ADB. ADB deducts theannuity due and allows the farmer to withdraw from his account the balanceof the sale proceeds.

ANNEX 3Page 6

23, Despite the theoretically tight reimbursement system, ADBperformance on sugar loans is no better than on some of its other operations.On March 31, 1972, only 55% of the principal due had actually been paid.Two considerations, however, should be kept in mind when looking at ADB'sresults on its sugar operations. First, because of the poor state of theindustry the two factories have not been able to buy on time all thequantities they undertook to purchase and many farmers have been left withcane in the field. Second, due partly to shortage of funds, GIHOC creditsfarmers' accounts with ADB only once a year when cutting is completed.Therefore, the rate of reimbursement by the end of the harvesting seasonshould show a significantly improved position.

24. The present system, however, is not satisfactory in many ways.First, there is no limiton the total acreage ADB finances for each individualfarmer and this has led to mismanagement of labor, consequent loe4es andhigher risks for ADB. Second, some farmers have been allowed to expand theirinitial holdings before they have proven their capacity to manage theiroriginal holdings in a way that enables them to repay their original loan.Third, since ADB has been financing up to 100% of total costs, many absenteelandlords have no stake in their farms and do not have enough incentive toget the best results. Fourth, ADB policy has led to disregarding the needsof small farmers by lending available funds to already wealthy people onadvantageous terms. If seriously interested in sugar cane farming, thesepeople could find the required funds from their own sources or other financinginstitutions.

ADB's Role in the Sugar Rehabilitation Project

25. To remedy the present situation, ADB would apply the followingrules when financing sugar cane farms under the project:

(a) New farmers

(i) Total acreage for new sugar cane farmers would belimited to 25 acres.

(ii) During the first year of development APB would financethe clearing of 20 acres (i.e., 80% of acreage), thetotal cost of planting material, and a living allowanceamounting to a maximum of 0 300 to be paid in two equalinstallments, the first after land clearance and thesecond after completion of the weeding.

(iii) During the following years, ADB would finance thetotal cost of fertilizers and 80% of the manpowerrequired for harvesting assuming a productivity of0.5 ton of cane cut and loaded per man-day.

ANNEX 3Page 7

(b) Existing Farmers

Loans to existing farmers would finance the same costs,though land clearing may not be required, and the sameterms would apply, subject to the following limitations:

(i) Loans would be subject to satisfactory technical per-formance and repayment record, and would be restrictedto an annual increase of 20% of a farmer's area undercane, with a maximum for any farmer of 20 acres in anyone year. ADB would not finance increases above theselimits, since larger farmers could either reinvesttheir own earnings or obtain loans from other financialinstitutions.

(ii) Loans for replanting would be available up to a maximumof 100 acres, provided farmers have performed satis-factorily and repaid previous loans in full.

26. ADB would keep separate accounts for existing loans and thoseopened in future. One loan and one current account would be opened for eachof its sugar cane farmers; the loan account would show the amount approved,and be debited with loan disbursement for approved expenses and creditedmonthly with cane sales proceeds. The balance of sales proceeds, afterdeduction of debt service due, would be transferred to the borrower's currentaccount.

27. ADB would obtain guarantees from GHASEL ensuring that:

(a) applicants for ADB loans have use of land convenientlylocated and suitable for sugar cane growing;

(b) GHASEL would provide seed cane and extension services.and

(c) GHASEL would buy the sugar cane produced by ADB's borrowerand pay the proceeds monthly into the borrower's loan accountwith ADB.

28. Under the proposed scheme, a farmer cultivating 25 acres wouldreceive ¢ 3,715 as development loan in the first year and about 0 4,035as seasonal loan in four annual installments of 0 1,275, 0 1,120, 4 1,000and 4 640 each. Both loans would bear interest of 9% per annum. Seasonalloans would be reimbursed in less than one year while the development loanswould be repaid over four years. An estimated cash flow for a 25-acre farmis shown in Annex 12. 4 1.8 M required by ADB to finance loans to sugarcane farmers would be on-lent by Government at an interest rate of 6-1/2%per annum and would include ¢ 1.28 M financed by IDA. Such on-lending, wouldbe by annual tranche, the amount of which would be related to the annualfarmers' expansion program, and each tranche would be on-lent for six years.

ANNEX 3Page 8

Conclusions

29. ADB's present position is precarious and may become critical.Ihe true position is obscured by thie new capital, which Government paysin every year and which allows rapid expansion of loans; if such paymentswere to stop and ADB were forced to live on its own resources, new lendingwould be curtailed. This should be prevented for several reasons. First,ADB is still relatively small with some 1,500 borrowers and it should notbe difficult to rectify the present situation; the proposed technicalassistance should be able to do so within a year. Second, ADB is a younginstitution and many of its problems arise from the shift from expansionbased on fresh capital to reliance on its own resources. Third, failureby ADB to carry out its intended function would have consequences reachingfar beyond the financial losses it would involve: it would shake theconfidence of farmers who are placing increasing trust in this new institutionafter the many unfortunate experiences they went through under the FirstRepublic Government. Finally, ADB was soundly established to fulfill animportant role in Ghana's agricultural development and has acquired valuableexperience which should not be lost.

30. It is therefore recommended that ADB, properly reinforced by theproposed technical assistance, should be the channel for on-lendingto sugar cane farmers provided it enforces the lending regulations set outin paragraph 25.

ANNEX 3AppendixPage 1

GHANA

SUGAR REHABILITATION PROJECT

TECHNICAL ASSISTANCE TO AGRICULTURAL DEVELOPMENT BANK

Terms of Reference

1. The Consultants shall review the policies, procedures and system offinancial control of ADB, shall make recommendations for the improvementthereof and shall assist ADB in the implementation of such recommendations.

2 (a) In particular, the Credit Management Specialist to be provided bythe firm of consultants shall:

Ci) Review the present credit procedures and the termsof credits and make recommendations to ADB as to:

(a) the appropriateness of procedures for making credits;methods of application for loans, including the sizeof individual credits; the proportion of costs to befinanced by credit; and procedures for investigatingthe viability of credit applicants, includingappraisal techniques and security arrangements;

((b) the adequacy of interest rates, taking into accountADB's borrowing and administration costs and thebuilding up of reserves including bad debts reserves;

(c) the appropriateness of repayment terms for the variouskinds of credit; and

(d) improved procedures for credit recovery and measuresfor dealing with overdue credits, supervision of loans,and establishment of working conditions with Ministryof Agriculture and other bodies involved in agriculturalcredit.

(ii) Review ADB's organization and staffing, at bothheadquarters and field offices, and make recommendationsfor improvements.

(b) The Credit Management Specialist shall complete theabove review and present his recommendations within six monthsof taking up his assignment. For the following period of12 months he will then assist in implementing agreed changesand in training staff, and at the expiry of such period, shallsubmit a final report.

ANNEX 3AppendixPage 2

3. (a) In particular the Credit Financial Specialist to be providedby the consultants shall:

(i) Review the present system of credit accounting and con-trol and make recommendations to ADB as to:

(a) improved procedures for recording credits, differen-tiating between seasonal, medium- and long-termcredits;

(b) periodic reporting to management on the status ofcredits, including aging of overdue payments ofintetest and principal;

(c) improvements necessary to ADB's internal auditand internal control procedures; and

(d) preparation of periodic cash flow forecast.

(ii) Review ADB's accounting organization and staffing, atboth headquarters and field offices, and make re-commendations for improvements.

(b) The Financial Specialist shall complete the above reviewand present his recommendations within three months of takingup his assignment. For the following period of 12 monthshe will then assist in the implementing of agreed changesand in training staff and at the expiry of such period,shall submit a draft final report.

4. During the course of their assignments, both specialists shouldreview the status of existing credits and make recommendations on actionnecessary to recover or, if necessary, write off overdue credits.

Progress Reports

5. The Consultants will prepare and submit to the ADB a ProgressReport six months after the commencement of the Implementation Phase givinga brief summary of all work performed.

October 19, 1972

ANNEX 3Table 1

GHANA

SUGAR REHABILITATION PROJECT

AGRICULTURAL DEVELOPMENT BANK

Audited Balance Sheets(; '000)

i 9 66k1 1967 1968 1969 1970 1971

ASCFpS

ah at Banks and in EIand 59.3 139.9 166.5 657.2 763.8 978.1Short-Term Investment 364.2 1,534.8 1,792.7 1,370.0 1,321.5 4,765.7Loans and Advances:

a) Private Sector n.a. 1,130.0 1,482.3 2,595.9 5,514.9 9,307.8b) Public Sector n.a. 354.3 658.1 828.4 373.4 1,343.1

Sub-total 1,141.5 1,484.3 2,140.4 3,424.3 5,888.3 10,650.9

Other Accounts 49.9 128.3 177.0 253.2 364.6 384.7Medium and Long-Term Investments:

a) Government Securities n.a. n.a. n.a. 5,160.0 5,160.0 800.0b) Other Investments n.a. n.a. n.a. 122.0 122.0 122.0

Sub-total 3,380.0 3,382.0 4,382.0 5,282.0 5,282.0 922.0

Fixed Assets (Net of Depreciation) 71.6 71.6 98.0 145.3 125.6 144,oCustomers' Liability on Guarantees 7,191.3 9,889.4 9,501.6 9,402.4 9,129.1 9,154.8

Total 12,257.8 16,630.3 18,258.2 20,534.4 22,874.9 27,000.2

CAPITAL, RESERVES AND LIABILITIES

Paid--up Capital 4,780.0 6,280.0 8,240.0 8,554.o 10,554.0 13,254.0General Reserve Fund 10.5 17.2 26.4 31.8 37.3 48.6Deposit and other Accounts 276.0 443.7 490.2 2,546.2 3,154.5 4,542.8Liability on Guarantees 7,191.3 9,889.4 9,501.6 9,402.4 9,129.1 9,154.8

Total 12,257.8 16,630.3 18,258.2 20,534.4 22,874.9 27,000.2

/ Financial year of 17 months (August 1, 1965 - December 31, 1966).Revised data as given in the 1967 Report.

September 28, 1972

ANNEX S'Iab]e "

GHANA

SUGAR REHABILITATION PROJECT

AGRICULTURAL DEVELOPMENT BANK

Audited Profit and Loss Accounts(x '000)

1966 1967 1968 1969 1970 1971

INCOME

Interest on Loans:Ia Actually Paid n.a. n.a. ) 141.9 231.8 450.7,f

Overdue n.a. n.a. ) 163.4 108.1 105. P'ther Interest n.a. n.a. 1.5 1.0 1.5

Sub-total n.a. 91.3 113.3 306.3 341.4 556.5investment Income n.a. 183.3 242.0 264.1 284.1 347.3Cornmission n.a. 4.2 15.2 14.9 31.0 72.9Miseellaneous n.a. 7.5 6.5 3.2 15.3 14.9

G~ross Income n.a. 286.3 377.0 588.4 671.8 991.6

Less Interest Overdue- n.a. n.a. n.a. 163.4 108.1 102.

Total Income n.a. 286.3 377.0 425.0 563.7 885.8

-7K- SES

Salaries, Social and Medical Charges n.a. 86.o 140.2 209.8 260.8 311.8

.aneratingr Expenses:h&ilding Maintenance n.a. n.ea. 23.7 33.9 38.7 43.6ehicles and Travel n.a. n.a. 22.3 44.4 40.7 59.1

-ffice Operation r.. a. n.a. 20.1 15.8 24.1 41.8- Financial T7hanges n.a. n.a. 0.9 20.8 51.9 43.2- Miscellaneous n.a. n.a. 6.7 10.5 10.2 13.8

Sub-total n.a. 44.4 73.7 125.4 165.6 201.5

Depreciation-Ru ngalows n.a. n.a. 6.1 11.2 13.5

- Office Equipment n.a. n.a. 5.0 7.3 9.0 12.2- 'ehic1es n.a. n.a. 13.6 16.2 14.5 12.6- Deferred Revenue Expenditures n.a. n.a. - 9.8 9.8 1'.

Sub-total n.a. 16.7 24.7 44.5 46.8 50.'5otal Expenses n.a. 147.1 238.6 379.7 473.2 572.2

Available Profits , 141.7 139.2 138.4 45.4 90.5 313.6

Allocation of Available ProfitsGeneral Reserve 136.2 132.6 24.2 - -Jontingency Reserve - - - _ - 77.3loan, Lcss Reserve _ _ 85.0 4o.0 75.0 150.0rroject Identification Reserve - - 20.0 - 10.0 75-ondistributed Profits 5.5 6.6 9.2 5.4 5.5 11.3

is 'rom 1969, the P/L Accounts show the interest and loans actually paid aoainst overdue interest, andconsequentl,y a significant reduction in the available profits.

September 28, 1972

GHANA

SUGAR REHABILITATION PROJECT

AGRICULTURAL DEVELOPMENT BANKLoans per Sector as of March 31, 1972

(9`-0i0)

Principal repaidNumber of Amounts Average size % of total Amounts Repayment of Actual repayment Principal as a % of

SECTOR loans approved of loans approved loans utilized principal due of principal overdue principal due

Food Crops 676 4,387.1 6.3 26 3,549.9 1,774.9 432.9 1,342.0 25

Fisheries 46 1,124.5 24.2 7 1,108.0 588.3 235.8 352.5 41

Livestock 255 2,098.5 8.6 12 1,856.0 929.8 265.2 664.6 29

Industrial Crops(excluding Sugarcane) 234 4,686.8 20.7 28 2,731.5 546.3 309.5 236.8 56

Agro-Rusiness 101 1,e61.4 10.5 7 931.3 257.0 166.7 90.3 64

Subtotal 1,312 13,358.3 10.2 80 10,176.7 4,096.3 1,410.1 2,686.2 34

Sugar Cane

Asutsuare 1J9 2,750.9 16.5 17 2,173.0 1,489.7 748.8 740.9 50

Komenda 709 540.1 7.5 3 371.2 283.6 213.9 69.7 75

Subtotal . 239 3,?91.0 13.2 "0 2,544.2 1,773.3 962.7 810.6 55

.ran1 Total 1,551 16,l4'9.3 10.1 100 12,720.9 5,869.6 2,372.8 3,496.8 4o

September 15, 1972

H 5X

I

ANNEX 4Page 1

GHANA

SUGAR REHABILITATION PROJECT

Agricultural Details

1. Introduction. This annex summarizes the findings and recommenda-tions of the appraisal mission's agricultural consultants. The consultants'full report is available.

A. General Description of Cane Production

2. Climatic Conditions. Sugar cane grows best between 770 and 82°F;higher daytime temperatures can be tolerated while temperatures below 650retard growth but increase the sucrose content in cane. The water require-ment of cane, which varies with the crop month, is determined by manyfactors such as evaporation and sunshine. The latter has a favorable effecton sucrose content. For example, the maximum requirement in a month atAsutsuare is estimated at 7 inches while at Komenda it is 6 inches due tolower evaporation. A distinct dry season is required for harvesting.

3. Soils and Land Preparation. Cane thrives on a wide variety ofsoils, and depth and soil structure are more important than fertility, whichcan be corrected. Thus, good land preparation is essential. A pH of 7 isoptimal. Topography is important and steep slopes must be avoided becauseof harvesting problems.

4. Planting. Planting is carried out simply by placing the settseither in the furrows or, in wet areas, in small furrows on top of theridges. Setts are usually planted butt to butt but they may be overlappedif germination is poor. Supplying of gaps is essential. The plantingmaterial is either stalks of 8 to 10 months plant cane (seed cane) or topsof mature cane. Seed cane is preferable.

5. Cultivation. At two to three months, cane is earthed up tofacilitate drainage, discing, weeding and harvesting. For ratoons, ridgesand furrows are reshaped. Fertilizer requirements vary and have to beestablished by trials; foliar analysis may be used to test nutrient require-ments.

6. Varieties. Varieties should be chosen according to their yield,pest and disease resistance, number of ratoons, period of optimum maturity,etc. It is important to test a number of different varieties as localconditions differ greatly.

ANNEX 4Page 2

7. Weeds, Pests and Diseases. Weed control is essential and isusually a combination of hand and chemical weeding. Cane diseases andpests are numerous and since specific control is expensive, introduction ofresistant varieties is the best solution.

8. Harvesting. Harvesting methods vary from completely manualoperations to mechanized cutting and loading. Mechanized cutting, however,requires careful field layout, preferably flat fields, and erect cane; itcan also result in delivery of excessive extraneous matter and consequentreduction in factory efficiency.

B. Asutsuare

9. Climate. Four seasons can be identified:

April/July: Summer rainy season; about 8 in/month;temperatures 86° to 70°F; relative humidity60% to 70%; sunshine hours 7 (April) to 5 (June);pan evaporation 7 in (April) to 4.5 in (June).

July/August/part September Drier season; unpredictable rainfall; tempera-

tures 85' to 70'F; humidity 65% to 68%; sunshine4.5 hours; pan evaporation 4.5-5.0 in.

September/mid-November Rainy season but less than in April/July;

temperatures 900 to 70°F; humidity lower;sunshine 8 hours/day in November; pan evapora-tion 5.7 in.

Mid-November/April Dry season; less than 4 in/month; temperatures950 to 74°F; low humidity (50%-60%); 7 hourssunshine; pan evaporation 7.8 in.

10. Harvesting has to be carried out in the dry season, November/April,and planting 11 months beforehand. While new plants must have adequatewater, the planting season, without irrigation, is limited by the very heavyrains and an important benefit of irrigation will be to enable planting inDecember/April.

11. The irrigation requirements have been calculated with reference torainfall and evaporation. The annual deficit is estimated at 19 in andirrigation should increase yields from 22/23 up to 35 and possibly 40 tonscane/acre. In addition, irrigation will safeguard against abnormally dryyears.

12. Soils and Land Preparation. Soils are of two main groups - tropicalblack earths and alluvial soils of the Volta Flood Plain. Characteristicsof t;he tropical black earths are extensive cracking when dry; low water

ANNEX 4Page 3

intake; compact subsoils; susceptibility to water logging; moderate organiccontent; liability to compaction; lack of potassium; and response tonitrogen. The soils need careful management but can give very good yields.

13. The alluvial soils are irregularly distributed; show low permeabilityin some types; poor internal drainage; poor nutrient status, and distinctacid reaction. The soils are generally suitable but high yields are not

expected and the first extensions will be made south of Inspectorate IV, whereblack earths predominate.

14. Heavy equipment will be provided for land clearing and the followingsequence of operations is envisaged:

(a) New land - clearing.Replanting - stubble ploughing with crawler tractor and

disc harrow;

(b) Subsoil up to 20-24 in;

(c) Heavy disc ploughing to at least 15 in;

(d) Harrowing;

(e) Landplaning;

(f) Furrowing (with depth control attachments); and

(g) Ditching.

A row space of 5 ft is recommended.

15. Planting and Planting Material. Present shortcomings in plantingmethods have resulted in large numbers of gaps and are a major cause of thelow yields. Germination will be improved by better land preparation, moreattention to quality and conditions of seedeane, and better control. Settswill be overlapped in early years.

16. Cultivation. Earthing-up and ridge and furrow shaping will beessential. The operation will be carried out about 2-1/2 months afterplanting with a second cultivation a month or so later. Cane will beburnt before harvest.

17. Fertilizing. Present applications are not based on experiments,and trials need to be carried out immediately. It is assumed that presentrates will be continued for plant cane (1 cwt ammonia, 1 cwt sulphate ofpotassium and 1 cwt triple superphosphate at planting with 2 cwt ammoniabefore earthing-up) but increased for ratoons to 4-1/2 cwt sulphate ofammonia, 1 cwt potash and 1 cwt superphosphate.

18. Varieties. Although the main varieties used, PR 980 and B 41.227,are expected to show good yields with irrigation, they have not been ade-quately evaluated and new varieties should be imported and tested on the

ANNEX 4Page 4

estate. As there is no quarantine station, varieties should be importedthrough the quarantine station of the East African Agriculture and ForestryOrganization in Kenya or another internationally accepted station.

19. Weeds, Pests and Diseases. Due partly to labor problems, weed con-trol has been poor. A combination of chemical and manual weeding will be in-trcduced; chemicals used will be 2.4 D-amine with TCA or equivalent. Pest anddiseases do not seem to have been a problem hitherto, although a number havebeen recorded; effective management together with proper selection of vari-eties should prevent losses in future.

20. Cane Yield and Quality. The following table shows production datato date:

Tons Sugar/-------Tons Cane per Acre------- Tons CaneEstate Farmers Average %

1966 27.4 23 25 2.71967 14 27 21 3.61968/69 17 22 19 0.61969/70 12 15 14 3.31970/71 9.9 14 13 4.1

These very low yields and recovery are due to a variety of reasons:

- only a part of the average available was harvested;

- old cane had to be harvested, particularly in the2nd and 3rd season;

- increasing proportion of ratoon cane; and

- poor planting, cultivation, and harvesting methods.

21. With the improved management and input under the project, yieldsare expected to improve to an average of 31 tons/acre and TS/TC% to 9%.The following table shows the estimated future yields of estate cane:

Tons Cane/acreplant 381st ratoon 332nd ratoon 283rd ratoon 25

Average 31

These yields are comparable with other estates with similar conditions (e.g.,Kilonibero in Tanzania) and may well be exceeded when high-yielding varietiesbecome available.

ANNEX 4Page 5

22. Farmers' cane yields are expected to improve from 14/15 TCA at pres-

ent to 20 TCA with improved standards, the use of heavy equipment for landclearing, an effective extension service, and maintenance of a proper replant-

ing cycle.

23. Total yield from estate and farmers' cane from 1972/73 to 1978/79is summarized in Table 1.

24. Development Program. The present estate acreage under cane isestimated at 4,000 acres. The farmers' cane acreage is estimated at 5,200acres of which it is assumed 85% (4,420 acres) is annually available forharvesting.

25. Based on eventual full irrigation of estate cane and the assumptionthat farmers will plant about 50% of the total cane area, the estate plantingprogram is planned as follows:

Year Estate Outgrowers GrandReplant New Land Total Replant New Land Total Total---------------------------Acres---------------------------------

1972/3 519 - 519 515 1,000 1,515 2,0341973/4 1,181 400 1,581 515 1,000 1,515 3,0961974/5 1,200 600 1,800 1,140 375 1,515 3,3151975/6 900 700 1,600 1,515 - 1,515 3,1151976/7 300 600 900 1,515 - 1,515 2,4151977/8 - - - - - - _ _

4.0100 2,300 6,400 5,200 2,375 7,575 13,975

As from 1977/78, about one quarter of the estate and outgrower acreage would

be replanted annually to replace cane arriving at the end of their cycle.The above planting program represents the acreage included in project costs.

26. Nurseries. Nursery requirements have been allowed for in the

expected estate tonnages. Seedcane for 1972/73 will be available fromexisting fields; nursery acreage would expand progressively to 200 acres andthis would meet estate and outgrower requirements.

27. Irrigation. The irrigation system is planned as follows:

1973/74 Rehabilitation irrigation system in Inspectorates II andIII. Preparatory work on irrigation-drainage system inInspectorate I.

1974/75 Irrigation in replanted fields in Inspectorates II and III(1,250 acres). Layout irrigation-drainage system inInspectorate I. Preparations for irrigation-drainage systemin Inspectorates IV, V and VI.

ANNEX 4Page 6

1975/76 Irrigation in replanted fields in Inspectorate I (150 acres).Layout irrigation-drainage system in Inspectorates IV and V(partly).

1976/77 Irrigation in replanted fields in Inspectorate IV (250 acres).Layout irrigation-drainage system in Inspectorates V (remain-ing part) and VI.Irrigation in replanted and new fields in Inspectorates Vand VI (1,150 acres).

C. Komenda

28. As at Asutsuare there are four seasons:

Mid-April - Mid-July Rainy season with average about 25 in;temperatures 82°-72°F; relative humidityrising from 75% to 82%; sunshine droppingfrom 6.8 hours to 4.1 hours; pan evaporation6.5 in in April to 4.4 in in July.

Mid-July - Mid-October Drier with highly variable rainfall; tempera-tures 810 to 71°F; relative humidity high(85%) due to low sunshine (3-1/2 to 4 hours);pan evaporation low (4-4-1/2 in).

October Short rainy season, usually less than 4 in.Pan evaporation rising to 5-1/2 in/month withhigher temperatures and more sunshine.

November - Mid-April Dry season with temperatures 88° - 72°F,humidity 75%, 7-1/2 hours sunshine and 5 into 7 in pan evaporation.

Maximum temperatures are lower than at Asutsuare, humidity is higher and panevaporation slightly lower.

29. Harvesting is carried out over the six months October-April andplanting in March-April resulting in 11-12-month-old cane.

30. Water requirements for plantcane and ratoons are the same as forAsutsuare because of lower maximum pan evaporation.

31. The annual water deficit is 20 inches, about the same as at Asutsuare.The expected yields at Komenda are lower at 21 tons/acre average and theycould be improved considerably with supplemental irrigation to 55 tons/acreor more. However, because of serious doubts over the efficiency of theirrigation system installed and the high costs of maintaining it, only a pilotscheme of 600 acres with one pump unit of the planned overhead system willbe carried out initially.

ANNEX 4Page 7

32. Soils and Land Preparation. Most of the soils are lowland andupland soils. The latter are ferralitic, have good drainage and are moder-ately fertile. Their yield potential is good. The lowland soils are subjectto hardpan and have to be carefully prepared and managed to allow root growthand prevent waterlogging. Reasonable yields are obtainable from them.

33. Land preparation will be similar to Asutsuare (para 14).

34. Planting and Planting Material. Germination has been better thanat Asutsuare due to more open soil structure and better management; overlappingsetts should be planted.

35. Cultivation. Cultivation will be generally the same as atAsutsuare and, as there, cane will be burnt before harvest.

36. Fertilizing. Present applications are excessive and the 3 cwtsulphate of ammonia applied at planting should be reduced to 1 cwt with1 cwt triple superphosphate and 1 cwt sulphate of potassium. A further2 cwt sulphate 4 ammonia should be applied before earthing-up. Ratoon fer-tilizer will be as for Asutsuare (para 17).

37. Varieties. The predominant variety is B 41.227 occupying 83% ofestate cane. It gives satisfactory yields but trials should be carried outto reduce the risks of using virtually only one variety.

38. Weeds, Pests and Diseases. The situation and remedies are the sameas for Asutsuare. The soil conditions are favorable to nematodes but symptomsof infestation are not apparent at present.

39. Cane Yields and Quality. The following table shows productiondata to date:

Tons Sugar/Season Estate Farmers Total Tons Cane

--------------TCA------------ %

1967 29 27 29 5.771968/69 30 29 30 5.811969/70 19 21 20 6.31971/72 19 15 16 5.6

The yields, though better than at Asutsuare, were still low in 1971/72 duemainly to high proportions of old cane and ratoon crops.

40. It is estimated that with improved drainage, better weed control,deep subsoiling, improved planting and optimum fertilizing, estate yields willimprove to an average of 21 TCA, and the TS/TC% to 9%. The following tableshows the estimated future yields on estate cane:

ANNEX 4Page 8

Tons Cane/acrePlant cane 281st ratoon 232nd ratoon 183rd ratoon 16

Average 21

41. Due to the increased proportion of ratoons, it is estimated thatthe acreage yield on farmers cane will drop to 17 tons/acre.

42. The total yield from estate and farmers' cane is shown 0i Table 1.

43. Development Program. The present estate acreage under cane isestimated to be 3,250 acres. The area to be developed is 1,250 acresresulting in a total of about 4,500 acres. The farmers' cane is estimated at3,435 acres of which 85Z is harvested.

44. The planting program for estate cane is as follows:

Year Estate Outgrowers GrandReplanting New Land Total Replanting New Land Total Total----------------------------- acres…----------------------------

1972/73 400 - 400 200 565 765 1,1651973/74 600 800 1,400 300 500 800 2,2001974/75 775 450 1,225 400 500 900 2,1251975/76 1,125 - 1,125 1,000 - 1,000 2,1251976/77 350 - 350 1,000 - 1,000 1,3501977/78 - - - 535 - 535 535

Total 3,250 1,250 4,500 3,435 1,565 5.000 9,500

46. Nurseries. Nursery requirements will be about 100 acres in 1971/72and 200 acres from 1972/73 onwards. Cane planted in the preceding year willbe used.

G H A N A

SUGAR REHABILITATION PROJECT

Agricultural Program Summary

(Acres)

Existing acreage Acreage to be T o t a 1to be replanted newly plantedunder the project under the project

Estate Outgrowers Total Estate Outgrowers Total Estate Outgrowers Total

Asutsuare 41,100 5,200 9,300 2,300 2,375 4L,675 6,400 7,575 13,975

Komenda 3,250 3,435 6,685 1,250 1,565 2,815 ,500 5,000 9,500

TOTAL 7,350 8,635 15,985 3,550 3,940 7,490 10,900 12,575 23,t475

November 6, 1972

ANNEX 4Table 2

GHANA

SUGAR REHABILITATION PROJECT

Total Yields

Estates Farmers TotalTons Tons cane/acre Tons Tons cane/acre Tons

Asutsuare

1972/73 34,420 10.0 52,955 14 87,375

1973/74 43,704 12.5 79,050 15 122,754

1974/75 80,205 20.6 97,920 16 178,125

1975/76 118,148 26.3 109,458 17 227,606

1976/77 146,390 27.9 115,897 18 262,287

1977/78 181,986 29.4 122,336 19 304,322

1978/79 194,908 31.4 128,775 20 323,683

Komenda

1972/73 47,310 19 43,800 15 91,110

1973/74 47,286 20 54,400 16 101,686

1974/75 72,268 21 65,025 17 137,293

1975/76 86,900 21 72,250 17 159,150

1976/77 84,175 21 72,250 17 156,425

1977/78 89,200 21 72,250 17 161,450

1978/79 90,025 21 72,250 17 162,275

October 18, 1972

ANNEX 5Page 1

GHANA

SUGAR REHABILITATION PROJECT

Field Engineering, Irrigation and Roads

Introduction

1. This report summarizes the findings and recommendations of theappraisal mission's technical consultants. The consultants' report, whichcontains full technical data and information, is available.

A. Asutsuare

Field Engineering

2. Land Preparation. Present land preparation, using 65 hp tractorswith three-point hitch disc ploughs which make two cross ploughings and har-row passages with furrowing, is inadequate as it cultivates to only 8-10 inand leaves a hard pan. The following procedure would be used in future:

(a) Land clearing or ratoon stubble breaking. Most of the areais free from heavy growth and the operation would be carriedout by a bulldozer with plough for ratoon stubble.

(b) Sub-soiling or ripping. Tractors equipped with three wing-type ripper points would make one cross pass.

(c) Heavy disc ploughing. Tractors would make one pass ploughingto at least 24 in.

(d) Disc harrowing. Tractors would make two cross passes.

(e) Land levelling. Most of the area in cane has been levelledand new areas appear not to need much levelling. Some fieldengineering would be needed and tractors would be used.

(f) Furrowing. This would be done by tractors equipped withthree furrow ploughs.

(g) Infield canals. Irrigation and drainage canals would bemade by tractors or road graders for the larger canals andditches.

ANNEX 5Page 2

3. Existing equipment would be rehabilitated and additional unitspurchased.

4. Cultivation. Existing wheel tractors, which include 78 new Massey-Fergusons, 99 Ursus (Polish) and 130 Fordson Majors in running order, aresufficient for mechanical cultivation operations and no expenditure is pro-posed. The following procedures would be used:

(a) Plant canes

(i) Seed covering by discs;

(ii) Pre-emergence weed treatment with one line per swath;

(iii) Cultivation at six to eight weeks after (ii) with fer-tilizer application; and

(iv) Second cultivation.

(b) Ratoon cane

(i) Disc cultivation for line repair and ridging;

(ii) Pre-emergence weed control;

(iii) Cultivation at four to six weeks after (ii) with fer-tilizing; and

(iv) Inter-row spraying one to two weeks after (iii).

5. Harvesting and Haulage. Present harvesting and haulage are mostinefficient. Haulage of farmers' cane is carried out by the estate usingtractor-trailer units and trucks (for over 15 miles). Losses in wagon andtruck time are very high and the cost per ton is probably around N4 2.40.Estate cane is cut and loaded by hand at an average rate of 0.3 tons per man-day. Cane and sugar losses are great due to high cutting and cane left undertrash. Loading is time-consuming -- the stalks are bundled and tied beforebeing head-carried to the wagon. The trailers, which are Polish, are of poordesign and weak.

6. The following system would be operated in future:

Farmers' Cane. Farmers' cane transport should be taken overeventually by farmers themselves but until this happens theestate would control operations more strictly by:

(a) Preparing harvesting schedules and making daily tonnageallotments;

(b) Daily visits to farmers harvesting cane;

ANNEX 5Page 3

(c) Closer supervision of cane transport personnel; and

(d) Limiting loading times.

Estate Cane

(a) Cutting

(i) Cane would be burnt before harvesting;

(ii) Only one field would be harvested at a time until dailytonnage requirements dictate two fields; and

(iii) Cutting would be on an incentive basis and performancestandards would be set.

It is estimated that cutting performance should reach 2 to 2.5 tonsper man-day within two to three years. The existing Massey Fergusoncutting machines would continue to be used on suitable areas.

(b) Loading. Machine loading would be introduced. The machinesshould be of simple construction with reverse drive; lowcompaction wide track; hydraulic crab, boom and piler; andgrab height of 13 feet. Estimated performance is 20 tons/hour.

(c) Hauling. Uauling would be by four-wheel-drive 80-100 HPtractors with two 6-8 ton trailers.

7. Mill Yard Cane Handling. Cane would be unloaded by two side-unloadelectric hoists (rather than by tipping as at present) and discharged eitherstraight onto the main carrier feed table or into the storage area. Storedcane would be carried to the feed tables by loaders fitted with cane forkgrabs; at present, cane is lifted by crawler cranes whose efficiency andreliability are very low.

8. Mechanized Equipment Repair and Maintenance. Maintenance ofequipment has been poor. The project provides for new field repair andmaintenance equipment and changes in the layout of the machine shop areas.

Irrigation

9. Present Position. The existing irrigation system follows the SirWilliam Halcrowe Partners design but despite a substantial investment, vir-tually no cane has been irrigated since 1966. The system consists of tem-porary pumping and water distribution facilities providing 35 cusecs; an 8acre feet water storage reservoir (the main canals were originally designed

ANNEX 5Page 4

for partial water storage but are of doubtful capacity due to faulty con-struction and have not been used); and main distribution canals consistingcf a main canal of 50 cusecs, a northern low level canal of 50 cusecs servingInspectorate III, a southern low level canal of 70 cusecs to Inspectorate IIIand a western supply system of 50 cusecs to Inspectorate II.

10. The status of the Inspectorates is as follows:

Inspectorate I. Although water is available nearby, the areahas not been laid out for irrigation.

Inspectorate II. Laid out for 220 acres of surface and 630 acresof overhead irrigation. The surface system hasnot been used since 1966 and considerable repairand reconstruction are needed. The overheadsystem was partially installed but abandoned; 90%of the equipment is in the field or in store buthas to be inventoried.

Inspectorate III. Laid out for surface irrigation but the distri-bution system needs rehabilitation.

Inspectorate IV. No irrigation system.

11. Irrigation Plan. All the estate would be put under overhead orsurface irrigation by 1977. Water requirement is predicated on a net of 6acre inches per month; water duty at 81 acres per cusec on a 20-hour day foroverhead, and 80 acres per cusec on a 24-hour day for furrow. The existingsystem would be rehabilitated and a new pumping station would be required toserve the sugar and rice growing areas.

(a) Pumping Station. A new pumping station with five 30-cusecpumps has been ordered to replace the existing temporarystation and would be commissioned in early 1973. HVA expertswere given an opportunity to review the pumping stationdesign and suggested modifications which were taken intoaccount by the Irrigation Division of the Ministry ofAgriculture.

(b) Development Program

(i) Inspectorate I - 1,200 acres. To be all under overheadirrigation. It is envisioned that this inspectoratewould be irrigated by a semi-portable overhead irrigationsystem. An inventory of the existing pumps, piping andsprinklers is required before a firm recommendation canbe made. It is proposed that this irrigation system beoperational at the beginning of 1974/75 crop year;

ANNEX 5Page 5

(ii) Inspectorates II and III - 2,100 acres. The existingoverhead irrigation system Inspectorate II is to berehabilitated on 650 acres that are at a higher levelthan the western canal serving that area. Equipment islocated in the area and part of the system has beeninstalled. More equipment earmarked for this area is instorage at the main warehouse. Existing furrow irrigationsystem on 1,450 acres of Inspectorates II and III is tobe repaired and put in working order. Proposed to beoperational during the 1974/75 crop year;

(iii) Inspectorate IV - 700 acres. All furrow irrigation isplanned for this area. Additional pumping stations andcanals will be required to deliver water to the area insufficient quantities. Proposed to be operational forthe 1975/76 crop year;

(iv) Inspectorate V - 1,200 acres. All of this area is pro-posed to be furrow-irrigated using an extension of theInspectorate IV main canal. Planned for 1976/77 cropyear; and

(v) Inspectorate VI - 1,200 acres. All area to be furrow-irrigated from the main canal from Inspectorate V. Plannedfor the 1976/77 crop year.

12. Costs. The estimated capital and operating costs are at Table 1.

Roads

13. The new roads to be built are as follows:

Factory - Inspectorate I. 8 miles 40 ft wide with 1.25ft hard gravel surface. Total cost including culvertsestimated at C 30,000.

Inspectorate II. 1.2 miles 30 ft. wide. Total costincluding culverts estimated at 0 4,800.

Inspctorate IV. 0.75 miles 30 ft. wide. Total costestimated at C 2,000.

Inspectorate V. 4 miles 30 ft wide. Total cost includingculverts estimated at C 10,000. All roads are scheduledfor construction in 1973/74.

ANNEX 5Page 6

B. Komenda

Field Engineering

14. Land preparation and cultivation procedures would be similar tothose at Asutsuare though costs would differ due to the different terrainand soil conditions. Cutting and loading operations would also be similar.Hauling would be based on continued use of existing equipment and therewould be no change in the mill yard.

15. Mechanical Equipment Repair and Maintenance. The equipment hasbeen much better maintained than at Asutsuare. However, the project providesfor some additional maintenance equipment, and the factory shop would infuture be used also for field equipment.

Irrigation

16. Present Position. Water for the irrigation, drinking and factorywater systems is supplied by a pumping station on the Pra River. A supplycanal about 21 miles long connects the pump station with the main irrigationcanal, about 2 miles long, which runs through the estate. Six pumping sta-itions on the estate pump water from the main canal into the distribution net-work. A separate pumping station of the Ghana Water and Sewage CorporationcGWSC) draws water from the canal to supply their purification plant.

17. The present water supply system is in very bad condition. The PraRLiver pumping station has only one out of five pumps working; the maincanal requires cleaning; the irrigation system which has been partiallyinstalled at very high cost is over-sophisticated and costly to maintain;zand there are indications that the piping will not withstand the pressures.In addition, both pumps in the GWSC pumping station are out of order.

18. Because of the serious doubts over the reliability of thep,resent system and its high cost, coupled with the fact that because of thewore friable soil, irrigation is not as necessary as at Asutsuare, thentission proposes that only a pilot irrigation project should be undertaken.About 600 acres would be selected in an area where the system is in reasonablygood order and the results of the scheme would be evaluated before proceedingwith any further irrigation development.

19. In the meantime all work on the irrigation system would cease.However, in order to ensure a reliable supply of water to the factory andhousing as well as to surrounding villages, assurances would be obtained thatGovernment would take all steps necessary to ensure that GWSC and the Ministryof Agriculture put the pumping stations and canals in sound working order andmaintain them efficiently.

Roads

20. Four miles of new 30-ft wide roads are proposed of which the totalcost including culverts is estimated at 0 12,000.

GHANA

SUGAR REHABILITATION PROJECT

Asutsuare Irrigation and Drainage

Capital Costs

Rehabilitation Civil Works Equipment Total CostOverhead Farmer

Acres Costs Acres Costs Type Costs Type Costs 0 t0QQ

1972/73 - - - - Rehabilitation 66.5 _ _ 66.5main canal

1973/74 650 89.9 1,450 62.7 - - - 152.6

1974/75 1,200 415 - - - 415.0

1975/76 - - 700 121.0 Pumping station 133.0 1 pump 15 cusec 33.8 287.8

1976/77 _ - 2,40 415.0 _ - 1 pump 30 cusec 51.3 466.3

1,850 504.9 4,550 598.7 199.5 85.1 1,388.2

September 13, 1972

ANNEX 6Page 1

GHANA

SUGAR REHABILITATION PROJECT

FACTORY DETAILS

Introduction

1. This annex summarizes the findings and recommendations of theappraisal mission's technical consultants. The consultants' reports,which contain full technical data and calculations, are available.

A. Asutsuare

Summary

2. The factory was originally designed for a capacity of 2,000 tonscane/day but the project provides for expansion to 2,500 tons to enable moreeconomic production at about 30,000 tons refined sugar/year. On the wholethe factory design is adequate and the machinery of good quality but overallrecovery is now only about 4%, whereas it should reach about 9%. The mainfaults are:

(a) low cane input leading to high out-of-cane downtime;

(b) stale cane due to intermittent grinding;

(c) some existing equipment, particularly the centrifuge,is of poor design and spares cannot be obtained;

(d) inefficient layout of auxiliary buildings; and

(e) inadequate training and personnel management.

3. The present refining process shown in Chart A is designed toproduce a high quality raw sugar by double sulphitation, followed byrefining with activated carbon and filter. Under the project, it is proposedto introduce the simpler and cheaper normal raw sugar process followed bymelt sulphitation. However, costs have been based on the continued useof carbon.

4. The proposed improvements should lead to an efficient factorycomparable with those elsewhere. The present and estimated futurerecoveries are shown in the following table, and overall estimates andproduction data are in Table 1.

ANNEX 6Page 2

Recoveries:

Per 100 sucrose in cane:

Present Estimated

In cane 100.00 100.00In bagasse 11.38 9.00In final molasses 17.55 12.00In final cake 0.48 1.00

Known losses 29.41 22.00Undetermine. losses 32.02 3.04.

Total losses 61.43 25.00Recovery 38.57 75.00

Total 100.00 100.00

Proposed Improvements

5, The main improvements and additions to be carried out arestmmarized below. The fob costs of equipment are listed in Table 2.

Cane Receiving/Unloading Automatic printing of caneweights; improvement to caneunloading (Annex 6, para 7);

Cane Tables : Reconstruction and lengthening;fitting of rotating equalizer;

Cane Washing : Provision for washing table ifrequired;

Cane Carrier : Provision for greater speedvariation; resiting speed controls;automation of carrier speed for 1stmill with overriding control; caneleveller for 1st knife set;

Milling Plant : Underlying roller for 1st mill;replacement of mechanical clutcheswith remote pneumatic clutches;improvements to intermediatecarriers and imbibition; regroovingof damaged rollers and provisionfor spare rollers; instruments tobe repaired and completed;

ANNEX 6Page 3

Steam Boiler Alteration to bagasse firing andinduced and forced draught fancontrols; enlarge fuel oil pumping/heating plant; additional electricboiler feed water pump; lengthenbagasse carrier and provide roofand end wall for bagasse storage;necessary addition to distilleryboiler to be determined but con-tingency funds provided;

Power Station Renew automatic equipment forsteam reducers; improvement ininstrumentation;

Juice Extraction 3 chokeless mill juice pumps -35 m3/hr - 30 m.h.; 2 chokelesspumps - 120 m3/hr - 10 m.h.; spareDSM screen; new water measuringdevice for imbibition;

Juice Weighing : Additional scale capacity; replacemixed juice pumps with 2 140 m3/hrpumps;

Juice Clarification Additional juice heater; dosingequipment for separan; overhaulvacuum filters; provide new screens;spares for pumps; strengthening mudconveyors; bigger bacillo fan;

Juice Concentration Extra evaporator pan; screening forclear juice; spares for pumps;

Chemical Cleaning Tank for used soda solution;

Vacuum Pans : Isolating valves in vapor lines;repair No. 5 pan; standby condensatepumps; spare parts for pumps; 11run-off tanks - 15 m3;

Crystallizers Overhaul cooling system; closedcooling/hot water system; extracrystallizer; screw conveyor; 1massecuite pump;

ANNEX 6Page 4

Centrifugals Rehabilitation of 12 centrifugalsauxiliary equipment; spares for run-off pumps; final molasses weigh scaleand pumps; D magma mingler;

Remelter and Remelt Pumps: Increase elevator capacity toremelter; increase screw conveyorcapacity;

Remelt Sulphitation Spare air compressor with oil/airseparator; standby melt sulphitationtank; liming tank; 3 circulationpumps; retaining tank for melt;

Filtration and Pumps Improvements to filters; 2 sweeteningoff water pumps and 2 sweet waterpumps; increase capacity of screwconveyor under filter presses;

Carbon Treatment : Spare pump for activated carbonsolution;

Sugar Drying, Classifying,Bagging : Increase capacity bucket elevator;

new sugar drier - 15 tons/hr; sparesewing machine; small packet wrappingmachine;

Laboratory : Equipment to be repaired and madecomplete; and

Factory Ventilation to be improved.

B. Komenda

StmLargy

6. The factory was designed for a capacity of 1,000 tons of cane perday and the project is designed to increase efficiency at this capacity, asincreased capacity would require not only larger cane acreages than may beavailable but major capital investments in the factory. Generally the presentfactory design is adequate and the machinery of good quality though of old-fashioned design and layout. However, the factory is badly ventilated andlit and the auxiliary buildings are inefficiently arranged.

7. The present refining process, using the double sulphitation system(Chart C), would be basically unchanged but temperatures and pH valueswould be altered as shown in Chart D. The final product will continue tobe "mill-white" sugar.

ANNEX 6Page 5

8. Present supplies of factory and drinking water from the Waterand Sewage Corporation are unreliable through the bad condition of theCorporation's pumping station, and the canal and pumping station from thePra River (see Annex 6).

9. The proposed improvements should lead to reasonably efficientproduction allowing for the small scale of the operation. Present (1970/71)and estimated future recoveries are shown in the following table, andoverall estimates and production data are in Table 4.

Recoveries:

Per 100 sucrose in cane:

Present Estimated

In cane 100.00 100.00In bagasse 9.48 9.00In final cake 0.59 1.00in final molasses 19.19 12.00

Determined losses 29.26 22.00Undetermined losses 12.00 3.00

Total losses 41.26 25.00Recovery 58.74 75.00

Proposed Improvements

10. The main improvements and additions to be carried out are sum-marized below. The fob costs of equipment are listed in Table 5:

Cane Weighing : Automatic printing of cane weights;

Cane Tables : Reconstruction of tables; fit levellerand variable speed control;

Cane Washing Cane washing may be required but wouldrequire extensive alterations to thecaneyard and increased water supply withsettling pond; no provision is necessaryat present;

Cane Carrier : Higher speed reduction factor;

Cane Knives : Install leveller before 1st set and fittingplates between chain guides;

ANNEX 6Page 6

Milling Plant Overhaul mills, fit underlying feed rollersfor 1st, 2nd and final mills; improveimbibition system, fit water and over-haul juice pumps; install bypass valve;

Steam Boiler Fit automatic starter to steam turbinefeed pump, enlarge and cover bagassestorage;

Mill House Pumps Flow meter for imbibition water; 5 juicereceiving tanks;

Juice Clarification : Extra heater for M. Juice; I pump forlimestation, increase lime tank capacity;1 extra sulphur burner; new vacuumfilter, drum, screens and spares, newbelt for mnd transport; screening forclear juice drawing tank; spare clearjuice pump;

Juice Concentration Improvements to syrup sulphitation;extra syrup pump;

Vacuum Pans Improve pan striking facilities; extrareceiver for D footings, 2 condensatepumps; 2 extra drawing tanks, and increaseheight;

Crystallizers Overhaul forced cooling system; sparemassecuite pump;

Centrifugals : Overhaul centrifugals; 1 D extra Dforeworker; new final molasses scale;

Sugar Drying,Bagging Overhaul sugar drying equipment; fit

magnet for iron catching; repair sewingmachine;

Storing, Stackingand Transport Overhaul conveyors;

Laboratory : Some equipment needs repair and replace-ment; and

Factory Improve ventilation and lighting.

October 18. 1972

GHANASUGAR RERABILITATION PROJECT

Estimates of Production, Downtime and Crushed CaneAsutsuare Factory

1972/73 1973/74 1974/75 1975/76 1976/77 1977/78 1978/79

Crop Days 122 129 146 151 160 148 155

Time LostCleaning 11 11 11 11 11Out of Cane/breakdowns 42 25 19 15 7 15 15Holidays 11 11 11 11 11 11 11

Total Lost 64 47 41 37 29 26 26

Grinding Days 58 82 105 114 131 122 129

Total Cane 87,375 122,7541 178,125 227,606 262,287 30L4,322 323,683

Crushing Rate 1,500 1,500 1,700 2,000 2,000 2,500 2,500

Cane Cut/day 1,500 1,500 1,700 2,000 2,000 2,500 2,500T.C.A. 10.1 12.7 16.1 18.9 20.5 22.1 23.5

Yield 4.5 6.o 7.5 9.0 9.0 9.0 9.0

Tons Refined 3,932 7,365 13,359 20,4.85 23,606 27,389 29,131

Mol. % cane 6.0 5.0 4..4 3.5 3.5 3.5 3.5Tons Fuel Oil 3,078 3,148 3,008 2,037 2,290 1,207 1,335

Tons Diesel/Electr. 495 435 375 375 375 365 365Lubricants J 6,500 6,500 6,500 6,500 6,500 6,500 6,500Upkeep/repair e 15o0,00 150,000 150,000 150,000 150,000 150,0oo 150,000

Tons F. Mo'L. 4,369 6,138 7,838 7,966 9,180 lo,651 11,329Molasses for Alcohol 3,932 5,524 7,054 7,169 8,262 9,586 10,196

September 13, 1972

(D XHJCh\

ANX 6Table 2

GHANA

MeAR REiBILITATION PROJICT

Asutsuare Factory Costs

FOB COSTUS$

Autcmatic printing cam weights 2,200Repositioning of the two existing cane tables. Erection of a new cane table opposite

the two old eane tables + rotating equalizer. Provisions in cane yard 148,500Cane table for cane loandry no,000improvement speed regulator cane carrier repositioning of the remote speed control

button cane carrier, overriding control safe guarding cane knives 6,600Cane leveller in front of the 1st knife set 6,600Alteration/re-inforement cane carrier support underneath the cane knives 5,500Urderlying feeding roller first mill 6,600Repositioning/alternation clutches intermediate carriers 6,600Repositioning forced feeding rollers 2nd u/i 5th mill 5,500Protecting of the intermediate carrier chain against bagasse 1,100Improve the inhibiticn facilities 3,3003 spare mill roUlers to be ordered 19,800Install ragnetic filters In the mill gear boxes ll,C00Improve the manually operated bagasse slides in the horizontel boiler carrier into remotely

controlled, togetkbr with the induced and forced drought fans 6,600Renew 3 boiler air heaters (1 available) 27,500Provide the turbine boiler feed water pUmp with an autmatic starting device 2,2001 extra fuel oil pump for boiler firing 1,100Extension of the bagasse yard with carrier and return cearrier 22,0CCIprove the aecessbility of the overhead carrier along the boilers 5,50oCover the bagasse yard with a roof and provide the yard wLth an end wal 27,500Bagasse pay loader for the bagasse yard UllODOA reserve boiler feed water tank 400 m3 13,200Install a bagasse press 13,200Install a 2nd boiler feed water supply-line 2,200Provide the 4 boilers with a water meter, one for each boiler, capacity 140 ton/hr. 1,320Redesign the bagasse furnace feeding gates 11,000A 3 ati.g. steas line in the milling plant 2,200Repair/renewal of the autamatic steam-reducers for make up steam 16,500Stem reducing-cooling device for the 1.25 ata. 10 tons/hr 7,7003 chockless type imbibition pumps, cap. 35/hr and 10 a head camplete with

electric motor and switch. Enlarge the existing suction and dischargelinesbeing resp All and 3" 3,630

2 chockless urecremeed/screened unweighed Juice pumps, cap. 120 m3/hr, and 10 m headcomplete with electric motor and switch and pipe lines 0 6" 3,300

1 spare D.S.M. screen complete with auxiliaries 8,8001 electromagnetic flow meter with recording equipment for water imbibition behind

the 4th mill 2,200Maxwell-Boulogne type juice weighing-scale of 50 tons/hr 1,6002 gate valves 0 6" for juice supply to the Maxwell-Boulogne + feed trough 4L,OOverflow return pipe line 0 8" from Maxwell Boulogne feed trough to the unmeasured

mixed juice tank 1,100Phosphate dosing equipment complete with dosing pump for phosphate dosing in the

measured mixed juice tank 1,650Alternative: without dosing pump (1,100)2 weighed mixed juice pumps cap. 140m3/hr and 50m head complete with

electric motor and switch 7,7001 juice heater complete with steam-trap and auxiliaries for mixed juice 15,1400Increase the diameter of the flash-pipe on the flashtank on top of the clarifiers

from 0 B" to 0 12" LL0Install a deficator with stirrer cap. 5 m3 on top of the 2 clarifiers coplete

with a splitter box platforn aai PH control 16,500Install a separen dosing equipment complete with stirrer 7,700

Dosing pump 5503 sets of vacuum filter screens complete with lead slabs and 2 distribution head 13,200Replacement of the bagocillo transport ventilator with rotating sluice 2,200Thelie stirrer tanks have to be enlarged 4401 evaworator vessel paralle to no. 1 vessel with a heating surface of 800 n2,

complete with fittings and pipe lines. Pipelines and valves to make the evaporator vesselsinterchangeable 121,000

1 flash tank or condensate tank without flash possibility in case the height from groundlevel becomes insufficient 1,100

1 condensate pump cap. 40 m3fhr and 30 m head for flash tank item 45, coplete withelectric motor snd switch 550

1 condensate pump cap. 1140 m3/hr, head 50 m complete with electric motor and starter 2,200Screening over the clear juice tank 550Tank voor storing of used soda solution 20 m3 complet, with pipe lines 5,5005 isolating gate valves 0 500 m in the vapour lines vacuum pans 1-3-4-5 and 6

1 isolating gate valve 0 600 mm in the vapour line vacuum pen 2 13,2006 juice separators (catchhall) in the vapour lines of the vacm pans ll,OQ

or Alternativet2 iuice separators, one for pan 1-2-3 and 1 for pan 4-5-o (7,700)so heightw. *41 vacuum pans if possible (4,400)

(to be ccntinuad on Page 2)

ANNEX 6

Page 2GHANA

SUGAR REHABILITATION PROJECT

Asutsuare Factory Coats

(continmed)

FOB COSTUs$

Repair refinery pan no. 5 (tube plates/tubes) 15,4004 storage tanks on panfloor with heating coils

Heighten the existing storage tanks as far as possible/necessary in order toobtain the required storage capacity U1000

1 injection waterpump 900 m3/hr and 40n head complete with electric motor and starter 16,5001 D-crystallizer with forced cooling cap. 55 ton 17,600Renewal of the cooling elements of the 4 existing D-crystallizers 13,200Install a closed cooling/heating water system for the 5 D-crystallizers with

2 pumps, cap. 20m3/hr, lm head 4,4001 R-crystallizer Capacity 55 ton 13,200Install a screw conveyor on top of the A/B-crystallizers 4,h00Extension of the screw conveyor over the D-crystallizers 1,650Improvement of the striking facilities for the R-strikes 5,50010 massecuite exhaust slides for the existing crystallizers (replacement ofof the gate valves, complete with handles) 3,850

Complete overhaul of D-massecuite centrifugals and the operating equipment 27,500Complete overhaul of the AB and R centrifugals and operating equipment 88,0001 final molasses scale cap. 10 tonsAhr 9,9001 unweighed final molasses pump cap. 8 m3/hr and 25 m head 5,5001 weighed final molasses pump cap. 8 m3 and 40 head )1 D-magma mingler complete or 8,250

use the D-sugar melter with modification (2,200)Spare parts for aircompressors centrifugals 1,100Renewal of a part vapour exhaust pipelines R-centrifugals 1,100Renewal of a part grasshopper conveyor of the R-centrifugals 1,650Increase cap. bucket elevator A/B sugar 3,300Capacity increase screwconveyor A/B sugar over the melters 2,750Dosing installation activated carbon on top of the melters to be transferred on top of the

sulphitated melt retention tank 5501 pump + stirrer activated carbon mixer 3,8501 alroompressor sulphur station cap. 500 m3/hr output and 2 atm.g. 3,300Oil and water separator for S02 cmpressors 1,100Rebuilding of the 3 mixed juice defco-sulphitation tanks into continuous sulphitation

tanks for melt sulphitation 8,800Continuous lime dosing equipment for melt sulphitation with splitter box 8,8003 circulation pumps for melt sulphitation with piping and valves cap. 250 m3/hr and12 m head complete with electric motor and starter 12,100Retention tank for sulphitated melt cap. lbn3 complete with stirrer and drive and

heating elements H.S. 7m2 2,2002parmpsfor treated melt to constant head tank above the filterpresses cap. 25m3/hr

and 20m head, complete with electric motor and starter 2,200Improve the 6 Abraham filterpresses 11,000Sweetening-off pumps cap. 10 m3/hr and 25m head complete with electric motor and starter 1,1001 drawing tank 2m3 for sweetening-off water 6602 sweet waterpumps (to melters) cap. 15 m3/hr and 15m head complete with electric

motor and starter 1,6501 drawing tank 2 m3 for sweetwater pump 660Increase the cap. of the mudconveyor under the Abrahan filter presses 2,7501 pump for filter mud from pudling tank to dumping, cap. 6 m3/hr and 3Cm head

complete with electric motor, starter, valves and pipelines 1,650Install a new sugar drier complete with cooler, cap. 15 ton/hr, guaranteed moisture content

of fine sugar less than 0.3% (some items of the old equipment can be used) 27,500InstaMmiiagnets in the sugar shutes of the dry grasshopper classifier conveyor to

the sugar bins 4,4001 tank for final molasses storage 1,500 m3 82,500For improvement/rehabilitation sufficient pipings, nuts, bolts, flanges and

electrical material 99,000Instrumentation improvement/renewal in general 54,°00Improvement of the ventilation in the factory 16,5001 new sugar bag sewing machine 880Laboratory equipment and stock position 22,000Installment of a horizontal boring machine, extension of a number of work benches

and hand tools 55,000Make-up spares in general store 275,000Improvement of the material store 99,000

(to be continued on Page 3)

ANNEX 6Table 2Page 3

GHANA

SUGAR REHABILITATION PROJECT

Asutsuare Factory Costs

(continued)

FOB COSTUS$

Further required improvements

A second S02 pipeline 4,400Modification of the pipelines to the storage tanks on the vacuun pan floor

(too many bends) 550Install a panwash tank with pump, electric motor and starter for transport of the steamingout wash to the measured mixed juice tank with a branch to the clarified juice drawing

tank complete with valves and pipings 4,400Steaming out pipe lines to and from the cut over lines etc. to the pan-wash tank item 103 2,200Modification of the massecuite lines from the cuite pumps (too maWu bends) 550Modification level indicator furnace fuel storage tank 220Replace a part of the boiler evaporation tubes 7,700Remove the platform on top of the crystallizers, Im towards the centrifugals 350Repair of the insulating material under the vacuumpan floor 2,200Repositioning of the bagacillo mixer closer to the 2 rotating vacuum filters 2,200Retail packing machine 16,500t4 cyclone type water separators for each steam boiler one 13,200

TOTAL 1,6,990

GHANA

SUGAR REHABILITATION PROJECT

ESTIMATES OF PRODUCTIONS, DOWNTIME AND CANE CRUSHED

KOqENDA FACTORY

1)72/73 1)73/74 1974/75 1975/76 1976/77 1977/78 1978/79

Crop days (100.0) 150 (10o.o) 160 (100.0) 182 (100.0) 188 (100.0) 188 (100.0) 192 (100.0) 1)6

Time lost

Cleaning ( 8.0) 12 ( 7.5) 12 ( 6.6) 12 ( 6.4) 12 ( 6.4) 12 ( 6.3) 12 ( 6.1) 12Out of cane/breaKdowns ( 7.4) 11 ( 6.2) 10 ( 3.8) 7 ( 3.1) 6 ( 4.2) 8 ( 4.1) 8 ( 5.1) 10Holidays 07 3 11 6.9) 11 ( 6.4 1 ( 5.9) 11 ( 5.9) 11 ( 5.6)Total lost ( 22-7) 34 ( 20.b) 33 ( 16.4) 30 ( 15-4) 29 ( 16.5) 31 ( 16.1) 31 1 6.) 33

Grinding days ( 77.3) 116 ( 7 . 4) 127 ( 8J.6) 152 ( 84.6) 159 ( 83.5) 157 ( 83.9) 161 ( 82.2) 163

Total cane 91,110 lol,686 137,293 159,150 156,425 161,450 162,275Crushing rate 785 800 900 1,000 1,000 1,000 1,000Cane cut/day 785 800 900 1,000 1,000 1,000 1,000T.C.A. 15.4 14.6 16.5 17.1 16.8 17.4 17.4yield 7.5 Y.o 9.0 9.0 9.0 9.0 9.0Tons mill wnite 6,8j3 y,152 12,356 14,324 14,078 14,531 14,605Nolasse t cane 3.5 3.5 3.5 3.5 3.5 3.5 3.5Tons fuel oil 840 816 882 775 815 815 1,000Tons diesel electr. 255 255 255 250 245 245 245Lubricants ¢ 5,ouo 5,000 5,000 5,000 5,000 5,000 5,000Upkeep/repair . luO,uOO luo.00o 100,00U 100,000 100,w00 100,000 100,000Tons F. molasses 3,18) 3,55) 4,805 5,570 5,475 5,65i 5,680Mol. for alcohol Ž,870 3,203 4,325 5,013 4,Yz8 5,Obo 5,112

_ _

ANNEX 6Tabe 4

GHANA

SUGAR REHABILITATION PROJICT

Komenda Factory Costs

FOB CostUS$

A complete double cane weighing bridge capacity 25 ton (7,700)with a closed printing device and platfors

To use the existing bridge and alter the platform *n install a printing mechani.sm 4,400Improve and lengthen the existing cane table and alter the slopeStronger drive for the cane table, 15 pk motor plas reduotor (motorreductor) with

speed controlRotating equalizer on top of the cane table ) 16,500Rotating leveller in the cane carrier Just before the lot cane knife set 5,500The side walls of the cane carrier before the cans cutters to be hightened 220Improve the tightening device of the oans carrier chains 1,100Improve the speed reduction factor and the speed control situation of the cane carrier 1,100Repair of the cane carrier chain 5,500Improve the imbibition system 2,7503 spare millrollers 14,300Repair the millroller lift indicators 220The let, 2nd and 5th mill to be provided with a under1,ving feeding roller 16,5003 chockless type inbibition pumps 15m

3/Ar. and 10 m head complete with electric

motor and starter 2,640Electric magnetic flov metor with recorder for water inbibition behind the h4th mill 2,2002 mixed juice pumps 54mm

3/hr., and 10 m head complete with electric motor and starter 2,200

5 drawing tanks 2 for mixed juice and 3 for juice imbibition 3,300Renew the imbibition pipe lines (220)j Renew the internediate carrier chain (5,500) 5,720Protection of the intermediate carrier chain against bagasse 1,100Automatic starting device for steam driven boiler f edwater pump 2,200Provide the 3 steamboilers with a high/low water level indicator (2,200)

a simple "Blacks" alasm wistle 770Replacement of the bagacillo transport ventilator with rotating sluice 2,200Replace the bagaoillo screens 1,650Complete overhaul bagasse press 2 880InstaLl an extra juice heater H.S. 80m complete with valves and fittings 9,9001 centrifugal pump for milk of lime with grit cyclone cap. 5m3Jhr. and 25m head

complete with electric motor and starter 2,200Increase the contents of the 3 milk of lime tankas 3301 sulphur burner complete 1.2m

2burning surface 11,000

Reinforce the framework on which the sulphur furnaces are situated 1,100Repair of the sulphur lift installation 330Replace the wooden sulphitator 8,800Rearrange mixed juice sulphitation 2,200Renew the vacuumfilter complete with distribution heads, scraper and a spare set

of screens 36,850Exchange the belt of the mud transport conveyor 0.4 x 30m endless 1,100overflow returnpump 103A/hr. and lOa head complete with electric motor and starter 2,200Screening installation on top clear juice tank 5501 clear juice pump cap. 54 J3/hr. and 3Gm head corplete with electric Motor and starter 1,870Renew the mixed juice sulphitator now in juice as defoe vessel 8,8001 syrup pump cap. 18w3Ar. and 30m heed complete with electric motor and starter 1,100Increase height sorting tanks on the vacuum pan floor if necessary 1,320Install the D-footing receiver ex Asutsuare 8,800Irprove the striking facilities under the vacuum pans 5,5001 condensate pDp 18m3/hr. and 34n head complete with electric motor and starter 5501 condensate pump 36m3/hr. and 3on head complete with electric motor and starter 550Install a 2nd airpump right now, not to be postponed, till phase "5" cap. 3,6Oa3/hr.

complete with electric motor and starter 11,000Renew/Repair the collapsed part of the condensor vacuum pans 4,400Renewal/repair vapour lines vacuum pans to the condensor partly 2,200aenewal of the elements cooling system D-crystallizers 13,200

Reinstall the forced closed cooling water system or the D-cr7stallizers with pumpsscap. 20n3/hr. and lOm head h4,40.

1 A/B massecuite pum p 10.8&3/r. and 25m head, complete with electric motor and starter(ranning clockwise) 2,750

Complete overhaul of the centrifugal plant 99,0001 extra D-centrifugul foreworker 48" x 23" complete, the same as the existing ones 36,3001 weighing scale for fina molasses, cap. 3A tnsAxr. 7,7001 weight final molasses pump cap. 9 K3/hr. and 2Gr head 2,200Overhaul sugar drying equipment and rebuilding of the sugar graashopper under the

A/B aftezworkers 5,500Magnets in the sugar bins l4400Oerhau sugar-eighing equipent 3,850Repair sugar bag sewing -achine 1,100Complete overhaul sugar bags conveyor in sugar store 5,500Pipe line material, nuts, bolts, flanges and electrical 44,000Laboratory equipient and stocks 1 ,a00Instrument ilmprovement 27,500Spareparts in ganeral store 229,900Electrical installation 27,500Workshop machine tools 33,000Reinstall the air drying installation of the centrifugal air control syten and

repoir/renew wher necessary 3p

777.700

ANNEX 6Chart A

GHANA

SUGAR REHABILITATION PROJECT

Aautsuare Factory - Ldstirug Flow Scheme

CArE YARDL __L._iii]

MILLS

0JAGACILL.O

LE 3 ; i E Sl;.LE.

t Li~ME 2fl

5UPH . 6.E:

C RIFIEI MU

MiUrDDY -)jICE

EVAP. QUINTUPLE

A SUGA PANS|

PANS

C~ SUGA4R

OlSTiLLERY

v 1st SUC.AP

RL*N-OFF TO MILL WHITE H4CU¢;E r2 2 ;UG.,R_ q t L -: __PAN

ANNEX 6Chart 1

GHANA

SUGAR RE;ABILITATION PROJECT

Asutsuare Factory - Future Flow Scheme

L. [ z MILLS

K J JUICE SCALE ABtCACILLO

CItARIrnER

H>sZ., LRS 5 uI LTER

EVAP QUINTUPLE MC MUD

_. 1Svt'' 1 A A_ SUGAR 2

Pi8 9S SCA UA

PANS PAN

2ndSUGAR PASS

PANS~ ~ ~~~PNLRTH

BAGS

RR rdSUAPAN

TO R_ UNOFSFTO RAW V 'S

ANNEX 6Chart C

- ~ ~ ~ ~ M -GHANA

SUGAR REHABILITATION PROJECT

Komenda Factory - Existing Flow Scheme

CAR NU .i ,)

C,'

MILLS

--- --

DACACILLO

L. _ _JUi(:E SCA4LE

G5* SULP. 10?

p. L0 pH.72 s J ILI

S02 0 AR F!

,H&5 . YMUD

EVAR QUAOI;UPLE

SYRUP SULrP.

DRAWNG TANh S

APANS S

SAGS

0M SGAPANS ~ .

DMAGMA] ~PANJS

L_ ~GERJ~

v1L~

An=EX 6

OHANA

SWAR REH&BILITATION PRDJIC?

Komenda Factory - Future Flov Schom

CA.: ."PI

M 2ILLS

BArGACILLO

E JUICE SCALE

S6 ULPI-1. 103'

LIME L I i m

PR I. r1.H22S02 ARIFIE RpR 6.6

_ D s_~~~~~~luMUDY JUICE

EVAP. QUADIZUPLE

SYRUP SUiLPH.

DRAWING TA\NKS

> |A|PANS A_ SUGAR

SAG S

?s4EER PANSlSLER l __D

MA PAN

ANNEX 7Page 1

GHANA

SUGAR REHABILITATION PROJECT

HOUSING

A. Asutsuare

General

1. The main estate buildings, including the factory, are locatedabout one mile from the village of Asutsuare and some five miles from thetown of Akuse, formerly a small river port, with a postal agency, school,bank services and small hospital. Those staff who are at present nothoused mostly travel from fairly distant towns by GIHOC buses.

Present Housing

2. The senior staff housing consists of 23 houses which are of areasonable standard. A junior staff hostel with a capacity of 48 roomshas been built and 30 junior staff houses are partially erected. No laborhousing is in existence.

Additional Staff Houses Required

3. It is proposed that all senior staff be housed on the estate.The alternative would be to rent houses at Tema or Akosombo. This wouldbe undesirable as it would lead to a breakup of the community as wellas require excessive travel time. Provision has been made for thecompletion of 30 houses and the erection of 75 new houses, a rest houseand a club. A clinic is partially complete which, on completion, willprovide very adequate facilities for staff and labor.

Additional Labor Houses Required

4. It is proposed to erect 911 labor housing units in the factoryarea and the cane plantation. This provision will enable approximately50% of the labor requirement to be housed.

5. A housing schedule is at Table 1.

B. Komenda

6. Most of the present dwellings occupied by the senior staff atKomenda are unsuitable for this category. This had been realized as longago as 1966 when the first of 26 new housing units was started. After long

ANNEX 7Page 2

delays the program was nearly completed in 1972, and the 26 houses should becompleted by the end of 1979. Finance is provided in the project costs forprovision of furniture and services to the housing areas. With the completionof these units, the senior and junior staff housing situation will be reason-ably satisfactory.

7. There is no labor housing at present at Komenda. Although labor iseasier than at Asutsuare, periods of shortage have occurred and it is deemednecessary to erect about 1,000 housing units for both seasonal and permanentworkers.

October 18, 1972

GHANA

SUGAR REHABILITATION PROJECT

Scheuile of Additional Housing and Niscellaneous Buildings

Reauired and Estimated CGots - Asutsuare

Under Construction Buildings to be Completed Buildings to be ConstructedNumber Numib.r

Description Required Built Number % complete Number Unit( Cst Totaleot gotr Unit Cost Total Cnst(~~l (0) llluab~ (a). (a)

Senior Staff Houses 34 23 NIL - NIL - - 11 52,000 572,000

Junior Staff Houses 94 NIL 30 50 30 3,120 93,600 64 6,240 399,400

Labor HousesSkilled and semi-skilled

Permanent 360 NIL NIL - NIL - _ 360 2,600 936,ooo

UnskilledPermanent 300 NIL NIL - NIL - - 300 1,040 312,000

UnskilledSeasonal 250 NIL NIL - NIL - - 250 850 212,500

Welfare Clinic 1 NIL 1 70 1 15,600 15,600 NIL - -

Club 1 NIL - - NIL - - 1 45,500 45,500

Training Centre 1 NIL NIL - NIL - - 1 88,400 88,400

Training Hostel 1 NIL NI1 - NIL - - 1 52,000 52,000

Miscellaneous

Rent House 1 NIL NIL - NIL - - 1 52,000 52,000

Servants' Quarters 34 10 NIL - NIL - - 24 1,040 24,960

1.200 2,694,760109. 200

Grand Total 803.960

Say ?.804.00

ANNEX 8Page 1

GHANA

SUGAR REHABILITATION PROJECT

FEASIBILITY STUDY OF FURTHER EXPANSION

Draft Terms of Reference

1. The Government of Ghana wishes to engage Consultants to carryout a study of the feasibility of expanding sugar production in Ghanawithin the limits of domestic consumption. The study should assess themerits of the following four alternative courses, which may not bemutually exclusive:

(a) Expansion of Asutsuare estate and factory from thecapacity of 30,000 tons sugar/year designed to beachieved under the existing program;

(b) Expansion of Komenda estate and factory from thecapacity of 15,000 tons sugar/year also designedto be achieved under the existing program;

(c) Establishment of a new estate and factory complexelsewhere in Ghana; and

(d) promotion of medium and small scale technology in bothfarming and processing practices to produce sugar of alower quality than mill-white, still satisfactory formany uses.

2. In carrying out the study, the Consultants should examine themarket prospects for domestic sugar, the types and quality required, andthe methods of production and marketing. They should make recommendationsin particular on the balance between estate and outgrowers cane acreage andon the viability of installing a cubing plant and/or of small packetsugars.

3. The Consultants should also examine and make recommendationson the production and marketing either on the domestic market or forexport of alcohol and molasses byproducts. They should make recommendationsas to disposal, taking into account environmental considerations, ofunmarketable byproducts.

4. In the event that the Consultants recommend expansion of Asutsuareor Komenda or both, they should prepare a project for such expansionsuitable for financing by an international lending agency. Preparationshould include:

ANNEX 8Page 2

(a) Details of physical execution of the project includingcapital and recurrent costs with phasing and foreignand local cost components;

(b) Estimates of additional management and staff requiredfor project implementation and operation;

(c) Assessment of the internal rate of return to the economyfrom the additional investment assuming an appropriatevalue for alternative imported sugar; and

(d) Assessment of the financial rate of return to the sugarcompany from its additional investment.

5. In the event that the Consultants conclude that there would bea case for establishing a new sugar industry complex elsewhere in Ghana,they should:

(a) Identify the area and indicate the cane acreage, factorycapacity and sugar output required for economic production;

(b) Give a broad estimate of the capital costs and indicatethe likely internal rate of return to the economy on theinvestment; and

(c) Set out the further steps required to prepare the projectin a form suitable for financing by an international agency.

6. In the event that the Consultants recommend the expansion of smallscale farming and processing practices, they should:

(a) identify the area or areas of expansion, indicate thetype and size of farms to be established, and analysetheir financial and economic viability;

(b) analyse the type of technology to be used for processingand propose related farmers organizations;

(c) indicate the type of government extension services,credit facilities and marketing arrangements that wouldbe required; and

(d) give a broad estimate of capital and recurrent costs andthe likely internal rate of return to the economy.

7. It is expected that the assignment will last two months and willrequire a total of 9 man-months, as follows:

ANNEX 8Page 3

Economist (Team Leader) 2 monthsAgriculturalist 1-1/2 monthsIrrigation Engineer 1 monthMill Engineer 1 monthProcessing Technologist 1 monthManagement Accountant 1-1/2 monthsMarketing Specialist 1 month

9 months

October 18, 1972

AM E9

Table1Page 1

GHANA

SUGAR REHABILITATION PRJECT

ASUTSUARE

pro tCosts

Foreig~n Exchange1972/73 1973/74 1974/75 1975/76 1976/77 1977/78 TotaL

It. AGRICULTURAL DEVELOPMENT

Estte New Platting (Acres) - 400 600 700 600 - 2530abor unskilled 9 14 16 14 - 53

-semi-skilled _ 4 7 7 6 - 24Materials - 25 38 44 38 - i45 75 109

Sub-total - 38 59 67 58 - 222 50 109

Estte _Rlati (Acres) 519 1,181 1,200 900 300 - 4,1003Mr aP 12 27 27 20 7 - 93

- semi-skilled 5 11 11 9 3 - 39 - -

Materials 33 74 76 57 19 - 259 75 194

Sub-total 50 112 114 86 29 - 391 50 194

Farmers - New Planting (Acres) 1.000 1.000 375 - - 2,375Contr'act 125 1IN 47 --- 297 60 178Materials 37 37 14 _ _ - 88 75 66Living Costs 12 12 5 29 - -

Sub-total 174 174 66 - - - 414 59 244

Fttr Rpatn (Acres) 515 51a 1,1140 1.515 Li- 5,200

Contract 103 136 131 - 487 60 281Materials 19 19 42 56 56 - 192 75 144

Sub-total 65 65 145 192 192 - 659 64 425

Fertilizer Subsidy 15 15 15 15 15 - 75 -

Total 304 404 399 360 294 - 1,761 55 972

IrrigationRehabilitation - Overbead system- Materials - 60% - 36 166 - - - 202- 95 192

- Labor - 40% - 54 249 - - - 303 - -

Rehabilitation - Furrow System- Materials -

60% - 25 - 48 166 - 239 95 227

- Labor - 40% - 38 _ 73 249 - 360 - -Rehabilitation - Main Canal 67 - _ - - - 67 t0 40Secondary Pumping Station- Civil Works - - - 133 - - 133 60 aQ- Pumps - - - 34 51 - 85 95 S1

Total Irrigation 67 153 415 288 466 - 1,389 45 620

Field EquipmentRehabilitation of ExistingEquipment 384 - _- - - 384 75 288

Crawlers Plus Implements 187 - - - 45 - -32 95 220Tractors 210 33 - 50 985 95 270Workshop Equipment 138 _ - - - 16 154 95 146Workshop Building 77 _- - - -_7 (o 46Haulage Equipment - Estate 311 - 5 8 105 10 4L39 95 419

- Farmers 57 32 32 32 278 83 '14 Qg 488

Sub-total 1,364 35 37 62 478 109 2,085 g0 1,877

Total 1,735 592 851 710 1,238 109 5,235 66 3,469

Contingencies - Price - 36 102 128 297 33 596 66 393

-Physical 87 30 43 36 62 5 263 66 174

Sub-total 87 66 145 164 359 38 859 66 567

Total AgriculturaL Development 1,822 658 996 874 1,597 147 ( ,094 66 4,036

ANNEX 9Table I (cont'd)Page 2

GHANA

SUGAR READILITATION PROJECT

ASLITSUARE

ProJect Costs

Foreign Exchange

1972/73 1973/74 1974/75 1975/76 1976/77 1977/78 Total % Pisownt

2. FACTCRY

Equipment C.I.F. Costs 1,020 1,298 87 15 314 - 2,734 100 2,734

Delivery- 7% 71 91 6 1 22 - 191 60 115

Erection - 20% 204 260 17 3 63 - 547 40 219

Civil Engineering - 12% 122 156 10 2 38 - 328 60

Sub-total 1,417 1,805 120 21 437 - 3,800 86 3,265

Cortingencies - Price 142 181 18 3 66 _ 410 96 353

_ Physical 71 90 6 1 22 _ 190 86 1f

Sub-total 213 271 24 4 88 _ 600 86 51f

Total Factory 1,630 2,076 144 2 525 - 4,400 86 3,781

3. ADMIf ISTRATION

Hoct.ing and other Buildings,ircluding Furniture 780 1,559 464 - * _ 2,803 50 1,401

Radio Equipment 20 - - - - - 20 95 19

Ofl'ice Equipment 34 34 _ _ _ _ 68 95 64

Vehicles - FWD Vehicles (14)64 - (2) 8 _ (1) 4 - 76 80 61- Motorcycles (10) 7 - - (10) 7 - 14 80 15

- Cars (4)15 - (2) 7 (2) 8 - 30 80 24- Ambulance 10 - - _ (1)10 - 20 60 16

- Trucks - 13 - - _ (2) 13 26 80 21

Sub-total 930 1,606 479 15 14 13 3,077 53 1,617

Contingencies - Price - 96 60 3 3 4 166 53 88

- Physical 47 80 24 1 1 1 154 53 8

Sub-total 47 176 84 4 4 5 320 53 1703

Total Administration 977 1,782 >63 19 186 18 3,377 53 I, Y87

4. MANAfD,MBIT

Management Fee 235 384 384 384 384 384 2,155 0o0 2,1 5

Maragement Salaries 342 411 411 411 411 411 2,397 27 647

On-Coets 230 248 248 248 246 246 1,470 100 1,470

Sub-total 807 1,043 1,043 1,043 1,043 1.043 6,022 71 4,272

Cointingencies - Price - 63 125 188 250 313 939 71 667

- Physical 40 52 52 52 52 52 300 71 213

Sub-total 40 115 177 240 30' 365 1,239 71 880

Total Management 847 1,158 1,220 1,283 1,345 1,408 7,261 71 5,152

GRAN) TOTAL - Tables 1 and 2 5,276 5,674 2.923 2,201 1,573 70 14,756

Septiaber 28, 1972

ANMEX 9

Page 1

GHANA

SUGAR REIARILITATION PROJECT

ASUTSUARE

PGo~ gsts

Foein Echange1972/73 1973/74 1974/75 1975/76 1976/77 1977/78 Total FAmount

1 AGRICULTURAL DEVELOPMENT

Estate New Planting (Acres) - 400 600 700 600 - 2,300Labor unskilled - 9 14 16 14 - 53 - -

-aemi_skilled - 4 7 7 6 - 24 -l4aterials - 25 38 44 38 - 145 75 109

Sub-total - 38 59 67 58 - 222 50 109

Estste Replanti (Acres) 519 1,181 1,200 900 300 - 4,100Libor -unskille 12 27 27 20 7 - 93

- semi- skilled 5 11 11 9 3 - 39 -Materials 33 74 76 57 19 - 259 75 194

Sub-total 50 112 114 86 29 - 391 50 194

Famers - New Planting (Acres) 1.000 1,000 375 - - - 2,375C7ontract 125O 1254 - - 29'7 60 178Materials 37 37 14 _- - 88 75 66Living Costs 12 12 5 - - 29 - -

Sub-total 174 174 66 -_ 414 59 244

Faxsers - Replanting (Acres) 5l~ 515 1,140 1515I 1,15 - 5,200

Contract 103 136 151 - 467 60 281Materials 19 19 42 56 56 - 192 75 144

Sub-total 65 65 _14 192 192 - 659 64 425

Fertilizer Subsidy 15 15 15 15 15 - 75 - -

Total 304 404 399 360 294 - 1,761 55 972

rrigationPehabilitation - Overhead System- Materials - 60% - 36 166 _ - - 202 9* 192-Labor -40% - 4 249 - - - 303 - -Pehabilitation - Furrow System- Materials - 60% - 25 - 48 166 - 239 95 227- Labor - 40% - 38 _ 73 249 - 360 - -Rehabilitation - Main Canal 67 - - - - 67 .D 40Secondary Pumping Station

C Civil Works - - _ 133 - - 133 (0 Se-Pumps - - - 34 51 _ 85 95 81

Total Irrigation 67 153 415 288 466 - 1,359 45 620

Field Equipmentlehabilitation of ExistingEquipment 384 _ _ _ _ _ 384 7 5 288

Crawlers Plus Implements 187 - _ - 45 ' 32 95 220Tractors 210 33 - 2' 50 235 05 070

Workshop Equipment 138 - - 16 154 95 146Workshop 13uilding 77 - - - - '7 Cn 46Haulage Equipment - Estate 311 - 5 8 105 10 4139 95 4i9

- Farmers 57 32 32 32 278 83 14 '5 488

Sub-total 1,364 35 37 62 478 109 2-,o85 90 1,877

Total 1,735 592 851 710 1,238 109 5,235 66 3,469

Contingencies - Price - 36 102 128 297 33 596 66 393- Physical 87 30 43 36 62 263 66 174

Sub-total 87 66 145 164 359 38 859 66 567

Total Agricultural revelopment 1,822 658 996 874 1,597 147 6,o94 66 4,o36

ANNEX 9Table I (cont'd)PLge 2

GHANA

SUJO RAEWILITATION PROJECT

ASTSEJARE

Project Coats

Foreign Exchange1972/73 1973/74 1974/75 1975/76 1976/77 1977/78 Total % Amount

2. FACTORY

Equxipment C.I,F. Costs 1,020 1,298 87 15 314 - 2,734 100 2,734

Delivery - 7% 71 91 6 1 22 - 191 60 115

Erection - 20% 204 260 17 3 63 - 547 40 219

Civril Engineering - 12% 122 156 10 2 38 - 328 60 197

Sub-totaL 1,417 1,805 120 21 437 - 3,800 86 3,265

Conitingencies - Price 142 181 18 3 66 - 410 86 353

- Physical 71 90 6 1 22 - 190 86 __

Sub-total 213 271 24 4 88 - 600 86 51t,

Total Factory 1,630 2,076 144 25 525 - 4,400 86 3.781

3. ADM4lIISTRATION

Housing and other Buildings,including Furniture 780 1,559 464 - - - 2,803 50 1,401

Radio Equipment 20 - - - - - 20 95 19Of:!ice Equipment 34 34 - 68 95 64

Vedicles - FWD Vehicles (14)64 - (2) 8 _ (1) 4 - 76 80 61

- Motorcycles (10) 7 - - (10) 7 - 14 80 11

- Cars (4)15 - (2) 7 (2) 8 - 30 80 24

- Ambulance 10 - - ()1O - 20 80 16- Trucks - 13 - - - (2) 13 26 80 21

Sub-total 930 1,606 479 15 14 13 3,057 53 1,617

Conitingencies - Price - 96 60 3 3 4 166 53 88

-Physical 47 80 24 1 1 1 154 S3 82

Sub-total 47 176 84 4 4 5 3f0 53 170

TotaeL Administration 977 1,782 563 19 18 18 3,377 53 1,187

4. MAOEINT

Manuagement Fee 235 384 384 384 384 384 2,155 100 2,15

Management Salaries 342 411 411 411 41i 411 2,397 27 647

On.-Costs 230 248 248 248 248 248 1,470 100 1,470

Sub-total B07 1,043 1,043 1,043 1,043 1,043 cu, 022 71 4,272

Conitingencies - Price - 63 125 188 250 313 939 71 667

- Physical 40 52 52 52 52 52 300 71 213

Sub-total 40 115 177 240 302 365 1,239 71 880

Total Management 847 1,158 1,220 1,283 1,345 1,4o8 7,261 71 5,152

GRAND TOTAL - Tables l and 2 5,276 5674 2,923 2.201 3,485 1,573 21_132 70 14,756

Septiber 28, 1972

ANNEX 9Table 2

GHANA

SUGAR REHABILITATION PROJECT

KOMENDA

Project Costs

Foreign Exchange

1972/73 1973/74 1974/75 1975/76 1976/77 1977/78 Total % Amount

1. ACRICULTURAL DEVELOPJMKlT

Estate - Nes Planting (Acres) - 800 450 - I _ 1,250

labor _ unskilled - 18 10 ' _ _ 20

-semi-skilled _ 8 4 - - - 12 _ _

Material - 50 28 _ - - 78 75 59

Sub-total - 76 42 - - _ 118 50 59

Estate - Replanting (Acres) 400 600 775 1,125 350 - 3,250

Labor - unskille 9 1 1 25 - 74 - -

- semi_skilled 4 6 7 11 3 - 31 - -

Material 25 38 49 71 22 - 205 75 154

Sub-total 38 58 74 107 33 _ 310 50 i54

Farmers - Neo Planting (Acre-) 565 500 500 - _ 1,565

Contract 71 63 63 _ _ - 197 60 118

Material 21 19 19 - - - 59 75 41Living Costs 7 6 6 _ - _ 19 - -

Sub-total 99 88 88 - - - 275 53 142

Fsrmers - Replanting (Acres) 200 300 400 1.000 1,000 535 3,435Contract 1o 27 36 90 90 66 309 a0 186

Material 7 11 15 37 37 20 127 75 95

Sub-total 25 38 51 127 127 68 436 64 281

Fertilizer Subsidy 8 8 9 10 10 5 50

Field Equipment217 - - - - - 217 95 2o06

Crawlers with Field Implemen-s 51 2 1 -95 1 47

Tractors 1613 -2 ---- 165 95 137

Workshop Eqiment 0 - 90 35 65

Field Workshop 109 - - - - _ 109 ?3 124

Haulage Eqoipent EsCtate 202 - - - - - 202 97 190

F-armers 32 32 32 32 32 32 192 95 82

Sub-total 864 34 32 32 32 32 1,024 9? 775

Total 1,034 302 29£ 276 202 105 2,215 74 1,631

Contingencies - Price - 18 36 30 48 32 184 74 136

- Physical 52 15 15 14 10 5 ill 62

Sub-total 52 33 51 E4 58 32 2?5 7O 218

Total Agricultoral Developomnt 1,086 335 347 340 260 142 2,510 74 1,919

2. FACTORY

Equipment CIF Costs 439 £57 _ * 14-

Delivery- 7% 74 46 - - - - 3Q 48

Erection- 20% 38 131 - - - - -2

Civil Engineering - 10 49 66 _ _ - 09

Slb-total 6f9 900 _ _ _ _ l,"o" 1,351

Contingencies - Price 67 30 _ _ _ _ 135

- Physical 33 4. - - - . 67

slb-total 100 13 - - - - 3 02

Total Factory 769 1,03 - - - - 1, 6 4 1,556

3. ADMINISTRATION

Housing 156 5L3 317 i , _ 1,241 7 521Office Equipment 20 *0 - _ _ _ 4. -2 39

Radio 20 2r _ _ - 4° . 38

Vehicles - FWD 56 _ _ _ - 37 03 S 4

-Motorcycles 7 - - - - 14 -7 11

- Car/Ambulance/Truck 49 13 14 t _ _ 8a 2 66

Slb-total 308 596 357 13 - 37 1,311 =7 748

Contingencies - Price - 36 43 1 1 11 52

-Physical 15 30 18 1 _- -. 6 7 38

Sub-total 15 66 E1 13 1G 17 90

Total Administration 323 662 416 7l _ 50 1,46o, r 838

4. MANAGEENT

Management Salaries 194 233 233 '33 233 '33 1,310 1j 367

On Costs 114 137 137 137 137 137 7?- 1C0 799

Sub-total 308 370 370 371 370 370 2,133 54 1,1£6

Contingencies - Price - 22 44 67 99 111 333 34 180P Physical 15 19 19 19 19 19 11' 54 59

Sub-total 15 41 63 86 108 130 441 -4 239

Total Management 323 411 433 456 478 300 2,601 -u 1,405

GRANID TOTAL 2,501 2,443 1,198 812 738 692 6,384 67 5,648

ANNEX 9Table 3

GHANA

SUGAR REHABILITATION PROJECT

FIELD DEVELOPMENT COSTS PER ACRE

New Planting and Replanting

Estate Labor Materials Total

Land Preparation 1/ 7.32 25.37 32.69Fertilizer - 1st application 2/ 1.20 15.00 16.20Planting 13.56 1.62 15.19Covering 0.40 0.54 0.94Weeding - Chemical 3/ 1.06 12.93 13.99Fertilizer - 2nd application 4/ 1.06 7.00 8.o6Discing 1.40 0.54 1.94Weeding - Hand 5/ 6.oo - 5.99

32._MY 63.00 95.00

I/ 14 Crawler tractor hours excluding equipment depreciation.2/ 1 cwt sulphate ammonia; 1 cwt potash; 1 cwt triple superphosphate.3/ 2 lbs 24D x 10 lbs TCA.4/ 2 cwt sulphate ammonia.5/ 6 man days at ' 1.00/day.'/ Of which 0 22.60 unskilled, 0 7.40 semiskilled.

Farmers Contract Materials Labor Total

Land Preparation 1/ 125.00 - 125.00Fertilizer 2/ - 11.10 - 11.10Planting 31- 25.50 - 25.50Living Expenses - - 12.00 12.00

Total 125.00 36.60 12.00 173.60

say 174.001/ 4-1/2 hours at 0 27.70'hour:

Replanting V 90.00/acre.2/ Split application - 2 cwt sulphate ammonia, 1.5 cwt single superphosphate;

1 cwt of potash costed at subsidized price and including transportfrom estate to farmer.

Fertilizer Subsidy to farmers: X 10.00/acre.

October 3, 1972

GIIANASUGAR REHABILITATION PROJECT

FTNANCTNG OF PROTECT COSTS

Project Cort Items IDA HVA GHASEL GOVERNMENT A.D.B. FARPES TOTALyCRF'PTT FOUITTY__ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

0 'oo us$ '000 % 'ooo us$ '000 '000 U9$ '000 9 0 '¢oo oo us$co 9o ooo f ¢ '000 vus '000 0 5 0 'coo us$ 'ooo

1. ASUTSTUARE

Field DevelpsetEstate Nev Planting -labor - _ _ _ _ _ 77 6 100 - - - _ _ _ _ _ _ 77 60

-Materials 109 86 75 - - - 36 27 20 - - _ _ _ _ _ _ _ 145 113Estate Replatg -Lbor - - 132 103 IOC - - - - - - - ' 132 103

-Materials 194 152 75 _ - - 65 50 25 - - 2 - _ _ _ - - 059 202Farmers New Planting -Contract 178 139 60 - - - - - 6o 47 20 59 46 20 297 232

-Materials 66 52 75 - - _ _ _ _ _ _ 22 17 25 _ _ 88 69-Living Costs _ - _ 29 23 100 _ _ - 29 23

Farmers Replanting -Contract 281 219 60 - - - - _ _ _ _ _ 93 73 20 93 73 20 467 365-Materials 144 113 75 - _ _ _ _ _ _ _ _ 48 37 25 _ _ - 192 150

Fertilizer Smbsidy - _ _ _ _ _ _ 75 59 100 - - - - - - 75 59

Total Field Development 972 761 55 - 310 240 18 75 59 4 252 197 14 152 119 9 1,761 1,376

IrrigationCivil Works 120 94 60 -- 80 60 4 - - -_ - 00 156Psops 81 62 95 -4 5 - 85 66Re.abilitation-Materials-60% 419 327 95 _ _ _ _ _ 2 18 5 - _ _ _ _ - 1441 3L5

-labor -400 - - - 663 518 100 - - - - 663 518

Total Irrigation 620 483 45 - - _ _ - - 769 602 55 - - - - - _ 1,389 1,085

Field and lo-kn! opFnlabilitation orf Fistiln q9-.ipent 288 025 75 - - - 96 75 25 - _ _ _ _ _ _ _ _ 384 300Crawlers -nd Tmple-enfs 220 172 95 - _ _ 12 9 5 2 _ _ _ _ _ _ _ 032 181Wh.eel Tractors and Tmplemnf.s 270 011 91 - - - 15 12 5 _ _ _ _ _ _ 285 223Workshop Fq.ipme-t 146 114 95 - _ _ 8 6 5 - _ _ _ _ _ _ _ i154 i20Wo-k.nsop n,ildin- 46 36 60 - - - 31 24 40 - - - - - - - - - 77 60

nage qqipmect -Esatfe 1419 327 '9i - _ _ 20 16 5 _ _ _ _ _ _ _ _ _ 439 343-Far-ers 483 391 95 - - - 26 21 5 _ _ _ _ _ _ _ _ _ 514 402

Totl -'ield To9ipac' 1S ,7 1,146t 90 - - 208 163 lo - - _ _ _ _ _ _ _ 2,0S5 1,629

Factory

Eq3,ipmcnt ?,849 2,2?16 97 - _ _ 76 59 3 - _ _ _ _ _ _ _ _ 2,925 2,285Ciiloris aW-k . ngia, erng 1416 325 48 - - - 459 359 52 - - - - _ _ _ _ _ 875 684

Tofal F-ct.r0 3.265 2,551 86 - - - 535 418 14 - - - - - - - - - 3,800 2,969

AdministrationIncremental o'.-king Capital - - - - - - - - - 1,250 976 100 - _ _ _ _ _ 1,250 976Housing and nRldilngs 1,401 1,095 50 - - 1,402 1,095 50 - _ _ _ _ _ 2,803 2,190Radio and Office Rqoipment 83 65 95 - _ 54 5 - - - _ _ _ _ _ 88 69'ehicles 133 10390 - - - 33 27 20 - - _ - _ _ _ _ _ 166 130

Mansageent Fee 2155 1,684 100 - - - - - - - - - - - - 2,155 64Monagenest Talaries and i scosts 2.117 1,654 55 - _ _ _ _ - 1,750 1,367 45 - _ _ _ _ _ 3,867 3,021

Total Administratiosn 5 9 4-601 57 - - - 38 31 _ 4,402 3,438 43 _ _ _ _ _ _ 10,329 8.070

TOTAT. ASl-KIASE 17 671 9_862 65 _ l,0o 852 6 5,.46 4,099 27 252 197 1 152 119 1 19,364 15,129

October 17, 1972

GHANASUGAR2 REH&I.LIfTION 11 FROJE( T

FI2AN00NG OF PROJECT COSTS(To-t'd)

Project C-t Ste-n IDA OiVA G1IASEL GOVERNMEINT A. )B. FARMERS TOTAL

CR0 01 '0TT '000 '0 '00 $ 00 0$'0 , '0 1 00 ' '000 uIs$ '7000 , '000 us$ '000 T, $ 000 OS9 '000

2.KOMENA

Field Dev..loOTeottaat Ne .... tin . Lbr - - - 40 31 100 4o 31

-Materialo ~~~ ~~~~~ ~~59 46 75 - - 1 15 25 -- - -- --- -78 61Notate BePlaoting -Laor- - - - 125 82 i0 - -- - 105 81

-lftota~ilo 154 120 75 - - - 50 40 05-2- - 205 1-60Farmer N- Pl-antlg -C-otr-t 110 93 60 -- - - - 40 31l 20 39 30 20 127 154

-Mat-irlal 44. 35 75 15 21125 -- - 59 46-Lioi.g C.St, - - - - - - -- - 15 100 - - 1 15

F-cors Replaotiag -C-ot-at 236l 145 60 -- - -- - -- - 61 49 10 62 48 20 309 242

-MaterIals ~~~ ~~~~ ~~~90 '74 - -5- -32 25 05 -- - 127 99Fot,tilize Outeldy - - - - - 5 3910 lo; - - - 50 39

Tote.l Field Developseot (0 6 5111 - 25 169 10 50 39 4 i67 131 14 101 76 9 1,189 929

anld.d WSork.hopRehabiltat 00 or osotiot " Eqolp-CO -o -l 11 8 0 5 217 169Crawlers aod Impl-cenets 1,9 I,, - 2 1, 5 ) 51. 40'Thee ratora and oFICeor-to 1' - 0 9) 7 5 165 3129W,,kehtlpFqOlpipm-t 95 66 - - . 4 0 90 70

Fi,ld lookbstop 10)4 B1 9 - 4 log -- -- 0 65laclag Fo,lspoect -Est.te - -?15 9 10 0 5 202 isS

-Paroops ~~~ ~~~~~ ~ ~ ~~12- NJ - - 11 6 - 192 150

Total-Field Oglllp-.et - -1 550 41 i 1.026 601

Fa,tory25 3 2Tq7lp-not 117l3 932197 -- - 32 25 3 -- - - 12429RC12i1 W0r40 aod F,gi,ee,li, l(l 126 45 183 143053 ---- -2 -- 9

Total F-olery 1.,5 1,7519 F50 "I') 71 1(10 n) 1,569 1,226

Ads,inistration

Sooreorotal Workito CaFOt.l i. - - - - - - s 003 0 -- - 650 5o6Oooeiog and Poilditoc l~~~~~~~~ ~ ~ ~ ~~~~~~~~,71 -so - 21 400, 50 - ,041 614

PoOioar-dS(ffi- To'lp-et 7 '3" 30 - 5 - - - - 0 61Vehi,l- ~~~~~I'll 11030 - 38 30Ž1 -- - -- 189 146

Man-OOenot alriono '-c'.t 1,1(6 311 ,4 - -- 992 ~ 7'5 46 2,156 1,6866

7,otal Oeoorto.1.511. i,49< 20 - 4? 33 1 0l,i63 1.689 53 - - - - - - 4,119 3,218

7<'J15L K52't'TTt ~~~~~~ ~~~~~~~4,990, 3,80Ž7 6Ž - - - 5Ž~3 '.10 7 2.213 1,728 28 167 131 2 101 78 1 7,903 6,174

1,767 2,381 SI 320 250 11 218 170 1- 60Ž 009) 11 39 30 1 P2 17 1 3,016 2,356

(steNod 429 335 38 320) 250 28 14Ž, III 13 203 i7s1 25 20 2 112 1 1,131 883

o,tal sot.Oeo 2 196 1 716 54 640 Soo 15 360_ 261 0 5s 066 0o 61. 50 2 37 19 1 ,4314

4. 7722'.?

IodtoPiol oPOnoOtO.l <'17 - - - - - <11 - - - - - - 65 54~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~655

Soolojeol looiotov',to . - - -- -5 45s 23 -- -50195

7otalllxP5. 0> '9 -- - -- -7 6 0 50 4519 - 315 246

IAOTTI 7771.A2 19,968 15,400 43 (- 507 1,974 1.543 1 9,314 6, 49P, 2051 2 2006 1 31,731 24,79o

Octeb-r 17, 1972

GHANTA

SUGAP. REHABILITP.TION PROJECT

Phasing of IDA Disbursements

Project Cost Items% of IDA

A. Asutsuare financing 1972/73 1973/74 1974/75 1975/76 1976/77 1977/78 Total Total in US$

Field DeveloEmentEstate N.P. materials 75 - 19 29 32 29 - 109 86

R.P. materials 75 25 55 57 43 14 - 194 152

Fanaers N.P. contracts 60 75 75 28 - - - 178 139

N.P. imaterials 75 28 28 10 - - - 66 52

R.P. contracts 60 28 28 61 82 82 - 281 219

R.P. materials 75 14 14 32 42 42 144 113

Total Field Development 271 I9 217 199 17 - 972 761

Ii.LgationCivil works 60 40 - 80 - - 120 94Pumlls 95 - - - 32 49 - 81 62

Rehabilitation materi-nls 95 - 58 158 46 157 - 419 327

Total Irrigation 3E IO 53 2M - 2 bU

Field and Road Equinraent 90 1,228 32 33 56 430 98 1,877 1,466

Factory 86 1,218 1,551 103 18 375 - 3,265 2,551

AdministrationHousing and building 50 389 780 232 - - _ 1,401 1,095Radio and office equipment 95 51 32 _ - - - 83 65

Vehicles 80 78 10 12 12 11 10 133 103

Management fee 100 334 546 182 273 273 547 2,155 1,684

Management salaries andon-costs 55 312 361 361 361 361 361 2 U7 1 654

Total Administration 1,11W 1,729 787 6 1i6-T7 91-T , g3d h01

Total Asutsuare 3,820 3,589 1,298 1,077 1,823 1,016 12,623 9,862 mD

GHANA

SUGAR REHABILITATION PROJECT

Phasing of IDA Disbursements

(continued)

% of IDAProject Cost Items financing 1972/73 1973/714 1974/75 1975/76 1976/77 1977/78 Total Total in US$

B. Komenda

Field Develo=entEstate P. materials 75 - 38 21 - - - 59 46

R.P. materials 75 19 29 37 52 17 - 154 120Farmers N.P. contracts 60 42 38 38 -- -_U8 93

N.P. materials 75 16 14 14 - - - 44 35R.P. contracts 60 U 16 22 54 54 29 186 145R. P. materials 75 5 8 11 28 28 15 95 74

Total Field Development 93 l;43 3 134 99 44 56

Field and Road Eqipment 95 822 33 30 30 30 30 975 760

Factory 86 577 777 - - - - 1,354 1,058

AdministrationHousing 50 78 271 172 5 _21 408Radio and office equipment 95 38 38 _ - - - 76 59Vehicles 80 90 10 11 10 - 30 151. U8Management salaries andon-costs 55 166 200 200 200 200 200 19166 911

Total Administration 77 i3iL 7 1,96

Total Kamenda 1,864 1,472 556 374 329 304 4,899 3,827

Total Asutsuare and Kamenda 5,585 4,899 1,800 1,370 2,071 1,157 16,882 13,189

C. Contingencies 2y6 466 366 311 557 20 2; 6 1, 716

D. Study 88 - - 58 - - _ 58 45

ADB Technical .ssistance 77 96 96 - _ _ _ 192 150 ra1

TOTAL IDA FINL~NCING 6,076 5,623 2,278 1,762 2,710 1,519 19,968 15,600october 17, 1272

ANNEX 10T able3

GHANA

SUGAR REHABILITATION PROJECT

Disbursement Schedule

IDA Fiscal Year Cumulative Disbursementand Quarter at End of Quarter

(us$ tooo)

1972/73

March 31, 1973 841June 30, 1973 2,403

1973/74

September 30, 1973 3,966December 31, 1973 4,747March 31, 197h 6,327June 30, 1974 7,577

1974/75

September 30, 1974 8,359December 31, 1974 9,140March 31, 1975 9,570June 30, 1975 9,999

1975/76

September 30, 1975 10,429December 31, 1975 10,920March 31, 1976 U-,271June 30, 1976 11,623

1976/77

September 30, 1976 11,974December 31, 1976 12,296March 31, 1977 12,,843June 30, 1977 13,390

1977/78

September 30, 1977 13,937December 31, 1977 14,h13March 31, 1978 14,855June 30, 1978 15,245

1978/79

September 30, 1978 15,600

ANNEX 11Page 1

GHANA

SUGAR REHABILITATION PROJECT

Sugar Industry Organization and Management

A. Ghana Sugar Estates Limited (GHASEL)

Constitution

1. GHASEL was formed in November 1971, under the Companies Code,1963 (Act 179). Regulations provide, inter alia:

- For GRASEL to take over GIHOC assets and liabilitiesrelated to its sugar and alcohol activities at AsutsuareKomenda, to expand these activities, and to cooperatewith other cane producers;

- that GRASEL is a private company;

- that no dividends will be paid unless:

(a) the Company will, after such payment, be able topay its debts as they fall due;

(b) the amount does not exceed the Company's incomesurplus; and

- Directors will number seven appointed by the Government;the representative of HVA in Ghana will be one of theDirectors and will be appointed as the sole ManagingDirector of GHASEL.

Capital

2. GRASEL's registered capital is 200,000 ordinary shares of no parvalue. Government will subscribe for 190,000 shares at 0 50 per share andthe shares would be paid for by the transfer from GIHOC to GHASEL of theassets and liabilities referred under para 1 above. Should the valuation ofthese assets fall short of t 9.5 M, Government would pay cash to GRASELcovering such shortfall. Should, on the other hand, the valuation exceed0 9.5 M the excess would be settled by the issue of new deferred sharesin GHASEL. Such deferred shares would have no voting rights and wouldreceive dividends only after the ordinary shares have been paid in any yeara dividend of 0 4 per share. HVA would be issued one share for each US$50paid in accordance with the Management and Subscription Agreement.

ANNEX 11Page 2

Board of Directors

3. The composition of the Board of Directors will be as follows:

- Commissioner for Trade and Industries (Chairman);

- Executive Chairman of the Capital Investment Board;

- Managing Director of ADB;

- Chief Regional Executive Central Region;

- Chief Regional Executive Eastern Region, and

- HVA Representative (Managing Director).

B. Management

General

4. Government, GIHOC, GHASEL and HVA have concluded a Managementand Subscription Agreement under which HVA would take over managementof GHASEL and of the project from the date the IDA Credit becomes effective.Information on HVA and its experience in the sugar industry is given inAppendix I. The Agreement will continue until June 30, 1978 and be renew-able thereafter for a period of three years, provided government, QIASELaid HVA have negotiated a new agreement prior June 30th, 1978.

Terms of Agreement

5. Initial Steps. Under terms and conditions of the Agreement, HVAw11 mobilize a team immediately to review management and personnelrequirements; prepare equipment and specifications; investigate currentconditions and advise GIHOC on operations prior to assumption of fullresponsibility. Until that time GIHOC will render all assistance possibleto HVA, including provision of information and access to the estates, andprovision of facilities to HVA staff. (GIHOC will continue to be responsi-ble till the date of credit effectiveness.)

6. HVA Powers and Responsibilities. According to the Agreement,-HVA is charged with the following powers and responsibilities:

(a) manage GHASEL in a proper, businesslike manner andensure that it carries out the project;

(b) determine prices for GHASEL products subject toBoard approval;

ANNEX 11Page 3

(c) supply services of qualified technical experts andstaff;

(d) provide back-up facilities and advice, including periodicvisits by its top management staff and advisers (technical,processing, agricultural and financial); each would make twovisits a year of at least two weeks' duration;

(e) ensure that, within four weeks of signature of the ManagementAgreement, a qualified representative in its employ isresident in Ghana. The resident representative will devotehis sole attention to the discharge of HVA's obligations;

(f) on behalf of G{ASEL, recruit staff from abroad, if necessary,and have power to engage and dismiss all employees;

(g) prepare annual standard establishments for staff and labor;

(h) prepare and implement a personnel training program and submitsemi-annual reports to the Board;

(i) install and maintain a full accounting and cost control systemand prepare accounts in line with accepted accounting principles;

(j) submit annual and semi-annual estimates of capital and revenueexpenditure and income, as well as supplementary estimatesas required;

(k) borrow no money without Board approval, except under temporaryloans within limits prescribed by the Board;

(1) dispose of no assets, not encumber any of the fixed assets,invest no funds, and incur no capital expenditures withoutBoard approval;

(m) subject to Board approval, HVA may entrust certain activities(e.g. irrigation design, soil tests, health advice) tospecialized services, the costs to be borne by GHASEL;

(n) negotiate and conclude contracts and engagements of all kindsfalling within the normal course of GHASEL's business. HVAshall have power to place all orders for machinery, equipment,spare parts, supplies and materials as HVA may considerexpedient for GHASEL's business, within the limits set in theannual budgets approved by the Board. HVA shall not compromiseor give any release from any contract or engagement withoutprior approval of the Board;

(o) at the request of GHASEL, place at the disposal of the formerits organization in Europe with all its facilities andconnections abroad for the purchase of such specializedequipment as GHASEL may require on the terms and conditionsspecified; and

ANNEX 11Page 4

(p) be responsible for the acts of all new expatriate employees,agents or others, engaged or appointed by them in case ofgross negligence in their appointment of delegation ofpowers to them.

7. Government Responsibilities. The Agreement requires Governmentto provide support to management by:

(a) facilitating prompt customs clearance of goods required forthe project and by personnel working on the project;

(b) ensuring timely provision of visas and permits;

(c) making available foreign exchange for procurement of equipmentand materials, staff obligations abroad, expatriate staffsavings and HVA's fees; and

(d) encouraging the outgrowers to avail themselves of the facilitiesprovided by GHASEL.

8. Remuneration for HVA. HVA will be paid for its services in thefollowing manner.

(a) From the date of the Agreement to July 1, 1973 a fixed feeto be determined plus the salary and on-cost of the staffseconded to the project plus the costs of the visiting experts.The management fee will be paid on June 30th, 1973;

(b) 1973/74. Fixed fee of US$200,000 plus a production fee of 3%of sugar production in metric tons multiplied by US$190, sub-ject to a maximum of US$300,000;

(c) 1974/75. Fixed fee of US$150,000 plus a production fee of3%, calculated as above, subject to a maximum of US$300,000;

(d) 1975/76. Fixed fee of US$150,000 plus a production fee of2-1/2%, calculated as above, plus 2% of GHASEL's net profit 1/subject to a maximum of US$300,000.

(e) 1976/77. Fixed fee of US$125,000, plus a production fee of2%, calculated as above, plus 2% of net profit; no maximum;

(f) 1977/78. Fixed fee of US$100,000 plus a production fee of2% calculated as above, plus 1.5% of net profit; no maximum.

9. Fixed fees are payable monthly in arrears, production fees 50% atthe end of the milling season and 50% at the end of the financial year, and

1/ Net profit is the audited pre-tax profit excluding interest on maturitiesof more than one year.

ANNEX 11Page 5

profit fees on completion of the audited accounts, but not later than fourmonths after the end of the financial year. All fees are payable in US dollarsto a bank in Amsterdam and are not subject to taxes. Costs shall be promptlyreimbursed in the currencies in which they are incurred.

Procurement Services

10. HVA will receive a fee of 4% of the FOB value of goods procured andpurchased through the services of its Amsterdam office subject to doing theprocurement in accordance with the Management Agreement.

Subscription

11. HVA will subscribe for shares in GHASEL (para 2) in the followingamounts:

US$200,000 - on July 31, 1974

US$150,000 - on July 31, 1975

US$150,000 - on July 31, 1976

Subscriptions shall be payable at the end of each financial year in US dollarsprovided HVA has received the fixed management fees due and these paymentshave been approved under the Capital Investment Act of 1963 entitling thetransfer abroad of dividends and the proceeds of sale of shares. HVA mayterminate its subscription if notice of acceleration or suspension has beengiven by IDA pursuant to the credit agreement, provided such notice is notthe result of a default by HVA.

Safeguarding of Interest of Minorities

12. HVA shall be given the opportunity of expressing its views anddeclare its interests in regard to all matters of major importance to GSEshareholders.

Transfer of HVA Shares

13. Should the Agreement be terminated, payment for HVA shares will bemade by Government to a bank in Amsterdam within six months of determinationof the price. The price will be the subscription price or, if higher, deter-mined by valuation on a net book value basis.

Arbitration

14. Any dispute shall be settled under the rules of the InternationalCenter for the Settlement of Investment Disputes.

ANNEX 11Page 6

C. Staff Establishment

15. The Managing Director will be based in Accra with a small staff.

The Asutsuare proposed staff will total some 28 and the Komenda some 12 ex-

patriates. The attached Organization Chart shows the distribution of the

staff, and details of the positions are at Appendix 2. A summary of thetotal staff and labor employed in the Industry, excluding contractors, is

at Table 1.

D. Labor

1i5. The four main instruments of labor legislation are the Labor

Decree, 1967; the Industrial Relations Act, 1965; the Workman's Compensation

Act, 1963; and the Social Security Act, 1965.

17. GIHOC recently negotiated a Labor/Employer Agreement, effective

from July 1971 for a period of two years, with the Industrial and Commercial

Workers' Traders' and Woodworkers' Union of the Traders' Union Congress. The

Agreement, obviously oriented towards an industrial operation, is not suited

tc, agriculture and is one of the reasons for low productivity and management

difficulties. However, it will not necessarily be assumed by GHASEL, and the

new management will review it and, if necessary, negotiate a new labor agree-

ment prior to assumption of full responsibility.

October 18, 1972

ANNEX 11Appendix 1Page 1

GHANA

SUGAR REHABILITATION PROJECT

HVA-INTERNATIONAAL NV

1. HVA-Internationaal NV (HVA) is a wholly-owned subsidiary of VerenigdeHVA-Maatschappijen NV, a public Dutch Company which was founded in 1879and which first engaged in commodity trading, especially in Indonesiawhere it later acquired substantial interests in production of sugar, coffee,tea, rubber, palm oil and other commodIties. These interests were national-ized in 1957. Other companies in the Group include:

HVAName Business Participation

Tropical Agriculture

HVA-Ethiopia Sugar Estates at Wonji and Shoa.Confectionery works 80

PT Agriconsult Inter- Management and consultancy innational (Djakarta) tropical agriculture 50

Landbouwe Maatschappij Oil palm estate 20Victoria (Surinam)

Trade

HVA-Nederland Trade in agricultural products(Amsterdam) and purchasing 100

Industry

NV Chemi Combinatie Lactic acid and chemical factories;(Amsterdam) research laboratories 50

2. The Group has had long experience in the sugar industry, startingin Indonesia. Since the mid-1950's it has pioneered the sugar industry inEthiopia which is now carried on at three estates totalling some 25,000 acreswith an annual production of about 130,000 tons of sugar. HVA also managesthe Kilombero estate in Tanzania which has an area of some 7,000 acres andan annual production of 36,000 tons. HVA has managed these projects suc-cessfully and also provided sound training of local staff with the resultthat expatriates are being replaced steadily by nationals.

ANNEX I 1Appendix 1Page 2

3. In addition to its management experience, HVA has conductedfeasibility studies for rehabilitation of sugar estates in Indonesia, asugar project in the Yemen Arab Republic, and extension of the Kilomberosugar factory. Its activities in tropical agriculture other than sugarinclude development and management of an oil palm estate in Surinam, andfeasibility studies on tea estates, oil palm estates, citrus plantations,and edible oil marketing.

October 18, 1972

GHANA

SUGAR REHAPILITATION PROJECT

Staff Establishment

NwnberPosi tion Asutnuare Womenda Qualifications and Experience Comnts

Administration

Managing Director 10 years in sugxr oroduction including position of PFVA representative. Resident

Hanaging Director or Gener.1 I'anager of sugar proCucing in AccrRconplex in tropics.

Financial Controller Recognized accounting qualification. 10 years as Chief Pesponsible to l{manging Director

Finenci-.l Officer of large organization and preferably for all financial snd secretarial

with sug.r e,-perience. iwtters.

Private Secretary

Estates

3'tate Manager 1 1 Degree in either agriculture, processing or engineer- Reaponsible for all estate

ing - 1I yea.ri' e-xperience in tro-.pic-l su-;r production operations.

&Li thI fur rer.r its Senior L.an."er. Ixoerj ence as=ener, 1 l:cheger or Deputy preferrd.-

Factory and Distillery

Chief Fngineer 1 1 Degree in engineering. 1C yenrs' experience in su_T rjndustry including three years in senrcr position.

Senior Engineer 2 2 Degree in engineerinr;. Five years in sugar in(u3try.

Electrical Engineer 1 1 Degree or equiv;]ent in clectric.l engineering. Threc

year ,' eoxperiencc of g:enera tior nmv dci.tribution inz.1h neg. u- tt ran,,e.

Machine Shop A

Enginrer 1 1 Degree or equivwIcnt in engineering ui1.h live ycara Ii!c;~perience in hei.v,, -nd lignt engineering and machineshop techni(,ue;.

Outside Engineer 1 - Appropriate qualification with three years'experience as foreman oS works or similar.

Instrun2nt Engineer 1 (1) Degree or equivalent in electrical engineering Shared with Korendce.preferably with apprenticeship to mnjor instrumentmanufacturer, and tiree to five years in a processindustry.

Process Engineer I 1 Degree in chemistry or diplona in sugzr technolo-ranOl five years as chief or senior cherist.

Assistant Process 1 1 Degree in chemistry or diplon, in sugar technologyEngineer and three years as shift economist or equivalent.

Plantation and Cane-FaIing

Plantation Manager 1 1 Degree in agriculture or eouivalent. Five years incane cultivation including two years as !lanager oflarge cane groiring section or plantation, preferablywfith additional experience in associated fields.

Area Managers 2 _ Degree in agriculture or ecuivalent. Five years in

cane cultivation, preferably under irrigation.

Equipment Field O.ficer 1 1 Diploma/certificate in agriculture or field engineer-inr preferred and ex jence in tractor and transport

Senior Agronomist 1 _op rations ln te can m ustry. Senior to Xomenda AgronomistSenior Agrcnomist 1 - ~~Degree in a icultural science and two ~-ears' eirt onaArnms

experience En the tropicos.

Agronomist - 1 Similar to above.

Assistant Agronomist 1 Degree in agricultural science. Previous cane

evoerience an advz.ntage.

Cane Farmers, Liaison 1 1 Degree, diplome. or equivalent in tropical agriculLure,Officer good knowledge of ca ne cul .ivation and the right

personality -nd administr.tive ability.

Irrigation Engineer 1 u.llficntjon in ci-rI end hydraulic engineeriig

with experience in irrigation, preferably on sugarest.tes.

Transport and FieldEngineering

Transport and FieldEngineering Manager 1 1 Degree or enuivalent in automotive engineering and five

years' ex:perience in major repairs and twio yearsadrmnistering L--rge T & F'Z workshop.

Assistant T and FEManager - 1 Jixil.r to above.

T & FE Engineer(Tractor) 1 _ DeGree or equivalent in automotive engineering and

three years with heavy plant manufacturer or dealer.

T &, FE Engineer(.Jorkshop) 1 _ As above

T e, FE Engineer(Truck and cars) 1 _ Gener-l -nd technical educ-tion to 12th grade and

three years in large workshop cr gar2ge.Field Maintenance

Engineer 1 General and techmical education to 12th grade andexperience oin :.uLonaotive engineering.

It :> :

A ccounts

Chief Accountant 1 _ leconised accountacy *ualification and five years'post eu;alifice'tion experience with two years assection hea-d of large accounts department.

Accountants - 2 siTd,lar to above.

Assistant Accountants 2 - Recognized accounting curulificsition and three years'post c(ualification - proiession;l or commercialexperience.

Stores Supervisor 1 GCE '0' level standard education and three yearsas stores supervisor in large organization.

Personnel Welfareand Training

Training Manaper 1 (1) Degree in enginecring or technology and additional Shared with Komenda.tehncpl education rualifications Five years'experience and two in training with major conpany.

Personnel Manager 1 (1) Degree preferred with imembership of IP! . Three Shared with Komenda.years as general persomnel officer in major coraparfy.

Assistant Personnel/ 1 (1) I,embership of IMP preferred and some years Shared with Komenda.Traininp Manager ex-perience in tr inin;/personnel.

Personnel Officer - 1 Similer to -bove.

Shop Floor TrainingOfficers (Factory, 2 - Degree, diploma in technical education plus three Shared with Komenda.T ~- FE ve:rs' experience in shop floor instruction.

Medical Officer I - PlenLSt red medicr practioner with di loma in tropi_ca lme3icine and two years' experienac prelerabLysith ind.ustri;l orgrn7-ation in developing country.School Hasters 1 _ Degree of Dutch Pcd,, go[ie cr demy and three years'experience,orederaoly At Dutch schools ovcrseas.

Junior Supervisory Staff

Factory and Distillery

Engineering Supervisors 14 14h

Foremen 14s 9

Pan Boiler Supervisor 1 -

Distillery Manager 1 -

Plantation and CaneFarming

Section Supervisors 6 3

Farm Supervisors - 8

Assistant Cane Farmers'Liaison Officer 1

Cane Farming Inspectors 3 2

Foremen 36 43

Iaa

ANNEX 11Table

GHANA

SUGAR REHABILITATION PROJECT

Sumnary of Staff and Labor Estimates

Asutsuare Komenda Total

Administration - - 3

Senior Staff 34 17 51

Junior Supervisory Staff 66 79 145

Clerical, etc. and Labor

Skilled - permanent 470 360 83r- seasonal 160 100 260

Unskilled - permanent 570 340 910- seasonal 880 510 1,390

2,080 j 310 ln90

Cane WnrmerR

Permanent 800 480 1,280Seasonal '.200 970 2,170

2.000 1,450 3,450

TOTAL 4,180 2,856 7p039

October 18, 1972

ANNE~X 11CHARTp

~~~~ ~~~~~~ -~~~~J

z

0.0

40~~~~~~~~~~~~~~~~~~~~~~~~~~~~4~~~~~~~~~~~~~~~

LLi z~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Z~~~~~~~~~~~~~~~~ N

Os Q0 z~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~X

0

'lizcci

S~~~~~~~~~~~~~~~~

0 z~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~0i -~~~~~ -oz -~~~~~~~~~~~~ ~ ~ ~ ~ W~~~ W Lz

Z~~~~~~~~~~~~~~~~~~~~ ~~~~~~~~~55

1~~~~~~~~~~~~~ 2

0 -J~~~~~~~~~~~~~~........ ...... ........... ... U............ ... .....

ANNF.X 12Table 1

GHANA

SUGAR REHABILITATION PROJECT

Cane Farmers - Per Acre Cost

(0)

Year 1 Year 2 Year 3 Year 4 Year 5

Labor Requirements (Man-Days)Planting seed cane 13 - - -Fertilizer application 2 2 2 2Weeding 16 16 16 16Earthing-up 8 - - - _Drainage 5 5 5 5Total up to Harvesting ND TU ___ __: 23 -Cost @ 9 1.00/MD 0 h4400 23.00 23.00 23.00 -

Harvesting (2 MD/Ton) MD - 50 42 36 32Cost @ 0 1.00/MD 0 - 50.00 T2.00 36.00 32.00

Total MD Required ND 44 73 65 59 32Total Cost @ X l.OO/MD 0 7T.O0 73.00 65,00 59.0 32.00

Material and Equipment (0)Land Clearing 125.00 - - - -Seed Cane (3T/Acre @ 0 8.50) 25.50 - - - -Fertilizers 11.10 11.10 11.10 11.10 11.10

Total Material and Equipment 161.60 U.10 11.10 11.10 11.10

Sub-total 205.60 84.10 76.10 70.10 43.10

MiscellaneousRent 1.50 1.50 1.50 1.50 1.50Local Council Charge,Cooperative Fees0 0.30/Ton - 7.50 6.30 5.40 4.80

Sub-total 1.50 9.00 7.80 6.90 6.30

Total Cost Per Acre 207.10 93.10 83.90 77.00 49.40

October 3, 1972

ANNEX 12Table 2

G If A N A

SUGAR REHILITATION PJWT

CASH FLOF 0F' A 25-ACRE SUGAR CAIE FAR!

Year 1 Year 2 Year 3 Year 4 Year 5 Total

Source of Funds

Yield per acre (Tons) - 25 21 18 16 80Total yields (Tons) 6 625 525 450 400 2,000

Retucnfrom sale at , 8.50/Ton - 5,3-2.5 4,462.5 3,825.0 3,400.0 17,000

Loan from ADB

Land preparation 2/ 2,500.00 - - - 2,500-00Seed cane , 637.50 - _ _ 637.50

Living expenses3/

300.00 - - - - 300.00Developsent loan 3,437.50 - _ I;7Z

Harvesting !/ - 1,000.00 840.00 720.00 640.oo 3,200.00Fertilizers 2/ 277.50 277.50 277.50 277.50 - 1,110.00

Total ADB loan 3,715.00 1,277.50 1,117.50 0 640.oo 7,747.50

Total Sources of Funds 3.715. 6,59o.oo 5.580.00 4,822.50 4,o4o.00 24.747.50

Application of Funds

Development costs 3,762.50 - - - _ 3,762,50Maintenance 277.50 277.50 277.50 277.50 _ 1,110.00Harvesting §/ - 1,000.00 840.00 720.00 640.oo 3,200.00Rent 37.50 37.50 37.50 37.50 37.50 187.50Miscellaneous 7/ _ 187.50 157.50 135.00 120.00 600.00

Total Application of Funds 4,077.50 1,502.50 1,312.50 1,170.00 7,07.50 8,860.00

Net Return before debt service (362 50) 5,087.50 4,267.50 3,652.50 3,242.50 15,887.50

Debt Service

Principal of development loan §/ - 1,375.00 1,031.25 687.50 343.75 3,437.50Interest at 9% p.a. 2/ - 309.00 186.00 93.00 31.00 619.00

Sub-total 1,. 00 127.25 780,50 -37I 40tn5Principal of annual loans - 1,277.50 1,117.50 997.50 917.50 4,310.00Interest at 9% p.a. - 23 37-73 35:78 34.58 148.07

Sub-total _ l3. 1,155,23 1,033,28 945.07

Total Debt Service - 3,001. 2,372.48 1,813.78 1,326.83 8,514.57

NET CASH FLOW (36 250) 2 .02 1,838.72 1,915.67 7,372.93

Cumulative Cash Flow (362 50) 1,723.52 3,618.54 5,457.26 7,372.93

Family labor employed (MD/acre) 44 37.6 36.0 34.8 6.4 158.8

Total family labor employed (MD) 1,100 940.0 900.0 870.0 160.00 3,970.0

Average earning per family meber O) - - 0.85 2o. 2.11 2.11 11.98 1.86

./ 80% of 25 acres at I 125 per acre./ 3 tons per acre at 9 8.5 per ton.

1 32 per acrey 80% of the labor requirements estimted at 2ND/ton costing 1.00/MD./ Including transport to the fields,

i/ Assuming that 80% of labor required for harvesting is hired.n/ ion fee, Local Council dues.

/ Respectively 40%, 30%, 20% and 10% of principal in year 2, 3, 4 and 5.Interest calculated over one year for the fertilizer caoponent of the annual loan, aDd over two months 1 th harvesting coamponent.

10] Average over the first two years.11/ After payment of e 1.00/MD to hired labor.

Aagust 18, 1972

ANNRX 1.;

GHANASUGAR REHABILITATION PROJECT

GHASELProjected Income and Expenditure Statements

Asutsuare(1 '000)

1972/73 197374 1974/75 1975/76 1976/77 1977/76 197B/79

Production - Sugar (tons) 3,930 7,370 13,360 20,490 23,610 27,390 29,130Alcohol ('000 gallons) 260 365 466 473 545 633 673

Sugar Sales at ¢256/ton 1,006 1,887 3,420 5,245 6,o44 7,012 7,457Less: Selling Expenses at ¢11.5/ton 45 85 154 236 272 315 335

Net Sugar Proceeds 961 1,802 3,266 5,009 5,772 6,697 7,122

Expenditure

Field CostsReplanting - - - - 86 152 152Patoons 236 193 218 277 317 317 317Trrigation/Drainage - - 88 113 153 196 232Agronomy 27 27 27 27 27 27 27Overheads 222 222 222 222 222 222 222Workshop 94 62 30 - - - -Harvesting and Haulage 94 112 182 260 321 400 434

Subtotal 6743 616 767 269 1,126 1,314 1,3134

Farmers' CanePurchase 45o 672 832 931 985 1,o40 1,095Haulage 117 174 215 241 255 269 283Cane Yard 23 23 31 31 32 33 33Extension Services 15 15 15 15 15 15 15

Subtotal 605 o84 1,093 1,218 1,267 1,357 1,428

FactorySalaries and Wages 465 465 465 465 465 465 465Repairs and Maintenance 150 150 150 150 150 150 150Overheads 105 105 105 105 105 105 105Consimable Materials 421 442 449 371 414 322 345

Subtotal 1,141 1,162 1,169 1,091 1,134 1,042 1,065

AdministrationGeneral 48 48 48 48 48 48 48Accounts and Stores 143 143 143 143 143 143 i143Personnel 52 52 52 52 52 52 52Training 108 108 108 1(8 108 108 109Welfare 100 100 100 100 100 100 100

Subtotal 451 451 451 451 451 451 441

ManagementSalaries Net of Taxes 280 280 Q280 280 280 240 140Income Tax 130 130 130 130 130 113 -Oncost 248 248 2 43 248 248 230 1?4

Subtotal 658 656 656 F58 583 264

Management Expenses Allocated to Capital 658 441 329 ?17 165 58 -Management Expenses Allocated to Revenue - 217 32-9 441 493 5?5 2t-4

DepreciationAgriculture Development 178 21" 23Q *94 31Q 426 447Factory 250 332 435 443 444 470 470Administration 86 60 111 124 124 124 124Management _ 33 56 75 87 98 1.01

Subtotal 514 42 0 136 -?73 1,118 1,14"

Oross Sugar Production Cost 3,384 3,972 4,64) 5,036 -,4(4 1,'07 5,732Less:Duty ebate on Fuel Oil 230 230 224 194 *02 168 169

3,154 ,742 4 ,4 2 03 ,5(3Net Profit (Loss) Sugar (2,193) (1,940o (1,159) 167 510 1,058 1,559

Distillery

Income - Alcohol at ¢ 2.0/gallon 520 730 932 946 1,090 1,266 1,346

Production Costs 136 170 203 905 229 2?7 .70Less:Duty Rebate on Fuel Oil 26 36 47 47 55 r3 67

Net Production Costs 110 134 156 15a 174 194 203

Net Profit on Alcohol 410 596 776 7,8 916 1,072 1,143

Total Net Profit (Loss) Before Interest (1,783) (1,344) (383) 955 1,420 .12 , 710

September 12, 1972

A.IIIE 13

GHANA Table 2SUGAR REHABILITATION PROJECT

GPASELProJected Income and Expenditure Statements

Komenda

1972/73 1973/74 197475 1975/76 1976/77 1977/7 19779

Production-Sugar (tons) 6,830 9,150 12,360 14,320 14,080 14,530 14,6ooMolasses (tons) _2,870 3,200 4,330 5,010 4,930 5,090 5,110

Sugar Sales at p242/ton 1,653 2,214 2,991 3,465 3,407 3,516 3,533Less:Selling Expenses at 011.5/ton 79 105 142 165 162 167 168

Net Sugar Proceeds 1,574 2,109 2,849 3,300 3,245 3,349 3,365

ExpenrLiture

Fiel.d CostsReplanting - - - - 74 107 107Ratcons 188 124 192 228 228 228 228Irrigation/Drainage 49 51 54 57 57 60 60Agrcnonwy 12 12 . 12 12 12 12 12Overheads 148 148 148 148 148 148 148Workshop 50 62 22 2 14 - -Harvesting and Haulage 195 164 240 294 282 294 298

Subtotal 642 561 668 741 815 849 853

Far-mers' CanePurchase 372 462 553 614 614 614 614Haulage 107 133 159 176 176 176 176Extension Services 10 10 10 10 10 10 10

Subtotal 489 605 722 800 800 800 800

FactoDrySalaries and Wages 271 271 271 271 271 271 271Consumable Materials 154 155 173 169 171 173 192Repairs and Maintenance 100 100 100 100 100 100 100Overheads 134 134 134 134 134 134 1w4

Subtotal 659 660 67d 674 677 676

AdministrationGeneral 32 32 32 32 32 32 32Accounts and Stores 68 68 68 68 68 68 68Administration 29 29 29 29 29 29 29Welfare 38 38 38 38 38 38 38

Subtotal 167 167 167 167 167 167 167

Mana4gementSalaries Net of Taxes 160 160 160 160 160 133 80Income Tax 73 73 73 73 73 61 -Oncost 137 137 137 137 137 125 68

Subtotal 370 370 370 370 370 319 148

Management Expenses Allocated to Capital 370 248 185 122 93 2Management Expenses Allocated to Revenue - 122 185 246 277 2A7 1

D rciationg ulture Development 99 131 139 146 155 162 168

Factory 85 123 175 175 175 175 175Administration 8 41 65 75 78 78 87Management - 19 31 42 49 55 57

Subtotal 192 314 410 438 457 470 487

Gross Sugar Production Cost 2,149 2,429 2,830 3,o68 3,192 3,251 3,152Less:Duty Rebate on Fuel 111 111 111 111 111 111 116

2,038 2,318 2,719 2,957 3,081 3,140 3,036

Net Profit (Loss) on Sugar (464) (209) 130 343 164 209 329

Sale of Molasses at 0 55/ton 158 176 238 276 271 280 281

Total Net Profit (Loss) Before Interest (306) (33) 368 619 435 489 610

September 12, 1972

GHANA

SUGAR REHABILITATION PROJECT

GHASEL

CONSOLIDATED INCOME STATEMENT

(¢ '000)

1972/73 1973/74 1974/75 1975/76 1976/77 1977/78 1978/79 1979/80 1980/81 19182

Net Profit (Before Interest)

Asutsuare (1,783) (1,344) (383) 955 1,426 2,139 2,702 2,750 2,750 2,750Komenda (306) (33) 368 619 435 489 610 625 625 625

Subtotal (2,089) (1,377) (15) 1,574 1,861 2,628 3,312 3,375 3,375 3,375

Prelinminary Expenses WrittenOff - - - - - 75 - - - -

Interest Payments 385 1,110 1,575 1,735 1,800 1,814 1,825 1,750 1,650 1_ 450

Profit (Loss) After Interest (2,474) (2,487) (1,590) (161) 61 730 1,487 1,625 1,725 1,925-

Capital E:nployed

Net Fixed Asset at Beginning ofthe Year 9.5o0 16,166 27.896 25.328 26,541 28,886 29,468 29,314 29,164 29,014

Inventories, Etc. 1,500 1,650 1,800 1,900 1,900 1,900 1,900 1,900 1,900 1,900

Cash 7 65 239 386 632 984 1,050 1,175 l.300 1,42

Total 11,007 17,881 24,935 27,614 29,073 31,770 32,418 32.389 32 364 32.339 H

(- X

Return on Capital Refore Interest - - - 5.7% 6.3% 8.3% 10.2/ 10.4% 10.3% 10,4% LwO

September 22, 1972

ANNEX 13Appendix to Table 3Page 1

GHANA

SUGAR REHABILITATION PROJECT

Assumptions for Income and Expenditure Statements

ASUTSUARE

Production Annex 6

Income Sugar t 256/ton - selling expenses 011.50/ton

Alcohol C 2.00/gallon

ExpenditureReplanting: C 95.00/acre per Annex 9

Ratoons: C 66/acre

Irrigation and Drainage: Overhead at C 33.00/acre eachFurrow at C 22.50/acre eachDrainage at C 10.50/acre each

Agronomy: Estimated charge for staff, equipment, etc.

Overhead: Executive and senior staff salaries plus75% on-cost

Junior and supervisory staff salaries plus75% on-cost

Car AllowancesFringe benefits for permanent labor atC 100/man each

Fringe benefits for temporary labor atC 50/man each

Workshops: Balance of costs not charged to field, duelow utilization, in early years

Harvesting and Haulage: Cutting - C 1.30/ton year 1, C 1.00/tonthereafter; loading - C 0.35/ton;haulage - C 0.60/ton

Purchase of Farmers' Cane: C 8.50/ton

ANNEX 13Appendix to Table 3Page 2

Haulage of Farmers' Cane: Farmers delivering cane to factorywithin 5 miles on reimbursement basis;beyond 5 miles delivery to receivingstations. Transport from field toreceiving station by tractor/trailer,receiving station to factory by truck/trailer. Total cost t 2.20/ton.

Extension Services: Liaison Officer and fringe benefitsAssistant Officer and 3 inspectorsTransportation Costs

FactorySalaries and wages: Total permanent and seasonal costs

Repairs and Maintenance: ¢ 150,000/year for lubricants, materials,etc.

Depreciation:Agricultural Development 2%

Irrigation - Civil and FieldWorks 2%

- PumpingStation 5%

- MobileEquipment 10%

Field Equipment 15%

Factory - Buildings 2%- Plant 5%

Administration - Housing 2.5%- Vehicles 20%

Management 5%

K0_4ENDA - as above, except for:

Income Sugar ¢ 242/ton

ExpenditureIrrigation and Drainage: t 42.00/acre for irrigation plot scheme

t 8.00/acre for drainage

Haulage of Farmers' Cane: 0 2.43/ton

October 18, 1972

GHANAA-SUG(A.R IOIIOSILATION PRlOJECT

G 0ASEL

00URC20 ANDS APPLICATION 0F' FUNDS03 9 000)

1972/73 1973/74 1974/75 1975/76 1976/77 1977/78 TOTAL 1978/79 1979/AD 1980/81 1981/82 1981/03 1983/84+ 1984/85 1985/86 1986/87 1987/88 1988/89 1989/90 1990/91 1991/99Onward

30URCES

wet P-ofOrtLos-A-ot-oS (1,783) (1,944) (3831 920 1,426 1,13), 1,010 ,702 1,73 ,70 2,750 1 ,750 2,750 2,750 2,750 2,50 0750 ,70 2,750 0,75 0 2750 2 ,750 K-meda (306) (33) 960 119 435 41,8 1,571 610 417 627, 10 2 0165 625 820 625 62o, 62565 2 63

SoStStnl (2,089; (1,377) (15) 1,574 1 ,0F61 2,618 2,532 3,11 3z 7 3,375 , 3,375 3,375 3,375 3,375 3,375 3,375 3,375 3,375 3,375 3,975 3,375

Add: M-g-mnet Costs Chargedto lpodtr

Asot Comm - 077~~~~~~2 329 )4o 497~ 525 2,005

Koe s - 112 183 4lA 277 1-7 119 - --

Sot~toto 339 72i4 689 770 R11 3,024

Denee-l.oo- A-otso..e soh 6 , S4te 036 350 1,118 5 ,013 I,'l,(6 1,142 1,112 i,i42 i,142 1,142 i,i42 1,142 1,142 1,142 1,142 1,142 1,112 o,4Kom-On 297 014 lie 438 4j7 470 1,218 lob 463 483 463 433 483 483 483 483 4,83 483 483 483 483

Sottotal 7r06 956 2,251, 1,374 i,43o 2,588i 7,304 1,6213 1,61,5 1,615 o,E2o 16s 1,625 1,625 1,625 i,6 P5 1,6o5 o,625 1 ,625 1,625 1,625O,o

CaSO in-ome (1,383) 1411 1,740 3,637 4,0(1 5,11 2301 494 505 5,000 7.000 3,000 5,000 5,000 5.000 5,000 5,000 5,00 5,000 5.000 3.080

Lo IBn ooOoeeme A(n IIA 5,258 5.426 2.114 1,548 2,416 1,019 18.475

U Overnet (Di-toO 3.714 0,410 1.462 600 - - 8.186 ---

ObtaL 8,932 7.836 3 ,5076 2,140 2,418 1,719 26,661 - - -----------

Sh,bot-T8tm.onno1,150 1,200 - - - - 3.0 - ------------

EooIty'-T17A - - IS 192 197 - 4'

00T11 0017261 9.339 9.004 5,561 5,969 6 ,601 6.747 43,311 4,94i 1,17 5,0 5,010o 5,030 5,000 5,000 5.000 5.020) 3000 5,000 5. 000 5,000 5,002

APPICAT) 000

* spIts 5ocAsr-sooe ,010 5.392 2,656 1 945 3.216 1,503 19.794 0,045 L,o41) 1,345 ,o4) 1,245 1,045 1,3159 1,145 o,o4s 1,3)45 i,o)45 i,o45 i,o45 1,4to-nda 2 36 2 2.294 1.024 642 559 591 7,478 4 3> 431 430 4630 43o 4130 430 130 430 430 430 430 430 43o

lobtotsa 7 1,31 2 1,686 3,682 2 ,3587 3,0735 2 170 271.2712 1,475 i,45 1,175, 1,475 i,47, i,475 1,475 1,175 a,497 1,475 .1,475 0,4,1 1,L17 1,475

ProllmOoargleperoeo -o~~~~~~~7 - - - - - 75 - --- ---------

Wo-king Cpitoolorem-t.o 1,007, 1%0 10.' 100 ,0

C-rp ... li-oo T - - - - ----- --- 160 15100 ls.,flDD,

Total Appli-nti-s Before Dett

Oc-vlo 8.947 7,836 3.832 2, 681 3 ,1117 2 100 29,247 1,0 ,7 ,-l , ,4-5 ,47s 0,475, 1,155 , 475 3,073 315 3155.2 1

L-eg-T-rs Io- - P,ioolpal1 - - - - 1.661 1,0)61 1 ,0570 1 650 1,150 1,950 2,100 2.250 2,480 2.0075 2.750 1,250 1 350 1,425 1 515 40Irotees 315 925 130 150 127 119 ,64 125 150 1,951 - 1,430 130 150 .000 _ 823 650 450 358 205 122_ 13-

Sobotnti 312' 925 1,956 1,550 1,121 3,450 9,322 3,400 3,400 34100 3,400 3,400 3.400 ,46 3.400 3,400 1 100 1.100 1,700 1,7088 413

1-to->n- Poo.-- Ploolipal - - - 1,400 050 150 3,007 - - - ---------Ooteron' I 2> 200 i3~~~~~~~~~~~~~~~-5 17 75 15 -

wlcotni .1 105~~~~~~l 1225 1,565 927 0075 3 .175 5 - ------- -- --

-boi> -ej 9 932 0 4 .0 .22 047 135 11.317 4 815 4 875 4 875 4 015 4,015 4 817 -9 1 05 105 4015,Ea7' 475 4.2 465 495 360

lot-h opo ,..o..111

- 50 106 14; 9i5 904 6 115 120 120 120 125 70215 105 225 105 105 75 1,1Oos;loosoe p ~ ~~ ~ ~ 65 2 39 396 132 904 004 1,050 1 775 1,300 1.425 1 550 1.115 i Oo o 12 2 050 0 2-% 2 450 2 5175 2 650 3,960

lo''oool try>>. boor., 14 1.5 1.5 7.5 1.5 1,5 ~~~~~~~~~~ 1.7 1.5 1.5 20 .oo 1.9 194 -5

September 0 1975

I

7HA3A-SUGAR REIIAOILIIATION PROJECT

S07B0ES ANDI APPLICATION OP F POOS

1972/73 1973/74 1974/75 1975/76 1976/77 1977/78 TOTAL C 970/79 1979/80 198n/A1 1980/80 L982/8l 1983/84 i984/85 0985/86 1986/87 1987/88 1988/89 1989/90 1990/91 1991/86

Net Profit -Les-Asots-- (1,783) (1,344) 1383) 955 1,406 2,13'1 L,O10 2,772 7,757 2,,750 75 2,758 2,730 2,7'50 2,750 0,750 0,750 2,750 2,750 2,750 2,750

oeae (308) (331 3683 61 435 48I? 1,571 817 o 6P5 625to 60 8o825 625 6805 825 625 81 25 825 -05~ 605

S3Jt408a (2,08.o( (1,377) 1]51 L,574 L 86T 2,628 o,s8o 3,3L12 3.375 3.375 3,375 3.375 3,375 3,375 3,375 3,375 3,375 3,375 3,375 3i,375 3,375

Add: lsno&--et Costs Charged

Asoraoers - 0~~ ~ ~~~~17 309 041 493 5001 2,G003 - - ----

Sub)total. 339 510 489 770 811 3,10 i24- -----

TDoo.a. oo- As-t-"-r 5il 64o 84c 93 973 1.118 5,023 i,0 j,4 1,14 1 I,mOo4 1,140 1,140 1,140 i,142 o,iho iih 1,142 1,14 o i,i42 i,4 1,142

Conenda ~~~~190 31i4 401 438 057 177 1.1 81 033 483 483 43 433 483 483 483 483 483 483 483 483 483

Subtot al 70o8 978 1,250 1,374 1,030 i,588 7,304 0,o-9 ] ,2 ,2 ,625 i,68os 16z0a 1,805 o,Os tos ,8o 1,8625Oo 1,625 i,625 1,805 1,825

Cash Ioo.e (1,383) (82) 1,743 3,637 00 ,08 13,017 4.00 570 .5,5,10 7,00 ,00 5,000 5.000 5.000 5,000 5,000 5.003 5,8000 5,008

Gogneo .T IDA) 5.258 5,428 2,114 1,540o .1 ,1 188475 - -----------

G-!--sot (D1 r-tl .1 .1 4 8 8.186

* - OubtoOni ~~~~~~ ~~8,972 7,836 3.576 2,188 2,418 1,719 26,661 -------------

Short-loft Loans ~~1,758 1,2580 3,000- ------------

Eg,ity-HObA , 5c 191 12 - 5( -------

TO ,, ollOOl 9,339 9,884 5,581 599 661 600 4.1 .4 ,0 ,0 ,0 ,0 ,0 ,0 .0 ,0 ,0 ,0 ,0 .0 ,0

aS oreodltore-Oo,:tnonrr 5,8~18 3.392 2.658 1.943 3.216 1,503 19.794 i,o47 I)4,14 ,s45 i,o45 1,005 I, o11 ,o5 1,00 io45 o,o05, o,oh5 1,005 i,o45 ',o45 i,ohs5oeoa 2 32 224 188 84 5 8 , 433 43 430 430 430 3 430 430 430 430 03 00O oo

Subtotal 7.372 7,688 3,682 2,387 3.003 7 21700 2 , .000 1,4(13 l,4,~ 1,1.75 1,475 0,475 1,075 1,475 1,455 1,171 1,475 1,075 1,075 1,7 1,075

Orell,dnaro 10--07000 - - - 75 -----

W-rkiog Sopital Irnets 1,oO 11 tO 100 (l,.. ----

Corportio- Tao- - - - - - - 1.688 1.650 1,7_088 l350 1.....,,,09,

Sorotre 8,847 7,836 ~~~~~~ ~~~~~~ ~~~3.832 2,887 315 117 8 2 9.247 1.7 ,T ,7 ,7 ,7 ,( ,7 04 ,7 ,0 .2 .3 .225 3-275

Tebt Seroioloog-Tero Soar, - irloolpal .. - - - - ~~~~~~ ~~~~~~ ~~~~~~ ~~~~1,661 1,061 1,575 1 650 1.703 1,958 2.188 2.250 2,408 2 ,51 0.55 2758 1,258 1 358 1.425 1 575 403

Itoorert 305 920 1,350 1,350 1,725 1 289 0,664 ~~~ 1750 ____ 1.808 - 1 ,47064.1,825,_1 75081,6,0,1,450 10300 1-15 ,.1 ,-065082908580458 358 205 125_ 15

aibroval 300 ~~~~ ~~923 1,350 1.550 1,005 3,458 9,335 3,408 3,408 3 400 3.400 3,488 3.400 3,408 3.480 3.408 1.700 1.708 1.7008 1,788 013

Ocrt-sr ot FiO11- - 1,4088 830 030 D,IC0 - - - - - -

Ir.err--t07 O~ I8~ 75 25 755

-,.tt.otl 6 15 1, 1,383 903 005 30,735 -

T7L1-PL1.AT70750 9 330 8 94 3,4000 5,022 8.425 6,395 07,0301 0,75 4875 4 875 0 875 0 8 75 4 875 4 6354 8707 1 - 4.823 4,803 4,925 3.89~0

aol 75o;.1..o ftoi:a. ~~~ ~~~~ ~~~58 174 147 040 030 984 06 125 125 103 125 125 120 103 1 25 205 103 105 75 1,31015 2 39 380 00 3 50~4 006 1.030 1 7 lO 03001 1 423 1 'I0 1-75 1 000 1 705 0 050 2 2½1 0458 0 575 2 658 3,960

T -rs Itz-oo . ct ~erriob.eoy hhIroe- 1.4 1.5 II5 1.5 1.3 1.5 1.0 1115 1.5 00 1.10-

September 17 1572

OPIuNA

SUGAR REHABILITATION PROJECT

GHASEL

BALANCE SHEETS( '000)

1972/73 1973/74 1974/75 1975/76 1976/77 1977/78 1978/79 1979/80 1980/ 1 19717F2

Fixed Assets

Opening Balance 9.500 16,166 22.896 25,328 26,541 28,886 29,468 29,314 29,164 29,014

Add: Additions 7 372 7.686 3,682 2,587 3,775 2,170 1,475 1,475 1,475 1,475

16,872 23,852 26,578 27,915 30,316 31,056 30,943 30,789 30,639 30,489

Less: Depreciation 706 956 1,250 1,374 1,430 1,588 1,629 1,625 1,625 1,625Closing Balance 16.166 22.896 25.328 26,541 28,886 29,468 29,314 29,164 29,014 28.864

Preliminary Expenses /5 75 75 75 75 - - - - -

Current Assets

Inventories, etc. 1,500 1,650 1,800 1,900 1,900 1,900 1,900 1,900 1,900 1,900

Cash 7 65 239 386 632 982 1,050 1.175 1.300 1 425

Subtotal 1.507 1,715 2,039 2.286 2,532 2.882 2,950 3,075 3,200 3,325

TOTAL ASSETS 17,748 24,686 27,442 28,902 31,493 32,350 32,264 32,239 32,214 32,189

Financed by:

r,overnrent Equity 9,500 9.500 9,500 9,500 9,500 9,500 9,500 9,500 9,500 9,500

HV4 Eauity - - 256 448 640 640 640 640 640 640Retained Earnings (2,474) (4,622) (5.698) (5,170) (4,339) (2,790) (1,301) 324 2,049 3,974

TOTAL EQITTv 7.026 4,878 4,058 4,778 5,801 7,350 8,839 10,464 12,189 14,114

';overnment Long-"erm Loan 8,972 16,808 20.384 22,524 24,942 25,000 23,425 21,775 20,025 18,075

c;overnment ̀hort-mern Loan 1,750 3.000 3.000 1,600 750 - - - - -

TOTAL PEFTO 10,722 19,808 23,384 24,124 25,692 25,000 23,425 21,775 20,025 18,075

TOTAL F41ITY AlW DEPS7 17,748 24,686 27,442 28,902 31,493 32.350 32,264 32,239 32,214 32,189

September 22,.1972

a z

Lu.

GHANA

SUGAR REh'BILITATION PROsoECT:

GHASEL

FINANCIAL RATE OF RETURN(p '000)

1979/80 1987/881972/73 1973/74 1974/75 1975/76 1976/77 1977/78 1978/79 1986/87 1996/97

ASITTSUARE

Costs

Project Costs 5,010 5,392 2.658 1.945 3.716 1,573 - - -Replacements - - - - - - 1,040 1,045 1,045Working Capital 1,000 100 100 50 - - - - -

TOTAL COSTS 6,010 5,492 2,758 1.995 3,216 1,573 1,040 1,045 1,045

Bernefits

Cash Income (1,269) ( 702) 457 1,891 2,399 3,257 3,844 3,892 3,892

Net Benefits (7,279) (6,194) (2,301) (104) (817) 1,684 2,804 2,847 2,847

KOMENDA

Costs

Project Costs 2,362 2,294 1,024 642 559 59- - -Replacements - - - - - - 430 430 430Working Capital 500 50 50 50 - - - - -

TOTAL COSTS 2,862 2,344 1,074 692 559 597 430 430 430

Benefits

Cash Income (114) 281 778 1,057 892 959 1,097 1,108 1,108

Net Benefits (2,976) (2,063) (296) 365 333 362 667 678 678

Combined Net Benefits(Asutsuare and Komenda) (10,255) (8,257) (2,597) 261 (484) 2,o46 3,471 3,525 3,525

Less Corporation Tax - - - - - 1,800

TOTAL *(10,255) (8,257) (2.597) 261 (484) 2,o46 3,471 3,525 1,825 gs

Estimated 'slue of Existing Assets (9.500)

§(19,755)

Internal Rate of Return - 8.01%Internal Pate of Return - 4.29%

September 22, 1972

ANNEX 14Page 1

GHANA

SUGAR REHABILITATION PROJECT

Economic Rate of Return Calculation

1. Tables 1 and 2 show the calculation of the economic rate of returnon the investment in Asutsuare and Komenda and the estimated foreign exchangebenefits from the project. The sensitivity of the Rate of Return to changesin costs and prices is given in Table 3.

2. Project Life. The life of investment in Asutsuare and Komendahas been estimated at 30 years and no residual value has been attributedafter that period. It has also been assumed that farmers would replanttheir holdings every five years over the same period.

3. Existing Assets. Asutsuare is at present producing about 3,000tons of sugar per year and, without new investment, it would soon cease allproduction. The existing investment has therefore been treated as a sunkcost and all future production is assumed to result from the project. InKomenda, on the other hand, the factory could keep producing at the presentlevel with regular replacement of existing equipment. The project wouldincrease the production and efficiency and therefore the economic analysisis based on incremental production and incremental investment and recurrentcosts.

4. Cost of M4aterial, Equipment and Staff. Capital costs given inTables 1 and 2 are adjusted from project costs (Annex 9, Tables 1 and 2)by deducting price contingencies (see para 8 below) and adding the incre-mental working capital required (Annex 13, Table 4). Annual replacementafter the development period is assumed to average 8% of total investmentin Asutsuare, and 10% in Komenda from year 7 through 30.

5. Recurrent costs are based on cost figures in Annex 13, Tables 1and 2. Farmers' profit on cane supplied to factories is excluded.

6. Labor Costs. Tables 1 and 2 show separately estate and on-farmunskilled labor costs valued at the official rate of ¢ 1.00 per man-day andinclude all family labor employed by farmers (see Annex 12, Table 1 foron-farm man-day requirements per acre and Annex 10 for estate labor).Present conditions of employment in Ghana, however, justify the use of ashadow wage rate for unskilled labor in agriculture. It has been estimatedin the course of a 1970 survey by B. E. Rourke 1/ that in the rural sector

1/ "Wages and Income of Agricultural Workers in Ghana", University ofGhana, Legon, August 1970.

ANNEX 14Page 2

the average total annual wage in cash and in kind, plus the worker's con-tribution to his own subsistence amounted to about 0 150 a year which gavean average of $ 0.50 a day over 300 workable days. Since that survey,however, rural employment increased after the 1972 devaluation. Higherprices of imported food induced an expansion of local food production witha consequent increase of rural employment. The shadow wage rate is nowestimated at 0 0.75 per man day in rural areas.

7. Shadow Rate of Exchange. Preliminary information given by theBank Western Africa Department indicated that the Cedi, officially rated atUS$0.78 (US$1 = ¢ 1.28), is overvalued by some 30% and represents only aboutUS$0.59 (US$1 = ¢ 1.70). In the economic rate of return analysis this ratehas been applied to the foreign exchange component of costs and to the im-port substitution value of sugar and alcohol (para 9). An analysis recentlyfinalized by the Western Africa Department showed that the shadow exchangerate would be more correctly estimated at US$1 = ¢ 1.65, i.e. a 3% increasein value. The use of the latter exchange rate reduces the various rates ofreturn by less than half a percent point.

8. Contingencies. The price contit7gencies included in project costs(Annex 9) have been deducted from the capital cost used in the economic rateof return calculation, as benefits are calculated with forecast prices forsugar and alcohol given in real terms.

9. Benefits. An import substitution price of US48.3/lb for refinedsugar has been used over the project life. These prices are based on esti-mates of the cost to Ghana of importing sugar at project free world pricesafter allowing for a freight and refining margin of USJ2.3/lb (para 7.06 ofmain report). The import substitution price for alcohol has been estimatedat US$1.40 per gallon, equivalent to the current international price ofalcohol.

-HA_NA

SUGAR REHABILITATION PROJECT

ECONOMIC RATE OF RETURN

ASUTSUARE

1982/831972.73 1973/74 1974/75 1975/76 1976/77 1977/78 1978/79 1979/80 1980/81 1981/82 -2001/02

COSTS

Estate

terials a,d Eienteipal Costs, Working, Capital andReplacerent:

_ Foreign Exchange 3,747 3,482 1,457 1,118 1,901 885 498 525 560 728 728- Local -osts 2,116 1,519 727 479 482 338 213 225 240 313 313

Recurrent Costs - Foreign Exc-hsne 1,667 1,684 1,846 1,887 2,076 2,146 2,218 2,218 2,218 2,218 2,218- Local Costs 715 722 791 808 889 919 951 951 951 951 951

S.b-total 8,245 7,407 4,821 4,292 5,348 4,288 3,880 3,919 3,969 4,210 4,210

LaborCapital Cost and Replacement 17 143 308 125 279 36 36 36 36 36 36Rec.-re.t Costs 174 205 214 238 277 316 332 332 332 332 332

Sob-total 191 348 522 363 556 352 368 368 368 368 368

Farmers

Materials snd Equipment:- Foreign Exchange 176 183 178 174 174 156 156 156 156 156 156- Local Costs 92 94 91 85 85 76 76 76 76 76 76

Labor 239 408 481 479 515 515 515 515 515 515 515

Sub-total 507 685 750 738 774 747 747 747 747 747 747

Less Income Tax on Management salaries 108 130 130 130 130 130 80 80 80 80 80

TOTAL COSTS 8,835 8,310 5,963 5.263 6,548 5,257 4,915 4,954 5.004 5,245 5,245

Foreign Exchange Component 5,590 5,349 3,481 3,179 4,151 3,187 2,872 2,899 2,934 3,102 3,102loecal Costs 2,815 2,205 1,479 1,242 1,326 1,203 1,160 1,172 1,187 1,260 1,260Labor 430 756 1,003 842 1,071 867 883 883 883 883 883

Adju stments iForegn Exchange Costs at Us$ I - e 1.70 7,4?4 7,103 4,623 4,222 5,513 4,232 3,814 3,850 3,896 4,119

Local Costs P,515 2,205 1,479 1,242 1,326 1,203 1,160 1,172 1,187 1,260 1,260Labor Costs with 1UD 17t O.t5 323 567 752 632 803 650 662 662 662 662 662

TOTAL ADJUSTED COSTS 10,562 9,875 6,85G4 6,96 7,642 6,085 5,636 5,6814 5,745 41

BEPEFITS

Froduction of Sugar (Tons) 3,930 7,370 13,360 20,490 23,610 27,390 29,130 29,130 29,130 29,130 29,130reoduction of Alcohol ('000 tallona) 260 365 466 473 545 633 673 673 673 673 673

aloe of- sugar at p311.13/ton(i.e. so 6 /lb) 1,222 2,293 4,157 6,375 7,346 8,522 9,063 9,063 9,063 9,063 9,063

value of Alcohol at 0P.40/ga2l.n(i.e. TAlc1j4o/gallon / 624 876 1,118 1,135 1,308 1,519 1,61- , 616161,61 1,615 1,6iD

TOTAL BENEFITS 1,846 3,169 5,27- 7,510 3,654 10,041 10,678 10,678 10,678 10,678 10,678

NET BENEFT'S (8,716) (6,706) (1,579) 1,414 1,012 3,956 5,042 4,994 4,933 4,637 4.637

ECONOMIC RATE OF RETYERN 17.44'

GHANA

MR." Rb1ABLrTA11E PI.J3CT A4NtEX t4T.ble 2

7ONMMIC SdLTF OF RETUJX

1972/73 1973/74 1974/75 1975/76 1976/77 1977/78 1978/79 1979/80 1980/81 1981/82 -200/o2

CO3TS

Estato-

Yater L^ ia Eo tDef4ts Cost, workiDg Capital

and Replaeenst:- Foreign EXclange Cmeponent 1,845 1,493 522 311 264 267 223 2445 263 280 301- Local Costs 944 6514 416 209 189 198 95 105 112 1120 129

Rec"rrent Costs -Foig Exchange 937 981 1,076 1,126 1,170 1,189 1,225 1,205 1,205 1,205 1,205- toosl 1402 420 461 482 501 510 517 517 517 517 517

Sob-total 4,128 3,548 2,475 2,128 2,124 2,164 2,040 2,072 2,097 2,122 .',152

laborCspita1 Cost snd Replaceaent 39 34 27 36 11 13 13 13 13 13 13Recorrent Costs 246 130 145 160 173 181 181 181 181 181 181

Sob-total 285 164 172 196 184 i94 194 194 194 194 194

Farmsers

Material and Equipent:- Foreign Exchange 97 103 115 122 122 86 86 86 86 86 86- Local Cots 100 103 108 109 109 88 88 88 88 88 88

Labor 207 226 245 286 288 313 332 341 341 341 341

Cob-total 1404 432 468 517 519 487 506 515 515 515 515

Less ITcoe 3rax on Management Salaries 61 73 73 73 73 73 37 37 37 37 37

TOTAL COSTS 4,756 4,071 3.042 2.768 2.754 2.772 2,703 2,744 2,769 2,794 2.824

F-reu3n Exhbange 2,879 2,577 1,713 1,559 1,556 1,542 1,514 1,536 i,554 1,571 1,592T!oca.L Costs 1,385 1,104 912 727 726 723 663 673 680 68o 697Lab.o 492 390 417 482 472 507 526 535 535 535 73-

Costs Wlithout ProJect - Total 1,933 1,933 1,933 1,933 1.933 1.933 1,933 1,933 1,933 1,933 1,933-F,,re,go Excbange 11,020 1,020 020 1,020 1,.02 1,020 1,020 1,020 1,020- L,c-al Costs 537 537 537 537 537 537 537 537 537 537 537- LU.bor 376 376 376 376 376 376 376 376 376 376 376

Inremsotal Costs - Total 2,823 2,138 1,109 835 821 839 7_7 _11 8

36 861 8119--o'reign Exchange 1,859 1,557 693 539 53 -522 hb 516 534 551

- T!cal Costs 848 567 375 190 189 186 126 136 143 151 P )- Ltor 116 14 41 106 96 131 150 159 159 159 1,

Adj,.t d Incremental CostsForeign Exchange Costs

at US$ 1 - e 1.70 2,419 2,o68 020 716 712 693 16 695 709 732 760Local Costs 848 567 375 190 189 186 12G 136 113 151 1j0Labor Costs with 00.75/MD 87 il 31 8o 72 98 113 119 113 119 11 )

TOTAL AD,1TJ0TED INCRBMSNTAL COSTS 3.404 2,646 1,326 986 973 977 895 940 971 1,002 1,039

B2NESITS

Total P-odu-tion of OSgar (Tons) 6,830 9,150 12,360 14,320 14,080 14,530 14.600 114,600 1,4o00 114,600 114,600Total Pmoduction of Molasses (Toss) 2,870 3,200 4,330 5,010 4,930 5,090 5,110 5,110 '7,110 5,110 5,110

Isren-ts_1 Production of Sug-r (Toss) 1,330 3,650 6,860 8,820 8,580 9,030 9,100 9,100 9,109! 9,o100 9.100looreseoxtal Production of Molasses (Toss) 300 630 1,760 2,440 2,360 2,520 .,3540 2,540 2,540 2,540 2,540

aluoe of1 Sgar at 0311 13/toei &.e. 1 6 /lb) 4114 1,136 2,134 2,744 2,669 2, 810 2,631 2,831 2,831 1,831 2,831

'Jalue o1 Molasses at t 55/ton 17 35 07 '134 130 139 140 140 140 14o 140

TfTAL BEIITFITS 431 1,171 2,231 2.378 2 2799 2.9249 2.971 L,971 ,971 2,971 2,971

NET B21EFITS (2,973) (1,475) 905 1,892 1,826 1,972 2,076 2,031 2,000 1,969 1,932

RATE OF RETURN 31.40(d

ANNEX 14Table 3

GHANASUGAR REHABILITATION PROJECT

ECONOMIC RATE OF RETURN - SENSITIVITY ANALYSIS

Raw Sugar Prices - (US Cents per lb.)

i ~ ~5 6 7 8

Economic Rates of ReturnASUTSUAREProject Costs As Estimated 7.22 12.52 /LTlIL/ 22.19 26.89

10% Increase in Costs 3.58 9.00 13.75 18.15 22.50

20% Increase in Costs -0.09 5.86 10.55 1h.77 18.75

KCXENDAProject Costs As Estimated 20.50 25.96 1. 07 36.90 h2.h010% Increase in Costs 17.14 22.17 27.12 32.07 37.0h

20% Increase in Costs 1h.19 18.91 23.h9 28.07 32.57

September 19, 1972

MAU fIUPPER GHANArVOILTA

Z I-<

**tQi> sIv0 1 2~w SUGAR REHABILITATION PROJECT F

ESTATE LOCATIONS

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- . . - --International boundaries

Primary roads

>> < r op~~~~~~~~~~~eCnt 0 Rivers

t A ekz~~~~~di , Lakes

of GIiIOeQ > Farmers sugar cane areas

o to 20 30 40 50 60

MILES

JUNE 1971 IBRD 3500

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