Transcript Slide 1
INTERNATIONAL BUSINESS E X PA N S I O N P L A N ADNAN ANWAR NICHOLAS BIANCHI JENSON DUNN FAISAL RAZA ARTHUR URATANI Assessing the Feasibility of Sugar and Ethanol Operations in Ghana STRT 571-45 INTERNATIONAL BUSINESS ENVIRONMENT SNAPSHOT OF GHANA Population Area GDP GDP per capita Currency Tropical climate 23,387,000 238,535 km2 $35.8 billion $1,500 Ghanaian Cedi (GHS) Wet and Dry season 28% of population live below international poverty line ($1.25/day) Agriculture accounts for 37% of GDP with the sector employing 56% of workforce Two-party democratic system Independent central bank (Bank of Ghana) ADVANTAGE: GHANA Ghana Economic Free Zone Incentives Political Factors • • • • • • • 0% tax rate for agriculture/industrial plant, machinery and equipment imported for investment purposes Low upfront capital investment costs 100% ownership of share by any investor 0% tax on profits for 10 years; no greater than 8% thereafter Guaranteed protection against expropriation • Two dominant but moderate political parties Central tendency acts as strong deterrent to radical policy change Relatively low perception of corruption for a developing country Monetary Policy • • • International Monetary Fund (IMF) oversight Inflation targeting framework Fiscal austerity measures Geography • • • Close proximity to Europe Coastal country Ideal climate for sugarcane cultivation OPPORTUNITY: EUROPE • TAKE A CLOSER LOOK The European Union (EU) has set a mandatory target of 20% biofuel incorporation by 2020 Increasing disparity between biofuel demand and supply in EU member states • BIOMASS ACTION PLAN (EU) 250 100 200 80 150 60 100 40 50 20 - - (50) (20) 2004 2005 2006 2007 2008 Difference Between Consumption and Production of Biofuels Total Biofuels Consumption Total Biofuels Production Thousand Barrels Per Day Thousand Barrels Per Day European Union Biofuel Consumption vs. Production Further promotion of renewable energy sources Security of supply and sustainable energy in Europe Preparation for the large scale use of bio-fuels Heightened cooperation with developing countries in the sustainable production of biofuels PRODUCTS Sugar – to serve Ghana’s demand Ethanol – to serve Europe’s demand • • • • $530 million in sugar imports over the last five years Upward trending regional demand of 2.3% per year Energy Self-Sufficient: Sugar Byproduct (bagasse) can be burned as fuel Growing demand in Europe Imports originating in Brazil totaled approx. 400 million gallons in ‘08 Ghana – the perfect fit • • • • • Abundance of affordable labor Food industry tax incentives Savannah Accelerated Development Authority (SADA) have acquired thousands of hectares of land for varied agricultural initiatives including sugarcane Government incentives for exportoriented industry Low transportation costs to target market CARGILL CAPABILITIES AND EXPERTISE • • • • • • 138,000 employees in 68 countries Net earnings of $3.33 billion (FY ‘09) Other revenues of $116.6 billion (FY ‘09) Fourth largest biofuel producer in U.S. Dedicated branch (Cargill Sugar) focused on sugar and ethanol opportunities Environmentally certified with the International Organization for Standardization (IOS) RELEVANT EXPERIENCE Sugar processing and ethanol production in Brazil Footprint in Europe (biodiesel capabilities) Existing operations in Ghana STRATEGY Greenfield Investment • • • 65,000 acres (43,000 acres for ethanol, 22,000 acres for sugar) [Domestic Market Seeking] Full capacity of 352,000 metric tons of sugar per year (using average yield of 16 metric tons per acre) [Cost Reducing / Resource Seeking] Full capacity of 26 million gallons of ethanol per year for export SUSTAINABILITY Economic Social Environmental DRAWBACKS AND RISKS TAKE A CLOSER LOOK THE SUGARCANE TRAP Tradeoff between food and fuel Limited arable land and water supply Heightens fears of corporate greed Product Price Stability - future ethanol vs. petroleum prices Currency Risk – government activities suggest stabilization Energy Reliance – growing resistance to dependence on foreign fuels Corruption Risk – prior history, lack of transparency controls Sugar Prices