Ghana - Sugar Rehabilitation Project

Document of The World Bank rAD nICTAT. T1j T NT,V Report No. 3525 PRUJET rrULIMNUL. AUDI1 RLPUa GHANA SUGAK REHABILITATIUN PKUJECT (CREDIT 354-GH) June 24, 1981 Operations Evaluation Department This document has a restricted distribution and may be used by recipients only in the performance of unear ocan oudes. us comems may notherwise De disclosed without world ank authorization.  FOR OFFICIAL USE ONLY PROJECT PERFORMANCE AUDIT REPORT CHANA RTICAR RRRARTT.TTATTON PRO.TECT (CREDIT 354-GH) MTV ' V r0'AVV'rC Page No. Preface ............................................................ i Basic Data Sheet ................................................... Highlights ......................................................... 1 PROJECT PERFORMANCE AUDIT MEMORANDUM I. PROJECT SUMMARY ......................... ........ 1 II. MAIN ISSUES .......................... 3 A. General ......... .......... 3 B. Reasons for Failure ..................... 3 C. Lack of Foreign Exchange ......... ... ......... 4 D. Conclusions ........................... 6 PROJECT COMPLETION REPORT I. Introduction .. . . . . . . . . . . . . . . .............. 8 II. Origin. Preparation and Appraisal of the Project ......... 9 VT. B0ank-'s Performance ... . . ................. 38 I lI IJA *WLLf . . . ................ - TIT. Rt e r ImRenam .n ...on .................. o................. 170 VTTT S--US T LcLuiAos * ******** *****................ 41 Annexes 1 - 14 This document has a restricted distribution and may be used by recipients only in the performance of their offcial duties. Its contents may not otherwise be disclosed without World Bank authorization.  - 1 - PROJECT PERFORMANCE AUDIT REPORT GHANA SUGAR REHABILITATION PROJECT (CREDIT 354-GH) PREFACE Thig iq n nPrfnrmAnP qndirt rif -ha 'Rncynr Rphqhilitnrinn Pvnrt-e in Ghana for which Credit 354-GH was approved in December 1972 in the sum of US$6A million of which ITU$14.R m 114 o Anchwrcad4 1hv Tiina 1 10RA* US$1.1 million was cancelled. The audit report consists of an audit memorandum prepared by the Oprtin Evala.I.tln DepartmentL*L, aL*d a Projec tJ. ompleto Reor f. Dr.D dated December 22, 1980. The PCR was prepared by the Western Africa Regional is based on a review of the President's Report No. 1159-GH dated December 8, 1972, the appraisal Report NO. rA-bVA of Aovember 15, L1, tne tCUit and Project Agreements dated January 29, 1973. Correspondence with the Borrower and internal Bank memoranda on project issues as contained in relevant Bank files have also been consulted and Bank staff associated with the project have been interviewed. An OED mission visited Ghana in September and October, 1980. The mission held discussions with officials of the Ministry of Finance, the Ghana Sugar Estates Ltd. (GHASEL), the Agricultural Development Bank (ADB) and the project consultants. A field trip was made to visit Komenda, one of two sugar estates concerned; a visit to Asutsuare, the other estate, was not made because of labor unrest at the.time. The audit finds that the PCR adequately covers the project's salient features. The audit memorandum focusses on the difficult economic and political environment in which the proiect was implemented. A copy of the draft report was sent to the Borrower on April 28, 1981 for comments; however, none were received. The valuable assistance provided by the Government of Ghana, partic- ularly GRASEL. is gratefully acknowledged.  - ii - PROJECT PERFORMANCE AUDIT REPORT GHANA SUGAR REHABILITATION PROJECT (CREDIT 354-GH) BASIC DATA SHEET KEY PROJECT DATA Appraisal Actual or Actual as % of Estimate Estimated Actual Appraisal Estimate Proiect Costs (US$ million) 24.8 41.3 167L Credit Amount (UTS$ million) 15.6 14.5/ 93 Board Approval Date - 12/21/72 - Effectiveness Date 04/30/73 05/31/73 Date Physical Component Completed 09/ /78 09/ /78 IOL Proportion then completed 100 n.a. Closing Date 03/31/79 03/31/79 100 Economic Rate of Return 20% Negative Financial Rate of Return 8% Negative Institutional Performance Good Poor - Agronomic Performance (tons of sugar in 1978) 37,684 6,965 18 Number of Beneficiaries (outgrowers in 1978) 850 n.a. CUMUTLATIVE DISBURSEMENTS FY73 FY74 FY75 FY76 FY77 FY78 FY79 FY80 Appraisal estimate (US$ million) 2.4 7.6 10.0 11.6 13.4 15.2 15.6 - Actual (US$ million) 0.0 3.2 7.5 9.9 12.1 13.6 14.3 14.5 Actual as % of estimate (US$ million) 0 42 75 85 90 89 92 93 Date of final disbursement 02/06/80 Principal repaid to 01/31/81 (US$ million) 0.00 MISSION DATA Date No. of Manweeks Specializations of Performance Types ot Mission (Month/Year) Persons in Field Mission MembersL Ratinj/I Trend/6 ProblemsL Pre-appraisal 02/71 2 2.0 - Appraisal 04-05/71 9 36.0 - - Re-appraisal 07/72 3 3.9 - - Total 41.9 Supervision I 03/73 1 1.4 a 2 1 T Supervision II 08-09/73 2 6.d a/d 3 3 M T Supervision III 06-07/74 1 2.0 a 3 1 M T Supervision IV 10/74 1 0.9 c 3 1 F T Supervision V 11-12/75 2 4.6 b/c 2 1 FI Supervision VI 06/76 1 0.4 c - - - Supervision VII 09-10/76 1 1.6 c - - - Supervision VIII 05/77 1 1.1 c 2 3 r I Supervision IX 05/78 1 0.7 a 3 3 F T P Supervision X /9 07/78 1 0.1 c - - Supervision XI / 10/78 2 0.2 a/c - Total 19.8 Completiol-~. /u01/0 9.0 ~ c- 70.7 OTHER PROJECT DATA Borrower Renublic of Ghana Executing Agencies Ghana Sugar Estates Ltd. (GHASEL) Agricultural Development Bank (ADB) Fiscal Year Borrower: July 1 - June 30 GHASEL: October 1 - September 30 ADB: January 1 - December 31 Name of Currency (abbreviation) Cedi (M) Currency Exchange Rate Re-appraisal Year US$1 * 91.28 Intervenine Years (Jan. 73 - June 78) USS1 - 91.15 Intervening Years (July 78 - March 79) US$1 - 01.35 Completion Year US$1 - t2.75 Follow-on Proiect None /1 Most of the increase was in terms of Incremental Working Capital to cover CHASEL's losses. 7W US$1.1 million was cancelled. /3 Calculated from Board approval date. a - ariculturist. b - agricultural economist. c - financial analyst. 7_ 1 - problem-free or minor problems, 2 - moderate oroblems. and 3 - major problems. 16 I - improving, 2 - stationary, and 3 - deteriorating. 77 F - financial. M - managerial. T - technical, P * political and 0 * other. 78 Discussions with Management. Brief visit which included review of other projects. T9 Discussions on proposed second sugar project. 7-O Discussions with Government officials. 711 /Consultants- reports are available.  - iii - 7 T- 7ffl ,-"n,,r. nIAMf't A ITMIVrT M Q f%r )r ' ravyLUI~ ~ ArWrr UD1%A;±~Li.1 %JA.J GANA SUGAR RnABILITTAITN DRECDT (CREDIT 354-GH) HIGHLIGHTS The project aimed at increasing Ghana's sugar production and making the industry efficient, thus reducing imports and eliminating the heavy losses incurred. Specifically the project provided for rehabilitating two sugar estates: replanting and expanding cane fields, rehabilitating factories, and improving support services. The project ended in failure. Implementation suffered from a multi- tude of problems, including political and economic problems, erratic rainfall and overcast weather, borer infestation, frequent breakdowns of equipment, labor problems, cost escalation, inadequate electricity and water supplies and. narticularly, lack of foreign exchange allocations. Sugar production in 1978, the last project year, reached a low of 18% of the appraisal target for that year. The nroiect's economic rate of return is negative. Tha fo1llwin noints are of snpeial interest: - roblems that -!a-uedi~ t-he ua 4idut- prior to appraislco tinued through project implementation and still existed at com- 8); - political and economic country problems resulted in bureaucratic indifference and apathy (PPAM, para. L);i - insufficient foreign exchange allocations hampered the project directly and indirectly (PCR, paras. 110 and 111; PPAM, para. 17); - Government was at variance with the Credit Agreement in a number of instances (PCR, para. 109); and - projects are unsuitable instruments to solve sector problems (PPAM, para. 22).  - 1 - PROJECT PERFORMANCE AUDIT MEMORANDUM GHANA SUGAR REHABILITATION PROJECT (rEnTT IRL-Gn) I. PROJECT SUMMARY 1. Sugar cane for airect consump.tiOn haS been grown in Ghana for several hundred years, but refined sugar consumed was all imported. By the late fifties establishment of a modern sugar industry was considered. In 1963 construction work started on two sugar estates: one at Asutsuare, 40 miles northeast of Accra on the Volta River, and one at Komenda, 120 miles west of Accra near Cape Coast. Production at Asutsuare started in 1966, at Komenda in 1967. 2. Initial responsibility for overall supervision of both projects was vested in a state-owned company, established in 1963. It merged in 1968 with 18 other state companies into the Ghana Industrial Holding Corporation (GIHOC) and was reconstituted as GIHOC's Sugar Products Division. The factories had been supplied and commissioned by Czech and Polish companies who continued for some time to provide technical assistance. The estates were managed by a Pakistani consulting firm. Inappropriate factory design and a number of operating problems including lack of irrigation, inefficient cane harvesting and cane transport, and frequent factory breakdowns caused recurring financial ln to GTHOC. Ghana Sugar Estates Limited (GHASEL) was formed in 1971 to take over from GIHOC the existing undertakings at Asutsuare and Komenda. A Dutch management company was apointed to manao CHASEL. 2V1oxr 4n 4t-a hat-tr%y tha aunor iniiact-ry wn- found to alrandv renuire -- -; -- - - -- -- -- -- - - -- --0-- -- - -- - - -- S -- - - considerable rehabilitation. In 1966, a Bank agricultural identification misso ~~ themene tWo estat-eS aS pos' Siil tisfrakspp-rt-_ TheP Government invited IFC to participate in financing the rehabilitation, but in view oL JLs pUicy LU autain from investiug in surplus world CMMA1-eLs. UFC had to decline. In 1967, a FAO identification mission also pointed to the prepared by UK consultants in 1968. The Bank, in 1969, indicated to the GoVefelCL Ls iLtLLst in fia.uig a sugar pr.ect.* Following del.aye Government reaction, the Bank sent an appraisal mission in April 1971 and, after the change of Government in January 19I/, a reappraisal missiu iu ly 1972. The project was approved by the Board in December 1972 and became effective in May is97. 4. The project, as appraised, aimed at increasing Ghana's sugar pro- duction and making the industry efficient and economic, thus reducing im- ports and eliminating the heavy financial losses incurred. It was believed that with strong management the factory problems could be rectified, and since agricultural potential at both sites was acceptable (even though at - 2 - Komenda it was low), a viable sugar industry was considered possible. Specif- ically, the project provided for: (i) expanding estate and farmers' cane area by 7,425 acres; (ii) replanting 16,050 acres of estate and farmers' cane; (iii) irrigating Asutsuare estate and initiating a pilot irrigation scheme at Komenda; (iv) rehabilitating and providing additional field, factory, and 1nher.qnrv Pnninment: (v) houing- helth and social farilitipq for stqff nind labor; (vi) vehicles for management and staff; (vii) extension services (by M4AqVT) and canonal and medium term credit (hy the Aarit-iurnl Tavulanment Bank, ADB) to farmers; (viii) a feasibility study for expanding the sugar ImpUlementatio enonee major prbes L1Le prjc was lste as a problem project in 1973 and 1974 and again in 1978, the last project year. LIe firt prou]ems weLIE UU4yb Ln apJLUVU± ULnU ILtcLVt!IeUb, uue tU circum- stances following the 1972 change of Government; the six years for implementa- tion estimated at appraisal were thereby in effect reduced to rive. Early procurement problems arose when the Government, because of its precarious financial situation, did not allocate the required foreign exchange for the 1973 project activities. Still, the first year's achievements were reason- able. Implementation in following years suffered from a multitude of prob- lems, including erratic rainfall (heavy rains followed by droughts); overcast weather (reducing the cane s sucrose content); borer infestation; frequent breakdowns of equipment due to poor reliability and lack of spare parts; mixed relations with outgrowers who later sold cane to private crushers paying higher prices than GHASEL; cost escalation for housing; labor shortages and labor unrest; unreliable and inadequate electricity supplies; unreliable and grossly inadequate irrigation due to faulty design and lack of foreign exchange allocations; and finally, lack of construction materials and a general lack of equipment again due to insufficient foreign exchange alloca- tion by the Government. 6. The project thus ended in failure. Sugar production fell more and more short of targets. and after the third project year output fell even in absolute terms until it reached a low of 18% of the appraisal target in 1978. Achievements fell short of targets in all stages of sugar production. Results (as percentage of appraisal targets) for the five project years are: cumulative area harvested- 88%: average rane vilds. 65% rimlntiue Cnp production, 57%; tons of sugar per ton of cane, an average of 71%; and cumula- tive SUar productnfion, 40%_ Tnc-rementaml prdcto isngtie " theagre gate since total sugar production of about 7,000 tons in 1978 was below total preproject* suar productionn of 10,800lf tn.S; t he apraisa4l trge.nt for. 107-0 was 37,700 tons of sugar. After project completion, sugar production declined tvnI. uH tee , th e4 ,rojecW tons ecnomic 199 a at e 9, r e a . L e dd a ll L of r n i tons. Hence, the project's economic rate of return is negative. - 3 - HI. MAIN ISSUES A. General 7. A critical evaluation of the project experience is presented in the PCR, and lessons (para. 124) have been learned concerning project prepara- tion, foreign exchange arrangements, cost monitoring, water supply, spare parts supply, project supervision, sector conditions affecting the project and overall country situation. Two lessons relate to external circumstances influencing project implementation and are further discussed in the audit memorandum. 8. The audit also draws attention to some other PCR conclusions. One is that nroblems that plagued the sugar industry prior to anoraisal. continued through project implementation (para. 45) and still existed at completion, with no sign of imnrouvnent. Another rnnr1iqnn iq that the nrnipet rnuld have succeeded, and by implication that the sugar industry is probably viable including foreign exchange availability and technical expertise (para. 114). .Ll1 A0 A. O.J U ~ OU 4 6 LI LJ I VJ 4L LL UA .J low returns and considerable technical risk (para. 107). B. Reasons for Failure 9. Perceptions of the causes for failure differ. GHASEL officials felt it was mainly due to the lack of coordination between the three parties involved: the Government, the Bank and the managing consultants. Particu- larly, they saw bureaucratic indifference on the part of the Government, lack of leadership on the part of the Bank and lack of dialogue with local staff on the part of the expatriate managing consultants as the main reasons. Govern- ment officials felt that GHASEL management had been poor but admitted that some administrative errors had been made (PPAM, para 13) by the Government. The managing consultants gave as reasons for failure: insufficient foreign exchange allocations, difficulties in procuring spares from Eastern European countries, insufficient Bank support and inefficiency on the part of the Government. Bank staff explanations for the failure (PCR, para's. 121 and 122) were the marginal growing conditions for cane, the unexpected drought, insufficient foreign exchange to meet the rising costs and prevailing politi- cal and economic conditions in Ghanali. 1/ Regional staff point out that the Bank persistently called the Govern- ment* ' artntion to GRASEL's prohlems in the course of missions and in correspondence. Where the Bank (and the managing agents) can possibly tnka anma hlm ic in not gagetin_ arly in the cnurse of the nrnirt.- that it should have undergone a thorough review or even be dropped. In of disbursements, but held back in the hope (supported by the managing agents' optimisti reports) o. a turnarundU whichL nee cm- -4- 10. The audit agrees that reasons for failure of this project are many- fo1l hi,t rnn iers the nolitI rna a ne Ponnmic, nrhlPmc ;anti t-hp roculting bureaucratic indifference and apathy, as decisive. With the coming'and going of five, d4 ff-eant emmen n tsl- in Cha~n a ., d-ing thei sen -ess, cii st.41 ea -ns were required to adjust to changing circumstances. For the project, and for all Bank projects, tiis meant slow decision-making because Government offi- cials would often be pre-occupied with more immediate political concerns. Als5o conid~ering thatL 'Low salries ad high ratesofi fla 'LJ±Li required ingenuity to make ends of family budgets meet, it comes as no surprise that civil servants felt somewhat indifferent and apathetic for things other than mere survival. Looking for secondary employment in the private sector and a brain drain are some reactions to the political and economic situation. The bureaucratic indifference became visible in Government's failure to make sufficient foreign exchange available, failure to allocate sufficient water and electricity, and failure by GHASEL's Board of Directors (seven members, six of which were civil servants) to provide leadership for the project. This situation could not easily be corrected by outsiders, and neither the manag- ing agents nor the Bank succeeded in obtaining the necessary Government attention. 11. Some other reasons blamed for project failure were: (i) the diffi- culties encountered in procuring spare parts from Poland and Czechoslovakia, the countries which had supplied the original sugar factories, and (ii) the comparative disadvantage of sugar production in Western Africa. These prob- lems were to a large extent known at appraisal but were expected to be over- come with strong and experienced management. Management could, however, not satisfy these high expectations.!/. Relations between the exnatriate managine consultants and the local GRASEL staff were generally poor; and this, too, had a negative imnact on nroiect nrogrAss. Low Government nricA fnr qiiar discouraged outgrowers from delivering their cane to GHASEL, since private caecrushe rsof f ereda prrice tw i-e as high. F?4nally, unepce drought conditions, also set production back. C. Lack of Foreign Exchange 12. Ghana's economic performance was poor during the 1973-1978 project periou: rea per capita Gur declined 3.1 percent annually. Tne most signifl- cant contribution to this weakness was the decline in exports, particularly cocoa exports. The decline in cocoa exports was primarily due to low producer prices, but also to inadequate cocoa farm rehabilitation, and shortages of labor, imported inputs and transport equipment-. . Cocoa export earnings, despite world market prices at record highs, stagnated. Government revenues, for about half depending on cocoa export duties, also stagnated and, with the 1/ The Managing Agents pointed out that one aspect not known at appraisal by eith1,er the Bank- or themselves was that before 1973, Ghana h-A nmn occasion ordered large quantities of parts which in the end could not be pa.U Iu. LLe suppiLe euncU weLe oviounly not too eager to supply spares. Moreover, it was understood from these suppliers that the two factories had, until then, not been fully paid. 2/ See OED. PPAR. Ghana Eastern Region Cocoa Proiect. currently tinder preparation. -5- rapid growth of current expenditures, the budget deficit increased from about 6% of the GDP in 1974 to nearly 13% in 1978. Throughout the seventies, Ghana experienced major balance of payments difficulties, despite improvements in the terms of trade. In this situation imports were severely restricted. 13. The manufacturine sector absorbed a disproportionate share of the country's limited foreign exchange. With low import prices resulting from currency overvaluaton nntrn1o were instited to keen imnorts down. Import licenses continued to be issued, however, in excess of available foreign exchange. The result w-as that not enoughn letr of credit- wer isue to cover the import licenses issued earlier. Government officials admitted this was an aULL1.LbLL4L.ve error andU blame-U -Isfcln omu-ct Ministry of Trade (which prepared the import program) and the Ministry of Finance (which allocated foreign excLange). lu imprUve fUreign exUnge allocations, an Import License Allocation Committee, on which both ministries are represented, was established in recent years. Despite these snortcomiUgs, Ministry of Finance officials nevertheless felt that, given the foreign exchange situation and the competition tor the letters or credit, GAnSEL should have lobbied harder. 14. GHASEL officials, referring to allegations that Government had made insufficient foreign exchange available to the project, explained that at least for most of the consultants' contract period, foreign exchange was no problem because of available funds from the Credit. The lack of foreign exchange was most pressing during the start-up period (PPAM, para. 5) and from 1977 onwards, after the Credit had been largely disbursed. However, lack of foreign exchange allocations to supporting services (electricity and irrigation), also hampered the project's progress and did so during most of the implementation period. Indications are that some foreign exchange was made available to other activities that served the cause of development less well than the project. 15. The managing consultants mentioned that insufficient and erratic deliveries of water and electricity, to be supplied by the Government, were ma4" ocinii-ntinsebatck nshnu- 1-ek of foricyn exchange was one of the main reasons for the shortfalls. Also, despite the shortage of foreign exchange, the 5% consultants prtpain (In fnraign exchange) in, GRASFL's equity, was made available by the Government to GHASEL in local currency, WhLL..e this contribution was meant to finance part of the pr ojec - --- exchange needs. 16. After project completion, GHASEL continued to face foreign exchange problems. For 1978/79, requestea import 1icenses amounted to e tuMilun, but only 02.0 million were granted. The amount that could actually be used, however, was only U0.3 million because Government approval came Loo late for many goods that needed to be manufactured to order, and for which payments could only be made after the end of the fiscal year during which the approval was valid. GHASEL officials felt it should not be necessary for them, as civil servants, to lobby with the Ministry of Finance, for the case of development. - 6- i1. In summary, insufficient oUreign exAnuge aLlUcation hampered the project directly during the start-up period and after 1977, as well as indirectly during most of the implementation DeCaUSe the water and power supply agencies suffered from the same problem. The insufficient foreign exchange allocations to the project were caused by the deteriorating national economy, bureaucratic indifference and misallocations. An example of the macro-economic impact on project performance is the low official cocoa pro- ducer price mainly caused by heavy taxation of cocoa, which leads to lower cocoa production and aggravates foreign exchange shortages./ In part, the failure to achieve objectives under the cocoa sector, including the Eastern Region Cocoa Project has, therefore, also contributed to the failure of the project. D. Conclusions 18. The failure of this project is not incidental: most projects in Ghana have suffered, or still experience, major problems. The Fisheries Proiect (Cr. 163-GH). the first Ghana agriculture project audited by OED/. was listed a problem project for most of the implementation period (although thp nrnhlmA were mainly caused by wrong prolect design). The Eastern Region Cocoa Project suffered from poor pricing policy and poor institutional per- formance, and achieved acceptahle aonnnmir rn expected economic cocoa prices. Of four other completed projects, in the only one was successful. 19. The basic problem afflicting all projects can be found in the I.~ULILy~ ~'J.J.L.L.dL LIU C'..UIqLLL.L~.L U~.L'U. I LA J. L ~ L. L.L_ULLZ. LLU U.Y the experiences of this project, as well as of the Cocoa Project1/. The iuterrelatiuuosip etween tse two. prujects is quite UUvious. Luhe sugar project depended on available foreign exchange expected to be generated by, among others and in part, tne cocoa project. Macro-economic performance and national political decisions were the major determinants for these and other projects. 20. The difficult economic situation, especially the shortage of foreign exchange had been a problem well known to the Bank for many years - prior to the project and during appraisal and processing of the Credit. It was known that the mills were in poor condition and that required repairs and spare parts could not be financed by the Bank because the suppliers of the 1/ See OED, PPAR, Ghana Eastern Region Cocoa Project, currently under preparation. 2/ OED Report No. 2794 dated December 28, 1979. 3/ OED Report Nos. 1363, 1568 and 1683 dated November 23, 1976, April 20, 1977 -A Tuly 2O 1077 esp-et4ely - 7 - mills were from non-member countries. At the time of appraisal and loan signing, the foreign exchange situation was not as critical as it was in subsequent years. The Credit Agreement covenant (Section 4.02 (d)), requiring the Government to allocate necessary foreign exchange to GHASEL, would have been adequate at the time. There were, however, no special provisions in the Credit Agreement which would have permitted the establishment of a foreign exchange counterpart fund which could have made available the needed funds in a timely fashion. 21. Inadequate consideration was also given to the foreign exchange requirements of other agencies such as the ones expected to provide irrigation an ala-trjoitv fnoilitiPq TIn thp event, their insufficient services, also caused by poor maintenance - another consequence of foreign exchange shortages Sont-bued Subsant41 - en nrncti-tinn nrnh1qzmq of the quaar comolex. Since foreign exchange problems are likely to become more frequent in more and more developing countries. cosieato need. f a4a a aMorcopeh= sive project approach, one that would also consider the foreign exchange requirements of the supporting services_- 22. Tne experience from tnis project asu h1il.L u LLLe .kM L. LICU CL is facing when Government policies appear to be counter-productive. There is little the Bank could do through this project to have adopteU producer/coU- sumer price policies and tax policies changed. This raises the wider question of how effective projects - and Credit Agreement covenants - are in solving sector and macro-economic problems. It is outside the scope of this audit to reach a conclusion on how intensive and convincing the Bank's dialogue with the Government on a change of these policies has been and what results have been obtained sofar. 1/-P 4_A4C1-- hat, in Vifew~ of Ghanc'S arit-,t chort-nap nf fnrpicrn J~~~~~t~~ - ~ *%L.. ~ - - - - - - - - - -- ----C, exchange, the most recently approved Bank projects in Ghana all include a substantial provision for foreI4gn exchange to finance wr kg"' capItal requirements. PROJECT COMPLETION REPORT GHANA SUGAR REHABILITATION PROJECT (Cr. 354-GH) 1. ILLLUUCLo The Sugar Industry in Ghana 1. Although a minor crop, sugarcane from low yielding native varie- ties, mostly for local direct consumption, has been grown in Ghana for several hundred years. By the late 1950's all granulated sugar consumed in the country was being imported. Around that time, preliminary investi- gations were undertaken into the establishment of a modern sugar industry. Two sites were identified: Komenda, about 120 miles west of Accra near Cape Coast; and Asutsuare, 40 miles northeast of Accra on the Volta River. Fi- nance for establishing the sugar industry was provided from a commodity ex- change fund, essentially a form of short-term credit. At Asutsuare the sugar factory was supplied, erected and commissioned by a Polish organiza- tion (CEKOP) and the Komenda factory was erected by Techno Export of Czechoslovakia. Construction work at both sites started in 1963. 2. Design capacity at Asutsuare was for 24,000 tons of sugar annually from 8,000 acres of irrigated cane; and at Komenda, 12,000 tons of sugar from 3,000 acres of cane. Production at Asutsuare commenced in 1966, at Komenda in 1967. By early 1968, total capital outlay was estimated at US$23 million, excluding irrigation works, and a further US$3 million had been incurred to cover operating losses. 1. Tnitial renonsibilftv for the overall sunervision of both nroiptr.q was vested in the State Sugar Products Corporation (SSPC), a state-owned company astshlished in 1QA3. Tn 1gAq, qpC w4a mrged, tneather irh 1A other state-owned corporations, into the Ghana Industrial Holding Corpora- -_& --J~A~ - O-l' A. 5 -- -- - - .e -- e_ and Polish suppliers continued for some time to provide technical assistance .LL L " L U L. L1L A. O. UA. L~3*U.LA I I. L~ wa 3 LL~L~ IV to a Pakistani firm, Associated Consulting Engineers (ACE), Romenda in 1968 an 115utsuae in 19* T mn1-6 H entoUt eUULndde HU n 1 17/4* 4. Operating difficulties were experienced from the very start at both sites. The factories consistently operated well below capacity. Insufficient cane was supplied by both estate and outgrowers, due in part to slow field development. In addition, cane quality was a problem due to untimely burnings, diseases and pests, and shortages of water and labor for the estates. The factories also suffered from inappropriate design. And because of a constant lack of foreign exchange, additional equipment for the factories and the field could not be provided. Financial and cost controls were also inadequate. In general, the magnitude of the various problems turned out to be beyond resolution, and financial 1--sses becane a recurring drain on GIHOC's resources. -9- . Very early in its niory, tne indubstry wdS LUUn1U LU LtZqu4J.= considerable rehabilitation. In 1967, an FAO identification mission pointed out the need for further financing. Serious questions were also raised with regard to the selection of the two sites, the mission pointing to the high proportion of heavy clay soils at Asutsuare, which it considered questionable for growing sugar, and to the high capital cost of installing irrigation facilities at Komenda and the limited area of suitable land available. 6. A more detailed and in-depth joint report was prepared by Tate and Lyle Technical Services Ltd. (TLTS) and Bookers Agricultural and Techni- cal Services (BATS) in 1968. This report confirmed the need for considerable financial and managerial resources and proposed an operational plan to rehabi- litate the industry. In particular, the report stressed the importance of concentrating efforts at Asutsuare where the long-term potential was greatest. While recognizing the suspect quality of some of Asutsuare soils, the report considered that, with careful management, efficient drainage and suitable irrioaton, the sugar-qrowin2 notential was good. The technology of the sugar factory, initially conceived for beet sugar, would require substantial modifi- cation tn adapt it to cane uar. On the ather hand. at Xomenda. while the factory was more suited for cane processing, the long term agricultural poten- t4 a1 h4hly Ao,htful 2ni rmild oinly ha ;an4.Qei After lAnothv trfals. As a result, the report suggested that Komenda should continue operating for a thre-yea periOd w it, ex-4S4-g -Ui- nt --dl - - - --es--sadamiiu fa- tional investment. !I. Origin, Preparation and A4ppraisLb. of the1 roUJectL A. Project Origin and Preparation 7. The Bank's interest in a sugar project goes back almost to the origin of the industry. The Government sought first to finance the project with private capital and invited the Bank to participate through IFC. At the time, the Bank considered private ownership to be essential to the project, and agreed to participate on this basis. However, when the Govern- ment subsequently decided to proceed.through its Public Corporations and cooperatives, the Bank withdrew its offer. 8. In 1966, a Bank Agricultural Identification Mission identified the two estates as potentially promising for Bank Group financing. IFC, however, could not participate in view of its overall policy of abstaining from invest- ment in surplus world commodities, such as sugar. In 1967, in discussions with the UK Overseas Development Ministry, also interested in the proposal, the Bank concluded that the project needed improved management and further study before makinq any financial commitment. In 1969. following a review of the TLTS/BATS study (para 6), a sugar project was included in the five-year lending program for Ghana and the Bank indinated itA interest to aovernment. - 10 - 9. Early in 1970, the Bank formally advised Government of its willing- ness to provide assistance in updating the ILItBAS report and to prepare a project should the feasibility be reconfirmed. However, following consider- able delays in obtaining the Government's reaction, the Bank agreed later in the year to drop its insistence on the further need to update the TLTS/BATS study and chose to consider the findings as adequate tor preparation purposes. 10. A pre-appraisal mission visited Ghana early in 1971 and recognized the urgent need to reduce the recurring losses of the industry by injecting funds and strong management without delay. Moreover, since three years had elapsed since the TLTS/BATS study, the mission stressed the need for a strong appraisal mission team. 11. The mission emphasized the persisting problems of the industry: low production, low yields per acre, abysmally low efficiency, inadequate equipment, poor management and organization, shortage of foreign exchange and high production costs. The losses were a continuing drain on Government funds and, in spite of some encouraging prospects, would continue indefinitely unlpss foreian exchanae and stronger mana2ement were iniected. 1T. The mission miln tioned wherher It nuld he herr fnr r.hAnn ton abandon its domestic industry and rely entirely on imports. However, it was Iazy thnt wh.2avar retnTmendatint nutqidp nArViq_ Incluitno th Rqnk, wnuld make, Government would not adopt such a course. The reasons for its position wr e:n ~' (a) nnA re -. ,- o Frn4n l- h.r =v--=,A4#-,,.f no 9 m- rn,r * the increasing numbers of farmers committed to cane growing; and (c) jobs the mills, the fact that the installations had no realizable value, the potential returns from imLproved effiieny anIU utJL z at A. n, t e os.Ldea tion that rehabilitation would lead to increased farmers' earnings and reduced Government expenditures, were consideren as adequate justification for further expenditures on rehabilitation. 13. The project outline proposed by the pre-appraisal mission to Government consisted of the following: rehabilitation of the Asutsuare and Komenda factories; expansion of the Asutsuare plantation; improvement of the irrigation and agricultural machinery at both estates; provision of credit; and studies for further expansion. Project implementation would require removing the estates from GIHOCOs control, the appointment of managing agents with full responsibility, and the establishment of a Sugar Marketing Board. B. Appraisal 14. The project was appraised in April-May 1971. The mission reaf- firmed findings of the pre-appraisal mission. The two factories, in produc- tion since 1967-68, had cost the country, by end-1970, about US$7 million in operating losses plus a capital investment roughly estimated at US$13-15 million. The industry had been poorly conceived and executed and was noorly managed. The problems were many, including inadequate cane supply, poor cane cultivation, harvesting and transport, very low factory efficiency, - 11 - and a difficult labor situation at Asutsuare. However, the mission con- sidered that, basically, the industry's problems were solvable with strong and capable management, improved working habits, and foreign exchange. AQrirultural notpntial at Aqutsnire was considered apntablp and rhp factory's problems could be solved. The main problem was shortage of labor. ----ion--f-aciliti -----A----hniioh than Asutsuare, Komenda's agricultural situation was less favourable and the mill- 4 11s too s -al for -- ecno- --oAuc+on. 17^menA, col, h ve,prA a worthwhile, if rather high-cost, operation, provided capital expenditure UIi.LU UJ &C. L I L U J.L jiumW "L 1ZUU.6AL.UL, ILC t.&A. 6 policie of t 0 e Agricultural Development Bank (ADB) would need to be revised and a more effective accounting and credt coUrol system implemented. The mission also proposed the establishment of a Sugar Board. 15. Specific Government action was required for the following: (a) selection and appointment of expatriate management; (b) formation of a new sugar company to take over GIHOC's Sugar Products Division; (c) preparation of legislation and staffing of the Sugar Board; (d) rehabilitation and completion of estate housing; and (e) appointment of credit specialists to assist ADB. 16. The project was reviewed by the Bank's Loan Committee on September 11, 1971 and was found justified on economic grounds. 17. At this time the Bank was concerned about investing in areas of surplus world commodities. Moreover, questions had been raised about the need for Ghana to retain its tariff protection on sugar imports, a policy which might be seen as an encouragement to maintaining an inefficient industry. In response, it was pointed out that, inter alia; all sugar produced was intended for locallconsumption; on a world-wide basis there was strong evidence that sugar surpluses were disappearing, consumption was rising and prices increasing; there was scope for additional capacity; and ,hana's nrosnectn and balance of navments outlook relied on substantial reduction of imports. Moreover, the absence of a truly competitive world Mnreat i-ninl%inat wJth the a w v1 d artchnn&a r:1m f Hia ihe iadi4ivustifJ.PA some degree of protection of the local sugar industry via import duties. In addirlion- thp vcPm nf nrntpPetinn qhntild hp flrible in ordtr rn ;unid over-protection and should be responsive to changes in the exchange rate. C. Negotiations and Events Following 18. Prior to negotiation agreement had been reached that total foreign exchangei~ f-JiLIC-IncAing of. LLL= LJk31. UJ . &LL VA. 15%Vt4 C JLLILLU kUA .W~ from IBRD-member countries should be met from Bank/IDA funds and that Government would contribute local funu Linancing. anuk Grup financing, s considered at time of negotiations, included a Bank loan of US$7.6 million and an IDA Credit of US$8.0 million. 19. A company, to be called Ghana Sugar Estates Limited (GUASEL), was incorporated on November 19, 1971 after the Bank had agreed on its regulations, financial structure and Board composition. Terms of a management contract - 12 - with the Dutch consultancy firm, EVA International BV, were being finalized at the time the Ghanaians were invited to negotiate, and signing was expected to take place during negotiations. 20. At the time of negotiation, the Bank also agreed to link the financing of technical assistance to ADB with that of the Proiect. Initially, attempts had been made to finance this assistance through the onqoina Fisheries Credit or through UNDP assistance but neither proposal had materialized. 21. The project was negotiated in December 1971. Important points on which a-reements ereA rched 1ncluded* (a the new rmnany's a-ity un1A be shared between Government (95%) and the management company (5%); (b) Go..verm--.,.,n ,,. takee the necefaryw steps to f4 d Cilitat the recruitmen.nt of labor for the estates; (c) the Komenda water supply system would be put in the Asutsuare pumping station and main irrigation canal would be turned over to GHASEL .11 not adequately maintained by the Ministry U Agriculture; (e) additional estate land would be made available if required at Asutsuare and Komenda; and (f) foreign exchange would be made available for procurement of spares from Czechoslovakia and other measures taken to allow import of spares promptly as required. 22n Following a major balance of payments crisis, the civilian Govern- ment of Ghana was overthrown in mid-January 1972 and replaced by a military- led National Redemption Council. Soon after taking over, the new Government took a number of important initiatives. It announced its intention of reviewing its commitments toward some of its international creditors. It embarked on an ambitious program of rapid expansion in domestic food produc- tion based upon "self reliance". It revalued the cedi in terms of the dollar (correcting a prior devaluation by the previous Administration in December 1971). And it proceeded to nationalize a number of foreign-owned mining and timber companies. 23. The uncertainties created by the new Government's measures and its precarious financial situation delayed the further processing of the project pending clarification of the situation. Also, the Bank had been asked to act as intermediary in the external debt dispute. An economic mission visited Ghana in the course of 1972 and its conclusions served as background for discussions on settlement of the external debt dispute. Late in the year, followina inAieArinn of imnrnvPmPnr in tho hAlAncp of navments situarion positive budgetary and other actions and the Government's readiness to move 24. Because of the above described delays the project was re-appraised in July 1972. The situation on the two estates had deteriorated considerably since the initial appraisal. Because of the foreign exchange shortage, the factories were near collapse for lack of spares and maintenance. The new Government had not renewed the managing agent's contract and ACE's personnel had left the country (in June, 1972). Although the outgrowers' cane acreage had increasd, transport was so disorganized that lar2e areas were being left unharvested. The situation was similar on the estates. 25. The mission emphasized the need for the HVA management team to assume duty In the shortest p-Isble1-4e- The. U17A BoardA had 4ns4stedA on - -Aeee for concrete evidence of the Bank's decision to present the project to the response had been received from Government on the proposals of the economic mission. 26. The mission also stressed the need for an early decision on importing field development equipment, so as to achieve at least part of the 1972/73 planting and development program. Otherwise first plantings would nave to be delayed until 1974. Based on the assumption that solutions would be found to the management and field equipment problems, the mission modified the develop- ment program by reducing the targets of early years but retained the original overall targets and time frame that had been adopted by the earlier appraisal. 27. Project costs had to be reconsidered. First, as a result of the devaluation of the cedi, the project's costs increased in cedi terms. Second, there were cost increases in dollar terms due to inflation. In total, however, dollar equivalent project costs increased only marginally, from US$22.7 to US$24.8 million. Further, a decision was taken at the time to alter the proposed Bank Group financing from a combination Loan/Credit to strictly IDA financing. This action realized a foreign exchange saving of USS1.3 million in capitalized interest, an amount sufficient to cover the increase in the project's foreign exchange cost. Thus the financing required from TDA would not exceed the USS15.6 million originally allocated by the Bank Group. Moreover, as increases in the international sugar price forecasts were expete too copnA- for r-he assimed fn rerPA_:PQ_ f-hp npr r r' economic rate of return was not expected to change from the earlier appraisal's ')8d AlPthough Government had re-uested the Bank tocnie retoctv financing of equipment under this project, the proposal had initially been turne down I'MW view of the sj uncertainties a" th tim *C _nen dl, a" C mission's suggestion, it was agreed that the Credit would finance retroactively an amoun o up to u uuuuuu cover nvA managemeut anu "v' ec tance costs. E. Project Assumptions 29. The objectives of the project as defined at appraisal and retained at re-appraisal were to increase Ghana's sugar production and make the industry efficient and economic, thus reducing imports and eliminating the heavy losses incurred in sustaining domestic production. The project also provided for a study to determine the feasibility of further expansion, and technical assistance for strengthening ADB. 30. The project, over a six-year period from 1972/73 to 1977/78, would finance the following: - 14 - (a) At Asutsuare i) Expansion of estate cane acreage from about 4,100 to about 6,400 acres and farmers' cane from about 5,200 to about 7,575 acres; ii) Replanting of some 4,100 acres of estate cane and some 5,200 acres of farmers' cane; iii) Irrigation works for all estate cane; iv) Rehabilitation, modification and additions to cane transport and field eauiment, cane yard, mill, refinery, workshops and laboratory: VN rymirinn of partly-built houses and nrovision of new housina and training, health and social facilities for management, staff and laor; .4j% Provisio4.n oftensio, n servies bm-,,f, GHAE and sesnl ndmd* term (four-year) credit to farmers through ADB. (b) At Komenda i) Expansion of estate cane acreage from about 3,250 to about 4,500 acres and farmers cane from about 3,500 to about 5,000 acres; ii) Replanting of some 3,250 acres of estate cane and -3,500 acres of farmers' cane; iii) Pilot scheme for irrigating some 600 acres of estate cane; iv) Rehabilitation, modification and additions to cane transport and field equipment, cane yard, mill, work-shops; and laboratory; v) Completion of existing houses and provision of new housing and training, health and social facilities for management, staff and labor; vi) Provision of vehicles for management and staff; and vii) Provision of extension services by CHASEL and seasonal and medium- term (four-year) credit to farmers through ADB. c) A dt"y n determine the feasibility of further expansion at Asutsuare, Komenda, or elsewhere, taking into account future aonting..4 and control reviewigits - re finnc ial 41 ositin accounting and control; reviewing its present financial position; audadvsig-o-cedi-pli-es-nd---e-re - 15 - F. Detailed Features 31. Field Development Program. The field development program was based on achieving as rapidly as practical cane deliveries of 2,500 tons/day at Asutsuare and 1,000 tons/day at Komenda, these being the quantities required to meet factory capacities. The development schedule assumed that farmers would add progressively bringing their total to 7,575 acres at Asutsuare and to 5,000 at Komenda. The balance of the cane would be met by increasing the acreage of estate cane at Asutsuare by 2,300 acres and at Komenda by 1,250 acres and introducing irrigation. 32. Although some farmers were self-financed (16% at Asutsuare and 3% at mmandal, farmer rpm2nd fmr mnra ena Arrpaa nn rrA it h1aA heon strong, due partly to the excessively easy credit facilities available. However, itwa cosdee tha th tihe crdi faC414t4P. proposed for the1 project might reduce farmer enthusiasm. Should this happen, the slack would b1e. a kla, n Ae.*e.,'-I, aw -n ~ n~a nA at Komen-.Ad -,rub acquisition of additional estate land. Assurances were obtained during negoi..at~ionstha 'GOvenmen wo-"-'1WL1 WU1 cas toJ IJe made avalale s"'Lcen additional estate land suitable for cane growing if this were required to meet factory capacities. 33. Cane Cultivation. Field preparation, cane planting, and cultiva- tion at Asutsuare had been unsatisfactory both for estate and farmer cane. The faults included inadequate tillage and drainage; poor germination; poor weed control and haphazard fertilizer use. Practices at Komenda were better but weed control, drainage and 'fertilizer application needed to be improved. Cane trials were to be instituted at both estates to test new imported varieties under local conditions. 34. Irrigation. All estate cane at Asutsuare would be irrigated and provision was made in project costs for modifications to the main pumping station. In view of the serious doubts over the Komenda irrigation system, only one pumping station would be operated initially on a trial basis for irrigating about 600 acres. If this proved satisfactory and the increased yields justified the capital and recurrent costs, and if additional cane were required to supply the factory, irrigation would be extended. 35. Cane Handling and Transport. Cane cutting, loading and transport methods were highly inefficient. Besides improvements in equipment and organization, two important innovations would be made: mechanical loaders would be used, and payment to cutters would be on a piece-work rather than on a daily basis. The roads serving the project areas and the estates were good and the only additions required were about 14 miles of minor roads at Asutsuare and 4 miles at Komenda. 36. Factories. Under the project, improvements, modifications and factories to their intended capacities: an annual output of about 30,000 tons of ref ned sugar at 15,000n t a crushnd ofamnof 130 working days, and of about 15,000 tons a year at Komenda of mill white, 4 ~ ~ I.~&L ~ 'J .LUJ ~J A ~ ~ a * A..k~a. ~ a,.~ ~ ~. -4 - 16 - forecasts for Asutsuare were based on the assumption that the new equipment would be installed in time for the 1973/74 crushing season. Planned expendi- ture at Asutsuare was based on the necessary replacement of much of the milling and refining equipment. Planned expenditure at Komenda had been kept to a minimum, as existing equipment was basically sound and it was assumed that Government would release foreign exchange for spares from Czechoslovakia. Assurances were obtained during negotiations that foreign exchange would be made available or other measures taken to allow import of spares promptly as required. The alternative to continuing with the existing equipment was to order replacements from Western suppliers, which would be prohibitively expensive. 37. Housing and Social Infrastructure. There were 23 completed houses at Asutsuare for management and staff together with a 48-room hotel. For Asutsuare the prolect provided for completion of 30 junior staff houses and a clinic; and construction of 11 new senior staff and 64 new junior staff houses. a club. a training center. rest house. and a hotel for anren- tices. Junior staff houses would also be constructed at Komenda and labor housini would be constructed at Asutsuare and Komenda. 38e StuidiaQ. Rv Tuine '40. 1Q71- a ;tudv wa-q t h &nmn1rti nn n"H feasibility and location of an expanded sugar industry. The study was to Include naoace-ani- nf Oi i4dace market roeiiiromn i- fn ciaMndi by-products and recommendations for utilization of by-products. Assurances were~ obained during~5 ngotatin tha anrgp .. ..j - able to IDA on conditions and with terms of reference acceptable to IDA to 39. Research. AppieQ KCarh Was ba.LY Ueeded The AMsuLuare agronomist to be provided by the management firm would be responsible for pro- grams of: varietal selection from clones imported from sugarcane breeding sta- tions in other countries; plant nutrition based on field trials and soil and foliar analysis; and water requirements of cane at Asutsuare and Komenda. G. Project Cost Estimates 40. Total project costs for the six-year period 1972/73 through 1977/78 were estimated to be 0 31.7 million (US$24.8 million), of which the foreign exchange component was 4 20.6 million (US$16.1 million) or 65%. A summary of project cost estimates is given at Annex 5. 41. The project would be financed as follows: (USS Million) IDA Credit 15.600 GHASET. - self-anerated funds 1.542 HVA Equity 0.500 Gvernmen 01 6.2 Farmers 0.226 Total 24.790 - 17 - 42. The foreign exchange costs of US$16.1 million would be financed by the proposed IDA Credit of US$15.6 million and by cash equity contributions by HVA totalling US$0.5 million. GRASEL's local currency costs of 4 10.7 million would be met by long-term Government loans totalling C 8.2 million and by self-generated funds totalling 42.5 million. Short-term loans of 43 million would be required by GHASEL in the first two years to meet operating deficits. The remaining local currency costs would be met by Government and farmers. H. Board Presentation and Credit Effectiveness 43. One main issue was raised at the time of Board presentation - the Ghana Governmen' dpriqinn to tAep oupr enntrnl nf thp fnrPin-owned minina companies. Some of these were owned by U.K. nationals, and the U.K. Govern- Board; but following discussions with Bank management, the U.K. eventually ag ree to -W.LL hd raw -it~UIJ LLLUL~~ sL~JU6UA obj ecU 16in alhog reutnl .A..~LL.0A that it was not possible to take any other action in view of the Ghana Woverument's -W LU lnuu ge to exen ful anu dLa u.LuL. lIue1l %uveLu- ment's intentions were further confirmed in a statement by the Executive Director for Ghana during Board presentation. 44. The original date of effectiveness of April 30, 1973 was postponed to May 30, 1973, due to delays in the implementation of some of the condi- tions (e.g. transfer of assets to GHASEL, signing of subsidiary loan agree- ments, GHASEL-ADB agreement, formal establishment of the Sugar Industry Committee and legal opinion). Most of these conditions were subsequently fulfilled and the Credit became effective May 31, 1973. III. Project Implementation A. Introduction 45. The Project achieved none of its major economic objectives. The problems which plagued the industry prior to the project, and which had been highlighted by the successive appraisal missions, continued throughout the project: low production, yields and efficiency; inadequate management and organization (to a degree): shortage of foreign exchange: and high production costs. The industry is still losing money and is unable to repay its debts. Moreover. rovernment invested more than double its planned contribution and is now faced with having to reimburse its IDA borrowings without much hope of receiving Any offsretino inromp from its investment or from foreign exchange savings. B. Summary of Project Performance 46. The following table summarizes the project's cumulative results when opare 't at Ae 1 xe ais . 4 adLL LUC . .LLI Y Q 41 jj.J ..'.*- are at Annexes 1, 3, 4 and 5. - 18 - Asutsuare Komenda Act. Act. Appraisal 1/ Actual 2/ Appr. Appraisal 1/ Actual 2/ Appr Tnt;al harvested acres - Estates 20,520 14,678 72 16,440 15,865 97 - - -- - - -- - - (in tons) - Outgrowers 455,280 228,908 50 307,725 221,810 72 Tons cane per acre - Estates 20.6 14.0 68 20.6 13.3 65 - Outgrowers 16.2 8.9 55 16.5 13.2 80 Sugar production (in tons) 68,747 22,464 33 56,743 27,685 49 Tons sugar per ton cane (Z) 8.0 5.2 65 9.0 6.0 67 Appraisal Estimates Actual Total Project Costs US$ 24.8 mn US$ 41.3 mln 3/ IDA Financing US$ 15.6 mln US$ 14.5 mln Government financing US$ 6.9 mln US$ 14.9 mln 4/ 1/ five years 1972/73 - 1976/77. 2/ five years 1973/74 - 1977/78. 3/ including USS22.9 mln of accumulated losses. Details paras 86-87 and Annex 5. 4/ not including interest due but not paid by CHASEL. C. Problems of Early Implementation (1973-74) 47. The appraisal mission had stressed the need 'for urgent assistance to been scheduled for early 1972, some eight months after appraisal. However, LJ 1. 1 -1 LI ..L. IL L~~ .A . .L I 1= LL 16 WJ VW~ V 1. L LLL=LL L d 4.1 J41 aA 1972, the Board could not approve the Credit until December of that year. nuLtOVer, cLUMLJtU WILI U t.:Icyb Ia U . ULn.UL11 UvL uzmeu approval o te project's legal documents, Credit effectiveness could not be achieved until june 73, more than two years after appraisal and one year behind the implemen- tation schedule. 48. The implementation schedule proposed by the appraisal mission had specified a six-year period, 1972-78. The re-appraisal mission, although recognizing that delays could result from the political circumstances at - 19 - the time, chose to retain the same implementation period while trimming down the targets for the earlier years. Subject to the contracting parties agreeing to an extension, the Credit Agreement's Project Completion and Credit Closing dates were stipulated as, respectively, September 30, 1978, and March 31, 1979. Moreover, and perhaps more important, the expiry date of HVA's Management Agreement was set for June 30, 1978, although provision was made for a possible extension. While not a major point, there was an implication that the Managing Agents had anroximately five years ahead of them to accomplish a six-vear program. 49. An additional constraint on the project start-up was the unwilling- ness= ofGvrmn, facig----------frein-echage --tut--, t ala.te .~ the necessary equipment and spares to carry out the first year-s (1973) reha- bi~ltati programd1 A.orI tLLe factory an te ' LL L.U. A'I e reapras l ission had stressed the need to order such equipment no later than December 1972. HVA nadu recogunieu te siuatu anu aceu prumptly in ntifyig suppliers SoOn after its arrival in January 1973. However, because of its precarious financial situation, Government did not make the necessary allocations to provide the needed funds. Combined to this was the unwillingness of suppliers to deliver unless payment was assured from !DA funds or Letters of Credit issued by acceptable banks. The procurement problem was further compounded by the initial unfamiliarity of the Managing Agents with !DA procurement procedures, so that further delays were incurred even after the Credit became effective on May 31, 1973. By late 1973, only a nominal quantity of spares and equipment had reached the project. As a result, the crushing season started with the factories having received only the barest of essential maintenance. For the field equipment, further cannibalization was carried out to make some equipment operational. 50. The first year's overall results would appear reasonable in terms of first year estimates (total cane production 89%, sugar production 79%), par- ticularly in view of the circumstances. The arrival of the managing agents enabled the industry to lift itself from a state of near collapse, and field and factory production exceeded by a comfortable margin that of the previous year. However, this was probably the last gleam of hope the project had. The delays incurred in rehabilitating the factories and proceeding with field develooment were to have a compounding influence when combined with the pro- ject's -further difficulties over the remaining four years. D. Constraints on Later Implementation 51. The following is a brief outline of the events and circumstances which surronAd project 4m1amantatin frnm 1974 to 1978. a2 1974/1975a f a - A hy7 a rAi n fA 11 ( ha Av rains followed by drought) which restricted the planting program. Outgrowers the inadequate pumping facilities at the Prah River Station. The facility LinaLy broke aown ana Government would nou L locae fore6i e^change o rehabilitate the station. There was no irrigation at Asutsuare, as construc- tion of the Volta River pumping station had not been competed. At Asutsuare, outgrower-relacions were mixed while at Komenda relations were reported good - 20 - and farmers were collaborating with the estate. At Asursuare, the ahentee owners were reluctant to cultivate or replant and to abide by harvesting schadu1. Rahablli a1ion F hIth fac tori an ctaed tAir r Irrnal of most of the equipment. The breakdown of the only operating turbo-generator at Asut-re, c,ratea spcajl pro'ble and ..aa..4.a to -a ... -1 . to Poland for repair. Field equipment financed from IDA funds arrived. W - A.I* 4L - & L1 I L ZL LJ..L.L.1.LL1 equipment originating from Eastern European countries. Shipment of the original order had been destroyed by fire at point of origin. The tractor fleet was down by 50%, and many were obsolete. In view of high costs (more than double the appraisal estimates) management decided to postpone the housing program and submit new proposals. This decision affected the labor situation, which was difficult at Asutsuare. Because of lack of local labor, the estate had to import labor from outlying districts and, since there was no housing on the estate, employees had to be bussed every day over considerable distances. The project reported lower than expected cane harvests at both sites, although the situation at the Komenda estate had improved considerably over the past year. Drop in yields at Asutsuare were attributed to the drought conditions. Outgrower production was down at both sites. There was a slight improvement in factory throughput at Asutsudre, and even better at Komenda. Downtime at Asutsuare was 50%, largely due to lack of cane. 53. 1975/76. Both estates were again affected by erratic and low overall rainfall. Development of the high level area at Asutsuare was started on force account but hampered by unreliable edrth moving equipment; progress was reported in installation of irrigation facilities. Borer infestation at Asutsuare increased over both estate and outgrower areas and was even more widespread at Komenda. The Volta River pumping station was finally put in operation in January 1976. Later in the year, new pumps were installed at the Prah River station but operation was erratic due to unreli- able nower sunolies. Field ecuinment and snares ordered in Anril 1975 had not been received at turn of the year and hampered field development at both ;ies F-torv rpliihilv.ty as a nrohlem at hoth sqtps. At A_qnrsnarp. the two turbines repaired in Poland broke down again; public utility power, uAd mc .2 arnative nroved unralilila ane 1nAdtiOt Tha fmur hnilprq also caused a lot of downtime due to repairs, postponement of harvest, and ovealllow ~~ghut.At, Komend a, where overhaul h'ad "-en repoted completed, further problems were encountered with the evaporator and baro- metric condensor plants.* In spite of improvements in can quantity, sugar yields were low, largely because of inability to schedule optimal harvesting with crushing (factories unreliable), and prolonged drought which resulted in poor growing conditions and borer damage. Management decided to replace the proposed building program using self-generated funds, resulting in the release of US$1 million from the IDA Credit to finance equipment and spares. Also the training program was started in this period. 54. 1976/77. Cane production at both estates continued to be in- fluenced by severe drought and borer infestation. At Asutsuare sucrose content was particularly affected by overcast weather. Outgrower cane production and harvesting were seriously hampered by unwillingness of out- growers to maintain agreed harvesting schedules, bushfires, lack of labor - 21 - e- 4U W L& 6. 0 jJ * 9WL U&JU=LA" C& , .J. al u e U in th exL t e ra. 1. electricity supply (no power for 4 months, intermittent rest of the time) h.ndered irrigation and held up the planting program, no new Field develop- ment was undertaken; outgrowers performed reasonably well and most of their cndRV was harvested. L onsiderable breakdowns in field equipment were reported at both estates. Serious labor problems developed as competition heightened from other projects in the estate areas. Both factories experienced high downtime. At Asutsuare, a major cleanup had to be carried out due to an overfilling of the evaporator (caused by possible carelessness). Of the t2.8 million worth of import licences approved that year for urgently needed spares and replacement for field equipment, only 40.4 million equivalent in foreign exchange was finally allocated, most of it too late. 55. 1977/1978. Drought and shortage of operational field equipment continued to plague cane production and development at both estates. At Asutsuare, work on the high level area was stopped for lack of construction materials; large numbers of outgrowers began selling their cane to private crushers. Lack of electrical power at Komenda practically halted irrigation on the estate. Vehicle and tractor fleets at both estates were largely immobilized for lack of spares. Factories were also short of soares and standard maintenance supplies. Large quantities of cane were left unharvested on both estates and out2rowers' farms at Asutsuarp for Ank nf rrangport equipment. No foreign exchange was allocated for the t5.6 million worth of imnort licences annrovd durin, the vpqr. FinAllv the manaing neants' contract expired June 30, 1978. 56. 1978/1979. Following the July 1978 supervision mission, the Goenmn wa .JJinorme oJL a .list oJf actionsL thLat were~ needed .IIL -- -- to bring the project around. As Government did not reply, a further letter w LUu Cu v 47, .io, aUV..ILg IUVCLIU-LuL hatL Ud usburmetWuL wouu not be made on new commitments taken after January 15, 1979 unless the specified actions were taken. No saisfactory reply was received before the closing date and the project was closed on March 31, 1979. However, due to the slow processing of the remaining claims by the Ministry of Finance, disbursements on prior commitments were made until February 6, 1980. The balance of the Credit, amounting to US$1.1 million, was cancelled. E. Project Agricultural Development (Annex 1) 57. Field Development. On arrival, the Managing Agents conducted a survey which revealed considerable discrepancies between the actual acreages under cultivation and the estimates contained in the Appraisal Report: A/R Estimate Actual Variance acres acres (actual vs Est.) % Asutsuare - Estate 4,100 2,180 - 1,920 - 47% - Outgrowers 6,200 8,500 + 2,300 + 37% Komenda - Estate 3,250 2,430 - 820 - 25% - Outgrowers 4,000 2,910 - 1,090 - 27% Total 17,550 16,020 - 1,530 - 9% - 22 - This situation reflected a number of factors which had occurred since apprai- -.41 namelv: (a' the general deterioration of the estates. and (b) the stimulation brought about, particularly at Asutsuare, by excessively easy cradit fqe-ilItioa fnr muit-arrnt7rq' PYn;n_c:ionr (a noint mentIoned in the Annriq.1 Report). However, in spite of the larger acreages, the outgrowers' fields wer in poor cond-4 *4n-- a)d Ithi yie ld Aol p-,.1A.r, to ben abysmall low (7.7 tons of cane/acre in 1973/74). Initially, therefore, the Asutsuare factry wuldhave to rely to alarger degree than expected on outgrower cane supplies, and thus lower sugar production could be expected. At Komenda, in adoition to tne smaller areas unuer cane, Lue survey revealeu ouly 3,35u cultivable acres on the estate, some 1,150 acres (26%) short of the appraisal estimate; suosequently, Government added 450 cultivable acres to the estate, bringing the total to 3,800 cultivable acres. 58. The field development and rehabilitation program established at appraisal was to be carried out over five years, 1972-77. The actual situa- tion in 1978 therefore can be compared with the program targets (table below). The acreage to be replanted represented the area assumed to be under cultiva- tion at time of appraisal. The new acreage represented additional areas planted in order to bring factory throughput to designed capacity. The results indicate (Annex 2) that the estate areas were almost totally replanted. However, the records do not make a clear distinction between replanted and newly planted areas; the latter seem to include fallow fields of uncertain history. What is clear is that very little progress was achieved in opening up new estate land. Anotaisal Estimates Actual Relanted New Total Assumed Renlanted Harvested Acreage Acreage Acreage Harvestable and Acreage 1078 Acreag 1/ TDulnned 1078 1978 Asutsuare - Estate 4,100 2,300 6,400 6,400 4,200 3,280 we r% , In I. , 1J '7 CZ 7, r,' - Outgrowers 3,425 1,565 5,000 4,250 N/A 2/ 3,800 Total 15,985 7,490 23,475 21,590 - 13,670 1/ The Appraisal Report estimated 85% of outgrowers' acreage available for harvesting. 2/ Accuracy of data cannot be established to provide reliable estimate. 59. The Managing Agents had put considerable hope in the development of the so-called "high level area" behind Asutsuare, comprising some 3,000 acres of land of fair cane growing potential (up to 30 tc/a). However, progress was - 23 - hampered b-r both lack of materials and the uniqaaiability of suitable contractors and hire equipment. The.appraisal had assumed that contractors were availabl.~ Th.e Lmanaging a nsiv..- -In-------------------g --------nim-----h. i situation, but the Credit did not include sufficient funds to meet all the and replacement for the existing field equipment of Eastern European origin. Although maintenance on this equipment was reasonably good, the project consistently hampered by lack of spares; moreover, some equipment models were no longer being manufactured. As a result, by 1979, only about 600 acres of the high level area had been planted. 60. Outgrowers' performance was particularly poor at Asutsuare, as indicated by a substantial decrease in harvestable acreage during the project (from 8,500 to 3,150 acres). The number of farmers also decreased (from 225 in 1975 to 148 in 1979). In fact, many fields were destroyed by accidental fires or simply abandoned by farmers. This was particularly true to the south and southwest of Asutsuare where the low rainfall, worsened by the droughts of 1974 to 1978, made land unsuitable to cane farming. While some of the farmers moved their operations to the more favorable areas around Somanya village, progress there was slow and never compensated for the lost acreage. The appraisal report had also expected that, after the Ministry of Agriculture's mechanization services were discontinued, farmers would use the services of outside contractors for field preparation; but the few contractors available also lacked eauipment and spares. and farmers grew increasingly dependent on GRASEL to assist in land preparation. Although the prnoet had nrnidpd ome euinment for this nurnose. and ADB also lent funds to GRASEL to increase its equipment pool, this proved to be insufficient. 61. At Komenda, the outgrower situation was more encouraging than at CiSutsuar, bu a cnieale ar of., th a4ntiiae ex'4~ otenion~ a2rea proved to be unaccessible or unfeasible. In the end, however, the net reuts at -menda weepstve h e harrreabl'le ac-eir0e resU ~ uu NUL LL J. 6va614 6 from 2,910 acres to 3,440 and the number of farmers also increased from 256 (197/3) to 3/U (197//)* 62. irrigation and Water Supply. The water supply 0-a41lts had been found incomplete by the Appraisal Mission. Government, which retained respon- sibility for the Volta River pumping station and main irrigation canal at Asutsuare (through the Irrigation Department of the Ministry of Agriculture) and the Prah River pumping station at Komenda (through the Ghana Water and Sewerage Corp. - GWSC), had agreed and given assurances at negotiations that the stations would be kept in working order and properly maintained throughout the project. The Volta River station, under construction at appraisal, was scheduled to become operational by December 1972, in time for the 1973/74 sea- son. However, serious faults in design had been found by HVA at appraisal and modifications had to be made to the structure so that construction was still under way when the Managing Agents arrived early in 1973. Further delays were incurred later, some of which were avoidable (e.g. deviations from design spe- cifications), so that the station only became operational early in 1976, three years behind schedule. As a result, adequate water supply at. Asutsuare was available only in the last two years of the project and yields increased in 1976/77 by almost 50% to 18.6 tc/a (although they declined to 11.4 tc/a in - 24 1977/78 due to equipment and harvesting problems). There is no doubt that this situation a-ri r,uc I h=panr0a Pcr t, pronanvduct-ionn, partic-lavrIy~nve of the persistent drought. 63. At the Prah River pumping station, the deteriorated state of operations continued (lcl ofL spaes untLiC theU Ii pumps (the only one that had been operational) collapsed in mid-1975. In view of UWOk. aULUIy LU IULLL LIM LurEIgn UXUInUge to replace the equip- ment, some US$200,000 had to be diverted from the Credit for the purchase of new pumps. Even after the new pumps had arrived, due to inadequate electrical power from the public services, only two could be operated at a time. Because of the initial doubts over the existing irrigation system at Komenda, project provisions had been confined to a pilot irrigation scheme of about 600 acres. However, in view of the drought situation, management decided to make use of existing resources to irrigate the whole eastern half of the estate. In all probability this would have paid off during the drought years, but unfortunately both water supply and electric power remained erratic and inadequate. The problem is still unresolved. 64. Cane Quality. While many of the factors affecting cane cultivation were more or less outside management's control, some comments must be made particularly with regard to cane quality. The abnormally low level of sucrose content resulted from a combination of factors. First, there were avloidable delays between burning/cutting and crushing. Theoretically, this could have accounted for a loss in sugar Yield of as much as 1% per ton of cane, or about 17-20% of total sugar produced under project conditions. Second, the crushine season got off to late starts - three years out of five at Asutsuare, and every year at Komenda. This triggered off undesirable reac- tions in the field in terms of suerose content: stand-over cane virriiallv perished, plant canes passed their peak, and borer infestation and red rot in- cAd Thi c ruaiiqon :a1c qfat-el aan ra rn n-rnii ren - Third, A a- though pests and diseases did not present a serious problem at either estate at appraisal, stem borers becamea majr polma oedadnnra4g ly significant one at Asutsuare. Outgrowers also suffered similarly. Project percent .of cane) could decrease by as much as three percentage points. Chemi- replace the dominant variety in current use seemed promising but took time to implement and final results could not be determined in the course of the project. 65. In general, there were strong indications that the ripening of cane (meaning the build up of sucrose in the stalks) did not follow the predicted pattern. For practical reasons harvesting had to be confined to the long dry season (November to March), and most of the factors which normally boost sugar yield are virtually absent in Ghana. There are no cool nights and shortening days and the factors which trigger flowering occur during the short dry season (July to September) when the stalks are still short. Moisture stress is also an important maturing factor in cane which is well grown; but cane in Ghana responds to lack of water by stunted growth only and, although very little growth seems to take place in the long dry season, the sucrose content of the cane deteriorates. - 25 - O;A. Research and Seed Production. In general, the technical agronomic practices recommended in the appraisal report were implemented and further Aienred %v rhe ManAging Agents' agricultural advisor. Many field trials were carried out to test new cane varieties and fertilizer application. In both cases, however, drougteht, fir boa Infesit-on anef mrhAnfrAl hreak- down impeded or invalidated many of the trials. Few convincing results emerged. S1hortages of good ee An wer frequent.Re-;aic nf th armiaht- nursery cane was often stunted or infested by borers. And germination was usually poor owing to late rains or sudden downpours which destroyed young plants. Although the estates were projected to provide seed cane for farmers, there were occasions when farmers' cane had to be purchased for planting on the estates. 67. Outgrovers. The assumption at appraisal had-be-en that the project would encourage, partly through the credit mechanism, partly by limiting farm sizes to 25 acres, the formation of farms managed by outgrower families. This was expected to reduce the practice of hiring non-family labor. Experience, however, showed this assumption to be false, as large and small farmers alike continued to depend on hired labor, and when such labor became difficult to obtain, grew to rely on the estates to carry out land preparation and (at Asutsuare) to get their cane harvested and loaded. The estates' extension services were generally well manned and staff trained to organize land prepar- ation and harvesting as well as to disseminate technical information and set up demonstration fields. As a result, most outgrowers came to expect the estates to implement the advice given and ADB to provide the funds. 68. Komenda faired much the better with its outgrower program. In fact, the farms were located on comparatively better land and enjoyed higher rain- fall than the estate. Although cane yields were not high, the farmers' inputs were minimal (they used no fertilizers and did little replantine) and they made some profit. Holdings of 10-25 acres represented about a quarter of the total number of farms, and while n frms were owed by individaul farmers. a considerable number were owned by cooperatives of quite large membership (often a member -er ce). Anth inAivfi1 farmar and co-onerators contri- buted a limited amount of personal labor. Also, the local ownership and o- the. farms res,$ *,.,.., -Utedl in. a,. more~ man'iageable mianp Altna_- tion. Thus the results at Komenda were somewhat encouraging although still far from expcaionsi. 69. At Asutsuare, in contraL, Mucu u te outgruwers' land was indifferent and arid and many of the farms did not survive the drought. More- over, a large number of the farms belonged to absentee owners, mostly from Accra, with little disposition to contribute personal effort. As a result, many farms were not cultivated, yields were poor and often not remunerative, and many of these farms were abandoned during the project. Many farms were also located at considerable distance from the factory, making transport uneconomical. Because of these factors, management concentrated on rehabili- tating the estate so as to reduce the factory's dependence on outgrower supply. Outgrower discipline was also a problem throughout the project, a fact which at times affected estate/outgrower relations. At the beginning of the project, - 26 - many farmers would intentionally set their fields on fire so as to force har- vesting and reeive earlier anymenrq. Trinartita agreements. which were even- tually worked out between outgrowers, GHASEL and ADB, tried to discourage this p-tt-t- hy matchino nayments with scheduled harvesting. In snite of this. outgrowers continued to show reluctance to stick to agreed supply schedules. Many of their fields, left standing with burnt cane (8,000 tons in 1977), were made worthless by the inability to harvest quickly.In the end, many out- growers, encouraged by prices paid by private crushers (who sold the sugar for the production of akpotesche, a local gin), stopped delivering to the factory. F. Technical Factors 70. Factory Rehabilitation. Because of the delays between the initial Appraisal in 1971 and the effective start to the program in 1973, the condi- tion of the factories was much worse than anticipated. Moreover, unit costs of replacement equipment had increased considerably during this period whilst the funds available were essentially fixed. Consequently, there were insuffi- cient resources for fully implementing the total program; of the available funds, the factories were allocated a greater proportion than originally en- visaged. In only one respect was the situation better than expected: useful quantities of key factory spares were found in flooded cellars or overgrown by grass. Had these spares not been available, results would have been even worse. 71. The Appraisal Report of 1972 provided a list of equipment to be supplied for the Komenda factory. It included 65 items (excluding alterna- tives) totalling US$777,700 f.o.b., in contrast with the 1971 Appraisal Report Technical Volume which listed 43 items totalling US$634,100. This list at Annex 7 shows what was actually procured. The equipment list includes some items which are typical of a factory rehabilitation project, i.e., provisions for extensive overhaul, and also capital replacement items. In addition it includes items more accurately described as maintenance, i.e., items having only a very short-term effect on factory performance. It is necessary to emphasize this difference in order to understand why performance improvements were short-lived. Although the scope of the work and estimated costs in real terms significantly exceeded estimates, several factory stations were still in need of replacement at the end of the project. The rehabilitation work did not result in normal standards of factory reliability. The project also in- cluded provisions for increasing stock levels of factory spares. In general, these funds were well spent, but obvious exceptions include massive ptocks of certain slow moving items for which a 10-year supply was purchasedL -As, certain types of pumps were replaced although very large stocks of spare parts were available in the stores. 72. The 'List of equipment to be supplied for the A'sutsuare factory totalled US$1,881,990 f.o.b., compared to the 1971 appraisal estimate of US102640 The inlcrease aper lo.w in lation..J to .inflJationL Lin tha pri od. A revised rehabilitation program was produced by HVA early in 1974, and Lurtner reviSuns were maue in tne unteAL to LC availaue funds. ALL= =4UA ment actually provided is at Annex 8. It is apparent that many items on the original program were deleted to reduce costs. Dur4-- theprjet,te -nca problems caused major unexpected expenditures. Due to boiler failure, large in the wrong place and the resulting amount was ten times of what was mean. _orunately, the item concerned was ratheln_ pnie - 27 - quantities of boiler tubes were consumed, until the problem was identified as unsuitable oil burners (and presumably excessive use). Similarly, turbo- alternator problems resulted in high costs for their (unsuccessful) overhaul in Poland, and later a new unit was purchased in the U.K. As a result of in- adequate funds, and unexpected technical problems, the project failed to im- prove factory reliability to normal standards. Parts of the equipment remain substandard, particularly cane preparation, mud filters and centrifugals. In general, the available funds were well spent . An exception might be the em- phasis given to improving the quality of refined sugar, as it had doubtful priority with production being so low. Towards the end of the project the non-availability of minor consumable stores was having serious effect on fac- tory reliability. Since then the situation has deteriorated further, even though most strategic spares are at reasonable stock levels. Results Achieved 73. Cane Quality. The importance of cane quality in relation to project and factory performance cannot be overstated: although the project resulted in slight initial improvements to cane quality, the estimated figures were never achieved and, at the end of the project, quality was worse than at in- ception. The reasons for the low level of sucrose content were explained ear- lier (paras. 64-65). Results indicate that cane quality was well below the standards achieved by most of the world's sugar factories. 74. Pol-Z cane, an estimation of cane sugar as measured in the factory, was significantly below target, and dropped during the course of the project. In addition, reported fibre-% cane rose to abnormal levels (around 20% com- pared to tvical fiures elsewhere of 1 5%) and juice purity declined almost steadily throughout the project. Details are in Annexes 3 and 4. 75. Sugar Recovery. Both factories experienced similar records on sugar recovery. Reported pol losses in bagasse averaged 12-13% and were higher than appraisal estimates in most years. Reported losses in filter cake were erra- tic, varying from close to target--1%--to as high as 5%. Filter performance was frequently unsatisfactory and unfiltered mud was dumped. Reported losses in final molasses during the project period averaged 20-23% of the pol in cane compared to Appraisal estimates of 12.0%. This very large increase was caused by various technical factors, the main one being the shortfall in cane quality (accounting for about 60-70% of the excess losses). As a consequence, overall sugar recovery averaged 57-60% compared to a target of 75%. Normal commercial standards range from a low of 75% to over 85% depending upon cane quality and factory performance. The appraisal target was therefore modest. Very approximately, it is estimated that the substandard cane quality accounted for 11% of the difference between actual and target recovery and substandard factory performance the remaining 4-7%. 76. Operating Time Efficiencies. The Appraisal report included estimates of the factory time efficiencies and these are compared to actual performance at Annexes 3 and 4. At both mills, overall performance was poor with total lost time, as a percentage of season hours, averaging 42-52% compared with Appraisal estimates of 16-18%. For illustrative purposes, the experience at Komenda is discussed below. Excepting the first project year (when it would be unrealistic to expect improved performance) rea1rS aoun,ted for about 10.5% of season hours. This high figure may indicate that the extensive backlog of maintenance work was never completely cleared (bca- f e~ --g, inSufficient Qnnrp) n~r rhArt tha fni-Pnrv wA not rehabilitated to normal standards of reliability. Although undoubtedly the of season hours; the impression obtained from staff and management reports was tuat tai a d bu =enu a uajor " - r-u r ---uI- m Iu -p m za fa e wa--s-- LL1d LLJ.~ A4U IJ~~1 UIL LC1t.;6VJ)Y JJLULU.L=LU- I.L= r4ip&L LL..41. J.=jJUL1A. Waa incorrect in stating that Komenda had a connection to the National Grid. Shortage of cane averaged /.4A of season hours. The Appraisal combined this item with factory repairs so that no clear target was set. Out-of-cane stops should ideally be zero and with a well-controlled harvest and transport operation, this can be achieved, except during heavy rainfall. As the time lost was often several hours per day rather than in long periods, steady factory operation was disrupted. It became difficult to maintain factory standards when it was known that efficient, continuous operation would result in out-of-cane stops. Conversely, it was difficult to achieve efficient harvesting and transport unless the factory were reliable (which it was not). The failure to resolve this problem resulted in significant deterioration of cane between harvesting and milling. Although reported by factory staff and management reports to be a major problem, stops for lack of water (and also fuel) accounted for only 1% of season hours. Possibly, the difficulties with water supply (from the Prah River pumping station) occupied a disproportionate amount of staff time. The lost time for non-factory causes was 10.9% compared to the Appraisal estimate of 7.5%. However, the difference would have been even greater had the factory stopped for public holidays as originally planned. 77. Whilst the factory milled all the available cane (in most years), the time efficiency performance was significant in that, if harvesting opera- tions had matched factory requirements, then it would have been possible to mill the cane at peak quality and thereby increase yields of sugar. The fail- ure to achieve target standards of time efficiency therefore reduced produc- tion of sugar and increased costs by virtue of an extended operating season. 78a Aa~~ Jll~4n nd Prodiirrinn. WV data relating to achieved and target factory capacities and production are also given at Annex 3 for an .Ane 4 for Komenda* Whil 110 l- would have been --,Qi11 in 1974/75 to believe that the project was progressing, for reasons explained earlier, hIL yp111h1-esis became untenable in 1075/176 when a virtually all aspects of performance declined markedly. The decline thereaf- ter acce±lrate so that in th 'Last proec yea proucio was only 31.4I% of the appraisal targets (delayed by one year) at Komenda and 10% at Asutsuare. The Appraisal report considered that a milling season uf 196 days was feasible at Komenda, and 155 days at Asutsuare, although the earlier BATS/TLTS study proposed 150 days. Operation for over 150 days occurred in three years at Komenda, two years at Asutsuare. Throughput at times was limited by technical problems, generally the overriding constraint being the rate or cane delivery, as a policy decision was taken not to store cane at the factory (excepting a small quantity in cane carts). By 1977/78, a season of only 91 days at Asutsuare was sufficient to process all the available cane. The - 29 - inadequacy of the cane supply is illustrated by the ratio of actual to target which decreased every year of the project, so that by the last year actual tons cane was only 22% of projected. As a result of this, together with factory yields also being below target (from 1975/76 onwards), sugar produc- tion has been disastrous. G. Training 79. At the beginning of the project, the General Manager at Asutsuare remarked "Tt is practically imoossible to amend or alter incorrect workinz practices adopted in the last years. Supervisors lack understanding of the basic working princinT-e and do not have Suff icient cmmand authority over subordinates to introduce or maintain efficient working practices. Serious shortage ..,, 4,- tehnca staff prevetntsa crUi~Amn- m ri el ri,tf nannla1 nn f;3-tir)V floor." This remark underscores the training task, more formally defined in personnel (B.Sc. or B.A. degree) followed by study as signments inl ove~~ sa ua indu str i es non-staff training: conaucteu at a Training Cent, to 11uu UP6Lau- ing courses for artisans, practical courses for school graduates, training courses to provide 'qualified foremen. and advances training courses for promoting to statt. Staff training in general proceeded as outlined above. A number of factory staff were selected for intensive training and were seconded to sugar factor- ies under HVA management in Ethiopia and Tanzania. Several of these candi- dates also visited sugar machinery manufacturers in Holland and UK. The dura- tion of the visits ranged from several weeks to almost one year. The present Ghanaian senior staff in the factories appear reasonably well trained (al- though with inadequate appreciation of the financial aspects of their work) and arq operating and maintaining the factory without external advice or assistance, although at a very low level of efficiency. Similarly most senior agricultural staff appear reasonably competent. While there are reports that insufficient training was undertaken by HVA, it is considered that the train- inL facilities provided were good. Since HVA left, no similar training has taken place and some trained staff have left, for various reasons. 80. In order to assess the priorities for non-staff training, HVA hA 4rited ereancoe-RBhe,,n tn etrrv nur ; rr;;inina sirvPv. Their renort was produced in July 1973 but, apparently, many of the recommendations were not accepted by UTVA. T1- 'f l T-ra4T44 " rW4,a wmc mnnntai n nua;ry 1975 and in February 1975 Integrated Management Consultants (IMECO) of nL.L.4LLU C0mMC-nC_-U1 C-1a secondsu Q %J WL I in __ __ concntraedO skilled operator and artisan training. A training school was then established at Asutsuare wit tf e assstnc ofL41L tU e 14'tina Vocuat- vLonua. Tann n 4t (NVTI) for training artisans and special courses were organized for laboratory and process workers. An experienced pan boiler from Tate & Lyle was brought in for two seasons to retrain the pan boilers. Supervisory courses at foreman - 30 - level for two groups of 36 were conducted by the Management Development and Productivity Institute (MIDPI) and later by the Ghana Institute of Management and Public Administration (GIMPA). A1. Some difficulties were experienced in obtaining the release of technical employees to participate in training because of the over-riding need to operat And maintain the factories. Similarly the ernatriate Training Engineers appointed to undertake artisan training spent most of their time atenin o ssnial fat--, -nrrle- Tho n~1d'd ifcite in imnlp- menting a comprehensive training program in a deteriorating operation led to apparently at Komenda. Since 1977, the emphasis of the Training Center at visors and assistants. 82. The overall assessment of the projects' training component is that staff training was satisfactory, but training of seasonal staff was ineffec- tive because of: (a) failure to define quickly the objectives: and (b) the use of training reviews by Ghanaian staff to pursue social and quasi-political objectives. H. Financial Factors 83. Financing. As required under the Credit Agreement, the assets of GIHOC's sugar products division were transfered to GHASEL and subsequently evaluated at 012.9 million, representing the Government-s equity in the new company. The matter of what liabilities should also have been absorbed by GRASEL was never decided, and the issue was still before the courts early in 1980. In accordance with the Management and Subscription Agreement between HVA and the Government, HVA contributed an additional US$0.5 million to the company's equity, representing about 5% of the total. This amount was re- imbursed to HVA in mid-1980. 84. Also under the terms of the Credit Agreement (Section 3.01 (b)), Government was to make the following loans to GHASEL. (a) long term loans totalling US$20.3 million comprising US$14.4 M4114^n fr^m rho TnA rroeiit anei 1J1;1 .9) millinn frnm it. n resources; and (b) an amount of up to 03.0 million as working capital. As at September 30, 1978, Government's position in GHASEL was as follows: - 31 - (N Million) (S Million) 1/ Equity 12.9 11.2 Loans IDA on-loan 2/ 15.9 13.8 Long term loans 3/ 13.4 11.6 Working capital loan 3.0 2.6 Interest due on loans 7.3 6.3 Total 52.5 45.5 1/ US$1.00 01.15 2/ Including outstanding claims for about US$571,000. Also includes 00.7 million due to Government Sept. 30, 1978. 3/ Including 08.4 million due Sept. 30,;1978 Thus, Government's own loans to GRASEL of US$14.2 million exceeded the Credit Agreement requirements by about US$5.3 million. 85. Operating Results. (Annexes 9, 10, 11) Largely because of its lower-than-expected sugar production, GRASEL reported losses for every year of its operations during the project. As of September 19/, accumu- lated losses amounted to 026.3 million. By then, the company was techni- cally bankrupt, being unable to repay some f/.3 million in interest due. 86. Project Costs. As shown at Annex 5, total project costs amounted to an estimated US$41.3 million, compared with an appraisal estimate of UaS.8 million, most of the difference going to cover nASEL' s large accumulated operating deficit. Under appraisal assumptions, some US$1.7 million (including contingencies) had been included in pruject costs to cover GHASEL-s incremental liquidity requirements in early years. However, covered.by additional Government financing. 87. Although the foreign exchange costs of the project were basically the same (TS$A. m4ll ^n) s are%4Anr nf *nasia 1 ( TNIS1A-1 mn1lll4n) the foreign expenditures of the project would have amounted to considerably more had more fundA hPan 2vAilahla. Althonah the total fnrpicn erchange expenditure proved insufficient, more was spent than anticipated on equipment, vphielp, a;nd Pxnatriat management. Of the USTlO.3 million in foraiqn exchange spent on agricultural development, factories and buildings, some US$9.3 million (A.R.: USS8.7 million including contingencies) were spent on factory and land development equipment and materials and vehicles. This was financed by USS7.5 million from the IDA Credit and US$1.8 million from Government (including HVA's US$0.5 million equity contribution to GHASEL). Foreign expenditure costs for expatriate manaRement amounted to US$5.6 million (IDA financed) compared with an anticipated US$4.9 million. The increased spending from IDA funds on equipment and management was done largely at the expense of the building program, which was curtailed consider- ably during the project (para 53 and Annex 12). - 12 - 88. Althouvh difficult to foresee at appraisal, the project was imple- mented in a period of severe international inflation (Annex 14), with con- siderable consequences for the prices of equipment and materials purchased abroad. In view of the limited foreign exchange resources, only part of the rphihilirarinn prnoram could hp carripd out, as disctisd Parlier in this report, and more funds would have been required to replace and repair the field eqip.ment and t--ctr -fl-t o-to whc unsa's fr 1'kof spares when the project ended. I. Accounting, Auditing and Reporting 89. Accounting. Although the accounting system developed by the Managing Agents was good, it was extremely elaborate and required a consid- erable number of staff to operate. By late 1979, the Accounting Department consisted of six professionals and 56 support staff and was receiving addi- tional assistance from the internal auditor's staff. Accounting is the only department where full control was taken over by Ghanaians in the course of the project. By late 1976, all expatriates had left or were due to leave and a Ghanaian had been promoted to the post of Financial Controller. Cost accounting was also the responsibility of the Accounting Department and a considerable amount of data was collected on the estate for budget purposes. Budget preparation was a rather lengthy and voluminous exercise. Controls appear to have been adequate with cost statements prepared every month. 90. Auditing. CHASEL's accounts were audited every year by the Company's two auditing firms. While there were no particular problems with regard to auditing during the project, none of the company's annual audited reports were ever submitted within the four-months time limit specified in the Credit Agreement. Audited reports for 1973/74 to 1976/77 were presented for the GHASEL Board's approval in due time; presentation by management of the 1977/78 audited report was delayed pending repayment of RVA's euity holding in the company. This matter was resolved in mid-1980. ADB's audited reports were seldom submitted, if at all, despite reminders. 91. Reports. Progress reporting by the Managing Agents was consistent and very detailed I Athough the tw.o major feas -b±l1ty of--44 preareai the course of the project by HVA made reference to the experience of the ongoing6 t J prjet it is 'ufrnteL that*Q he *La a L1l O 'ReporCt did no reuie nor the Managing Agents take it upon themselves to prepare a formal account ad fl .anayi oL1 fL the po~ject as it dre to compU~ U lCet~.LUn- j. Procurement and Disbursement 92. Procurement. Purchasing was centralized in Accra and managed by an experienced procurement officer. Local purchases were controlled directly by the Accra office while foreign procurement was handled by HVA's Amsterdam office. While the system was sound in principle, many difficulties arose which were outside the control of GHASEL (although some perhaps could have been foreseen). Many factory items and field equipment could be purchased only from Czechoslovakia or Poland for which. the use of IDA funds was not authorized. Delivery periods from these countries were variable. The major time delay occured between issuing the order and obtaining a Letter - 33 - of Credit; on average this was 11 months. Delivery took a further six months on average. A few small items took as long as three years. Conse- quently, in certain cases it was considered necessary to arrange for manu- facture in Western Europe or to replace the complete item. Apart from the delays, either procedure resulted in increased costs. 93. Procurement under ICB procedures did not always work smoothly. Due partly, at the beginning, to lack of familiarity with IDA's requirements. or for other reasons, the Managing Agents considered the procedures difficult to apply within the time constraints which they claimed to be facine. Consequently, many requests were made to IDA to waive ICB requirements. In retrospect. there is zood reason to believe that in some cases the Managing Agents could have used more foresight and planning, although there were inqranrPR whorp nurh rpnnints were inilifid and rickly granted. r1a. 4irv-7 nf m4"^v, n-rl4ava un mA t Igzaa Oinri TTl,r nn1) (f-lia 14m t was later increased to US$20,000), for which tenders were not required, ment of letters of credit). The urgency of many parts necessitated the 95. Towards the end of the project, in 1977 and 1^78, after-most IDA funds for equipment had been spent or committed, management found it almost impossible to establish foreign exchange leters of credit as Govern- ment was unwilling to give the project the necessary priority in its alloca- tion of foreign exchange. The resulting non-availabitty or consumable stores and spares had serious repercussions on factory performance and-field operations. Also, late delivery of factory spares contributed to the problems of the factory. As in the case for procurement under ICB, there is some doubt that the initial ordering of factory spares was ever early enough. Again with hindsight, it is apparent that spares should have been ordered 1-1/2 to two years in advance of estimated requirements. 96. Disbursement. (Annex 12) When compared with the appraisal's estimated schedule, actual credit disbursements started very slowly, reflect- ing the slower than expected early procurement. Agreement was reached during the project to reallocate funds from the Civil Work category toward the Equipment and Vehicles Category after the decision by GRASEL to finance project buildings out of its own resources. By the time the project reached its scheduled completion date (Sept. 30, 1978), some US$1.1 million were left uncommitted in the Credit (including US$0.6 million meant for ADB). In December, 1978, following repeated but unsuccessful requests to Government to take a number of measures (e.g. providing foreign exchange, management, sugar pricing policy), IDA proposed that no further commitments to be fin.qnrPd nut of thp Credit be taken after January 15, 1979 unless the requested actions be taken. The Credit was closed March 31, 1979, as scheduled. l1Y4na ennciAarhla ijalAvq in nrnrP9inv thp last payment claims. the undisbursed amount of US$1.1 million was cancelled May 20, 1980. - 34 - IV. Institutional Development Al. Ghana Suga r-at 4f- ment had been fulfilled by the time the project was negotiated. The assets of GIHOC's sugar proaucs aivisun were duly transferred LUnAbL anu subsequently evaluated by consultants (para 83). 98. Board of Directors. Although the Managing Agents' contract with Government gave the former very broad powers with regard to day-to-day operations, the ultimate power of decision on matters of policy always rested with the Board of Directors. It is to the Board's credit that it gave the Managing Agents its trust and confidence; but it seems to have done so at the expense of relinquishing its broader role of assessing the core issues and problems. Rather, it seemed to accept management's view that by solving the immediate problems (which were many) the longer term issues would also be solved. Never did the Board come to grip with nor did it intervene actively to help solve the industry's and the project's major problems which had to do with cane production (and quality) and the project's ability and resources (or lack thereof) to fully rehabilitate the factories. The saga of the Volta River and Prah River pumping stations, the problems with the Asutsuare outgrowers and the relations with the ECG are obvious cases. While management sought to handle the technical aspects of these problems directly, the Board as a body could have had much more leverage w1th the authorities concerned. 99. TnrPa_ f-hp initiatfvp fr an fndPnPndent assessment had to come from the outside. In 1978, the Ministry for Economic Planning set up a committee lacked technical expertise and as a result concentrated on estab- "shingdegrees of: blame for the prjc' lac of sucs rather than finding the root causes for its failure (HVA was considered the main culprit for having fale tU reailtt thed indutr, %e Bank Uas blme for having underestimated the problems and the financial requirements, and Government for not having provided the foreign exchange and the required pumping facilities). Only after the Managing Agents' departure did the Board finally react and commission a number of studies to chart the industry's future. As part explanation of the Board's lack of active participation, its membership consisted mostly ot senior otticials (or their alternates) of various ministries or government-controlled agencies, forming a Board that lacked the vitality and motivation to carry out its assigned oversight function. 100. Managing Agents. Several HVA staff participated in the appraisal missions and had followed the situation closely prior to HVA taking over as Managing Agents. Also, it seems justified to presume that HVA's successes elsewhere in Africa, the strong terms of its contract, which gave it full freedom to manage with assured cooperation from Government, the GHASEL Board and IDA, and its wish to establish a strong foothold in West Africa, made HVA confident that its staff could turn the industry around and make the - 35 - project a success. IDA supervision missions reported on several occasions the.n4- , e n r a- f C-4onn -4 P1, #-1, M - -4- nc A -or * n,fc,-',m o ,..u n,--nrn4.,.n the difficulties they had to face. Moreover, neither the Board nor Govern- ment, at 'Las in L th 1-is foryaso epoet verqusioe officially HVA's management ability. In fact, the Board's own lethargy was probably due, in part, to its belief that the Managing Agents woud eventually be successful. The Managing Agents themselves contributed to no little degree to this aura of confidence and retained until quite late in the project the hope that the problems would be solved and targets achieved. This was consistently reflected in their annual budgets, where they persis- tently set out hope-filled targets that were seldom achieved. 101. Perhaps the strongest criticism of the Managing Agents is that they failed to periodically and realistically review and assess the risks of fail- ure, already high at the start, which were increasing with every year's lack of success. They could have taken a strong position with regard to their con- tinued participation in a project which lacked the resources to be success- fully implemented. Even when there were ominous signs that the project would not be achieved as intended, they pinned their hopes and sights on the new projects which they had been commissioned to prepare. In the event, their contract was not extended beyond the June 30, 1978 terminal data. 102. RVA's nerformance as Manaving Aaents has since become a nublic issue in Ghana, and the tendency has been to make them share a large portion of the bla1r=m fm r th nrmlart0.Q AQ nrfA 4In thqs report, the effects of sustained drought, delays in implementation, procurement difficul- to fulfill its own critical obligations (i.e., foreign exchange, pumping stto s eletri powerO etc-)L. L. WOA 0L.. , a".31. conI tr. -6.40. e(JA *60 O the J results and were obviously outside of EVA's direct control. While it is possible to criticize some of the specific decisions taken by the Managing Agents (and in some cases sustained by the Board, i.e., such as delaying high level area development at Asutsuare), the on-balance conclusion is that HVA operated about as well as they could under the circumstances existing in Ghana at that time. B. The Sugar Industry Board and Sugar Prices 103. The appraisal report had called for the establishment of a Sugar 14 - .~ U L.666 0 .LLOJ ". o~di0 kOLLuLJy 4 ~ .DJ , 6U LUUL1.L-UL LL11- industry and to advise Government on sectoral policies. The SIB was estab- lihe i 19 i374 along lines acceptable to IDA. Somewhat like the CHASE, Board, composition of the SIB was made up largely of representatives of the Minis- tries, Government controlled agencies, and industry related organizations. However, in contrast with GRASEL, attending representatives were mostly inter- mediate officials with no direct power except that of making recommendations to Government. As a result, SIB's experiences over the years has consisted mostly in commissioning studies and reviewing reports dealing with the indus- try, including the feasibility studies carried out under the project. The SIB's influence on pricing policies during the project was negligible largely because of Government's apparent unwillingness, whether for political or other - 36 - re-a-scnse , onb-,4n 1",~ r'h_ C,,Atc =orn- - A-t-4-yc n-4 rTflC7T er n trA -u-s"'s to adjust producer cane and factory sugar prices. Whenever Government finally agreed 4 - - - - - - -r - 4 ... .,,, -- 1,±. a-4 su..., A-WI - .4 "C ,..- contributed in no small way to GRASEL's cash flow problems and was largely LeDPULLi.Le ILVL ULLVALL6 cane fdr.erL LU Ce L!hiL c tdlt LUCLus. C. The Agricultural Development Bank 104. The project had provided funds for technical assistance to improve ADB' s lagging accounting syte an controls, credit policies and procedures. The basic objective was to improve ADB's desperately low credit recovery rate. Two specialists from the Dutch consultant, Berenschot and Bosboom, started their work in Ghana early in 1973. A number of reports were pub- lished in 1973 and 1974 and, following some changes, the recommendations were approved early in 1974. Subsequently, it was found that the implemen- tation of the consultants' recommendations would take longer than anticipated and IDA was requested to finance the extension of the consultants' assign- ment by an additional 27 manmonths. In view of the difficulty in reallocating further project funds under the Sugar Credit, IDA eventually agreed to include the financing of the extension under the Oil Palm Project which was being processed at the time. Most of the consultants' recommendations have been implemented. However, many of these were later found to be based on standards difficult to attain locally and had to be modified. Following the consultants' advice, ADB had bought a computer to link a number of branches with its Accra head office. Due to the low capacity of the equipment, as well as intermittent power and maintenance problems (spares!), the system had to be abandoned. One component of the consultants' assignment which seems to have succeeded has to do with training. ADB's training system, which has been extended and is currently being strengthened under USAID assistance, in being used as a model throughout West Africa and ADB has already provided technical assistance to Gambia and Sierra Leone in this regard. 105. It is unfortunate, however, that in spite of the apparent improve- ments in An-B's internal nprarin ,neipr thp prniret thp results would indicate that the underlying objective of the exercise has not been achieved. reported to be a low 55% of the total C2.5 million in loans approved for sugar farmers~ fromU 197/5 'o IM7 *JIJ. LJUu. . million due, or 55%, had been recovered at the end of the 1978 crop year, the same as at appraisal. nowever, &WD Officials point out that tne recovery problems have resulted more from the farmers inability or unwillingness to repay than from ADB's poor organization. ADB had set up offices in the cane growing areas and manned them with competent staff. However, the tripartite agreements between the cane farmers, GHASEL and ADB did not work properly and many of its clauses could be enforced only with difficulty. The reasons offered by ADB for the poor level of recovery include the following (a) lack of machinery to prepare land adequately to provide optimum yields and to insure timely harvesting, (b) competition for labor from other major projects (road construction at Komenda, Kpong dam at Asutsuare) in the sugar-growing areas, (c) drought and ill-timed rainfall, (d) uncontrollable bush fires, and kef fixed factory producer prices which were no. competitive with those offered by private crushers who also handle harvesting. - 37 1U. Tne project also proviaed funas to assist w in proviaing creait for outgrower farm development and for the purchase of fertilizers. While the funds for.fertilizers were largely disbursed at the end of the project, no claims had been submitted against the category for'outgrower land development. In view of the lack of funds from other sources to strengthen the outgrower equipment pool, a proposal was made toward the end of the project to reallo- cate these funds for this purpose. However, the proposal never materialized for lack of a Government request, and the project closed with the funds undisbursed. D. Industry Expansion Studies 107. The project had provided for a study of the expansion of Ghana's sugar industry. Prepared by HVA in 1976, the study proposed a project in the Aveyime area south of Asutsuare. The project was to include an estate of about 15,000 acres of fully irrizated sugarcane, a 48,000 ton refined suaar factory, and a distillery with a capacity of 6 million liters of alcohol. The nro1ect was nre-anoraised by IDA in late 1976. However. prolect costs were found to be extremely high (US$152 million, including US$98 million in foreign eXchange) with nnnsfdPrable tpnhnical risks and relatively a low rate of re- turn. The project was therefore turned down by IDA. 108. As an alternative, it was proposed to carry out immediately a study of expand44-ng1 the ."4-----n------------------------ association with an expanded factory capacity. This second study was com- consolidation and expansion project was estimated at US$70.4 million with a foreign excuange compunu U 2 u .L m.A.u. uosoiation ouny kW.L L expansion) was estimated at US$51.2 million (foreign exchange: US$27.8 mil- lion).. in either case the economic rate of return was estimated at about 19% and the financial rate of return at 11%. The technical coefficients of the project appeared reasonable and the project was considered wortny of appraisal. Appraisal, however, would be subject to a number of conditions, including: (a) Government honoring its obligations under the ongoing projects, (b) obtaining bridge financing, (c) conclusion of a satisfactory management agreement, and (d) finding co-financing. The proposals were submitted to Government late in 1977. Government did not reply to the proposals. By the end of 1978, no action had been taken on the above conditions, and when IDA proposed to inter- rupt disbursements on new commitments for the ongoing project, it also advised Government of its decision not to pursue further proposals for sugar ventures. E. Performance of the Borrower and Compliance with Covenants 109. While there were a number of instances where Government was at variance with the Credit Agreement, there are two particular cases that stand out which had a considerable negative effect on project implementation. These are the provisions (Section 4.02) whereby Government undertook to ensure (a) water supply at Asutsuare and Komenda, and (b) foreign exchange for spares and r-n1tPmznt of Pristina factory and field eouipment. - 38 - 110. Water supply for the two sites had been thoroughly reviewed at appraisal and discussed with Government prior to and during negotiations. Government was well aware of its responsibilities in both cases (see para 21). There is no doubt that the lack of irrigation at Asutsuare during the first three years of the project combined with the effects of a prolonged and (statistically) unusual drought had catastrophic consequences on cane growing (quantity and quality) on that estate. The lack of water at Komenda had similar implications as a large part of the existing system could have been put to use to counteract the drought and offset the borer infestation which plagued the estate. Uhilp 4ft wniile haxve hpnn difficult at annral-al to foresqe the accelerating rate of international and local inflation and the severity of the the lack of foreign exchange was the principal cause of the project's provided some foreign exchange (estimated at US$1.3 million) in the course of the project to purchase spares and equipment, sume uf it in non-IBUD member countries. However, since IDA funds proved insufficient to fully Linance tue necesary expendurs, Le JCZJJLl.LJL..y LUJ. i.UVC4.A LL excess cost as well as for maintaining the equipment in working order befell to Government. There is no point in arguing whether it was lack of resources or priority of allocation. The fact remains that in the last two years of the project only a fraction of GHASEL's authorized import licences were ever covered by letters of credit. V. Bank's Performance 112. The prevailing opinion in Ghana and within RVA is that IDA apprai- sal missions had underestimated the cost and problems of rehabilitating the industry and, as a consequence, IDA had not provided sufficient resources to accomplish the task. In retrospect, this position may have some validity when considering that both fields and factories were more deteriorated than anticipated, the harvestable acreages were less than the appraisal estimates, the procurement problems in Eastern European countries, etc. 11L Roth the annraigal of Anrfl 1971 and the re-annraisal of July 1Q79 had realized the industry was deteriorating and had stressed the urgency of stabilizing effect of the change in Government and ensuing implementation have predicted the advent of the energy crisis in 1973 and its effect on world mentation and costs. 114. Appraisal targets and objectives were based on judgments as to what was achievable in Ghana. Moreover, they were based on the assumption that a number of conditions would be met, such as early rehabilitation of equipment - 39 - and factories, rapid increase in cane production, satisfactory foreign exchange funding, and strong management. Recent studies commissioned by GHASEL on the future of the company suggest that the industry is viable, nrovided that.adeauate foreign exchange-and technical expertise is brought to bear. There is reason to believe that if all th project ingredients had gna riahr - such as nroner land develonment.adeauate irrigation and rainfall. timely procurement and factory overhaul, adequate cane production and quality, strictsChedUling of harvesting and prnraSSina - the nrniet could have been successful. However, none went right and the project failed. This may p0.Int to one of th.-e areas in th evauation o~f this project to wjhich the Bank could possibly have given more attention, that is the matter of risk analysis. Thni s kind of exercise would have Lent itself well to this pro04ect as 4. h-a past history and a number of quantifiable variables which were bound to have considerable influence on the outcome. Unfortunately, no thorough risk analysis of this project was ever carried out, either before or during implementation. The sensitivity analysis or the appraisal report ib skimpy at best. 115. There is also the question of the Bank's early decision to not insist on having the TLTS/BATS study updated in the early stages of project processing (para 9), or in not undertaking a formal independent preparation of this project. The suitability of the soils at Asutsuare (para 5) had been doubted, and this doubt could have justified further pedological investigation. Closer investigation during the project also confirmed the marginality of growing conditions (para 65). As noted in this report, the TLTS/BATS study was three years old when the project was appraised. As an alternative to a formal preparation exercise, the Bank agreed to field a very strong appraisal mission. This approach may have been influenced by desires within the Bank to accelerate the processing of some projects, in order to boost the lending program to Ghana. In any event, the initial anrainat of the nroiect was well done and it is questionable whether a more formal preparation would have contributed much vital data (except perhaps where and inventory uas concerned) rn the information already available. Moreover, there is little that either preparation or appraisal could have ,'n to 1 , evnt tha suseu.tl ad ve r Se 1 f.f fe tJ-- - --- IA riaf outcome. 116. A question must be raised however on the thoroughness of the re- mission attempted to disturb as little as possible what had already been agreed at negotiations. wether coinCidentL U nU, cst a%4C were ma= to match exactly the amount of capitalized interest that would have been re- quired under the earlier Loan/Credit financing proposal. As indicated earlier in this report, the difference in certain costs (e.g. rehabilitation equipment at Asutsuare) between appraisal and re-appraisal seemed small given tne ci- cumstances at the time. The total provision for contingencies (15%) would also appear small. 117. The frequency and composition of supervision missions may also be questioned. Of the 11 missions which visited Ghana with regard to this pro- ject, seven may be considered as full supervision mission; the other four were shorter visits for discussion of particular aspects and may have included the review of other projects. Of the seven supervision missions, four were held - 40 - between March 1973, just before effectiveness, and October 1974. Thereafter, the intervals lengthened and the other three were held in November 1975, May 1977, and May 1978. The interval between full supervision missions ranged between four months and 17 months. This timing of supervision is in the context of a project that was classified as a problem project almost immediately after Credit effectiveness; it was removed from the list in August 1975, but was reintroduced again in May 1978. 118. While some of this supervision record was due to staff and time constraints. considerable reliance was given to the renorts submitted regular- ly by the Managing Agents. While much can be said of the technical quality of the rannr- thair Qhnrt torm fnrprAq w nvarih1v nuarnntimicfi- thlc building false expectations. Such false expectations may sometimes have affecte Tn'A'a xr4ew of t-he nv 4t-- T- chniilA 1%i vnnt-=A t-l%mr nf" the- supervision missions ever included specialists in sugarcane cultivation specialist consultants might have provided a more balanced view. Many of the project ' tecnal coef ients were unacceptau w uguout is hisory, and it is difficult to avoid the conclusion that the project should have been th uuje uf a serious in-depth review at some time during AmplemenCation. VI. Rate of Return 119. The project's financial rate of return is clearly negative (A.R. estimate 8%), as GHASEL is insolvent and has little prospect of ever becoming profitable. The Government could decide to continue financing the company's losses (amounting to 426.3 million at September 30, 1978). It might place a high value on safeguarding employment (although the current competition for labor makes employment outside the industry more attractive). But while the Government has reiterated a number of times its intention to support the in- dustry, there have been signs lately that it may be reconsidering its de- cision to continue subsidizing unviable operations. 120. The economic rate of return is also obviously negative (A.R. estimate 20%). The rate of return at appraisal was based on the assumption that without the project, the Asutsuare factory would have collapsed. Al- though that is a possibility, it is more likely that Government would have kept it going by subsidizing its losses, as it is presently doing. There have hppn no euintifiabl hpnpfftq. Thp nroiprt has not rpqn1t1d in any fncrnmen- tal production of sugar, as current production, from both estates, is about ean nalto T+A or wn nrinr tin.2nripra Ia7Theraic non~~wtcs advantage, as both operating and overhead cost ratios are now higher than be- fore appraisal. TTS 4ng a shadowr. rate for< 1br -UIn,lA n4.,f, e1n 4,-, either, because competition for labor in the general areas surrounding the ~ ~ L~~A. ~U.J LCU .14 L1.L~±~A. ~ LDL1L FC.L"U VU6L._U= 61L= .ILU U.D A- . "L1 V .J.=W of the project's obvious failure, there is no need to refine an economic rate of return. - 41 - VII. Conclusions and Lessons Learned 121. Conclusion. This was a technically marginal project from the outset, requiring the timely combination of very specific conditions for its success. Otherwise, it was doomed to fail. The main causes of this project's failure are obvious: insufficient cane of satisfactory quality and incomplete re- habilitation of the factories. In the first instance, the low level of cane production was largely occasioned by unexpected drought conditions for all cane areas (including outgrowers), coupled with inadequate and late irrigation of the estates. The marginal suitability of the growing conditions for sugarcane was also a factor. In the case of the factories, the reason was haillT fin.nri;2l*! inquffierint fnrian Awnhanap to mppt risina nosts. There were many other problems but none were as consequential. 122. The reasons for failure, however, must be understood against the throughout the project period. These difficult conditions explain many of the .e. LU LA ~ U A=LjLWLLI.U1 4U A ~ LWL V L. UG in al ICY '60 en- sure the necessary and essential water supply at both estates or the foreign excnange to meet tne excess costs. nad tne GUvernment's crcumstnces been more favorable, many of the critical delays and financial constraints could have been averred. 123. The question remains as to whether the project should have been reassessed in the course of implementation. Such a decision might have been taken in 1975 and 1976 when it became obvious that Credit funds would be in- sufficient to finalize the intended rehabilitations and that Government's foreign exchange resources were becoming increasingly scarce. Moreover, in spite of rising expectations, the cumulative results of the past were still disappointingly low and full achievement of the expected target was being pro- jected further into the future. 124. Lessons Learned. Some of the important lessons which may be drawn from this project include: (a) IDA should have maintained its position concerning the need to update the feasibility study which had been used in lieu of preparation. Moreover, growing conditions at both estates had been questioned and more effort could have been given to fur- ther ascertain their potential; (b) By definition, rehabilitation projects require considerable fnrplan Prhanop in tha Parlv staaes of imnlementation. Firm arrangements should have been made between the Bank and Govern- met itert aceert the processngof conditins of effectiveness or to insure some form of bridge financing in thoe 14 y i a d l rr 4 maA pp ee .w uld WI have b- whole year's delay would have been' avoided; - 42 - (c) Technical coefficients and rehabilitation costs should be monitored very closely so as to determine at an eary stage the extent of possible cost overruns. In such an event firm commitments should be obtained from Government before the funds are required. Such eventualities should be discussed at negotiations; (d) In view of the critical importance of the water supply for both estates, IDA should have insisted on having the rehabili- tation and completion of both pumping stations (and possibly their power supply) taken over and financed (if needed) by the project; (e) The availability of spares and equipment to replace existing installations originating from non-IBRD member countries should be assured at appraisal or beforehand. There were cases under this proiect where such equipment or spares were not being manufactured any more at time of appraisal and had to be custom made at very high costs; (f) Althouah it is understandable that the Bank. faced by its own manpower constraints, may have to rely more on the reports of consultants it mqv he niiPtioned whpthpr these can arovide the depth of supervision needed for projects being implemented ,-A,Amy A4ff4-iT -athnical t-nnitins or in diffinilt countries; %91 Thle circumstances which surrounded the implemnentation of this project make it important for the Bank to consider the industries in the context of countries experiencing deteriorating conditions, particularly in their public sector, which are bound to affect project implementation; and (h) The overall country situation would also need to be taken more into account when developing complex projects whose success depends to a large degree on the cooperation of outside agencies (in this case, MOA's Irrigation Dept. and the public utility providing power). h〞尸”‘病刊．&&&.~&,．、”&d”州‘&．雜”州，l磚．,：個”fP.“引1..& .l唱》k，•，.I&”閑．■．,,‘■．1~.”•斗1.．一”．•‘&,,.”…闢•．o, .，彎Ill&I&“狀一”．戶”•．A”•…A,,．『”，一1,&‘為．，•，．一”、j ,1 oA州．r區•＇l•．• 之么口．』。‘二叫，一‘,J一你月！&&l。”o斗＇? 湯二、．J。綢，觔．l劇，叔．I&l，一j&,I”二•1..1“」“v .0指．陽），卜啊．》 p＇•，‘。”.lj ..1-.I&.&,.r吃，ul J.&．磚‘q二｀．吃叩‘之．」．&&,,.u&，疋：.1、IAo .od．肥唱一。1110.&&.I&．。•。”•• 唱．&C二‘0‘•騙O&o,9．邊，,&o&o，一＇．么J一，,. 。，.,l。‘”令，唱祝．&&，神．&d&l，首■■‘0.，喊。，個•藝｀唱l唱z‘喊I亂g■‘,l,&‘。‘、”，一6;&t:,＇。，&，二玉 、領，O亂‘,t 00口，g才＇潔1 01.,.,,,I&01,&l，一。，、I•＇0.,t，〞，&.”。 ．•．【•，o，二‘，之‘!&l•‘結，唱l，。鷹t，有〞‘lr化瞭e‘才一‘•‘一，•江．方二＇1•J&.,＇才“．• “。膩，.9二。二tg&,I,&．。〔■e蔥。一，,．情”,t。夜馴比，&&l,-o盧．1，。。“,tl，•。，,,．肥”．•‘I、．t■二闖•。，、，”」‘二＇l•‘上 龍州；粤喜認妝；凝糁綴：觀齡：江．森：::；識馮．眾次I梁：:？默撇，隴嗡勰：萬：::::;’仳取絮鄴 眾：婪需i:：才獸：：誌r方‘窩拙黑寨r胤：:：當r豐：鄴二眾：r默才認！才：:：眾；&”方：：兀： j．眾．貿獄‘；。矣寫騙二耑：I，祇：::::．必，以：l‘龍．州斗：:::::!&”方取離二 勵．】‘：鬥一啊可于罵 度．。，.‘•‘。‘lt．•，，。“,0.,,‘加．？。：,..:.0 &,‘•，l•‘，疲”吃“&，•‘。‘”一l二“，陳一，I,,,,.，弓‘’『•，t.&,&l&.&I(&,&,I&,,．•，。I:,r。；」．。‘ 叩絨：寫：:::,:::：州：鵠器論：::::::;}::：】州：:::;:：默：”仳之森二 f,0&,&&,,,，·‘,，盧”．邊‘肥，’號•11‘一•州∥“•，&1.1&t，盧‘1,&&0&&,1101&.00..&&1．、．u二月。，。””•邊一，．•“二 ;;:::：祟眾嗡；認：計默：婪發邸發談！認雙忠Z計念了；斤龍黜橋默：發黜次；::;I&:::；認：…，.，二， ：絮嗡默潔默默：；祟：：謂溉：；默：：以觀：：以必綴黜：l黜：】：織慨：喜織識！i:：二：:&,.&:::；以： 寸二”,,,，一喲＇I”•馴螂。啊‘綢．引。一”一”)”』t.&&I&.．。”., .&&“觀’，併戲‘&&f1lt&l州，&n昤，•，I小“c用闐， 訂n記不不屆不 、，&0．總．0.&I•‘,&.,It,O,，馴‘,.J•，&1”鰍，.“丑 &,,,z,,.,&,,to,.9&，•‘，•‘…“11，。‘9.,.,.&t&t&,co‘唱喊‘:&.，化記‘。。。．u＇、I總l，闔”.‘』一“, “二症”&，•．l,111。，1•，r飼1．•“jo倘｀&.0.．開o&,, •‘O，•，O廈，&&&，日，體留‘引：‘∥，開，∥‘.l,n 00審，.&&:，■．3二，,.,&.u．〕，二』‘ &，。，&&,,,,.t•．&,,’〞•，&e,.l;t『o&,&ltt‘引‘〔。．&,rLI te,&&&e&1111,’飲‘l&&&.&“切l。？&&“二〕1.1，二 o&．。，．』。“總“，膩，才‘.,.&.,&.,,1 11祖，參』l症‘.,.,;，闢‘喝，戶“I&&Ot二。．。，，網必‘．、州。二。才•“It&‘化、〝．•．奮．,．、＇,‘。， &,“。‘&”•∥，∥，&，任“&,,lI&，龍””引，11‘∥l妒，&,&&&.,&&O,&,&“叩e∥I&”噱e，乙。壯他”&”•二•，J..”才“&．•， &&.&l汎。頂‘&,,.&,,&.,,.,,，二‘盧。〞，01,.，毫＇＇。dl&.,“寫一，,.，閱“。＇&“二。團‘g。哺，&l,,．〕。二J.”二，,, •．,&0”。，.,j•1 et碼e‘亂．參”『，t州，,.n以、‘“•“•，卹，『0&,1.”喘。：•｀,，。，·‘,‘∥，二l•“；二，r.“么、磚〞 悶謀：：以：;｝才蠶j繙：I眾：】鴛！；祟：：詼：::；州叔，斗眾‘:::::::&:::：兀： 不r斤可兀1屆翁不病不 &:，細：婦。里→＿_，鑒挪還」。二，____＿必二拱。：。豐二＿___＿必趨g」．二州＿__＿」叢二茹肥二一巡；匹七。：二＿_＿盛還餡 1．。一1•蘆‘•“．自，&,1卜，l&t 01‘奮·‘遞‘•‘邊‘嘔一，:&l『．。‘．奮 ,“州＇•1祠不不不奮刁 1召〕〕『茹哺j計面泌〕1沾斤劉 IX&&UV斤‘騙i鄙r騙必論瀾斤不不、不不爾疳不兩勵審  - 44 - GHANA Annex 2 SUGAR REHABILITATION PROJECT (CR. 354-CH) PROJECT COMPLETION REPORT COMPOSITION OF HARVESTABLE CANE ACREAGES 17I "I 1-/1 f API "I AJIU-ft Ai77.7 Asutsuare Estate PlantL CaneCs 550J JU u)L,I.DU 70 Ratoons 1,150 2,030 1,480 2,610 3,208 Total - Estate 1,700 2,400 3,530 3,770 3,278 Oucgrowers Plant Canes - 740 3,030* 1,440 843 Ratoons 7,000 4,760 3,140 2,580 2,307 Total - Outgrowers 7,000 5,500 6,170 4,029 3,150 KomLnda Estate P1nt Canes 729 6R 800 79q 505 Ratoons 2,036 2,464 2,436 2,548 2,938 Total - Estate 2,765 3,144 2,236 3,277 3,443 Outgrowers P1ant Canes N/A N/A N/A. N/A N/A Ratoons N/A N/A N/A N/A N/A Total - Outgrowers 3,380 3,216 3,044 3,396 3,800 Accuracy has not been established  しい戸網白 ．叫．.,t鵬崎：L.&&．埋ょー旦．と→Annex 3 に独想護L玉口竺1」光．巴製り U亀．」」』L』rL郎比巴観L引二加U翌肥らUょ 1,.H&). 加ルム1．脇’.nnル1.,．的Nl．り1．ル ‘一一一一一一―】「一一一－一―一－申一―-11------11一→一――一―1 「甲一―一―--1 ドー一―ーコ ー’&..&..．ワ．．川ム．目． 吻．.1..I h七川飼L司． 切．．』．.&t...r.. U.-‘、り．.d加‘&Hlr.. “一‘1 柵’.1-&..U-&i& &．引’こ：::：ニ．.-．ごニー旨 &...&..,. H』師．n,＂島肌‘1.11.&M為．自gU ’」‘臥 b,..a&&-,&．び． ,.&. 期．酬．旧．J鯛加□．JaもM．以．四．価n 四．J踊u口’&1 u山，．。．隊．し“IwJ.&...1..&& 11目口名ン &－・加てコ’r，いかり．山，&l .1. .H .n ... 脇］い’以．& ’■．..-．■り．国月向‘し．-a園過． しりu..~.1..Mり■nl. &N.. .l&Lし山．. ・．, ，昌協，し． &. ,I &,&0. ご：:L&:;&;:::. ：七呂で：:: ご：:: IH.... 器ご．l..‘レ’：器お：: 訟り：」引：」召に う ..&.，が．・‘．リ‘・L&&U’・－・．．・・u・り”j.&&.&1.&&1,. .．』‘1 ,,&．的．1&&1孟孟． 馴ダ口…「．&&.-&&.－…に曲． 無1玉二：．・吻L・・Ia…茎二1 -．・．二わ‘て：国“『‘ら王1;1・…て：・11-．・二：1&．に：, &H.&r一．.&&.‘戸．-kl.&1‘ーレ．t ．必．A. 臥． &1り‘関い，」飼…．. &‘始． &H.1’』－h&&..1踊．.&&&&.. u. ..1開h. .．加，.. m &.. ..．肋‘.,．湖1&&.-，い．,. ．的”1旧り’ンヨ，,..&，与‘．ト冨 &1&&..Ldh.．題‘叫．. ‘電u. い． .. 仙，n. .,. .&,.．■し．t WlllL ,．電‘j&1 r.&&&u.&&&&‘→～. t肋’.... .．加日1.’協．．争加．．叫，...&...&1 &.1憐‘.J&11... &.J相‘&1名 し，. 加加u い．円的1い，&1 &,,‘事．加．』． u』 1’馴rL&&&1.&&&&.1 .L. &.1 朗． ... し． ,1. 物． ,.. M. ．島． &，雷．.1 &&L “肥 &.&.If．叫1‘旧．1 .,u. &....*t..，麟．...a. .1....,．目．.... ...,．崎．.0..-，肋．.w い．1,.&.1的1 も．&.．踏も．1 .－…’*&.，りH…’. gL&&.1 ,.. 以，ユ．F‘麟1... 糾．..w ．馴1.&.. .ul.&. &h 島’』 k‘』「‘．→り“‘引．&&f&. &－明． &H..．四1... &.J.1,...．欄田1,.&．幽．a&11&1.. ‘鵬’1う1. ょ→．&－一‘‘がい加．. ..．加，．的．.,..Nl &&，コt. ,.&.. &..*&,. .1‘月．.‘田IW ...,&1 ...‘い‘町 1→’.．り’l.l‘らりけ． &. &,-u .,.,,. .. .. .. ら』．. 5』い1 ..‘七．.N u...... 切．uo -.u...I&..&lao.,J柳 &&h.&&v,&. 1，』．.. .I0 &.. 血 .1.．引しh・んHり加1. .. ル． Ht ルーか 助．.&..kか・りn,p. -I.u町M... &.，い．no い，り． り‘…い ．ド’&．『‘りL.,-. .nu. k.．飼り． 川．舶．．』1.. 1 為’.&&&&’肋踊b:JM田M曲伽闘 「“dhl－ド．..&Iいリ“..&D‘踊し山1 1.M L剛ち幽仏bLM 伽‘dし加． 1叫ク．.&L山L幽しMい吾1’加 りr..‘曲‘．り’’ド‘一戸’’い》‘&L. .‘』‘.，仙． 1。 &-&-1.1. .．田． u&L川が‘LJd ,&I,．的． .nb L‘開1わ， い’... hd引”r．り‘一M&W&&. U乎絡． ,&1 .. .. &’肋， い．....d．い．ド．&J．喝．l .,. リ． .. ul 1.1 ■r.-I&.&...&d...&d&...I‘ー‘L．加．ul .．協いLpa し自M Ldら‘... &-L&. ‘引， u&...-.&’一．ドい－..．肋uねり．N.gW .IU.Mo L臓Lい且D，肌．&&I 1.h山D& uH&.dL&.&M』ド‘‘ー－1.*．→．.．軸ト1 れ■…』．. u... .. h&bI&.l .Iりし．『．.’鵬．& &．』凶いIu. ..N。huか＂．。 と糒U監 ..1 』．■．し． 加が山H ．』J ．→卿‘. .~&&h. 嶋． .&u.．朗」．l．崎．.&-..11.－し．l .H-.&．加パい引絡－.. 1.‘し．.Iり．→‘.’り自d .Nh.．ん山申園． u 1町レ’.&．い島au&.-H-L剥．&．助．．副Lレしb り』‘.&..l..&．目1ー’.. .,&... ．い－pい kk..&N.1&.11－、．.．副．I ：コ．t．戸しq&- 」■’山．&r. ．馴開．．圏山， リ． 1-..‘い． r引肌り川‘.．い‘り’.- いt レり．’利H叫ヨ．臓！．価．& 札‘柳．．鳴■日」．.4 ．り’&&.-. . ,hkl &. .‘ず．. 馬．．日り い． れ‘-&h申引国．-.-& ＂か‘-‘一．.--dにり．...d ．→． .I&&&PI ．ール．  ！州”：〕〕〕〕〕中’〕！方：勿 ！〕：,::!!:!:！〕！/！〕一〕一〔 _____＿〕：&::：齋“&:&’江：!:‘·！〕；!;:! 亡舌亡亡：乞！，二，::,,_，二，,,,,-i區磧匡―i i于惑手憤聖―&；。：膩，;“亡亡三三：藝華三兀；三斤弁三華：“茫丰三：·註洛藝·日汗三杳―膳三靂 :!!,!！〕“－一：:::::::,.::.；。．&-}&i !&&，〕：::::::：、一：一二一；:：一＿〕：座‘ 江C：二·；二：：壯：二：：二江」 &:&!‘藝他“&&:!&&’邑〕〕〔’,！〕： :：、：、震！萬：:::：、；:;:：權三！:！〕〕〕！!！〕〕〔：〕！：一〕’ !:!:!!：〕！!;：、：、：!!！〕〔―: 邢丑果‘三三‘三去鳥娥”〕！〕 ‘」  - 47 - GHANA SUCAR REHABILITATION PROJECT (CR. 354-GH) Annex 5 Project Completion Report Project Costs and Financing (US$ '000) ---APPRAISAL ESTIMATES-- ----ESTIMATED ACTUAL---- Local Foreign Local a Costs Exchange Total Costs Exchange Total Costs 1/ Agricultural Development, Factories Buildings and Equipment 4,525 10,967 15,492 1,954 10,276 12,230 Management and Training 2,431 4,938 7,369 176 5/ 5,609 5,785 ineental 'Wrktng Cpital I &SLI - 1 491 9-) mon I71 an Total - GHASEL 8,639 15,905 24,544 25,020 15,885 40.905 Industry Expansion Study 6 45 51 - 197 197 Technical Assistance to ADB 45 150 195 22 2/ 207 229 8,690 16,100 24,790 25,042 16,289 41,331 Financed by: Long Term Loans IDA Credit - On Lent - 15,600 15,600 - 14,477 14,477 Covernment I - .. ADB m, - 6,922 3,036 1,312 4,348 - - - 192 - 192 Eq- 500 500 - 500 500 Short-Term Loans Government -n Creditors 3/ - 12-60 _ -- 6,012 -6.012 Farmers 226 - 226 N/A N/A N/A Internally Generated Funds 1,542 - 1,542 5,245 - 5,245 8,690 16,100 24,790 25,042 16,289 41,331 1/ Include contingencies 2/ Estimated 4/ Includes an undetermined amount of foreign exchange for locally procured goods of foreign origin 5/ Does not include housing, transport, etc, which could not be retraced in CHASEL nermn as specifically allocated to expatriate management.  GHANA Annex 6 SUGAR FlNLAILITATION PROJECT (CR. 354-G) PROJECT COMIPLETI1N REVORT MONTHLY RAINFALL IN HW'S AT ASUTSUARE AND KOMENDA October November December Janua February March Aprii Ma June JuLX Aug t September Total Asutsuare 1973-714 88 116 31 20 24 130 13 196 244 133 0 144 1,147 1774-75 70 42 17 n 17 614 120 131 219 86 0 61 827 1975-76 167 87 7 u 84 165 111 92 96 22 112 8 951 1976-77 108 27 104 34 38 4 33 63 108 N/A Ni/A "/A 559(1) 1977-78 o1ts 34 6 9 46 37 172 149 150 5 20 56 788 Akuse 19146-74 152 105 31 21 42 104 125 172 208 81 12 119 1,202 Komenda 1973-74 74 39 97 19 44 . 97 38 233 15p4 1 22 1,94,3 1974-75 18 6 16 1 50 163 25 3h1 222 158 17 1,038 1975-76 25 134 1 0 26 78 175 131 108 1 67 9 755 1976-77 24 18 5 114 2 64 150 82 234 10 10 38 651 1977-78 42 15 0 2 21 12 84 111 259 26 28 6.7 6147 20 Year average 98 74 22 20 41 76 100 216 354 103 46 50 1,200 (1) Nine Monthn only  -―。 11卹 I■切 l焜l吋 I•唱屬 屆U個中U ■•u叮kN 卜、1 .1 0.1州勾他， 個→面11巒嗎山江劉切 k■屆屆州I山州H‘痲－ 叫叫l日“屬d•庇。 l霄l僅，1 91 Ud么dl l讓IJI Ilq“必開J!& .C藝。．11田l”。訕」亂，u 11州卜中。‘I口 優化口州卜邸6 11州O寸c&U H黠e闕試闕闕闕N闕H闕H闕卜吧 lmD】eme奮l【，望t, r月r t IV一―----―一一一→一―一一一一一一一一一―-～一一 一，＇。闕H闕＿ imP粩emenL&?d潤卜豐卜• 二二二！二二二二二二二二二二二二二二二二亡二：亡二二二二二二亡二二二二二二二二二二二二二二二仕亡二二二二二二二二二亡二二二二二二二二二二二仕登二二二二二二二？二二二豐二二二，二，二二亡二二二？二二一－，豐，,―一―一一一－一－－叩二二二二一―: lmPlemet、t，。d〞×以闢×”“闕父k闕“××闕闕“ד&&“闕”×闕1闢闕：屹闕×”，吃××馴l闕闕闕闕闕”×糾！××” 一叮一日不騙一‘〕一‘&.‘一“一‘。‘’。‘!&!.&!.，。州一一〕一 個日，鸞互絕j囑‘糒」由，．濤！勻hj江，娜二 11目！I個I兀一唱。，馴。綢勵h盒‘己哺己蘊C雜細視個。 11常］日tl―召」，，物視」鈴馮曆認書·必，。召諍，個三l中徑 。1 11雙1己一個〔．唱日廈倘二留t個言。了一口l瞭寫”肥．鰓｝當b :!!―〕！。〕〕〕〕〕，〕「〕！-;！〕，〕〕〕〕〕〕〕’〕〕〕〕！．〕！〕〕〕〕〕〕〕〕〕〕〕〔〕！〕！:!-!!!!！〕！ - 50 Annex 7 Page 2 Komenda Factor7 - Additional items provided under IDA Credit Purchase And installation of pumps at Pra river pumping station Underfeed rollers mills 3 and 4 Boiler oil. firing equipment Ventilators for factory Batch clarifier Sulphur station compressor Separan. dosing system Soda system for evaporator cleaning Electrify mill house crane l:[!111!i［큐「 UT a~ T"M0 luns 6&~~ cl pWIJ pu Ue7~ luff~ TM~~ ;0 WW.W VW ý~ -~-1 w~ 9~ an z~ wc I on in WT%7-,~ air. je W-~d3r, w; =~DemrumT T~lu TV27~ -9-:; ~Wcj.7= r- COSI-, ~ -~ T~ cri inga~ -9~MTM jaffi~ 43P m 70 9~ x~ m v; ( P- n 990 Irre. wir. ;o ~1 mov ý %, -0 uvtr. »rt cr surTpad gol; WI= WI p dn, or. ~~ d=d ~~ jo; ra I ~ 9v~ It "Irr" vm pcem 951 p- ~_E 51 CM) omw~ an- X3-arpm~ jo; fez 2~ 1 ATUD Z pm 2~ rpno*Ta ~ -MI,~ n7- p- r -daD ad ~di .,.; u~ 9 JW~ PM ^om mu,doo 'VMOR MM pm TU wir. a~ vm imm~ cr. ;T~ penvan ao; u~ i pm %Lwp vm ~ru Ini^ d- pmmw~ av; gm PUT ~ 0 ~ nWT4 DIN LÖM ~1 M r, J:WiIN CR 1~ va~ im 220 'cm" %~~[= %TOM -ZO.1 ' =DT*r~ C %U~um å~ om MOMMT4Mn MVT%nv~ 14TM JW; 9~ =Tmvqt-3n -mr P- t *q% 70 ~L~ ~am~ ~w~ng 4~ vm m P~Tsm a~ Ix I ~~ ~ p~ md tu cer-m Tv- w m~ inumn am~ =~=1 affle~*~=7 Wp70~ IMTJL a94TM OND-c m am -» VIV~ J- P 2 MOMEN *C 1 ~1 a- - T-.; Pm~T -d:rz Ve~ I OvmaDI C ~ r" 99~ &M I 5,91 2r t Pur SIOTI pmre~ pm rTwgwww~ r pm av am- jp Tav~ 0~ ~-~C jo Tm~ ou~ 2? z PIDR"z-zna x not 5 '94LTý 8~ mrm 70 x yo do% tv AL4~z mums T x an OM n7^ --~ -c ER4 pacm 7 T~. 2=71~ 17 elcr. P R%~9 b~ @W. 3p ~ xx an se -tteZ *=Toot pr=; VII^ åqsTrrvs&ÅJýc i x pm j~ DVýMM Inla ~1 0 P-4 son P- Xvir= 006 chý ~ =; I ÅIT~D ~MR p&~ *q% V~0 ~=om/v~ uv av; n w~ 69~ bu mm r-_= CCT%Me, ,.«;^ jwwv29!! ~ 0 --- goim) -ou Z9 - 53 - GHANA SUGAR REHABILITATION PROJECT (CT. 154-GH) PROJECT COMPLETION REPORT GHANA SUGAR ESTATES LITED TRADING AND PROFIT AND LOSS ACCOUNT POR YEARS ENDED SEFPEMBER 30 9o. 1975 1977 1977 1978 Sugar 3,161 10,241 11,083 11 425 15 196 Aohol 1,612 880 1,502 3,82Z 2,891 Alco o--, . 1. ... .1.. m1 Molasses 572 r7o 1,40 7* 91 Total Sales Income 5,345 11,799 14,069 15,793 18,178 Finished Goods Stock Adjustment (79) - - - Less: Cost of Sales 8,790 9,81A 12,4-re 13,906 19.419 Gross operating Profit (Loss) (3,524) 1,965 1,597 1,887 (1,241) Less: Administrative and General Expenses 3,776 4,240 5,319 6,641 8,397 Add: Miscellaneous Ince 136 285 299 280 489 Net Operating Profit (Loss) (7,164) (1,970) (3,423) (4,474) (9,149) ajustments (148) (1) (2) 8 Net Profit (Loass) Transferred to Incae Surplus Account (7,164) (2,118) (3,424) (4,476) (9,141) SaLance(Deficit) Carried Forward (7,164) (9,282) (12,706) (17,1a2) (26,323) 1/ 16 months  Iuth SUGAR REHABILITATION PROJECT (CR. 354-GH) Annex 10 PROJECT COMPLEINON RIEORT GHANA SUGAR ESTATES LIMITED BAIANCE sHEET AT SEPTEMBER 30 - 197 ---------- - 1975 --------- -------- 1976 -- ------ - ------- 1978 -------- Assets Employed Fixed Assets 14,682 15,840 16,594 17,208 17,846 Development Expenditures 2,065 2,82 3,107 2,929 2,750 Growing Crops 1,354 2,307 2,378 5,629 4,982 22,079 25,766 25,578 Current Assets Stocks 2,784 3,142 5,870 3,826 14,218 Trade and Sundry Debtors 112 272 280 198 L,212 Amount Due from Staff 90 102 163 i6o 182 Payments in Advance 295 452 997 419 325 Cash and Bank Balances 1,1153 3,429 2,595 3,608 1,623 4,h24 7,397 9,905 8,511 7,560 Less: Current Liabilities Bank Overdraft 346 312 2 19 - Creditors and Accrued Liabilities 2,296 4,ce4 7,72 14,171 26,091 Amount Due to Staff 88 41 46 208 167 24730 i77 7,772 2 Net Current Assets 1.69). 3,I38) 19,795 24,009 24,212 19,879 6,88o Financed lby Stated Capital 1 1 13,279 13,1451 13,151 Capital Suspense 12,875 12,875 Income Surplus (Deficiency) (7,164) (9,282) (12,706) (17,182) (26,323) Shareholder's Equity 5,712 3,5911 573 (3,731) (12,87:2) Long Tern Loans 111,083 20,1.15 23,639 23,610 19,752 19,795 24,009 21,212 19,879 6,88D  - 55 - Aknnex 1L1 SUGAR FLEAI5LITATIN PJEC (C,. 3546-) F20ECT Com~LETIOm oEmir6 GIA UG ESATES LMD17 0UCfc 00 APPLICATIc0 MMB OF 7is5TATDMEN! FOM MEAR0 ENDED SEPMBGER 30 n 1 1973 1976 1975 1976 1977 1978 P-t Profit (Lo..> (7,166) (2,118, (.6) (4676) (9,2,1) Add: dOrtiti of NangeIent feA- ttc. . 193 319 ho0 235 Deprecaon 1,1 1,532 1,589 1.675 1.769 C.Os 1-cc. (l-.s) (6,99) (267> (1.633) (2.60) (7,0[7) Long Ter. Lo..n. & o.erogent of - ean (DA Creit) 6, 6,19 3,226 1,926 -21 0~.-ont of n (aIorLina Cital) -^ 3o - 3,000) oer,ent of 0ana -. 6,3%5 2,000 - (2-000) 1.39) AM - - 133 - 67 16 ... . 16,086 6.331 3.24 (29) (3,858) squity It. tioe '0 %ub Ta.l 1276 - - ank vrda 2- 0 10 Short Ter. Laoo - qoermeent of 06..han-2e0 2,~ TotaI Sorc.. 12,876 9.431 6.o0 1,883 (260) (826) AMICATIOKS For Io d Ld L-bhol1. knd Bu1lding t - 201.0.re 2,26 363 105 187 26 10 Duildl.ga - K .da 1-48e 663 15 71 fopd. Br45ee and I. 6 Deeo.1oMent 706 316 395 546 52 (136) rectory unchIq.ry & EquIP-ot 6,637 916 1.296 1,16 r1.1d tl:hl-jrv . zq M 639 je5 176 27 09 47 Other EqLin 2 13 26 6 71 62 Motor e 7 66 178 17 99 runitur nd inslinnt 96 396 69 62 64 61 Ebab 1,1 12.516 3,972 2.110 2,20 1,762 1295 Capit i Moks 1.n ryo.... - 166 60 735 567 1,112 M«nagement F... -d On-Co-t. - 2,25 1,96 665 223 1,66 Gro.g Crop. 360 996 9,53 31 (7) Sub-Total1 360 3,616 2,669 871 6,021 929 Changes in Invento1ry A 7eeivab1les* ,201 667 3,j62 2,6107) 1,1036 lese: Changes lo l'0yables - (2.366) (2,661) (3,705) (,609 (1,739) c. 1 a &cn. 3:28roo) -:12 '>3:6 !~'<.0 75 et c res (Dec emse Total appIlIc-Lon- 12,876 8.87 3,765 2,76 (1,253) 119 Cash ErU. (Dflclt) A.1 1, 214 ,285 (833 1,013 (2 33) Cash 9rplu~ (DMfICIt) C- il-ive 1,]66 3,29 2,796 3,  - 56 - Annex 12 GHANA SUGAR REHABILITATION PROJECT (CR. 354-CH) PROJECT COMPLETION REPORT Final Allocation of Disbursement Schedule C-ategory Original AmntnrDsure (US$) (US$) Part A - (MASET T - CIvil Wnr- 2n.00.00 753,684. II - Equipment -And 7,019.143.08 III - Ferifizer- 40.0.043777 IV - Ex.atri2te Maaement (a)saaris 92000. 00 757,759.80 (b) Personnel on-costs 1,773.000.00 4,075.000.23 (c) Management fees ,8.0.076329 Par t 13 - AB L ~. A J ..A I Fertilizers 274.000.00 197,264.70 YII - Ln Development 596.000.00 0.00 Part C - Technical Assistance to ADB 150.000.00 207,485.79 Part D - Industry Expansion Study 45,000.00 197,001.18 U- -11,716,000.00 Toa Ld15,600,000.00 14,477.429.31 Cancellation 1,122,570.69 15,600,000.00 15,600,000.00 - 57 - Annex 13 SUGAR REHABILITATION PROJECT (CR. 354-GH) PROJECT COMPLETION REPORT Agricultural nevelonment Bank - Proiect-Related Loans to Sugar Cane Farmers (as of end of crop year 1978) Cron Number of ----Hectares ------ Amount Amount Amount Amount Year Farmers Approved Planted Approved Utilized Due Paid Arrears 1975/76 119 1,326 1,239 1,034.956 952,673 698,182 410,032 288,150 (41%) 1976/77 98 716 620 653,470 511,126 181,956 80,743 101,213 (56%) 1977/78 106 794 594 814,977 515,040 81 - 81 (100%) Total 323 2,836 2,453 2,503.403 1,978.839 888,219 490,775 389,444 (44%) C日方方r 邑『遛日日 ;!!11- 〕！!!！〕，::,,!,，巨〕：&1 !;;！〕潘〕 誹；1亡：‘亡’“三：·牌〕 矓｝&.＿〕，不 朧！號”&&”日三’;;- !!：。：:：二：___i〕l i&&“·‘&&&&！司 雙 !;;;;;;;;,！啊 〕‘&&：二‘二“1 11 :::::::::;！引 !”叩蘆 ;::;，。：：。：！州｝! ”一〕！1}！【 三：二三’二：·’i&]1 11屋？ ;;:;:;::：、！1｝隴 &“云言‘云必：！〕！憐 :”吃屆””編1& 弋」 言不 ::::::::：龍！- &;!- ，藝”州‘二譫‘- 必 ＿了］ ::::::::：龔！{ 一〕〕― “亡頸”&&&i- ,,,,．…霄：n ,&&&&&&&！【〕 :::＊····一！！〕―: 唱”I·｛亡  M,!ALf( UPPER GHANA .SUGAR REHABILITATION PROJECT 9 ESTATE LOCATIC)NS Kumas Bibioni Atcsombo Dam Ki i Kppg oforidua Klde Akuse - ---- ',Asutsuare Estate ACCRA Torkwo -- - Ilternational boLndaries . Prilary roads Cape Coast Komendo Rvers Esae Søkondi Lakes Takorodi FlIn e rs u a an,ra 0 10 20 30 40 50 60 MILES JUR d 1971 i 3500