Announcement of Fifteen Million Six Hundred Thousand Dollars Credit for a Sugar Rehabilitation Project in Ghana on December 21, 1972

'!' ~. ,:/- i '4 :, .INTERNATIONAL DEVELOPMENT ASSOCIATION 1818 H STREET, N.W .. WASHINGTON 0, C. 20433 TELEPHONE: EXECUTIVE 3-6360 IDA Press Release No. 72/72 Subject: $1.5.6 million credit for a December 21, 1972 sugar rehabilitation project in Ghana The International Development Association (IDA) 1 an affiliate of the World Bank, has approved a credit equivalent to $15. 6 million to help finance a project for the rehabilitation of Ghana's sugar industry by expansion of cane production, repla~ement of field and factory equipment, the provision of efficient management and a feasibility study for future expansion. Technical assistance for the strengthening of Ghana's Agricultural Development Bank (ADB) is also provided under the project. ~hana is currently facing the major task of restructuring her economy and the ·present project reflects the World Bank Group's 91_1.pport for this objective which entails a larger effort in Ghana's agricultural sector. The Government's • plan calls for greater productJ.on in agriculture in order to achieve greater self-sufficiency in food for domestic consumption; measures to increase export diversification; and a wider geographic spread of agricultural development. Agriculture accounts for about 40% of Ghana's GNP and provides livelihood for about 60% of the populatioo. An important feature of the Government's agricultural policy is the emphasis on. increased production of raw materials for Ghana's own factories. The present campaign. ill support of these objectives includes ~'Operation Feed Yourself," the drive which was launched earlier in the year with a $15 mil- lion program for increased production of traditional local canmodities. Increased productioo of sugar, together with other less familiar agricultural crops, such as rice and cotton, is a logical second stage of the larger opera- tion. Because credit for farmers is an integral part of the Gavet'Dlllent's program, a·great deal depends upon Ghana's chief source of finance for farmers -- the ADB. The present project provides _for technical c:lSsistance for Alf.B in account- • " ing and in credit control • The project consista of the rehabilitation of Ghana's two sugar factories and estates at Komenda 1 in the.coastal region, and at Asutsuare further north. The provision of management and equipment for their operations is also pr·ovided /more  --~ .. IDA P~R. No. 72/72 -- Ghana -- sugar rehabiljtation ,. .. for. - 2 .... Sugarcane outgrower fields will be expanded and rehabilitated and credit to outgrowers and the provision of technical assistance are also features of the project which is to be carried out over the period from 1973 to 1978. • Asutsuare and Komenda are areas known to be generally suitable for cane growing. About 250 farmere on 5,000 acres and 280 farmers on 3,500 acres grow sugarcane for sale to the respective factories. The project provides for the establishment of a newly registered limited liability c::vmpany, Ghana Sugar Estates Limited {GHASEL) , which has been formed specifically to own and operate the two factories and estates. Apart from 5% of the equity capital held by the Dutch firm HVA Internationaal, the Government of Ghana will be the sole owner of the company. HVA will be pro- viding management services under the project. Farmers in the project area will be eligible for credit, extension services and to sell their output to GHASEL. Proceeds of loans would be used by the farmers for land clearance, planting materials and fertilizers. • The project also provides for a Sugar Industry Committee, which will be set up and have the responsibility for monitoring the sugar industry in general and also to advise the Government. The project will ensure the continued employment of some 5,000 workers on the two estates, including about 3,000 at Asutsuare who would otherwise have been laid off. The project is also expected to create about 1,700 additional jobs. The total cost of the project has been estimated at $24.59 million of which the foreign exchange costs will be $16.1 million, to be covered by the IDA credit of $15.6 million and HVA's equity contribution of $500,000. Other costs have been apportioned between GHASEL, ADB and the Government. The Government will relend $14.4 million from the credit to GHASEL at 7'-1+% interest over 20 years with a six-year grace period. Government lending for local costs to GHASEL and ADB would be on the same terms. Tne IDA credit to the Republic of Ghana is for a term of 50 years, including 10. years of grace. It is interest free exc~pt for 3/4 of 1% per~ annum service charge to meet Ille\ ....s administrative ~P~~~s-..- - 0 - •  I . .- .. ,; -- ,C • INTERNATIONAL DEVELOPMENT ASSOCIATION 1818 H STREET, N.W., WASHINGTON 25, D. C. TELEPHONE: EXECUTIVE 3-6360 December 26 ,. 1972 TEQINI CAL DATA PBJJECI': Sugar rehabilitation COUNTRY: Republic of Ghana TOTAL OOST: $24. 59 million IDA FINANCING: $15.6 million, SO years, 10-year grace period, free of interest, service charge of 3/4 of 1% to cover IDA' s achninistrative expenses. OTHER FINANCING: HVA Equity $0.50 million, GHASEL (cash generation) $1.54 million, Farmers' own funds $0.23 million, Govemment $6.92 million. IMPLEMENTING ORGANIZATI~: A newly registered limited liability company, Ghana Sugar Estates Limited (GHASEL), has been formed to own and operate the • two factories and estates. Address: c/o Capital Investments Board, P.O. Box Ml93, Accra, Ghana. HVA is providing management services to GHASEL under the project. PROJECT DESCRIPTICt;: The project includes: machinery and equipment for two sugar factories and their associated sugarcane estates at Asutsuare and Kanenda; planting 3,550 acres of sugarcane and replanting 7,350 acres; provision of credit and extension services to assist smallholders bring about 3,900 acres into sugarcane production and to replant about 8,700 acres; rehabilitation of irrigation works to meet all Asutsuare require- ments and pilot works for about 600 acres at Komenda; housing for manage- ment, staff and workers on the two estates, and vehicles for management and staff on the two estates; expatriate management services to establish operation of the sugar industry in a single Ghanaian company and to train Ghanaian management and staff; technical assistance to the Agricultural Development Bank in credit accounting and control, reviewing the financial position of the Bank, and advising on credit policies and procedures, and a study to determine the feasibility for further expansion of sugar production. <X>NSULTANTS: The Government has appointed Berenschott Bosboom of Holland to assist the ADB in credit control and accounting procedures, after evaluating proposals from three interested firms. A study will be con- ducted of the feasibility of subsequently expanding sugar production in Ghana beyond what is envisaged in the proposed project. Consultants shall • be selected for this study by June 30, 1974 • PROCUBEMENT: Factory and equipment, field and administration equtpment and vehicles and fertilizer valued at $8.2 million will be procured on the basis of international competition. However, certain new sugar factory /more  _ ....... , ~ ... •. . 4 . - 2 - equipment must be integrated with existing machinery; and spare parts needed to recondition field equipment will be purchased from original suppliers. Civil works contracts for irrigation, factories and • housing valued at $5.7 million will be procured through international competitive bidding. ESTIMATED COMPLETICN DATE: 1979. - 0 - • •