A former member and secretary to the Komenda Sugar Project Management Board, Mr Ransford Chatman Vanni-Amoah, has said Minister of Trade and Industry, Alan Kyerematen, sold some 125 acres of the Komenda sugarcane farm, which was meant to produce the raw material for the sugar factory, to local spirit (akpeteshie) distillers.
Mr Vanni-Amoah’s comment is a response to President Nana Akufo-Addo’s remark on Thursday, 21 October 2021, that the Komenda Sugar factory built by his predecessor John Mahama, collapsed soon after it was opened because the government, at the time, made no provision for raw material supplies, thus, the difficulty in accessing a $24 million facility from the Indian government to grow the cane farm to feed the factory.
According to the president, Mr Mahama himself, could not access the facility because the factory collapsed under him.
Speaking on Accra-based Peace FM on Thursday, the president said: “Immediately after the factory was built, it shut down”, adding: “This was in the NDC time – May 2016”.
“Immediately after the commissioning on the 30th of May 2016, the factory was shut down because of lack of raw materials”, he explained.
“Soon after”, he noted, “a transaction advisor who was appointed by the then-NDC government – I think it was PricewaterhouseCoopers – came to try and assist the government to sell 70 per cent of the share in the factory. And all this is happening in the Mahama era; it’s not my time”.
“Up and down, up and down, no progress [was made]. Why? Because the fundamental issue which has dogged the Komenda Sugar Factory is the absence of a plan for the supply of raw material. It makes it a very very difficult project”, the president said.
He then asked: “Why didn’t the Mahama government go for that $24 million? The money was there before he left office; why didn’t he access it?”
“But, in fact”, the president continued: “It was going to be difficult to access the money because the factory itself that he had built had collapsed”.
Therefore, “Are you going to tell people you want some more money when the thing that you are doing is itself on the backfoot?”
Asked what he meant by the factory had collapsed, he said: “The shutdown of the factory, how do you understand it?”
“Immediately after you built a factory, then you bring it down for [maintenance]? It was shut down for lack of raw material to feed the factory and this is the point that I’ve been making: that the whole planning of the Komenda Sugar factory was wrong from the get-go”, he stressed.
“What we have been trying to do, what Alan Kyerematen has been trying to do – the very valiant effort that he has made – is to try now, to reconfigure the investment in such a way that he has now access, also, to raw material supplies for the factory”, Mr Akufo-Addo emphasised.
He said: “I think the work that has been done between him and the transaction advisor and the board of the company, is now in the situation whereby God willing, by February, next year, we will have got the Komenda Sugar factory working again. This is the target that they have”.
“They’ve made arrangements now to supply the factory with raw material. It’s going to be sustainable. If the factory is going to start working, it has to be sustainable”, he said.
“When you come back to it then you understand how it is that the poor planning continues to be an albatross around our neck – how sustainable is it? Because the initial planning never properly incorporated raw material supplies into the project because if it had been so, we would not be in this discussion today”.
Reacting to the president’s comments, Mr Vanni-Amoah said before a loan of US$125 million was approved by parliament in connection with the project, the Ministry of Trade and Industry, acting on behalf of the government of Ghana, “entered into an agreement with Seftech India Private Ltd to pre-finance the development of a 125-acre nursery plantation, which ought to be transplanted onto the 2,000-acre farms by January 2017”.
He said: “The NPP assumed power and they abandoned the project. The sugarcane nursery plantation was left to over grow due to lack of political will to operationalise the factory”.
“In July 2018, Mr Kyerematen sold the 125-acre sugarcanes to Akpeteshie distillers. Meanwhile, President Akufo-Addo says we did not plan on the raw materials. Akufo-Addo should ask his minister why Seftech India Private Ltd are demanding judgment debt for the job executed at the farms?”
According to him, “if the president is willing to operationalise the factory, he and his minister would not be giving flimsy excuses anytime they are asked about the Komenda Sugar factory”.
Mr Vanni-Amoah added that the John Mahama-led government “had the sugar factory as one of the priority projects”.
Read the full statement below:
For Immediate Release
21/ 10/ 21
AKUFO ADDO IS RATHER A SELF-MADE ALBATROSS, NOT THE KOMENDA SUGAR FACTORY.
My attention has been drawn to an interview granted by the President of the Republic of Ghana, Nana Addo Dankwa Akufo Addo this morning on Accra-based Peace Fm, which he asserted that the Komenda Sugar Factory is an albatross on the neck of the government due to lack of proper planning and unavailability of the raw materials.
I wish to set the records straight and expose the ignorance of the president as far as Komenda Sugar Factory issues are concerned.
PLANNING OF THE ESTABLISHMENT OF THE SUGAR FACTORY
President Akufo Addo says we did not plan properly before the Komenda Sugar Factory was built. The president really needs proper education on the sugar factory business.
In the establishment of sugar factories, backward integration approach is adopted. Sugarcane is perishable, so if you grow the raw materials before building the factory, you will cause a financial loss because there would be no machine for milling when the sugarcanes mature.
If the president really read Economics at the University of Ghana, he would understand the Backward Integration and Forward Integration in setting up industries.
The idea for the establishment of the Komenda Sugar Factory was conceived by the Atta Mills/ Mahama led NDC government in the year 2009 with the painstaking feasibility studies executed with the help of the National Federation of Cooperative Sugar Factories Limited in India (NFCSF).
India has expertise in the field of sugar production. Over 500 sugar factories are available in India and they are the second-largest producers of sugar in the world. These Indians advised that the Backward Integration approach is the best and suitable.
Due to the bilateral relationship between Ghana and India, the EXIM Bank of India agreed to assist Ghana to own a sugar factory. US$35 million from the Exim Bank of India as the first trench of credit facility to construct a state-of-the-art sugar factory at Komenda.
The contract, the scope of work, including Engineering, Procurement and Construction (EPC) of the plant was supervised by the National Federation of Cooperative Sugar Factories Limited of India as the project consultants. Seftech India Private Limited was the contractor of the factory.
AVAILABILITY OF RAW MATERIAL – THE SUGARCANE
Although the capacity of the processing plant is 1,250 tonnes of crushing per day, in the interim, the factory was going to depend on the out-grower canes. The available out-growers within the catchment area could supply between 500 to 700 tonnes of sugarcane per day, which is above the minimum requirement of 150 tonnes per day.
The second trench of the loan of US$24.54 million was approved by the Parliament of Ghana in November 2016 which was to be accessed in February 2017 to develop 40% of the needed raw materials to be owned by the factory and 60% would be given to the out-growers.
If the president lacks knowledge on this second trench, he must consult Mr Kyerematen. It is disingenuous on the part of the president to ask that if the money was there, why did John Mahama refuse to utilise it?
ALAN KYEREMATEN SOLD 125-ACRE SUGARCANES TO AKPETESHIE DISTILLERS
Before the loan of US$125 million was approved by the Parliament, the Ministry of Trade and Industry, acting on behalf of the government of Ghana, entered into an agreement with Seftech India Private Ltd to pre-finance the development of a 125-acre nursery plantation, which ought to be transplanted onto the 2,000-acre farms by January 2017.
The NPP assumed power and they abandoned the project. The sugarcane nursery plantation was left to overgrow due to a lack of political will to operationalise the factory.
In July 2018, Mr Kyerematen sold the 125-acre sugarcanes to Akpeteshie distillers. Meanwhile, President Akufo Addo says we did not plan on the raw materials. Akufo-Addo should ask his minister why Seftech India Private Ltd is demanding judgment debt for the job executed at the farms?
If the president is willing to operationalise the factory, he and his minister would not be giving flimsy excuses anytime they are asked about the Komenda Sugar Factory.
John Mahama-led NDC government had the Sugar Factory as one of the priority projects.
Annually, over US$400,000,000 worth of sugar is imported into the country and this quantity is about 80% of the total need of the nation. The economy cannot afford this huge drain on its scarce foreign exchange reserve. There is an unbelievably huge market for sugar begging to be exploited. There is, therefore, the need that sugar producing factories are established in this country.
Our vision was to see a nation that is self-sufficient in the production of sugar to meet both its domestic and industrial needs and to export the commodity to other African countries.
This project is committed to producing very high-quality sugar using methods that exclude the use of sulphur, the capture of a sizeable share of the local sugar market and also to export sugar produced in Ghana to the West African market.
The objective of the project is to meet the urgent need of producing sugar indigenously by using efficient machinery based on state-of-the-art technology, at the lowest cost of production to exploit the tremendously large market in Ghana and in other equally large markets of the West African sub-region in due course of time. In the process, jobs will be offered to a large number of Ghanaians at the production plant, and the market will be provided for the produce of a large number of sugarcane farmers.
The key benefit of the project is an import substitute that will enable savings on foreign exchange of US$10.352m per annum. The sugar factory will also produce 4.32m units of power per annum. It will enable the neighbouring villagers to light their homes. The project will benefit approximate 20thousand local farmers.
PROJECT JUSTIFICATION AND BENEFITS
The project has various advantages:
Sugarcane is a robust crop and will grow in several agro-ecological zones, hence it can benefit several communities, which have no major dependable cash crops to raise their income levels and generate employment.
It will bring desirable socio-economic benefits in terms of income, job opportunities and stem the rural-urban drift of the youth.
A high-quality sugar will be a credible import substitution product that could be patronised by pharmaceutical industries;
Confectionary Industries e.g. chocolate, toffee, drinks and beverages, bakeries, etc.; and Alcoholic industries.
• The industry will provide by-products which will be the primary materials for secondary industries in the manufacture of various types of products.
a. The paper industry;
b. Organic fertiliser from the filter mud;
c. Livestock feed from bagasse and cane tops; and
d. Molasses for distilling, etc.
• The project is justified in terms of the additional jobs and incomes that would be generated and possibly that production would significantly replace the large imports of sugar in Ghana, which will enable the scarce hard-earned foreign exchange to be saved for more important and development-oriented projects.
• It will generate sufficient income to support research development of the nation.
• It will support Government’s efforts to reactivate the sugar industry in Ghana.
• The climatic conditions; rainfall, temperature and soil conditions in the area of operation are very conducive to sugar cane cultivation and hence the sugar industry can be developed easily.
• Industrialisation of the rural area where the plant is sited.
• Poverty alleviation and eradication in the community of operation.
• Sustainable socio-economic development and growth of the rural people.
• Optimum utilisation of available resources that are presently going to waste.
• The resultant stemming of urban drift.
PROFITABILTY and DEBT SERVICE
During the period of the first ten years, the project will generate equal to US$69.6m cash surplus. The project will be able to service all its debts. The debt service coverage ratio is 4.14 which is excellent.
The simple internal rate of return on capital investment is US$75.58m. It comes to 18.21% which is very good by international standards.
At this juncture, I would like to reiterate the point that, the Akufo Addo led NPP government lacks the political will be operationalise the Komenda Sugar Factory, and have left is to rot away. The factory and the president, who is an albatross?
Ransford Chatman Vanni-Amoah
(Former Member/ Secretary - Komenda Sugar Project Management Board)