The Resurrection of Komenda Sugar:
On Tuesday May 31, 2016, President John Dramani Mahama amidst pomp and display commissioned the Komenda Sugar factory near Cape Coast, in the Central Region of Ghana. The project was a Public Private Partnership funded by the Indian Exim Bank and the Government of Ghana. The Komenda factory had been part of the vast number of over 400 industries that the first president of Ghana, Kwame Nkrumah, bequeathed the nation; only for a good number to be run down by subsequent governments.
Right at inception, the project attracted quite some opprobrium, with some critics holding the view that it would be another fiasco; just as other government led industrial ventures have been in the past. Key among these was the censure by the Think Tank Imani Ghana. You may read their reservations in this link; Article
However others, including myself, maintained a positive outlook and saw the glass half full. I definitely could see the possibility of the project pulling through successfully, and thus immediately penned (well, more precisely typed) a rejoinder to Imani’s risk assessment (You may also follow this link for the details; (Risk Assessment article)
Political Gamesmanship and Germane Concerns:
Three months short of exactly two years after the initial views above, the sugar factory in Komenda has finally been built. At news of the imminent commissioning of the plant, the government and its supporters filled the media space with all the praise they could milk out of the potential the project promises. Those on the opposing end, in their frantic efforts to dull the shine, christened the Komenda factory a mere political gimmick. They argue that it was quickly commissioned to improve the electoral fortunes of the governing National Democratic Congress (NDC).
While these sentiments raged, news broke that the project authorities had to buy sugar cane from individual farmers to test run the plant. Actually, it was reported farmers are now being exhorted to go into sugar cane farming to help feed the plant. The news sounded too ridiculous to be true, so initially I ignored it. Subsequent interactions on social media and with some government communicators later gave gravitas to the challenges confronting the factory. Also, I read a post from the President of Imani Ghana which actually caps further capital requirement at some Fifty Million United States Dollars (USD 50,000,000.0) in order for the project to be up and operating with raw materials, transport, storage, utilities and other infrastructure to boot.
While I’m not keen on the political chess playing involving the commissioning date et al, I believe some of the concerns raised by Civil Society and the public remain relevant to the success of the factory or otherwise. To this extent, it would be appropriate to look at the concerns raised on the merit of each.
The subject of inadequate financing can be overcome if it can be established from the feasibility and business plan that further investment in the project would not amount to throwing good money after bad. The other hurdles, i.e. storage and transport as well as utilities can be surmounted with some decent ingenuity. For instance, storage of the raw material and finished product may not become much of a headache; depending on the process flow design and the final product distribution strategy adopted. The matter of transportation on the other hand can be addressed by outsourcing it. Meanwhile, it is reported that the plant would self power when production is in full gear, thus providing insurance against the concern of erratic power supply.
This leaves the managers of the factory with the other challenge cited by Bright Simons, formerly of Imani, which is working capital. This I believe should not be an issue since the Overseas Investment Finance Programme of the Exim Bank of India explicitly provides for a guarantee facility for working capital when Indian businesses are involved elsewhere. As such, knowing that this same entity is involved in funding this project, it remains inconceivable that the Komenda business plan would proceed without making provision to access working capital. But like I indicated earlier, without the risk of falling for the sunk cost fallacy, this could also be easily resolved.
Making Omelet Without Eggs:
All that having been noted, my primary concern is this; why did the project implementers flout the very fundamental consideration of adequate availability and sustainable supply of raw material? This could be the make or break factor for this business if you ask me. (Well, that is assuming we do not have a management setup of square pegs in round holes as usual)
There is no gainsaying the fact that not a single grain of sugar can be produced by that monumental fabrication of steel works at Komenda, if it’s not fed with the required volumes of sugar cane.
From reports, the factory seeks to rely (at least currently) on sugar cane produced by farmers in the project area. Certainly, like many Ghanaians, I see the cart being put before the horse.
The only information we gather so far on the company’s plans for producing raw material is that they possess in the region of a 100 hectares of land which they intend to cultivate as a nucleus farm. But the operative word here is ‘intend’. Why on God’s green earth would anyone still be hanging onto intentions of planting sugar cane when hard cash has already been sunk into a factory ready to start processing the raw material here and now?
It is standard practice that a factory of this nature should have in place a nucleus farm, which could serve at least 40% of its feedstock needs, while looking to out growers for more supply. The sustainable approach for raw material supply is a combination of a nucleus farm and an out grower scheme; not one or the other. So why would the implementers concentrate on bolting and screwing metal tubes and conveyor belts into place without any advanced consideration of what would be juiced and crystallized into the end product?
Is Komenda Doomed to Repeat Ayensu?
The Komenda imbroglio quickly brings to mind the similar narrative of the Ayensu starch factory at Bawjiase, also in the central region. The same rhetoric of farmers in the area producing cassava to feed the plant was chanted. With no organized entity to ensure that enough cassava was produced, that project has become more or less a white elephant. The so called Corporate- Village Enterprise (COVE) model, which was to ensure sustainability of the business, disappeared as quickly as it was conceived.
In recent times, a local brewery had sought to bring in a company all the way from Vietnam to come produce cassava in Ghana in order to supply enough for the factory to produce starch for their needs. However, in deliberations with the agribusiness lead of this brewery, together with other consultants, we managed to make a case for a local aggregation system by indigenous businesses to supply cassava to this end. As such today, my client and other Ghanaian businesses are involved in aggregating for this brewery. Suffice it to say that the approach above is a remedial measure and therefore could not address comprehensively the raw material needs of the factory. As such, despite those efforts, the inability to ensure a coherent approach to raw material production and supply at inception has left the factory producing way below capacity, resulting in another unmitigated abuse of the tax payers’ money.
I make the reference above to drive home the point that, producing raw material to feed a factory, and ensuring that such raw material is supplied on a sustainable basis is an entire enterprise on its own. As such, those who manage such manufacturing projects cannot treat that end of the chain as an afterthought.
The Way Out:
It is important for management of the factory to be innovative around the subject of raw material supply for the factory. The agriculture sector in Ghana is one that lacks the needed support at the individual level to ensure that the huge volumes of raw material that may be required for such a project is realized by local farmers on their own. However, there are arrangements that can be made to dovetail other agribusiness projects into that of Komenda, to ensure sustainable supply of sugar cane. This could easily be engineered with the help of the right experts.
As things stand, it would be prudent for the project implementers to go back to the drawing board and analyze the raw material or ‘sugar cane challenge’ objectively. They must develop a critical path along which sustainable quantities can be supplied to the plant within record time. As fate would have it, sugar cane is a coarse growing member of the grass family with no rest period; which means it grows all year round. As such, the best time to begin salvaging the situation is now.
With this issues coming to the fore this early, one would hope that they would be conscientiously addressed. When this is done with the utmost urgency, it is hoped cash flow can be attained before end of the period of deferred credit and moratorium for the project. That is, if it has not elapsed already. Putting in an early stitch at this time could possibly ensure that the Komenda sugar business would not be running at a deficit in terms of honouring its debt obligations by the time it is operating at full throttle. text