Ghana agriculture/agri-business sector briefing

Part of the MASDAR Group of Companies

Over 35 years experience of providing agricultural consultancy, project management and farm operating services

Expertise in Africa, Asia, UK and Eastern Europe

For both public and private sector clients

In Ghana since 1977 – office significant project

About us

The MCF Team

Examples of MCF Global Experience

Nigeria Development and management of Afcott Cotton Estate with outgrowers 60000ha

Ghana Oil Palm Master Plan Study Nation Agro-industries study

Swaziland Planning and establishment of Irrigated Rice Estate 30000-ha

Zambia Planning and establishment of Chanyanya Ranch: Irrigated soya, wheat, maize, potatoes, tobacco, dairy and beef

Poland/Czech Republic Privatisation of State Farms

UK Numerous large scale arable, potato and livestock operations

Cambodia Feasibility studies for oil palm, sweet sorghum, rubber and jatropha plantations on behalf of investment fund

Malaysia & Thailand Performance Improvement Project for Unilever Palm Oil Plantations: 25,000ha

Papua New Guinea Performance Improvement Project for New Britain Palm Oil: 40,000ha

Indonesia Management Training Programme for PT Astro Agro Lestari Lbk: 263,000ha

Russia Fresh Produce & Animal Feedstuff Production and Marketing Study - Ekaterinburg

Philippines Managing 40,000 ha oil palm development

Strong growth in recent years: GDP per capita tripling over the past decade. Government debt reduced, although the current account

deficit remains high

Chief exports are gold, cocoa and petroleum products, Key imports are capital equipment and foodstuffs. The country’s agriculture potential is significant An oilfield with over 3bn bbl of light oil was discovered

in 2007, and production began in December 2010. The risk of ‘resource curse’ or ‘Dutch Disease’ has to be

monitored, given the experience of African countries such as Angola and Nigeria.

The Ghanaian Economy

The Ghanaian Agricultural Sector

35% GDP – 65% pop.

Principal crops: yams, cassava, plantains & cocoa

Principal exports: cocoa, palm oil & sugar (re-exports)

Principal imports: rice, sugar, palm oil & wheat

Ghana agricultural production growth

2.6%

-1.5%

4.3%

8.8%

4.8%

1960s 1970s 1980s 1990s 2000s

Ghana agricultural exports and imports (US$m)

0

200

400

600

800

1,000

1,200

1,400

1,600

1961 1965 1969 1973 1977 1981 1985 1989 1993 1997 2001 2005 2009

Agricultural imports Agricultural exports

Social Changes Affecting Ag. Sector

• Urban population will more than triple by 2050 - 62% of the population will live in cities

• Already shortage of labour in rural areas as young men are the first to leave

• New consumer trends in food consumption

Urbanisation rate by region (2010)

40%

24%

43%

51%

59%

45%

Africa Eastern Africa Central Africa NorthernAfrica

SouthernAfrica

Western Africa

Population of African cities in 2010 and 2025 (mn)

11 11

9

5 5 4 4 4 4

14

16 15

8 8

6 6

4

6

2010 2025

1. Land title – expensive & time consuming to get clear title – “Compensation”

2. No supporting sector - need to be totally self sufficient – CAPEX and expertise

3. Limited access to expensive credit

4. The costs of doing business in Ghana – improving but still expensive & tedious

5. Limited transport, power & water infrastructure

Challenges in the Ghana Ag Sector

1. Clear, open and free market – no government intervention

2. Complete supply chain and marketing chains in place

3. Easy access to cheap credit – land is best collateral

4. Low costs, but more regulation & red tape

5. Fully developed transport, power & water infrastructure

…Compared to UK

• Established:

– Siat (Belgium) – oil palm

– Olam (Singapore) – oil palm

– SAPH (Ivory Coast) – Rubber

– Blue Skies (Ghana) – Pineapples

– Gov of Ghana – cereals, sugar, livestock

• New arrivals

– GADCO (Ghana/Brazil) – rice & protein crops

– Africa Atlantic (USA) – cereals & oilseeds

Main Players

• Large scale mechanised farms

• Large scale biofuel plantations

• Outgrowers organised and supported by the above

• Conservation agriculture

• Application of agricultural lime to acid soils

When these innovations are established and delivering quality in volume agro-industry innovations will follow – They will not work before

Innovations

• Job Seekers

– Farm managers (practical hands-on)

– Engineers

• Entrepreneurs

– In the innovations previously mentioned

– Establish an investment fund to provide long term equity start-up capital for the above

• Investors

– Back the innovators with long term equity

Opportunities for the Diaspora

Disclaimers The information contained in this document is being provided for

illustrative purposes only and has not been independently verified. A full feasibility study should be undertaken before any decisions are taken as to whether to proceed with any projects set out in this presentation.

No representation or warranty, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information or opinions contained herein. Neither MASDAR Corporate Farming nor any of its employees, representatives or advisers shall have any responsibility or liability whatsoever (for negligence or otherwise) for any loss howsoever arising from any use of this document or its contents or otherwise arising in connection with this document. The information set out in this document may be subject to updating, completion, revision, verification and amendment and such information may change materially.

Past performance is not a guide to the future. The value of farming businesses and of their holdings of property and the income from them, can fall as well as rise and any person undertaking such businesses may not get back the original amount invested.

Opportunity Case study: Large Scale Mechanised Cereals & Oilseeds

• 12,000 ha of land under cultivation

• Double crop, with rice in the wet season and sunflower in the dry season

• Complemented by an outgrower operation, to the extent of 20% of our own harvest

• Rationale is to increase productivity of under utilised fertile land to produce rice and sunflower oil to replace imports and to export to other Ecowas countries such as Nigeria

Summary data

Yr 1 Yr 6

Hectares in Production 1,000 12,000

Production - Rice (mt) 2,300 39,000

Production - Sunflower (mt) 1,600 28,080

US$M Yr 1 Yr 6

Sales 2.32 47.87

PBIT (1.93) 16.90

EBITDA (1.17) 20.79

CAPEX (8.60) (3.89)

Returns

• Total investment $40m

• Investor IRR 37%

• NPV @ 30% - $4m

• Sensitive to:

1. Yields

2. Prices

• Key Success Factor – MANAGEMENT

Mechanised Cultivation

A Medium Size Rice Mill

Risks Risk Mitigation Strategies

Short term fluctuations in prices • Range of crops • Low financial gearing

Annual fluctuations in crop yields • Preventative programmes to control pests and diseases

• Number of units in different areas • Irrigation • Own applied R&D

Political • Strong local partners • Out-growers

Economic • Local contracts priced in US$ • Hold funds in US$ • Food is a basic necessity • Do not rush IPO

Summary

1. Farming opportunities in Ghana are many & varied

2. Simple system which can be quickly scaled up

3. High local prices can de-risk start up

4. Technical execution must be excellent

5. Risks must be managed

6. If 2-5 in place excellent returns for investors

7. When farms are producing volume excellent opportunities in agro-industry – NOT BEFORE