Project Report_Group-2_Final.docx

PROJECTREPORT

Submitted To: Prof. Palakh Jain

Submitted By:Subodh Kumar – 12PT2-51Sushant Singh – 12PT2-56

MANAGEMENT DEVELOPMENT INSTITUTE GURGAON

Post Graduate Programme in Management (Part-time)

INTEGARTED COMPLEX: ALOE VERA FARMING AND PROCESSING International Business Strategy

Acknowledgements

We would like to express our sincere gratitude to Dr. Palakh Jain for giving us the opportunity to work on this project. It would never be possible for us to take this project to this level without his innovative ideas and his relentless support and encouragement.

Name of Students Roll Number

Subodh Saxena - 51

Sushant Singh - 56

Executive Summary

As per the course requirement of International Business, the authors have chosen agricultural based project to get maximum exposure and learning from this course. The selection of industry type, product and FDI destination country decisions have been taken strategically and in lined with academic and business goals. The academic interest includes exposure to International market and application of theories and analytical tools, while internationalization of a firm. On the other hand going global with accurate strategy to ensure above average returns also gives opportunity to explore several business aspects. Ensuring above average returns while securing sustainability for a firm is another challenge while internationalization of a firm.

To satisfy academic objectives as well as firm’s goal it was decided to select some agricultural based product, which can be cultivated in a country other than India and sold in the market that exists in some other continent. This would give chance to explore various challenges and opportunities that exist in agricultural sector FDI in foreign country. The next part of study includes exploration of product market in other continent and to identify the desired competitive advantage a firm should develop which can empower it to compete, leading and sustaining in the market. Screening of the countries for plant cultivation on large scale and target country for selling the final product had been a challenging task. This gave opportunity to study regional integration, economic blocks and recent trade agreements between the countries favorable for the agri-business and give rationale to select the most favorable countries for business internationalization. Formulating these strategies is the first and the most complex task for the authors as this strategy would create long term competitive advantage in international business. However it was realized that flexibility, efficiency and learning part would be also an essential focus point, while internationalization with long term sustainability. This sprouted the idea of exploiting large scale economies by building global volume and deriving synergies across the firm. There had been a lot of back and forth brain storming related to selection sequence of type of final product and suitable market (country). Which should come first, ‘a product’ or ‘a country’? As the formulation of the firm was from scratch it gave a lot of opportunity and flexibility to research different agricultural products in demand, which are presently in demand and can give above average returns. Since the final product has to be transported to the other country market and firm has to compete with local competitors, logistics would be a key concern for cost effectiveness. This gave rationale to produce high quality value added processed food from the agricultural product.

The project report discuss in detail about the product selection, country selection for Aloe Vera cultivation and target market country selection for exporting value added bulk Aloe Vera concentrate. To limit the scope of the project report only bulk exporting of Aloe Vera extract to Aloe Vera based intermediaries dealing with related industries in other countries.

Table of Contents

1. Introduction...................................................................................................................................2

2. Firm Detail.....................................................................................................................................2

3. Product Selection...........................................................................................................................3

4. About Aloe Vera............................................................................................................................4

4.1 Introduction...........................................................................................................................4

4.2 Origin & Geographic Distribution...........................................................................................4

4.3 Plant Description....................................................................................................................4

4.4 Uses.......................................................................................................................................5

4.5 Commercial Applications.......................................................................................................5

4.5.1 Health/Medical Products...............................................................................................5

4.5.2 Cosmetics Products........................................................................................................5

4.5.3 Food...............................................................................................................................5

4.6 Soil and Climatic Requirements.............................................................................................6

5. Aloe Vera Global Market Scenario.................................................................................................6

5.1 Aloe Vera Market Players......................................................................................................7

5.1.1 Forever Living Products (FLP).........................................................................................7

5.1.2 Aloecorp.........................................................................................................................7

5.1.3 Terry Laboratories..........................................................................................................8

5.2 International Quality Certification and Research Organization in Aloe Vera Industry...........8

6. Country Selection..........................................................................................................................8

6.1 On the Basis of Ranking of Ease of Doing Business................................................................9

6.2 On the Basis of Availability of Factors of Doing Business.......................................................9

7. Identifying of Ghana Using Michael Porter’s Diamond Model Tool.............................................10

7.1 Firm Strategy, Structure and Rivalry....................................................................................10

7.2 Factor Conditions.................................................................................................................11

7.3 Demand Conditions.............................................................................................................11

7.4 Related and Supporting Industries.......................................................................................11

8. About Ghana................................................................................................................................11

8.1 Geographic and Demographic Background of The Country.................................................11

8.2 Agricultural Subsectors by GDP (%).....................................................................................12

8.3 Land Use, Vegetation, Soils And Climate.............................................................................12

8.3.1 Land Use (Specific to Agriculture)................................................................................12

8.3.2 Land Use (General).......................................................................................................13

8.3.3 Land Area by Region....................................................................................................13

8.3.4 Agro-ecological zones..................................................................................................14

8.3.5 Rainfall Distribution by Agro-Ecological Zones.............................................................14

8.3.6 Climate.........................................................................................................................14

8.3.7 Topography..................................................................................................................15

8.3.8 Vegetation...................................................................................................................15

8.3.9 Soils..............................................................................................................................15

8.3.10 Fertility Status of Soils in Some Regions.......................................................................16

8.4 Population...........................................................................................................................16

8.5 Political Environment...........................................................................................................16

8.6 Economic Environment........................................................................................................17

8.7 Trade and Investment Environment....................................................................................17

8.8 Climatic Environment...........................................................................................................18

8.9 Legal Environment...............................................................................................................18

8.10 Educational Environment.....................................................................................................18

8.11 Economic System.................................................................................................................18

8.12 Interest Rates and Inflation.................................................................................................19

8.13 Employment........................................................................................................................19

8.14 Foreign Direct Investment...................................................................................................20

9. Country Selection for Target Market...........................................................................................20

9.1 China....................................................................................................................................21

9.2 Australia...............................................................................................................................21

9.3 Europe.................................................................................................................................22

10. Trade Agreement Between Ghana and EU..............................................................................22

10.1 Ghana and The EPA Negotiations........................................................................................22

10.2 The Structure of Ghana’s EPA With The EU.........................................................................23

10.3 The Structure of Ghana’s Trade...........................................................................................23

10.4 Ghana’s Leading Trade Partners..........................................................................................24

10.5 The Cotonou Agreement.....................................................................................................24

10.5.1 Overview of ACP-EC Partnership Agreement (“The Cotonou Agreement”)................25

10.5.2 The Objectives of The Cotonou Agreement.................................................................25

10.5.3 The Actors of The Cotonou Agreement........................................................................25

10.5.4 The Implementation of The Cotonou Agreement........................................................26

11. Land Acquisition in Ghana.......................................................................................................26

11.1 Fertile Land and Water Resources.......................................................................................26

11.2 Types of Land.......................................................................................................................26

11.3 Key Points in Land Acquisition and Negotiation...................................................................26

12. Integrated Complex for Aloe Vera Cultivation and Processing................................................27

12.1 Project Location...................................................................................................................27

12.2 Proposed Business Legal Status...........................................................................................27

12.3 Project Capacity and Rationale............................................................................................27

12.4 Proposed Product Mix.........................................................................................................28

12.5 Aloe Vera Integrated Complex.............................................................................................28

12.6 Aloe Vera Cultivation...........................................................................................................28

12.6.1 Aloe Vera Cultivation...................................................................................................29

12.6.2 Soil and Climate...........................................................................................................29

12.6.3 Irrigation and Inter-culture..........................................................................................29

12.6.4 Plant Protection...........................................................................................................29

12.7 Processing............................................................................................................................30

12.7.1 The Stages of the TTS (Time, Temperature and Sanitation) Aloe Process....................30

12.7.2 Leaf Harvesting and Handling......................................................................................30

12.7.3 Pasteurization..............................................................................................................30

12.7.4 Concentration..............................................................................................................30

12.7.5 Vacuum Dehydration Technology................................................................................30

12.7.6 Packaging and Dispatching...........................................................................................31

13. Project Pre-requisitions and Financial.....................................................................................32

14. Appendix..................................................................................................................................33

Bibliography.........................................................................................................................................33

Table of Figures

Figure 1: Constitutes of Aloe Vera.........................................................................................................4Figure 2: Rise of Aloe Vera Consumption..............................................................................................6Figure 3: Michael Porter's Diamond Model.........................................................................................10Figure 4: Agriculture Subsector by GDP (%).........................................................................................12Figure 5: Usage of Agriculture Land.....................................................................................................12Figure 6: Usage of General Land..........................................................................................................13Figure 7: Land Area by Region.............................................................................................................13Figure 8: Land Area by Region (%).......................................................................................................14Figure 9: Rainfall Distribution by Agro-Ecological Zones......................................................................14Figure 10: Vegetation Area wise..........................................................................................................15Figure 11: Fertility Status of Soils.........................................................................................................16Figure 12: Summary of Macro Economic Environment.......................................................................20Figure 13: Ghana's top export and imports, World (2005)..................................................................24Figure 14: Ghana's export market (2005)............................................................................................24Figure 15: Sample Project Site.............................................................................................................27Figure 16: Sample of Aloe Vera Cultivation.........................................................................................29Figure 17: Aloe Vera Processing Plant.................................................................................................31Figure 18: Dominant soil map..............................................................................................................33

Table of Tables

Table 1: Product Selection Criteria........................................................................................................3Table 2: Country Selection (On the Basis of Ease of Doing Business)....................................................9Table 3: Country Selection (On the Basis of Availability of Doing Business)........................................10

Farming and Food Processing in Ghana - International Business Strategy Page 1

1. Introduction

The report is prepared in context of the internationalization of an existing firm doing cultivation of agricultural processed value added product in India. Initially a few agri-based processed products were selected for screening - some of them were palm oil, soya protein, pea protein, fruit concentrates, mentha oil, Aloe Vera concentrate/gel/powder, sunflower oil and flower essence. In the initial scrutiny Aloe Vera gel/concentrate and Pea protein were selected based on global market demand, lesser numbers of competitors and author’s ease of understanding cultivation and production process. Pea protein is an emerging market and replacement of soya protein. It has got some inherent properties which makes it superior to other available protein supplements. Since the product is new and still in nascent state, cultivation methods and process know how is not readily available so, it is not considered as a product for the project report. The report discuss in details about Aloe Vera cultivation, processing, global market, competitors and demand in latter sections of this project report.

Since it is an agricultural based business, land and labor are the prime factors of production required. To internationalize the business in cost effective way, cheap land and labor sourcing would be the prime concern for the firm. In the initial research, it is apparent that FDI destination for the firm for Aloe Vera cultivation should be Africa continent. Selection criterion and finalization of the appropriate country in Africa has been done systematically and will be discussed in detail in the report.

The other hidden objective of this project report work is to develop vision and initial framework for entrepreneurship in near future after completion of MBA course. This give an opportunity and motivation to work in depth on factual aspects of the project such as natural methods of cultivation, global demand of end products, growth in the market, recent research and development in application of Aloe Vera products, plant and technology supplier, project profitability and assessment of returns on investment. Author will also try to visit the cultivation site and processing plant near the NCR region to have real time exposure on cultivation techniques and processing methods. Meeting with farmers and producers will also give the insight on opportunities & challenges in this business. However, this discussion will not be covered in the project report and shall be discussed separately with the faculty for any further guidance and support.

2. Firm Detail

Name: Prakritik Agri Global Agro Foods Limited

Vision Statement: To create health awareness about natural farming and provide high quality value added food products globally.

Mission Statement: To achieve global leadership in providing high quality food ingredient produced with natural farming and processing methods at the best natural locations in the world, while creating value for our farmers.

Goal of the Firm: To become global leader in next five years in supplying Aloe Vera concentrate and other related products to world’s leading companies in food, pharmaceutical, healthcare and beauty products industries.

Objective of the Firm: The firm will expand in phases to achieve its long terms goals. In the first phase, firm will have its own farms for cultivating Aloe Vera with additional spare processing capacity in the processing plant. In the next phase farmers will be encouraged to cultivate Aloe Vera for the firm for mutual benefits. The firm will provide farming support to the local farmers to cultivate Aloe Vera with natural techniques. The firm will have following objectives to achieve its business goals:

To acquire large agricultural land far from any type of pollution


Acquire knowledge related to natural farming without application of chemical fertilizers and harmful pesticides

To become independent on electrical power production for captive consumption by utilizing agricultural waste and processing plant waste as a fuel to produce electricity

Creating efficient value chain operation system by collaborative farming with the local farmers.

To expand market and enhance demand by promoting awareness about benefits of natural farming products

Initially firm will try to position itself as a bulk supplier of Aloe Vera products. In the next phase firm will explore the market for producing other value added products such as pea protein, Mentha oil etc.

3. Product Selection

The project initial activity is to select the final product for internationalization. The discussion and brain storming revolves around the key selection criterion and personal interest of the authors towards particular industry. As industry domain of agricultural based product, final product is selected from a few shortlisted products based on the following criterion:

Selection Criterion Aloe Vera

Pea Plant Fruits Sunflowe

r Soya Remarks

Ease of Cultivation 5 2 1 3 4Climatic conditions, use of organic manure, insecticides etc.

Low agriculture expertise required 5 2 1 4 3 Agricultural knowledge,

Irrigation techniques etcHigh market demand for the end product and growth

3 5 2 1 4 Global demand for the end product mix

Above average returns 4 5 3 2 1 Returns on investment

Scope for Value addition 4 5 3 1 2

Variety of end product with significant market value

Availability of Technology and know-how for processing the end product

4 1 2 3 5 Energy efficient Plant and Technology

Low capital intensive 5 2 4 3 1 Initial investment

Land requirement for cultivation and Yield per hectare

5 3 1 4 2 Cultivation fertile land

Total 35 25 17 21 22 Table 1: Product Selection Criteria

Each product is given comparative ranking by the authors from 1 to 5 based on the secondary data and other information gathered for the different products.

From the above table it is evident that Aloe Vera has got the highest score of 35 followed by Pea Plant. The above table does not rule out the other products for cultivation but Aloe Vera is certainly better business proposition than the other products. In the next phase of expansion, other products can also be considered for cultivation and processing the value added products.


4. About Aloe Vera

Figure 1: Constitutes of Aloe Vera

4.1 Introduction

United Nations Food and Agricultural Organization (FAO) has identified Aloe Vera, the herbaceous plant containing over 160 chemicals, as “a new plant resource with the most promising prospects in the world”. Aloe Vera is often called a “Natural healer”,” Lily of the desert” or the “Plant of immortality”; this plant belongs to the Aloe barbadensis variety and is renowned for medicinal properties. Aloe Vera barbadensis is the most celebrated aloe variety.

4.2 Origin & Geographic Distribution

There are approximately 360 species and sub-species in the succulent plant genus Aloe, distributed in tropical and sub-tropical Africa, the Arabian Peninsula and certain islands of the Indian Ocean, with the centers of diversity being South Africa (Transvaal) and the region of Eritrea, Ethiopia and Northern Somalia. They grow best on rocky sites and hillsides in semi-arid lands and are drought tolerant. Over 100 species are cultivated in the world with an overwhelming number of hybrids and cultivars.

4.3 Plant Description

Aloe is more or less succulent shrubby perennials, spiked, with or without organized white spots and may vary in both size and height with fleshy fibrous roots. Leaves are arranged spirally in a rosette, very thick and fleshy and containing a colorless, yellow, brown or purple sap for which they are valued. It is very cactus-like in its characteristics. The medicinal and nutritional possibilities for members of the aloe family are varied and it is a nutritional powerhouse and a true gift from nature, hence the reference to Aloe as, “Nature’s Own First Aid kit!”


4.4 Uses

The original commercial use of the Aloe plant was in the production of a latex substance called Aloin, a yellow sap used for many years as a laxative ingredient. This product became synonymous with the name "Aloe" and recorded in the trade, technical and government literature during the early 20th century. The sap of certain Aloes has medicinal and cosmetic applications and has been valued as such for over three thousand years. The juice of aloe leaves contains the purgative aloin. Today the various drug-yielding species, e.g., Aloe Vera and Aloe chinensis, are still used for their traditional medicinal properties as well as for X-ray-burn treatment, insect repellent, and a transparent pigment used in miniature painting; cords and nets are made from the leaf fiber. Aloe is best known today for its ability to treat burns, it has been used for treating stomach disorders, headache, constipation, influenza and fevers, colic, kidney ailments, ringworm, skin, hemorrhoids, wounds, dystrophy, blistering, toothache, sunburn, menstrual problems, insomnia, snakebite, hair loss, meningitis and other ailments.

4.5 Commercial Applications

The global commercial use of Aloe Vera extracts in Aloe Vera concentrate / powder form is as an input to the following industries:

4.5.1 Health/Medical Products

Pharmaceutical Products Tonic Salve (for protection of delicate and irritated skin from

body fluid and enzymatic drainage Supplement Juice Tablets

4.5.2 Cosmetics Products

Shampoo Hair conditioner/mask Hair tonic and dressing etc. Eye liner Sun Blocker cream/lotion/spray

4.5.3 Food

Instant Drink Powder Tee Drinks with different flavours


ALOE VERA

Scientific Name : Barbadensis Miller

Native : Africa (Drier Part)

Total Aloe Vera Cultivation (Global)

: 23,600 Hectare

Grown in Americas : 19,100 Hectare

Present uses & Application

: Food, Healthcare, Pharmaceutical

Global Market (approx)Raw Aloe Leaves : 70-80 Million USD

Processed Derivatives

: 1 Billion USD

Valueadded products

: 25 Billion USD

Expected Growth : 35% in next Five years

World Bulk Supplier share (Global)USA : 60% - 65%

Latin America : 20% - 25%

Australia, India & China

: 10%

Volume of finished products containing Aloe Vera

: 110 billion USD

About Cultivation climatic conditions : Dry

Temperature : 20 - 22 deg C

Soil : Dry and poor soil without much care

Irrigation Requirement

: 150 ml water/month /Kg of leaf

Leaves harvesting cycle

: 4 times a year

Plantation Density : 5000 plant per acre

Aloe Vera Leaves Yield

: 60,000 Kg per acre

Aloe Vera Extract Yield

: 45%- 50% w/w

Bulk Product from Leaves

: Extract, Powder and Gel

ALOE VERA

Scientific Name : Barbadensis Miller

Native : Africa (Drier Part)

Total Aloe Vera Cultivation (Global)

: 23,600 Hectare

Grown in Americas : 19,100 Hectare

Present uses & Application

: Food, Healthcare, Pharmaceutical

Global Market (approx)Raw Aloe Leaves : 70-80 Million USD

Processed Derivatives

: 1 Billion USD

Valueadded products

: 25 Billion USD

Expected Growth : 35% in next Five years

World Bulk Supplier share (Global)USA : 60% - 65%

Latin America : 20% - 25%

Australia, India & China

: 10%

Volume of finished products containing Aloe Vera

: 110 billion USD

About Cultivation climatic conditions : Dry

Temperature : 20 - 22 deg C

Soil : Dry and poor soil without much care

Irrigation Requirement

: 150 ml water/month /Kg of leaf

Leaves harvesting cycle

: 4 times a year

Plantation Density : 5000 plant per acre

Aloe Vera Leaves Yield

: 60,000 Kg per acre

Aloe Vera Extract Yield

: 45%- 50% w/w

Bulk Product from Leaves

: Extract, Powder and Gel

4.6 Soil and Climatic Requirements

Native to Africa, the Aloe Vera is accustomed to living in dry, rocky, and open areas, exposed to high intensity sunlight and heat. Its fleshy leaves that retain water, horizontally growing roots to catch the scarce water, and sometimes prickly exterior are all adaptations that help the plant survive in these extreme conditions. The plant can be cultivated in dry climatic conditions, in poor soils without much care. The root system is shallow and does not penetrate deep into soil. They require sandy calcareous soil /loamy soil with adequate drainage. Plants grow luxuriantly with moderate irrigation during dry season and with generous fertilization, leaves attain a full size within three years of planting. Temperature requirement is 20-22° C.

5. Aloe Vera Global Market Scenario

The current global turnover of raw aloe leaves amount up to 70-80 million US dollars, which is expected to grow at the rate of 35% in the next five years. For processed derivatives and value added products, current global trade is estimated at around 1 billion and 25 billion US dollars respectively. USA supplies the major bulk of aloe in world market having a share of 60-65%, whereas Latin American countries supply 20-25% and Australia, China and India combined together have a market share of only 10%. American consumers are most familiar with aloe’s use in skin-care products and there have been dramatic increases in Aloe Vera sales in the United States. As a beverage, aloe drinks have long been a staple drink in American health food stores and with direct marketing companies. Korea is currently the largest international market place for aloe, with Japan running a close second. Both of these countries have a long and respected tradition of herbal medicine. Aloe beverages are also very popular in Korea, Singapore and Malaysia. In Australia, market for skin and hair products containing aloe is increasing. The use of aloe in cosmetic products is growing at a modest rate in the Scandinavian countries, Switzerland, Italy, Spain and in several African nations. Aloe produced in Zanzibar, West Indies, Cape Colone, Bonaire, etc, is shipped to the United States and Europe. According to a workshop in 2012 conducted by International Aloe Council the global demand for Aloe Vera products is estimated to have reached $13 billion.

Aloe Vera has fast become one of the most commonly used plants in herbal cosmetics and medicines. Whether its creams, gels, lotions, shower gels or just plain Aloe Vera juice, it is here to stay. But ever wondered where this plant has come from and how all of a sudden it has become such a rage in the ayurvedic, herbal and medical world. The market is in emerging stage and has very high prospects in near future. The current global turnover of raw aloe leaves amounts upto US$ 70-90 million dollars, which is expected to grow at a rate of 35% in the next five years.

Figure 2: Rise of Aloe Vera Consumption


5.1 Aloe Vera Market Players

The following companies are one of the leading companies in the world in cultivating and producing Aloe Vera related products:

5.1.1 Forever Living Products (FLP)

Forever Living Products owns its own Aloe plantations in the Rio Grande Valley of southern Texas, as well as, our 6,500-acre plantation in the Dominican Republic—the largest in the world.

Inception of the Company

In 1978, Rex Maughan founded Forever Living Products (FLP), Scottsdale, AZ, a company with a marketing concept but without a product. Finally, Mr. Maughan decided that Aloe Vera would be a promising product for his business. In the 1980s he acquired patents for stabilizing aloe gel-an essential prerequisite for shipping aloe gel-as well as shares in plantations in the Rio Grande valley.

Processing Units and Value Added Products

Presently, FLP operates two manufacturing units in Texas, one producing 20,000 liters of raw aloe gel per day, mainly for cosmetics and the other producing 65,000 bottles of aloe juice per shift. The company offers the branded polysaccharide ingredient Active-Aloe, which targets the nutra ceutical and the health and body care markets.

Aloe Vera Farming

FLP manages the world's largest Aloe Vera farm, with 2020 hectares located in the Dominican Republic, in addition to the 820 hectares in the Rio Grande Valley. To secure the supply of their five million contract traders, FLP recently vertically integrated one of the larger processors, Terry Laboratories. The U.S. aloe industry plantations are moving further and further south. In the past, the largest aloe fields could be found in Florida and South Texas. Two frost periods in the late 1970s and early 1980s, however, completely destroyed the harvests in those years. This drove market leaders to look for places with better weather conditions. These were found in Mexico, Costa Rica, the Dominican Republic and Venezuela, where the largest aloe farms are today.

FLP Competitors and Market Leadership

FLP competes with Aloecorp, Broomfield, CO, another company located in the U.S. but owned by the South Korean network-marketer Namyang Aloe, for the leading position as aloe supplier and marketer. According to CEO Mick Anderson, Aloecorp supplies 40% of the raw aloe sold globally. Aloecorp's sister company Unigen is the R&D branch, performing pre-clinical and clinical studies. Another sister company is Oasis, which functions as the marketing branch of the parent company Nam Yang Group in the U.S. Currently, Aloecorp is extending its operations to the Pacific Rim China, Australia & Europe.

5.1.2 Aloecorp

Industry leader in producing quality Aloe Vera raw material including gels, whole leaf, liquid concentrates and powders with headquarters in U.S.A.., having own cultivation farm in Maxico.


5.1.3 Terry Laboratories

Terry Laboratories is the largest manufacturer of Aloe extracts and concentrates in the industry based on sales and volume – Melbourne USA based company

5.2 International Quality Certification and Research Organization in Aloe Vera Industry

The International Aloe Science Council is a non-profit trade organization based in for the Aloe Vera industry world-wide. Aloe growers, processors, finished goods manufacturers, marketing companies, insurance companies, equipment suppliers, printers, sales organizations, physicians, scientists and researchers are all eligible for and comprise the membership. The common bond between this diverse group of individuals and companies is an interest in promoting Aloe Vera and its use in skin care products, beverages, pharmaceuticals, and a wide variety of other products. The organization serves as a liaison and source of information for research, development and promotion of Aloe Vera and associated products. As a member, a company can have access to a wide variety of information, support, advice and certification programs.

Part of the success of Aloe Vera is certainly due to the IASC, an organization founded to protect both the industry and the consumer. The IASC basically represents an association of the major aloe companies and scientists-mostly based in the U.S. The main activity of the organization is promoting and awarding a quality label according to a certification program set by the IASC itself. This is intended to set barriers for players in this fiercely competitive market and to exclude suppliers of adulterated material. Adulteration is a serious problem in the aloe business, as it is easily carried out through the addition of excess water to gels or maltodextrin to powders.

High quality Aloe Vera gel, containing 0.5-1.3% solid material, currently sells for $1.25 and $1.95 per kg (wholesale price) as non-concentrated pure juice. Whole leaf extract (0.95-2.0% solid matter) is available for $2.00-4.00. Usually, 10x to 40x concentrated gel is supplied. Powder (200x concentrate) sells for $225-305 per kg for IASC-certified material. You can, however, get powder for $60, but it is likely to contain up to 60% maltodextrin. In the U.S., Aloe Vera gel as juice or an intermediary product is usually only shipped if it has been stabilized with preservatives. For example, liquid dietary supplements are permitted to contain up to 2000 mg/l of sorbates and benzoates, either individually or in combination. If the product is marketed as a non-alcoholic beverage, the levels of permitted preservatives are much lower (330 mg/l of sorbates and 150 mg/l of benzoates).

6. Country Selection

After finalizing the product for the business, firm has to select the country for internationalization of the business. Selecting country for the business is very tedious and important task for the internationalization of the business. The methodology adopted for the selecting the country would start from selecting the continent first and then narrowed down to the destination country.

The main points considered for the selection of the country are given below:

Availability of the factors of production like land, labour, capital, knowledge etc in abundance.

Suitable climatic conditions for the cultivation of the Aloe Vera.

Countries having comparative advantage in terms of having agriculture as a main source of economy as this will ensure the availability of supporting industries.


Government policies and interventions for that particular business domain which will ensure the availability of the imported tools and technology.

Low competition from existing Aloe Vera contract farming companies.

Favorable trade agreements with other countries for exporting processed agriculture products such as zero tariffs, nil import duty.

At broader level while considering all the above points we found that Africa is having the comparative advantage over all other continents. Choosing the target country from the Arica continent is also a tedious process because of the huge size of the continent and large number of countries i.e. 54.

For selecting country from the Africa continent we have filtered few countries on the basis of the “Ranking of ease of doing business” and “Factors of production”.

6.1 On the Basis of Ranking of Ease of Doing Business

In this selection criterion, firm has finalized the parameters of ease of doing business essential for the business. Firm has taken the help of the website http://www.doingbusiness.org for getting the ranks for different African countries on various parameters. Below table elaborates the parameters selected and their rankings for different countries.

Ranking parameters (Ease)

Ranking (As per doing business.org) Kenya Ghana Ethiopia Rwanda

Starting a business 25 20 37 1Getting electricity 35 6 7 2Registering property 36 4 19 1Getting credit 1 5 14 1Paying taxes 33 9 17 3Average Ranking 26 8.8 18.8 1.6

Table 2: Country Selection (On the Basis of Ease of Doing Business)

From this table firm has found that the “Average Ranking” of Rwanda was the best amongst all other countries on selected parameters and Ghana, Ethiopia and Kenya follows the Rwanda.

6.2 On the Basis of Availability of Factors of Doing Business

After narrowing down the country selection process on the basis of the “ranking of ease of doing business” firm has done the ranking of the above selected countries on the basis of the “availability of the factors of doing business”. Below tables elaborate the factors selected with their weightage for different countries.

Factors Weightage

Kenya Ghana Ethiopia RwandaRan

kScor

eRan

kScor

eRan

kScor

eRan

kScor

eLand availability 0.20 3 0.6 2 0.4 4 0.8 1 0.2

Labour availability 0.18 3 0.54 2 0.36 4 0.72 1 0.18

Government interventions 0.18 1 0.18 4 0.72 3 0.54 2 0.36

Ease of 0.15 3 0.45 3 0.45 4 0.6 1 0.15


transportExports Policies 0.16 2 0.32 4 0.64 1 0.16 3 0.48Climate 0.13 3 0.39 4 0.52 1 0.13 2 0.26Total 2.48 3.09 2.95 1.63

Table 3: Country Selection (On the Basis of Availability of Doing Business)

Firm has finalized the target country for business by having the best trade-off between the both the above rankings. While consolidating firm has found that the Ghana is at second position in the ranking of ease of doing business and at the first position in the availability of factors of doing business. Although Rwanda is at the first position in the ranking of ease of doing business but it lags way behind in the ranking of factors of doing business. Hence we have selected the Ghana as the country for doing our business.

7. Identifying of Ghana Using Michael Porter’s Diamond Model Tool

Porter’s diamond model explains the comparative advantage of nations. According to this model competitive advantage at both the firm and national levels originates from the presence and quality in the country of the four major elements explained below.

Figure 3: Michael Porter's Diamond Model

7.1 Firm Strategy, Structure and Rivalry

The firm initial strategy is to demonstrate the Aloe Vera cultivation on the firm’s acquired land in the natural way. The self grown Aloe Vera is planned to processed in the integrated complex in eco friendly way and will be exported to other countries. As agriculture is the main business in the Ghana, Cocoa and palm is the main crops cultivated by farmers. In the next phase of the firm’s strategy will be to motivate the farmers to grow Aloe Vera, which has higher yield and low cost of cultivation as it requires lesser insecticides and fertilizers.

As agriculture is the main business in the Ghana, the competition in this business is very high. The intense competition in the agriculture sector leads us for the continuous improvement in the cultivation techniques, tools, crops etc. In order to have the competitive advantage over the competitors we are also putting the processing plant for making the Aloe Vera extract along with the cultivation of Aloe Vera. Exporting processed extract of Aloe Vera instead of raw Aloe Vera will help us to reduce the transportation cost. The demand and price for final extract product is


higher than the raw Aloe Vera leaves. Intense rivalry also motivates us to use modern machinery and technology in the processing industry to gain the competitive advantage over our competitors.

7.2 Factor Conditions

The main factors of production for the agriculture business are land, labour and technology. Agriculture in Ghana accounts for about 40 percent of the national economy, three quarters of export earnings, and employs 60 percent of the labour force. Agriculture is the backbone of the economy and the sector has served as the main driver for the growth over the last two decades.

The factors of production required for agriculture i.e. land and labour are present in abundant and at also at very low rates. So both these factors will help us to have the competitive advantage over the other countries.

7.3 Demand Conditions

The above factor would not be applicable much in this context as the firm is exporting the final product to other country. Demand of Aloe Vera products in Ghana is not very high, but due to availability of cheap and large amount of factors of productions of agriculture, this country will give us the competitive advantage over other countries in cultivating and processing the Aloe Vera.

The demand of Aloe Vera is increasing at a huge rate in all over the world. The suitable climatic conditions and cheap factors of production will help us to gain the competitive advantage over other countries.

7.4 Related and Supporting Industries

As the agriculture is the main business in Ghana, there is a huge presence of the relating and supporting industries like agriculture equipments, processing equipments etc. Operating within a mass of related and supporting industries provides advantages through information and knowledge synergies, economies of scale and scope, and access to appropriate or superior inputs.

Michael Porter’s diamond model analysis indicates that the Ghana is the suitable destination for the Aloe Vera cultivation.

8. About Ghana

8.1 Geographic and Demographic Background of The Country

The Country : Republic of Ghana.

Capital : Accra.

Population : 18.9 Million 1

Population Estimate (2010) : 24.22 Million 2

Population Growth Rate : 2.4% per annum 3

Geographic Location : Latitude 4o44’N and 11o11’N;


Longitude 3o11’ W and 1o11’E

Coastline : 550 km long

Principal Agricultural Exports : Cocoa, Timber, Horticultural Products,

Fish/Sea Foods, Game & Wildlife

Principal Mineral Resources : Gold, Bauxite, Manganese and Diamond.

8.2 Agricultural Subsectors by GDP (%)

Figure 4: Agriculture Subsector by GDP (%)

Source: Ghana Statistical Service, Accra


8.3 Land Use, Vegetation, Soils And Climate

8.3.1 Land Use (Specific to Agriculture)

Figure 5: Usage of Agriculture Land

Sources: The Ghana Survey Dep’t and MOFA, Accra

Note: Percentages will not add up to 100, because percentages of areas under cultivation, irrigation and inland waters are of the Agricultural Land Area (ALA).

8.3.2 Land Use (General)

Figure 6: Usage of General Land

Source: Medium Term Agric. Development Program (MTADP) Document (1991). Ministry of Food and Agriculture, Accra.


8.3.3 Land Area by Region

Figure 7: Land Area by Region

Source: The Ghana Survey Dept. Accra.

Figure 8: Land Area by Region (%)

8.3.4 Agro-ecological zones

There are 5 main agro-ecological zones defined on the basis of climate, reflected by the natural vegetation and influenced by the soils. These are Rain Forest, Deciduous Forest, Transitional Zone, Coastal Savanna and Northern Savanna (Guinea and Sudan Savanna).


8.3.5 Rainfall Distribution by Agro-Ecological Zones

Figure 9: Rainfall Distribution by Agro-Ecological Zones

Source: Meteorological Services Department, Accra.

*Rainfall distribution is bimodal in the Forest, Transitional and Coastal Zones, giving a major and minor growing season; elsewhere (Guinea Savanna and Sudan Savanna), the unimodal distribution gives a single growing season.

8.3.6 Climate

Tropical eastern coastal belt is warm and comparatively dry, the south west corner is hot and humid, the north is hot and dry. Annual average temperatures range from 26.1 0C in places near the coast to 28.9 0C in the extreme north. Temperatures can move into the 40s though. The highest temperatures are recorded in the Upper East Region, specifically at Navrongo.

8.3.7 Topography

The topography is predominantly undulating, with slopes less than 1%. Even though the slopes are gentle, about 70% of the country is subject to moderate to severe sheet and gully erosion.

8.3.8 Vegetation

Figure 10: Vegetation Area wise

Source: Min. of Lands and Forestry, Accra


8.3.9 Soils

The soils have predominantly light textured surface horizons in which sandy loams and loams are common. Lower soil horizons have slightly heavier textures varying from coarse sandy loams to clays. Heavier textured soils occur in many valley bottoms and in parts of the Accra Plains. Many soils contain abundant coarse material either gravel and stone, or concretionary materials which affect their physical properties, particularly their water holding capacity.

8.3.10 Fertility Status of Soils in Some Regions

Figure 11: Fertility Status of Soils

Source: Soil Research Institute, CSIR-Kumasi

n.a.: Not Available

Note: See Appendix 11 for soil-crop suitability map.Conclusion

8.4 Population

Ghana has a population of about 24.65 million people and is one of the most populous countries in West Africa, second only to Nigeria. Since achieving political independence in 1957, its population has nearly tripled in size, from about 6 million to 24.6 million in 2010, and is expected to increase to 27 million by 2020.

The past rapid growth of Ghana’s population is an outcome of high fertility, which until recently remained fairly constant, and declining mortality. This combination of high fertility and declining mortality is also cause for the young age structure of the Ghanian population with 43 percent under 15 years of age and over 65 years. However, Ghana’s age structure is changing consequence of falling fertility.

It is estimated that the declining proportion of children and the increasing share of the working age group, between now and 2020 the number of children under 15 (now nearly eight million)


will remain virtually constant while the 15 to 64 year age group will nearly double to 18 million. It is estimated that there will also be a substantial increase in the elderly population (65 and over), to over one million, but their share of the total population will still be small.

8.5 Political Environment

The system of government practiced in Ghana is parliamentary democracy with separation of powers among the Executive, the Legislature and the Judiciary guaranteed under the constitution. The press enjoys a great deal of freedom which has nurtured it into one of the most vibrant in Africa. The 1992 constitution provides checks and balances which limit the powers of each of the Legislature, the Executive and the Judiciary.

The constitution also provides a Council of State, made up of experienced elders with proven character, to advise the President on national issues. The constitution has also established a number of autonomous institutions such as the Commission for Human Rights and Administrative Justice (CHRAJ), the Electoral Commission (EC) and Economic and Orgranized Crime office (EOCO). These institutions are there to facilitate good governance.

The Government is elected by universal suffrage. There have been five democratically elected presidents and parliaments since 1992 and the next presidential and parliamentary elections are due in December 2012.

Ghana has 10 Administrative regions and 169 district assemblies. Decentralization of governmental powers to the District Assemblies has been vigorously pursued for some time now and the process still continues.

Ghana is considered a beacon of hope for black Africa as it continues to champion the course of good governance as well as pursuing sound economic management.

8.6 Economic Environment

Ghana’s macroeconomic performance has been positive in recent times. This level of performance has been stimulated by the prevalence of relative peace coupled with private sector competitiveness; human resource development; good governance and civic responsibility. The sound macro-economic management along with high prices for gold and cocoa helped sustain GDP growth in 2008 and 2009.

For 2010, GDP growth was 4.1%, and the economy continues on its path of recovery, mainly backed by government’s expenditure in infrastructure and FDIs. The Government Statistician put provisional per capita GDP for 2010 at GH¢1,872.07 ($1,318.36) compared with GH¢1,069.89 ($753) under the old series, moving the country into the lower middle income bracket. The new series places Ghana as the third largest in ranking of GDP per person in the ECOWAS sub-region behind Cape Verde and Nigeria, and 21st in Africa.

On sectoral performance, the share of the agricultural sector in GDP under the new series saw agriculture, the dominant sector, now making up to 30.2% of the economy, lagging behind the services sector, which accounts for 51%. The industrial sector accounts for 18.6%. (Source: GNA 5 November 2010).


The economy is seeing significant progress which is underlined by the relative political stability and macroeconomic reforms. The improvement in the economy has brought about an influx of foreign investments of various forms as well as a gradual increase in middle-class professionals.

8.7 Trade and Investment Environment

Ghana offers a stable investment environment and as a result has witnessed steady increases in inward investment, topping USD 3 billion in 2012. Although Ghana’s investment environment is considered one of the strongest in sub-Saharan Africa, it is not without its challenges. Corruption remains a problem and investment procedures can lack transparency. Additionally, operational challenges associated with developing countries (weak infrastructure and an unreliable power supply) are present. In the resource sector, especially the new oil sector, disputes have occurred between companies and the government over revenue issues, but this is not an unusual occurrence in countries where new resource finds are made that trigger revisions to the existing fiscal regime.

8.8 Climatic Environment

The climate is mainly tropical. There are two main seasons; the wet and the dry seasons. Northern Ghana experiences its rainy season from March to November while the south, including the capital Accra, experiences the season from April to mid-November.

8.9 Legal Environment

Ghana offers a stable investment environment and as a result has witnessed steady increases in inward investment, topping USD 3 billion in 2012. Although Ghana’s investment environment is considered one of the strongest in sub-Saharan Africa, it is not without its challenges. Corruption remains a problem and investment procedures can lack transparency. Additionally, operational challenges associated with developing countries (weak infrastructure and an unreliable power supply) are present. In the resource sector, especially the new oil sector, disputes have occurred between companies and the government over revenue issues, but this is not an unusual occurrence in countries where new resource finds are made that trigger revisions to the existing fiscal regime.

8.10Educational Environment

Ghana has approximately 18,530 primary schools, 8,850 junior secondary schools, 900 senior secondary schools, 28 training colleges, 20 technical institutions, four diploma-awarding institutions, six public universities and over forty private universities. Most Ghanaians have relatively easy access to primary and secondary education. Ghana’s spending on education has varied between 28 and 40 percent of its annual budget in the past decade. All teaching is done in English, Ghana’s official language.

Ghana has a six-year primary education system beginning at the age of six. Under the educational reforms implemented in 1987, after the six year primary education, the students pass on to a three-year junior secondary system, all making up the basic education and this is followed by a three year senior high school system.

At the end of the third year of Junior High School, (JHS), there is a Basic Education Certificate Examination (BECE). Those continuing must complete the three-year Senior High School (SHS)


program and take the West African Senior Secondary Cerificate Examination (WASSCE) to enter university.

8.11Economic System

Ghana’s macroeconomic performance has been positive in recent times. This level of performance has been stimulated by the prevalence of relative peace coupled with private sector competitiveness; human resource development; good governance and civic responsibility. The sound macro-economic management along with high prices for gold and cocoa helped sustain GDP growth in 2008 and 2009.

For 2010, GDP growth was 4.1%, and the economy continues on its path of recovery, mainly backed by government’s expenditure in infrastructure and FDIs. The Government Statistician put provisional per capita GDP for 2010 at GH¢1,872.07 ($1,318.36) compared with GH¢1,069.89 ($753) under the old series, moving the country into the lower middle income bracket. The new series places Ghana as the third largest in ranking of GDP per person in the ECOWAS sub-region behind Cape Verde and Nigeria, and 21st in Africa.

On sectoral performance, the share of the agricultural sector in GDP under the new series saw agriculture, the dominant sector, now making up to 30.2% of the economy, lagging behind the services sector, which accounts for 51%. The industrial sector accounts for 18.6%. (Source: GNA 5 November 2010).

The economy is seeing significant progress which is underlined by the relative political stability and macroeconomic reforms. The improvement in the economy has brought about an influx of foreign investments of various forms as well as a gradual increase in middle-class professionals.

8.12Interest Rates and Inflation

Inflation has been on a downward trend since it peaked at 20.7% in June 2009. This fall in inflation, according to the Monetary Policy Committee of the Bank of Ghana, has been driven by both non-food and food inflation.

Inflation as at May 2012 was 9.3%. A single digit inflation rate of 9.44 %was achieved at the end of August 2010, which led to a corresponding drop in the prime rate by the Bank of Ghana to 13.5%. By February 2011, inflation which was at 8.58% in December of 2010 has fallen further to 8.39% as of July 2011.

The cedi has slipped against the dollar by 19% and has been fluctuating against major currencies since the beginning of 2012. It is currently experiencing some depreciation against major trading currencies, and the exchange rate is GH¢1.96: US$1. Expectations are that the local currency will appreciate against the major foreign currencies and this would improve foreign exchange risk for companies in Ghana.

8.13Employment

According to the latest population census (2010) Ghana’s population is estimated at 24.65 million. Constituted in this is an economically active population of about 10.33 million. (Source:


IMF, World Economic Outlook Database). The current minimum wage stands at GH¢ 4.48 per day and took effect from 9 February 2012.

Government has embarked on a wage policy reform by which all civil and public servants were expected to have be fully migrated by the end of June 2011 to the Single Spine Pay Policy. However, the process is still ongoing and a number of civil servants are yet to be migrated on to the scheme. The single spine pay policy, implemented by the Fair Wages and Salaries Commission, is a unified salary structure that places all public sector employees on one vertical structure, making sure that, jobs within the same job value range are placed within the same pay range. It is hoped that the policy would help to make the public services pay competitive for the attraction and retention of highly-skilled labor force.

Ghana has a strong and vibrant labor movement that is very effective in articulating the demands of workers. The various sectors of the economy are represented by sector labor unions that are affiliated to the national umbrella labor union called the Trades Union Congress (TUC). It is the TUC that negotiates with the Ghana government and employers association over wages on behalf of the workers.

8.14Foreign Direct Investment

According to UNCTAD (World Investment Report 26 July 2011), Ghana was the 7th largest recipient of foreign direct investments (FDIs) in Africa at the end of 2010. Investors brought into the country, an amount of $2.5 billion, representing about 5% of total FDI inflows to developing countries.

In the first quarter of 2012, the Ghana Investment Promotion Centre recorded a total of 95 new projects with a total estimated value of US$1.18 billion. TheForeign trade policies estimated value represents an increase of 67.98% compared to the value recorded in the same quarter of 2011.

The FDI component of the estimated value of the newly registered projects was US$979.85 million. This is a significant increase of about 178% over the recorded FDI value in the corresponding quarter of 2011. The USA with an FDI value of US$407.21 million ranks first and China remains the top source of FDI to Ghana in terms of the number of projects (Ghana Investment Promotion Press Release 10 May 2012)


Figure 12: Summary of Macro Economic Environment

9. Country Selection for Target Market

As per the business plan, in the initial phase, the firm will limit to producing only bulk Aloe Vera processed products, such as Aloe Vera Gel and Powder. These processed products shall be sold globally to the companies producing Aloe Vera based value added products and selling to consumers directly. This will enable company only to focus on few activities such as cultivation, processing and transportation of the processed bulk products to other market country. The firm will try to brand and position its bulk containers of Aloe Vera as ‘Processed from natural cultivation’ and ‘Very High quality product’ certified by Global quality accreditation companies such as The International Aloe Science Council (IASC). The firm will also ensure cost effectiveness of the end product as this will motivate the bulk buyer to import from us from Africa on long term basis.

The selection criterion of choosing the target country for selling the bulk product would be:

Countries where present cultivation of Aloe Vera is either negligible or insufficient to the present local demand

Countries where climate doesn’t allow for Aloe Vera farming as the climatic conditions are below freezing temperature not suitable for Aloe Vera cultivation

Countries, where Aloe Vera based products are in emerging condition and have a lot of scope in terms of end consumption and entry of new industries based on products utilizing Aloe Vera extract

Countries, having special advantage to trade with because of favorable trading treaties/ agreement

Advantages in terms of geographical location for exporting the bulk product such as logistics, mode of transportation such as Air /marine transportation and total transportation time permitting shelf life of the end product

The following continents / countries have some of the above advantages and can be selected for initial screening:

9.1 China

The Chinese government supports the development of a domestic aloe industry and welcomes foreign investment. This year, the Wanlu Biology Company in Yunnan was founded for $1.2


million. By using membrane separation technology, an annual output of 10,000 tons is planned. Foreign aloe companies have been encouraged to invest in China since. The People's Republic recently joined the World Trade Organization (WTO). Interest, particularly by U.S. companies, is reflected in the opening of a Pacific Rim office by the IASC in Hainan. China has an ideal environment for large-scale aloe planting. The Island of Hainan and the southwest province Yunnan are climatically favorable regions for aloe cultivation. As well as aloe pups-young aloe plants-supplied by U.S. farmers, there is a specific Chinese variety of Aloe Vera (Aloe barbadensis var. chinensis), which is multiplied by the use of micropropagation techniques. Today, the value of China's aloe industry is approximately $12 million but a ten-fold growth is anticipated within the next five to eight years. The Chinese demand for derivatives alone is estimated to reach $2.4 billion by 2010.This means that China will soon become one of the major aloe suppliers worldwide.

Selecting China as a target country for selling bulk Aloe Vera would have problems in terms of competing with the local farmers cultivating Aloe Vera. China has the most productive and cost effective labor force. The country would be the best destination for the firms only in to processing the Aloe Vera from cultivated leaves to product value added products. In next phase firm may invest in China for processing the Aloe Vera products. But at this stage, since the firm is in to selling the bulk Aloe Vera extract processed from self grown Aloe Vera leafs, going China for selling the Bull Aloe Vera would not make valuable business proposition.

9.2 Australia

Australia offers ideals conditions for growing Aloe Vera. Its soil is rich in minerals and trace elements. Its warm, sunny climate is devoid of frost and cold snaps. Presently a few companies in are cultivating Aloe Vera. Australia’s maxim of “clean and green”, Aloe Vera of Australia’s Aloe Vera plants are grown without chemicals, phosphates or pesticides – only seaweed fertilizers are used, and plants are watered with pure rain water.

Australian firms have adopted new extraction and processing methods, plus the meticulous testing of each batch for quality and purity, by an government accredited analysis laboratory to ensure optimum efficacy and quality.

Australian companies are presently supplying Aloe Vera products to major supermarkets, selected pharmacies and health food outlets. Export markets include Poland, Hong Kong, China, Korea, Pakistan, Greece, Vietnam Philippines Etc.

Aloe Vera of Australia Pty Ltd. product range is unique and comprehensive range of pure, natural, chemical free and safe health and beauty products for the whole family – products that contain a high content of Aloe Vera, plus pure essential oils and herbal and botanical extracts.

Australia consumer market is limited and the existing suppliers are presently exporting the excess production to other countries. This discourages us to export the bulk product to Australia.

9.3 Europe

Because of the climate, cultivation of Aloe Vera in Europe is confined to South Spain (mainland and the Canary Islands). However in Europe, the consumer trend toward natural products, organically grown and manufactured, has gained enormous popularity. Consequently, aloe derivatives, which have been organically certified, increasingly gain a competitive advantage on


the European markets. Small Spanish producers have realized this trend and supply raw material and finished products with organic labels. In addition to stabilized gels, they increasingly offer non-preserved intermediary and finished products, or fresh and frozen leaves and leaf fillets, the latter particularly to food manufacturers. Another strategy for differentiation being pursued by the global market leaders is the fractionation of aloe extracts, in order to supply branded ingredients with high potency as bioactives for functional foods and cosmetics.

Europe market is promising in terms of competing with the existing small producers mainly in south Spain. Due to climatic condition the Aloe Vera cultivation is very limited, which leads to high price of Aloe Vera bulks supplying to Aloe Vera based industries. However, quality and credibility might be the two important criterion for the local Aloe Vera related Industry, qualifying international Aloe Vera bulk producers to export their processed products in Europe. Firm quality certification with IASC will qualify to export the bulk Aloe Vera to European countries.

There are other comparative advantages while trading with European countries due to economic treaties with Ghana such as EPA and Cotonou Agreement. In initial scrutinizing the Europe is selected for exporting the final product.

10. Trade Agreement Between Ghana and EU

10.1Ghana and The EPA Negotiations

75 African Caribbean and Pacific (ACP) countries, including Ghana, are engaged in negotiations with the EU over possible Economic Partnership Agreements (EPAs). The new arrangements, which will succeed the trade provisions of the Cotonou Agreement, are expected to enter into force on 1 January 2008. EPAs are essentially free trade agreements (FTA), which will overhaul the entire way in which Ghana’s trade relations, are structured. Unlike previous EU-ACP agreements that provided unilateral preferential access to the EU market for Ghanaian exporters, EPAs require that Ghana reciprocate by liberalizing tariffs on EU goods entering its market, as well as agreeing to additional binding rules in new areas such as investment, competition, government procurement and services. This move to reciprocal liberalization will entail fundamental changes to all African economies and will have important implications for Africa’s development.

The stated aim of EU-ACP trade relations is to ‘foster the smooth and gradual integration of the ACP states into the world economy promoting their sustainable development and contributing to poverty eradication’. However, the structure and content of the EPA negotiations have raised concerns about the impact these agreements will have on Ghana and its efforts towards poverty eradication, regional integration and economic growth. It is therefore crucial that greater attention is paid to their development implications.

10.2The Structure of Ghana’s EPA With The EU

The precise structure of EPAs is still under negotiation between ACP and EU states. However, as envisaged by the EU, EPAs would include:

The establishment of free trade areas with ACP regions.


Liberalization of 90% of the total value of trade between the EU and the ACP, whereby the EU liberalizes 100% of its trade and the ACP liberalizes 80% of its trade. This would leave ACP countries, including Ghana, able to protect only 20% of the total value of their trade with the EU through the use of an exclusion list.

The implementation of liberalization in Ghana over a period of 10-12 years. Binding rules on investment, government procurement and competition policy.

As established under the Cotonou Agreement, EPA negotiations began in 2002 and are to be negotiated during a five-year preparatory period, concluding on the 31 December 2007. In the negotiations, ACP countries are split into six regional groups: West Africa; Eastern and Southern Africa (ESA); Southern African Development Community (SADC); Central Africa; the Caribbean (CARIFORUM); and the Pacific. Each of these groups is negotiating a separate EPA with the EU. Ghana is negotiating as part of the West African Group of countries, which includes Benin, Burkina Faso, Cape Verde, Côte d’Ivoire, Gambia, Ghana, Guinea, Guinea-Bissau, Liberia, Mali, Mauritania, Niger, Nigeria, Sierra Leone, Senegal and Togo. In total, these 16 West African countries are inhabited by 242 million people and form a diverse and acutely poor regional economic grouping. West Africa’s gross domestic product (GDP) per capita amounted to little over US$326 in 2004. Apart from Ghana, Nigeria and Cote d’Ivoire, all of the countries in the group are categorized as ‘least developed’ (LDC).

10.3The Structure of Ghana’s Trade

The structure and composition of Ghana’s exports is still dominated by the production of primary resources, which make up 85% of total merchandise exports. Cocoa and cocoa preparations are Ghana’s leading export, contributing 42% to the total export base. Other important exports include timber, gold, fish, fruits and vegetables.

Non-food industrial supplies dominate Ghana’s imports, including plant machinery, vehicles, raw materials and petroleum products (see figure below). Trade in services has been growing at a much faster pace than exports of goods, and accounted for about 20% of the country’s total exports in 2000.

Figure 13: Ghana's top export and imports, World (2005)

10.4Ghana’s Leading Trade Partners

The EU is by far Ghana’s largest export market, accounting for more than half of all exports. Ghana’s other major trading partners include the USA and China, which account for nearly 8%


and 5% of total exports, respectively. The share of Ghana’s exports to African countries stands at 8%. Both India and Japan each account for 4% of Ghana’s exports. These developed and developing country markets absorb the bulk of Ghanaian exports.

Figure 14: Ghana's export market (2005)

10.5The Cotonou Agreement

The Cotonou Agreement is the most comprehensive partnership agreement between developing countries and the EU. Since 2000, it has been the framework for the EU's relations with 79 countries from Africa, the Caribbean and the Pacific (ACP). In March 2010, the European Commission and the African Caribbean Pacific group have concluded the second revision of the Cotonou Partnership Agreement following a first revision in 2001. ACP-EU cooperation has been adapted to new challenges, such as climate change, food security, regional integration, State fragility and aid effectiveness.

10.5.1 Overview of ACP-EC Partnership Agreement (“The Cotonou Agreement”)

European Development Fund (EDF) is the main instrument for providing Community assistance for development cooperation under the Cotonou Agreement. The EDF is funded by the EU Member State on the basis of specific contribution keys. Each EDF is concluded for a multi-annual period.

The "Partnership Agreement between the members of the African, Caribbean and Pacific Group of States of the one part and the European Community and its Member States of the other part" was signed on 23 June 2000 in Cotonou, Bénin ? hence the name " ACP-EC Partnership Agreement" or "Cotonou Agreement". It was concluded for a twenty-year period from March 2000 to February 2020, and entered into force in April 2003. It was for the first time revised in June 2005, with the revision entering into force on 1 July 2008.

The Cotonou Agreement is a global agreement, introducing important changes and ambitious objectives while preserving the 'acquis' of 25 years of ACP-EC cooperation.

Compared to preceding agreements and conventions shaping EC's development cooperation, the Cotonou Agreement represents further progress in a number of aspects. It is designed to establish a comprehensive partnership, based on three complementary pillars:


development cooperation, economic and trade cooperation, and the political dimension.

10.5.2 The Objectives of The Cotonou Agreement

The partnership is centered on the objective of reducing and eventually eradicating poverty consistent with the objectives of sustainable development and the gradual integration of the ACP countries into the world economy (Art. 1 of Cotonou Agreement).The fundamental principles of the Cotonou Agreement

equality of the partners and ownership of the development strategies; participation (central governments as the main partners, partnership open to different

kinds of other actors) pivotal role of dialogue and the fulfillment of mutual obligations differentiation and regionalization

10.5.3 The Actors of The Cotonou Agreement

The actors of cooperation are: States (authorities and/or organisations of states at local, national and regional level); Non-state actors (private sector; economic and social partners, including trade union

organisations, civil society in all its forms according to national characteristics).

10.5.4 The Implementation of The Cotonou Agreement

The 10th EDF covers the period from 2008 to 2013 and has been allocated 22.7 billion; it was established between the EU Member States by Internal Agreement. In comparison to the 9th EDF which covered the period 2000 to 2007, the initial amount available has increased by almost 65 % (the 9th EDF was initially allocated ? 13.8 billion for 2000-2007).

The cooperation with the ACP States funded from the EDF is complemented by development cooperation funded from the EC budget, through budgetary instruments - the Development Cooperation Instrument, the Instrument for Stability, the European Instrument for Democracy and Human Rights and the European Humanitarian Aid Instrument.

11. Land Acquisition in Ghana

11.1Fertile Land and Water Resources

Ghana’s vast tracts of fertile and inexpensive land with excellent water resources are extremely attractive to investors interested in commercial farming of maize, soy and rice. Given that only 16% of Ghana’s arable land is currently under agricultural production, there are significant supplies of land resources available for foreign investors interested in establishing commercial farm operations. The process for acquiring land can be relatively cumbersome, time-consuming and complex for outside investors to navigate. However, foreigners are permitted to lease land for up to 50 years under a registered leasehold title.

11.2Types of Land

In Ghana, the Constitution identifies three types of land:


Public lands controlled by the government Stool or skin lands controlled by traditional authorities on behalf of communities family or private lands controlled by individuals or family clans Foreigners may be able to acquire leasehold interests in public land directly from the government for very large tracts of land, but public lands represent only 20 percent of land in the country. Family or private lands are often not the most optimal in terms of size, fertility and access to water.

11.3Key Points in Land Acquisition and Negotiation

Investors should initially focus on ensuring that the land in which they are interested will not be contested by neighboring families or chieftaincies. Investors or their representatives cannot be seen on the property until after they have met with the appropriate traditional authorities and the regional council to obtain their blessing and approval to proceed with exploration of the land and due diligence measures. Because most land available to investors is fallow, specific boundary lines are not always well established, thus care must be taken to identify any and all claims at the outset. Investors will also be interested in securing transferable rights and negotiating leases that are sufficiently long-term to justify the investment necessary to establish commercial operations.

Equally as important as the terms that the investor is seeking are the terms that the investor is willing to offer to the community. The traditional authorities act as stewards of the land on behalf of the community. As a result, the negotiation process must involve all stakeholders, including the chiefs, elders, and members of the community. This helps to ensure that a lease agreement is not challenged in the future for failure to adequately compensate the community for the use of its land resources.

Typically, communities are most interested in a combination of benefits from a commercial operation. In addition to direct employment opportunities, farmers desire access to better technologies and techniques brought by a commercial farm. Farmers also value access to machinery for hire, post-harvesting services, and market linkages from the improvement of transportation services or the direct purchase of product by the commercial operator. Any investor interested in securing a long-term lease should be willing to enter into a mutually-beneficial, long-term arrangement with the local community in order to ensure the best possible opportunity for success.

12. Integrated Complex for Aloe Vera Cultivation and Processing

12.1Project Location

Prakritik Agri Global Food Products Limited, Asesewa Ghana


Figure 15: Sample Project Site

The firm will acquire about 500 hectare land on lease in Asesewa, which is a situated in eastern part of Ghana and located about 150 Km from the capital Accra. The site is about 120 km from the port of Tema. This gives location advantage in terms of cost effective logistics for the end product and advantages related to resource availability.

12.2Proposed Business Legal Status

The said project can be a sole proprietorship or a partnership and even it can be foreign participation under the Ghana Investment Promotion Centre Act 1994 (Act 478) to be registered with the Centre. The selection totally depends upon the choice of the entrepreneur. This prefeasibility assumes the legal status of a sole proprietorship/partnership as this does not involve heavy investment. Moreover less legal requirements and costs are involved in forming, administration and running the sole proprietorship or partnership business. Lower tax rates for this type of business legal status would be an added advantage.

12.3Project Capacity and Rationale

Selection of the project size is really critical. After doing thorough market research, it is decided that the proposed feasibility will be based on the initial processing capacity of 1,000 Tons aloe leaves per day with the production of Aloe Vera powder (or equivalent) of 10 Tons per day. As it is evident from rise in the pharmaceutical and cosmetic industry that there is a huge demand of aloe products in the domestic market, a sizeable production is required.

12.4Proposed Product Mix

Single Strength Gels Liquid Concentrates Whole Leaf Concentrates Aloe Oil Extracts Aloe Specialty Products Aloe Vera Powders

The firm will obtain quality certification of all above products from The International Aloe Science Council.

12.5Aloe Vera Integrated Complex

The integrated complex of 500 Hectare will comprise of the following division:


Aloe Vera Farms: 450 Hectare land will be allocated for Aloe Vera cultivation. Aloe Vera shall be cultivated by adopting natural farming techniques and will be taken certification to ensure the credibility amongst the customers.

Processing Plant: 5 Hectare Land shall be developed for Processing Plant. The entire complex shall plan for the present capacity and provisions for future expansion. Safety and environment would be the prime concern while construction and operation of the plant.

Waste Treatment: The project is committed to produce adopt zero pollution. All the discharge water streams shall be treated and then discharged to the river bodies. The process effluent and Aloe Vera waste pulp shall be dried and then used as fuel to produce steam and electricity

Waste and Agriculture Biomass based Captive Power Plant: The waste pulp after juice extraction shall be dried and used as fuel to the boiler to produce high pressure steam, which will be fed to the turbine for power generation. The balance fuel requirement for power generation shall be met by Agricultural biomass such as rice husk etc which shall be procured from the nearby region. The entire plant shall be independent in terms of power requirement which includes power required for plant processing and irrigation etc.

12.6Aloe Vera Cultivation

Aloe Vera will be grown using ecologically and environmentally responsible procedures. The firm shall be registered as a Food & Cosmetic manufacturer with the Ghana Food & Drug Administration. It shall be also certified by ISO.

ISO 9001: 2000 Quality Management System

Completed QMS compliance will be adopted which will allow the firm to register & sell products globally, while providing a system for continuous quality and operational improvement

Figure 16: Sample of Aloe Vera Cultivation

12.6.1 Aloe Vera Cultivation

Aloe Vera grows to the height of 1½ - 2½ ft. Its leaves are long and thick, juicy with a wheel like phylotaxy. The two sides of the leaves have thorny structure with a thorny tip. The inner


substance of the leaves is jelly like, with bad odour and bitter in taste. The length of the leaves ranges from 25-30 cm, while the breadth ranges from 3-5 cm. It is normally not propagated through seeds. Vegetative propagation is easy and convenient.

12.6.2 Soil and Climate

Aloe Vera is found to grow in hot humid and high rainfall conditions. It is grown in all kind of soils but well drained soil with high organic matter, is most suitable. It grows well in bright sun light. Shady conditions results in disease infestation it is highly sensitive to water stagnation. Therefore, well drained high land should be selected for its cultivation. A rainfall ranging from 1000 – 1200 mm is ideal for Aloe Vera cultivation. Seedling Preparation and Planting Since it is difficult to grow Aloe Vera from seeds, seedlings are normally raised from roots of the plants. Sucker itself can be used as seedlings as in Banana. Rainy season is ideal for sucker plantation. A spacing of 1.5 x 1 ft, 1 ft x 2 ft or 2 ft x 2 ft is followed. Land Preparation About 2-3 ploughings and laddering are done to make the soil weed free and friable. Land leveling is then followed. For controlling termites problem, 350-400 kg Neem Cake / ha may be applied.

12.6.3 Irrigation and Inter-culture

After 40 days or so weeding and earthing up are done. Earthing up is also practiced after top dressing of fertilizer. Aloe Vera is slightly tolerant to drought, but very sensitive to water stagnation. Therefore, proper drainage is more important than irrigation. As per need light irrigation during drought is enough.

12.6.4 Plant Protection

Aloe Vera is infested by various insets and pest’s Special care is needed for their control in medicinal plants like Aloe Vera where the juices of the leaves are directly taken as medicine. Clean cultivation, intercultural operation, regular and need based irrigation, application of adequate organic manure, treatment of suker before planting, and cultivation of Aloe Vera in sunny conditions are conducive for healthy growth of the Aloe Vera crop. Use of organic source of plant protection materials like raw garlic juice, neem oil (10,000 ppm) 2-3 ml / lit, tobacco extractant 20 ml / lit gave reasonably good result.

12.7Processing

12.7.1 The Stages of the TTS (Time, Temperature and Sanitation) Aloe Process

Processed Aloe Vera, derived from the leaf often involves heating, dehydration and filtration. Processing may cause irreversible degradation of the polysaccharides and loss of other bioactive constituents which results in changes to the physiological properties of the ingredient and benefits of the finished product. The loss of activity may, in some cases, be the result of enzymatic activity after the leaf is removed from the plant, the use of excessive heat, prolonged exposure to heat or microbial contamination prior to stabilization of the product. To ensure the highest quality Aloe Vera ingredient it is processed based on time, temperature and sanitation to eliminate sources of degradation in processing. The overall timing of TTS production phases is extremely critical and important for the end product quality.


12.7.2 Leaf Harvesting and Handling

Timing and sanitation begin with early morning harvesting and careful removal of the leaf from the mother plant. Proper extraction of the leaf leaves the base of the leaf intact and sealed from possible introduction of microbes. Microbial contamination can significantly degrade the vital components of aloe that must be retained for maximum benefit in a finished product. The other major source of microbial contamination comes from the rind of the leaf. To prevent contamination during processing, the leaves are handled very carefully to prevent puncture of the rind and soaked in a food grade sanitizer which effectively reduces microbial levels in preparation for the next step in aloe processing.

12.7.3 Pasteurization

Biological activity remains essentially intact when aloe is pasteurized by the high temperature short time (HTST) method. This method is similar to that used in the pasteurization of the milk. Extended periods or higher temperatures will result in greatly reduced quality.

12.7.4 Concentration

The product obtained using the harvesting, sanitation and pasteurization methods can be concentrated under vacuum without the loss of quality. The concentration operation must be conducted at temperatures below 50°C with continuous flow. Higher vacuums and temperatures will cause activity loss, as will extend concentration times.

12.7.5 Vacuum Dehydration Technology

Vacuum dehydration technology is a latest technology that significantly improves the retention of heat labile nutrients. This low temperature-short time (LTST) drying method quickly and gently stabilizes Aloe Vera with the optimal balance of heat and time. Academic studies also show that the flavor and color of the product is improved due to low oxidation and that it has improved physical characteristics such as solubility and flow ability. Vacuum dehydration is a green technology; energy efficient and environmentally friendly.

12.7.6 Packaging and Dispatching

Packaging is done in marine safe container suitable to export to other countries through marine transport for different products.


Figure 17: Aloe Vera Processing Plant

13. Project Pre-requisitions and Financial

Aloe Vera Cultivation : 1000 Tons per Aloe Vera Leaves Cultivation

Plant Capacity : 10 Tons/day (or equivalent)

Land Requirement : 500 hectares (450 Hectares for Aloe Vera cultivation + 5 Hectares for Processing plant, waste treatment and Captive Power generation)

Land Lease Cost : 750 USD / Year (on lease for 25 years)


Plant & Machinery Cost : 4.8 million USD

Total Infrastructure Cost : 700,000 USD

Office equipment requirement : 5,000 USD

Agricultural Equipment cost : 400,000 USD

Other Misc. Investment : 100,000 USD

TOTAL CAPITAL INVESTMENT : 6.01 million USD

No. of operating days in a Year : 360 day

Aloe Vera Cultivation Cost : 500,000 USD /Year (including seeding, labor and organic fertilizer and insecticides, diesel etc)

Final Product packaging, forwarding : 900,000 USD/Year

to European countries

TOTAL COST OF SALES : 1.40 million USD per Year

Revenues from Variety of Aloe Vera Products

Average Selling Price : 2500 USD /Ton

Total Revenues generated : 11 million USD (Conservative side 60% of the total revenues)

TOTAL PROFIT BEFORE TAX PER : 9.6 million USD

YEAR

Pay Back Period : Less than a Year

IRR : 0.65


14. Appendix

Figure 18: Dominant soil map

Bibliography

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