The growing business: New initiatives come together to boost agribusiness

Agribusiness is considered to be one of the most promising subsectors in Ghanaian industry. However, save a few basic processing activities, such as in palm oil production, little is being done on an ongoing commercial scale. In an environment where so many industrial players rely on imported raw materials and semi-finished goods, agribusiness stands out because of the many crops well suited to Ghana’s agricultural lands that could help reduce reliance on imports.

Standing in the way of agribusiness success, however, are several factors common across economic sectors in Ghana, such as transportation bottlenecks and weak access to credit. Still, the potential gains far outweigh the challenges, as some multinationals have already realised. For example, Swiss foods company Nestlé uses Ghana as a manufacturing base to supply the West Africa region. “Ghana has a number of attributes that make it an attractive location for investment in agriculture and agribusiness,” according to a 2012 World Bank report outlining its Commercial Agricultural Policy, which it helped to fund along with the US Agency for International Development. “While food prices have fallen from their recent peaks, they are nevertheless expected to remain above historical levels into the medium term.”

CONSTRAINTS: The constraints start with basic inputs. Agriculture in Ghana is undertaken almost entirely by small-scale operators. This is usually subsistence farming, and these growers often lack access to extension services, irrigation, high-yield seeds and heavy machinery. Government support includes ploughing services and subsidised fertiliser, but these programmes are not generally effective (see Agriculture chapter).

Post-harvest losses are 30-40%, according to the Ministry of Agriculture. This is due to several factors, which require investment in general, and specifically, agricultural infrastructure: lack of storage facilities and preservation systems, lack of agribusinesses as intermediary buyers and lack of marketing. Another issue is the difficulty farmers face in securing finance.

EXCEPTIONS TO THE RULE: Certain products stand out as exceptions to general constraints and conditions in Ghana. In the cocoa industry, for example, the state values the small size of producers as domestic cocoa production is considered to be of a higher grade in part because the beans are farmed on a small scale, which allows for post-harvest drying techniques superior to those of larger operations. Since cocoa is the second-biggest export in Ghana, an infrastructure network has been developed to service the sector, including a state agency for buying, exporting and marketing the crop, called the Ghana Cocoa Board but commonly known as Cocobod, and middleman companies that act as go-betweens for farmers and Cocobod.

POLICY RESPONSES: Ghana’s government knows its problems and has come up with a long list of programmes to address them: donor-funded schemes for credit, helping to pay for and deliver inputs, and training, among others. Results have thus far been mixed. The aforementioned Commercial Agricultural Policy seeks to enlist private sector investors, existing farmers and farming communities, donor-funding agencies and the public sector. This approach includes establishing a land registry to overcome land acquisition obstacles, and model projects in two forms: an out-grower scheme in which existing farmers get training from an investor and sell it the output, and an equity scheme in which a large-scale farming operation gives an equity stake in itself to land owners in return for the use of that land. The programme proposes public-private partnerships in areas in which private investment is less likely, including enhanced data collection, irrigation, land clearing, credit access and storage facilities.

Though there are some notable examples involving private-sector actors, such as rice grower GADCO, participation from private investors is uncommon. However, some advancements are slowly being made, such as the recent plan announced in May 2012 to revive a government sugar factory closed in 1983; the potential investor is India’s Ministry of Trade and Industry.

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The Report: Ghana 2012

Industry chapter from The Report: Ghana 2012

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