Interview: Peter Ndegwa
In what ways has consumer spending in Ghana evolved in recent years?
PETER NDEGWA: Ghana’s growth in the past five years has given us confidence that consumer purchasing power, and demand for premium brands in particular, will continue to grow in the medium term. Local sourcing has allowed companies to provide feasible alternatives for all categories of customers, and allows firms to maintain a competitive pricing structure.
How feasible is local sourcing in Ghana?
NDEGWA: Although many programmes to develop upstream production exist to boost yields, there have been challenges with efficient distribution of inputs. It is important for the government and private sector to work together and provide farmers with access to the best resources. Ongoing programmes for seed and fertiliser experimentation could help us discover which species of non-traditional crops would be most suitable for Ghana’s climate. It is important to improve access to credit must by small-scale farmers, who should be linked to potential off-takers to increase efficiency in Ghana’s value chain. This would allow for better collaboration to boost yields while assuring lenders that loans will be paid back.
How would you assess the benefits for producers who have chosen to source locally?
NDEGWA: We continue to monitor measurable benefits from the tax concession. It is still early days, before the benefits of local sourcing start to flow, as we are in the investment phase – so costs are higher and therefore we need sustained incentives to continue investing in local sourcing which is valuable in the long term. Over the past four years we have increased local sourcing from 10% to 48%. However, this is still far behind other sub-Saharan markets, where local sourcing exceeds 80-90%. Once Ghana’s value chain for locally manufactured products reaches these levels of local sourcing – which is likely to happen by around 2020 – it will improve the costs of doing business. Indeed, currency depreciation made locally sourced sorghum the more economical choice. At the same time, we would estimate that further improvements in the domestic value chain would reduce the cost of manufacturing by 20%. While the benefits have not been immediate, I am confident that local materials will yield stronger margins for agricultural manufacturers over the long term.
What measures can Ghana take to increase its appeal for potential investors in agro-industry?
NDEGWA: An urgent upgrade to infrastructure, and educational awareness, will promote investment in Ghana’s agro-industry. Also, when farmers are equipped with improved technical knowledge and the best agronomic practices we can expect to see increased yields and better-quality goods to supply local demand. Moreover, many farmers cannot reach buyers because of poor road infrastructure. Supply could be made more adequate by easing access to remote, small-scale farms. There is great demand for local products among Ghanaians. Government is therefore encouraged to continue creating an environment for industry and to promote the agricultural sector as an engine of sustainable growth.
What is the most pressing challenge facing Ghanaian manufacturers at present?
NDEGWA: The biggest issue is the ongoing power shortage. Using local agricultural products such as cassava to provide starch is sustainable as long as it can be processed quickly. 40% of cassava goes to waste in less than 72 hours if it is not processed properly. Yet with the current power deficit, it has been difficult for a processor like the Ayensu factory to operate at capacity, with high costs for all parties involved. More power must be brought onto the grid.