Closing the gap: The rising cost of rice imports is driving change in domestic production

Rice production in Ghana has fallen under intense scrutiny in recent years, as the government works to reduce its agricultural imports by raising domestic production. However, as consumer patterns shift and rice consumption grows, the gap between local demand and supply has risen. Heavy import demands for rice cost the country millions annually, despite domestic capacity for Ghana to meet its rice needs.

The Ghana Investment Promotion Centre (GIPC) has been campaigning to increase outside investment in rice farming, and a number of new government initiatives aimed at improving rice production have given the sector a promising future. Though irrigation difficulties, post-harvest inefficiencies, and misperceptions regarding the nutritional value of local rice have hindered domestic growth, increased demand and rising rice prices should help local farmers leverage yields and expand operations.

IRRIGATION: Rice farming has grown steadily in Ghana in the last decade, mainly in the Volta Region, where a network of waterways offers adequate water supplies for new paddies. Rice producers in Ghana fall under three agro-ecological areas: irrigated, rain-fed lowland and rain-fed upland. The rain-fed lowland system covers 78% of production area, the irrigated system covers 16% and the upland system covers 6%.

In 2011, 197,000 ha of land in Ghana was allocated to rice production, compared to just 115,000 ha in 2000, with an average annual growth rate of 17.64%, according to Ministry of Food and Agriculture (MoFA) data. Although output has fluctuated over the past 13 years, it has shown substantial increases from a total yield of 253,000 tonnes in 2000, rising from an all-time low of 111,000 tonnes in 2007 to reach 481,134 tonnes in 2012. Of this, about 275,000 tonnes is milled and fit for human consumption each year, according to the US Department of Agriculture (USDA).

MoFA data shows that rice consumption has almost doubled since 1985, when per-capita consumption was 12.7 kg per person per year. As of 2010 the average Ghanaian consumed 24 kg of rice each year, creating a heavy import demand for the country. The USDA raised its demand estimates for Ghana by 200,000 tonnes in January 2013, projecting the country will import 600,000 tonnes of milled rice this year.

PRICE RISE: Rice costs are rising, according to the MoFA, and imported rice is particularly expensive. In January 2012 an 84-kg bag of locally produced paddy rice cost GHS66.20 ($34.10), but by December it had jumped by 24% to reach GHS81.86 ($44.60). This is still low compared to import prices, which rose from GHS97.60 ($50.10) for a 50-kg bag in January 2012, to GHS117.85 ($60.60) in December 2012, a 21% increase. Comparing the costs, local rice prices sat at GHS0.97 ($0.49) per kg in December 2012, compared to GHS2.36 ($1.20) per kg for imported rice. According to the ministry, rice imports cost the country an estimated $450m annually.

Production issues are the main challenge for rice farmers. According to the MoFA, the average rice yield in Ghana is 2.4 tonnes per ha – much lower than the 6.5 tonnes per ha of achievable yield under optimal conditions. This is due in part to post-harvest losses, which account for 30% of crop loss in Ghana, with infrastructure deficits, particularly in relation to storage and irrigation, also contributing to low production.

GROWTH PLANS: Under the government’s 2009 National Rice Development Strategy (NRDS), the MoFA hopes to double rice production by 2018. Policy initiatives of the NRDS include adoption of a value-chain approach to agricultural development, improved land and water management practices, capacity building to boost productivity and meet international standards, strong partnerships with the private sector, improved access to government services and enhanced support for commercial farm ventures.

The government accelerated a number of rice programmes in 2012, including its provision of 20,000 kg of improved pest- and disease-resistant high-yield seeds to maize, rice and soybean farmers, although the specific breakdown of seed allocation remains unclear. Under the Agriculture Machine Subsidy Programme, rice combine harvesters were made available at Agricultural Mechanisation Service Centres (AMSECs) across 64 districts, with training provided to 400 operators – though the extent to which farmers were trained was not clear at the time of writing. In 2013 the MoFA will provide 50 rice threshers to small-scale rice farmers at its network of AMSECs.

Irrigation improvements will allow for easier establishment of rice paddies in Ghana, and the government is working on a number of ambitious projects. Most notable, the Accra Plains Irrigation project will irrigate 11,000 ha of land when complete, and target a 60:20:20 mix of agribusiness, large-scale farms and smallholder farmers. The MoFA also plans to rehabilitate 11 dams across the country in 2013, particularly in the Volta and Greater Accra regions, where the majority of rice farming in the country takes place.

COURTING INVESTMENT: Indeed, private sector involvement will be a key avenue to raise rice production in Ghana, and public-private partnerships have so far shown promising results. In 2009 the government launched a five-year Project for Sustainable Development of Rain-Fed Lowland Rice Production in partnership with the Japan International Cooperation Agency to promote local production and improve the economic conditions of small-scale farmers; the project is coming to the end of its funding, and is set to finish in 2014. In April 2013 American multinational AVCO Agri Company acquired 500 ha of land in the Volta Region for rice cultivation, announcing plans to invest some $500,000 in the next three to five years.

The Global Agri-Development Company (GADCO), which is leading the way for rice production in the Volta Region, provides a successful rice-farming story so far. In 2011 GADCO signed a 30-year lease on 1000 ha of land in the Volta Region to develop high-quality rice crops. Today GADCO produces two annual harvests over 1600 ha of land, and plants new paddies each month. Established by two investment bankers with the help of Brazilian agricultural experts, GADCO has shown success where other companies and development agencies have failed. High capital demands are the most common causes of rice farm failures, but GADCO sourced $15m in its first investment phase, delivering 40% returns to its investors.

The next phase will involve a yet-to-be-announced Latin American partner and $100m in investments to be spread across five additional African countries.

In April 2012 Fifi Kwetey, then-deputy minister of finance, announced that GADCO’s rice farms will add 20,000 tonnes of high-grade rice to overall output in the next several years, with the company planning to expand the project to 4000 ha by 2016, making it the largest rice producer in the Volta Region.

CHANGING ATTITUDES: There is a view in Ghana that imported rice, particularly perfumed varieties such as jasmine or basmati, is of higher quality and offers a better nutritional value. At the MoFA, deputy head of research and policy Nicholas Neequaye said changing that perception will be critical to growing Ghana’s domestic rice market. “We have had some quality issues compared to imports from Thailand in the past, but practices have improved and I can say with confidence that our local varieties are more nutritious than polished imports,” Neequaye told OBG.

At Olam, one of the largest rice importers in Ghana, senior vice-president for West Africa Amit Agrawal noted the current quality of its marketing. “Local rice is not low-quality; it’s just not backed by a commercial business model. You need a high-quality mill, packaging, branding and credit before you can access the market. For local producers to access the market, they need an investment capability that is not within their reach,” Agrawal told OBG.

RISING STANDARDS: In April 2013 the Ghana Rice Interprofessional Body announced plans to issue certification logos for rice grown domestically, in an effort to boost quality and reduce import dependency. Unique logos on domestically grown rice are expected to help farmers improve their practices and quality.