OBG talks to Anthony Pile, Founder and CEO, Blue Skies

Interview: Anthony Pile

How do Ghana’s fiscal and currency challenges impact the outlook for agricultural producers?

ANTHONY PILE: The changing fortunes of the currency against hard currencies aren’t necessarily a bad thing. For example, during the period when the currency was being managed against the dollar, it suited importers as it made imported materials artificially cheaper. However, this also caused people to think twice about whether these materials could be produced in Ghana. As an exporter, it was difficult to bring back hard currency and use it efficiently in an economy where prices were increasing more than the local currency was depreciating.

When you use your reserves to support the currency, you help importers. There are some political benefits to this. But think about what Ghana needs – growth of agribusiness, more industry and the ability to earn hard currency. To achieve all this we need an exporting agricultural sector. At a time when the value of the currency is falling – due to internal factors as well as external factors, like the tapering of quantitative easing in the US – exporting industries are better off. Intelligent exporters will be selling as much as they can.

When the currency fluctuates, it is finding its natural value, so we shouldn’t worry. What we should worry about is industry. If you get industry going, you can take advantage of these circumstances. We need to get the economy on track for the post-oil era. There are benefits to be gained from a weakening currency.

How do you view the efficiency of contract farming versus other governance mechanisms?

PILE: A small farmer is anything up to 2 ha. A large farmer can be anything up to 2000 ha. The latter tends to have a management structure harnessing its resources to deliver an efficient operation, using chemicals and large earth-moving equipment. In smaller organisations, you will find the owner also working as the manager and farmer, with little or no mechanisation. A farmer with a larger plot supplies multiple partners and is less likely to respond to feedback and criticism from a single offtake partner; prices and terms are often non-negotiable. With a smallholder, it’s more of a partnership.

The key to managing variations in quality between disparate smallholders is to hold roundtable discussions over any concerns facing either the farmers or their processing partners, be it crop disease or salaries. At a time of currency depreciation, it is also important to pay in hard currency equivalents.

In which parts of the value chain have you seen lenders most eager to participate?

PILE: We try to get banks to lend to farmers. In the past year, we have seen two or three banks demanding a full set of financials from farmers in our network. A processor like Blue Skies can guarantee the offtake and help them meet the specs through the help of our in-house agronomists. So what is the risk? The banks want the offtaker to guarantee the loan as well, which is unreasonable. Support from the Export Trade, Agricultural and Industrial Development Fund is widely acclaimed, but it only brings the interest rate down to 12%. Pineapples won’t be ready for between 13 and 14 months, so farmers will struggle to manage with loans with interest rates of 12%; therefore they need more help. Instead, the banks cater mostly to the processing portion of the value chain. In our experience, the Nigerian banks have been particularly responsive.

Why is it important for Ghana to foster a new generation of agricultural entrepreneurs?

PILE: There was once a time when students were actively encouraged to develop agricultural skills; however, now it is usually the disobedient ones who are sent to work on farms. This creates a negative image of agriculture that we need to work together to change. It isn’t bad to get your hands dirty; it can be rewarding not only on a personal level but also on a financial level. Engaging younger farmers and agro-entrepreneurs in our industry is important if we want to decrease the rate of urbanisation and encourage rural development.