The government of Ghana targets agriculture sector to lower dependence on imports

Although oil and gas have been the focus of domestic economic headlines over the last decade, agriculture remains a key pillar of the economy. It employs almost half of the national labour force, and a key agricultural product – cocoa – is one of the country’s top-three export commodities (see analysis). Upon assuming office in January 2017 President Nana Akufo-Addo’s administration continued to highlight one of its primary campaign platforms: jumpstarting the agriculture sector. This will require steps to further bolster exports and provide for more reliable domestic consumption.

In its “Africa Agriculture Status Report” (AASR) 2017 “The Business of Smallholder Agriculture in Sub-Saharan Africa”, Alliance for a Green Revolution in Africa – a Bill and Melinda Gates Foundation-funded agriculture organisation – named Ghana as one of the countries in sub-Saharan Africa that has made significant strides in transitioning from a subsistence-farming society to a more commercially focused one: less than 10% of farms are now subsistence oriented. Indeed, the share of land held by small-scale farmers – those with fewer than 5 ha of land – has declined to 22%, while medium-scale farms of 5-100 ha make up roughly 32% of farmland.

While challenges such as low mechanisation and difficulties in land access remain, the Ministry of Food and Agriculture (MoFA) and other stakeholders will be building on this strong foundation in order to improve sector output and exports in coming years.

Sector Status

Agriculture remains a key sector, employing 45% of the population. However, expansion has slowed in recent years, shifting from a growth rate of 5.7% in 2013 to just 0.04% in 2015, according to the World Bank. At the end of 2016 the sector accounted for 18.9% of GDP, down from 25.2% at the end of 2015 and 28.2% at the end of 2014, according to the Ghana Statistical Service (GSS). This translated into a total added value of GHS29.6bn ($7.1bn) in 2016, with over 76% of this derived from crops, and the remainder coming from livestock, fishing (see analysis) and forestry.

Agriculture is expected to contribute proportionally less to GDP as other growing industries – notably oil and gas, and accompanying services – take up a bigger piece of the pie. A lack of market understanding, poor infrastructure and value chain management, and insufficient farming inputs and extension services have also contributed to the sector’s decline in performance.

Cereals

Despite the general sector slowdown in the past few years, the cereals segment has registered growth. According to the UN Food and Agriculture Organisation (FAO), in 2016 cereal production totalled 3m tonnes, up 8% compared to 2015 as well as the five-year average, due in part to higher rainfall in the 2016 season. Rice production increased by 17%, while maize output grew by 6%. This trend has continued in 2017, and the government has set ambitious targets to boost medium-term maize production by 30% and rice production by 49% under the Planting for Food and Jobs scheme which is set to be rolled out by the end of 2017.

Poultry & Livestock

Chicken accounts for the majority of poultry meat consumption, and other products include guinea fowl, duck and turkey. A 2017 report from the US Foreign Agriculture Service (FAS) estimated that domestic broiler meat production would increase by 6% to 31,800 tonnes in 2017. However, this would meet less than 25% of demand, which grew from 161,000 tonnes in 2016 to 175,000 in 2017. This means imports – primarily from the US, Brazil and the EU – will likely rise by 12,700 tonnes to 143,000 tonnes.

A key issue contributing to rising imports is that the increasingly middle-class, urban consumers prefer imported frozen chicken products as they are 30-40% cheaper than those produced locally, and they are also pre-cut and processed. Domestic poultry processors still lack the equipment to produce chicken cuts preferred by most consumers. This represents an untapped market. “Many people in the country are working and do not have time to take so many steps to prepare their meals. They want something that is ready, so if we are able to provide that to consumers, they will be willing to pay for it,” Edem Azagloe, president of the African Youth Network for Agricultural Transformation, told OBG. “We have to understand the dynamics of the market, and that will help us structure our businesses to capture a larger market share.”

In addition to high energy prices, feed remains expensive, accounting for more than 60% of poultry producers’ production costs. The government sought to address this issue in 2017 by increasing local production of soybeans, which serves as feed, by 25%.

Although poultry and fish continue to account for the majority of protein intake, livestock is playing a growing role. FAS notes that Ghana’s growing middle class provides an emerging market for beef and dairy products. According to a 2016 FAO review of domestic value chains in livestock and dairy, the livestock segment directly contributes 1.7% to total GDP and 8.7% to agricultural GDP. Around 40% of people working in agriculture are engaged in the livestock segment.

Fruit & Vegetables

The country has made efforts to raise safety standards to lift the 2015 EU trade ban, which prohibited the export of several products, including capsicum and aubergine. The injunction led to a significant reduction in exports to the EU. Whereas before the ban the country exported some 2000 tonnes of produce per year, as of mid-2017 it was exporting 200 tonnes, local media reported in June 2017.

According to the Ghana Export Promotion Authority, export earnings from the segment, excluding cocoa, totalled $371.1m in 2016 compared to $396.9m the previous year, equalling 15.1% of total non-traditional export earnings in 2016. Apart from cocoa – which alone accounts for 8-12% of GDP and 40% of foreign exchange earnings annually – top agricultural products include cashews, bananas and shea nuts. There is vast potential to raise production and exports: a 2016 study by the FAO and Ghana Institute of Horticulturalists showed a huge gap between production and potential yield levels for both fruits and vegetables.

In February 2017 local media reported that the Plant Protection and Regulatory Services Directorate had introduced new standard operating procedures for export inspection and certification of fruits, vegetables and other plants as part of reforms to meet EU requirements. In June 2017 a Dutch trade mission also arrived to explore business and investment opportunities in horticulture. In addition, the Japan Social Development Fund approved a $2.8m grant for the commercial cultivation of vegetables in the Greater Accra, Western, Eastern and Volta regions. The funding will help establish irrigation systems and warehouses for better post-harvest handling and market linkages.

The efforts to improve the inspection and control system for fruit and vegetables exports led to the European Commission’s move in October 2017 to allow Ghanaian farmers to resume exports of all plant commodities to the EU market from the beginning of 2018.

While there are several fruit-processing firms supplying the local market, commercial production still experiences operational challenges. “The key challenge for fruit production here in Ghana is meeting technical demands of EU retailers,” Stephan Morris, group technical manager at Blue Skies Ghana, a fruit-processing and juice company, told OBG. “This requires staff training, considerable logistics alignment, and a high number of chemicals and equipment imports.”

Planting For Food & Jobs

The government has made modernising agriculture and developing agri-business a priority for 2017 and beyond. At the centre of this push is the Planting for Food and Jobs programme, a scheme to improve food production and create jobs – particularly for youths – and to increase yields from major crops to boost food security. Higher domestic production, especially of maize and sorghum, would lower food imports, which currently stand at more than $2bn per year. The programme centres on value chain development and job creation in areas such as processing and packaging, which could provide higher incomes for farmers. The programme’s five pillars focus on seed, fertiliser, extension services, marketing and e-agriculture. According to a MoFA document released in January 2017, the plan’s budget for 2017 is GHS560.5m ($134.2m). The programme has been welcomed with cautious optimism.

“The government already intends to expand the programme in 2018, which is a clear message that agriculture is a key focus for this government,” Danquah Addo-Yobo, managing director of Yara Ghana, an agriculture solutions company, told OBG. “I am hoping we will learn a lot from the programme in 2017 for an impact assessment to ensure exponential expansion, not merely a doubling of input volumes.”

Inputs

The first two pillars of the programme focus on providing improved and subsidised seeds and fertilisers to local farmers. The MoFA estimated that farmers would receive GHS14m ($3.4m) worth of new seeds in 2017. This provision is particularly important for cash crops such as cocoa, as farmers often rely on old and less productive plants (see analysis).

Subsidised fertilisers – worth an estimated GHS238.8m ($57.2m) – are also a crucial input to build on recent agricultural progress. As reported in the World Bank’s 2017 “Enabling the Business of Agriculture” (EBA) report, Ghana has made considerable strides, increasing fertiliser use nearly 10-fold, from 3.7 kg per ha of arable land in 2002 to 35.8 kg in 2013, much closer to the internationally recommended 50 kg per ha. According to the World Bank, low fertiliser use is a key cause of low agricultural productivity across West Africa. In 2017 the programme was set to provide around 156,188 tonnes of fertiliser to farmers at 50% of the market cost. Under the scheme, the government directly purchases fertiliser from suppliers at a fixed price and distributes it to farmers, who are expected to pay 25% of the market price at the time of delivery and the remaining 25% at the end of the season.

Market Focus

As part of the initiative the government is also seeking to mobilise produce from farmers for appropriate storage and marketing, in part by facilitating access warehouses and identifying local institutions, such as hospitals and schools, to sell produce to. Understanding of this value chain will be important in ensuring farmers reap rewards from increased yields. Without proper planning and management, simply increasing supply would likely lead to a fall in price, which could hurt farmers. “The value chain has to help manage post-harvest losses,” Peter Obeng-Koranteng, a board member for Yara Ghana, told OBG. “There have to be centres where farmers can bring produce and sell it to avoid having to wait for buyers and lose quality.”

The government is working to address the issue with the Northern Rural Growth Project and the Market Oriented Agricultural Project, which allow actors to interact with one another through value-chain committees. These aim to bridge gaps and give smallholders greater access to input and output markets.

The government has also indicated it plans to build 1000-tonne warehouses in each of the country’s 216 districts to address storage and logistics inadequacies. Owusu Afriyie Akoto, the minister of food and agriculture, told local media in a June 2017 that Ghana’s warehouse storage capacity is 60,000 tonnes, well below the estimated requirement of 200,000 tonnes.

Human Capital & E-Agriculture

To improve support services to farmers, the government is planning to recruit and train 3200 officers. This is welcome news as according to the AASR 2016 “Progress towards Agricultural Transformation in Africa” – the 2017 AASR report did not cover this particular statistic – the ratio of agricultural extension agents to farmers was 1:1500, compared to the recommended ratio of 1:400.

Modernisation of the sector is a priority for the government (see analysis). In AASR 2016 Ghana was ranked among the countries contributing to the growth in public spending for agricultural research and development, alongside larger economies such as South Africa and Kenya. Furthermore, the “Africa Capacity Report 2017” – an annual framework produced by the African Capacity Building Foundation to highlight science, technology and innovation development – noted that the country has one of the best innovation systems for agriculture in West Africa, as it has several institutes for research on crops, livestock, food, water and industry.

Fertiliser Subsidy Programme

Another major government initiative in 2017 was the expansion of the existing Fertiliser Subsidy Programme, which, with the exception of 2014, has been running annually since 2008. In 2017 the programme had a budget of GHS207m ($49.6m). Although the initiative has helped increase fertiliser use and therefore productivity, concerns have been expressed about the programme’s design and the impact it has on market competition. The government fixes the same price for all the suppliers and allocates volumes to fertiliser suppliers, thereby diminishing competition and the benefits it can bring in terms of enhancing quality and capacity of the market.

Involvement by the aid community has also affected private sector engagement in this field. “If we want to change agriculture, then the suppliers should influence the chain with knowledge, training and market development,” Addo-Yobo told OBG. “Guaranteed subsidies provide little incentive for suppliers to come to the market with long-term views of supporting farmers or building the market. In 2014 the government did not run a subsidy programme, and you could count the serious and active private sector players.”

International Interest

Agriculture remains an active sector for international support. In May 2017 the African Development Bank (AfDB) announced new investment strategies on the continent to support farmers working with major cash crops, including cocoa. These strategies should be tailored towards providing high-yielding seeds and making large farms more productive. Khaled Sherif, AfDB’s vice-president for regional development, integration and business delivery, told local media in May 2017 that investment in large storage facilities would enable the governments of cocoa-producing countries such as Ghana, Cameroon and Côte d’Ivoire to manage the release of raw cocoa beans into the global market to control the prices.

In April 2017 the International Fund for Agricultural Development sought $92.8m from the AfDB to implement Ghana’s Northern Rural Growth Programme. The initiative was designed with the goal of ensuring the equitable and sustainable reduction of poverty and food insecurity among rural households in northern Ghana. In addition, Ghana was among the 13 African countries to sign agreements with India to increase the supply of agricultural machinery and advance credit to farmers. This is part of ongoing efforts to strengthen cooperation between India and West Africa.

Developing Workforce

In an effort to tackle unemployment, in January 2017 the government announced plans to create 1.5m jobs, with a specific focus on agriculture. General unemployment is not excessive at 5.8% as of 2016, according to the International Labour Organisation. However, the rate is significantly higher for the growing youth population, with nearly half (48%) of people between the ages of 15 and 24 unemployed. This issue is compounded by the gap between the skills of the potential workforce and those needed to advance the sector. Developing technical skills and knowledge – especially with regard to technology, seeds and fertilisers – is a priority for policymakers. Indeed, as reported in a 2014 World Bank study, labour-intensive sectors such as agriculture suffer from low productivity and require increased education. More emphasis on practical instruction in curricula is expected to be helpful. “When you take graduates from agriculture programmes directly out of universities, they lack the hands-on, practical experience and skills that come with farming and agri-business,” Azagloe told OBG. “Agriculture in the classroom is very different from on the field,” he added.

It is widely acknowledged that there is a need for further outreach to university graduates. “There are thousands of young people graduating each year with various degrees related to agriculture, from biotechnology to agri-business,” Joseph Opoku Gakpo, a journalist on the environment desk at Multimedia Group, told OBG. “Target these young people who are educated in the industry, and give them support; let them begin in some small-scale farming and expand to a larger scale.” This can be challenging due to prevailing attitudes towards the sector: the most recent GSS “Labour Force Report” found that as education level increases, interest in the agriculture sector declines, with 18% of people with no education wanting to work in agriculture compared to only 2% who have one or more degrees.

Still, there have been efforts to improve the skills of the workforce. Local firm Tikola, in collaboration with the Netherlands-funded GhanaVeg initiative, has trained 300 farmers in the Western Region on organic farming techniques since 2012, building on previous efforts that trained 15,000 domestic farmers. As part of its One Step Forward scheme launched in 2017, Yara Ghana is supporting rural female farmers, undertaking capacity-building initiatives to train them in agricultural best practices as well as providing free fertilisers.

Challenges

Land acquisition is a challenge that affects several sectors of the Ghanaian economy, including the agriculture sector. Agriculture represents one of the most straightforward ways for the country to become a more export-oriented economy, but to increase yields, scalability is required, and that is necessarily linked to land ownership.”

When a tract of land is held in trust by a traditional leader on behalf of a local community as customary land, it can be difficult to transfer this to a private entity. According to estimates by the FAO, around 80% of domestic land is governed by traditional rulers.

“Acquiring enough land to achieve economies of scale is difficult,” Obeng-Koranteng told OBG. “In general it is easier to farm in the north because land acquisition is simpler. Land is primarily government-owned in this region, meaning purchase does not require the often time-consuming process of obtaining consent from the relevant community chief.”

Another area requiring improvement is increasing access to credit for artisanal and commercial agriculture. The cost of securing financing is high and repayment periods are short; the World Bank reports that the cost of credit ranges between 25% and 40%.

The AASR 2017 notes Ghana has relatively high potential to expand leasing products in agriculture, as it already has strong supporting infrastructure for leasing, including equipment dealers, leasing companies and conducive regulatory frameworks. The availability of credit has been improving with the advent of additional mobile money technologies (see analysis), but a lack of finance remains an impediment to the expansion of commercial agri-business in the country.

Water Resources

The World Bank’s 2017 EBA report noted that Ghana scores above neighbouring countries Côte d’Ivoire and Nigeria on water-related indicators, including strong, integrated water resource management and individual water use for irrigation. However, there is also room for improvement.

The FAO reported in 2014 that less than 1.6% of the total amount of land suitable for irrigation had so far been developed. Furthermore, the Water Resources Commission of Ghana announced in May 2017 that around 60% of domestic water bodies are polluted, particularly in the south-west of the country, where illegal mining activities take place (see Mining chapter).

Outlook

After years of slower growth the sector is poised for a revival, particularly given the strong government and private interest in advancing development through technological innovations. As long as initiatives are well coordinated along the value chain, domestic-use and export-focused commercial agriculture is likely to make steady progress in the short term.