11 December 2017

Ghana: Agric Can Do Magic for Ghana

If Ghana can see beyond agriculture and tap fully into the potential of agribusiness, it will have great economic transformation stories to tell.

This is because "Transformational FDI (Foreign Direct Investment) has yet to materialize in Ghana's agribusiness sector, despite the opportunities, together with a vibrant local entrepreneurial class of actors involved in commercial agriculture and the distribution of food products," according to the World Bank Group, comprising the International Finance Corporation (IFC) and the World Bank.

They say "Ghana provides favourable conditions for agribusiness" and point to the Accra plains and the Northern Savannah Agro-ecological Zone as areas with potential for high-value horticulture and commercial agriculture, respectively.

"The Accra plains have the potential to supply growing local and global markets with high-value horticulture. Fresh cut fruits, juices, vegetables, and potential long-term champions, such as avocadoes, are labor-intensive and offer many job opportunities for women. "High-value horticulture would also benefit large numbers of smallholders through organized contract farming."

On the other hand, "The poorer Northern Savannah Agro-ecological Zone (NSEZ) also has potential to develop commercial agriculture. With about 6 million hectares (ha) of arable land, the NSEZ can grow sugarcane, cassava, cotton, coconut, cashew nuts, shea and livestock - with the potential to create 400,000 jobs... "

These analyses of the IFC and the World Bank have been captured in a joint IFC and World Bank study that has identified agribusiness, ICT and education services in Ghana as high growth potential sectors.

The CPSD

The pair indicates that the report "Creating Markets in Ghana - Country Private Sector Diagnostic" is in its draft state. "This report was prepared in consultation with government officials and the private sector in Ghana. Further consultations will be held with the private sector and government officials before the finalization of the report."

The World Bank Group's CPSD aims to identify sectors where private sector solutions can create or expand markets and make substantial contributions to development impact. Piloted in Kazakhstan and Ghana, the diagnostics use a structured approach to analyse key sectors with unrealised private sector potential in each country, select several sectors for deeper analysis, and make recommendations for action.

Also, the CPSD aligns with the World Bank Group's Maximising Finance for Development (MFD) approach, which looks to private sector solutions to reach the 2030 Sustainable Development Goals (SDGs).

The Ghana study emphasises several important reforms needed to promote private sector investments, in particular facilitating trade, providing competitive energy, opening rural land markets, developing technical skills, and financing small and medium enterprises (SMEs). In addition, targeted measures to facilitate the entry of "pioneer investors" that can create new markets and have a demonstration effect for other investors can be introduced.

IFC Regional Director for Sub-Saharan Africa Oumar Seydi said, "IFC is committed to working toward creating markets and mobilizing significantly more finance in Ghana through the private sector. Better identification of targeted key sectors for growth will help us engage to encourage good policies, and interest from investors."

Similarly, "We are supporting Ghana's government to further encourage private sector's role in addressing development challenges and driving inclusive and sustainable growth," said Henry Kerali, World Bank Country Director for Ghana, Liberia and Sierra Leone. "The study analyses all of Ghana's economic sectors to determine how the private sector can best become the country's engine of growth."

Furthermore, "At the World Bank Group, we have decades of experience in unlocking private investment," said Hans Peter Lankes, Vice President, Economics and Private Sector Development, IFC. "With our support for policy and regulatory reforms, we can de-risk countries and make private finance a viable option for governments. This can help level the playing field and provide development solutions that benefit the poorest."

Agriculture versus Agribusiness

According to the Ghana CPSD, while agriculture refers to on-farm production that includes crops and livestock but not floriculture, fisheries or forestry, agribusiness denotes organised firms - from SMEs to multinational corporations - involved in input supply or in downstream transformation.

In fact, agriculture can be described as one aspect of agribusiness; thus, the latter is broader than the former.

"Agribusiness, including agriculture and downstream processing activities, is the largest sector in Ghana's economy," said the World Bank Group.

The facts are that agribusiness accounts for 25 per cent of GDP, employs nearly half the workforce and, with 35 per cent of exports, is Ghana's main exporter. The sector has been growing at more than five per cent annually since 2008.

"Because of its capacity for job creation and its importance in producing inputs for manufacturing products, agribusiness has high desirability in terms of its potential for development impact," the group said, indicating that agribusiness has a high multiplier effect and "creates 750 jobs for every additional US$1 million of output."

Apart from that, "Two-thirds of non-oil manufacturing depends on agriculture for raw materials."

Maximising the opportunities agribusiness presents would require that the main constraints standing in the way must be tackled. These constraints include difficult access to land for large investors; lack of farming, technical and managerial skills; inadequate access to irrigation; difficult access to finance; limited government support for commercial agriculture; and limited ability to main good sanitary and phytosanitary standards of food products.

Government pre-empts

Government appears to have pre-empted the release of the report, consequently announcing in the 2018 budget major interventions that would address some of the concerns raised in the CPSD.

When the World Bank Group interacted with journalists on the report in Accra a couple of weeks ago, the Group's array of officials from the IFC and World Bank recognised that the budget had announced several initiatives under the Akufo-Addo Programme for Economic Transformation (AAPET) that included ramping up investments in agriculture.

"So, there were quite a number of announcements in the budget and of course, we, as the World Bank Group - that is IFC and the World Bank - will be supporting various elements in these programmes the government has pronounced," Kerali, World Bank Country Director for Ghana, Liberia and Sierra Leone indicated.

AAPET

When Mr. Ken Ofori-Atta, Minister for Finance, presented the budget to parliament on November 15, he explained that the AAPET "is a three-pronged economic development programme that will accelerate investments in Agriculture, Strategic Infrastructure and Industrialization."

He further said "Under the program, we will modernize agriculture, improve production efficiency, achieve food security, and increase profitability for our farmers. The plan is to invest in the entire agricultural and agribusiness value chain, which will create new businesses and job opportunities in the sector."

According to him, the AAPET will: abolish duties on some agricultural produce processing equipment and machinery; support the development of agribusiness start-ups; provide a GHC400 million fund to de-risk the agriculture and agribusiness sector through sustainable agriculture financing and crop insurance schemes; increase the pace of agricultural mechanization; and provide specific technical assistance and tax incentives to support agro-processing, packaging, and market access.

Other interventions under AAPET will be to: launch a major pension scheme for cocoa farmers; ramp up investments under the Planting for Food and Jobs (seeds, subsidized fertilizer, etc); develop modern storage facilities through the "One District, One Warehouse" programme; implement a grant funding facility for agribusiness start-ups; launch the commodities exchange; and open up key food basket zones through road construction and irrigation projects.

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