While extractives are increasingly important to Ghana’s economy—with gold and (more recently) oil important exports—agriculture continues to be the dominant sector.
The agricultural sector in Ghana employs over 71% of the rural populace1 and about 2.74 million households operate a farm or keep livestock. Cocoa also continues to be the leading export.
Still, the relative importance of the agricultural sector in Ghana´s GDP has been declining—from about 39% of GDP in 1980 to 39.4% in 2000 to 22% in 2013. The services sector has seen the highest growth (3%) over this period (2000–2013), followed by the industrial sector.
Figure 1.1: Comparison of Ghana’s Agricultural sector to other sectors.
The decline of agriculture’s share of GDP does not necessarily mean it has diminished in importance. Agriculture plays a key role in powering industry through agro-processing and in increasingly in services through logistics, marketing, and distribution of agricultural goods. Indeed, as economies transform and value chains are upgraded, we expect to see agriculture continue to play a crucial role in the economy as agro-processing is a key pathway to transforming economies2 However, there is still much to be done before agriculture becomes the transformative engine of growth that it is capable of becoming.
While agricultural production has shown steady growth, growing at an average of 5% annually by value over the past 10 years and reaching a gross value of about $7 billion in 2012. The growth has mostly been due to expansion of land and the rise in commodity prices.
The sector is characterized by little use of modern technology and inputs, and, as a result, crop and animal productivity is low. As seen in figure 2.1, the yields of most crops in Ghana are significantly lower than what can be achieved using best practices. The average food crop producer is resource poor and therefore uses little fertilizer, insecticides, high yielding varieties, or irrigation-based cultivation
The result of the underperformance of Ghana agriculture is:
- The country produces 51% of its potential cereal consumption, 60% of fish requirements, 50% of its meat, and less than 30% of the raw materials needed for agro-based industries.
- Agricultural imports have been on the increase over the last decade, primarily due to the inability of the agricultural and agro-processing sectors to meet the demands of the emerging and very dynamic urban markets.
All the same, the government recognizes agriculture’s importance and potential for driving economic transformation. The government has put in place a number of policies to unlock the potential of its agriculture sector.
To appreciate the evolution of governmental thinking, an overview of Ghana’s agriculture and agro-industrial policies is given below:
Ghana Agricultural Policy Overview
Policy makers in Ghana agree that agricultural transformation and growth are of paramount importance to overall economic growth and development. According to the national development agenda, agriculture is expected to lead the structural transformation of the economy and maximize the benefits of accelerated growth3. Various policies have been developed to help realize this vision.
In 2002, Ghana developed its first Food and Agriculture Sector Development Policy (FASDEP I), a framework for the implementation of strategies to modernize agriculture, with a focus on the private sector.
This was abandoned in 2006 for FASDEP II, implemented in 2007, which aimed to address the loopholes and inefficiencies of FASDEP I and to galvanize all categories of farmers, while targeting poor and risk-prone producers.
The main objective of FASDEP II was to improve food security, incomes, and sustainable management of land resources, while also increasing competitiveness and improving institutional coordination and the application of technology in agriculture.
FASDEP II is anchored by five strategic pillars, one of which is food security. To attain food security, the strategy identifies five staple crops (maize, rice, yams, cassava, and cowpea) as key to providing sufficient quantities year-round. The plan focuses on the development of two of these crops that have a comparative advantage in each agricultural zone based on their importance and availability in markets.
Support will be provided in the form of inputs (irrigation, land, planting materials, etc.) to enhance productivity along the whole chain.
In addition, to address the issue of declining growth in the incomes of smallholders, crops such as mango, cashew, oil palm, rubber, plantain, and citrus, as well as the raising of small ruminants (sheep and goats), poultry, and vegetables, will be promoted on the basis of the comparative and competitive advantages of agro-ecological zones and the availability of markets. This will be carried out through linkages with industry to improve productivity and contribute to poverty reduction.
The policy also looks at the potential for expanding domestic markets (including agro-industry) as incomes grow. The aim here is to enhance Ghana’s comparative advantage in producing the needed volumes and quality of agricultural commodities for the international market.
This may be achieved by addressing issues in the domestic markets (e.g., standardization and infrastructure); issues with agricultural exports (e.g., skills/knowledge requirements, market access/information, and a weak legal environment); and post-production issues (e.g., product development, institutional arrangements, and supply-side constraints).
The government will partner with the private sector to increase investment in the sectors mentioned above and build the capacity of operators to compete in the global market.
In 2011, the government of Ghana developed a Medium-Term Agriculture Sector Investment Plan (METASIP 2011–15) as a five-year plan for agriculture development, with a vision of modernized agriculture, a transformed economy, food security, employment creation, and poverty reduction.
METASIP was developed to implement medium-term programs in FASDEP II and to achieve the Comprehensive Africa Agriculture Development Program (CAADP) annual agricultural growth rate target of 6%, with a 10% allocation for agriculture expenditure in the national budget.
Policy Actions
A number of strategic actions were adopted in order to achieve the policy objectives of FASDEP II. These strategies ran in tandem with existing sub sector and service sector policies, and thus were accepted as a framework for the implementation of FASDEP II.. A summary is given below:
Fertilizer Subsidy Program: Two key government responses to the food situation in 2007 were (1) the removal of import taxes on rice and edible oil and (2) the introduction of a nationwide fertilizer subsidy program (covering four types of inorganic fertilizer) in June 2008.
At the time, unit fertilizer use in Ghana had declined from 21.9 kg/ha in 1978 to 8 kg/ha in 20065. The objective of the subsidy program was to forestall further decrease in fertilizer use by restoring fertilizer prices to 2007 levels and ensuring uniformity in prices across the country.
In 2008, the Ghanaian Government subsidized 600,000 bags (50 kg) of inorganic fertilizer at a cost of US $14,067,964 (against a budgeted amount of US $11,000,000).
Under this program, farmers bought subsidized fertilizer with region-specific and fertilizer-specific coupons distributed by the Ministry of Food and Agriculture (MoFA) through its District Directorates and extension officers.
NAFCO Program:
To reduce food waste due to lack of storage, NAFCO has the mandate to mop up excess food supply and release it to the market at appropriate times to ensure a continuous food supply and stabilization of food prices.
Produce is bought from farmers by License Buying Companies (LBCs)7 at farm gate prices, which are determined by a post-harvest committee. The main aim of these farm gate prices is to protect the Ghanaian farmer by guaranteeing a secured income.
The post-harvest committee takes into consideration the production cost to the farmer plus a 10% profit margin. NAFCO currently has an operational stock of 15,000 MT of white maize and 15,000 MT of yellow maize.
It also has 15,000 MT of paddy rice, and 1,000 MT of soya beans. NAFCO has emergency government stock of 10,000 MT of white maize, 10,000 MT of milled rice, and 1,000 MT of soya bean.
Block Farms Program: The Block Farm Program, which was launched in 2009 as a pilot in six regions of Ghana, is intended to bring in large tracts of arable land (in blocks) for the production of selected commodities in which the locations (regions and districts) have comparative advantage.
The idea was to exploit economies of scale and ensure that the block farms benefited from subsidized mechanization services and inputs (fertilizers, improved seed, and pesticides) in the form of credit, as well as extension services that were delivered to the farms and farmers by MoFA. By bundling the delivery of inputs and services, it is envisaged that they are delivered on time and at a lower unit cost.
Agricultural extension agents (AEAs) work closely with the farmers so that they follow recommended practices to meet yield expectations. After harvest, AEAs recover in kind the cost of the services and inputs provided by the government to the block farmers8. In the 2009 pilot phase of the program, a total area of 14,186 ha was targeted for the six regions, but they managed to achieve 11,577 ha (or 81.6%)9 .
Looking to scale up and to implement the program countrywide, a target of 150,000 Ha was planned, which was perceived by the national review as overly ambitious, and so the targets were revised downward. For the Northern Region, for example, an initial target of 47,400 ha was slashed to 20,688 ha, of which the region managed to achieve only 69%, focusing on rice and maize.
AMSEC Program:
The Agricultural Mechanization Service Enterprise Centre (AMSEC) program is a credit facility to assist the private sector in purchasing agricultural machinery and setting up commercially viable firms in strategic locations.
The facility is the government’s response to the high entry barrier into the mechanization services industry as a result of high initial capital investment on farm machinery and high cost of borrowing from commercial banks.
The aim of the program is to make mechanization services for farm activities available at farmers’ doorsteps, with each district that has potential for mechanization having at least one AMSEC set up there.
The idea is to raise the low tractor to farmer ratio estimated at 1:1800 and reduce the high number of aged tractors, with an estimated average age of more than 15 years.
AMSEC was piloted in 2007 with 12 centers in eight regions. A review of the program has shown that the newer type of tractors associated with the AMSEC program seem to break down more frequently than those operated by non-AMSEC agents, about 17–64% more, due to lack of skilled operators, mechanics, and spare parts for the newer brand of tractors imported via the program. Also, poorly prepared fields with stumps have contributed greatly to most of the damages to all brands of tractors.
Ghana Value Chain Studies
Agriculture has the potential to drive transformation and make a positive impact on rural poverty. The African Center for Economic Transformation (ACET) believes that linking the objective of increasing smallholder incomes and resilience to the broader economic transformation agenda will be mutually beneficial to agriculture and the rest of the economy, particularly the manufacturing sector (starting from agro-processing).
Such linkage is also likely to raise the profile of agriculture and engage the interest and participation of a wider segment of government and the population, thereby increasing support for agriculture.
To better understand how this can be accomplished, four value chain studies were conducted under a grant from the Bill and Melinda Gates Foundation (BMGF).
Using BMGF’s poverty reduction objective and ACET’s economic transformation objective as guidance, rice, poultry, cassava, and cocoa in Ghana were selected for detailed study. These products were chosen based on their potential to address food and nutritional security and to serve as inputs to agro-industry. Table 1.1 below discusses the rationale in more detail for each product.
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