LEVERAGING AGRIBUSINESS AS MEANS OF WEALTH CREATION AND ECONOMIC DEVELOPMENT IN GHANA

Agriculture has long been recognized as a key driver of economic development in developing countries. In Ghana, agriculture accounts for approximately 19% of the country's GDP and employs over half of the populaon. Given the large proporon of people dependent on agriculture for their livelihoods, every government since independence has tried to leverage the sector's potenal for job and wealth creaon. Evidence of economic growth opportunies offered by the sector are numerous. Ghana has over 18 9m hectares of arable land, including around 5,000 square km of largely unexploited land in the Afram plains, and 148 billion cubic metres of water in Lake Volta alone. We have a youthful populaon imbued with an incomparable entrepreneurial spirit for starng and growing businesses. We are also blessed with a young and growing populaon whose demand for food presents a lucrave market for food producers in other countries, a fact proven by Ghana's annual importaon of around $2 billion of food. Last, but not least, we also have products like shea nuts and cocoa for which we have natural comparave advantage and to which we should be adding more value to boost our local economy. Fundamentally, a two-pronged strategy that focuses on selected import substuon and value addion to local products (both for exports and local consumpon) could form the core of Ghana's agriculture-driven wealth creaon strategy.

Let us first consider import substuon. According to the Ministry of Finance, Ghana imports an average $2 1 billion of food annually To delve a bit further into these numbers, here are some results from FAOSTAT for 2019 imports on two products that I think Ghana shouldNOTbeimporng:

1. Poultry (Broilers): 213,526 metric tons (esmated 2 value$308m )

2. Rice: 760,132 metric tons (esmated value 3$423m )

Now consider the case of chicken broiler meat; my personal bug bear but also my favourite candidate for wealth creaon by import substuon. The chicken we eat is essenally the result of converng mainly maize and soy into meat (for simplicity let us ignore other inputs). Doing this efficiently involves several actorsinarelavelylongvaluechainthatincludes:

1. the producon of high-quality maize and soy seeds (requires R&D, seed producon farms, agriculture extension officers, cold storage, logiscsandtransportservices;

2. Primary producon of maize and soy, condioning and storage, trading by middlemen andontheGhanaCommodityExchange

3. Processing of maize and soy into feed for broilers andlayers

4. Producon of hatching eggs and day-old chicks andtheassociatedresearchanddevelopment

5. Poultry farms to raise the birds for slaughter; abaoirs for slaughter, meat processing companies to dress, butcher and package the meat for onward distribuon to cold stores and retailoutlets.

All these stages require local employees across several educaonal levels in both urban and rural areas. In fact, analysis carried out a few years ago by the Injaro team esmated that around 800,000 jobs would be created or sustained if Ghana fully localized broiler producon! Addionally, if the value chain operates at the right scale, the country benefits from avoiding shelling out $300m in foreign exchange yearly while adding over $400 million dollars to the economy. A similaranalysisofthericesectorwouldalsoshowclear benefits, albeit with fewer actors along the value chain.

With all these evidence of the potenal benefits, why have our governments failed to substute poultry or rice imports aer all these years? We will come back to thisquesonlater

There are many who would argue that import substuon goes against the concept of each country focusing on areas where it has a comparave advantage. In the light of the subsidies enjoyed by farmers in many of the food exporng countries, I queson whether an applicaon of this concept is intrinsically fair to countries like ours where farmers receiveverylilesupporttoboostproducon.

This notwithstanding, any country seeking to create wealth through agribusiness should also seek to fully exploit products for which it has a natural compeve advantage. Ghana has a compeve advantage both for export-oriented cash crops (e.g. cocoa, shea and fresh fruits) and for locally consumed products (such as derivaves of cassava, plantain, yam) whose demand is expected to grow with the populaon and also modify as urban lifestyles and consumer preferencesevolve.

For export-oriented crops, our objecve should primarily be to increasingly add more value in-country so that we can capture more of the economic value for Ghana. For instance, it is a well- known fact that cocoa 4 farmers retain around 6% of the value of a bar of chocolate. This leaves significant economic value on the table. What if we could capture even 15% of the value of a chocolate bar in the cocoa producing countries? Assuming annual exports of $2bn of cocoa beans, scaling up local value addion to capture 10% of the value of chocolate bar would represent an addional $3bn in economic value for Ghana. In these mes of increased climate acon, reducing the carbon footprint of our food could present a strong argument for localizing more stages of chocolate producon within cocoa growing countries. A similar argument could be made for shea buer, which is a key ingredient within the global $500 billion cosmecs industry. Ghana could be more proacve in leveraging theclimateopportunitytoboostitseconomy

In exploring opportunies to create wealth via agribusiness it is easy to forget one of the more obvious growth opportunies, effecvely targeng the local market We must remember that other countries acvely assess and target Ghana as an export market because they see the potenal presented by a growing, increasingly prosperous and urbanizing populaon. In the light of this we must not ignore the gold mine in our own backyard. The evolving tastes of the Ghanaian consumer challenges food processing companies to improve product quality, launch more convenient ready-to-eat meals, see the opportunity in snacking/eang on the go and generally seek ways to deliver value for Ghanaian customers in the same manner that they would target an export market. For instance, many homes in Ghana have migrated to making fufu with flour instead of pounding it the tradional way. Convenience and a change in the composion of households have contributed to this shi. Fortunately, there are already several examples of businesses that are acvely sasfying Ghanaian taste buds with high quality products like shitor, plantain chips, roasted groundnuts, coconut chips, gari derivaves, breakfast cereals, cocoa beverages, banku doughs, fufu powder etc. Demand for these staples will connue to expand as the populaon grows and will connue to present a lucraveeconomicopportunityforentrepreneurs.

Whether we are considering import substuon or value addion via processing, there is a central objecve that must be at the centre of our focus if we want to transform inefficient underperforming value chains into engines for economic growth - the acve coordinaon of a structured and supporve economic eco-system that is ghtly linked to consumer markets and designed to achieve profitability for all actors in the value chain by progressivelyincreasingproducvity

This concept is not enrely new. Indeed, it has been implemented successfully in Côte d'Ivoire for poultry via a partnership between the government and the associaonofpoultryproducers(IPRAVI)andunderan umbrella programme called PAPAN (Programme, Dáppui A La Producon Avicole). This partnership, signed in 2005, resulted in output more than doubling within four years and the country now has a thriving poultry sector featuring large-scale businesses, like SIPRA, vercally integrated from farm to fork. It is therefore not surprising that in its 2017 report, “Time for Africa”, Rabobank projected Côte d'Ivoire's poultry sector to grow by 6-10% year-on-year between 2015 and 2025. Nigeria is also implemenng a similar idea for its dairy sector in an effort to substute around $2.5 billion of annual dairy imports. The Advancing Local Dairy Development in Nigeria (“ALDDN”) is a private-sector led market driven programme that aims to improve the producvity of rural dairy farmers and help them sell their products profitably in local markets.Itissupportedbyseveralministries,including theFederalMinistryofAgriculture.

Why do I cite these examples? Well, under the hood of these agribusiness growth vehicles is a market led, commercially oriented strategy that Ghana is well posioned to emulate and even improve upon. From studying the examples of our West African siblings one can disl some of the key features of a wealth-creang agribusinessstrategyasfollows:

1. Market-Led: There must be established demand for the crop, livestock or agricultural product being targeted for economic transformaon and wealth creaon. Demand is typically proven by a significant import bill (e.g. poultry in Ghana), significant external value addion (e.g. cocoa beans / chocolate), or growing and relavely inelasc local demand (e.g. a staple like plantain or cassava). For an export-oriented strategy, a careful analysis of the long-term economic feasibility of forward integraon needs to be completedtoinformsoundgoalseng.

2. Defined Commercial Objecves: Increased producvity must be at the heart of any agribusiness wealth creaon strategy. In the case of Côte d'Ivoire's poultry sector, the government insisted an annual reducon in producer prices as a quid pro quo for sector protecon and financial support.

3. Supported by the Government: Commied longterm support from the government is essenal as such sector transformaons could require infrastructure investments, tax incenves, temporary protecon of the local industry, subsidies, financial risk migaon, and the ability to harness the resources of development partners to support the central commercial objecve. For instance, Côte d'Ivoire imposed a levy on imported poultry products and used those proceeds to seed a fund that provided capital and loan guarantees to SMEs in the value chain. This typeofstrategicintervenoncanonlybeachieved withanalignedgovernment.

4. Centrally Coordinated and Designed: Whether the transformaon strategy is led by the private sectororbyagovernmentagency,theremustbea central body to co-ordinate all the actors across the value chain and provide advocacy support for the programme. This can be achieved by seng up a board or secretariat with an irrevocable mandate to execute the strategy independently. There must also be a clear definion of roles, responsibilies, incenves, deadlines and targets for all pares which must be strictly enforced. The central coordinang body should also act as the single point of contact for all pares seeking to make intervenons within the target sector or value chain. This would ensure that all intervenons made, including by any NGOs, are consistent with the objecves of the transformaon strategy The importance of aligning the numerous development partners with the strategy cannot be over emphasized. Currently, Ghana has several NGOs operang in the country each with its own agriculture strategy and typically implemenng “projects” that (a) barely scrape the p of the iceberg in solving real problems and (b) are oen of such short duraon that what lile impact they make is barely sustainable. I would propose that the government mandate that a percentage of all NGO funding targeng Ghana be paid into the coffers of the central coordinang body to support a very short list of value chain transformaon iniaves. This, in my view, would result in more sustainable impactforGhana'sagribusinesses.

5. Tailored Financing Soluons: Any long-term transformaon agenda in the agricultural sector must incorporate accessible appropriately priced financing and risk migaon products for each segment of the value chain. Private capital needs to be mobilized alongside government and NGO funding sources to provide the blended financing soluons required to develop the enre value chain. Certain acvies, such as research and development or greenfield primary producon, may not be commercially viable in the short term but are essenal for the long-term success of the enre transformaon programme. The central unitmustfacilitatefinancingofallsegmentsofthe value chain, by deploying tax incenves, loan guarantees (e.g. GIRSAL), first-loss capital and insurance products. This is to ensure that the conveyor that transforms raw materials into value-added products is not jammed at any point duetoalackofcapital.

6. Reporng of Results and Mutual Accountability: The central coordinang unit must ensure regular reporng on the key performance indicators. These performance metrics should, in turn, feed into a periodic performance review roundtable where all pares are held accountable for their resultsandtheappropriaterewardsandsancons applied to discourage non-performance on the partofanyvaluechainactor

It is important to recognize two crical success factors aswepursuewealthcreaonviaagribusiness:

(I) the need for paence and (ii) the need to focus on two or threehighprioritysectors.First,on theneedfor paence,it is a fact that implemenng these strategies takes me, with melines easily spanning more than a decade They also require persistent investment throughout the implementaon period. It is therefore crically important that both of our major polical pares discard their typical games of one-upmanship and commit to implemenng the same consistent strategy for the benefit of the naon Let each government prove its effecveness by the progress made against the independently set KPIs rather than by other measures that may not be consistent with achieving the core goal of substung a certain monetary value of imports or measurably adding economicvaluetoalocalrawmaterialpriortoexport.

Second, focusing our limited financial capital, human resources and geo-polical goodwill on the two or three sectors with the highest potenal for job and wealth creaon is a beer strategy than having a tall list of iniavesand failingto successfullyimplement a single one. I would strongly recommend starng with the poultry value chain and adding on two others, possibly rice and cocoa (for increased value addion). Once we lock in on the sectors, let us focus the majority of our capital and resources on those sectors over a 15-20 year horizon and push for aggressive advancement towards the job and wealth creaon target. If executed right, we will begin to see tangible benefits within five years and cross the sustainability infleconpointbyyear10.

In sum, for a country where more than 70% of rural dwellers rely on agriculture for their livelihood and where many industries rely on agricultural raw materials, there is no doubt that a dynamic agribusinesssector remainsa credibletool for creang wealth and catalyzing economic growth. However, achieving the potenal of the sector requires careful market-led and producvity-based strategies backed by consistent long-term government support. The strategies need to focus on a small number of crops or value chains that yield the greatest economic benefit for the country from the perspecve of reducing naonal demand for hard currency, creaon of jobs across several income brackets, and advancing knowledge-based industrial growth. As a country we need to commit to a long-term effort with a singular focus on commercially sound KPIs that will be pursued consistently across several presidenal mandates and, possibly, under the supervision of different polical pares. Other African countries have been able to execute such strategies successfully I see no reason whyGhanaianscannotdothesame.

References

1 hps://thebonline com/2022/07/06/essenalfood-imports-hit-us2bn-annually/

2 United States Department of Agriculture's Global Agricultural Informaon Network (GAIN) report for Ghanapublishedin2020

3 According to the United Naons Comtrade database, the value of rice imports into Ghana in 2019 was approximatelyUS$423million.

⁴hps://www.fairtrade.org.uk/farmers-andworkers/cocoa/