1. No category

Promoting Sustainable Rural Transformation
Ghana Country Report
Synthesis and Reflection
Dr. Julius Gatune
African Center for Economic Transformation (ACET)
May 28, 2015
Services has replaced agriculture as the dominant sector
% Share of GDP
% Contribution to Agriculture GDP
Industry,
value added
(%GDP)
Services,
value added
(% GDP)
Agriculture,
value added
(%GDP)
28.39
28.57
2
2.5
2.5
3.7
1.7
1.6
2.8
2.4
32.2
Crops
Forestry
Cocoa
49.47
23.6
15.6
39.41
Livestock
21.96
2009
2000
Fisheries
2013
2013
• Agriculture has lost shares in contribution to GDP while services share
has increased proportionately
• While crops continue to dominate the agriculture GDP contribution,
cocoa has been the most dynamic sector
Source: WDI 2013, GLSS 2013
Agricultural growth has mainly been driven by area expansion, and yields remain
low.
Yield Gaps of Some Key Crops
Top Ten Agricultural Products, Production Trends
Production (1000 $)
7,000,000
Production Value (1000 $)
Agricultural Area (1000 ha)
16,000
15,500
6,000,000
5,000,000
15,000
4,000,000
14,500
3,000,000
2,000,000
14,000
1,000,000
13,500
see also
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
-
Maize
Area Cultivated (1000 Ha)
8,000,000
Oil Palm
Rice
84%
40%
74%
18%
43%
Cassava
34%
Cocoa
33%
70%
55%
60%
Yield Gap (Vs Benchmark countries)
Yiled gap (Vs Field Station Potential)
The result of the underperformance of Ghanaian agriculture is:
• The country produces 51% of its 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.
• Agricultural value chains remain fragmented and underdeveloped.
Source: Breisinger et al (2011), FAOSTAT
ACET –BMGF Study:
Promoting Rural Sustainable Development and Transformation in Africa
Objective of Study
The overall objective of the study is to increase smallholder
productivity and to improve post-production value (storage, processing,
and market access—domestic or foreign) in order to improve the
incomes and food security of smallholders, and also to increase
agriculture’s contribution to an overall economic transformation that
reduces poverty in the whole country.
Study Components
i. Study of on-farm productivity, a value-chain analysis to identify value
Outputs:
•
Part
1: Diagnostic
capture
opportunitiesReport
and a simulation exercise on the distribution
I.of benefits
Diagnostic
findings the welfare effects
to understand
Analysis
ii. II.
Policy
advocacy process to promote adoption of the key
• Part
2: Detailed Implementation
Arrangements
recommendations
of the country reports
in the transformation
plans, budgets, and programs of the countries.
4
Country-Crop Studies
Crop
Sorghum
Millet
Poultry
Cassava
Cow
Rice
Cotton
Cocoa
Kenya
×
×
×
×
Uganda
×
×
Tanzania
×
×
×
×
×
×
Ghana
×
×
Burkina Faso
×
×
×
×
×
×
Country-Crop Selection Criteria
Outputs:
•
Part 1: Diagnostic Report
i. Importance to smallholders
I. Diagnostic findings
ii. Potential for post-production value improvement.
II. Analysis
iii. Other considerations include the market size, imports substitution
• Part
2: Detailed
Implementation
Arrangements
opportunity,
experience
with product,
agro-ecological conditions, and
possibility of developing agro-processing clusters
5
Study Approach
Background study
•Desk research to
Activities
Output
identify knowledge gaps
•A generic benchmarking
to identify:
₋ Potential value
capture opportunities
₋ Gap between country
and relevant peer
groups
• Meet country Partners
to discuss background
papers and develop
TORs
• Network with
stakeholders
• Background papers
• TORs for detailed
country study to close
knowledge gaps
Country-crop studies
Synthesis and advocacy
•Feld work by local experts,
• Develop a country report
including value-chain
analyses, guided by a TORs
prepared by ACET staff
• Production of a report for
each country that articulates
how the findings could be key
elements of a country
economic transformation
strategy that prioritizes
increasing the incomes and
resilience of smallholders..
that highlight the linkages
between improving
smallholder incomes and
resilience and promoting
economic transformation in
each country;
•Advocate, for greater priority
to be given to agricultural
transformation in the country
development strategy and
budget
•Network with stakeholders
• Country-Crop papers
• Welfare impact analysis
• policy papers
• Country report (synthesis)
• Policy briefs and workshops
• Report launch events
• Policy forums
6
Rice
7
Rice production has shown significant growth, though the key production ecosystem
shows a huge yield gap.
Rice Production Trends and Key Producing Regions
600000
Production (Tn)
3
Yield (Tn/Ha)
500000
2.5
400000
2
300000
1.5
200000
1
100000
0.5
0
Others,
21%
Northern
, 37%
Volta,
15%
Upper
East, 27%
0
see also
Production Ecosystems
Irrigated,
16%
Rice Farmers (% Share)
Viable Small
Scale
Upland
rain-fed,
6%
40%
Marginal Small
Holders
Lowland rain-fed,
78%
Emergent
Commercial
Ultra Poor
farmers
Yield Outcomes (MT/Ha)
25%
4.5
Irrigated
Commercial
2.5
20%
Rain Fed
1.0
15%
Source: MoFA(2011), FAOSTAT, National Rice Development Strategy
High
2.4
Low
3.5
Finance is key to rice production and productivity.
Main rice production constraints
Constraints to Rice Production (% Reporting Yes)
•
100
80
70
30
•
Not Satisfied
Difficult to
with Research access skilled
and Extension
labor
Financial
limitation
Difficult to
O
Access Markets
Factors Impacting Yield
5
•
3
1
rainfall
pattern
Mechanised
harvesting
Source: Field survey
1
Inadequate
Irregular
fertilizer
water supply
Market is the main challenge
to rice production, while lack
of mechanized harvesting is
seen as the key challenge to
increasing yields.
The two factors are closely
tied, as lack of mechanized
harvesting means that manual
methods are used. This is not
only costly but also increases
impurities, lowering the quality
of local rice and its
marketability.
However, mechanization
requires heavy capital input,
thus explaining why financial
limitation is the other big
challenge.
Ghana’s rice market is essentially two markets, segmented by
quality and infrastructure challenges.
3.5
Rice Price in Three Major Urban Markets
3
Accra
2.5
Kumasi
Tamale
2
1.5
1
0.5
Local Rice
Market
• Low quality with high levels of impurities (only 5% is Grade 2
and 83% is Grade 5). Significant transport costs due to poor
roads are a further disadvantage.
• Sold mainly in rural markets and urban centers in the North.
Traded in roadside markets using Olonka tin measure.
Imported
Rice
Market
• Sold mainly in Accra in well-packaged and convenient units
(50Kg, 25Kg, 10Kg and 5kg).
• Heavily marketed on radio and TV.
• Sells on quality and taste (aromatic) (51% is Grade 2).
Nov-13
Aug-13
May-13
Feb-13
Nov-12
Aug-12
May-12
Feb-12
Nov-11
Aug-11
May-11
Feb-11
Nov-10
Aug-10
May-10
Feb-10
Nov-09
Aug-09
May-09
Feb-09
Nov-08
Aug-08
May-08
Feb-08
Nov-07
Aug-07
May-07
0
A small percentage
of local Grade 2
aromatic rice sell
well in Accra,
showing that with
support, local rice
can compete.
Value capture opportunities for rice
Farming system
Quality
Markets
• Move towards commercial farming through better contracting
models perhaps use aggregators as the contracting
intermediary
• Increase efforts at irrigation
• Access to farm level machinery though new service models.
• Help aggregators integrate forward and own mills and to retailing
then they will care about quality and upgrade value chain
• Rice standards across the value chain
• Diffuse knowhow of a few farmers who produce high quality e,g
Bolgatanga farmers harvesting methods
• Rebrand local rice as healthy (”superfood’)
Bigger traders
• Structured markets e.g. school feeding programs can be beneficial to
farmers. It is
• New products e.g. rice beer, rice crispies
successful traders
who eventually
become successful
processors
Poultry
12
The Ghana poultry sector has been shrinking and highly underperforms
compared to the region.
Domestic Poultry Demand Met Locally
80%
42%
10%
2000
2007
2010
Domestic Poultry Demand Met Locally
(2007)
99%
100%
100%
Senegal
Mali
Burkina
Faso
84%
42%
Ghana
Source: USDA, Killebrew et al (2010)
West
Africa
• Capacity of domestic
industry to meet local
demand has fallen
drastically.
• Compared to the region,
Ghana poultry is
underperforming.
• Challenges cited include:
₋ Unfavorable and
indifferent government
policy direction
₋ Escalating costs of
production
₋ Inefficient methods of
production
₋ Lack of funds and credit
₋ Lack of knowhow
Ghana’s poultry productivity is low, resulting in a high-cost production
system
Flocks Per Year
10–20% Mortality (% Farmers Reporting)
6.5 Commercial
Benchmark
countries (Brazil,
USA, Netherlands)
3
Ghana
High
1
Small
Holder
Reasons for High Mortality
Lack of
vaccines,
10%
86%
Poor
quality of
chicks, 5%
66%
Diseases,
45%
Low
• Low productivity means that production cost in
Ghana is almost twice that of benchmark
countries.
• Poor feeds mean low conversion ratios.
• Veterinary officers are highly under-resourced,
which has made room for quacks and fake drugs.
• Feeds and utilities costs are also very high in
Ghana compared to benchmark countries.
Source: Field survey, Technoserve (2011)
Poor
management
practices, 39%
Cost of Producing a 2.5 kg Chicken ($)
5.38
118%
6.17
2.83
Brazil
Kumasi
Accra
Ghana’s poultry sector is currently very
uncompetitive.
Ghana smallholder poultry sector
Flock Structure
Turkey
2%
• Farmers with 0–1000 birds constitute
about 60%.
• DOCs normally imported from Belgium
and the Netherlands.
• 61% of farmers prefer to produce their
own feed to cut costs, improve quality,
and guarantee supply.
Chicken
65%
Guinea
Fowl
35%
Production Constraints
Sources of Finance
58%
57%
34%
17%
17%
8%
Veterinary
services
9%
Marketing
Source: Field survey
Feed
Finance
Bank loans
Personal Incomes
Savings
Due to high cost of feeds and unreliability of supply, many farmers resort to
making their own feeds. However, results are variable.
Formulate Own Feed (%)
Feed Formula Knowledge Source (%)
Personal…
Yes
70.7
No
No
Response
26.1
3.3
1-1000
50
1001-2000
33
Veterinary officer
9
Training workshop
9
Specialist
7
Nutritionist
5
Suppliers
4
15-1000
1001-2000
26
2001-3000
3001-4000
2
3001-4000
6
4001-5000
2
4001-5000
6
Source: Field survey
5001+
11
20
Vitamins
&
Minerals,
11%
Soya,
15%
Wheat,
20%
31
2
11
14
Others
2001-3000
5000+
53
Cost to Feed 100 Birds (GH₵), %
Cost to Produce 1 Ton (GH₵), %
Typical Feed Formula
Fishmeal,
22%
Maize,
32%
• About 50% of feed could be twice
as expensive as the lowest-cost
producer.
• Over two-thirds of farmers could
be spending twice as much or
more on feeds than the lowest-cost
farmers.
Formulating one’s own feed seems to be hit or
miss. It may raise the cost of production rather
than lowering it!
Value capture opportunities for Poultry
Improved
Disease
Management
• Upgrade FBOs to provide basic veterinary services
• Extend free vaccination service to DOCs against Merek’s
Research and
Development
• Technology for De-Beaking DOCs and sex selection
• Alternative feeds formulation support based on locality e.g. use of
sorghum, cassava, cocoa etc.
• Diffuse knowhow of fabricating hatcheries (can be made from
used fridges)
• Breed a local Ghana chicken that best suited to Ghana e.g. Kenya’s
Kenbro
Markets
• Social marketing of local chicken and white eggs as healthy
• Incentive local chains like Papaye to integrate backwards to
contract farming
• New products e.g. rice beer, rice crispies
Cassava
18
19
The biggest challenge to cassava production is finance however labor
follows closely and its solution lies in accessing finance for mechanization
Cassava production challenges
1.36
1.67
1.54
1.36
Unavailability
Lack of
of land
market for
produce
Lack of
storage
facility
112
56
Manual Weeding
Source: field survey
Herbicide
1.76
2.8
High
Lack of tractor
Labor
Lack of
Lack of
transport cost services
unavailability infrastructure agricultural
finance
•
Cost (GHc/Acre)
1.7
2.12
•
•
Substituting labor with technology can show significant
saving as case of weeding shows
However this shift has been only observed in task where
capital investment required is significant. For instance
tractor use remains low
Innovative financing models and also business models will
be needed to increase uptake of mechanization
21
Mechanization is key to making commercial cassava farming profitable, due
to challenges of labor availability.
Recent testimonials on impact of mechanization
Impact of mechanization on efficiency
13.60%
11.60%
42%
16.30%
Total Saving Improved Mechanized Mechanized
varieties
planting harvesting
• In Trinidad, a farmer increased the harvest from
only 1500 lbs/day with 6 men to 5,000 lbs in 5
hours with a machine.
• Agro2 in Panama can plant 5–7 ha of cassava
per day, instead of 0.5–1 ha per day using
manual labor.
• An experimental cassava harvester at KNUST can
improve efficiency by 35%.
Simulated Impact of Mechanization (Profit/Acre, GH₵)
158
93
52
Commercial
Farmer
Commercial
Farmer
+Mechanization
Small Holder
farmer
• Our analysis found that the returns for commercial
farmers without mechanization were about half
those of a smallholder farmer, though their yields
were higher. This is due to a much higher use of
labor.
• When mechanization is employed, the simulation
indicates that commercial farmers’ returns triple.
Source: Ospina et al (undated) http://guardian.co.tt/business/2012-04-22/ttaba-eases-farmers%E2%80%99-workload;
http://www.agro2.com/latest-news/agro2-now-owns-a-cassava-planter-and-uprooter
Value capture opportunities for cassava
Farm
mechanization
Food processing
Markets
• Mechanization (ploughing, planting and harvesting) to make good
returns at low prices
• Better linkage between R&D and entrepreneurs to commercialize
innovations
• Integrating rural based artisanal processors to urban based SME
food manufacturers.
• Gender friendly food processing machines
• Product development e.g attieke-gari
• Industrial products (HQFC, starch, sweetners
• Mandates e.g. cassava inclusion in bread
Cocoa
24
While cocoa production has been on the rise, productivity remains below
potential.
Volta ,
0%
,
0
%
O
Cocoa Yield (Kg/Ha)
Malaysia
Cote
d'Ivoire
Ghana
735
541
424
Source: CRIG (2010), MOFA
Ghana Disaggregated Yields (Kg/Ha)
High Technology
Medium
Technology (2050% of Farmers)
Low Technology
(50-65% of
Farmers)
1400
650
400
Key Producing Regions
Western
south,
25%
Western
North,
29%
Ashanti,
19%
BrongAhafo,
10%
Central ,
9%
Eastern,
8%
Production Constraints
• Cocoa production is constrained
by aging, illiterate, and poor
farmers – have little resources
to rehabilitate farms and cannot
take up new technologies.
• Inputs are also not reaching all
farmers.
• Gold mining taking over lands
Ghana offers a higher producer price than competing countries, which creates an
incentive for smuggling cocoa to Ghana.
Cocoa Producer Prices As Share of ICCO Daily Price
O
1500
Cocoa Exports, MT
Ghana
cote divoire
1000
500
0
06/07
07/08 ,08/09 ,09/10 10/11
• Ghana’s producer price has always been higher than
Côte d’Ivoire’s. However, in 2009/10, Côte d’Ivoire’s
price was higher, then fell drastically below Ghana’s. In
that year, Ghana’s exports rose by about 30% (Côte
d’Ivoire’s by 18%), the highest ever recorded volume of
exports. Ghana has yet to reach that target.
• There is compelling evidence that this big jump in
Ghana’s exports was partly due to smuggling.
Share of processed cocoa has been rising
Cocoa Export Trends, US$ Millions
2500
2000
Cocoa Beans
Cote d'Ivoire
Processed Cocoa
37.4%
Ghana
21.7%
Indonesia
1500
1000
500
2010
2009
2008
2007
2006
2005
2004
2003
2002
0
2001
Key Export Markets, % Share
Global Share
14.7%
Nigeria
7.1%
Cameroon
6.1%
Netherlands
33.8%
UK
Belgium
Japan
12.0%
8.9%
7.2%
Ecuador
3.9%
Germany
3.6%
Togo
3.3%
USA
3.3%
O
Dominica…
1.5%
• Exports have been rising, and the share of processed cocoa has been increasing. Processed
cocoa is now 38% of the total value of exports (32% in equivalent quantity of beans).
• Processing largely means grinding, and as such, processed cocoa exports are mainly cocoa
butter, cocoa liquor, cocoa powder, and cocoa cake.
• Real value from processing comes from making industrial chocolate (couverture) and
consumer chocolate. However, these require excellent logistics (as chocolate recipes
require a blend of beans from many sources, and also sugar and milk) and proximity to
consumer markets.
However processing generates little value in additional exports and has very low
job-creating potential due to its highly automated nature.
Extra Value Created
Jobs Per Factory
38%
884
32%
117
Raw Beans
Processed Beans
Incentives Provided to Processors
2000
2015
O
• Light crop beans are sold at 20% discount.
• 100% exemption from the payment of direct and
indirect duties and levies on all imports for
production and exports from free zones.
• 100% exemption from the payment of income tax
on profits for 10 years (after 10 years, they pay no
more than 8%, compared to 25% for non-EPZ
companies).
• No value-added tax (VAT) on purchases, including
utilities, and no restriction on fund repatriation.
Source: CRIG (2010), MOFA
• For its 20% discount on beans,
Ghana is currently getting an
extra 6% in value.
• For all the tax breaks and
excellent infrastructure for
locating in EPZ, only 1,293 jobs
have been created by the 9
processors (an average of 117
jobs per factory).
• Many cocoa products, such as
liquor, soaps, and animal feeds,
that have local markets and can
stimulate the local SME-based
cocoa processing sector remain
uncommercialized.
Should we subsidize cocoa
processing for local markets or
for export markets?
New Cocoa Sharecropper?- Can we entice the Ghana middle class to invest
in cocoa production?
Profits (losses)
Year
Farmer
•
Investor
farmer
1
(733)
(1,111)
2
56
(552)
3
366
2
4
614
250
5
945
581
6
945
581
7
945
581
8
945
581
9
945
581
10
945
581
•
•
•
Farmer absorbs half the cost of land
preparation, seedlings and planting and
harvesting.
The investors assume full cost of
maintenance, herbicides and fertilizer.
Harvesting starts in year 2 though yields
are only 400 T/Ha. Full yield is in year 5
when it reaches 850 T/Ha and stay
there. Cocoa is sold at GHc 3,125/Ton
The cost used are as follows: Planting
GhC 160/Ha; seedlings GHc 450/Ha;
Maintenance GHc 576/Ha; Herbicides
GHc 140/Ha; Fertilizer 398/Ha;
Harvesting GHc 150 /Ha; Drying 24
GHc/Ha..
This can an extension of abunu
and abusa traditional systems
where investor get the extra
yield due to his investment
29
The cost structure is dominated by labor for maintenance. Input costs are about
50% of the investment.
Cocoa Production Cost structure (5 yr period)
10.8%
8.0%
1.3%
42.1%
100.0%
1.6%
28.2%
6.0%
2.1%
land
seedling cost
preparation
fertlizer
planting
maintenance
herbicides
O
insecticides
Cash Flow and Yield (5-yr. Period)
3,000
Cost
Revenues
Yield
1,000
GHc/Ha
2,000
600
400
1,000
200
-
1
2 Year 3
Source: CRIG (2010), MOFA
4
5
Kg/Ha
800
harvesting
Drying
total
• While maintenance is the biggest
cost, input costs are almost half of
the cost. This can explain why
most farmers choose the low-cost,
low-yield production.
• Cocoa farmers break even in Year
3. However, after that, the
margins are very healthy, at
almost 50%.
Value capture opportunities for Cocoa
Yields and
production
• New middle class share cropper?
• New service providers business models – Youth inputs services
supplier groups
• Fine Flavor cocoa
Niche cocoa
markets
• Organic cocoa
• Fairtrade cocoa
Cocoa products
• Product development – many alternative products development at
CRIG but not commercialized
• Niche chocolate- Soul Cocoa?
• Local chocolate consumption -School feeding, chocolate-fortified
gari etc
• Leveraging regional monopoly power to develop a West Africa
chocolate hub
Synthesis and reflection
32
Agriculture plays and Key Role in Kenya Economy, however full potential
yet to be tapped
Agriculture generates about 22% of GDP directly and maybe another 20% through
manufacturing, services and distribution).
50% of Value??
Production
50% of Value??
Logistics
Processing
Marketing and
distribution
..True potential will come from transformed agricultural value chains
90% of Value
10% of Value
Production
Logistics
Processing
• Agricultural growth has not translated to poverty much reduction
• Too many people working in low productivity farm jobs yet a
transformed value means more jobs upstream
• Marketing not production should be the locomotive that drives
the chain
Marketing and
distribution
Markets are key to
transformation of the
agricultural value
chains
33
Ghana Agricultural value chains have many challenges
Production
structure
Issues
Policy
Questions
•Low yields
–Saved seeds
–Low knowhow
•Poor quality
–Old mills
–Mixing varieties
•Labor challenges
•Subsistence
orientation
Logistics
Processing
Marketing and
distribution
•Post-harvest losses
•No Supply guarantee-
•Informal markets
(upto 30% for eggs)
–Transport
•Middlemen/women
stranglehold
(bogeyman?)
•Payment on quantity
rather than quality
quantity , quality and
price (ASCo case)
•High costs (energy,
packaging)
•Access to equipment
•Product development
dominance thus low
value addition
•Low products diversity
•Low quality products
•Inability to address
changing markets
–urban poor
–Urban rich
Be
•Who to support
•Formal vs informal
(small holder ?)
•What to subsidize?
(inputs or Info?)
•Farmer
organization
tariffs?
•Market infrastructure cassava bread)
•Mandates vs incentives
(govt vs private vs
•Industrial policy•PPPs for market and
PPP)
equipment fabrication, distribution
vs imports
•
•
•Artisanal vs formal
•Trade policy e.g
FASDEP II and METASIP provide a good framework for
agriculture driven transformation
However need greater alignment between agriculture policy
and trade and industry policy
•Food imports bans vs
Policy should prioritize
how to deliver better
services and catalyze
innovations rather than
focus on providing inputs
Innovations are starting to play a key role in farm level
production
Knowledge
• Franchising model for inputs supply e.g.
farmshop in Kenya
• Inputs as a service model e.g. weed killers
• Smart card to better target subsidies
.
Inputs
• ICTs addressing information asymmetry
and knowledge gaps; Esoko
• Farmer Consultant – a new line of
business for medium sized farms
Farm
mechanization
Financing
models
• Tractors for hire model being promoted by
some commercial farmers
• Rural fabricators can sell a service rather
than selling equipment (key to success of
Gari enterprises in Nigeria)
• Finance as part of an inputs package e.g.
One acre fund
• Identifying key places to offer finance e.g.
root capital model
• Insurance -Credit risk e.g. USAID, rainfall
insurance
• Service oriented
business models can
play a key role in
improving productivity
₋ Poor farmers cannot
acquire capital
equipment but can
pay for a service
₋ Good entry point for
youth in agriculture
as service providers
Can we subsidize
service as we do for
inputs and what
business model will
have the desired
impact
While small holder farmers will continue to be the bedrock of
agriculture, objective should be to have a health ecosystem with a mix
of farmers
• Very poor and faming is focused on food for family.
Subsistence
Small Holder
Commercial
taste rather than yield is key in varieties choice
• Do they need welfare support or agric. Support?
• Commercial orientation make it easy for them to
 Enter into contract farming
 Likely to form strong FBOs that can provide many
services and even integrate forward to processing
Medium
commercial
• Means and enthusiasm to adapt new
technologies
• Easy to diffuse technologies to small holder as
distance is not too far from small holder
Large Scale
commercial
• Able to bring new technologies and developed
markets e.g. exports
• Can provide highly specialized capital intensive
services e.g. breeding in pouultry
• Farming system benefits from infrastructure they
provide
Potential for creating
a highly symbiotic
ecosystems with
each farmer
specializing
Unlocking the
inherent synergy in
ecosystem should
be the focus. Where
is the low hanging
fruit?
3
6
Middlemen: From the agriculture bogeymen to value chain
upgraders ?
Input Providers
• More likely to be trusted by farmers as perceived to have
better knowledge of market. In Benin the success of Nerica was
due to efforts of one trader
• Trader can use same infrastructure to buy and supply input e.g.
Pwani feeds in Kenya
Make contract
farming work
• Repeated interaction means deep understanding and insights in
what works.
• In Guiness Ghana is using middlemen (logistic providers to
interface and manage contracted farmers
Financing
• Intimate knowledge from repeated interaction mans middlemen
have better understanding of credit worthiness of various
farmers.
• Note:70% of rice farmers get financing from middlemen
Quality control
• Have a stake in increasing quality as they are
the interface with market
• In Uganda middle men supply tarpaulins to
farmers for drying
Big traders
can be beneficial to
farmers. It is
successful traders
who eventually
become successful
processors
Processor can improve supply by developing deeper relationships with
farmers, especially in helping them diversifying their livelihoods
Processor
Farmer
Buy cassava
Cassava farmers
Cassava starch
When farmers engage with processors as
buyers and sellers, a deeper relationship is
established. This makes is easier to
implement contract farming. Also regular
income from livestock keeping means farmers
can take better care of cassava
Poultry
Sell animal feeds
• Poor farmers are risk averse and thus not likely to invest in expensive
inputs.
• Diversifying incomes is one way of reducing risk. When processors help
farmers diversify risk, they increase their supply e.g. Premium foods in
Kumasi through piggery
Animal feeds
Diversifying incomes
is key to lowering
farmers risk aversion
and thus technology
uptake
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Rural processors and urban based SMEs processors can complement each
other through a service model
SME processor
Artisanal processor
Strengths
• Sourcing raw
materials (many time
they are owned by
farmer groups
Challenges
• Meeting food and
product standards due
low level of knowledge
• Product development
and packaging
• Knowledge of urban and
export markets
Supply bulk product
Artisanal processor can
become a contract
manufacturer for SME
processors. SMEs does
product development
packaging and marketing e.g.
Model used by St Bassa
Processors in Ghana
Consultancy services
Strengths
• Identifying markets
and developing
products development
• Navigating regulatory
space
Challenges
• Steady supply of raw
material
Can SME be further
linked to “African Store”
for diaspora or global
supermarkets with ethnic
food lines
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Agricultural transformation journey is yet to unfold
Industrial agro-processing
SMEs and Cottage
industry processing
Artisanal processing
What will it take?
• Framer processing groups
• Strong equipment
fabrication sector
• Gender friendly machines
• Business model to support
access to technology
Energy,
infrastructure
and finance are a
prerequisite to
success in
processing
• Markets and product
development
• Capacity to navigate
regulatory framework
• Business support services
• Access to modern food
processing equipment
• Strong supply chains that
can guarantee sufficient
capacity utilization
• Well develop consumer
markets e.g. supermarkets
• Supportive industrial policy
A Multi-pronged Approach is Needed
Incentives
• Tax breaks to upgrade
equipment and
encourage local
content use
• Subsidies or fund to
support emergence of
strong value chain
actors
Mandates
• Local content laws e.g.
5% cassava bread
• Need to be sure that
undue burden is not
put processors) but
balance with need to
challenge processors
Questions
• What should be subsidized? production vs processing
vs research vs market channels Vs promotion
• What is the role of policy (government)?
 How should food policy look like?
 How to harmonize industrial policy and agricultural
policy
 How do we align budgeting process so that it supports
emergence of strong value chains
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PPPs
• Where capital
requirements are high
government may need
to come in e.g rice mills
• Can we incentivize
investors to relocate via
agroprocessing parks?
Note Nigeria banned
import of barley forcing
brewers and food
processors to turn to
sorghum and develop the
supply chains. This has
been a great success
Questions
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