Curb inefficiencies in food supply chain

BY: Daily Graphic
Dr Owusu Afriyie Akoto - Minister of Food and Agriculture
Dr Owusu Afriyie Akoto - Minister of Food and Agriculture

Ghana’s inflation peaked at 27.6 per cent in May, year-on-year from 23.6 per cent in April, the highest in 18 years.

Food prices were up 30.1 per cent in annual terms in May, with oils and fats, water and cereal products seeing the largest increases this year.

The May inflation was driven higher by categories such as food, transport and housing, with the prices of imported goods rising more than domestically produced ones for the second month in a row.

This underscores the dilemma the Bank of Ghana (BoG) faces in trying to balance its efforts to stop intolerable price growth increases.

We are worried by the fact that the authorities and analysts foresee further significant rises in prices over the coming months, despite the concerted efforts by the BoG to use monetary policy tools to curb the inflationary pressures.

This time, the pressure is being led by food inflation rather than non-food inflation, as had been the case during past surges in price levels.

This is because food and beverage prices account for half of the entire basket of goods and services used by the Ghana Statistical Service (GSS) to compute consumer price index.

This is derived from the spending patterns of the average household in the country, as determined by GSS’s periodic Ghana Living Standards Survey that shows that headline inflation has risen so rapidly.

Indeed, the traditional sources of increased inflation in the country – cedi depreciation and rising transport costs – have played a major role in fuelling the current surge in price levels, but these have had an inordinate effect on food inflation too.

Consequently, the impact of monetary policy tightening is severely limited. Due to the structure of rising inflation this time around, a different approach is required to curb it, at least over the short term, targeting food prices.

Over the medium to long term, increased domestic agricultural production is the solution. However, the populace desires immediate succor and, indeed, needs it to restore their rapidly declining standards of living.

For us, current inflationary pressures are derived from supply chain inefficiencies rather than surging demand, which can be resolved with monetary policy tightening.

To curb the current surge, we urge the government to, in the short term, introduce a policy support for entrepreneurs willing to compete along all facets of the roles currently being played by ‘Market Queens’.

These predominantly female food distribution sector players source food crops at the farm gate, package them, transport them to wholesale points in urban centres and from there to retail markets, where they use their economic power to determine which retail sellers get which food items and at what prices.

For us, the market queens are taking advantage of the supply chain disruptions created by COVID-19, which still linger in varying degrees and sharply increased commercial transport costs, to expand their margins to a point that borders on profiteering.

They are simply operating more as oligopolies, instead of being competitors in the market space.

This supply chain model is hopelessly inefficient and presents potential investment opportunities for agricultural commodity traders.

The Daily Graphic, therefore, urges the government to provide logistical support, wherever a bottleneck exists, for investors to compete.

For instance, the district assemblies in food-producing areas can assist in identifying actual farms from which foodstuffs can be purchased for the government to facilitate the leasing of trucks for intercity transportation to the urban centres.

Crucially, the government can facilitate the establishment of retail sales outlets in urban consumer centres, as was the fashion of the yellow kiosks once used by the defunct Ghana Food Distribution Company.

This, for us, will immediately bring down food prices by making the supply chain more efficient, and that will lead to increased production.