Transforming Ghana’s economy through agro-industrialisation

Agriculture is the backbone of Africa’s economy.

For 70 per cent of the population, it is the primary source of livelihood and accounts for about 25 per cent of the continent’s Gross Domestic Product (GDP). However, Africa’s agricultural productivity and yields are among the lowest.

Yields in African agriculture are less than half of those achieved in Asia.

Although the volume of agricultural production has doubled over the past three decades, the increase is largely on the extensive margin, owing to expansion of total area cultivated as opposed to increased factor productivity.

Furthermore, the vast majority of agricultural activities are at subsistence level with farm sizes remaining small with more than 85 per cent of land holdings being less than two hectares.

These predominantly subsistent smallholder farmers use rudimentary farm technologies and inadequate levels of modern inputs.  

In addition to small farm holdings and inadequate use of modern technologies, there are widespread market failures due to lack of physical infrastructure such as roads, telecommunications and electricity, absence of markets for credit and insurance, lack of property rights and land tenure system, and prevalence of corruption.

These are some of the fundamental problems that prevent efficient allocation of resources within the agricultural sector as well as other sectors within rural spaces.

Unfortunately, despite the continent’s endowment with vast land and natural resources, Africa continues to be a net food importer, spending about US$ 35 billion per year.

 Agro-industry

The consensus is that Africa’s agriculture is not performing well, manufacturing remains one of the lowest in terms of value added and employment, and the services sector is positioned to serve mainly the domestic consumers.

Undoubtedly, Africa needs to transform its economic structure to sustain growth.

Agro-industry presents a promising prospect.

With the right policies and enabling environment in place, it has the potential to bring the best of agricultural, manufacturing and services sectors.

Due to its backward and forward linkages, it increases value addition in GDP and elevates the continent through the global value chain, creating employment opportunities and increasing incomes, strengthening food security and improving nutrition to promote a healthier and productive workforce and ultimately alleviate poverty.

Agro-industry is broadly defined as post-harvest activities involving the transformation, preservation and preparation of agricultural production for intermediary or final consumption.

It comprises of artisanal, minimally processed and packaged agricultural raw materials, the processing of intermediate goods and the fabrication of final products derived from agriculture.

An extended definition of agro-industry includes not only agriculture related industries but also distribution and trading activities.

The most important subsectors within the agro-industry sector are food-processing and beverages, accounting for more than 50 per cent of the total formal agro-processing sector in low and middle-income countries.

Considering the entire food system including the production of goods and commodities, marketing and retailing, which account for more than 50 per cent of the GDP of developing countries, agro-industry could play a vital role in the creation of income and employment opportunities in Ghana.

Challenges

Agro-industry could be the next natural stage in the quest for structural transformation of Ghana’s economy.

It has the potential to be the engine of growth by creating a well-paying, off-farm employment, increasing incomes, and alleviating poverty.

Furthermore, it could improve the lives of Ghanaians through ensuring food security, improved nutrition, and a healthier and more productive workforce.

Promoting agro-industry in Ghana is, however, not without challenges.

Many of the problems hindering the promotion of agro-industry in Africa are specific to country, subsector and product category.

The following challenges are identified: 

• access to infrastructure
• access to finance
• access to market
• entrepreneurship and managerial capacity
• lack of enabling regulatory environment 

Recommendations

In order to materialise Ghana’s potential for agro-industrialisation, policymakers and development practitioners need to focus on getting the fundamentals right.

Emphasis should be given on increasing competitiveness through closing the infrastructure and skills gap, reforming regulations and institutions, deepening value chains, attracting foreign direct investment through preferential taxes, and creation of industrial clusters and partnership with agro-allied industries.

The banks should recognise that agriculture can make an impact in African economies only when its production and distribution chains are substantially developed, its links to markets reinforced, and its transition to business-oriented activities accelerated.

This requires interventions in agriculture infrastructure, agro-processing and agricultural value chains.

Finally, given women’s contributions to Africa’s agriculture and food security, the banks must commit themselves to ensuring that growth is inclusive of women.

It should increase its interventions in women-empowering projects and reduce gender inequalities in African agriculture.

In order to champion gender mainstreaming and woman empowerment, the banks should aim at promoting female agribusiness entrepreneurs along the value chain, through improved access to financing and credit as well as funding of agricultural infrastructure projects led by women.

To this end, giving due attention to the identified challenges, concerted efforts from related partners, African governments, multilateral and bilateral donors, and private sector will be required for broader results.

The writer is the Registrar, 
Chartered Institute of Agriculture, Ghana ([email protected])