Ubuntu Entrepreneurship with Henry Abraham … Growing Ghana’s agriculture

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My last column commented on the huge changes that societies all over the world have found themselves able to make, to fend off the covid-19 virus pandemic. Until very recently, these changes would have seemed quite inconceivable (for example, who would have thought it possible to shut down every church in Ghana overnight?) We see that we are able to change further and faster than we thought.

That is good news, as there will be many more challenges to meet, post pandemic. The economic effects of pandemic disruption will be dramatic even if, as we all hope, the health effects are not too large in Ghana. And of course, the future will bring other unexpected challenges, as well as foreseen “biggies” such as climate change mitigation and adaptation.

Hence Ghana needs people of entrepreneurial mindset, people who see opportunities where others only see challenges. They may be business owners, but they may also be within government, or working in existing corporates.  I have met plenty of such Ghanaians, from civil servants to bankers, from small shop owners to CEOs of major companies. They are all committed to building organisations and systems that respond to people’s needs by delivering what they value affordably, who are determined and energetic, and who are able to inspire and draw in partners to help deliver their visions.

We particularly need more such people in Ghanaian agriculture. Firstly, agriculture has been seen as a traditional industry that has not attracted many well educated entrepreneurs (surveys show the more educated you are, the less interested in agriculture:  only 2% of university graduates expressed interest in working in agriculture when surveyed a few years ago starkly contrasting with the 40% of our workforce in agriculture).  Secondly, the challenges in agriculture post pandemic will be magnified by the pressure both here and elsewhere to increase food security, which will mean long term impacts for global food supply chains, as countries keep hold of more of the food they grow. Thirdly, agriculture is a sector where we must not fail, given that need for our own food security.

These points focus on agriculture as a business. Another dimension is growing food for personal consumption. That too is likely to grow significantly, as individuals seek to protect their own food security, and facilitating that will also bring significant benefit.

One certainty post pandemic is that Ghanaians will continue to need similar amounts of food as we did pre pandemic, as will other countries. Indeed, if times are harder overall post pandemic as we expect, that will encourage a switch back from expensive and less available imported foods to local foods.  Hence the medium-term demand prospects for Ghanaian agricultural products are better than for many other industries.

But given the likely hard times post pandemic, there may be reduced buying power from the Ghanaian public. So cash available to buy food from farmers may shrink both from export buyers, and in-country buyers. How do we increase local production as will be needed given reducing imports, when the total money available to buy Ghanaian produce may be decreasing?

The answer is to make the radical improvements in cost-efficiency in Ghanaian agriculture that are well within our grasp, so both farmers and consumers do better.

Switching from costly imported agricultural inputs to cost-effective locally manufactured inputs will be one useful step. But most important is to use this economic shock as an opportunity to step up  how we address the poor integration between farmers and agricultural markets. This lack of integration means much food rots at farms, or farmers simply plant much less than they could, since selling more food would be difficult and unprofitable.

There has been significant progress in Ghana’s agriculture over the last decade that we can build on. There is much more use of fertiliser (albeit mainly imported synthetic fertiliser which may not give long term sustainability) and improved seeds than previously, though we are still well below optimal levels. Agricultural extension work has expanded, though we are still well below recommended numbers of extension officers.

But progress has been limited in addressing the weak links between farmers and markets. It is still too hard to get produce to a buyer that will pay a fair price (from the farmer’s point of view), and to find well organised and reliable farmers who can supply consistently and at an efficient scale (from the buyer’s point of view).

The recently announced Government plan to build new agricultural warehouses across the country this year, supported by purchasing food from them to the national food buffer stock, is to be welcomed as a significant step forward.

Yet similar past initiatives have had limited benefits for reasons such as failures in planning and delivery, and also because they have similarly focussed on solving only one of the problems within the ecosystem that links farmers, distributors/aggregators, and buyers together in the agricultural value chain. If one bottle-neck in this chain is released but other bottlenecks are not fixed, overall flow through the system will not improve.

What are these additional bottlenecks? As well as the lack of local aggregation facilities which the new government initiative should help, there are knowledge and skills shortfalls which could prevent effective use of the new infrastructure. For example, if local farmers do not have the skills to plan their farming business longer term, they may not work well with the warehouses which will need to plan and have contracts in place so they can pay back loans and secure their businesses.

There are also other physical infrastructure shortfalls.  In many areas, we need to improve local roads that give access to farms. Doing this within a rolling rural roads upgrade programme will help keep costs down.

Financing is another key bottleneck, with many farmers struggling to fund upfront purchases of inputs they need to improve productivity, market their produce and so on.

Whilst most banks in Ghana claim to support small businesses including farming, the feedback from farmers is that they face huge difficulty in getting the finance they need. Part of the problem is that many farmers have poor financial records and small business sizes, making loan due diligence costs exorbitantly high for both bank and the famer to whom such costs will eventually be passed. Hence improved skills in record keeping and planning are critical for the farmer, and efficient local intermediaries who have the knowledge to judge and minimise loan risks are also vital. Here there are interesting initiatives taking advantage of farmers mobile money records to help address this.

So the big picture is that the interconnected nature of these challenges requires integrated solutions. The new produce warehouses across the country, if well delivered, could be very useful. But they must be complemented by strengthening other measures. If farmers do not have the skills and finances to increase production to access opportunities provided by new warehouse facility, decent local roads to transport their produce to the facility, and financing to enable increased productivity, results will disappoint. Similarly, clarity on government produce uptake contracts will help investors in the warehouses raise finance more cheaply.

So why not link up these pieces of the jigsaw more closely and transparently, to ensure no piece goes missing just when it is needed?

  • Business should own the warehouse facility, and also offer to finance inputs for local supplier farmers at fair and transparent rates to increase their productivity. It may make sense to have common ownership of several warehouses in the same region, to give economies of scale.
  • Banks should provide finance for the warehouses backed by clear contracts for Government offtake of produce and where possible private offtake contracts too.
  • Government should ensure delivery of timely improvements of the local road networks around the warehouses, with contractual penalties if it fails.
  • Government should encourage extension work and “information brokers” to expand and improve the quality of their information, improving farmers knowledge of opportunities to improve production, and of fair prices for their produce.
  • Warehouses should be required to publish their offer prices for produce so these are transparent to farmers and information brokers, to reduce the risk that the market power of a local warehouse may lead to reduced prices for farmers and reduced overall output.

The alignment of interests proposed above could be helped by simple standard contracts between the farmers, the warehouse businesses, government and the banks: for example, that specify an offer of supply of inputs to the farmer by the warehouse business and sale of produce by the farmer at prices clearly linked to retail market rates to the warehouse; and between the warehouse business and government for purchase of produce by government and management of delivery of local road infrastructure improvement by government.

Achieving this will require not just rapid mobilisation of finance, but project management capabilities which likely far exceed government’s capacity. Project management will have to be urgently nurtured and bought in from the private sector, and increasing local project management capability will itself be a valuable outcome of this process.

None of this is beyond our grasp. And the responses to the pandemic proves we can mobilise quickly when we see the challenge clearly. Here, the prize is food security and big economic benefits for Ghana. That’s a substantial enough prize to go all out to win!

>>>Henry Abraham is a social entrepreneur based in Accra, and founder of HJA Africa which sells Ghana produced organic farm inputs (see hjaafrica.com). His personal blogsite is hjabraham.com

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