Government must be looking at a more sustainable plan to entice the private sector to continue with inputs’ subsidy component in the implementation of the flagship programme ‘Planting for Food and Jobs’ (PFJ), West Africa Head of the Alliance for a Green Revolution in Africa (AGRA), Foster Boateng, has said.
“There must be a waning period for any subsidy programme. Ideally, a flagship programme should not travel beyond three to four years. Subsidy is good to create demand for inputs, however too much of it and its longevity has the tendency to collapse the private sector as farmers will not be willing to buy from the open market. Subsidy must be used to prepare the market for a private sector takeover, once you succeed in creating a critical demand,” he said.
In 2017, the government launched PFJ as one of the major agricultural flagships to stimulate growth and development by promoting food security and jobs creation. The motivating tools under PFJ is providing 50% subsidy of the cost of inputs (improved seeds and fertilizers) and complementary services such as extension services and marketing of outputs.
Mr. Boateng observed that government must consider to shift the subsidy from supply of inputs to other areas in the value chain like processing and marketing to sustain agricultural transformation. “After motivating farmers to adapt to the use of improved seeds and fertilizers, it should automatically create demand where the private sector must be allowed to take over the market. The private sector has also shown keen interest to agro inputs supply; we have a lot of the companies coming to Ghana.”
Agric contribution to GDP
In an interview with B&FT, the West Africa Head of AGRA said decline in agriculture contribution to gross domestic product (GDP) is an attestation that the country is achieving a broader economic transformation from agrarian to a more industry and services driven economy, adding “more people have moved from primary production to services along the value chain. Primary agriculture contribution will therefore decrease to open up for more services and value addition.”
Figures released by the Ghana Statistical Service indicate that the agriculture sector contribution to GDP declined as it grew marginally by 4.6 percent, a 0.2 percentage point decline from that of 2018, making it the slowest growth since recording 6.1 growth in 2017, from the previous year’s 2.9 percent. The 4.6 percent growth in 2019 represented the least recorded in all three sectors of the economy-industry and services grew at 6.4 percent and 7.6 percent respectively.
“If you see decline in agriculture contribution to GDP, it means you are achieving agriculture transformation-translating into yield increases, high labour productivity on the farm, increase in national agriculture output and increase in demand for quality food. Any country with about 45 percent agriculture contribution to GDP is poor.
“A transformational agriculture economy like Ghana depicts characteristics such as productivity gain (yield increase and greater value addition per worker) by injecting mechanization, increase in national agriculture output as framers enjoy rising income, and exhibition of change in consumer taste as people begin to focus of processed food because they can afford to buy,” he explained.
To sustain agriculture transformation, Mr. Boateng underscored the importance for the government of promote the necessary conditions. “Provide essential prerequisites by showing commitment in terms of prioritizing agricultural transformation. Government’s expenditure in agriculture must not be less than 10% of GDP. Invest in critical areas: research, extension and infrastructure. Government must also create the enabling environment with incentives such as tax reliefs and sovereign guarantees to attract private sector investment.”
He also mentioned government’s responsiveness to the troubles of agribusiness enterprises. “For instance, in difficult times like the outbreak of COVID-19 and its negative impact on agribusiness SMEs, swift intervention in a form of stimulus packages are very essential to sustain the sector.”