The agriculture and agribusiness sector in sub-Saharan Africa was estimated by the World Bank in 2016 to reach US$1trillion in value by 2030, up from US$313billion in 2010.
However, agribusiness faces a multi-billion-dollar financing gap estimated at US$11billion annually, usually for expansion.
For two days last week (March 7-8), stakeholders in the agricultural sector in the country participated in the first-ever Access to Finance Forum, under the theme ‘The role of financial institutions in the agricultural sector’, with a focus on the cashew and oil palm value chains.
The Executive Director-Competitive Cashew initiative (ComCashew), Rita Weidinger, stated that investors’ decision to invest into processing is closely influenced by access to financial instruments.
“If appropriate risk mitigation products are lacking, or if available financial instrument do not match processors needs, they may be discouraged from adopting better technologies, purchasing agricultural inputs, or making other decisions that would improve the efficiency of their businesses.”
Improving access to finance would increase processors’ choices and provide them with more effective tools to manage risks, she added.
Weidinger observed that the global demand for cashew has been increasing by 7-10% annually over the last 10 years. This trend will continue over the next few years, as healthy-eating increases among consuming countries, she stated.
The Comcashew Executive Director said if Ghana processes its total production of 110,000 metric tonnes of raw cashew nuts (RCN) and its shells, at least 30,000 jobs would be created in rural communities and over US$20million paid annually in wages alone; meanwhile, the gross value of kernel and shell derivatives would exceed US$210million annually.
Weidinger said of the 13 processing factories established, only six processors were still operational in 2018 – mainly due to the fall in RCN prices. More needs to be done to support local processing, she stressed.
In the same way, growth of the oil palm sector cannot be underestimated, Weidinger added.
“Oil palm has many uses, and it continues to increase due to the high consumption. Ghana’s oil palm imports increased from 163,000 tonnes in 2015 to 203,000 tonnes in 2016, which represents an increase of about 23.9 percent over a one-year period. This certainly shows room for local processing, as the market already exists within the country. Total imports alone are recorded at US$337million.”
She observed that it is estimated financial institutions provide only 5% of the borrowing for agribusinesses; and in the few cases where banking finance is available, the cost of finance is usually prohibitive for both smallholders and SMEs – with interest rates often as high as 35%.
Seth Akoto, Director of Crop Services-MoFA, stated that cashew contributed US$196million to the economic sector – representing 53% of the overall value of the country’s non-traditional exports, with the overall total being US$371million last year (2018).
He said government – through a joint effort by the Ministry of Local government and Rural Development and the Ministry of Food and Agriculture (MoFA) – rolled out the PERD programme: which is Planting for Export and Rural Development to develop nine commodity value chains; namely cashew, coffee, cotton, coconut, citrus, oil palm, mango, rubber and shea.
The PERD programme will support 1 million farmers in 170 districts with certified, free planting materials to cover one million hectares; and will engage 10,000 young graduates as crop-specialised extension officers.