In 2020, President Nana Akufo-Addo announced that Ghana will no longer export raw cocoa beans and instead intends to process more and more of its cocoa within the nation’s borders. This decision is intended to reduce Ghana’s dependence on the production and export of raw materials and in so doing boost industry, create jobs and elevate Ghana’s status in the global marketplace as a trader of processed goods at the top end of the value chain.
The move towards agro-processing is one that has been accelerated among many nations in sub-Saharan Africa that fell subject to food shortages connected with trade disruptions during the COVID-19 pandemic. Today more than ever, it is indispensable that African countries reduce their dependence on imports of raw commodities and finished goods.
Many nations within the continent boast suitable agro-climatic conditions that allow for the production of diverse agricultural commodities yet these same countries continue to rely on the import of large quantities of food and other agricultural products. Despite a general increase in export of manufactured goods, imports of raw commodities have also increased significantly. Moreover, Africa’s exports are mainly dominated by raw materials highlighting how less and less of its commodities are being processed locally.
Agro-processing can be defined as the post-harvest activities carried out for the preservation and preparation of raw material for final consumption or other purposes. Agro-processing is essential for sustained and accelerated economic growth, food security, job creation and poverty reduction. Agro-processing also has the ability to boost ancillary economic activities in the tertiary sector.
In order for African nations to boost agro-processing, the necessary conditions need to be intentionally set in place. Firstly, it is necessary to attract investment to stimulate and grow the private sector. Ghana, even prior to the pandemic, has taken steps towards achieving this goal through creating an attractive environment for foreign direct investment into industry, evidenced by the nation’s status as the largest recipient of foreign direct investment in West Africa. Ghana has also been selected as the host for the African Continental Free Trade Area, emphasising the prioritisation of its privatisation agenda.
Secondly, post-harvest infrastructure is key to store, transport and trade commodities. Poor infrastructure, or rather a lack thereof, can disrupt supply chains and lead to a reduction in yields that could have been utilised for the sale or processing of commodities. Raw commodities are naturally perishable however African countries boast higher than average post-harvest losses. Interventions are therefore needed by Government to directly address these infrastructure gaps.
One such intervention is through the existence of a commodity exchange which not only provides famers access to markets, including to agro-processors, through connecting buyers and sellers of commodities to trade but they also provide farmers the opportunity to store and improve the quality of their commodities in certified warehouses through cleaning, drying and grading services. Moreover, the storage of the commodities in appropriate conditions in itself helps to reduce post-harvest losses.
For example, through Ghana Commodity Exchange services, post harvest losses are less than 1% for maize compared to the national average of around 38% thus highlighting the essential role commodity exchanges play in preserving the quantity and quality of commodities which can then be utilised for agro-processing. Further investments are therefore required to scale up Africa’s commodity exchanges as they play an essential role in filling the infrastructure gap.
Thirdly, value chain actors require access to finance to purchase up-to-date technologies and modern inputs without which, production yields will remain low. In addition, these purchases have the potential to improve the quality of commodities produced required for processing which in turn enables African products to compete on the world stage.
In summary, it is clear that a convergence of government policy with private sector investments is essential to drive agro-processing which in turn will increase prospects for economic development of nations on the continent.
The writer works with Commodity Exchange