Overview of the agriculture sector in Africa

There is a consensus that sustainable agriculture and rural development play a fundamental role in the attainment of the Sustainable Development Goals (SDGs) in Africa, particularly in the eradication of hunger and poverty.

In most African economies, African Development Bank (AfDB), a leading regional financial institution, reckons that the agriculture sector is the main contributor to job creation, however the majority of agricultural activities do not suffice to secure the livelihoods of smallholder farmers who currently dominate a big portion in the sector.

Throughout years, many efforts have been made to increase productivity and improve Agriculture infrastructure by governments. Nevertheless, very little attention has been paid to immature agricultural market structure and –value addition to agriculture products. As matter of fact, in Agricultural development, increasing yield is only half of the equation; value addition and marketing are equally important. Consequently, even　though improvement measures could be implemented in seeding and harvesting, enormous post-harvest losses, value addition deficits as well as weak market linkage hinder the development of the agriculture sector in Sub-Saharan Africa.

According to the AfDB, the level of agro-processing at the rural level in Africa is perceived as extremely primitive even compared to that in other developing nations. As the result, Sub-Saharan African countries face huge post-harvest losses. To depict it, one instance is that perishable agro-commodities such as fruits and vegetables count for average 35-50% of the post-harvest losses in the total attainable production, as for the losses of grains, they are between 15 to 25% [1]. Moreover, the low level of the agro-processing capacity worsens Sub Saharan countries’ dependency on imports of primary foods and processed products. This creates a vicious cycle for the agricultural development in sub-Saharan Africa.

A World Bank report issued in 2013 indicates that Africa’s farmers and agribusinesses could create a trillion-dollar food market by 2030 [2], if they can expand their access to more capital and electricity, better technology and irrigated land to grow high-quality and nutritious foods. These projections suggest that agriculture would offer the greatest prospects for a threefold increase in the GDP of African countries.

To investigate growing agribusiness opportunities, we visited the Republic of Ghana to study its local agricultural markets. Ghana is the largest cocoa producer after Cote d’Ivoire with a production of more than 812 thousand tons in 2019 [3], it has the potential to further advance the country’s agribusiness. Big potential can also be found in maize and rice productions, two very attractive crops to Japanese companies, especially processing equipment manufacturers. In addition, the country is renowned as an investor-friendly business environment in West Africa was an additional factor for us to choose the country for this study.

Case study: The Republic of Ghana

We conducted a study in three locations: Accra, the capital city of Ghana to investigate business environment, then in Tamale and Wa where the fields are located to investigate agriculture’s condition.

Map of QUNIE’s research points

In the Republic of Ghana, Agriculture’s contribution to the GDP accounted for 19.7% in 2018 [4]. Overall, the average size of Ghanaian farmers is predominantly smallholder, and they rely on traditional tools and rain-fed as water source.

a. Business environment

First, the important component of this study was to investigate the business, environment; therefore, we conducted an interview with an expert of investment in the agricultural sector at the Ghana Investment Promotion Center (GIPC).

This interview further revealed numerous motivations offered by the Ghanaian government under the "Investment Act" in order to encourage foreign investments by introducing incentives such as:

• Tax holidays to the new entrants
• Guarantees against discrimination
• Guarantees against expropriation
• Investment guarantees, transfers of capital, profits and dividends and personal remittances
• Guarantees in dispute resolution

b. Government programs in the field of Agriculture

With regard to the agriculture sector’s growth, particularly food crops, the lasting contribution of the Ghanaian government made it possible. An interview with a senior agriculture officer from the Ministry of Food and Agriculture showed that the "Planting for food and jobs" program implemented since 2017 has enhanced agricultural productivity of food crops subsector; it was designed to focus on five areas to mainly improve quality of products to an extent that they can become competitive agro-products in the market.

Focal areas of "Planting for food and jobs"

Figure created by QUNIE based on the interview.

According to the senior officer, incentives brought by the government’s program particularly on imported quality seeds and fertilizers, enable the farmers to buy the seeds and fertilizers with 50% discount, added to complementary services such as extension services have significantly improved productivity of the famers. Nevertheless, marketing of output is still a problem, smallholder farmers are still in the situation of consuming their products to subside or, in best-case scenario, farmers sell their products in the local community markets. They never enter the value chain or commercialize in the main markets. In other words, the government is still unable to improve the weak market linkage and Agriculture mechanization. The ministry officer believes that private companies can bring farmers to the appropriate value chains by deploying appropriate means such as establishing supply chain, construction of processing facilities…

c. The domestic Market

According to the government expert from the ministry of Agriculture, the most important food crops in Ghana are:

• Maize
• Rice
• Vegetables: tomato, onion, pepper, cabbage, carrot, lettuce and cucumber
• Soy bean
• Cowpeas

We observed that the food markets extremely differ between urban and rural areas in terms of price, product availability, and market conditions.

The pricing process is not transparent to consumers in local markets. As matter of fact, shopkeepers give random prices to commodities based on their visual appreciation of the quality without using specific criteria (such as weight or number of items…) for its determination, in other words, the shopkeeper just looks at the commodity and gives a price. Moreover, due to high logistics cost, the price is sometimes doubled in the urban areas compared to local areas. This causes dramatic and sudden changes in prices for agricultural products thus leading to unstable farmer’s incomes.

It is important to note that super markets in the urban areas largely sold imported goods, and the stores’ ambience looked clean and decent like those seen in developed countries, however the same level of cleanness is not found in the rural areas. This issue reflects on the perceived quality and reputation of local goods. Perceived quality is a major factor in consumer purchasing decisions and is the main reason why consumers prefer imported goods. Local products are •often associated with poor quality and uncleanness.

 

A fruit and vegetable vendor in a local wet market and a super market in Accra

Due to the lingering problems of post-harvest losses and low value addition, Ghana heavily depends on food imports. In fact, during our visits to a local supermarket, most of the goods sold on the shelves were imported from European or Asian countries. Moreover, research shows that in the case of rice, which is the second most important crop in Ghana, 85% of the consumed rice is imported from Asian countries. This situation of high import bills implies a heavy burden on the national GDP, and puts the country’s food security at risk, if food imports are blocked by other countries for example.

d. Lives of the farmers

For the third part of the study, we have conducted field visits to the local farms in the northern region of Ghana, in the city of Tamale and suburbs of the city of Wa, where Maize fields are located.

1. Farmers’ collectives

We found that there are cooperative organizations called "Farmers Based organizations" (or FBOs) where Ghanaian smallholder farmers gather. The organization usually comprise of around 100 farmers per FBO at most and generally managed by people with basic management skills who are able to support farmers in their daily activities.

Most of them are illiterate, thus, joining FBO is their best solution to increase their bargaining power in the markets. In fact, the farmers in these regions have no access to primary education, also their farming methods are passed down for generations.

Illiteracy is a big social problem which traps them into the difficult situation where significant development of the Agriculture sector is hardly expected. But, in the meantime, FBOs are regarded as an effective cooperative model to support smallholder farmers in labor activities, production through farming advice and procurement at a daily level. In many cases, these cooperatives collect a fee from members in order to provide these services.

2. Difficulties of the farmers

The field trip to the local farms showed that farmers face several difficulties in their daily activities, among other things we can cite:

• The lack of infrastructure
• The lack of agronomy knowledge
• Abandoned farming lands due to slash and burn agriculture
• The lack of equipment
• The absence of irrigation
• Natural disasters: bush fires (natural or human caused) and heavy rain
• Lack of access to post-harvest knowledge and technologies (storage, transportation…)

These difficulties are all regarded as business opportunities, companies with the expertise and solutions for the above issues, such as irrigation infrastructure companies, training providers, equipment for mechanized farming manufacturers and distributors are very needed to enter the market. These companies will not only contribute to the effective growth of the sector but will surely secure profitable market share at an early stage of this growing market.

Image of a maize field damaged by bush fire (loss of 8 hectares)

Image of storage conditions in a maize warehouse resulting in post-harvest losses

e. Agribusiness private companies

Our findings show that government programs have long been related to enhancing production and improving post-harvest processes such as storage of end products and hygiene management. Nevertheless, these programs have yet to include processing and market creation for the local products. In fact, processors specialized in milling packaging or other processing operations are concentrated in the big cities, whereas the producers are mainly located in the remote rural areas. This situation has created a new market for brokers. Brokering companies greatly relieve the farmers’ burden of market access, they also contribute to the improvement of agriculture productivity. Their typical business model is that the companies offer extension services and agriculture advice to the farmers in order to guarantee the contracted production amount.

An example of these companies is DEGAS LTD, a Japanese start-up operating in Ghana. Their business model is to pre-finance fertilizers to smallholder farmers, who will pay back in maize rather than cash after the harvest season. The company cleans the maize, packages and sells it to processors. DEGAS LTD. sometimes also buys the extra yield from the farmers -if any- against cash. This is a win-win situation for both parts, making the farmers: have better access to seeds, fertilizers and clients, and DEGAS LTD. ensures the supply of raw material to their clients in processing industry.

Another example having a similar business model is AGRICARE LTD, a local company manufacturer of feed products, who also provides support of seeds fertilizers and training to the farmers.

Perspectives and opportunities in Ghana

A rising trend in the country is digitization. ICT seems to be the future of agriculture in the eye of young entrepreneurs.

As part of this mission, we visited the Kosmos Innovation Center (KIC), an incubation center located in the capital city of Accra. The center is founded by Kosmos Energy, an American oil company operating in Ghana.

Kosmos Innovation Center

Discussion with one of the leaders who actually tenants the center’s working space expressed their openness to various sources of human resources and investment. They are very keen to work along with companies from different origins such as Japan to improve the quality of their accelerator and investment programs.

It is notable that entrepreneurs working there were full of passion to innovative ideas that would greatly contribute to the development of agriculture. To illustrate this, here are some examples:

1. TROTRO tractor provides an application-based own platform where farmers can find a tractor’s owner who wants to rent it. They call themselves as "an Uber for Tractor" allowing small farmers to mechanized farming. It’s worth mentioning that TROTRO tractors face major difficulties to cover large number of farmers, due to illiteracy, therefore, they work in partnerships with FBOs to manage the bookings for smallholder farmers interested in their services.
2. Agro Innova, offers a mobile and web-based management system that allows poultry farmers to record, monitor, and track their operations in real time.
3. Farm Cure, provides pest traps to insects in the fields, which are supplemented by a mobile app to help identify insect pests on vegetable farms and predict subsequent infestations on the same or nearby farms. The app also recommends best practice to help mitigate the impact of any pest.

An ICT technology can be perceived as an essential tool for the development of various economic sectors, also it might be perceived as an effective solution to the development of the agricultural sector in the continent. However, before accepting this idea, one might ask:

• How far has the African continent gone in ICT development, network coverage, network speed and internet cost?
• Are the target users ready for using ICT solutions?

When it comes to a smooth implementation of an ICT product, we believe that development of user-friendly interface must be a key component. As mentioned above, one of the biggest challenges is low literacy rate of farmers that to be overcome.

What are opportunities of Agriculture development in the Republic of Ghana?

In conclusion, though the Agriculture sector in Ghana is still struggling in some areas, the business environment is undergoing a fast transition. The new support programs offered by Ghanaian government as well as the creation of incubation centers have created an enabling business climate that contributed to the rise of many local start-ups.

Without a doubt, the Government still has a long way to go by implementing more programs and reforms of Agriculture sector. Private companies as well can bring technical solutions and expertise to the field. In addition, startups represent huge potential for development. They generate employment opportunities and possess strong understanding of social and business contexts. They are therefore very capable to make strong impacts but it is unfortunate that their roles are often overlooked in the sector. We strongly believe that enhancing them is one of the possibilities to reach agriculture improvements.

Orchestrating a large business network of peers in which the members interact and share the value creation will be a key driver for Ghanaian Agriculture.

Precisely, connecting relevant private and public actors to local start-ups, will empower them to implement solutions that are locally led and locally designed to address key issues such as market linkage and modernization of Agriculture. Businesses are welcomed to play an important role in such ecosystem by providing solutions and benefiting from opportunities of business expansion to new markets as well as investment friendly environment in the Republic Of Ghana.