ARUN - Social Investment Platform | Partner’s Essay: “Challenges of the Agricultural Entrepreneurs in Ghana” 

Partner’s Essay: “Challenges of the Agricultural Entrepreneurs in Ghana”

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Tsutomu Nishimura, Partner

■Ghana, Africa

I have been working in Ghana from mid-June until mid-October.

As it is true for other African countries, Ghana`s agriculture sector is the main industry that accounts for 30% of their GDP. Ghanaian government places agriculture as the prioritized area for development as the agriculture scores high for creating employment opportunities, providing food security and the source of foreign currency revenue. As it is recent trend, agricultural investments by private sectors (both international and domestic) is also promoted. In the Ministry of Food and Agriculture’s agribusiness support division, I am assisting in providing information regarding agricultural investment promotion and establishing support systems for the private sector.

What do you imagine from the agriculture in Ghana?  Many of you may think of cacao, being made familiar by “Ghana chocolate.” In the south, Ghana has relatively high precipitation and produces the staple crop cassaba, yam, grains such as maize and rice, as well as fruits such as pineapples, mangos, and oranges. The production scope, however, varies. There are small-sized farms with fields that produce the amount of grains only for their consumption, a group of women who brings in the produces such as cassaba, performs primary processing (to flour) and sells it in the local market (Photo 1),  an owner of an orchard who employs laborers to cultivate land in order to expand production each year, and wishes to start a fruit juice processing plant (Photo 2), and a foreign capital enterprise that has installed a large scale irrigation system, and is producing grains from the areas of over several thousand hectares (Photo 3).

■Problems that Ghanaian Entrepreneurs Face

The local agricultural entrepreneurs and farm owners complain in unison that except for the direct investments from overseas, they do not have access to the funds to expand their farm lands and business, or starting a new business. Agriculture is a business against nature with high risks from the weather and natural disasters, therefore in many African countries without an established agricultural insurance system, most private financial institutions hesitate approving loans for the agricultural sector. The situation in Ghana is not an exception. The bank interests are high to begin with, and many more risk factors are added for agricultural loans, resulting in interest rates as high as 25 to 30%.  In such an environment, farm owners who work hard to expand their farm lands and want to move up to the next step of starting a product processing business would think twice about doing so. Furthermore, the reality is that many small-to-medium enterprises do not even have access to the financial system because of the terms of security and other obstacles.

Providing the agricultural sector with free input goods such as seeds and fertilizers, as well as  agricultural machinery is a common method of support, but many local farmers whom I have met in Ghana expressed that if the terms are appropriate, they would like to expand their business through bank loans. They do not need the loans of tens of millions of yen but somewhere around hundreds of thousands to millions of yen, the amount that enables investment in small-scale processing plants and agricultural machinery.  As a result of such investment, local employment is created as well.  Providing necessary funds for the local agriculture businesses and entrepreneurs with continuous technical support for business management and improvement of production/processing technology, I think this is a role that public sector plays, will result in the development of local agricultural industry.

■The Future

It seems that there are many obstacles before the local agriculture industries and entrepreneurs will experience fast growth, and become the candidates for social investment of organizations such as ARUN. The time has yet to come when, through investment, the system to support their business expansion and development become widely available, while various logistics are worked out to support the system. On the other hand, there are social investment funds that fund agricultural sectors in Africa. When the entrepreneurs start to use such opportunities and create successful models of the collaboration between social investors and local entrepreneurs, “development of agricultural business through investment” as a business model will become more diverse.

Rather than serious writing, to help you picture agricultural industry in Ghana, I’d like to introduce the entrepreneurs and the business that I mentioned in the article here.

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Photo 1 : Processing Cassaba (Peeling cassaba, processing machine, the product, cassaba flour)

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Photo 2:  Orchard Owner and Trial Juice Product

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Photo 3: Large Scale Farm with Large Irrigation System and Silos

 


January 2022
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