Background
The Government of Ghana (GoG) has engaged the World Bank and
USAID in supporting agricultural development project – the Ghana Commercial
Agriculture Project (GCAP), with the principal objective of improving the
investment climate for agri-business and developing inclusive Private-Public
Partnerships (PPPs) and smallholder linkages aimed at increasing on-farm
productivity and value addition in selected value chains.
‘Modernizing agriculture’ remains the overarching theme of
Ghana’s agricultural policy as well as the new private sector development
strategy. It focuses on a stronger role for the private sector in transforming
agriculture from a low-productivity subsistence-based sector to one
characterized by high-productivity, integrated value chains, and extensive
value addition. Government interventions are focused on the enabling
environment and other targeted measures to facilitate such investment,
alongside more direct interventions targeted at food insecure areas.
Ghana’s current agricultural policy framework and national
development plan emphasizes the importance of graduating from a
subsistence-based small-holder system to a sector characterized by a stronger
market-based orientation based on a combination of productive small-holders
alongside larger commercial enterprises engaged in agricultural production,
agro-processing and other activities along the value chain.
To maximize the
impacts of private investment in agriculture on development, a particular focus
is to facilitate small-holder linkages with other commercial businesses
through, for instance, contract farming and out-grower schemes. Recognizing
some of the challenges of past efforts, the Government is adopting a new
approach of public-private partnerships (PPPs) in which complementary and
targeted public support serves to leverage of facilitate private investment in
the agriculture sector.
A major thrust of the new approach centres on enhancing the role
of commercial agriculture and strengthening agricultural value chains. Under
the program the Government is seeking to broaden and deepen private sector
investment in agriculture – noting that it is already occurring but can be
augmented – in the following ways:
1. Additional
large-scale commercial farms in the cereals sector has the potential to utilize
large tracts of unutilized land to meet domestic consumer demand (rice, white
maize) and as lower-cost imports to the poultry industry (yellow maize) and,
ultimately, for export to the region.
2. There are
additional opportunities for multinational investors to expand the horticulture
sector, given Ghana’s established market presence in Europe and favorable
geographical position, to raise export revenues.
3. Additional
agro-processing especially in the horticulture sector can provide alternative
markets to local production that is unable to meet European requirements
(tastes or standards) and create jobs.
4 .More private input
dealers can extend the availability of seeds and fertilizer to raise
productivity across the sector.
5.Additional private
enterprises engaged in the marketing and processing of food staples for local
consumption, for instance by aggregating output from small-holders for bulk
distribution and processing to generate economies of scale in the value chain.
Innovative institutional arrangements between large(r) scale
investors and small-holders can generate mutual benefits and provide effective
mechanisms for bolstering small-holder productivity. For instance, out-grower
schemes provide linkages between vertically integrated plantations and
surrounding small-holders. Contract farming arrangements can provide benefits
for input and output dealers and small-holder farmers. To this end, the
Government is keen to develop the Accra Plains through Public Private
Partnership (PPP) and provide support to encourage the development of nucleus
investment arrangements for the benefit of local smallholder farmers.
The Proposed
Project
The project development objective is
increased access to land, private sector finance, input output markets by
smallholder farms from PPP in commercial agriculture in Accra Plains and SADA
Region and increasing on-farm productivity and value addition in selected
value chains. The main outcome of the project would be an improved investment
climate that delivers more – and more inclusive – private sector investment in
agriculture. Accordingly, project success would be defined by the following
results:
1. Increased private
investment in agriculture should increase across a range of related enterprises
including large(r)-scale commercial farming, agricultural processing and
marketing industries and small-scale entrepreneurial farmers.
2. An expansion of
marketing arrangements that link small-holders with larger commercial entities.
(These commercial entities could be engaged in production, as in the
traditional nucleus-out grower type model, or in downstream marketing or
processing, in the case of contract framing.)
3. Increased
productivity of small-holder farmers brought about by a combination of (input
and output) market access improvements, improved technology and behavioral
shifts resulting from lower risks and/ or improved incentives generated from a
stronger private-sector led agricultural sector.
Proposed Project Approach:
The proposed project would be based on four main concepts:
1. Support and
strengthen the Government’s ability to promote a sound enabling environment for
commercial agriculture investment (large and small; foreign and domestic) by
improving the enabling environment and developing a more pro-active investment
promotion orientation. This could include the provision of critical
infrastructure in key locations.
2. Address the
fragmented nature of existing policy and capacity by consolidating core
functions into a streamlined institutional structure (perhaps a
one-stop-shop). Also to improve the oversight and monitoring capability
to promote sustainable agro-industry.
3. Adoption of a
‘transaction based approach’ by seeking to identify, package, negotiate and
secure specific investments, with a PPP element where necessary. It is
envisaged that a set of viable discrete projects would be identified during
project preparation such that these could be mobilized rapidly upon project
effectiveness.
4. Social and
environmental issues to be at the core of the project, with all commercial
agriculture investments to adhere to national and World Bank standards.
The project would adopt a ‘proof of concept’ approach and would
aim to adapt to experience on two fronts. First, the limited application
of PPPs in Ghana means the details of successful partnerships would be learned
through application.
Second, the fragmented institutional architecture
would need to be resolved early through an interim arrangement constructed
around a project implementation unit while a longer term solution is identified
(as part of project activities). Consequently, the project would need to
be flexible to adapt to experience. A transaction-based approach would
help retain a sharp focus on results while allowing for a pragmatic
implementation modality. This flexibility is reflected in the project
scope outlined below.
Project Scope
The proposed project would have three components, with the first
being focused on improving the overall investment climate for agricultural
development in Ghana, and the second and third directly targeting private
sector led agricultural investment involving smallholder farmers through PPP
arrangements. The second and third components would initially be focused
in the SADA Region and Accra Plains regions.
Proposed Project
Components
Component One: Strengthening investment promotion
infrastructure, facilitating secure access to land and project management. This component would ensure that Ghana attracts
investors willing and able to invest in strategic subsectors that contribute
most positively to national development gains. It would promote a secure
investment climate – particularly with respect to access to land – that
reflects rights and obligations of investors, government and affected
communities.
This component would establish a ‘one-stop shop’ for investment
promotion, drawing on the competences from existing Ministries, Department and
Agencies in a streamlined institutional architecture. This would transform the
current fragmented and ineffective regime to one in which agriculture-related
investment promotion efforts are focused on securing domestic and foreign
investments in activities/ locations/ business models that most contribute to
Ghana’s national development goals. It would also strengthen the oversight
capacity of Government to ensure investors’ development plans are being
fulfilled and to develop more orderly exit of failing investors and the reallocation
of land to new entrants.
This component would also support an improved mechanism for
facilitating access to land by reducing the search costs to potential investors
through an expansion of a database of land suitable for investors and by
actively matching potential investors with suitable land owners. In the case of
land under traditional ownership, due diligence and sensitization of
surrounding communities would promote an understanding of the rights and
obligations from subsequent lease agreements. A ‘model’ lease agreement would
be developed to form the basis of all subsequent investor agreements, and which
includes indicative arrangements for managing leasehold payments and other
community development-type funds.
Component Two: Securing PPPs and small-holder
linkages in the Accra Plains This component will conclude a transaction for a PPP in an
irrigation investment in the Accra Plains. The entire Accra Plains Plains area
extends to around 150,000ha and the ultimate objective of the Government is to fully
develop the entire area.
It would also assist with land
acquisition under the one-stop-shop proposed above. It would also include
additional support to extend nucleus investments for the benefit of
small-holders through various means including assistance to expand necessary
infrastructure into out-grower lands as well as direct support to the
smallholders to ensure they are capable out-growers.
This component would
focus on the Accra Plains, where an area has been proposed (in general
terms) for a substantial irrigation investment to be managed under a PPP and
which would supply water to both large commercial farms and an out-grower
scheme.
Component three: Securing PPPs and small-holder
linkages SADA Regions
This component would involve the identification and
realization of private investments in the value chain through PPPs.
Investors could be local or international. Investments could be in
production or processing and ancillary businesses.
This would provide
assistance for the establishment of large commercial farms as nucleus farms
with appropriate linkages under out-grower schemes. Support to the
nucleus would include critical access infrastructure including roads, power
connections and primary irrigation facilities. This would include support
to warehousing and storage through the rehabilitation and concessioning of
publically owned marketing infrastructure (including the development of
warehouse receipts system). It would also include support for agri-business
centers that provide essential services and inputs to small-holder
farmers.
This would initially focus on the Northern Region, but would be
responsive to opportunities in other regions if these were of sufficient
scale. (It would be important to avoid supervisory activities being
spread too thinly across a wide area in order to keep management costs down.)
For all investments so assisted, the project would seek
to leverage small-holder participation. Project activities would include developing a framework
for out-grower schemes and contract farming arrangements that would sensitize
potential small-holder participants in order to align expectations of both
small-holders and the ‘nucleus’.
This project would support start-up
costs resulting from institutional demands of sustainable small-holder linkages
as well as any investment costs from new agronomic practices etc. that maximize
the impacts of marketing linkages. Activities could include:
organizing small-holder participants into groups and building their capacity to
become capable partners, recognizing the greater demand for business acumen in
negotiating beneficial arrangements with investors; grants to meet the
establishment costs of small-holder farmers (land preparation, planting
material, etc.); and/or working capital for out growers to procure necessary
farm inputs (improved seed, fertilizer).
To encourage investors
themselves to finance small-holder linkages as part of their integrated business
model (and thereby maximizing the use of IDA resources), while recognizing the
increased financial risks from doing so, this would include a risk sharing
mechanism (eg. first loss cover).
