Business News of Wednesday, 25 January 2017
Source: Edward Desewu
The Alliance for Development and Industrialization, (ADI), an advocacy group and think tank comprising new generation entrepreneurs and business executives, has noted with great concern the decline in Ghana’s cocoa production over the past few years. From a peak of one million tons achieved at the start of the decade, Ghana’s annual cocoa production has declined to barely 800,000 tons – and sometimes less – in each subsequent cropping season.
This in turn has had a dire effect on the performance of the Ghanaian economy, especially at a time that the downturn in global market prices for both gold and crude oil, the country’s other major commodity exports, have seriously constrained our foreign exchange earnings.
ADI is therefore calling on the newly established administration of President Nana Akufo Addo to regard the restoration of our hitherto cocoa production levels, and indeed improvements thereon as a major priority for policy reform and implementation going forward.
It is most instructive, in this regard that Cocobod’s assertions that its distribution of 60 million seedlings annually since 2013 has been sufficient to support increased production are questionable. The hard truth is that an estimate 60 – 70% of those seedlings procured for distribution to cocoa farmers have not actually supported increased production because COCOBOD failed to follow up with the requisite technical and financial support services that would have ensured the efficient and effective use of the seedlings distributed.
The result has been substantial financial loss to the state. At the barest minimum, the loss of effectiveness of one third of the seedlings procured at GHc2 per seedling translates into a financial waste of some GHC80 million. Add another 20% of this as wasted cost of handling, transport storage etc and the loss to the state annually amounts to GHC96 million.
However if the loss to the state is computed on the basis of potential export revenues foregone, rather than input expenditure wasted, then the losses increase exponentially into the region of hundreds of millions of US dollars annually.
The lesson here is that support to cocoa farmers by the state needs to be provided in a holistic manner that addresses all the challenges of every cocoa farmer in Ghana. Simply providing seedlings and fertilizer to some of them falls far short of optimal.
Here it is necessary to emphasize that the state must support each and every cocoa farmer because every cocoa farmer is valuable and is deserving of state support.
We therefore propose that the new government adopts a strategy of applying Key Performance Indicators for each stage of the production chain, from planting, right through to harvesting.
This proposed process would start from establishing an accurate, up to date database which identifies each cocoa farmer, location of each cocoa farm and size of land under cultivation, as well as a physical and topological map of each farm.
Using this information, the state would be well positioned to make provision for suitable new, climate-smart technologies, across various processes such as mulching practices and pre-planting of plantain suckers one year in advance.
Equally important are strategies to protect cocoa farms from diseases such as mistletoe which have been ravaging them in recent years. This requires the resumption of effective mass spraying services. Also, since most cocoa farms in Ghana are aged, they require automated pruning and support services.
Financial service support for farmers also needs to be improved. In this regard, basic credit to farmers is an imperative, to enable them meet labour and production input costs. In view of the well documented difficulties in accessing agricultural finance, there is the urgent need to avail cocoa farms of agricultural insurance, which would make access to credit easier by protecting lenders against credit risk.
To enable our proposed enhanced support services by the state to be efficiently and effectively implemented, we believe that government has two options.
One would be for Cocobod to be given significantly enhanced capacity in the form of manpower and material resources to meet its expanded mandate and operations.
The other would be for the requisite holistic support services to be outsourced to the private sector, with Cocobod mandated to ensure effective monitoring of their operations and activities to ensure efficiency and effectiveness.
Considering the widely accepted superiority of the private sector in terms of efficient use of resources, we recommend the latter option. This would involve the provision of state support through the private sector in return for regulated service fees based on output performance.
There are two clear advantages derivable from this. One is that farmers would not be able to divert financial resource support from the state to other, unproductive purposes.
The other is that competitive, private sector support would ensure that farmers actual get the requisite proper support of the right quantum and nature. Private sector service providers, having been selected by government on the basis of competitive bidding, would be evaluated and rewarded on the basis of the efficiency and effectiveness of their services in terms of their facilitation of actual output. Thus would serve as the incentive to ensure that their services are delivered at the right time, in the right quantum and at most competitive cost, on a holistic basis, covering the supply of inputs such as seedlings and fertilizer, the provision of technical services such as mass spraying and pruning, and the facilitation of access to crucial financial services, namely credit and risk management through agricultural insurance.
Instructively, our proposed business model is already being implemented for selected cocoa farms in some parts of the country through a collaboration between the Mastercard Foundation and a private agricultural services provider, Pree-pez Limited. This however is limited in scope because it does not involve any support from the state and is therefore being executed strictly on commercial basis. However the results so far have been very impressive with regards to the effects of the intervention on production from the beneficiary farms.
Crucial to the efficiency of the proposed model, involving state support would be monitoring of both inputs and the resultant output. Cocobod would implement a reporting system that tracks the progress made by each and every farm, resulting from the state sponsored support delivered through private sector service providers. Here government would use GPS technology for real time reporting to monitor implementation.
Our proposed model fits in with the philosophy of the new government with regards to using the private sector to mobilize material resources and technical capabilities to generate productive capacity.
We hope our proposed model is given close consideration and we stand ready to provide details on how the model works, including empirical analyses of the similar model being implemented by the Mastercard Foundation and Pree-pez Limited.
We are confident that properly designed and implemented it would ensure a quantum leap in productivity and resultant output in Ghana’s cocoa industry in a most cost efficient and effective manner.