Transforming Ghana’s Agricultural Sector

Agriculture is a significant contributor to the Ghanaian economy and an important source of employment, with over 40% of all workers engaged in farming. With growth and development, the country is gradually shifting away from this sector towards industry and services, but agriculture is still key for the economy, and a necessary vehicle for reducing poverty and food insecurity.

Increasing agricultural output is an important policy goal of the government, and can be achieved through three main mechanisms: increasing area under cultivation, improving the yield, and reducing post-harvest losses, all areas in which there’s currently room for improvement. Only about 64% of the total agriculture land area of Ghana is cultivated, 30% of agricultural land is under mechanization and the use of improved seeds and fertilizer is low. Post-harvest losses are also relevant, reaching about 18% of the country’s annual maize production. 

Government investment could potentially increase agricultural output in these areas, but with so many areas requiring attention, where would investment do the most good for every cedi spent? Ghana Priorities, a collaboration between the National Development Planning Commission and the award-winning think tank Copenhagen Consensus, provides new inputs for this discussion. Since last year, 28 teams of economists have studied over 80 initiatives to detect the smartest policies for the country not only in economic but also social and environmental terms. The results are now being published for the benefit of all Ghana.

To improve the agricultural sector’s production efficiency and post-harvest management, a group of researchers, namely Robert Darko Osei, Freda Asem, Charles Yaw Okyere, Wilson Appiah-Kubi, Justina Onumah and Yaw Ofori-Appiah from the University of Ghana and Brad Wong of Copenhagen Consensus analysed the cost and benefits of improved seeds and fertilizer, irrigation and mechanization to increase yields, and warehouses to reduce post-harvest losses.

Improved seeds can increase agricultural yields, but their use is still low in Ghana, mostly due to their high cost and lack of information among smallholder farmers. Subsidies for improved seeds for maize production could boost their usage by 30% and have a substantial effect on yield. The researchers estimated the total cost of this intervention at GH¢ 490 million for the highly efficient hybrid seeds and GH¢ 510 million for the popular open-pollinated variety (OPV), but the benefit in higher agricultural yields would be worth nearly GH¢ 1.8 billion with hybrid seeds and close to GH¢ 1.2 billion with OPV. Every cedi spent on this intervention would bring a return 2.3 to 3.6 times higher than the original investment.

Fertilizer use is also below the optimal levels among smallholder farmers, so the researchers examined the economic viability of maintaining the current 50% subsidy so that farmers can afford the required quantities. After 5 years the subsidies would gradually be lowered as farmers would benefit from higher yields. In total, the costs amount to GH¢ 460 million, but the intervention would increase fertilizer use by 27% and result in a benefit of GH¢ 2 billion, over 4 times higher than the cost.

The scarcity of water is an additional limiting factor for crops and climate change aggravates the situation, so the economists studied the possibility of rehabilitating 10 existing irrigation sites to cover a total area of 3,400 hectares. While the government would cover the cost of rehabilitation, the cost of ongoing maintenance would be borne by farmers in the form of user fees. Implementing this programme was estimated to cost GH¢ 360 million over three years, but it would result in benefits worth over GH¢ 510m over a 10-year period, 1.5 times the cost of the original investment.

Mechanization is essential for improving agricultural productivity but remains low among Ghana’s smallholder farmers. An intervention to increase the area under mechanization by 13% in 10 years through purchasing additional tractors and implements to improve soil quality and higher plant growth would cost nearly GH¢ 300 million. However, the benefit would be an 11% increase in yields and overall agricultural output. This benefit would amount to over GH¢ 820 million by 2039, which means every cedi spent on this initiative would generate nearly three cedis in benefit.

Investing in post-harvest loss reduction is another pathway for stabilizing prices, ensuring food security and reducing poverty. The researchers looked at constructing 46 new warehouses with an average capacity of 1,000 tonnes to curb post-harvest storage losses. For the entire 15 years of this intervention, the costs are estimated at GH¢ 50 million, but the benefits in post-harvest losses avoided, stability and an eventual reduction of prices amount to GH¢ 90 million, nearly double the cost.

Ghana’s agricultural sector has great potential for improvement through smart investments in the right policies and modernized technologies. Altogether, these five interventions provide policymakers interesting new inputs to help improve food security, reduce poverty and increase agricultural exports to boost the country’s economy.

This article was originally published in Ghana's newspaper of record - The Daily Graphic. It was co-written by Prof. Robert Darko Osei, Associate Professor in the Institute of Statistical, Social and Economic Research (ISSER) at the University of Ghana