The Agro-Processing Industry and its Potential for Structural Transformation of the Ghanaian Economy
The Agro-Processing Industry and its Potential for Structural Transformation of the Ghanaian Economy
Abstract and Keywords
The chapter examines the role of the agro-processing economy as a crucial engine for structural transformation in Ghana. We first discuss the evolutionary process of policies that have been enacted to promote the activities of the agricultural sector, and how these may have affected the agro-processing sector, given existing linkages. We also provide a discussion of the evolution and structure of agro-processing firms in Ghana, with some emphasis on their performance and constraints. We describe value chain activities of four key agro-processing subsectors in Ghana, in addition to case studies of firms in the fruit and fruit juices and nuts and oils subsectors. We emphasize the potential of the Ghanaian agro-processing industry in contributing to sustained growth and development.
The agricultural sector plays a critical role in the overall economic growth of the Ghanaian economy. Indeed, agriculture is expected to lead to a significant transformation of the economy through improvements in the sector’s productivity. The sector is divided into a number of subsectors: crops, cocoa, livestock, forestry, and fisheries. The crop subsector contributes about 66.2 per cent to the sector, with a large percentage of its products undergoing some form of processing (MoFA 2010). The major products include cocoa, cashew, sunflower, oil palm, groundnut, fruits, and vegetables, among others. The most common item that is processed is maize, followed by other commodities such as nuts and oils, fish, and grains such as millet, sorghum, and guinea corn.
Food processing is an important activity related to the agricultural sector and is dominated by predominantly small- and medium-scale firms which operate in the informal sector of Ghana. Indeed, the agro-processing sector may be classified into two groups: domestic processing and factory processing (Quartey and Darkwah 2015). Domestic processing activities are dominated by female workers who are predominantly illiterate and have no formal training. Skills in food processing are acquired mostly through apprenticeship and a large amount of family labour is employed. This domestic processing often leads to processed outputs of variable quality. Nonetheless, these small-scale units are able to create employment opportunities and make use of local resources. Factory processing activities, on the other hand, are mostly foreign-owned (p.192) (e.g. Nestle and Cadbury) or state-owned (e.g. Fan Milk). These factories can process large quantities of raw materials and can contribute significantly to the economy through export activities.
Agro-processing is important for a number of reasons, chief of which is a reduction in post-harvest losses. Post-harvest losses in maize, cassava, rice, and yam amounted to about 35 per cent, 3406 per cent, 6.9 per cent and 24.4 per cent per cent in 2007 (MoFA, 2007) as a result of, among others, ineffective food-processing technologies. According to the Ministry of Food and Agriculture (2012), only 5 per cent of food products harvested in Ghana are processed. Therefore, from a health and nutrition perspective, agro-processing has the potential to increase nutritional value and also increase food security, through a reduction in food spoilage and wastage. Processed foods also enjoy greater price stability on the world market and may therefore increase market opportunities for exports, contributing to income securities particularly in rural communities, which are mostly engaged in farming. The development of the agro-processing industry may also promote employment generation, contribute to enterprise development, diversification of rural economies, import substitution, among others. According to Quartey and Darkwah (2015), agro-processing is the most important sub-sector of the manufacturing sector, with food and beverages representing the largest component of processed commodities.
There are a lot of opportunities to add value to agricultural commodities—export of processed horticultural products (i.e. fruit and beverages), for instance, has become increasingly significant in the Ghanaian economy, particularly given the presence of a knowledgeable private sector. Indeed, export of produce from the agro-processing sector in Ghana is dominated by horticultural products (fruit and beverages), in addition to vegetables, roots and tubers, and palm oil. Pineapples, bananas, mangoes, and flowers were among the top non-traditional export commodities in Ghana in 2012. Notable horticultural processing firms include Blue Skies (processes pineapples and other fruits into juice for local and international markets); Pinora (processes pineapples and oranges into frozen concentrates for export); see, among others Owoo and Lambon-Quayefio (2017: Figure 1).
Presently, the agro-processing industry in Ghana is not well-advanced and there is a relatively low degree of value-addition to agricultural commodities, and few linkages with marketing and financial services, partly due to the small firm sizes and under-developed processes which lead to many of these firms operating below-capacity using inefficient technologies. According to Afful-Koomson et al. (2014), 85 per cent of all agro-processing firms in Ghana are micro-enterprises, 7 per cent are very small firms, 5 per cent are small firms and only 3 per cent are medium agro-processing firms. An implication of the limited scale of production of agro-processing firms in the country is that (p.193) they are faced with greater bureaucratic, legal, and administrative challenges, compared to larger firms. Typically, policy directives and initiatives are less tailored to the needs of SMEs within the country and therefore these firms are more often faced with overbearing regulations, delays, etc.
2. Agriculture’s Role in the Ghanaian Economy
2.1. Sectoral Performances
The agricultural sector has traditionally been the largest contributor to Ghana’s GDP and has been the cornerstone of the economy since the country’s independence in 1957. Between 2000–8 for example, the average sectoral share in GDP for this sector was 38.7 per cent, compared to 26.1 per cent and 31.3 per cent for the Industry and Services sectors, respectively (GSS 2008). Additionally, the sector employed about 55 per cent of Ghana’s population between 2000–7 (ISSER, SGER 2008).
By 2010 however, there had been a change in the landscape with regards to the economic contributions of the various sectors—the services sector became the largest contributor to the country’s GDP and growth in the agricultural sector began to stagnate. The services sector continued to drive the economy and accounted for approximately 50 per cent of total production during 2012–14, while the agricultural and industry sectors contributed about 23 per cent and 27 per cent, respectively (Ghana Budget Statement 2015); see Owoo and Lambon-Quayefio (2017: Figure 2).
There are a number of factors that may explain the deteriorating performance of the agricultural sector over time. First, the economic reforms of 1983, which led to the removal of agricultural subsidies, led to a slow-down in the performance of the food crop, fishing, and livestock sub-sectors. Additionally, inadequate access to markets and storage facilities and the resultant post-harvest losses may also explain the reduced performance of the agricultural sector. Other factors include the rapid loss of forest cover as a result of bushfires and logging activities, in addition to inadequate irrigation facilities and poor extension services. More recently, the discovery of oil deposits in the country has also been attributed to the declined performance of the agricultural sector, through the Dutch Disease phenomenon. This phenomenon refers to the adverse effects of a significant increase in a country’s wealth. Here, a boom in a natural resource sector of an economy, such as the oil sector in Ghana, leads to the shrinkage of other non-resource sectors. This may lead to the country specializing in the resource sectors, which makes the economy more vulnerable to resource-specific shocks.
Despite the increased significance of the services sector to the country’s total production, this sector may not easily be properly positioned to bring (p.194) about the necessary structural transformation of the Ghanaian economy. This is because, in the strictest sense, transformation involves not only the reallocation of economic activity across the three sectors (i.e. agriculture, manufacturing, and services), but the increase of new and more productive activities and a shift away from older, less productive, traditional activities. This increase of new and productive activities is what is expected to drive the economy forward while the shift from older, less productive activities is what is expected to diffuse the gains of productivity throughout the economy (McMillan and Rodrik 2011). In Ghana, however, the dominance of the informal activities in the services sector and the prevalence of low-productivity activities, in addition to the reduced significance and performance of the manufacturing sector make recent changes in sectoral contributions more indicative of a structural shift, as opposed to a structural transformation.
Interestingly, although the services sector records the largest contribution to GDP, the agricultural sector is the only sector that maintained its rising growth trend over 2013–14. While the industry and services sectors recorded declines in growth during 2012–14, the agricultural sector has been able to maintain its contribution to the economy, with the food and crops sub-sector accounting for about 75 per cent per cent of the total agricultural production within the period; see Owoo and Lambon-Quayefio (2017: Figure 3).
Generally, Ghana may have a very strong competitive advantage within its agricultural sector for a number of reasons. First, over two-thirds of the total land is fertile and requires little fertilizer to produce farm commodities. Second, the government has demonstrated significant interest in agribusiness and a commitment to support increased investment in this area. Third, there is a large unemployed youth population that may provide the much-needed labour supply for the agricultural sector.
2.2. Agricultural Policies and the Agro-Processing Industry
Generally, the role of government in the formulation and enactment of economy-wide policies that provide an enabling environment for the growth of economic activities is expected to be crucial. These policies are meant to engender conducive environments for private sector development through the provision of stable macroeconomic conditions such as low inflation, stable exchange rates and limited budget deficits. The economic reform of the 1980s, which mandated the promotion of free markets and trade liberalization have played an important role in encouraging exports of goods, in addition to the growth of the agro-processing industry. Efficient financial systems, good legal and regulatory environments, a reliable judicial system (p.195) are other factors that contribute to a favourable general economic climate to foster the activities of the agricultural sector. A fuller discussion of agricultural policies can be found in Owoo and Lambon-Quayefio (2017).
Historically, agricultural policies in Ghana have generally favoured the production of raw materials and primary products. After independence, continued emphasis was placed on primary agricultural production in an attempt to provide the requisite raw materials for the manufacturing sector, under the dominant import-substitution strategy. It is important to note that this period marks one of the earliest known attempts to promote agro-processing within the country. The main difference between the colonial and post-colonial era was the focus on the modernization of agriculture in the latter era, through emphasis on large-scale state-led production.
Between 1966 and the early 1980s, there were changes in government, which led to alternating socialist and capitalist policies on agricultural promotion and by the early 1980s, the agricultural sector began to decline. Between 1991 and 2000, the Medium-Term Agricultural Development Programme (MTADP) was the main policy that aimed to provide a comprehensive framework for the recovery and accelerated growth of the agricultural sector. The Food and Agriculture Sector Development Policy (FASDEP I) of 2002 was relevant chiefly because it adopted a sector-wide approach to guide agricultural development and interventions. The World Bank-IMF sponsored Interim PRSP (2000–2) and the Growth and Poverty Reduction Strategies, GPRS I (2003–5) and GPRS II (2006–9) were also significant to agricultural production in the country. The first Ghana Poverty Reduction Strategy (GPRS I), 2003–5 focused on agricultural development to drive rural development, while the second Growth and Poverty Reduction Strategy (GPRS II), 2006–9, and its follow-up, the Ghana Shared Growth and Development Agenda I (GSGDA), 2010–13, proposed that agriculture would lead the growth and structural transformation of the economy (METASIP 2010).
The second phase of the Food and Agriculture Sector Development Policy (FASDEP II) aimed, among many other things, to promote agro-based industrial development in the country. The main difference between FASDEP I and FASDEP II is that the latter adopted a value-chain approach to agricultural development.
Although various agricultural policies over time have included sections that focus on the development of the agro-processing industry in Ghana, Ghana may still from an integrated and strategic national plan that takes into account specific characteristics and challenges faced by small- and medium-scale firms in the informal sector of the country, who are largely engaged in agro-processing activities. Such a national policy plan may also facilitate important linkages between the agro-processing industry and other relevant sectors.
3.1. Definition of Agro-Processing and Linkages within the Economy
The FAO (1997) describes agro-processing as the transformation of products originating from agriculture, forestry, and fisheries. While agro-processing may involve global-to-local patterns (processing of imported agricultural commodities to be sold on the local market) and local-to-global patterns (processing of locally-produced commodities for export), the industry in Ghana appears to be mostly concentrated on local-to-local patterns (production of locally-produced commodities for domestic consumption), and dominated by informal sector activities.
Agro-processing may vary from simple preservation operations such as drying products in the sun to more complex, capital-intensive processes. Agro-processing industries are typically comprised of upstream and downstream industries. Upstream industries refer to the initial processing of agricultural commodities such as rice and flour milling, leather tanning, cotton ginning, fish canning, among others. Downstream industries are involved in more complex processing of intermediate products made from agricultural materials and include the making of bread, biscuits, textiles, paper, clothing, footwear, etc. (FAO 1997). Agro-processing firms are characterized by crucial backward and forward linkages.
Backward linkages arise when local producers are able to satisfy their demand for raw materials and services from local suppliers. This may refer to the supply of credit, inputs, and other production-generating services. Backward linkages may be established by the procurement of capital goods and equipment from other industries; or the purchase of agricultural inputs from farmers. Forward linkages on the other hand refer to the creation of additional opportunities in other parts of the economy, from the activity of agro-processors, through the sale of processed products. This refers to the marketing of these products and the generation of employment opportunities through the value-addition processes. Forward linkages have positive implications for increased export earnings, employment generation, and greater food security (Babu 2000) and may be established through sale of processed goods to final consumers; and sale of processed gods as inputs to other firms who use these as inputs to their own production processes.
The role of agro-processing in Ghana’s development could be vital, given its ability to generate increased demand for the products of other industries through backward or forward linkages. Despite the promising state of Ghana’s agricultural sector, the linkage between agriculture and industry appears weak, and value additions by the manufacturing sector remain low. Agro-processing, an integrated form of agricultural development may be expected to have the (p.197) strongest effect on agricultural production, given the increased demand for primary products from this sector. Additionally, the infrastructure (e.g. roads and transport facilities, power, etc.), which is essential for promoting the growth in agro-processing, could also be vital to increased growth in the agriculture sector.
3.2. Evolution and Structure of Agro-Processing Firms
According to Okorley and Kwaten (2000), agro-processing in Ghana can be traced back to the colonial period, where these activities were performed on a small scale and consumed locally. After independence in 1957, the industrialization drive embarked on by the new government resulted in a number of state-owned processing factories which were directly linked to the country’s agricultural products. These agro-processing factories were strategically located to use the primary agricultural products produced by the various regions. For example, the sugar factories located in Komenda and Asutuare in the Western and Eastern regions,, respectively, were meant to use the raw sugar canes produced in these regions as raw materials. Also, the Pwalugu tomato factory was located in the region to make use of the abundant supply of good quality tomatoes in Pwalugu and its surrounding areas. Others included the Bolgatanga meat processing factory and the Nsawam Fruit Cannery. About two decades after their establishment, after the overthrow of Kwame Nkrumah, most of these state-owned processing plants experienced declines in their production performance due to administrative and managerial challenges. As a result, some of these processing plants were either sold/privatized or left to run down.
In recent times, apart from cocoa which is processed on a large scale, the agro-processing industry in Ghana has been described as in its nascent stages according to Sutton and Kpentey (2012). The industry in Ghana is characterized by a large number of micro, small-, and medium-scale processing enterprises that are involved in activities such as gari processing, fish smoking, flour making, nut and palm oil processing, as well as fruit and juice processing. These artisanal processing activities have relied mainly on very simple and locally-manufactured technology in their processing activities. Over the years, processing of these products has moved from completely traditional methods of processing to semi- mechanized and then to fully mechanized methods.
3.3. Performance of Agro-Processing Firms and Contribution to the Economy
Although the agro-processing industry in Ghana is dominated by small- and medium-scale players, it continues to play a significant role in the Ghanaian (p.198) economy. According to the Ghana Export Promotion Authority, the industry grew at an average rate of 14.93 per cent in 2008–13 (GEPA 2014). A report from the United Nations Industrial Development Organization (UNIDO 2011) shows that within the manufacturing sector in Ghana, the agro-industry represents more than half (54.6 per cent) of total manufacturing value added. Specifically, the food and beverages subsector of the agro-processing industry accounted for about 32.5 per cent of total manufacturing value added in 2003 (World Bank 2009).
Da Silva et al. (2009) argue that the agro-processing industry in an important source of employment and income generation globally. In addition, FAO (1997) reports that the highest shares of employment in the agro-processing industries are found in Africa. In spite of the lack of national level data on employment in the industry, Amapadu-Ameyaw and Omari (2015) demonstrate that in Ghana the agro-processing industry is an important source of employment for the rural people, and especially for women given that the sector is dominated by women. In a survey of 272 small- and medium-scale agro-processing enterprises in Ghana, Afful-Koomson et al. (2014) found that Brong Ahafo, Western, and Northern regions employ the majority of the labour force in the industry. By firm size, the study also showed that micro agro-processing firms employ about 48 per cent of the total agro-processing labour force. This is therefore reflective of the importance of the industry for employment, income, and inclusive growth for the country.
The contribution of the agro-processing industry to total export earnings in Ghana cannot be overestimated. Export earnings from the agro-processing industry have increased from US$181.1 million in 2004 to about US$902.5 million in 2011, representing a growth of 398 per cent for that period (Oduro and Offei 2014). In 2004, the industry accounted for about 7.4 per cent of total export earnings even though this dropped significantly to about 4.9 per cent in 2011. In addition, processed and semi-processed agricultural products accounted for about 86.31 per cent of the country’s non-traditional exports, contributing US$2.16 billion in export earnings in 2014 compared to the US$2.11 billion in 2013 (GEPA 2014); see Owoo and Lambon-Quayefio (2017: Table 1) showing the trend in Ghana’s agro-processed exports between 2004–11.
With respect to sector productivity, findings from Amapdu-Ameyaw and Omari (2015) and Afful-Koomson et al. (2014) have found that the indigenous technology adopted among the firms in the industry has resulted in reduced efficiency and productivity, compared to the multinational agro-processing firms who are able to rely on modern and more efficient technology in their operations. The labour intensive and time-consuming features of the indigenous technology often hinder the opportunity to scale up operations, creating a scope for policy in this area.
Despite general and specific policies put in place by the Government of Ghana and aimed at promoting the agro-processing industry in the country, Ghana produces a little over 30 per cent of the raw materials needed by agro-based industries (RoG 2007). Almost all the food products sold to local markets have very limited value addition. Cereals and grain legumes are often just threshed, while roots and tubers and plantains are sold predominantly in their raw form. Recent attempts to produce cassava, plantain, and yam flour are yielding results but, at present, markets for these are not yet fully established. Low income levels are also a source of restrained demand for well-packaged cassava, plantain, and yam flour. It is important to note that there are hardly any statistics on the output of the agro-processing industry in the country. A critical element of the modernization of the agriculture sector is value addition to primary produce. However, the lack of reliable statistics on the supply of and demand for processed agricultural products, constrains the effectiveness of this sector (MoFA 2010).
A number of reasons may be proposed to explain the low uptake in agro-processing in the country. These include the lack of agro-processing facilities and modern equipment, which often results in significant agricultural yields going to waste; the high cost of equipment is another factor. Agro-processors also often receive limited information from extension officers, in addition to low access to adequate packaging materials. There is also a lack of marketing skills on the part of agro-processors.
Attention to hygiene and basic food safety procedures is found, at times, to be limited among informal enterprises, including agro-processors (FAO 2014). Knowledge of specific regulations and legislation governing food safety and hygiene issues is only evident among those processors who market their product through formal outlets. Other reasons are the irregular supply of energy, low youth interest in farming, agro-processing, and agribusiness, in general, due to low profitability. Additionally, the greater perceived gains in the mining sector also attracts youth away from the agricultural sector.
3.5. Policy Environment of Agro-Processing Firms
As outlined in Section 2, Ghana’s agricultural policies have aimed at the promotion of the agro-processing industry, through the creation of strong linkages between the agricultural and industrial sectors. Indeed, one of the key goals of the Ghana Shared Growth and Development Agenda (GSGDA) is the strengthening of the agro-processing sector. The focus on agro processing is important, given the rapidly expanding urban sector, and also due (p.200) to the sector’s potential to bring about a critical structural transformation of the economy.
Although Ghana’s agricultural sector continues to contribute positively to the country’s GDP, there remains a weak linkage between agriculture and industry. According to Nti (2015), the manufacturing sector grew by only about 2 per cent annually between 2006–13, with the share of manufacturing declining over the same period from about 10 per cent of GDP to 5.8 per cent. Although agro-processing of food and beverages represents about 30 per cent of manufacturing, poor linkages to agricultural raw materials results in little value addition, a situation which limits growth and transformation of the economy.
There have been policies formulated and implemented by Ghana’s government (through the Ministry of Food and Agriculture and the Ministry of Trade and Industry) that have had positive impacts on the agro-processing sector. The fruit and juice processing subsector, for instance, has benefitted from a number of incentives, including zero input duties on inputs, zero value-added tax (VAT) and national health insurance levy (NHIL) on inputs, low level corporate income tax, zero VAT and NHIL on imported packaging material, zero import duties on farm machinery, among others. The creation of the Export Development Agriculture and Investment Fund (EDAIF) in 2000 to promote non-traditional exports also plays a positive role in the agro-processing industry, through the provision of financial resources for export activities. The fertilizer subsidy program, initiated in 2008, involves the absorption of approximately a third of the cost of certain categories of fertilizers. This policy leads to a reduction in the costs of production of raw materials for agro-processing firms.
Despite the fact that agro-processing has been encouraged since the time of independence, with a policy of industrialization through import substitution, Ghana’s current agro-processing industry may be described as having low-value addition, with low technology at the cottage industry level, and few large-scale industries (Aryeetey and Mensah 2008; Quartey and Darkwah 2015). There has not been an entire absence of technological innovations. For example, development projects such as the Village Infrastructure Project support the introduction of technologies such as shea processing equipment in the northern region of Ghana. Development projects have also supported capacity-building through knowledge transfer and training of small and medium firms (Owusu-Kwarteng 2014). Nonetheless, it is doubtful that these technologies can support large-scale production, particularly by medium-scale firms. In Ghana, over 70 per cent of agro-processing occurs informally, posing challenges for technical innovations and knowledge transfer, in addition to quality control.
(p.201) With respect to local technology development and adaptation, there appears to be an apparent disconnect between local product development and uptake by local agro-processing firms, which further reduces technology adoptions in the agro-processing sector. Agricultural research could play a critical role in enhancing agro-industry competitiveness. However, policy makers may need to focus on better ways of facilitating the flow of agricultural technology from public discovery to private use, taking into account key barriers (cost- and non-cost-related) to technology transfer between public research institutions and private seed companies, and the role of the policy in impeding or accelerating technology development and transfer.
It is argued that the growth and development of small-scale food processing industries in West African countries has been limited as a result of inefficient and inappropriate technologies, poor management, inadequate working capital, limited access to financial institutions, high interest rates, and low profit margins Aworh 2008). Indeed, in Ghana, the presence of recent utility tariff increases and a high interest rate pose a major challenge to the survival and growth of small agro-processing firms in the country. Additionally, the recent income tax regime appears to be unfavourable. In past periods, agro-processing firms enjoyed a five-year tax holidays; under the new regime, businesses will be charged a 1 per cent rate during the five-year period, and subsequently, the standard corporate tax of 25 per cent.
4. Key Agro-Processing Subsectors
Four major subsectors of the agro-processing industry are discussed in this section. These include nuts and oils, grains, roots and tubers, and fruits and fruit juices. Owoo and Lambon-Quayefio (2017: Figure 4) models the value chain process of these products from the farm through to handling, processing, and distribution to the final consumer.
As mentioned above, a large amount of the agricultural products harvested at farms do not undergo any processing, but are distributed and consumed directly, either locally or internationally. Some of the agricultural output however does go through some degree of processing before final sale and consumption. A number of factors, however, play an important role in the agricultural production stage, and also during the agro-processing stage. As discussed above, the microeconomic climate is an important determinant within the value chain, and this can be influenced by public policies, as discussed above, aimed at improving the competitiveness of agro-processing industries. Additionally, the presence of institutions, such as adequate access to credit, food safety, and standards boards, access to technical knowledge, etc., are also important. In (p.202) Ghana, agro-processing firms face constraints with respect to the availability of these enabling institutions. Facilitating services such as good transportation systems, adequate storage facilities, efficient packaging systems, among others, also contribute to the production of agricultural commodities and agro-processing activities; see Owoo and Lambon-Quayefio (2017: Figure 4). It is important to note however that value chains vary for different products.
4.1. Nuts and Oils
The major nuts produced and processed in Ghana include palm nut, shea nut, ground nut, cashew and coconut. Palm oil and shea butter/oil are the predominantly processed nuts; these activities are typically carried out on small- and medium-scales in the country. Addaquaye (2004) classifies the processing technologies into three namely: the traditional manual method; semi-mechanized; and fully-mechanized methods.
Palm oil and shea oil/butter processing, which is predominantly undertaken by women, involves very laborious tasks, such as pounding/milling, kneading, washing, and cream boiling, all carried out with very simple household equipment such as the pestle and mortar. This process, according to Addaquaye (2004), is the main method of processing oils in most West African countries, including Ghana. Hall et.al (1996) claim that this process takes about 20–30 hours in order to produce substantial amounts of oil. Mensah (2001) also documents that about 80 per cent of Ghana’s shea butter is produced through the traditional processing techniques.
There have been attempts to reduce the long processing times and the excessive use of water and firewood in the processing of these oils. Additionally, women engaged in the process are exposed to long hours of heat and smoke. Collaborative work with the United Nations Fund for Women’s Development, non-governmental organizations such as Technoserve, and development partners such as the Netherlands Development Organisation (SNV) has led to the emergence of improvements in the form of semi-mechanized technologies which are locally designed and manufactured. Examples of such equipment include the hydraulic and mechanical presses which are meant to make oil processing more efficient. These have reduced processing times and facilitated more moderate use of inputs such as water.
Nonetheless, household units that produce oil at the micro- and small-scale levels continue to rely on traditional manual methods of extracting oil due to financial constraints in purchasing the locally-manufactured equipment. As a solution to the problem of financial constraint, in some instances, these rural women who are engaged in oil processing have organized themselves into groups in order to access the semi- mechanized processing technologies which allow them to increase their production.
(p.203) Over the years, these semi-mechanized technologies have developed further from equipment designed to perform particular operations such as oil digestion and oil pressing to machines that combine several operations in the process (FAO 2002). Apart from gaining access to the improved technologies, these women’s groups have also been able to undertake effective marketing of their products (Mensah, 2001). Some of the finished products include oils for household cooking, oil for the cosmetic industry as well as oil for the soap-making industry. In some cases, the palm nut is also processed into palm nut paste (used in preparing soups) and packaged for export.
Shea nuts are picked and processed into kernel by young women and girls. The pulp of the shea nut may be sold to domestic consumers. Men are typically responsible for bagging large amounts of shea kernels and transporting these to processing centres. These kernels may also be transported to exporters. At the processing sites, the kernels are crushed, roasted, milled into paste and boiled to an emulsion. The oil is then collected and cooled in order to obtain the butter. This processing of kernels into butter is typically handled by women. The butter is transported to the shea butter traders, who go on to export it for sales, or sell it in the domestic market. The value-addition process in the shea butter subsector is summarized in Owoo and Lambon-Quayefio (2017: Figure 4a).
The main grains cultivated in Ghana are maize, millet, sorghum and rice. Maize is the most important cereal crop produced in Ghana and it is also the most widely consumed staple food in Ghana (FAO 2008; Morris et al. 1999). In Ghana, processing of these grains is primarily undertaken by women using simple household equipment. Processing usually involves de-husking, roasting and milling into flour. The flour is further processed into different kinds of porridges, beverages, and other foods. Milling of the grains is usually done with mechanized locally fabricated grinders, which is an improvement from the use of stone grinders and pestle and mortar that were employed in the past.
In fairly recent times, grains have been processed on a medium to large scale using relatively more sophisticated technology. At the medium-scale level, grains are roasted and milled into flour and mixed with other legumes such as soya beans and groundnut and packaged for both domestic consumption and for export. On a large scale, grains are processed into grits and serve as raw materials for poultry farms and for giant brewery companies such as Guinness Ghana Brewery Limited and Accra Brewery Limited in the production of new beer varieties and other beverages. Also, grains in Ghana are processed into (p.204) high-end infant cereals such as Cerelac, using state of the art food processing technology by renowned food processing companies such as Nestle.
Smallholder farmers produce substantial amounts of maize in Ghana. These are sold in sacks to aggregators, who repackage these into 50 and 100 kilogram bags for sale to local consumers, and also to maize processors. This weighing function may serve as a form of value addition as the standard weight conforms to the sale requirements set out by the Ghana Standards Authority (GSA). In some circumstances, these market aggregators pre-finance the activities of smallholder farmers, who pay back at the time of harvest, with maize yields. Smallholder farmers may also sell to market ‘queens’ (women who often act as aggregators and contribute significantly to the quantity of specific crops and the prices that they are sold for on the market) for sale in local markets, or to processors such as beverage breweries. Maize processing typically involves the shelling and grading/sorting of maize products. The value chain for the production of maize is described by Owoo and Lambon-Quayefio (2017: Figure 4b).
4.3. Roots and Tubers
According to MoFA (2010), roots and tubers, which include cassava, yam, cocoyam, and sweet potato, contributes about 50 per cent of Ghana’s agricultural GDP. Of these four, cassava is the most often processed due to the fact that it is the most perishable of the roots and tubers, deteriorating within a period of two to three days after harvest (FAO 1998). The processing of cassava in the past has predominantly been carried out by individual micro and small processors. These processors have relied on very rudimentary technology made from local materials. Some of the finished products include gari, kokonte (sun-dried cassava chips/flour), cassava dough (agbelima), tapioca, and starch, usually for local and domestic consumption.
The introduction of starchy high-quality cassava flour (HQCF), glucose syrups, and industrial alcohol (which served as potential cassava-based industrial raw material for the bakery, plywood, paperboard, pharmaceutical, confectionery and beverages industry in the mid-1990s) has seen the emergence of several medium and large-scale processing enterprises in the country (Dziedzoave 2008). The technology used in the processing of cassava has also evolved from the traditional manual technique which involves the use of heavy knives for peeling and heavy reliance on the sun for drying the cassava chips. The traditional processing method also includes sifting, fermentation, and roasting.
Medium- and large-scale processing of cassava benefitted from the introduction of motorized cassava graters in the 1ate 1960s. Since this period, stakeholders in the industry, such as research institutes, university (p.205) departments, small-scale artisanal shops, and blacksmiths, have designed and developed different kinds of cassava processing equipment, with the support of various non- governmental organizations. Some of the locally manufactured equipment used in processing cassava in recent times has included graters, cassava chippers, screw presses, hydraulic presses, cassava dough disintegrators, sieving machines, grading machines, plate mills, hammer mills, and mechanical dryers. In recent times, these new technologies have been adopted, especially at the micro and small-scale levels by groups of women who have formed cooperatives in order to be able to purchase the equipment. Currently, the export of cassava chips for industrial use has been made possible through the efforts of private initiatives, supported by the government. The renewed demand for wet cassava chips especially in the brewery industry, which makes use of more sophisticated technology, has made cassava processing an even more profitable venture in Ghana.
Production of cassava is carried out predominantly by small-scale farmers. There are also a few medium and large-scale producers of cassava in the country. After harvest, small-scale farmers typically sell their fresh cassava root produce to assembly traders and other middlemen for sale in local markets. In some instances, assembly traders supply fresh cassava roots as raw material to some processing plants. Medium- and large-scale producers of cassava however sell their produce predominantly to processors, who make cassava products such as gari, agbelima, and kokonte, which is sold in local markets or exported. Processors also make starch which may be exported or consumed in the local market. The value chain for the production of cassava in Ghana is described in Owoo and Lambon-Quayefio (2017 Figure 4b).
4.4. Fruits and Fruit Juice Processing
Between the mid-1990s and 2002, Ghana depended on about four large fruit-processing companies that employed very expensive, capital-intensive and imported technology for fruit-juice processing in the country.1 The huge capital outlay required for fruit-juice processing therefore served as an entry barrier. During the same period, there was a proliferation of flavoured drinks through the use of syrups and these types of drinks required substantially less start-up capital. Due to the large number of producers of flavoured drinks, the Soft Drinks Manufacturers Association of Ghana was formed. The viability and the perceived shortage of players in the fruit juice industry propelled the leadership of this association to engage local engineers in the manufacture (p.206) of simple machines and equipment to overcome the huge capital outlay of fruit processing. This initiative was largely successful and the subsequent locally manufactured technology adequately handled processing steps that ranged from extraction of juices to bottling on a small scale. Washing and cutting up of fruits however remained a manual process. A main factor that increased the adoption of these technologies was its affordability. Also, the local equipment facilitates the production of juice on a relatively small scale. Over time, these local technologies have been further advanced with the introduction of hydraulic presses for juice extraction, a semi-automated process that further increases efficiency.
A major challenge in the juice-processing industry in Ghana is the issue of a limited supply of fruit, which serves as the main raw material for the industry. Farmers are often unable to provide a constant supply of fruits to the processors’ factories due to relatively high input prices and unexpected weather conditions. Also, fruit farmers in the peri-urban areas are gradually losing their farmlands to very large estate developers. With regards to packaging, the industry is challenged by a lack of access to clean and sanitary bottles. The heavy reliance on recycled bottles for its packaging is unsustainable as processors are not guaranteed continuous supply of these bottles. To get around this challenge, the association has begun to explore the option of using plastic bottles. These however entail additional costs.
Although not currently widespread, some players in the fruit-processing industry have begun to export cut fruits for export to European markets. Fruit export to European markets was precipitated by the high demand for the Ghana’s sweet pineapple variety, accompanied by the proximity of the country to its target market, which ensures constant supply to Europe via cargo planes. This mode of transportation is however costly, and therefore an association formed by pineapple exporters has explored cheaper options to transport fresh produce to Europe. Sea freight appears to be a cheaper option, and combined with the availability of cold storage facilities at the ports, has facilitated more efficient transportation of processed goods to European markets.
The process of learning in the fruit-juice processing subsector of the industry can be described as a top-to-bottom transfer of knowledge. Leadership of the association is periodically engaged in different capacity building and training activities at the national or international level. Knowledge and skills gained about new technologies as well as best practices in the industry, which are likely to improve the production process, are then cascaded down to members through locally organized training workshops for its members. Additionally, the availability of juice processing manuals, through funding from the agriculture ministry and development partners like GTZ, opens up the industry to more entrepreneurs.
(p.207) The supply of pineapples is dominated by small-scale farmers who operate on approximately 1–5 acres of land. Market women often play the role of middlemen, who take on the risks of storage, transport, and associated finance between farm and final consumer. Middlemen may supply harvested pineapples to small grocery stores or large-scale MNC shops. Alternatively, they may also supply pineapples to various processing plants. Once processed into juice or pulp, products may be sold in the local markets through retailers, or in the international market through the services of exporters, which may include large commercial farms. It is important to note that in addition to processed pineapples, large international supermarkets also buy the whole pineapple as well. The value chain for the production of pineapples is described in Owoo and Lambon-Quayefio (2017: Figure 4d).
5. Case Studies
This section provides case studies of two major firms involved in agro-processing in the country. This includes Sekaf Ghana Ltd, which processes shea butter for local and international markets (see Box 1) and Blue Skies Ghana Ltd, which produces and processes pineapples and other fruits for domestic and foreign consumption (see Box 2).
Blue Skies Ghana Ltd is a foreign-owned company that has been in operation since 1998; while Sekaf Ghana Ltd is a locally-owned company established in 2003.
Although agricultural production in the country is generally rainfall-dependent, there are a number of factors that make this sector a viable area to focus more attention and investment. These factors include the presence of a well-endowed drainage basin with networks of water bodies that can be tapped for irrigation; a well-established agricultural research system which has been successful in the improvement of crop production such as cassava, maize and cowpea; a large youth population which can provide a ready supply of labour for increased crop production; relative proximity to the European market for exports facilitation, compared to other countries in southern Africa, (GIPC 2013). A major strength of the agricultural sector is the diversity of commodities being produced in each of the three major agriculture zones within the country. The northern savannah zone, the largest agricultural zone, is well-known for its production of rice, millet, sorghum, yam, tomatoes, (p.208) cattle, sheep, goat, and cotton. More recently, mango plantations and ostrich farms are also gaining agricultural prominence in the zone. The coastal savannah zone is another important agricultural zone in the country. The lower portion of this zone drains into the Volta River and therefore provides a conducive environment for fish farming and aquaculture. Other commodities produced in this zone include sweet potato and soybean crops under irrigation, in addition to rice, maize, cassava, vegetables, sugar cane, mangoes, coconut and various livestock. The forest zone, with its more abundant supply of rainfall, is more noted for the production of cocoa. (p.209) Other crops cultivated in this area include coffee, oil palm, cashew, rubber, plantain, banana, and citrus crops.
Although the services sector currently contributes the majority share to total GDP within the Ghanaian economy, it is unlikely to sustain growth (p.210) and long-term development due to a recognized lack of competitiveness in this sector. First, although education levels within Ghana are relatively high, the quality of education that is needed to foster innovation and increased productivity is lacking. Rather, these average levels of education may be sufficient to spur production in light manufacturing sectors such as agro-processing, which typically relies on relatively lower skilled labour. Additionally, while service sectors thrive on well-developed infrastructure and technology such as good transportation systems, storage facilities, financial systems, among others, the current access to only basic infrastructure (e.g. electricity, road networks from farming communities to urban and peri-urban markets, irrigation facilities) in Ghana may be more conducive to activities of the agricultural and agro-processing sector. The experience gathered by the labour force in these blue-collar jobs in the agro-processing industries may also likely propel the establishment and growth of heavy manufacturing industries which will ultimately spur overall economic growth and development.
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(1) Information from this session was obtained from a one-on-one interview with the President of the Fruit Processing and Marketing Association of Ghana (FPMAG).