GHANA“Unlocking Agricultural Values”

John Aggrey

john_aggrey@outlook.com

December, 2013

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• It contributes about 23% to GDP (2012) and grew at a rate of 0.8%(2011)• Contributes about 45% of all export earnings.• Government is focused on accelerating the modernization of agriculture to

transform the economy through the continuous introduction of technology , improved seeds, agric mechanization and investor participation

Subject Highlights

Sector Overview

HIGHLIGHT SUMMARY

• Crops • Cocoa• Livestock• Fisheries• Forestry

Sub-sectors

• Exemption from customs import duties on plant and machinery• investors can have 100 % ownership in local companies and joint start-ups• incentives for agro-processing activities, including a 5-year tax holiday from

start of operation• Tax rebate for using local raw materials• Guarantee of unconditional transfer through any authorized dealer bank of

dividends and net profits

Investment Incentives

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EXECUTIVE SUMMARY

The Government of Ghana is committed to increasing private sector development and agricultural capacity to realize its vision of Ghana as a prosperous middle-income country by the year 2020.

The Food and Agriculture Sector Development Policy (“FASDEP” II) includes plans to modernize the agriculture sector through strengthening value chains, enhancing productivity, improving quality standards, and promoting public-private partnerships.

The identified basic problems of the agriculture sector include: reliance on rain fed agriculture and low level and relatively inefficient irrigated agriculture; low level of mechanization in production and processing; high post-harvest losses as a result of poor post-harvest management; low level and ineffective agricultural finance; poor extension services as a result of several institutional and structural inefficiencies; lack of ready markets and processing; low performing breeds of livestock; poor feeding of livestock; high cost of feed for poultry; poor livestock housing and husbandry management; competition from imports and poor post-production management of livestock products; over-fishing of natural waters; undeveloped fish value chain (e.g. inadequate supply systems for fingerlings and feed) and lack of skills in aquaculture.

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EXECUTIVE SUMMARY

The sector offers a unique set of advantages to interested investors, including large plots of arable land, ecological zones that make the country suitable for the production of a diverse range of commodities (maize, rice, oil palm, chili, cashew and among others), a strong enabling environment for investment, and established export channels to Europe and the United States

Strategies in policies and private sector-government participation to improve agricultural performance should therefore focus on aggressive investments to address these constraints and to improve agricultural productivity and enhance market access.

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THE STATE OF THE AGRICULTURE SECTOR IN GHANA

It is difficult for African economies to be competitive in global agriculture markets due to agriculture subsidies in the U.S. and Europe, efficient farming practices in Brazil and Argentina, and the scale of rice production in Thailand and Vietnam.

In terms of staple crops, Ghana is largely a net importer. Not surprisingly, global maize production is dominated by the United States, which offers generous subsidies to corporate farms in the Midwest, and Brazil and Argentina, which have some of the most efficient agricultural processes in the world.

Rice quality is rated on a scale of 1 to 5, with 1 being the highest quality. Rice from Southeast Asia receives a 2.4 on average. In contrast, Ghanaian rice receives a 4.7. As a result, Thai and Vietnamese rice are popular in the urban areas, where customers are less price-conscious (even though the difference in price is not huge).

Other top rice importers include the United States and Pakistan.

Ghana is highly competitive in one key cash crop – cocoa, for which it controls 24.5% of the world market – and involved in the importation of several others

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REGULATORY BODIES AND PRIMARY ROLES

INSTITUTION FUNCTION

Ministry of Food and Agriculture( “MOFA”)

• To promote sustainable agriculture and thriving agribusiness through research and technology development, effective extension and other support services to farmers, processors and traders for improved livelihood.

Ministry of Health (“MoH”)

• Provision of a strong and effective advocacy role in inter sectoral action in the health delivery.

• Provide framework for the regulation of food, drugs and health service delivery and practice.

Ministry of Trade and Industry (“MOTI”)

• Responsible for trade and industry policy formulation, monitoring and evaluation.

• The principal agency responsible for coordinating and monitoring the implementation of private sector programmes and activities

Food and Drugs Board (“FDB”)• charged with the regulation of food, drugs, Food supplements, herbal

and homeopathic medicines, veterinary medicines, cosmetics, medical devices, household chemical substances, tobacco and tobacco products.

Ghana Export Promotion Authority(“GEPA”)

• GEPA is the National Export Trade Support Institution of the Ministry of Trade and Industry (MOTI) responsible for the facilitation, development and promotion of Ghanaian exports.

Ghana Standard Authority (“GSA”)

• It undertakes testing and inspection services of all products• Has the mandate to offer product certification approval• Destination inspection of imported high risk goods

Ghana Free Zone Board (“GFZB”)

• The GFZB was established by an Act of Parliament to enable the establishment of free zones in Ghana for the promotion of economic development, to provide for the regulation of activities in free zones and for related purposes, organizing market missions to enable Ghanaian exporters meet prospective overseas buyers.

INDUSTRY OVERVIEW

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Sub-sectors

Key Trends Agricultural Growth Rate

Industry breakdown

Drivers of Growth

• Farm inputs availability • Fertilizer subsidies• Investment incentives

Challenges

• Land acquisition• Inadequate farm inputs• Loan access• Low investor relations

59.9%

14.3%

11.1%

7.6%

7.1%

Agricultural Sub-sectors

Crops Cocoa Forestry Fisheries Livestock

Source: MOFA, 2012

Agricultural performance as measured by the value of Agricultural Gross Domestic Product (“AgGDP”) over the period 2007-2012 increased from GH¢5.3 billion in 2007 to GH¢6.6 billion in 2012.

It contributed to about 45% of all export earnings.

Ghana remains a major net importer of agricultural food products, with imports of approximately 1 billion and exports of about $100 million in 2011.

2007 2008 2009 2010 2011 2012-1

4

9

7.4 7.2

5.3

0.8 1.3

Agric. % Growth Rate

% G

row

th R

ate

Source: MOFA, 2012

Source: MOFA,GSS 2012

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RICE

Major Importers

Top rice exporters to Ghana (2005-2010) Overview

The value chain for rice in Ghana is divided into two main channels: the local rice and the imported rice value chain.

Rice imports are subject to an import duty of 20%. Per capita consumption of rice in 2010/2012 is

estimated at 25.83 kg. Rain-fed rice production contributes 84% of total

current production, generating average paddy yields of 1.0 - 2.4 metric tonnes per hectare.

while irrigated production accounts for just about 16% of production but produces the highest average paddy yields of 4.5mt per hectare.

Source: MOFA

Production

Source: UNCOMTRADE

36.19%

30.36%

21.60%

2.38% 1.95% 0.99%

Thai-land

Vietnam

USA

Pak-istan

India

Togo

Source: UNCOMTRADE

Royal Bow Company Ltd Olam Cereal Investment

Co. Gh. Ltd

CCTC Ezal Trading Gh. Ltd.

2009 2010 2011 20120

100,000

200,000

300,000

400,000

500,000

600,000

391,440

491,603 463,975 485,500

Annual variations in Rice Production

Rice Prod (MT)

Source: MOFA

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OIL PALM

Of the 17 major vegetable oils traded on the international market, palm oil is the most important

Top African Oil Palm Producers, 2011/2012 Overview

According to MASDAR’s 2011 Oil Palm Master Plan Study for Ghana, “the projected domestic national demand for fresh fruit bunches (FFB) was 6.7 million mt in 2011 while local production for that year was only estimated to be 3.7 million mt.

In Ghana some of the major players include in SIAT, Wilmar International and NORPALM.

Palm oil is 5-10 times more productive than other oil bearing crops and has the lowest requirement for inputs of fuel, fertilizers and pesticides per tonne of production.

Palm oil presently accounts for a 21% share of the global edible oil market.

Source: UNCOMTRADE

Source: MASDAR, 2012

Nigeria46%

Sierra Leone2%

Angola3%

Benin2%

Cameroon10%

Congo DRC10%

Cote dÍvoire16%

Ghana6%

Guinea3%

Liberia2%

0

10

20

30

40

50

60

49.05

42.15

24.05

16.6512.95

8.71 7.425.33 4.82 4.03 3.1

Global Consumption (million tonnes)

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CASHEW AND SHEANUT

EXPORT EARNINGS OF CASHEW AND SHEA NUT AS AGAINST OTHER COMMODITIES

HighlightsOverview

The prospects of Ghana's cashew production is high because the country can rake in between US300m and US400 if increases cashew production from the current 50,000 metric tonnes to 200,000 tonnes annually.

Production was more than 20,000 metric tonnes of raw cashew nuts in the year 2012, with its production largely centred in the Brong-Ahafo Region.

he country is considered to be the hub for trading cashews from neighbouring countries, including Cote d’Ivoire and Burkina Faso.

Cashew Sea Food Sheanut Banana Pineapple Coffee Yam Products0.00

20,000.00

40,000.00

60,000.00

80,000.00

100,000.00

120,000.00

140,000.00

160,000.00146,716.33

33,451.53 29,056.7616,946.04 16,519.17 12,922.09 12,481.42

2011 2010

Source: GIPC, Ghana Statistical Service, 2011

In total, more than 80,000 metric tonnes of raw cashew nut was exported in 2011. On the processors side, Ghana has an installed processing capacity of about 18,000 metric tonnes.

With the global demand for shea butter in the Western world, it has become a hot commodity.

It is used in food products such as chocolates. Confectioners use it as a cocoa butter equivalent to give chocolate a higher melting point and a smoother texture. The butter is used in popular chocolate bars such as Milky Way and Kit Kat.

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BANANA

WHY INVEST

EU Imports from Ghana (ton)Corporate Overview

The Ghanaian banana industry has a significant advantage in that most of the banana farms were put in place only a few years ago. In 2010, bananas represented 47.7% of Ghana’s fruit exports value to the EU market.With the decline of the pineapple industry, the banana sector ensures a sustainable alternative and constitutes an important source of employment and incomes, contributing to the social and economic development of the country. It is also a foreign exchange earner that contributes to Ghana’s balance of payments. 2007 2008 2010 2011

0

10,000

20,000

30,000

40,000

50,000

60,000

33,404

46,232

52,631 53,167

Source: EU- Ghana Trade Reports

Investment component general investment promotion; land administration improvement; services and infrastructure provision for banana developments or extensions including cold storages.

Agricultural component

increasing local capacities to provide the sector with quality inputs and resources (technology, research, development and extension partnership with private sector;

Social component

housing for banana workers and their families, including access to basic commodities and services (water, electricity, health, education);

Competitiveness component

extension of current plantation areas to improve productivity of commercial (exporting) banana growers;

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INVESTMENT CLIMATE AND INCENTIVES

Investors can have 100% ownership in local companies and joint start-ups.

Exemption from customs import duties on plant and machinery, equipment and accessories imported exclusively and especially for establishing enterprises

Multilateral Investment Guarantee Agency (MIGA) membership – Ghana’s signature of the World Bank’s MIGA convention guarantees coverage against non-commercial risks

Additional incentives for agro-processing activities, including a 5-year tax holiday from start of operation

Location incentives –After the initial 5-year tax holiday period, agro-processing enterprises that use local agricultural raw materials as their main inputs will have corporate tax rates based on location

LOCATION

Accra-Tema-20%,

Other Regional Capitals-10%,

Outside Regional Capitals-0 %,

Throughout Northern, Upper East, Upper West Regions –0%

Source: Ghana Investment Promotion Council

THANK YOU