Agricultural Transformation in the Savannah

This chapter examines how farmers have adjusted their farming practices since the 1980s, especially in response to emerging land scarcities, rising wages, and changing markets. Data was collected in four representative villages in the Northern part of the country through focus group discussions and interviews, and the data was supplemented with a farm modeling analysis. It is found that farmers have successfully adapted by increasing the size of their crop areas, growing more market-oriented crops, adopting labor-saving technologies like tractors and herbicides, and by growing fewer labor-intensive crops, which collectively has allowed them to increase their farm incomes and labor productivity. But as opportunities for bringing more land into cultivation are becoming exhausted, farmers will need to shift towards more yield increasing technologies.

Strong Democracy, Weak State

Through a comparative analysis of presidential tenures from Jerry Rawlings through John Mahama, this chapter notes that Ghana’s stable but modest growth reflects its long-term democratic stability and the need to retain voters’ support through expanding access to education and health. However, rapid growth through structural transformation has been hindered by weak state capacity and three political economy factors. First, robust democracy has enabled a broader range of interest groups to permeate policymaking decisions, often resulting in policy backtracking and volatility and fiscal deficits that stifle credit access for domestic business through high interest rates. Secondly, public sector reforms historically were not pursued to the same degree as macroeconomic reforms so, state bureaucrats lack the technical capacity to identify winning industries or to facilitate the transition to higher value-added sectors. Thirdly, successive governments have failed to invest in strong, productive relationships with the private sector. Consequently, achieving transformation in Ghana will require more activist economic policies within the confines of the state’s capacity.

Urbanization and its Impact on Ghana’s Rural Transformation

Urbanization without industrialization is a major feature in Ghana, as elsewhere in much of Africa. This chapter explores how urbanization in Ghana has affected agricultural development in terms of rural employment, the farm size distribution, and use of modern inputs. In examining these relationships, the authors recognize that there have been distinct spatial patterns of urbanization in Ghana, and urbanization has not affected agriculture equally throughout the country. Therefore, the chapter develops a spatial typology of seven types of districts based on their city population size and location in the north or south of the country and examines the share of households employed in agriculture, nonagriculture, or both across these different district types. The findings illustrate that urbanization is increasing the share of rural households in the nonfarm economy, and contributed to a shift towards more medium-sized farms in the agriculturally important areas of the north. The chapter further tests the induced innovation hypothesis, which predicts that urbanization and associated increases in population density and market access should lead to more intensive farming practices. The findings show though that while there has been substantial uptake of fertilizers, herbicides, and mechanization in recent years, there is only limited support that this has been driven by urbanization.

Ghana’s Agricultural Transformation

This chapter provides a broad overview of the agricultural sector and helps situate the narrower focus in each of the subsequent chapters of Part II of the book. Ghana’s agriculture has performed reasonably well since the 1980s in terms of its growth, labor productivity, farm incomes, and the decline in rural poverty. It then provides a description of the main features of the agricultural transformation that has occurred, and explains three drivers underlying these patterns: the policy environment; growing population pressure on the land base; and rapid urbanization. The chapter also identifies how agricultural transformation is progressing differently in the northern and southern regions of the country. In the former, substantial increases in farm production and incomes has come more from increases in the cropped area and crop mix than from increased yields. Land productivity has increased only modestly, but labor productivity has increased substantially in line with wages. In the latter, farm households have taken advantage of urban–rural linkages to diversify into nonagricultural sources of income, and farms have become smaller and more part-time. Despite having greater access to urban markets, services, infrastructure and an increasing population pressure on the land base, there is little evidence of agricultural intensification leading to higher land productivity in these areas.

Future Prospects

Chapter 10 concludes the book by looking to the future. It reviews key findings from each of the preceding chapters and then considers the implications given future trends and Ghana’s policy environment. The chapter highlights the need to develop a broader swath of high-productivity industrial and agricultural activities if Ghana is to succeed in sustaining or even accelerating its rate of growth in per capita income. To this end, the chapter identifies considerable opportunities within the agriculture sector and broader food system, including meeting a rapidly growing domestic demand for higher-value foods like fruits, vegetables, and livestock products, and for processed and pre-cooked foods. The chapter acknowledges that the feasibility of addressing all of these areas requires a consideration of the political and policy environment, and more effective public–private partnerships than has been evident in the past. The chapter also provides an update on the government’s most recent initiative, Planting for Food and Jobs (PFJ), and contrasts this with the vision of a market- and private-sector-led transformation of the agri-food system previously discussed.

Introduction

This chapter provides an overview of the book and places Ghana’s transformation trajectory in the broader sub-Saharan African context. It notes that much of the growth in Africa over the last decade was driven by growth in the services sector rather than in manufacturing. The sustainability of this trajectory is problematic since services are mostly domestically consumed and therefore constrained by growth in national demand, and labor productivity is generally low. The chapter then argues why modernizing agriculture offers one route for African countries to both improve labor productivity and provide decent jobs. Such modernization involves a shift towards commercial farming practices, stronger integration of agricultural value chains, and a focus on opportunities in the broader agri-food system. The chapter justifies why Ghana offers a useful case study for in-depth analysis of the options for modernizing agriculture and summarizes the key research questions addressed in each of the subsequent chapters.

Unleashing the Power of Mechanization

After reviewing recent developments in the uptake of agricultural mechanization in Ghana, and the factors that are driving the growth in farmers’ demand, this chapter discusses supply-side constraints to greater mechanization, and evaluates the government’s program of subsidized tractors through Agricultural Mechanization Services Centers (AMSECs). The chapter concludes that such interventions often lead to market distortions in machinery prices, encouraging rent-seeking behavior, and discouraging the development of private sector supply system. The program is also unnecessarily costly to the public sector. Instead, the government would be more effective in achieving its goals if it were to withdraw from the AMSEC program and instead play a more complementary and supporting role to the private sector. This might include funding appropriate mechanization research, technical training of young mechanics, and ensuring that financial institutions can provide the longer-term lending needed by private agents and farmers in the mechanization supply chain.

Developing Agricultural Value Chains

This chapter asks how can agricultural value chains be further developed in Ghana given prevailing market failure problems that constrain the private sector from playing a greater role. Using first the experience of public interventions in the cocoa subsector through the Ghana Cocoa Board, the chapter evaluates how interventions in three other value chains compare: pineapples, rice, and tomatoes. These latter three crops have under-exploited opportunities because of the inability of farmers to produce sufficient amounts of high-quality farm products that meet urban market, agro-processor, and export demands. This is due to a lack of better seed varieties, an absence of quality control through grading and pricing along value chains, inadequate post-harvest handling, and few large-scale agribusinesses willing or able to take the lead in developing new export markets. The findings reveal opportunities and constraints along the value chains of these commodities, identifies the roles that the public sector should ideally play and, in turn, analyzes whether it has the capacity to feasibly do so.

Ghana’s Economy-wide Transformation

This chapter relies on a conceptual framework development by Dani Rodrik (2014, 2018) that identifies three sources of growth: accumulation of fundamental capabilities (e.g., better institutions, enabling policies, and healthy, educated workers), catching-up growth through expansion of modern manufacturing, and structural change due to the movement of workers from low- to high-productivity sectors. The chapter argues that Ghana has invested in fundamentals rather than in transformative policies, resulting in slow but persistently stable growth and limited industrialization. This is illustrated through a rigorous analysis of sector-wise relative labor productivity and employment shares from 1984–2011. The chapter concludes by claiming that accelerating, and even just sustaining the country’s average annual GDP/capita growth rate of 2.8 percent, requires modernizing larger shares of the agricultural, manufacturing, and services sectors. Growing national demand offers new market opportunities in these sectors as do opportunities for increased exports into the West African regional market.

Public Expenditure on Agriculture and its Impact

This chapter examines trends in public agricultural spending between 1961 and 2012 and disaggregates that spending into the cocoa and noncocoa sectors. The majority of total spending has gone into the cocoa subsector, while the noncocoa subsector, which includes all the country’s food staples, has been neglected. The government’s public spending on agriculture has fallen short of 10 percent of its total expenditure in most years since 1961, and in recent times the share has averaged only 2 to 3 percent, which is low even by African standards. The government has also spent relatively little on complementary investments in rural roads and other essential rural infrastructure. Econometric analyses then estimate the impact of public spending on agricultural productivity growth, insights into the marginal returns to public investments in the cocoa and noncocoa subsectors, and by type of public investment. This is followed by a discussion of some of the government’s recent attempts to promote noncocoa agricultural growth through several new subsidy and investment programs.