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References

Ghana Economy

AGRICULTURE

Agriculture is Ghana’s most important economic sector, employing more than half the population on a formal and informal basis and accounting for almost half of GDP and export earnings. The country produces a variety of crops in various climatic zones which range from dry savanna to wet forest and which run in eastwest bands across the country.  Agricultural crops, including yams, grains, cocoa, oil palms, kola nuts, and timber, form the base of Ghana’s economy.


Although Nkrumah attempted to use agricultural wealth as a springboard for the country’s overall economic development, Ghanaian agricultural output has consistently fallen since the 1960s. Beginning with the drop in commodity prices in the late 1960s, farmers have been faced with fewer incentives to produce as well as with a general deterioration of necessary infrastructure and services.  Farmers have also had to deal with increasingly expensive inputs, such as fertilizer, because of overvaluation of the cedi. Food production has fallen as well, with a decline in the food self-sufficiency ratio from 83 percent in 1961-66 to 71 percent in 1978-80, coupled with a four-fold increase in food imports in the decade prior to 1982. By 1983, when drought hit the region, food shortages were widespread, and export crop production reached an all-time low.


When the Rawlings government initiated the first phase of the ERP in 1984, agriculture was identified as the economic sector that could rescue Ghana from financial ruin.  Accordingly, since that time, the government has invested significant funds in the rehabilitation of agriculture.  Primarily through the use of loans and grants, the government has directed capital toward repairing and improving the transportation and distribution infrastructure serving export crops. In addition, specific projects aimed at increasing cocoa yields and at developing the timber industry have been initiated. Except for specific development programs, however, the government has tried to allow the free market to promote higher producer prices and to increase efficiency.
Although the government was criticized for focusing on exports rather than on food crops under the ERP, by the early 1990s the PNDC had begun to address the need to increase local production of food. In early 1991, the government announced that one goal of the Medium Term Agricultural Development Program 1991-2000 was to attain food self-sufficiency and security by the year 2000. To this end, the government sought to improve extension services for farmers and to improve crop-disease research. Despite the statements concerning the importance of food crops, however, the plan was still heavily oriented toward market production, improvement of Ghana’s balance-of-payments position, and provision of materials for local industrial production. Furthermore, following World Bank guidelines, the government planned to rely more heavily on the private sector for needed services and to reduce the role of the public sector, a clear disadvantage for subsistence producers. In particular, industrial tree crops such as cocoa, coffee, and oil palm seedlings were singled out for assistance. Clearly, agricultural sectors that could not produce foreign exchange earnings were assigned a lower priority under the ERP.


The government attempted to reduce its role in marketing and assistance to farmers in several ways. In particular, the Cocoa Marketing Board steadily relinquished its powers over pricing and marketing. The government, furthermore, established a new farmers’ organization, the Ghana National Association of Farmers and Fishermen, in early 1991 to replace the Ghana Federation of Agricultural Cooperatives.  The new organization was to be funded by the farmers themselves to operate as a cooperative venture at the district, regional, and national levels. Although the government argued that it did not want to be accused of manipulating farmers, the lack of government financial support again put subsistence producers at a disadvantage.


Cocoa
Other Commercial Crops
Food Crops and Livestock
Forestry
Fishing

 

Cocoa

Cocoa production occurs in the forested areas of the country—Ashanti Region, Brong-Ahafo Region, Central Region, Eastern Region, Western Region, and Volta Region—where rainfall is 1,000-1,500 millimeters per year.  The crop year begins in October, when purchases of the main crop begin, while the smaller mid-crop cycle starts in July.  All cocoa, except that which is smuggled out of the country, is sold at fixed prices to the Cocoa Marketing Board.  Although most cocoa production is carried out by peasant farmers on plots of less than 3 hectares, a small number of farmers appear to dominate the trade. Indeed, some studies show that about one-fourth of all cocoa farmers receive just over half of total cocoa income.


In 1979 the government initiated reform of the cocoa sector, focusing on the government’s role in controlling the industry through the Cocoa Marketing Board. The board was dissolved and reconstituted as the Ghana Cocoa Board (Cocobod). In 1984 it underwent further institutional reform aimed at subjecting the cocoa sector to market forces.  Cocobod’s role was reduced, and 40 percent of its staff, or at least 35,000 employees, were dismissed. Furthermore, the government shifted responsibility for crop transport to the private sector. Subsidies for production inputs (fertilizers, insecticides, fungicides, and equipment) were removed, and there was a measure of privatization of the processing sector through at least one joint venture. In addition, a new payment system known as the Akuafo Check System was introduced in 1982 at the point of purchase of dried beans. Formerly, producebuying clerks had often held back cash payments, abused funds, and paid farmer with false checks. Under the Akuafo system, a farmer was given a check signed by the produce clerk and the treasurer that he could cash at a bank of his choice. Plantation divestiture proceeded slowly, however, with only seven of fifty-two plantations sold by the end of 1990. Although Ghana was the world’s largest cocoa producer in the early 1960s, by the early 1980s Ghanaian production had dwindled almost to the point of insignificance. The drop from an average of more than 450,000 tons per year to a low of 159,000 tons in 1983-84 has been attributed to aging trees, widespread disease, bad weather, and low producer prices. In addition, bush fires in 1983 destroyed some 60,000 hectares of cocoa farms, so that the 1983-84 crop was barely 28 percent of the 557,000 tons recorded in 1964-65. Output then recovered to 228,000 tons in 1986-87. Revised figures show that production amounted to 301,000 tons in 1988-89, 293,000 tons in 1990-91, and 305,000 tons in 1992-93. After declining to 255,000 tons in 1993-94, the crop was projected to return to the 300,000 ton range in 1994-95.


In the early 1990s, Cocobod continued to liberalize and to privatize cocoa marketing. The board raised prices to producers and introduced a new system providing greater incentives for private traders. In particular, Cocobod agreed to pay traders a minimum producer price as well as an additional fee to cover the buyers’ operating and transportation costs and to provide some profit. Cocobod still handled overseas shipment and export of cocoa to ensure quality control.


In addition to instituting marketing reforms, the government also attempted to restructure cocoa production. In 1983 farmers were provided with seedlings to replace trees lost in the drought and trees more than thirty years old (about one-fourth of the total number of trees in 1984). Until the early 1990s, an estimated 40 hectares continued to be added to the total area of 800,000 hectares under cocoa production each year. In addition, a major program to upgrade existing roads and to construct 3,000 kilometers of new feeder roads was launched to ease the transportation and sale of cocoa from some of the more neglected but very fertile growing areas on the border with Côte d’Ivoire. Furthermore, the government tried to increase Ghana’s productivity from 300 kilograms per hectare to compete with Southeast Asian productivity of almost 1,000 kilograms per hectare. New emphasis was placed on extension services, drought and disease research, and the use of fertilizers and insecticides. The results of these measures were to be seem in rising cocoa production in the early 1990s.

 

Other Commercial Crops

The main industrial crops are palm oil, cotton, rubber, sugar cane, tobacco, and kenaf, the latter used in the production of fiber bags. None is of strategic economic importance, and all, apart from oil palms, have suffered as a result of the country’s economic difficulties. Despite claims that such crops could assist local industrialization efforts, the government has not focused the same attention on this sector as on export crops. For example, sugar cane output has diminished with the closure of the country’s two sugar mills, which produced 237,000 tons per year in 1974-76, but only 110,000 tons in 1989.
The government has actually encouraged the export rather than the local processing of rubber, rehabilitating more than 3,000 hectares of plantations specifically for export production rather than revitalizing the local Bonsa Tire Company, which could produce only 400 tires per day in 1988 despite its installed capacity for 1,500 per day.


By the 1990s, the tobacco sector was expanding and moving toward higher export production. Ghana’s dark-fired leaf probably grows too fast and requires too rich a soil to compete effectively with rival crops, but the potential for flue-cured and Burley varieties is good. Pricing difficulties had reduced tobacco production from 3,400 tons in the early 1970s to an estimated 1,433 tons in 1989.  Output began to improve in 1990, however, reaching 2,080 tons.


The Leaf Development Company was established in 1988 to produce tobacco leaf for the local market and to lay the basis for a future export industry. In 1991, the company’s first commercial crop amounted to 300 tons of flue-cured, 50 tons of Burley, and 50 tons of dark-fired tobacco (all green leaf weights), of which 250 tons were exported, earning US$380,000. In 1991 Rothmans, the British tobacco company, acquired a 49.5 percent stake in the company and took over management of the Meridian Tobacco Company in partnership with the state-owned Social Security and National Insurance Trust. Another firm, the Pioneer Tobacco Company, announced a 92 percent increase in post-tax profits of more than ¢1 billion for 1991. The company declared dividends worth ¢360 million, double the amount paid out in 1990.


Cotton production expanded rapidly in the early and mid-1970s, reaching 24,000 tons in 1977, but it fell back to one-third of this figure in 1989. Since the reorganization of the Ghana Cotton Development Board into the Ghana Cotton Company, cotton production has steadily increased from 4 percent of the country’s national requirement to 50 percent in 1990. Between 1986 and 1989, Ghana saved US$6 million through local lint cotton production. The company expected that between 1991 and 1995, about 20,000 hectares of land would be put under cotton cultivation, enabling Ghana to produce 95 percent of the national requirement.

Food Crops and Livestock

The main food crops are corn, yams, cassava, and other root crops. Despite government efforts to encourage farmers to switch to production of staples, total food production fell by an average of 2.7 percent per year between 1971-73 and 1981-83. By 1983 Ghana was self-sufficient in only one staple food crop—plantains. Food imports rose from 43,000 tons in 1973 to 152,000 tons in 1981.
Those were various reasons for this poor performance, including growing urbanization and a shift in consumer preference from starchy home-grown staples to rice and corn.  However, farmers also suffered from shortages of production inputs, difficulties in transporting produce to market, and competition from imported foods that were underpriced because of the vastly overvalued cedi. Weather also played a major part, particularly in 1983, when drought cut cereal production from 518,000 tons in 1982 to only 450,000 tons at a time when an extra million people had to be fed after the expulsion of Ghanaians from Nigeria. Food imports in 1982-83 amounted to 115,000 tons (40 percent as food aid), with the 1983-84 shortfall estimated at 370,000 tons (of which food aid commitments covered 91,000 tons).
There was a spectacular improvement beginning in 1984, mainly because of recovery from the prior year’s drought. By 1988 the agricultural sector had vastly expanded, with food crops responsible for the bulk of the increase. Drought conditions returned in 1990, bringing massive falls in the production of all food crops apart from rice, but better weather and improved production brought prices down in 1991.
In August 1990, the government moved to liberalize the agricultural sector, announcing the end of minimum crop prices. The measure’s impact was difficult to gauge because higher production meant more food was available at better prices anyway. The government’s medium-term plan, outlined in 1990, sought to raise average crop yields and to increase food security, with special attention to improved producer incentives and storage facilities.
Livestock production is severely limited by the incidence of tsetse fly in Ghana’s forested regions and by poor grazing vegetation elsewhere. It is of major importance only in the relatively arid north and has not been earmarked for special treatment in Ghana’s recovery program. In 1989 there were an estimated 1.2 million cattle, 2.2 million sheep, 2 million goats, 550,000 pigs, and 8 million chickens in Ghana.

 

Forestry

Forests cover about one-third of Ghana’s total area, with commercial forestry concentrated in the southern parts of the country. This sector accounted for 4.2 percent of GDP in 1990; timber was the country’s third largest foreign exchange earner. Since 1983 forestry has benefited from more than US$120 million in aid and commercial credits and has undergone substantial changes, resulting in doubled earnings between 1985 and 1990. In 1993 timber and wood products earnings totalled US$140 million against a targeted level of US$130 million. Between January and November 1994, exports amounted to 919,000 tons and earned US$212 million.
Until the 1980s, forestry production suffered because of the overvalued cedi and deterioration of the transportation infrastructure. Log production declined by 66 percent during 1970- 81 and sawed timber by 47 percent. Exports fell from US$130 million in 1973 to US$15 million in 1983, and four nationalized firms went bankrupt during that period.
The forestry sector was given a large boost in 1986, mainly because of the World Bank’s US$24 million timber rehabilitation credit, which financed imports of logging equipment. As a consequence, log production rose 65 percent in 1984-87, and export revenues rose 665 percent in 1983-88.  Furthermore, the old Ghana Timber Marketing Board was disbanded and replaced by two bodies, the Timber Export Development Board—responsible for marketing and pricing, and the Forest Products Inspection Bureau—responsible for monitoring contracts, maintaining quality standards, grading products, and acting as a watchdog for illegal transactions.  Some of the external financing underwrote these institutional changes, while much of the rest financed forestry management and research as well as equipment for logging, saw milling, and manufacturing.
The sector, however, faced several problems. The most important was severe deforestation. A century ago, Ghana’s tropical hardwood forest extended from about the middle of the country southward to the sea. Moreover, nearly half the country was covered with forests, which included 680 species of trees and several varieties of mahoganies. Most of this wood has been cut. By the early 1990s, only about one-third of the country was still forested, and not all of this was of commercial value. This situation has forced the government to make difficult choices between desperately needed hard currency earnings and conservation. The Forest Resource Management Project, part of the ERP, was initiated in 1988, and in 1989 the government banned log exports of eighteen species. The government later extended the list and imposed high duties on other species, planning to phase out log and air-dried timber exports altogether by 1994.
Instead, the government hoped to increase sales of wood products to replace earnings from logs. Government figures showed that one cubic meter of lumber and plywood was worth more than twice as much as the same amount of logs; veneers earned five times as much; and other products, such as furniture and floorings, earned six times the price of an equivalent volume of logs. Improvements in the processing sector caused wood products (excluding lumber) to rise to about 20 percent of export earnings in 1991, accounting for 6.9 percent of volume exports. By comparison, wood products represented 11 percent of earnings and 5.5 percent of volume in 1985. The fall in the proportion of volume sales accounted for by logs was accompanied by a dramatic fall in their share in earnings, from 50-60 percent in the mid-1980s to 23 percent in 1990.
By the early 1990s, there were approximately 220 lumber processors in Ghana, but the industry operated under several constraints. Most overseas demand is for kiln-dried products, and Ghanaian manufacturers lack sufficient kilns to meet that demand. The cheap air-dried processing method is not satisfactory because air-dried wood tends to destabilize over time. Foreign investment incentives are not so attractive in this sector as in others, for example, mining. Furthermore, infrastructure in the Western Region where lumber processing is located continues to be relatively neglected compared with mining and cocoa production regions. Other difficulties include lack of expertise at technological and managerial levels. Scandals have been reported in Ghana’s forestry industry since 1986, and they erupted again in early 1992. The most notable case involved African Timber and Plywood, once Ghana’s largest exporter of round logs. In the mid-1980s, the government embarked on a US$36 million rehabilitation project to boost the company’s production. In 1992 as much as US$2.3 million was alleged to have been siphoned off from the project through various malpractices, and a number of officials were arrested. Furthermore, the environmental group, Friends of the Earth, alleged that there had been additional thefts by numerous foreign companies totaling almost US$50 million in hard currency during the 1980s. In 1992 the government began investigating the activities of hundreds of companies, both foreign and local, that were alleged to have entered into a range of illegal dealings including smuggling, fraudulent invoicing, violation of local currency regulations, corruption, bribery, and nonpayment of royalties. The corruption is so wide spread, however, that it is unlikely that the Ghanaian authorities will stop timber-related crimes anytime soon.

Fishing

Fishing increased considerably in the late 1960s, from 105,100 tons of marine fish caught in 1967 to 230,100 tons in 1971. In 1982 the yield was 234,100 tons, composed of 199,100 tons of marine varieties and 35,000 tons of freshwater fish from Lake Volta. The industry was hit by fuel shortages, inadequate storage facilities, and the general economic difficulties of the 1970s and the 1980s.  Nevertheless, by 1988 the fish catch was 302,900 tons; by 1991 it amounted to 289,675 tons, down from more than 319,000 tons in 1990.
Large-scale poaching by foreign vessels has severely depleted fish stocks in Ghana’s 200-nautical-mile maritime Exclusive Economic Zone, causing major government concern.  The most affected stocks are sea bottom-feeding fish. Tuna stocks reportedly remain unaffected. A 1992 Ministry of Food and Agriculture report recommended that the government accelerate mobilization of surveillance and enforcement units and step up regulation of trawler fleets. That same year, the government passed a fisheries law to curb overfishing and to help protect the marine environment.  Fishermen were banned from catching specified shellfish, and all fishing vessel operators were required to obtain licenses. The law provided for a regulatory body—the Fisheries Monitoring, Control, Surveillance, and Enforcement Unit—as well as a fisheries advisory council. These organizations, however, both of which are underfunded and undermanned, are unlikely to stop illegal fishing activities anytime soon.


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