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PROGRAM INFORMATION DOCUMENT (PID)
APPRAISAL STAGE
Report No.: AB3522
Ghana Agriculture DPC
Operation Name
AFRICA
Region
General agriculture, fishing and forestry sector (40%);
Sector
Agricultural extension and research (20%);Micro- and SME
finance (20%);Agro-industry (20%)
P102675
Project ID
REPUBLIC OF GHANA
Borrower(s)
MINISTRY OF FINANCE AND ECONOMIC PLANNING
Implementing Agency
December 12, 2007
Date PID Prepared
January 22, 2008
Date of Appraisal
Authorization
March 27, 2008
Date of Board Approval
1. Country and Sector Background
(a)
Recent Economic Developments in Ghana
Ghana’s economic performance continues to be strong, notwithstanding disruptions in power
supply in the latter part of 2006 that persisted into the first half of 2007. While disruptions in
power supply had a negative impact on industrial output, their effects on real GDP growth in
2007 have been offset by buoyant domestic demand, fuelled by high levels of public expenditure
and strong investment activity. Strong domestic activity has led to consistently higher balance of
payments current account deficit, with import growth outpacing exports, and slightly lower
levels of international reserves during months of higher imports of goods and services.
Projections for 2007 indicate that the overall fiscal deficit could reach 7.8 percent of GDP, up
from 7.5 percent at end-2006 and 3.0 percent at end-2005. Most of the increase in the public
sector’s financing needs will be met either by external investors interested in holding cedis
denominated assets,1 or by external borrowing. The total domestic debt to GDP ratio is projected
to decline by around 3 percent of GDP, dropping from 20 to 17 percent, while total public debt
as a share of GDP is projected to remain around 40 percent.
Overall poverty in Ghana decreased between 1991/92 and 1998/99 from 51.7% to 39.5%
and to 28.5% in 2004/05. The Country Economic Memorandum (CEM) (2007) notes that
national rural poverty has decreased from 64% in 1991/92 to 50% in 1998/99 to 39% in 2004/06.
Moreover, the depth of poverty among rural households as measured by the poverty gap has also
fallen over the same period from 0.24 to 0.18 to 0.14.
This remarkable achievement is in part due to the strong growth of the agriculture sector
over this period. Cocoa earnings this year amount to about $1.2 billion, exceeding that from
1
In December 2006 the government issued a 5 year cedi denominated bond with a 14.5 percent coupon. While the
target amount for this bond issue was ¢650 billion, it was over three times oversubscribed, receiving bids equivalent
to ¢2.2 trillion. The government chose to accept about one-third of the offers, settling for an amount of ¢756 billion
(or US$82.2 million). It is estimated that foreign investors accounted for 85 percent of the purchases of this five
year bond.
gold. Farmers now receive 70% of international prices, increasing the impact on the local rural
economy. The agricultural sector experienced sustained growth rates averaging around 5% per
annum2 between 2001 and 2006 (compared to 2.1% in 2000), in excess of the population growth
rate estimated at 2.7% per year. Over the period 2000 – 2005, crops and livestock sub-sectors
grew by 30% in real terms – equal to an average increase of 5.4% per annum.
Aggregate growth in the agricultural sector – including fishing and forestry – has exceeded
4% in every year since 2000. While the structural distribution of growth across agriculture,
manufacturing and services has remained fairly balanced over the last decade, it is clear that the
agriculture sector is also moving away from a heavy reliance on cocoa and building its strengths
in non-cocoa sectors. There has been investment in the promotion of non-traditional exports,
some of which is starting to be reflected in export earnings. Exports played an important role the increase in production of cash crops of 10.4% over the period 2001 – 2006 accounts for 40%
of the increase in GDP. Horticultural exports are currently at US$65 million, a 132% increase
over the baseline established in 2000 and marine fish exports have also grown substantially.
Agricultural exports (including timber) are the primary source of foreign exchange accounting
for over half of export receipts in 2006. A review of the sector suggests substantial scope to
increase physical yields; opportunities to substitute low-value production for higher value crops,
including those for export, and further scope to attract domestic processing and increased value
addition.
Along with the PRSC (as part of the multi-donor budget support), the Agriculture DPC
seeks to allow a multi-year commitment to the Ghana Growth and Poverty Reduction
Strategy (GPRS II). Ghana’s first national Poverty Reduction Strategy (GPRS I) was finalised
in 2002 with the aim of generating growth, controlling inflation and increasing expenditure on
programmes targeting the poorest and most vulnerable in society. While much of the
government’s macroeconomic agenda was achieved during the GPRS I period (2003-2005),
high-growth issues, gender equality, inclusion and social protection required further attention.
Although there has been an improvement in the national poverty levels over the years, poverty at
the regional level has worsened in some regions. In the Upper West Region for instance, the
poverty level increased from 66.9% in 1992 to 88.25% in 1999 (GSS, 1999 and 2000) and it
remained at 87.9% in 2005 (GSS, 2007). A second generation GPRS was produced by
government in late 2005, with an ambitious overarching goal of raising average per capita
income levels to middle-income levels by 2015, i.e., from about US$ 400 to about US$ 1,000.
The GPRS II (2006-2009) is an agriculture-led strategy which seeks to diversify the
economy's structure from traditional cocoa to cereals and other cash crops for export
markets. Other sectors considered to have long-term potential include: tourism, information and
communication technologies, light industry based on textiles and garments, and value-added to
minerals. The GPRS II emphasizes policies to promote equitable growth that will be sustainable
over the medium to long term. GPRS II presents its strategies and actions according to three
thematic pillars: Private Sector Competitiveness; Human Resource Development; and
Governance and Civic Responsibility. Development partners consider that the GPRS II, together
with the recommendations of the Africa Peer Review Mechanism (APRM), provides an
2
Data are from MoFA/PPMED. There are number of different estimates of agricultural GDP, with significant
differences between sources. As part of the improvements in sector monitoring, MoFA will need to work with
Ghana Statistical Services (GSS) to agree on a consistent set of sub-sector statistics.
acceptable basis for aligning support over the short to medium term although a greater strategic
depth in the discussion of trade-offs, a more credible costing of GPRS II priority programs, and a
robust results framework are still required and are starting to be addressed by the National
Development Planning Commission.
GoG estimates resource needs for GPRS II implementation to be about $2 billion per
annum. About one-third of this is allocated to Pillar I : Private Sector Competitiveness. Within
the agriculture sector, as specified in the costed GPRS II, public investments are focused on the
food security element. The GPRS II notes that much of the productivity enhancements are
expected to come from private sector activity supported by limited public investments and a
conducive institutional framework. The financing framework for the GPRS II identifies a
significant funding gap. While the PRSC 5/MDBS contributes additional budgetary resources, it
is not sufficient to fully meet financing needs and as noted in the PRSC V program document, a
financing gap remains for GPRS II implementation even with budgetary support. Noting this, the
Agriculture DPC seeks to support the financing needs of the GPRS II, with a specific focus on
increasing and improving agriculture outcomes.
(b)
Macroeconomic Outlook and Debt Sustainability
The Ghanaian economy continues to experience real GDP growth and macroeconomic
stability despite disruptions in power supply and increases in domestic prices for retail
petroleum prices. A growth rate of 6.2% for 2006 occurred despite disruptions in power
supplies. Cocoa remains an important element of this growth performance. The policy
distortions that characterized Ghana’s agricultural sector until 1983-84 have been reduced
substantially. The exchange rate, which now floats, is no longer consistently overvalued; trade
policies are relatively even in their treatment of different sectors, with relatively uniform tariffs
and logical exemptions, for example for inputs and products conducive to improved health and
education. Nevertheless, specific distortions still afflict Ghana’s agricultural sector. Importcompeting sectors are protected by the standard tariff of 20 percent, while there is some implicit
taxation of exports. In the case of cocoa, the marketing board’s share of the export price has risen
with increases in the world market price, limiting incentives for investment.
The economic outlook for the medium term is reasonably positive, provided that strong
export growth is maintained, exports of minerals and non-traditionals increases, and
macroeconomic stability is preserved. Remittances from Ghanaians living and working abroad
also continue to play an important role in driving domestic demand and economic growth,
representing around 15% of GDP in 2006. Available data up to September 2007 and projections
to end 2007 indicate a provisional GDP growth of 6.3 per cent, 0.2 percentage points below the
target of 6.5 per cent. Agriculture sector growth is however projected to be lower, at 4.3 per cent
against a target of 6.1 per cent, indicating a projected margin of 1.8 percentage points below the
target. This shortfall is being attributed to the drought and flood conditions which affected the
northern part of the country and a relative decline in the fishing sub-sector as a result of
dwindling fisheries resources. The Industry sector is projected to grow by 7.4 per cent, a decline
from the 2006 growth rates of 9.5 per cent, due to power supply issues. The Services sector is
however projected to grow faster at 8.2 per cent exceeding the 6.7 per cent target by 1.5
percentage points. Inflation began the year at 10.9 per cent and was down to 10.1 per cent at the
end of October 2007, after peaking at 11.0 per cent in May 2007.
One of the main issues confronting the Bank and other development partners supporting
the implementation of the GPRS II is the government’s stated intention to access
international capital markets to help fund its development program. The result of the joint
Bank-IMF debt sustainability analysis suggests that Ghana's risk of debt distress is moderate,
close to the low risk category. This debt sustainability analysis incorporates non-concessional
borrowing of US$700 million over the next three years, plus continued annual market access of
about 1 percent of GDP for the rest of the projection period. The analysis attempts to be realistic
with regard to commercial borrowing volumes and to illustrate the value of prudence and the
importance of the judicious use of non-concessional funds. The two other elements of the
analysis are: (i) continued macroeconomic stabilization (prudent fiscal stance, single-digit
inflation); and (ii) perseverance with the pace of structural reforms (public financial management
(PFM), and reforms of state-owned enterprises (SOEs), including divestiture. Remittances are
assumed to remain constant as a share of GDP (at 15 percent), while FDI inflows are expected to
increase gradually. International reserves would exceed 4 months of imports at the end of the
projection period.
The main endogenous factor3 contributing to this positive debt sustainability outlook is the
strong projected real GDP growth – contributing on average to a 1.7 percentage point
decline in the stock of external debt to GDP ratio between now and the end of the
projection period (2026). The contribution coming from higher GDP growth is partially offset
however by rising interest payments, reducing the net effect of the endogenous factors to 0.9
percent. In addition, net current transfers, namely remittances inflows and official transfers, and
foreign direct investment flows are expected to contribute on average with 18 percentage points
of GDP, further adding to the decline in the external debt to GDP ratio during this period. These
inflows (i.e., net transfers and net foreign investment) are expected to increase from the historical
average of just over 13 percent of GDP during 1995-2005, to 18 percent of GDP during 20072011 period, triggered by the country’s stable macroeconomic environment.
The recent 2007 External Review of Public Financial Management (ERPFM) indicates that
the widening of the fiscal deficit led to an increase in the domestic debt to GDP ratio to
13.8% by the end of 2006, up from 10.8% one year earlier. Nevertheless, there remains an
overall downward trend in public debt, with the central government debt to GDP ratio falling to
42% in 2006 from 70% in 2005, reflecting resources freed up by the Heavily Indebted Poor
Countries (HIPC) debt initiative and the Multilateral Debt Relief Initiative (MDRI).
C.
Agriculture Dependency and Contribution to GDP
A central message of both the World Development Report 2008 entitled “Agriculture for
Development”, and IEG report entitled “World Bank Assistance to African agriculture” is
that better agricultural performance is essential to overall growth, food security and
poverty reduction. African governments are pursuing these objectives including through
coordinated actions and support provided through NEPAD’s Comprehensive African Agriculture
Development Programme (CAADP). The Bank’s Africa Action Plan commits it to support
agricultural growth objectives, giving increased attention to agriculture and laying out targets for
agricultural GDP growth, and land and labor productivity. The commitment is now being
22
Endogenous factors are derived from the budget constraint equation, which assesses sustainability in terms of the
growth in real GDP, and interest rate on the stock of debt.
translated into an operational road-map for achieving these goals through support to a scale-up of
public sector delivery of core public goods and services and tackling of policy and institutional
constraints to improved sector outcomes. However identifying the right mix of policies and
adequate financing to make a fundamental change in agricultural performance remain
constraints.
The WDR 2008 analysis suggests that agriculture strategies in general should reflect four
objectives in a “policy diamond” that set priorities in the agriculture-for-development
agenda (Figure 1). The first objective is establishing efficient markets and value chains. The
second is accelerating smallholder entry to agricultural markets and raising smallholder
innovativeness and competitiveness. The third is improving livelihoods and food security in
subsistence agriculture and low-skilled rural occupations. The fourth is increasing employment
and investment opportunities in the rural economy while enhancing skills to allow the rural poor
to seize these opportunities or to successfully migrate. Together these objectives drive the three
pathways out of poverty—farming, rural employment, and migration. While all four objectives
are necessary, the relative priority changes according to how dependent countries are on
agriculture. Based on this analysis, harnessing agriculture’s potential contribution to African
development will require success in two priority areas: improving smallholder competitiveness
in high-and medium-potential areas, where returns to investment are highest and improving
livelihoods, food security, and resilience in remote and risky environments.
This policy framework presented in the WDR has direct relevance to agricultural policies
in Ghana. Firstly, agriculture in Ghana is a critical element in vulnerability strategies.
According to a recent survey of 20 districts around Ghana, respondents identified twelve
‘frequent’ natural disasters and shocks, and another eleven ‘less frequent’. These include natural
events such as floods, draught, bush fire and livestock diseases as well as the consequence of
human activity including alien herdsmen, livestock theft and soil and water pollution (MoFA
2007). Another survey in 25 districts in five regions4 identified a set of risk coping strategies,
many of which are agriculture-based. The survey identifies 5% of households as vulnerable,
characterized as extremely low labor return, high dependency ratio, poor quality housing, and
land holdings of less than 0.5 hectare.
Agriculture in Ghana is characterised by a large smallholder sector, and a very small
commercial sector. The Poverty and Social Impact Analysis (PSIA) identified five categories
of farmers as follows: (1) Large Scale Commercial (LSC); (2) Small Commercial (SC); (3)
Semi-Commercial (S-C); (4) Non-Poor Complex Diverse Risk Prone (NPCDR), and (5) Poor
Complex Diverse Risk Prone Farmers (PCDR). The weakness of FASDEP I, in terms of
targeting, was that it failed to recognise the different categories of farmers and that smallholders
are not a homogenous group. The analysis carried out for the AgSSIP ICR and the CEM suggests
growing evidence in Ghana that small-holders can be successful. As noted earlier, two beacons
of cocoa and horticulture, particularly pineapples, is based squarely on the small-holder systems.
The challenges of penetrating global markets for both primary commodities (cocoa) and highvalue exports (horticulture) are indeed significant but Ghana has shown an ability to overcome
the global challenges and export successfully. Production and exports of cocoa have risen
4
The survey took place in the following regions: Upper West, Upper East, Northern, Brong Ahafo and Ashanti
Regions.
dramatically in recent years (even accounting for the distortions in the data dues to smuggling
from Cote d’Ivoire).
Second, an important feature of Ghanaian agricultural performance has been the
increasing role of the small holder farmer in supporting growth. The 2008 WDR notes that
growth in agriculture is increasingly driven by the rapidly expanding demand for livestock
products and high value crops and that the poverty impact of growth in the agricultural sector
will depend on the extent to which the poor can connect to these new growth processes, either as
smallholders or as labourers. Agricultural growth will rest on a balance of food staples,
traditional bulk exports, and higher-value products, including livestock, with different groups of
smallholders likely to participate in each. Staple crops dominate current production, and they
will continue to do so in the near future. Demand for food in Sub-Saharan Africa is expected to
reach US$100 billion by 2015, double its level of 2000. The recent history of agricultural growth
in Ghana indicates that it can in fact support value addition for key export and cash crops
through increasing small holder access to credit, irrigation, market information, research and
technologies. The cocoa and horticulture sub-sectors are areas where coordination and value
chain consolidation has resulted in significant improvements, even for small holders. A key
factor has been the increasing focus on organization of small holder groups who can coordinate
better to access key inputs and markets.
One clear area of successful interventions for small holder agriculture to contribute to
growth and poverty reduction has been cocoa. Ghana has a comparative advantage (and
premium price) in cocoa, and this remains the backbone of the rural economy. While this strong
dependence on one export crop makes the sector vulnerable to external price fluctuations, strong
management by the Cocoa Board (Cocobod), an increase in quality and improved extension
services have had a positive impact on the sector and on the economy. Reductions in production
and marketing costs, stabilized farm gate prices and greater use of the local buying companies
are still required actions to improve efficiency and enhance farmer resilience to a decline in
world market prices. Another important concern is the sustainability of production, as the
expansion of the cultivation of cocoa in primary forest areas, when trees get old and soil fertility
exhausted, will put pressure on forest areas. Children’s education, non-farm income
opportunities and improved working conditions are increasingly being demanded by cocoa
farmers and will need to be addressed as the industry transforms. Value addition in the cocoa
sector remains low, with very little processing taking place but with a strong focus to increase
this and secure success in this sector. In 1998/99 about 11% of domestic production was
processed into butter, liquor, cake and powder as well as small amounts of finished chocolate; it
is currently about 15%. Processing capacity is restricted to about one-fifth of current production
suggesting that substantial investment is required if more domestic cocoa bean production is to
be processed domestically. Export earnings from existing processed cocoa already amounts to
US$102 million (2002 – 2004), having increased three-fold over the previous decade.
A second emerging sector, also characterized by small holders, is that of horticulture. The
Horticulture Exports Industry Initiative (HEII) supports the development of Ghana’s Horticulture
Export Industry which has seen a dramatic increase in volumes exported and the value of these
exports over the last few years. HEII has effectively responded to the crisis caused to the
pineapple industry by helping small scale farmers convert their varieties to the variety demanded
by the market. Once the conversion is complete, smallholders who contribute over 40% of
exported pineapple should be able to export 23,000Mt of MD2 by November 2009. A
rehabilitated cold storage facility at the Sea Port (Shed 9) will support improvements in fruit
quality and perhaps an increased market share, with the potential for the industry to reach a
capacity of 300,000 tons by 2010. In addition, a certification scheme for accessing high quality
planting materials of mango, citrus and pineapple coupled with knowledge of improved
production techniques has been initiated. Mango is likely to become an important export crop
for smallholders, and has the additional attraction of being cultivated in the North as well. About
70% of 2,000 out-growers have been supplied with planting materials on a 50% grant basis.
Public/private collaborative research has been facilitated by the Public/Private Research
Committee and a Geographic Information System (GIS) Database Management System has been
established to provide reliable and accessible data for planning.
However, securing livelihoods and improving smallholder competitiveness also requires
attention to productivity. Macro-economic simulations highlight the potential of stronger
agricultural growth based on improved yields and improvements in marketing (IFPRI, 2006). As
is true for much of Africa, however, expansion in agricultural production has come largely from
expansion of cultivated areas and less so from productivity gains. In 2002 the area under
cassava, yams, cocoyams and plantain was 54 percent greater than in 1993 while the area under
cereals increased by 30 percent. Only cassava demonstrated a clear increase in average yield,
though only about eight percent higher than the average at the beginning of the decade. Rice and
millet registered yield gains in 2002, but in the past three years their average yields have been
lagging. Compared to demographic growth (2.7 percent per year), production per capita
(agricultural labour productivity) increased by 8 percent. Increase in production resulted from 5.3
percent improvement in average yield (land productivity), and 26.3 percent expansion and
diversification of cropped areas, particularly for groundnut, cowpea, plantain, yam, and maize.
At the same time, performance in production output contributed to food security improvement
and additional income to the farmers. Compared to the NEPAD/CAADP target of 6 percent, this
performance has been good although there is room for improvements in yields of staple crops in
particular.
Low yields of staple crops continue to be an area of concern both because of the impact on
poverty and for meeting domestic demand. Besides an increase in the yield per ha of cassava,
yields per ha of the main other crops have remained stagnant over the last 5 years. Yet, broadbased crop production contributes to 20.3 percent to GDP growth, ahead of forestry and cocoa,
and therefore plays a very important role in increasing Agricultural GDP. The technology to
raise productivity exists in many cases but farmers are yet to fully exploit these opportunities.
Technology delivery has been hampered in the past by ineffective delivery systems. Adoption is
low because of disconnects between the research and extension system, and in the access to
critical complementary inputs. In some instances farmers lack the incentives to make productive
investments. A more diverse system of delivery, using public-private partnerships, needs to be
developed, which can cater for the more complex needs of the entire commodity chain needed
for successful development of high value crops and livestock products.
Irrigation and improved water resource management will also be an important factor in
meeting growth targets and addressing rainfall variability in marginal areas. The
Agricultural Services Sub-sector Investment Project (AgSSIP), together with GOG and other
donor support, supported the increase of irrigated agricultural production through the
rehabilitation of 9 irrigation schemes, covering 1,864 hectares of rice (70%) and vegetables
(30%). However, improving the management of these schemes, increasing water user fees for
maintenance, addressing electricity tariffs are needed to sustain and take full advantage of these
investments. Development of small scale irrigation in the country will depend on the
implementation of a sound irrigation policy that addresses the business environment issues, and
devolves more responsibility to water users associations in selection of required irrigation
equipment, routine maintenance and rehabilitation/renewal of irrigation infrastructures and
equipments. The enactment of the irrigation policy is therefore critical and attention needs to be
paid to the sustainability of these schemes and future developments.
The third priority for agriculture based countries, as identified by the WDR, is that of
developing markets and value chains. Here, Ghana has started to make progress which it will
need to sustain. Food safety and good agricultural practices to meet international standards and
access to new markets has been recognized by the country as a necessary aspect of agricultural
policy. A harmonized pesticide list, to guide pesticide usage in line with international standards,
has been published by the Environmental Protection Agency. The Ghana Standards Board
laboratory is being upgraded for ISO 17025 certification. Farmers are being trained in Good
Agricultural Practices and are being trained to meet EurepGap certification requirements which
are expected to offer smallholders better access to the European market. Implementation of the
Horticulture Export Industry Initiative (HEII) has promoted collaboration between development
partners, public sector and the industry5.
Agricultural growth, and consequently economic growth, is undermined by increasing land
degradation. Improving environmental sustainability to both safeguard current trends and boost
the ability of agriculture to contribute to the national development agenda, and in particular, to
address the agro-ecological constraints of marginal areas is part of the development through
agriculture agenda. As noted by the World Development Report 2008, agriculture is a major
user—and potential abuser—of natural resources. It is estimated that soil erosion costs about 2%
of the national GDP annually, thus reducing Ghana’s potential for growth. However, current
trends of increasing production through area expansion, rising competing demands for water,
higher demands for electricity, and increasing concerns about environmental costs by consumers
of exported commodities, are motivating a shift in the agriculture sector towards adherence to
good agricultural practices and environmental management. Moving to a broader recognition of
agriculture as a major provider of environmental services (such as sequestering carbon,
managing watersheds, and preserving biodiversity) also needs to be recognized and addressed
within the implementation of the sector policy.
In the sub-sector of fisheries, this aspect of sustainable use to contribute to and maintain
economic growth, is particularly relevant. Ghana has access to substantial marine and inland
fisheries, including a 550km coastline and the largest inland lake in Africa, as well as many
rivers and ponds. Fishing is an important source of income for local communities: Data from the
GLSS IV revealed that communities on the coast derive 40% - 50% of their incomes from
fishing, while those on the Volta figures are 75% - 80%. (GDP data only captures Volta lake
inland fisheries and the coastal fishing resource – and even these data are subject to wide margin
of error.) It is reported that the fishing industry provides livelihoods for 1 – 2 million fishermen,
processors and traders, including 200,000 marine and inland fishermen and 500 public servants
5
HEII has had a strong impact on the horticulture industry and has served as a model for other programmes. The
AfDB’s Export Marketing and Quality Awareness Programme (EMQAP); Millennium Challenge Account (MCA)
programme and USAID’s Trade and Investment Programme for Competitive Export Economy (TIPCEE) have
drawn lessons from the HEII and the public-private partnership approach.
responsible for fishing-related policy and services. Marine fishing is characterized by (i) artisanal
coastal fishing; (ii) domestic commercial fleet and (iii) illegal encroachment into Ghana’s
Exclusive Economic one (EEZ) by foreign vessels. According to IMM (2003), there are 200
fishing communities along Ghana’s 550km coastline with 310 beach landing sites. There are no
recent estimated of the extent of illegal commercial fishing in Ghanaian waters. Inland fishing is
focused on Lake Volta, home to around 1,200 fishing communities producing around 50,000mt
per annum as well us other (unrecorded) communities dependent on fishing in other lakes, rivers
and ponds. It is estimated that Lake Volta’s potential yield is being exceeded and catch per unit
is reported to be falling, with many observers attributing this to over-exploitation, as well as
environmental degradation (including poisoning from the use of insecticide as a method of
fishing). Aquaculture has recently (since 1950s) emerged as a growing industry but it remains
marginal source, although is an important source of tilapia and catfish, often sold to urban
markets. Moving forward, the overall policy agenda for the sector is expected to follow the
Ministry of Fisheries’ Aquaculture Strategic Framework (published in August 2006).
Limited processing means very short value chains, with little value addition between steps
except the marketing margin. There is very little processing beyond (i) freezing and/ or
canning commercial marine landings and (ii) smoking or drying artisanal marine and inland
production. At the same time, post-harvest losses from artisinal fishing are high – some estimates
report levels of up to 70%, particularly in high season when there is a glut of production and
landing sites are saturated. Official export data reports significant increase in fish exports,
increasing three-fold over from 2001 – 2006. Spain is the biggest importer accounting for 41%
of official exports (by value) in 2005. Other important destinations are France (11% of exports),
Cote d’Ivoire (10%), Portugal and Chile (7% each), and Greece, Panama and Mauritania (4%
each). Overall, the export industry has undergone major consolidation in recent years, with the
number of exporters falling from 328 in 1996 to 120 in 2002 even though the value of exports
has doubled from $12.4 million to $24.5 million. Tuna has come to dominate exports, increasing
from $2 million to $12 million over the period, attracting new entrants into this segment of the
market.
A number of factors threaten the continued important contribution that inland and marine
fisheries make to the agricultural economy. Stocks – both inland and marine – are falling, due
to over-fishing, especially due to illegal practices. Second, the decline in available firewood is
threatening smoke-fish enterprises; local deforestation also leads to decline in water quality.
Exporters to the EU now have to meet stringent sanitary and phyto-sanitary (SPS) conditions.
Standards have been met but the clear evidence is that meeting these standards is costly, and act
as a fixed costs thereby generating economies of scale that provide an advantage to larger
operators. Some efforts to improve fisheries management are underway; including traditional
management, government regulation and a recent innovation of co-management by government
and stakeholders (particularly in the marine sub-sector). In addition, a number of interventions in
support of improved landing and handling facilities in artisanal fishing communities aim to
reduce post-harvest losses and strengthen the value chain. This includes new improved smoking
technology although the update has been low due to high cost compared to the traditional
alternatives, breakages and the absence of young entrants into the industry. However the sector
needs to make progress in reducing excessive pressure on fisheries and improving the
management of the sector.
Using lessons learnt from commodity chain development for crops such as cocoa and pineapple,
Ghana can address the priorities identified in the policy diamond to improve agricultural
performance across the country. Large areas of Ghana, agro-ecologically inferior with more
limited production opportunities, have grown slowly. The cost of this lagging growth is
significant: if Northern regions had grown at the same rate as the rest of Ghana in the last
decade, the average growth rate would have been 0.7 percentage points higher – i.e. one-third of
the way in meeting the challenge of increasing the growth rate from 6% to 8%. Private sector
participation in cotton, oil seeds, mango development can be encouraged while supporting the
small holder/outgrower model while has proven to be successful elsewhere in the country.
FASDEP II recognizes the value of this approach and is expected to support value chain
development for commodities grown across the countries, with a focus on using appropriate
strategies for different groups of small holders.
2. Operation Objectives
The development objectives of the proposed operation are to increase the contribution of
agriculture to growth and poverty reduction while improving the management of soil and
water resources. The proposed DPC for Agriculture aims to provide focused attention to
accelerated growth in agriculture to meet GPRS II goals and poverty alleviation through propoor growth in agriculture. This operation supports the implementation of the Food and
Agriculture sector development policy.
3. Rationale for Bank Involvement
In March 2007 donors signed the Ghana Joint Assistance Strategy (G-JAS) in Accra. The
17 donors are African Development Bank, CIDA, Danida, DFID, EC, France, Germany, IFAD,
Italy, Japan, Millennium Challenge Corporation, Netherlands, Spain, Switzerland, UN, USAID
and World Bank. The Ghana JAS notes that modernisation of agriculture is central to the
diversification and expansion of exports needed to achieve and sustain higher economic growth.
Strategic priorities include strengthening rural infrastructure, especially rural roads and
irrigation, improving land tenure and management, promoting promising agricultural value
chains, enhancing access to credit for women and men by strengthening rural financial
institutions, and strengthening the provision and targeting of agricultural research and extension
services. The proposed DPC supports this approach and the agenda for harmonization with
donor partners.
Box 1: The Ghana-Joint Assistance Strategy
G-JAS: Commitment of Donor support to Agriculture
To promote the productivity and diversification of agriculture and rural non-farm growth, G-JAS
partners will support the development of a SWAp framework focusing on enhancing the
productivity of crops, livestock and aquaculture and land resources, improving food security and
expanding vital infrastructure including irrigation and supply chain development. To promote
rural development more generally, partners are supporting sector reforms and investments in rural
roads and energy and measures to promote micro-finance institutions and the tourism sector.
Analytical work relating to land tenure, biosafety regulations, capacity development of
microfinance institutions and improving access to finance for micro-, small, and medium
enterprises will help guide work in this area.
The Country Assistance Strategy for 2008-11 notes that this DPC would be follow up to the
closed Agricultural Services Sub-Sector Investment Project (AgSSIP) responding to the adoption
by government and partners of the Food and Agriculture Sector Policy (FASDEP) and in support
of a sector-wide approach in agriculture. The CAS notes that this series of DPCs for the
Agriculture sector will also be accompanied by Global Environment Facility (GEF) funds to
support the scale-up of sustainable land management practices.
The Agricultural Services Sub-Sector Services Investment Project AgSSIP (US $67 million
IDA, total project costs US $ 123 million; closed April 2007) aimed to reduce rural poverty by
increasing agricultural productivity and incomes, through the strengthening of MoFA and
decentralized agricultural planning and development, and the promotion of demand driven
agricultural services and farmer based organizations. AgSSIP has made progress in developing
the basic institutional framework for a number of innovations, which can be of critical
importance for the future growth in the sector.
As the main support to the Government to implement its sector policy in agriculture, AgSSIP has
been instrumental in supporting the transition of the sector towards a more diversified and export
led sector. This move was reflected in Ghana’s Poverty Reduction Strategy (GPRS) which was
approved by Parliament in Feb 2003. The program targeted the sources of potential growth
identified in the Bank’s 2004-7 CAS, namely, the development of non-traditional export crops,
improved farmer access to infrastructure, technology, international markets and improved quality
control. The project also responded to GOG’s desire to expand the role of farmer-based
organizations, disengaging MoFA from non-core activities and supporting private sector
participation in agricultural and rural development. The first phase of AgSSIP is rated as
marginally satisfactory and the proposed DPC seeks to consolidate gains made so far and support
the move towards a Sector Wide Approach in agricultural development. The sector recognizes
the need to coordinate with infrastructure, district level planning, private sector and health,
amongst others, to increase agricultural growth, facilitate the transition from production to value
addition and thereby unleash the potential of agriculture as an engine of overall growth in the
economy.
Collaboration with Other Donors
As part of the implementation of the Comprehensive Development Framework initiated in
Ghana in 1999, donors active in the sector have been meeting more frequently to discuss
GOG’s strategy and policies in the agriculture sector. The donors active in the agriculture
sector, including, the European Union, CIDA, DFID, GTZ and JICA participated in the
preparation of AgSSIP and in its pre-appraisal and appraisal. This forum was to be used to
follow-up on the implementation of the Accelerated Agricultural Growth and Development
Strategy and AgSSIP. While all the support to AgSSIP was to be given in the form of parallel
financing, donors agreed that, to the extent possible, they would field joint implementation
support and program evaluation missions. Joint implementation support missions were held and
the coordination between the donors improved, particularly after the mid-term review and
restructuring of AgSSIP.
A sector budget support program (earmarked funding) was initiated by CIDA in 2004.
CIDA committed $85 million Canadian Dollars to MoFA over five years (2004-09) for
implementation of FASDEP (approximately US$15 per year). Through its MOU with MoFEP,
CIDA funds flow through GoG channels, using existing GoG policies and procedures but funds
are earmarked for the Agriculture sector (including fisheries). Disbursements comprise base and
performance payments, and CIDA trigger and target mechanism which underlies disbursements.
CIDA has established an independent trigger and target review process which includes a) a
MoFA assessment of its performance against the annual targets, and b) an independent review by
an external consultant whose confirmation (or otherwise) of MoFA achievement causes the
appropriate resource transfer. DfID has chosen the FABS mechanism as its vehicle to provide
sectoral budgetary support, increasing the annual volume of funding by approximately $9 million
dollars for the period 2006-096. DfID has also adopted the CIDA target and trigger mechanism
against which to measure the MoFA performance it wishes to see, adding five further targets and
three triggers for the first year. Based on this understanding sixteen trigger thresholds have been
defined for 2006, some of which have sub-components. Among the sixteen triggers are three
triggers related to the result areas of DFID’s Support to Agriculture Sector Harmonization
project.
With the experience gained in Phase I of AgSSIP, GOG preference is for funding to flow
through the budget rather than through discrete projects. Since IDA funds cannot be
earmarked and earmarking may lead to delayed releases of funds, the DPC is considered to be
the appropriate response to this request by the GOG. Other donors active in the sector are
expected to align their support in support of the revised FASDEP 2008 under the sector wide
approach and sector investment plan to be developed in early 2008.
To remain consistent with the sector dialogue and the current triggers required by CIDA
and DFID, the proposed DPC will seek to incorporate the existing triggers within the policy
framework. CIDA and DFID will also do the same and all three institutions will coordinate
across these targets and triggers. Appraisal of the benchmarks will also be done jointly and
benchmarks for 2008 will be jointly set. This will allow donors to agree on policy actions which
can be supported by various project funding regardless of whether the funds are in the form of
budget support or not.
The DPC also supports the objectives and approach of the TerrAfrica multi-stakeholder
partnership. TerrAfrica is a multi-stakeholder Global Partnership aiming at creating enabling
conditions to increase sustainable land management in Sub-Saharan Africa. Ghana has been
6
DfID has indicatively broken down its BS to support five outputs
actively engaged in the TerrAfrica partnership since its first framing workshop in 2004. It is
currently a member of the Executive Committee, representing West Africa, and is one of the four
countries for priority support under the TerrAfrica Work Program. It is expected that a GEF
project will provide additional support for sustainable land management activities at the national
level in 2008/2009.
4. Financing
The proposed credit is for XXX SDR (US$15 million equivalent). The series anticipates a total
financing between US$30-40 over the 3 year period (2008-2010).
5. Institutional and Implementation Arrangements
Implementation. The following ministries will be responsible for implementing this
operation on behalf of the Government: Ministry of Finance and Economic Planning and
Ministry of Food and Agriculture (MoFA). Their functions will be in line with their normal
institutional mandates.
It is expected that the Ministry of Finance and Economic Planning (MoFEP), the Ministry of
Food and Agriculture and the Ministry of Fisheries would be responsible for the overall
implementation of the proposed DPC. Bank supervision will be aligned with the activities of
other donors, in particular with CIDA and DfID and with the sector monitoring activities. The
actions to be monitored under the proposed DPC are extracted from government policy
documents (e.g., GPRS II, the 2007 budget statement and the sector monitoring and evaluation
matrix), ensuring this alignment and reducing the transaction costs of managing budgetary
support for the government. During the period of implementation of the program supported by
the proposed DPC, supervision would draw on a) monthly reports on budget expenditures with
breakdown by Ministry, Department and Agency with a lag of no more that 6 weeks after the end
of each month, and with the breakdown for Items 1-4 of the Ghanaian budget (personnel,
administration, services, investment); (b) quarterly reports on domestically financed povertyrelated (including HIPC and MDRI financed expenditures), with a lag of no more that 6 weeks
after the end of each month; (c) sector progress reports (MoFA) and (d) sector monitoring and
evaluation reports.
Monitoring and evaluation: The new sector monitoring and evaluation framework will serve
as the basis for monitoring sector performance and hence progress under this operation as
well. The benchmarks in the proposed DPC are aligned with the sector M&E framework.
Appraisal of the benchmarks will be done jointly with other Donor Partners (in April 2008) and
benchmarks for 2008 will also be jointly set. It is therefore expected that the policy action
matrix for DPC 3 under this series will be aligned more fully with other Donor partners,
particularly those who are ready to move to sector or general budget support. During the
program of work it is expected that surveys on livestock, adoption rate for improved
technologies, post harvest losses will be carried out and will add to the data base available for the
sector. A detailed Agriculture Sector Review will then be carried out by the end of this program,
in partnership with the Government and other donor partners.
6. Benefits and Risks
The main risks are: (i) political risk associated with the 2008 election campaign (low); (ii)
continued delays in decentralization process (moderate); (iii) delays in budget allocations and
weak financial management capacity (high); and (iv) delays in the completion of the SWAp
framework (currently to be completed by February 2008, moderate). A substantive risk is that
the releases to the sector to support the development of the Sector Wide Approach in agriculture
may not be made in timely or adequate manner. This risk could be managed by regular and more
detailed dialogue on budget allocation and sector level MTEFs, in parallel with the budget
discussions under the ERPFM and the PRSC processes.
7. Poverty and Social Impacts and Environment Aspects
Under real GDP growth rates in the 6 percent range, poverty is projected to decline
further, meeting the MDG goal of halving the 1990 rate of poverty incidence before 2015
and Ghana is also expected to reach the goal of halving hunger by 2015. The proposed DPC
complements the PRSC-5 and places emphasis on actions aimed at facilitating private sector
development, increasing agricultural productivity of staple crops and maintaining progress in
expanding the country’s export potential.
To inform the policy making process supported by the PRSC series, the Government of
Ghana, with support from its development partners, carried out a series of poverty and
social impact analysis (PSIAs), including in Agriculture. These studies aimed at ensuring
that, over time, sufficient analysis of the poverty and social impact of policies was completed,
providing a contribution to the discussions of each subsequent round of PRSCs. The PSIAs
focused on four key areas, namely, (i) tackling vulnerability and exclusion; (ii) the economic
transformation of the agriculture sector; (iii) power sector reforms and setting electricity tariffs;
and (iv) decentralization and pro-poor service delivery. The preparation of these PSIAs involved
key stakeholders in the elaboration of terms of reference and the review of findings and
recommendations. The revised FASDEP has responded to the PSIA on Agriculture by focusing
both on growth and on poverty.
Environmental Aspects
The proposed operation is as a development policy credit, requiring that the program
document identify possible environmental outcomes arising from activities supported by
the lending operation. The revised FASDEP policy states the important of improving the
implementation of sector environmental impact assessments and strengthening land and water
management. This has a bearing not just on environmental resources and services but also on the
productivity of the sector itself and on the well-being of the people of Ghana. Food safety, good
agricultural practices (including careful use of pesticides, fertilizer, hygienic practices), soil and
water management will be emphasized in policy dialogue and the implementation of the revised
FASDEP. It is also expected that GEF support will be provided in the second DPC to strengthen
sustainable land management activities. A fundamental focus of increasing productivity is also
to ensure higher productivity through improved agricultural practices, and to rely less on area
expansion. It is therefore expected that the careful implementation of the policy should result in
a positive impact on the environment.
Ghana has a robust environmental institutional framework and considerable capacities to
set environmental management standards. The main frameworks are the 1991 National
Environmental Policy, the 1992 National Environmental Action Plan, and the 1994
Environmental Protection Agency (EPA) Act. This framework laws give an adequate reflection
of the national environmental policy objectives, seeking to reconcile economic development and
natural resource conservation. The EPA has since the late 1980s adopted environmental impact
assessment as a management tool to screen undertakings likely to pose adverse impact on the
environment. Environmental screening and assessments became legal requirements in 1999 with
the promulgation of the Environmental Assessment Regulations (Legislative Instrument 1652)
and Environmental Impact Assessments (EIAs) are applied to most development projects.
Procedures have been established to screen and evaluate all development projects and programs
that may have significant social and environmental impacts. Under the country’s Environmental
Assessment Regulations (Legislative Instrument 1652), an EIA is mandatory for seventeen types
of activities classified as critical. These activities include: (i) mining, (ii) petroleum and gas field
development and exploration, (iii) construction of dams, harbors and roads, and (iv) logging and
disposal of timber.
The planned DPC will support the use of environmental safeguards in the agriculture
sector and an environmental assessment of the FASDEP II will be conducted. A critical
constraint to effective environmental governance is the implementation of these regulations and
policies where they are needed. A new environment department in the Ministry is expected to
spearhead the development of the Sustainable Agricultural Land Management Strategy. The
GPRS II also identifies the requirement to ensure that EIAs and Environmental Audits are
carried out for projects and also proposes strengthening of the capacity of institutions involved in
enforcement of environmental protection. The Environment Department in the Ministry of
Agriculture would need to be strengthened for this to happen effectively and will need to work
more closely with the EPA. A parallel operation on Natural Resource and Environmental
Governance will also strengthen the ability of the EPA to respond to these needs across the
sectors.
Sustainable management of Ghana’s water and land resources is a critical factor in
sustained agricultural growth. The recognition of this is implicit in various national and sector
policies, strategies and action plans, including the National Environmental Action Plan (NEAP),
the Soil Fertility Management Plan, the National Wildlife Policy, the Water Policy and the
National Irrigation Policy. The National Action Programme to Combat Drought and
Desertification (NAP) Appendix 2 provides a long-term strategy to address land degradation in
affected areas in Ghana. The Growth and Poverty Reduction Strategy II, based on Ghana’s
commitment to the Millennium Development Goal (MDG), particularly Goals 1 and 7, and the
New Partnership for Africa’s Development (NEPAD), which drives the development agenda of
Ghana and the Food and Agricultural Sector Development Policy (FASDEP) indicate sustainable
natural resource management as an essential component of the frameworks. The development of
a Sustainable Agricultural Land Management Strategy has been proposed in the FASDEP as an
important tool to implement the policy provisions of the Land Policy and provide an opportunity
to better integrate sustainable land management into the existing policy frameworks. This is
necessary to inform the goal, objectives and policy actions to facilitate increased attention paid to
sustainable land management in Ghana.
8. Contact Point
Contact:
Title:
Tel:
Fax:
Email:
Gayatri Acharya
Senior Economist
+233-21-414116
+233-21-227887
[email protected]
9. For more information contact:
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