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The “How To” of Agricultural Transformation

September 20, 2010

Phase Two of the Ghana Strategy Support Program

Shashi L. Kolavalli

These are particularly challenging times for African countries like Ghana that are seeking to develop their agriculture sectors. After decades of neglect, there is increasing interest in investing in agriculture, fueled initially by the food crisis and sustained by the enthusiasm surrounding the Comprehensive Africa Agriculture Development Program (CAADP). How to achieve agricultural growth, however, continues to be a puzzle; what to invest in is the key question. The attention of policymakers and donors appears to have shifted from developing pro-agriculture policies and strategies to developing investment plans that can deliver the desired growth.

What should the Ghanaian Ministry of Food and Agriculture be doing to facilitate private investments? How should it work with the private sector? Should it be subsidizing fertilizers, pursuing block farming, or setting up grain reserves? If so, how? In addition to these important issues there are concerns about the capacity of ministries and in-the country administrative systems to make effective use of available resources. To some extent, divergent thought on these issues is what holds back the alignment of country and donor policies and, thereby, greater aid effectiveness.

While the focus continues to be on private-sector led growth in agriculture, two noteworthy approaches have emerged in Ghana and elsewhere. The first is a gradual shift away from making general improvements in the way input and output markets function and, instead, improving specific value chains through the delivery of marked development interventions (that is, anchoring interventions around improving the competitiveness of certain commodities). The second notable approach is a subtle emphasis on commercial agriculture: in addition to linking smallholders to markets, this type of agricultural development seeks to combine aspects of large-scale farming and foreign direct investments with expectations of benefiting from the transfer of technologies and capabilities from elsewhere. All of this entails strategic coordination with the private sector, which has begun to happen.

In practice, value chain development, which embodies market and private-sector development, goes beyond merely seeking to overcome market failures and instead aims to transform relationships between economic agents. The assumption behind this approach is that, in the absence of trust, agents interacting with each other at arms length relationships, in a competitive environment are driven by opportunistic behavior. Value chain development also recognizes the existence of coordination failures between agents. The objective in further developing value chains therefore is to foster cooperation between agents that will ultimately create mutually beneficial commercial relationships, which are inevitably superior to what they are under competitive behavior. Value chain development often entails identifying and supporting an agent in the chain who is in a position to influence other agents to upgrade their operations and likewise down the line through mutually beneficial relationships. A key expectation is that such relationships would make it feasible to develop smallholders in a private-sector led approach to develop agriculture.

Value chain development entails risks that are usually associated with industrial policy—picking winners and risking rent-seeking behavior—but it can be an effective tool for strategic targeting of regions and households. Countries like Ghana—where IFPRI has had a strategic support program since 2005—are also targeting commodities and products for import substitution. The approach is also a clearer and an aggressive way to develop private sector as it goes beyond merely providing a facilitating environment. Value chain analyses can offer simple diagnostics of binding constraints and potential investment opportunities. The interventions that would emerge from such analyses would include the usual public investments and infrastructure development in addition to direct support to private entities.

The Ghana Strategic Support Program, a research and capacity-strengthening initiative, generates knowledge with the aim of improving agricultural and rural development research, decision making, policies, and strategies. After having supported policymaking with strategic analysis during the first phase of the Ghana Strategy Support Program—focusing on understanding the structure and linkages of Ghana’s economy, the nature of growth required to meet the developmental objectives, and the returns to public expenditures, in addition to governance of delivery of key services—the ongoing second phase is designed to answer the “how to” of agricultural transformation focusing on the emerging approaches. Stakeholders felt that previous analysis did not go far enough to identify binding constraints, investment opportunities, or make ex ante assessments of potential options. A lack of availability of data, particularly with adequate levels of disaggregation, limited the capability of strategic research from being adequately supportive of decisions to develop investment plans.

The overall thrust of the current research program is on generating knowledge to improve returns on investments in the sector and defining an appropriate role for the state in this approach. The activities involve characterizing various subsectors including selected value chains to identify binding constraints and examining institutions appropriate to effectively deliver the desired policies. Focusing on returns, in collaboration with the Ministry of Food and Agriculture, the program is examining recent private and public investments in agriculture and the factors that area associated with their performance. In collaboration with the Council of Scientific and Industrial Research, we are examining how the agricultural research system is functioning as a source of innovation to generate ideas and opportunities for investments in the sector.

Our research on the tomato value chain is an example of our work or emerging approaches. Ghana has been making efforts since its independence in 1957 to develop a processing sector that can offer remunerative markets for tomato—an important diversification and food crop. But these attempts have failed. The country is faced with increasing fresh and processed tomatoes while farmers complain of inadequate markets. Our preliminary analysis of the value chain—primarily to demonstrate the need to increase productivity as a basis to sustain value adding—was done in collaboration with traders, farmers, processors, and agricultural specialists. Further analysis based on detailed household and market surveys is being undertaken to understand the working of the market, particularly the effect of trader-enforced regulation of tomato flows into major markets and the sources of competitiveness Burkina Faso growers who have captured a significant share of the Ghana fresh-tomato market. A dialogue was organized recently to develop a systemic understanding of the value chain among all the actors. It was also a part of an enlightened approach to influencing policy by making research accessible to all stakeholders rather than targeting only official policymakers. The program is also working with parliamentarians who are increasingly finding a role for themselves in the making of policy.

The research undertaken by the Ghana Strategy Support Program began with a component that focused on policy processes. A concern soon arose that if research needs to be demand driven, what priority would this policy-process research receive? However, a number of broader governance issues have emerged since. There is interest in understanding how continental initiatives such as CAADP will influence investments in the agriculture sector. Partially as a result, harmonization and alignment of external support to African countries have emerged as important issues. Providing access to land under traditional management plans and the delivery of key services are some of the governance issues that have become relevant, in addition to strengthening the capacity of the state to be an effective regulator and facilitator of the private sector.

There is considerable demand for research to guide the increasing investments in agriculture. This type of research offers opportunities for experimentation by building strategic alliances with development partners engaged in implementation of development interventions. There is also considerable interest building local knowledge systems. In order to guarantee that research systems cover the range of issues on which decision makers are demanding information and do so with adequate rigor, the necessary first step that needs to be taken is strengthening of statistical systems.

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3 Comments leave one →
  1. October 8, 2010 12:12 am

    its a nice piece of literature for the policy makers and to the struggling farmers as well.more power!

  2. October 25, 2010 7:18 am

    I have read most of this interesting issues on agricultural transformation but i want to know how agricultural transformation and rural transformation relate each other.

  3. October 25, 2010 7:24 am

    I have read most of this interesting issues in agricultural transformation but i want to know
    how agricultural transformation and rural transformation relate to each other.

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