How To Make A Profit From Farming

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1 Food Security Support Initiative The Netherlands Embassy, Ghana Thea Hilhorst Bob van der Bijl Monique Calon Jeroen Kelderhuis Gideon van Toledo Roland Waardenburg Mission Report

2 Wageningen UR Centre for Development Innovation (CDI) works on processes of innovation and change in the areas of secure and healthy food, adaptive agriculture, sustainable markets and ecosystem governance. It is an interdisciplinary and internationally focused unit of Wageningen University & Research centre within the Social Sciences Group. Through facilitating innovation, brokering knowledge and supporting capacity development, our group of 60 staff help to link Wageningen UR s expertise to the global challenges of sustainable and equitable development. CDI works to inspire new forms of learning and collaboration between citizens, governments, businesses, NGOs and the scientific community. More information: Innovation & Change Ecosystem Governance Adaptive Agriculture Sustainable Markets Secure & Healthy Food Project (BO ), Food Security Support Initiative This research project has been carried out within the Policy Supporting Research for the Ministry of Economic Affairs, Agriculture and Innovation, Cluster / theme: International Cooperation.

3 Food Security Support Initiative The Netherlands Embassy, Ghana Thea Hilhorst Bob van der Bijl Monique Calon Jeroen Kelderhuis Gideon van Toledo Roland Waardenburg Mission Report June 2011 Project code Wageningen UR Centre for Development Innovation

4 Food Security Support Initiative Mission Report The Netherlands Embassy, Ghana Hilhorst, T. Bijl, B. van der Calon, M. Kelderhuis, J. Toledo, G. van Waardenburg, R. June 2011 Centre for Development Innovation, Wageningen University & Research centre This report presents the findings of a mission to Ghana in June 2011, aimed at providing support to the Embassy (EKN) for the design and implementation of the Food and Nutrition component of the Multi-Annual Strategic Plans (MASP) and the Fast Track Process. There are three pillars for fast track initiatives on Food Security in Ghana: (1) sustainable cocoa; (2) a second food sub-sector; and (3) the Regional (Agri)business Support Office. There is also a water programme, focussing on urban water and sanitation. ii

5 Table of contents 1 Introduction and Background Mission Activities Overall Outputs Ghana Context Key Features of Food Security and Agricultural Development Netherlands Position Relative to the Ghanaian Context Programme Focus Pillar 1 Sustainable Cocoa Pillar 2 Second Food Sub-sector Pillar 3 Regional (Agri)business Support Office Water Next Steps Embassy Capacity and Resource Needs Follow-Up Appendix 1 Team Composition Appendix 2 Pillar 1: Cocoa Appendix 3 Pillar 2: Identification of Options for Second Pillar under the Food Security Programme Appendix 4 Pillar 2: Medium-scale Palm Oil Processing Appendix 5 Pillar 2: Horticulture Value Chains Appendix 6 Pillar 3: Public Private Partnerships in Ghana Appendix 7 Pillar 3: Regional (Agri)business Support Office iii

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7 1 Introduction and Background In the context of the Food Security Support Initiative of the Ministry of Foreign Affairs and the Ministry of Economic Affairs, Agriculture and Innovation, an embassy support mission was conducted to Ghana. The Cabinet letters on Development Cooperation to Parliament of November 2010 and March 2011, and the Strategy Note on Food Security (May 2011) are the point of departure. These policy papers emphasize the role of private sector development and Dutch expertise in achieving the food security objectives. This mission is part of a series of support missions undertaken in the six countries that were selected for the Fast Track Process (Ghana, Ethiopia, Kenya, Mali, Mozambique and Rwanda). Discussions between the embassies and the Task Team Food and Nutrition Security resulted in embassy-specific terms of reference. Specific activities in Ghana are an appraisal of possible Fast Track proposals, advice on subsector choices for the Multi Annual Strategic Plan (MASP) and for support to private sector development (establishment of a support facility; use of public private partnerships). Food Security Support Initiative 1

8 2 Mission Activities The four-day support mission took place from 30 th May to the 3 rd June The team of six people is composed of members of the Task Team Food and Nutrition Security from BuZa and EL&I, a representative of the Netherlands- African Business council (NABC), an independent expert on fruit and horticulture value chain development, an expert on public private partnerships (Ecorys), and a team leader from the Royal Tropical Institute-Wageningen University (see Appendix 1). The embassy prepared a concept note and identified 3 potential pillars: the cocoa sub-sector; a second food crop sub-sector -still to be identified-; and, thirdly, support to private sector engagement in Ghana more in general. Governance, gender and environment are transversal themes. The programme was prepared by the embassy with input from the mission team. Some meetings were with the entire team while part of the work was also done in sub-groups organised by pillar. The programme consisted of discussions with the embassy team in plenary sessions and by pillar, a discussion on procurement; a roundtable on investment models in agriculture with representatives of a range of (agro)-business working in Ghana, private sector support programs, a bank, and development partners; and meetings with Ministry of finance; bilateral development partners (AFD, GIZ, USAID); support agencies working on agro-business development with smallholders (Solidaridad, IFDC, Technoserve, Louis Bolk Institute); actors involved in port development (including Dutch consultancy-construction firms); and the German Ghanaian Economic Association. Field visits were organised to the Cocoa producer organisation, to Heineken on local sourcing of sorghum, to the tilapia fish farm Tropo farm in the Volta region and to a vegetable and fruit cooperative near Accra. Receptions hosted by the Head of Development Cooperation and by the Ghana-Netherlands Chamber of Commerce (Ghanecc) created occasions for more informal exchanges. 2 Mission Report The Netherlands Embassy, Ghana

9 3 Overall Outputs The mission led to the following outputs: 1. Appraisal of the Fast Track Initiative in the cocoa sector and listing of issues that need to be addressed in the final proposal. Roadmap for fast track initiative. 2. Identification of actions required for strategic planning and strengthening coordination with EL&I, NL based Choco-working group, IDH-UNDP platform and other initiatives to improve the sustainability of the cocoa sector. 3. Identification of two sub-sectors with potential for contributing to food and nutrition security via private sector development and with opportunities for engagement of Netherlands expertise and businesses. These sectors are small/medium scale palm oil processing outside plantations and commercial vegetables production for urban markets. 4. Guidance note on the range of public private partnerships models and (existing) finance mechanisms for companies. 5. Suggestions for strengthening support to the Dutch private sector already active in Ghana or planning to invest in Ghana; and the regional dimensions of private sector support. 6. Actions required to improve synergy between centrally funded instruments and delegated embassy activities. Food Security Support Initiative 3

10 4 Ghana Context 4.1 Key Features of Food Security and Agricultural Development Ghana Context The aim of Ghana is to become an aid-free country within the next decade. Government effectiveness is undermined by weak capacity of the public sector and (mis)allocation of funds. The emerging oil and gas sector may generate revenues for investing in infrastructure for development. It can also affect the exchange rate, which may reduce the competitiveness of Ghana in export markets. Respondents referred often to an aging rural population and accelerating rural-urban migration, implicitly suggesting a fast declining engagement of young people in farming. However, according to the 2000 census, the median age of the population is 18.9 years in rural areas and the population over 65 increased from 4.1 % in 1960 to 7.9 % in The upcoming analysis of the census data of 2010 will provide more clarity on the size and age distribution of the population in rural areas. Electricity supply and the road network can be a limiting factor; roads are of poor quality in cocoa producing areas. Food Security Ghana has relatively low levels of absolute food insecurity but is reported to have high levels of nutrient deficiency. Food insecurity, including seasonal shortages, is mainly a concern in Northern Ghana. Here, several initiatives to develop staple crops (rice, maize, pulses, soy) and cotton have started or are in the pipeline (USAID, DfID, World Bank etc.). Elsewhere in Ghana, food insecurity for the rural and urban poor is linked mainly to purchasing power (like available income and costs of food). The ease of international trade in the ECOWAS region is reported to influence the costs of staple food at local markets. (Rural people s selfsufficiency in food production also reduces the risk of malnutrition). Possible sources of protein are pulses (cowpea, soy etc.), sesame, fish (sea, rivers, ponds), and animal husbandry (poultry, goats, cattle etc.). (Red) palm oil is an important source of vitamin A. GAIN (Global Alliance for Improved Nutrition) introduced wheat flour and vegetable oil fortification. Agriculture Ghana offers good opportunities for agricultural development and private sector investment. There is a large diversity in agro-ecological zones (e.g. absolute rainfall; 1 or 2 cropping seasons); Agricultural production potential is high from the perspective of bridging yield gaps (current average yields, best performers, research stations). Considerable market potential exists for a range of products in local markets (urban areas), regional markets (ECOWAS) and international. Urbanisation and a developing middle class along with access to European markets are all supportive elements. Ghana can play a (potential) role as a regional commercial and trading hub. This would require more progress on trade relations within ECOWAS. This is essential as Ghana s home market (24 million people) is too small for achieving economies of scale, particularly compared to Nigeria. Ivory Coast is reported to have a better organised agricultural sector (with associated logistics) and could compete with Ghana if stability is restored. 4 Mission Report The Netherlands Embassy, Ghana

11 Potential for import substitution of food products (rice, palm oil, tomatoes) but less for chicken meat (imports Brazil, Europe and elsewhere); Dumping is a problem for the private sector (one company visited mentioned an example of fish from China). There are many examples of exporting agri-food companies also to the Netherlands (cocoa, sheanuts and sheabutter, fruits products to AH). Examples of local businesses and value chain development that demonstrate the potential for innovation and growth are Blue Skies Company (fruit salads, juices), and Eden Tree (processed vegetables). Producers (large and small farmers) are reported to have limited technical as well as business skills and make low usage of quality inputs. Some NGOs are now implementing programmes to address the last two points, with positive results in terms of increased productivity. They have developed innovations in capacity building of smallholders around business skills (cocoa clinics). A number of these NGO/INGO initiatives in the cash crop sector are undertaken in close cooperation with (multinational) companies. Solidaridad mentioned that almost 90% of their budget for supporting cocoa growers to raise productivity and improve business skills, was provided by companies. Solidaridad claims that these farmers have a 30-40% increase in income. Applying new skills may require access to finance. Financial services can be prohibitive for farmers (> 20% interest for working capital) and there is limited availability of long term credit to invest in equipment. IFDC is organising input markets and traders, and working with government on regulation (quality of and access to inputs). Producers organisations seem to be weak and there is limited experience of producers organisations joining forces around value chain development (inputs, processing); most outgrower projects are organised by private sector or projects. There are significant gender issues that must be taken into account. Many farmers are women, who also play a key role in tackling food security issues at household level. Access to land is a problem for women. Land governance is highly complex and there is much dispute and conflict, while litigation is costly (and ineffective). It can become a binding constraint for investments in land and replanting of trees (cocoa, oil palm, rubber). Land is becoming scarce, particularly in the south, and it is difficult for young people to access land and engage in farming. Agricultural production is competing also with (legal and illegal) gold mining and (future) residential areas near urban areas. Inheritance systems produce micro plots (in the South also cocoa). Despite these complexities, the GoG and World Bank are developing programs to introduce large scale farms (over 5000 ha). Other initiatives focus on outgrower schemes linked to nucleus estates and processing facilities, to increase production and avoid conflict. 4.2 Netherlands Position Relative to the Ghanaian Context The bilateral development cooperation programme did not have a strong focus on the productive sectors in the past decade, except for natural resources and environmental governance. Embassy influence is achieved through policy dialogue related to budget support (general and sector). Significant presence of Dutch companies in Ghana (>100), ranging from big multinationals to small SMEs. The ORET programme was successful. Presence in the agri-business is less developed, but several companies are active in cash crops (cocoa, staples, and cotton), agro-input supply, agroprocessing and other infrastructure, and consultancy. PSI has supported agro-business development (Pineapple, teak, fish feed, palm oil). However, most recent PSOM/PSI subsidies are awarded to non-dutch companies (5 out of 6 mostly agribusiness). Food Security Support Initiative 5

12 The first inventory of the Netherlands African business Council revealed interest among Dutch companies to invest in Ghana. Dutch financial actors (FMO) have a large portfolio in Ghana. Dutch not-for-profit organisations like Solidaridad and Louis Bolk are actively engaging with the private sector and work on smallholder business development, also in what may become the priority sectors for the embassy (cocoa, possibly palm oil and/or horticulture). SNV will expand its portfolio of agriculture related activities in Ghana. The embassy also uses the expertise of other international organisations like Technoserve and IFDC, both originating from the US. It is likely that other competent international and Ghanaian organisations exist which have useful expertise with respect to brokering linkages between markets and producers, helping producers to organise, building capacity, representing the interests of vulnerable groups and supporting overall value chain innovation. Some Dutch knowledge institutes are working on agriculture and food security in Ghana. Examples are Cos-SYS (Wageningen UR, KIT, and Agriterra) which works on palm oil, cocoa and goats, and Louis Bolk. Alterra has been hired by the World Bank to execute climate and soil mapping for Northern Ghana. Linkages have existed on value chain development and staple crop production in the north (Wageningen UR). Again it is likely that this is not a complete inventory of Dutch expertise on Ghana. 6 Mission Report The Netherlands Embassy, Ghana

13 5 Programme Focus 5.1 Pillar 1 Sustainable Cocoa Cocoa is a highly pertinent choice as priority area as it provides income for a large group of small scale farmers and revenues for the country. Cocoa is important for the Ghanaian economy. Both Ghana and the Netherlands have a unique position in cocoa sector, with Ghana being the second largest producer after the Ivory Coast (where farms tend to be larger). The Netherlands plays a central role in trade and processing, and there are strong private sector interests around cocoa resulting in regular consultation (Choco working-group) and the establishment of a platform to promote the sustainability in the cocoa sector (organised by IDH). The Netherlands plays an important role also at the international level via the International Cocoa Organization (ICCO). The market demand for cocoa is growing and prospects are good. About 1 million cocoa male and female farmers are active in Ghana, predominantly smallholders. Those engaged in cocoa cultivation can be plantation owners, sharecroppers, caretakers or farm labourers. It is estimated that 25% of the cocoa farms are owned by women, but they often do not benefit sufficiently (no direct trading) 1. A study on the cocoa sector observes recent migrations to cocoa producing areas and a new interest of young men and women in cocoa farming. On average, owners of cocoa farmers are aged on average 52 years, which is an indication of skewed ownership of cocoa plantations due to poor access to land for young farmers (Ruf, 2007) 2. Cocoa has a strong indirect effect on food production via income and employment around cultivation of cocoa, in the value chain (grading, trading, transporting, exporting) and via spin off / multiplier effects in the local economy. Often, cocoa trees are intercropped with a range of food crops (rootcrops, vegetables, fruit trees etc.) grown for subsistence and the market. This is particularly important in the east of the country; in Western Ghana, monocropping of cocoa is more frequent. These food crops may benefit from inputs used on cocoa, as well as from skillbuilding of cocoa farmers and workers (male and female) with respect to good farming practices and running the farm as an enterprise. In Ghana, the trade in cocoa is regulated through 27 licensed buying companies and the centralisation of exports by the COCOBOD a parastatal. Producers receive 70% of the World market price; the remaining 30% are used for investments in research, extension services, planting material, and infrastructure investments. Cocoa farmers are weakly organised. Cocoa farmers use many informal organisations (like for labour exchange), but see less need for organising formally. Lack of trust can also be an issue. However, farmers need to build stronger organisations to improve their capacity to negotiate. The Fast track proposal in support of the cocoa association is therefore highly relevant (see for more detail Appendix 2). As the forest cover is disappearing fast, cocoa expansion is to focus on replacement to avoid more deforestation. The challenge for the cocoa sector in Ghana is to increase productivity and maintain quality. This requires investments in renewal of plantations, good agricultural practices, improved processing and better business skills. 1 The programme Gender Equity in Certified Value Chains by KIT, HIVOS, Oxfam-Novib, and Solidaridad, 4C and IDH is exploring possibilities for improving the position of women in certified value chains. Cacao in Ghana is one of the case studies. 2 Ruf F The new Ghana Cocoa boom in the 2000s- from forest clearing to green revolution. A report prepared for the Ministry of finance and Economic Planning, Ghana. Food Security Support Initiative 7

14 The ability of cocoa producers and GoG to improve production and quality is influenced by tree renewal and the governance of the sector (distribution of costs and benefits, quality control, curbing of cheating, and corruption). Land rights are also important for improving production (gold miners destroying trees, access to land for new farmers, role of land rights in renewal of trees). Infrastructure is poor in the cocoa areas, such as with respect to feeder roads, which increases the costs of transport of cocoa and also food products. The mission expects that the embassy can build up quickly the knowledge required for working effectively in the cocoa sub-sector. They can build on the expertise available in Ghana among Dutch private sector and private-not-for profit organisations; by linking to relevant structures in Ghana (Cocobod, etc.) and via knowledge and exchange networks in the Netherlands (Choco working group, IDH, Cos-SYS). Following the setting of strategic priorities, further political analysis is required in order to identify the actions, strategic funding and alliances required for increasing the leverage of the embassy in this sector. Leverage can also be mobilised by making use of other ongoing work at the embassy. Examples are the work in the context of Natural Resources and Environmental Governance (NREG) to stop illegal gold mining in cocoa producing areas and to explore the possibilities of REDD+/ payment for environmental services for making cocoa production more sustainable. Other useful linkages can be developed around the nexus cocoa-food security- environment-governance- gender with research and advocacy organisations and NGOs that have been supported via KASA (NREG) and STAR during the MASP. Conclusion The cocoa initiative qualifies as a fast track initiative for food security, which is expected to contribute towards higher productivity of food crops and more income for some small scale farmers. Cocoa is one of the main export commodities to Netherlands based companies. There are also strong linkages with EL&I and other centrally funded programs such as IDH. 5.2 Pillar 2 Second Food Sub-sector The envisaged pathway of impact with respect to food security and nutrition is by targeting smallscale producers and promoting private sector development. The aim is modernisation via good agricultural practices and value chain development, economic viability and social and environmental sustainability, increase of productivity and quality and decrease of post-harvest losses, a more entrepreneurial approach to farming and better agribusiness services, and strengthening farmer organisations. This is expected to lead to more production and higher profits for producers, with spin off and spill over effects in communities and on the wider economy that will contribute to better food and nutrition security. In terms of private sector development and the link with food security, it is necessary to distinguish between different market segments, such as: 1) high value and niche export markets; 2) bulk export products like cocoa; 3)marketing for national and regional middle class populations; 4) and marketing for poor rural and urban populations (including staples) and 5) local sourcing by international agro-processors. In each market segment there is opportunity for more private sector and entrepreneurial development. The types of Dutch private sector players and the roles/contributions they make to food and nutrition security vary considerably. Currently, Dutch private sector interests are predominantly in segment two, and, to a lesser extent, section 1. However, there is interest to move into section 3/4/5- that is producing for regional markets and local sourcing. Companies such as Unilever, Heineken, Friesland-Campina, and DSM are interested in sourcing locally in (West) Africa for 8 Mission Report The Netherlands Embassy, Ghana

15 regional and local markets, Friesland-Campina for example plans to source 10-15% of the raw materials for dairy products locally. There are high levels of donor engagement in the agricultural sector, although it was suggested that harmonisation could be improved. The Donor group is functional (Germany is sector lead) and has regular coordination meetings with government parties. Although the embassy was not very present in agriculture over recent years, the good contact with other development partners can be used for getting a quick overview of ongoing work to avoid duplication, and to identify promising niches and opportunities for collaboration (like finance mechanisms). The embassy was active on nutrition via the Ghana school feeding programme, which was supported for many years by EKN and SNV. This support is phased out due to weak results, partly as a result of political interference. Besides that, the programme has been largely ineffective in creating significant market demand for local produce or promoting private sector involvement. Small and medium scale palm oil processing is a large sector in the local economy and important for food and nutrition security. There is much waste during processing and opportunities exist also to improve nutritional value. Few donors are active in this sub-sector, where promising innovations are taking place around processing. There is Dutch expertise available (Solidaridad, Cos-Sys) and a PSI project (see Appendix 3). The horticulture sector offers opportunities for small farmers to produce for domestic, regional and international markets. Although Ghana prides itself on its fruit and horticulture sector, there are indications that the sector has underperformed in the past years. For example, Ghana was too slow in taking up a new pineapple variety popular in Europe and lost a significant proportion of its international market to Costa Rica. The Dutch private sector and knowledge institutions could play a role in revitalising the up-market vegetable and fruits sector. Public-private partnerships would be an useful instrument. Conclusion Sub-sectors with most potential for food and nutrition security and that meet the criteria of the embassy (private sector driven, commercial viable within 5 years, no donor saturation) are small and medium scale palm oil processing and vegetable production for the urban market (see Appendices 3, 4 and 5). 5.3 Pillar 3 Regional (Agri)business Support Office Ghana is becoming a lower middle income country, and will move from Profile 1 (MDG-focus) to Profile 3 (Broadened relationship). The Embassy is starting the process of transiting from a development cooperation partner to a bilateral economic relation in the coming years. It is planning to adopt an even more pro-active role in signalling market opportunities and having in depth knowledge of local businesses. When looking just at Ghana, the demand for a NABSO or NBSO is limited, but there is growing Dutch business interest in the wider (ECOWAS) region. From the standpoint of Dutch businesses, a regional NBSO in Lagos would be preferred over Accra When the embassy in Accra would focus on agribusiness specifically, this could justify using the Embassy as a regional hub for assisting agribusinesses and identification of potential market leads (especially Nigeria and Ivory Coast (cocoa). The Embassy is open to playing a role as regional business support hub. Strengthening embassy capacity with a temporary EL&I attaché with a regional terms of reference is important for building up the regional trade network with the Netherlands (e.g. via a 2 year appointment). Such an attaché could also assist with strengthening the role of the Embassy in the cocoa sector in Ghana and Ivory Coast. Food Security Support Initiative 9

16 Also assisting Dutch businesses in their bid for tenders financed by loans or grants from international financial institutions (IFIs) could become part of the ToR. Ghana is among the four pilot countries under this initiative. NABC can play a role in creating awareness with companies, linking and matchmaking as well as with organising business missions and market development by consortia of Dutch companies. When it comes to connecting Dutch expertise and Dutch businesses with policy objectives of the embassy, it would also be an option to invest in a knowledge centre in Ghana (e.g. for cocoa or palm oil). There are many different instruments available directly through the Netherlands (PSI, ORIO, NUFFIC scholarships), indirectly (IFC, AECF), Dutch private equity funds and also through other countries. It seems that many of the current proposals of Netherlands companies for innovation (outside cocoa) would fit well in PSI- type of programs, which have clear procedures for selecting and approving proposals in order to ensure quality, impact and transparency. However, the embassy flagged an important mismatch between the policy objective to increase Dutch private sector involvement, and the fact that most instruments are untied and therefore not serving the new agenda. Existing EL&I instruments such as economic missions, 2g@there have a high potential that needs to be made available to more countries, such as Ghana. It was observed that the problem for the private sector with respect to access to finance is a combination of: 1. A lack of well prepared project proposals that contain the information needed to attract private finance (equity, debt) for their projects. The core of the conditions to attract finance is a healthy balance between project risks and returns and other investment-/ lending conditions such as duration of the loan. 2. A suggested mismatch between the conditions of the available financial instruments (investors, banks) and the conditions needed to support the business cases. This implies that also well prepared business cases cannot be realized with the existing financial instruments available in the market. The number of well prepared project proposals can be improved by the provision of grants or (conditional) loans for project preparation and/ or technical assistance and training activities in this field; Access to finance can be improved by the application of grants or the provision of loans, equity or other financial instruments under soft conditions. For companies it will be difficult to assess what option is the most adapted to their needs. An overview of instruments could be made available through the embassy (Appendix 7). It is advised to conduct a study on the available financial instruments in Ghana focussing on a) private finance; b) public finance and funds; c) public-private finance such as the Agence Française de Développement (AFD) initiative (loan scheme for rubber sector) and the AECF (for more information see Appendix 6). The Embassy wants to further explore possibilities for public private partnerships. Appendix 6 introduces various forms of public private partnerships and the roles the embassy could play in: 1. The development of business ideas to full-grown project plans (brokering and (funding of) technical assistance role); 2. The introduction of new financial instruments or contribution to existing ones. This concerns financial instruments/ - funds that use (partly) public funding so that they can offer equity, loans or guarantees against better conditions than the private sector (initiating role for new instruments or funding/ shareholders role for existing and/ or new instruments); 3. The delivery of public infrastructure (e.g. ports, roads, energy, water, etc.) using contract structures that aim to allocate risks optimally between public and private stakeholders. In many cases private stakeholders will be responsible not only for e.g. the construction but for an integrated service covering a combination of design, construction, maintenance and 10 Mission Report The Netherlands Embassy, Ghana

17 finance. In most cases private stakeholders will finance the infrastructure and receive a return on their investment over the course of the operational phase (usually between 15 and 30 years). Towards this type of PPPs an appropriate role can be to assist Dutch private companies in getting their message and views across on the optimal way of infrastructure development and finance (and the way they can finance the infrastructure). This can be done by acting as broker and offering funding for the development of proposals by the private sector (e.g. feasibility study in which the views of the private sector are further explained and elaborated on). How PPPs are used will depend on the strategic choices and modalities chosen. Depending on these decisions, there may be potential for joining existing PPP for supporting enterprises or financial instruments (e.g. AFD loan scheme for rubber which may expand to cocoa). Such a decision needs to be based on a thorough analysis of these instruments. Developing PPPs is therefore always a tailor-made process bringing the right partners and financiers together. Both EL&I and BZ have expertise t can assist the Embassy further with regards to PPPs (see also pillar 2). There is a small potential with respect to the Ghana ports, which need to be further explored by actively engaging with private and public sector stakeholders both in Ghana as in The Netherlands. There seems to be interest from the Ministry of Finance and Economic Planning (and the sector ministries) to acquire capacity on PPPs once a new law on PPPs has been adopted. Conclusions There is no scope yet for a NBSO. Strengthening embassy capacity with a temporary EL&I attaché is important for building up the regional trade network with the Netherlands. It will be helpful to make an overview of available financial instruments for (Dutch) companies in Ghana that could be made available through the embassy. Whether PPP are useful depends on the strategic choices made in the MASP. Developing PPPs is always a tailor-made process bringing the right partners and financiers together, and requires expertise. Food Security Support Initiative 11

18 6 Water The focus of the water programme will be urban water and sanitation, which would indeed serve an important part of the population. The potential risk of drinking water pollution as a result of the expansion of intensive fish farming in the Volta region (and intensification of agrochemical use in farming more in general) may need to be assessed, as well as the capacity of GoG to regulate and monitor. Generally, for agriculture, water stress is not a major issue as in most parts of the country double cropping is even possible. It is also not an issue for cocoa production. Some donors are planning to upgrade existing irrigation systems and possibly invest in new infrastructural works, which may help to improve drainage and improve the efficiency of input use. The mission will inform the upcoming DME mission to Ghana that will assist the Embassy in exploring potential Dutch activities in the water sector. 12 Mission Report The Netherlands Embassy, Ghana

19 7 Next Steps 7.1 Embassy Capacity and Resource Needs The concept note prepared by the Embassy provides a good starting point in working towards the food security component in the MASP. The focus of the embassy is clear and SMART. The embassy is working towards the objective to make Ghana aid free within a decade. Therefore, engagement on food security and agricultural modernisation need to be time bound (excluding engagements in subsectors that would require more than a decade to materialise, e.g. extension of irrigation). Furthermore, the embassy is also cautious in taking on new engagements on which it cannot deliver (e.g. due to insufficient staff expertise, time and management capacity). The embassy demonstrates flexibility and a capacity to innovate with respect to adjusting existing programmes to the changing context (e.g. working on REDD in relation to cocoa as part of NREG and focusing NUFFIC scholarships more towards priority themes). The embassy has the capacity to make the general context analysis for the food and nutrition security component in the MASP. Considerable analysis has been done by other donors on the overall food security situation in Ghana. Coordination mechanisms amongst development partners and with the government are sufficiently developed for assembling relatively quickly an overview of the major investments already taking place to avoid duplication. By partially refocusing existing work packages among staff, the Embassy should be able to implement the food security and nutrition component of its programme. In addition, by working closely with implementing partners, such as Solidaridad, IFDC, Technoserve and others, the new programmes could be implemented efficiently. Embassy capacity also depends on the effectiveness of policy and political dialogue. The embassy is analysing the effect of ending the budget support on its leverage of the Embassy with respect to the GoG and ways for preventing such loss of influence The NABC and the Ghana-Netherlands Chamber of Commerce and Industry could play its part in mobilizing the Dutch private sector in Ghana. To ensure that the ambitions set with respect to food security are met, connection with Netherlands and Ghanaian expertise networks are important and can be further developed, also for monitoring and learning. Pillar 1: cocoa - Analysis of the cocoa sector is available in Ghana and in the Netherlands. There is sufficient technical capacity at the embassy to collate and synthesis this existing information, although staff time may be lacking. Additional support and resources may be required with respect to consultations on strategic choices and planning exercises between Dutch and Ghanaian stakeholders, and to involve Dutch expertise. The growing synergy between Embassy and EL&I around cocoa will increase the effectiveness of the work of both parties. Pillar 2: second food sub-sector. The first step is additional scoping, which should provide the information for making strategic choices. These studies should give insight also in the contribution to both economic development and food & nutrition security, also for the more vulnerable groups in society. Short studies by a Ghana based experienced consultant should be sufficient to assess the potential of the two proposed sub sectors (small and medium scale palm oil processing; commercial horticulture). Solidaridad has conducted a study on small scale palm oil processing which could serve as the basis for further work. What role public investment can play in promoting private sector development and innovation that contributes significantly to food security and is commercially viable, will be developed in the MASP. This includes an analysis of the conditions under which the use of public resources for private sector development is justified, as well as permitted (to avoid unfair competition). Decisions have to be made about the extent to which the Food Security Support Initiative 13

20 Embassy itself will manage and guide a knowledge intensive programme, tender such a programme, develop a PPP or will invest in the programmes of other donors. Pillar 3: The appointment of a regional EL&I attaché is likely to boost (agri)business development relations between Ghana, and the wider the ECOWAS region, and the Netherlands. This may bring to Ghana expertise from the Dutch private sector and knowledge institutes. Additional expertise may have to be hired to complete overviews of financial instruments for companies, and when the embassy decides to engage in a PPP. 7.2 Follow-Up Finalising Fast track initiative and clarification of road map. Establishing closer links between the Embassy, EL&I and the Choco working group, its networks and work plans. Embassy to commission scoping study to assess feasibility of commercially viable innovation on small and medium scale palm oil processing, and commercial horticulture. Overview of centrally funded instruments and programs with implications for Ghana embassy (BuZa, EL&I) and coordination. One example is IFDC, which will submit a new regional proposal to DDE focussing on agricultural value chain development and public private partnerships, involving Netherlands (based) companies and small scale producers and other agribusiness entrepreneurs. The embassy has indicated that if this proposal contains a Ghana-chapter, DDE should aim to cover in one contract all the different interventions that work through IFDC. Overview of private sector funding opportunities (EVD instrumentarium, other Dutch investment funds, matchmaking facilities, international equity and revolving funds, etc.) and explore possibilities of enhancing scope of 2g@there. Mapping Dutch expertise on priority sectors (cocoa, agribusiness etc.). Explore possibilities for a general agribusiness trade mission, which requires interest by companies. NABC expects that this is feasible and that there will be interest also for palm oil estimated at about 5 companies) and horticulture (about 10). 14 Mission Report The Netherlands Embassy, Ghana

21 Appendix 1 Team Composition Bob van der Bijl NABC Monique Calon BuZa Thea Hilhorst KIT/Wageningen UR Centre for Development Innovation Jeroen Kelderhuis EL&I Gideon van Toledo Ecorys Roland Waardenburg independent consultant Appendix 1 15

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23 Appendix 2 Pillar 1: Cocoa General The Embassy could become the focal point for interventions in the cocoa sector in Ghana and the region. To that end, within the coming 4 years the Embassy could build up a coherent programme on cocoa, liaising with networks in government, private sector, knowledge institutes in the Netherlands and Ghana. Activities in the cocoa sector could be linked to a clearer Embassy profile on economic diplomacy and private sector development initiatives. Sustainable Cocoa 1. Advise on decision on cocoa proposal Cocoa Abrabopa for intervention in view of fast tracking of one activity in 2011 under this pillar A field visit and interviews with stakeholders were undertaken with a view to assess the proposal for sponsorship of sustainable expansion of the Cocoa Abrabopa Association submitted to the Embassy. The proposal builds further on earlier interventions by the Embassy (via IFDC) and provides a good opportunity for fast tracking the food security agenda. The association focuses on training and education of the cocoa; extension services; credits; group building; certifications; warehousing; social security; mapping of farms; hard ware and maintenance. Other sponsors of the Cocoa Abrabopa association have been Wienco and Rabobank Foundation. A financial contribution by the Embassy of approx. 6 million euro (1.1 million in 2011) would allow the Association to assist up to farmers by 2016 (now farmers). Linking this proposal to the Dutch food security agenda is guaranteed via: 1. Proven higher yields leads to higher income for the farmers allowing for higher and more diverse consumption as well as allowing other investments (the farm, (higher) education of children, better housing etc.). 2. Promoting back yard farming for consumption and trading surpluses (plantain, banana, cassava, citrus, oil palm, yam, pineapple). 3. Improved farming skills are relevant not only for cocoa production but also for other crops, food and/or cash crops. 4. Certification of the cocoa production addresses conditions that are also relevant for food crop farming (record keeping, farm and community hygiene, storage and use of fertilizer, human rights and working conditions, good agricultural practices, environment and biodiversity). Some concerns that need to be addressed to improve the proposal: More detailed explanation of the financial input of Wienco and its relation to the investment by the Embassy (added value of Dutch public sector contribution) Exit strategy that guarantees sustainability of the association after 2014 Risks analysis (via COCA) on the Cocoa Abrabopa association, given the absence of IFDC as recipient of funds Discuss and integrate experiences (and future commitment) of Rabobank Foundation with the association More elaboration on gender aspects in the proposal and guaranteed absence of child labor Comparative advantage of Technoserve needs to be explained Environmentally sustainability of the agrochemicals being promoted and possible alternatives. Appendix 2 17

24 2. Advise on potential for a regional focus of cocoa programme Given the pivotal role of the Dutch private sector in the international cocoa sector and the Dutch role in certification programs, the Netherlands is in a unique position to improve conditions for the businesses involved as well as stakeholders in the whole chain, also vis-à-vis other international players. EL&I has been chairing the Choco working group in the Netherlands and via its attaché in London is active in the international cocoa body ICCO-, which brings together consumer and producer organizations. In Ghana a coordination platform will be created by IDH and UNDP, to support the IDH programme on cocoa. Dutch private sector expects the Dutch government and its Embassy to play a coordinating role in Ghana and could in the future also in Ivory Coast and other countries in the region. Linking private sector interest in the cocoa sector with opportunities and obstacles in the development of the private sector in the regional (ECOWAS) region would argue for a more coherent, programmatic approach by the Embassy to promoting agribusiness development including addressing needs to enhance capacity (within government), infrastructure (port development, roads) and coordination of Dutch and other initiatives. 3. Advise on collaboration between Embassy and Dutch policy coordinating structures (i.a. Chocoworkinggroep) Whilst referring to the above under point 2, a more structured approach could be undertaking between the interventions of the Embassy (incl. regional) and the Choco workinggroep. If the Embassy takes up a coordinating role in the cocoa sector locally (especially Dutch initiatives like IDH, UTZ, Solidaridad, Rain Forest Alliance, Wageningen UR research activities), it could provide valuable input to the stakeholders in the Netherlands or vice versa. The EL&I representative and the Embassy should therefore regularly match their activities. A meeting could be organized by the Choco workinggroup secretariat and the Embassy representative (during the DDE/DME conference in June or via a videoconference) to make some concrete agreements to this end. Moreover, a regular inventory and mapping of ongoing initiatives by other development partners, private sector, NGOs and also COCOBOD around the value chain of cocoa, is important and can be undertaken by the Embassy and the Choco workinggroup. 4. Advise on ways of integration with activities undertaken by i.a. IDH, CoS-SiS (Wageningen UR), Dutch private sector etc. Whilst referring to the above under points 2 and 3, the Ministry of EL&I is organizing a mission to Ghana with Research Institutes from the Netherlands, UK and Ghana. The Mission will bring together different stakeholders on finding ways to enhance the effectiveness and efficiency in generating and managing knowledge on sustainable cocoa production, processing and consumption. The expected output of this initiative is the formulation of a feasible approach towards intensified cooperation between different knowledge partners in line with the knowledge support requirements of different private sector partners in the cocoa supply chain. The Embassy has an advisory role on this subject (see point 5 and 6). One of the result of this mission could be a mutual agreed annual research agenda on cocoa. 5. Advise on need for Embassy interventions on governance constrains in cocoa sector Whilst referring to point 1: the Embassy could set up a more coherent and strategic network within the cocoa sector and offering capacity building and G2G interventions (e.g. via NUFFIC, technical assistance etc.). Economic diplomacy (market access, market ordering and trouble shooting) can also be applied to assist the Dutch private sector on their request. A study could be undertaken of the strengths and weaknesses of the sector (in Ghana and Ivory Coast) including governance issues and market flaws. Such a study could also address the influence of land grabbing and mining activities by foreign companies in 18 Appendix 2

25 Ghana, and on factors that hinder the renewal of cocoa plantations, which is essential for improving production (such as tenure systems around land and trees). 6. Advise on analytical work or interventions to enhance positive impacts of improved cocoa production on food crop production The pathway of impact on food security of improved cocoa production (and capacity building) needs to be developed. A study could be undertaken in close cooperation with the Abrabopa Association to analyze the impact of improved farming skills in cocoa production on food crop production. A proposal to that end could be made by EL&I/DGIS. 7. Advise on potential synergies of bilateral programme with Dutch private sector and Dutch expertise centres; See point 2, 3 and 4 8. Assess needs for short-term support to provide necessary capacity and quality expertise to kick start the programme in Ghana, and provide draft terms of reference; Analysis on the cocoa sector is available and there is no need for the Netherlands embassy to repeat this work, there is sufficient technical capacity to collate and synthesis existing information, although staff time may be lacking. Additional support and resources may be required with respect to consultations and planning exercises required between Dutch and Ghanaian actors with respect to strategic choices. 9. Propose areas for transversal interventions regarding good governance and gender (in line with MASP instructions). Special attention for strengthening the role of women in the cocoa value chain and in the association is justified. According to a case study, around 20% of the cocoa farms are owned by women, but they seem to sell their cocoa through male relatives because they do no master the marketing system and seem more vulnerable to cheating. Women play also an important role in foodcrop production. To ensure the impact on food security, women therefore need to benefit directly from capacity building efforts (technology, business skills). Environmental consideration: Expansion of cocoa can lead to deforestation, and for this reason, replacement of cocoa trees is emphasized. The use of agrochemicals in cocoa is another point of attention that can be analysed. As indicated in point 5, governance issues in the cocoa chain are important for foodsecurity impact and sustainability of the sector. Some examples are marketing systems and the use of levies, land governance, the application of standards, etc Budget The mission will make sure that DGIS/EL&I budgets will be made available for the above activities under the fast tracking funds as well as under the MASP financial paragraphs. Appendix 2 19

26

27 Appendix 3 Pillar 2: Identification of Options for Second Pillar under the Food Security Programme Priority setting of sub-sectors of food products (shaded cells- reasons for exclusion because of binding risks or not meeting embassy criteria) Commodity Palm oil processing SME Commercial horticulture Aguaculture (fish farm) Maize Food sec market Poor; middle class urban/ rural (staple) Urban middle class (price)/regio nal markets Middle- lower class (price) Yes white =staple; yellow-animal feed nutrition innovation Possibility for adoption (smallholders/sme) Yes Processing Yes -finance equipment yes Yes Seeds & production and processing technology/ma rketing skills Value chain organization/ outgrowers; business services White maize reduce yield gap; increase area -input supply Yellow maize; introduction new crop Soy Animal feed yes introduction new crop Rice Staple Production productivity increase Intensive poultry rearing Middle- lower class (price) yes Value chain organization; business services Cotton No-indirect Value chain organization; ginnery Tubers/ cassava Sorghum/ millet Staple Production/ productivity; value chain development (new products) Yes depending on type of technology/ financial requirement Market risks Yes- techn is known; organization services Medium-low; varieties not yet adjusted; technology to be adapted Medium-low; irrigation infrastructure; Medium to low finance/ organization supply services (chick, feed, veterinary etc) Yes- if business dev services are functional and finance is available Yes depending on innovation Commercial sustainab. 3-5 years Yes if technology is performing yes Donor saturation low Dutch interest Solidaridad; cos-sis Lowmedium? Eastwest/Rijkzwa an/unilever yes Low-medium To be assessed yes high To be assessed Yes- import substitution Yes- import substitution No- high tech/ high organization (outgrower onlymonopoly) Eggs-yes; meat no (import too cheap) Yesdepending on innovation Depending on the innovation High high No information Private sector driven- no direct need for public support No information To be assessed To be assessed Yes (Rijk zwaan, others) Yes- wienco To be Assessed (only for cassava) The mission received proposals on maize-soy and aquaculture and also discussed possible foodcrops with other development partners (particularly IFDC, solidaridad, technoserve, USAID). The most promising options are firstly medium-scale palm oil processing of fruits produced by smallholders outside plantations to improve productivity of pressing and quality of the palm oil (vitamin A). A second option suggested is innovation in vegetable production for urban markets. Other products are already supported by many Appendix 3 21

28 development parties (maize, soy, rice), relatively complex for smallholders and requiring access to specialised services (intensive aquaculture, intensive poultry rearing), or do not require public support as the approach and technology are known (cotton). Some proposals by private sector companies can be funded via PSI or even private equity, if the proposal is bankable. 22 Appendix 3

29 Appendix 4 Pillar 2: Medium-scale Palm Oil Processing Background The oil palm is an indigenous tree crop in West and central Africa, and grows along coastal areas from Guinea to Congo. In the West African region, Nigeria and Ivory Coast are the largest producers. Palm oil is an important part of the diet for most Ghanaians, and can also be used for biofuel, soap etc. Ghanaian consumers prefer for cooking the red coloured more acid type of oil, produced by small and medium scale processors, instead of the palm oil produced by processing plants (Moss, 2010). Crude red palm oil contains Vitamin E and is considered the world s richest plant source of bioavailable provitamin A 3. Data from 2005 suggest that total palm oil use in Ghana was , all for consumption, while national production was MT (54%). In Ghana, it is estimated that about 70% of the palm oil produced is grown by small and medium scale farmers on ha ; the rest is produced by plantations (nucleus estates and outgrowers ha in 2000) (Moss, 2010; Osei-Amponsah et al, 2010). These data show that although the area under smallholder production is much larger (87%), their contribution to palm oil production is lower (70%) which reflects lower yields and lower efficiency of small and medium scale palm oil pressing technology. Yields on estates are estimated at ton/ha of fruit bunches, outgrowers 7-10 t and for small holders much lower (3-5 t) who also use other varieties. Industrial mills can extract up to 95% of the oil available in the mesocarp of a fruit while some artisanal processors extract 50% or even less. Currently, the red palm oil is mostly sold through trading networks in the West African regions. Moreover, a survey found that the average values of free fatty acid per sample ranged from 9.97 to per cent and were in all cases higher than the maximum FFA level of 5 per cent specified for the industrial and export markets. These high levels are mainly caused by post harvest handling of fruits (storage and fermentation) (Osei-Amponsah et al, 2010). Women play an important role in small-scale processing and the local palm oil trade. A survey in Ghana found that 80 per cent of processors are females and 66 per cent of these processors depend on oil palm milling as the main source of income. The processor usually does not own the milling equipment (hand spindle press operated with a separate digester) but access such services from a mill owner for a fee. On average, 20 people work at each mill, involved in various stages of processing. Processors are not organised and most (>90%) had never had any type of formal training on good processing practices. Buyers of their palm oil are Nigerian agents and Togo buyers, mill owners, local bulkers and market women from local markets (Osei-Amponsah et al, 2010). The impact of certification (RSPO -Roundtable on sustainable Palm oil) to encourage good agricultural and processing practices and improve the sustainability of the palm oil sector on the livelihoods of small-scale producers and processors has not been assessed yet. There is a need to improve practices from economic, social, health and environmental perspectives but this of small and medium scale producers and processors is also the least likely to join because they do not export palm oil outside west Africa (Moss 2010). Moreover, a focus on RSPO would benefit mostly the plantation sector maybe at the expense of the small and medium scale business. Improving production and productivity of small and medium producers, which has a large potential for food and nutrition security while reducing losses and multiplier effects on income and employment requires an alternative approach (in the spirit of RSPO) 3 Appendix 4 23

30 There are several private sector driven initiatives to improve the efficiency of oil extraction (small and medium scale). This is a very old concept and all kinds of equipment of varying quality are used. Most of these new initiatives aimed at improved small/medium scale milling seek to provide a processing service where there is currently low capacity; taking fruit from existing farms. The new equipment aims to be of higher efficiency. In most cases the objective is first of all to supply the strong local demand for unrefined oil. Examples in Ghana are the UK firm Wacapol (1 mini mill in Abrafo- Cape Coast), Cottage Gold Limited (partly Ghanaian) and the Germany company Geschäftsführer QEW GmbH (Moss, 2010). There is also a PSI supported initiative. Solidaridad is considering working with Wacapol. From a regional perspective, Ghana is considered a good target country to start working on improving the palm oil sector, as production conditions are representative for the region but government interference is much lower (Moss, 2010). Successful approaches are likely to be applicable also in other west and central African countries. Interventions in small and medium scale palm oil processing have gender dimensions. The challenge is probably to maintain and even strengthen the position of female producers and traders. Environmental aspects are related mostly to pollution of water and energy efficiency. Governance aspects may be related on the one hand to chain dynamics and on the other hand whether the interest of more informal small and medium scale producers and processors are taking into account in discussions on modernizing the palm oil sector in Ghana, and on introducing RSPO certification. Next Steps The scope has to be assessed for promoting innovation in the small and medium processing sector for palm oil, which 1) would improve food security and nutrition, 2) generate income and employment, 3) is not duplicating ongoing efforts and 4) is commercially viable within 3-5 years. Secondly, an organization has to be identified that is capable of facilitating private sector driven innovation in Ghana in consultation with knowledge networks and other stakeholders in the sector; enhance the emergence of required business development services (equipment, repair, financing, training, etc) and promote regional dissemination. The next step is to commission a study (10 days- Ghana based expert on (palm oil) processing) that builds on the data collected in the report commissioned by Solidaridad (Moss 2010). However, most likely the focus should not be on introducing RSPO certification, but which need to be assessed in more detail. Tasks include: An estimation of small and medium scale palm oil processing businesses operating outside the plantation sector in Ghana (number, size, ownership, technology, employees starting with regional MoFa directors) An inventory of ongoing initiatives to introduce new type of mills by private sector parties and approaches used, and if possible an assessment of technological and socio-economic feasibility. Depending on the results of the study, consultations have to be organised with key stakeholders at both national and field level to assess the value added of embassy engagement in boosting commercial viable innovation in oil palm processing that is private sector driven and contributes significantly to food and nutrition security. 24 Appendix 4

31 Sources Moss, Rob (2010). Support for RSPO /oil palm in West Africa. Confidential report for Solidaridad. Osei-Amponsah, C; S. Adjei-Nsiah, Leontine Visser, Tjeerdjan Stomph, Owuraku Sakyi-Dawson (2010). Processing practices of small scale oil palm fruit processors in the Kwaebibirem District, Ghana: A Diagnostic Study. In: Huis, A. Roling, N. and A. Youdeowei (2010) Consolidating the COS-SIS research agenda. Pp Appendix 4 25

32 Appendix 5 Pillar 2: Horticulture Value Chains Context Although Ghana does not have high levels of under nutrition, micro-nutrient deficiencies are common. This suggests a severe lack of variety in the diet, which can be combated through increased production of vitamin and mineral rich food as well as through increased incomes which would allow poorer families to improve their diets. Climate and soil conditions in Ghana are suitable for a wide variety of crops. It is mainly the lack of organizational and institutional capacities which has kept Ghanaian farmers who would like to expand into commercial agriculture from doing so. Access to technical knowledge and to finance are also major constraints. The fruit and vegetable farms we visited reinforced our impressions that the horticulture sector in Ghana is failing to thrive. An empty and poorly equipped warehouse confirmed this. However, it was not possible to explore further during the mission. Most studies of the horticulture sector focus on export crops. Very little information could be found about supply and demand for the local market. There are however, clear indications that the demand for luxury vegetables is not met. Ghana imports large amounts of basic foods including vegetables which could easily be produced locally. The Netherlands exports potatoes and onions to Ghana as well as other vegetables from other countries in the sub-region. Commercial farmers in Ghana tend to focus more on export crops than on crops for the local market. Ghana is also well positioned to serve regional markets. Within West Africa, there is a huge unmet demand for horticultural products. ICRISAT has estimated that in the period January to April approximately 600 tons of tomatoes daily cross the border from Burkina Faso to Ghana. ICRISAT supports development of new technologies for irrigated horticulture in West Africa. Food processing industries are poorly developed. Most products are sold fresh. Losses are high due to poor transport and the lack of storage and processing facilities. Netherlands Added Value The Netherlands has a strong tradition in horticulture, agro-logistics and food processing in both Western countries and in developing countries. Many Dutch companies are keen to expand their markets by tapping into increased local demand for a more diversified diet and, increasingly improved capacities of local farmers to produce higher quality products for direct sales to higher segments of the markets (e.g. hotels, restaurants, airline catering etc.) and processing industries. This sector is a typical Dutch entry point in other countries in Africa where opportunities exist to promote horticulture. The Netherlands has the necessary expertise: inputs, production, logistics, finance, organization and marketing. Ahold is a name that you will find in many reports around Fresh Fruits and Vegetables. Rijk Zwaan is known as one of the leading seed suppliers in the world, and is ready to start in West Africa. Invaluable expertise has been build up at Wageningen UR. The Greenery and its members know everything there is to know about producing quality crops. Bakker Barendrecht has been instrumental in Mali to build expertise for mango exports. TNO, together with ICCO, has invested in transforming pineapple waste into syrup and flour used in bakery products. DADTCO, a Dutch company involved in cassava processing for the local market expects to start operations in Ghana in 2011/2012. The fact that the fruit and vegetable sector has so far been limited in its success, coupled to the 26 Appendix 5

33 nutritional value of vegetables and fruits, make it a logical entry point for Dutch expertise and private sector investment. Ghana could also become a gateway to other countries in West Africa. Development Case From a development perspective, as Ghana moves from low income country status to low middle income, non ODA economic development will become increasingly important. In the coming years farmers need to professionalize their operations and become more competitive. Agribusiness will also increasingly focus on high value products for the elite. The idea of involving small farmers through outgrower schemes is commonly accepted as a means to engage small scale farmers in commercial agriculture. Revenues are lost through import. Moreover, supplies and prices are affected by external factors over which the Ghanaian government, businesses and farmers have limited control. Increased investment in horticulture could be justified through a number of development poverty reduction and food security outcomes Increased incomes for medium and small scale farmers Farmers motivated to adopt improved farming practices and increase productivity Development of organizations which can more effectively meet market demand Improved availability of high value products on the market Import substitution Opportunities for development of export markets Marketing: The Business Case The basic marketing elements have to be improved leading to full year supplies of a specific assortment that can not only cater to the ever increasing wholesale and retail market, but also to the also increasing catering and institutional market. IFDC has been active, mainly in the North, with the promotion of vegetables. The embassy could build on that experience, creating a basis for improvement of input supplies and productivity increases. IFDC also gained experience in marketing produce and coupled with discussions with buyers we can learn what is expected from the sector in the South. Producers are most certainly convinced on the constraints they encounter in their efforts. The buyers are not too optimistic about the prospects of a professional vegetable industry. A quick round in a local supermarket showed that many vegetables are imported. This also applies to professional caterers, high end hotels and other niche markets for non traditional vegetables, who tend to import vegetables. A professional buyer needs to be able to rely on its supplier: volume, quality, price and timing should be as agreed. That is what went wrong with Ghanaian pineapple exports. There was no reliable basis for agreements. Even pilots were frustrated by numerous incidents. Appendix 5 27

34 SWOT Analysis Strengths: Ghana has the climate zones to grow qualitative vegetables. Government programs want to enforce local production. Support for the sector can be generated. Weaknesses: Current production is not meeting demand. Current production is not of high quality. Farmers think in challenges, not in opportunities. Opportunities: Huge imports, therefore huge market opportunities Dutch expertise available for inputs, farming practices, marketing, organization Threats: Climate change Non-committed farmers Price distortions through imports Value Chain: Increasing productivity: soil fertility, yield, post-harvest losses Increasing quality through improved agronomic practices Bridging the seasons Full year supply Determined range of products Improve logistics: storage (cold), feeder roads, vehicles, packaging Create marketing company Bring in mix of Dutch and Ghanaian interns to facilitate and control Improve inputs: seeds, fertilizers and pesticides Build organizational capability What else you can do: Build entrepreneurial capabilities with farmer business schools Create demo farms with nucleus Stiff credit scheme, zero tolerance Involve women to take the lead Organize meet the buyer meetings to discuss assortment, pricing, logistics Dutch expertise throughout the supply chain: Rijk Zwaan RABO Wageningen UR Ahold ZLTO Greenery Markets: Industrial Street market Supermarkets Hotels and restaurants Institutional Export 28 Appendix 5

35 Conclusion and Next Steps It s all there: the market, the farmers, and the climate. The opportunity to create a more professional vegetable industry is a logical one, where this commodity is so naturally picked up by the market. 1. Desk study to assess vegetable demand and supply in Ghana. 2. Assessment of past and on-going initiatives (success stories) to support horticulture in Ghana. 3. Review of Dutch companies who could support the development of the horticulture industry in Ghana (input supplies, knowledge and skills, marketing, agro-logistics). 4. Develop a PPP in support of the horticultural production and marketing in Ghana. Appendix 5 29

36 Appendix 6 Pillar 3: Public Private Partnerships in Ghana Brief Analysis and Findings 2. PPS for companies/ SMEs Concept Development (often innovation) Design (of Business case) Financing implementation 3. PPS for financial instrument/ funds 1. PPPs as alliances: public, private, NGO, knowledge institutes 4. PPPs for procurement (infrastructure) The figure above illustrates the possible forms a Public Private Partnership (PPP) can take. It shows that there are many forms. In view of this mission the whole range of PPP possibilities is examined. In the Appendix of this document a short introduction to the various forms of PPPs is provided. Based on this mission: 1. There is a small potential identified (however not clearly towards agriculture: warehousing; Ghana ports; <cocoa; other pillars;>..) towards concept development (1). The potential should be further explored by actively engaging with private and public sector stakeholders both in Ghana as in The Netherlands; 2. Additional research will help to underpin recommendations towards: Joining (or setting up) PPP schemes aimed at providing financial support to companies/ SMEs (2) Joining (or setting up) financial instruments/ funds that are aimed at supporting companies/ SMEs or infra development (either grants, loans, equity) (3); Some promising initiatives have been identified such as the Agence Française de Développement (AFD) initiative (loan scheme for rubber sector). The potential of this instrument and other instruments should be further explored. It is advised to conduct an analysis of the financial instruments and funds currently available in Ghana (IFIs, private investors, subsidies, etc.). This knowledge will help the Dutch government to decide on its strategy. 3. MoF is developing a PPP program for infrastructure (4). It is the Consultants opinion that they receive plenty of Technical Assistance for this and plenty of support money is in the pipeline (World Bank). It is recommended to aim activities at promoting Dutch companies that can benefit of the infrastructure projects being planned (consultants, contractors). This can be done by e.g. Actively approach Ghanaian stakeholders in a joint effort between Dutch government and companies. The goal is to strengthen the Dutch position towards the development of the infrastructure; E.g. trainings and feasibility studies can be prepared and offered to the Ghana authorities. These activities should aim at convincing the Ghana government of the benefits of the Dutch 30 Appendix 6

37 solution. PPPs are important as the Ghana Government will only be interested the Dutch solution includes financing the infrastructure. Recommendations and Actions A1 PPPs that are aimed at creating (business) opportunities There is a small potential identified (however not clearly towards agriculture: warehousing; Ghana ports;..) towards concept development; Intensify dialogue with private stakeholders aimed at identifying specific opportunities/ ideas that have a need for: o Match making/ Brokering This should lead to interest amongst relevant public (Ghana) and private (Ghana/ Netherlands; production/ distribution/ supply) to further develop the businesscase: o Financing of concept/ business development Business case development; Identify possible opportunities in Ghana o In communication with stakeholders in Ghana (private and public); o Carry out market studies for identified opportunities/ markets. Intensify link between Ghana and The Netherlands. o Make sure the opportunities in Ghana are visible for Dutch companies in The Netherlands; o Make sure the needs from Dutch companies are known in Ghana; In a separate memo a set-up is proposed on how to organize this. The question is answered if and what extra capacities and capabilities are needed (at the Dutch Government level) to achieve results. B1 Financing of companies/ SMEs that are facing problems with access to finance It is concluded that additional research/ more time is needed to underpin recommendations towards financial instruments/ funds (either grants, loans, equity); Study on existing financial instruments o Aimed at the Dutch focus sectors; o What are the problems regarding access to finance? (which markets?; which barriers?) o What financial instruments are available in the markets that aim to solve these problems? What financial instruments are functioning well? o What financial instruments are being developed? o Make as much use as possible of existing studies. Characteristics Size Market Impact financial Impact socioeconomic Instrument A Public (Dutch/ International) private (Dutch/ international), public-private?.. Instrument B Grant, loan, equity? Instrument... Identify opportunities for The Netherlands o Continuation and simplification of existing public instruments: Appendix 6 31

38 o o o Tog@there; 2explore; Missions; Provide money to existing financial instruments: Grant schemes; Funds (loans; equity): Support Cocoa Aprapoba with soft loan? Assist to further develop markets for existing financial instruments: Cocoa? Agence Française de Développement (AFD) will provide information on their instrument (aimed at rubber plantations) and intends to develop this also for the cocoa sector Small and medium scale Palm oil processing? Vegetables? Involve Dutch stakeholders (FMO, Triodos, Rabobank, ). B2. Financing of public infrastructure MoF is developing a PPP program. Assumption that they receive plenty of Technical Assistance for this and plenty of support money is in the pipeline (World Bank). Attention to aim activities at promoting Dutch companies that can benefit of the infrastructure projects being planned (consultants, contractors). Monitor the development of PPP Policy (MoF/ World Bank); Aiming at having a clear and up to date view of the pipeline of projects o Ports; o Energy; o Water? o Cooperate with private stakeholders to create opportunities: o Offer workshops; o Offer feasibility studies that form the basis for an offer of Dutch private stakeholders to realize the infrastructure; Specific opportunities are: o Port development (Haskoning; BAM; Ecorys); o Warehousing (cocoa) (Unicontrol Cor Ritzenaar); Allocate funds to sponsor this Expertise to be Hired Additional research on financial framework in Ghana towards target sectors: o Grants; o Loans; o Equity; o Guarantees. See memo on agri-support office by Bob van der Bijl (NABC) - Appendix Appendix 6

39 Appendix on Public Private Partnerships The below figure illustrates possible ways of PPP. 2. PPS for companies/ SMEs Concept Development (often innovation) Design (of Business case) Financing implementation 3. PPS for financial instrument/ funds 1. PPPs as alliances: public, private, NGO, knowledge institutes 4. PPPs for procurement (infrastructure) The figure makes a clear distinction between: A. PPPs that are aimed at creating opportunities by bringing further project ideas resulting in concrete business plans for e.g.: o Companies (small or medium enterprises); o Projects (e.g. infrastructure) or programs; o Financial instruments/ facilities (e.g. investment funds). In this case a PPP is a form of cooperation between public and private stakeholders with the objective to further explore and refine ideas. This kind of PPPs are particularly useful if there are too little incentives for the individual stakeholders to further develop the idea but there is common ground and interest to jointly explore it. For example this can be a (private) business concept that takes too much investments and/or risks to further explore from the private perspective or is interesting but not the companies core business. Or it can be the design of a financial instrument that is only interesting when public investors intend to invest in it (public investments in financial instruments reduce risks for private sector participants. Because of this such instruments can invest in-, loan-, or guarantee to projects that are not feasible from a purely private perspective). B. PPPs that are aimed at financing concrete business plans that are clear in terms of objectives, investments needed, returns in terms of money and socio-economic benefits. A distinction can be made between: o Financing of companies/ SMEs that are facing problems with access to finance. o Financing of projects (e.g. infrastructure) or programs; o Financing of financial instruments. Regarding infrastructure there is a clear need for investments by the Government of Ghana. The Government has a financing problem. Public Private Partnership contracts between the government and a consortium of contractors and investors are a mean to attract private finance for this. In such contracts contractors will design, build and maintain the infrastructure over a generally long period (20 to 30 years) and receive in return the right to operate the infrastructure or a yearly payment by the Government. Appendix 6 33

40 Questions related to A Is it to be expected that there are companies with ideas towards possible opportunities in Ghana? How many ideas? (market size) What the embassy/ government can do to on one hand identify such opportunities and on the other support the initiators by providing support. Questions related to B financing companies of financial instruments Questions are: In which sectors do companies deal with a clear financing need? Under what conditions will companies be able to finance? What can the embassy do create these conditions? What instruments already exist? (Either Dutch or international)? Is there a clear need for additional financing or new instruments? Questions related to B PPPs for infrastructure Questions are: What are the objectives in various sectors to attract private finance for infrastructure? What support is already provided to the government of Ghana to help them attract private finance for their infrastructure (Either Dutch or international)? What is the interest of Dutch companies towards infrastructure? How does this interest relate to the finance of infrastructure? What can the embassy do assist Dutch companies? 34 Appendix 6

41 Appendix 7 Pillar 3: Regional (Agri)business Support Office Appropriate Financing Mechanisms Outside the cocoa sector, Dutch business interests in Ghana are limited in the agribusiness sector some interests in shea and palm oil. Ghana s local market is limited and regional trade from Ghana is limited as well Some (Dutch) NGO s (esp. Solidaridad) are successfully engaging with the private sector by providing training and (innovative) inputs. These could be expanded by means of development aid. Given the strength of the Dutch agribusiness, there is scope to increase Dutch trade and investment in Ghana and the region (ECOWAS), but this needs to be stimulated especially in the Netherlands. Given the focus on agribusiness and inclusion of Dutch private sector, activities can be carried out to increase Dutch business interest in Ghana. Possibilities are: economic missions, 2g@there and other EL&I and BZ instruments. At the initial stage, Dutch companies need practical information on doing business in Ghana, the right contacts and information on existing initiatives and financing possibilities. In the project formulation phase, the need with Dutch investors is mainly two-fold: need for practical training of outgrowers and provision of capital (initial investment and working capital). Within the agribusiness sector, financing possibilities for Dutch companies seem to be quite significant. PSI seems to be the most advantageous instrument. AECF has a higher multiplier. Many other instruments: companies may find it difficult to know all that is available and how to select the best instrument. Possibilities to team up with NGO s to ensure improved local knowledge are quite substantial as well. (Dutch) Private Equity investors are interested in the agribusiness sector. NABC can link these to new initiatives. Potential Partnerships with Agri-business Platforms Local institutions are weak, both in government and government controlled companies. Several NGO s and INGO s seem to be strong and are working successfully with the private sector. Practical training of farmers and employees and the provision of appropriate inputs are the key to agribusiness development/improved food security/improved nutrition. Activities of Dutch companies is limited but seem to be slightly increasing. Especially the involvement of Dutch companies and knowledge institutions in the provision of farming inputs (e.g. seeds) seems to be promising. Furthermore several niches could be developed in the medium term (especially horticulture/floriculture and fruit). Several NGO s and INGO s like Solidaridad and IFDC are pursuing an innovation agenda (new types of fertilizer, pest control, seeds, farming methods, processing methods and sustainable value chain development in general). These initiatives could be linked to Dutch knowledge institutions and Dutch companies (or company networks). This could very well be translated into 2g@there programmes, where NGOs and INGOs can also be included. An EL&I attaché could be an option to guide the process from the Embassy s side, preferably with a regional focus. Appendix 7 35

42 Types of Services Demand for business support is quite limited, even more so when limited to agribusiness. Provision of trade information now covered by the Dutch Embassy and GHANECC. Given the limited demand, it doesn t seem to be feasible to set up a separate (agri)business support office for Ghana only. The existing GHANECC structure is very limited, but could be effective with an increased contribution from the Embassy based on a clearly defined services package and on clear governance requirements. Services should be focusing on providing the right contacts and the provision of trade information. In depth market research should be carried out by the local private sector. Personnel Issues and Required Short-term Expertise Dutch Embassy: additional personnel needs would be 1 regional EL&I attaché and 1 local staff. Close coordination with development aid staff is necessary (see e.g. Ethiopia example) Ghanecc can function well with a slightly larger staff: 1 manager, 2 local staff. Short term expertise: there is a need for the embassy to produce an overview of the major players in the agribusiness sector. This can be used as input for economic missions, 2g@there and for information provision to (potential) investors and traders. Partly via the economic instruments that are to be introduced for the focus countries, NABC in close collaboration with the Dutch Embassy, Agentschap.NL and Ghanecc - can facilitate the private sector initiatives from the Netherlands and promote opportunities. There is room for one mission per year and one or two 2g@there projects in the coming four years. NABC is interested in a regional office, NBSO / NABSO, not in a Ghana-only office. 36 Appendix 7

43 This report presents the findings of a mission to Ghana in June 2011, aimed at providing support to the Embassy (EKN) for the design and implementation of the Food and Nutrition component of the Multi-Annual Strategic Plans (MASP) and the Fast Track Process. There are three pillars for fast track initiatives on Food Security in Ghana: (1) sustainable cocoa; (2) a second food sub-sector; and (3) the Regional (Agri)business Support Office. There is also a water programme, focussing on urban water and sanitation. More information: Centre for Development Innovation Wageningen UR P.O. Box AB Wageningen The Netherlands