Plunging cocoa prices in the past few months have been a major worry for more than 700,000 farmers located in the lush green forests of Ghana, who depend on this cash crop to feed themselves and provide education and health to their families. But the inadequate capacity of Ghana to add more value to a large quantity of its cocoa is even a bigger issue.
Global demand for chocolate is expected to grow 25% by 2020, so cocoa prices will eventually recover. But cocoa farms must increase Ghana’s share of the final retail price of chocolate, which is only 5% at present. By increasing the country’s processing capacity, farmers in these countries can increase their incomes and create more critical jobs in the process.
Ghana’s cocoa example mirrors the overall condition of Africa’s export commodities. The continent still exports more raw agricultural produce with little or no value addition.
It has become increasingly obvious that while Africa is growing, it is not transforming. One well-known policy solution that has been offered to create more jobs is to scale up the manufacturing sector. And this includes making agricultural processing active.
To do this, Ghana – like any other African nation – will need the roads, energy, transport and markets to power the factories that process agricultural produce. With lower labour costs and easy access to raw materials, agro-industries in Africa offer an excellent opportunity for private investors too. It has the right markets for agro-industries to thrive and its regional market remains hugely untapped.
But there are several opportunities. Global food demand, for example, is set to double by 2050. Africa’s agriculture and agribusiness markets could reach US$1tr in 2030. For any economic transformation to happen, agriculture and agribusiness must grow and rightly combine to make value addition possible.
Africa loses billions of dollars due to its inability to produce enough and process its agricultural commodities. The Africa Progress Panel, chaired by Kofi Annan, in its 2014 report ‘Grain, Fish, Money’, estimates that Africa spends $35bn per year in food imports. Indeed, connecting farm production, processing and distribution could create numerous jobs and lift millions of Africans out of poverty.
We must think of linking farmers to the market through mobile technologies and give accurate and timely information to smallholder farmers to enable them to reduce the threats weather extremes pose. While we have witnessed mobile technology revolutions across Africa, we need to reinvent our meteorological institutions to enable them to predict the weather and disseminate accurate and relevant data to farmers in the village. Here, forging a good partnership with the private sector initiatives like Esoko – an agricultural information service operating in 10 African countries – is key.
Agribusiness must centre on smallholder farmers. Agribusiness investments must not, therefore, ignore ‘land-grabbing’. Smallholders need the land and infrastructure to help feed themselves and others. Agriculture and agribusiness pursued in this manner could be the next frontier to change Africa’s growth and transformation story.
This article was first published by the Africa Progress Panel. Stephen Yeboah is a research fellow at the Africa Progress Panel.