Ghana has been advised to inject revenue from oil into the cocoa industry and by extension the agriculture sector.
The Deputy CEO of the Ghana COCOBOD in charge of Agronomy and Quality Control, Dr. Yaw Adu-Ampomah gave the advice when he spoke to ghanabusinessnews.com in an exclusive interview after he launched Ghana’s Fair Trade Organic Cocoa Project in Accra Thursday November 10, 2011.
“Cocoa is going to play a major role in the economy of Ghana. Only that we have to be smart to inject oil money into cocoa and also into agriculture,” Dr. Adu-Ampomah said.
Dr Adu-Ampomah says farmers don’t have access to credit to buy inputs which have become expensive. “We have to subsidise with oil money to produce our food and have our cash crop. We must use the oil money to support agriculture,” he added.
Figures from the Bank of Ghana show that the total export revenue of Ghana’s crude oil from January to September 2011 is $1.97 billion.
But a report conducted by the African Development Bank, World Bank and the German Federal Ministry for Economic Cooperation and Development shows that Ghana’s cocoa farmers have the best access to credit in Africa even though much can be done.
The value chain finance in Ghana’s cocoa sector is one of the best examples of short-term trade credit for agricultural producers in Africa, according to the report titled “Financing Africa through the Crisis and Beyond.”
Ghana is the second largest cocoa producer in the world after neighbouring Ivory Coast. It recently hit a million tonnes of cocoa production, according to figures posted by the Ghana Cocoa Board (COCOBOD).
The report noted licensed buying companies (LBCs) routinely provide significant amounts of short-term credit to producers for the purchase of the required inputs such as fertilizer and pesticides before the growing season commences.
In return for the credit payment, the report indicates that cocoa growers commit to selling the resultant cocoa harvest to the LBCs at an agreed price saying, “the capital and interest are repaid to the LBCs through the proceeds of the sale, and the balance goes to the farmer.”
Meanwhile, The Centre for Policy Analysis (CEPA) had warned that Ghana’s economy is likely to suffer the phenomena known as the Dutch Disease when the country begins commercial production of oil. The Think Tank gave the warning in May 2010.
According to CEPA as Ghana enters the oil era, an exchange rate effect symptomatic of the Dutch Disease is expected. The exchange rate effect, together with the yield on Ghana’s Eurobond source of information on the country risk premium on Ghana and the rate of inflation would be key considerations in the deliberations of the Monetary Policy Committee (MPC) of the Bank of Ghana (BOG) for the determination of both the real and nominal policy rate (prime rate).
CEPA believes that Ghana’s economy which has been largely based on cocoa will become an oil economy following the start of commercial production of oil.
In an analysis of the economy sent to ghanabusinessnews.com, CEPA postulated that the Ghanaian economy appears set to move from what may be called a cocoa economy to an oil economy.
By Emmanuel K. Dogbevi & Ekow Quandzie
Listen to Dr. Adu-Ampomah in attached audio.