Jo INT D ISCUSSI o N pApeR 66880 AG R I C U lT U R e A N D R U R A l D e V e l o p m e N T & A f R I C A R e G I o N HoRTICUlTURe expoRTS fRom GHANA: A Strategic Study JUNe 2011 Joint Department al Discussion Paper – Issue 2 Agriculture And rurAl development & AfricA region HortIculture exPorts from GHana: a strategic study © 2011 the International Bank for reconstruction and Development / the World Bank 1818 H street, nW Washington, Dc 20433 telephone 202-473-1000 Internet www.worldbank.org/ard e-mail ard@worldbank.org all rights reserved. this volume is a product of the staff of the International Bank for reconstruction and Development / the World Bank. the findings, interpretations, and conclusions expressed in this paper do not necessarily reflect the views of the executive Directors of the World Bank or the governments they represent. the World Bank does not guarantee the accuracy of the data included in this work. the boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of the World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. 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Au t h o r s A n d Ac knowledgements iii Authors Part I of this report prepared by Dr. Peter Jaeger (accord associates) in mid-2008 following a two week research visit to Ghana. the development of the strategy, and the foundations on which it stands, represent the findings and conclusions of a small team of specialists: Dr. andrew sergeant (accord associates), Dr. andy Graffham and Dr. John orchard (natural resources Institute), augustine adongo (Integrated business consulting), steve Homer (BIos Partners), and Dr. Peter Jaeger (team leader- accord associates) all compiled background papers for Part III and contributed to the development of the recommended actions for a strategy and its implementation presented here in Part II. Acknowledgements the initial scoping mission was supported throughout by the staff of the export marketing and Quality awareness Project, namely mawuli agboka, eric Quaye, Harry Bleppony, and David crentsil. all four gave up time to guide, help and share their insights into the horticultural scene. the review could not have achieved the breadth and depth without their assistance. many players in the Ghanaian and the european fruit and vegetable industry gave up their time willingly to interviews with us. We should like to acknowledge the warm welcome received from all. In spite of busy schedules and businesses to run, time was always available for yet another researcher. Particular thanks to Jean-michel Voisard and his team at the trade and Investment Program for a competitive export economy (tIPcee) for sharing their experiences, overview and data. the project was funded by the european union and directed by christophe ravry at the World Bank in collaboration with the ministry of food and agriculture of the Government of Ghana. g h An A ex po rt h orticulture clu ster str Ategic p rofile study iv c o nt e nt s contents Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .v Maps .of .Ghana . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vi Acronyms, .Abbreviations, .and .Conversions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . viii PARt I: SCoPIng RevIew . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 PARt II: ReCommended ACtIonS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 PARt III: BACkgRound PAPeRS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91 gh A nA e xport h orticulture clu ster str Ategic prof i l e st udy pr e fAc e v PrefAce In 2003, the World Bank—the agriculture and rural Development (arD) department of the sustainable Development network (sDn) of the africa region—commissioned a Ghana Horticultural sector Development study.1 later that year, the Horticulture export and Investment Initiative (HeII) was created as the result of restructuring of the agribusiness support component of the agriculture services sub-sector Investment Programme (agssIP). HeII played an important role in reshaping the Ghana horticulture cluster through a series of crucial technical support initiatives and building of a key logistics infrastructure at the tema seaport. HeII also helped to raise the visibility of the horticulture cluster, which resulted in a renewed interest in the sector both from private investors and donor partners. the african Development Bank (aDB), the united states agency for International Development (usaID), the German technical cooperation (GtZ), and the millennium challenge corporation (mcc) among others were or are all actively involved in support to the cluster. five years after the original study, the horticulture cluster in Ghana had moved ahead. Developments in the institutional environment had combined with an evolution both of the businesses and of the product portfolio; international trade had expanded and an increasing population participated in export horticulture supported by infrastructural enhancements. at the same time, the external operating environment had changed: not only are markets dynamic, but there were also new influ- ences from policy and trade agreements. With funding from the european commission, the World Bank and the ministry of food and agriculture sought to develop a new vision for commercial horticulture in Ghana. to this end, a new strategy was needed that could engage the collaboration of the cluster participants and provide an overall direction. a two step project was devised: the first step would be a scoping exercise to appraise the evolution of the cluster since 2003 both within Ghana and in the market as its operating environment. With an intermission for review and validation, the exercise would then move on to defining a second step that would lead to the strategy itself. the initial scoping review was carried out in early 2008. the scoping study revealed a picture of mixed health, of some suc- cesses but not without difficulties; and it confirmed the need for a plan to take the industry forward. the process of validating the review emphasized the necessity for a wide-ranging review of many different factors in order to build a solid business case for a strategy. the present report is the outcome of this two step process. It is laid out in three parts. Part I reports on the initial scoping study. Part II defines the vision and the strategy that was formulated in 2010. Part III is a collection of a number of background papers that were researched and written to provide a foundation for the strategy. 1 Voisard and Jaeger. 2003, ‘Ghana Horticulture sector Development study’. World Bank unpublished g h An A ex po rt h orticulture clu ster str Ategic p rofile study vi mA ps o f g hA nA mAPs of ghAnA mAP 1 ghAnA - AdministrAtive divisions Source: http://www.fao.org/giews/french/basedocs/gha/ghaadm1f.stm gh A nA e xport h orticulture clu ster str Ategic prof i l e st udy m Ap s o f g hA n A vii mAP 2 ghAnA – relief And mAjor towns And cities IBRD 33411 2° W 0° 2° E To Tenkodogo B U R K I N A FA S O Hamale Navrongo To Bobo- UPPER EAST WalewaleTumu Diolasso Bolgatanga GHANA Nakpanduri UPPER WEST Walewale To Dapaong Ko lpa Black Vo wn Wa 10° N 10° N Gushiegu lta e Volta h it To W Djougou N O R T H E R N Yendi Tamale BENIN To Ferkéssédougou Sawla Fufulsu Bole To a Djougou ak D Oti CÔTE Nakpayili TOGO D'IVOIRE a ol t Salaga B l a ck V To Bouna Makongo Yeji Kintampo Dambai 8° N 8° N Jema VOLTA B R O N G - A H A F O Atebubu Kwadwokurom Tain ru Techiman P Berekum To Sokodé Sunyani Mount Afadjato (880 m) K w go Ranges Af r a a h m Lake Bi a To Agboville u Volta Kpandu To P l Abomey a t Agogo Goaso e a u Kumasi Ho a p i m - To Bibiani EASTERN Krokosue ASHANTI To Anu Porto- im m Novo Obuasi Bi r Diaso Tano Kade Vol ta kw Koforidua Aflao 6° N Oda A 6° N WE S T E R N Dunkwa Enchi GREATER 2° E ACCRA To Abidjan Tema Twifo Praso Prestea CENTRAL ACCRA GHANA P ra Tarkwa Winneba a SELECTED CITIES AND TOWNS obr Ank Cape Coast REGION CAPITALS Newtown NATIONAL CAPITAL This map was produced by Sekondi the Map Design Unit of The World Bank. The boundaries, Axim Takoradi Gulf of G uinea RIVERS colors, denominations and any other information shown MAIN ROADS on this map do not imply, on the part of The World Bank 0 20 40 60 80 Kilometers RAILROADS Group, any judgment on the legal status of any territory, REGION BOUNDARIES or any endorsement or 0 20 40 60 Miles acceptance of such boundaries. 2° W 0° INTERNATIONAL BOUNDARIES SEPTEMBER 2004 Source: World Bank g h An A ex po rt h orticulture clu ster str Ategic p rofile study viii Acronyms & Abbrevi Ati ons & con v e r s i o n s AcronYms & ABBreviAtions & conversions orgAnizAtions: acP africa, caribbean, and Pacific (signatory countries of the lomé convention) aDB agricultural Development Bank aDra adventist Development & relief agency afDB african Development Bank aftar agriculture and rural Development Department of the africa region of the World Bank aGoa african Growth and opportunity act agssIP agricultural services sub-sector Investment Programme caaDP comprehensive africa agriculture Development Programme coleacP comité pour liaison europe acP Damfa Dangme-West mango farmers’ association eBa everything But arms ec european commission ecoWas economic community of West african states eDIf export Development & Investment fund emQaP export marketing and Quality awareness Project ePa economic Partnership agreements eu european union eu-aaacP eu all acP agricultural commodities Programme faGe federation of associations of Ghanaian exporters fao food and agriculture organization fasDeP food and agriculture sector Development Policy fBo farmer Based organization fom farmer ownership model gh A nA e xport h orticulture clu ster str Ategic prof i l e st udy Ac r o n y m s & A b b revi Ati ons & conversions ix GaVex Ghana association of Vegetable exporters GePc Ghana export Promotion council GHPPP Ghana Private Public Partnership food Industry Development Programme GIPc Ghana Investment Promotion centre GIs Geographical Information systems GPHa Ghana Ports & Harbour authority GsB Ghana standards Board GsP Generalized system of Preferences GtZ Gesellschaft für technische Zusammenarbeit – German Government agency for international co-operation GYea Ghana Yam exporters association HaG Horticultural association of Ghana HeII Horticultural exports Industry Initiative IfaD International fund for agricultural Development Itfc Integrated tamale fruit company JItaP Joint Integrated technical assistance Programme to selected least Developed and other african countries KIa Kotoka International airport mca millennium challenge account mcf millennium challenge fund miDa millennium Development authority moaP market oriented agriculture Programme (of GtZ) mofa ministry of food and agriculture motI ministry of trade and Industry nePaD new Partnership for africa’s Development nHtf national Horticultural task force nrGP northern rural Growth Programme PamPeaG Papaya and mango Producers’ and exporters’ association of Ghana PIP Pesticides Initiative Programme Psom Programme for co-operation for emerging markets (from the Dutch Government) sPeG sea-freight Pineapple exporters of Ghana tIPcee trade and Investment Program for a competitive export economy g h An A ex po rt h orticulture clu ster str Ategic p rofile study x Acronyms & Abbrevi Ati ons & con v e r s i o n s uBa union Bananière africain usaID united states agency for International Development VePeaG Vegetable Producers and exporters association of Ghana VIaD Volta Integrated agricultural Development co ltd Wto World trade organization YKmfa Yilo-Krobo mango farmers’ association other ABBreviAtions: c&f cost & freight cIf cost, Insurance & freight cY container Yard foB free on Board Ha Hectares Kg Kilogram Km Kilometre lb Pound (unit of mass) m meters nGo non-Governmental organization ntae non-traditional agricultural exports ssa sub-saharan africa t tonnes conversions: metric units are used where possible in this report. 1 kg = 2.2046 lb 1 lb = 0.4536 Kg 1 ha = 2.471 acres 1 acre = 0.4047 Ha gh A nA e xport h orticulture clu ster str Ategic prof i l e st udy Ac r o n y m s & A b b revi Ati ons & conversions xi currencY: the Ghanaian cedi was redenominated in July 2007 with GH¢10,000 re-set to GHs1. since then, the cedi has fallen in value from 0.946/usD to 1.472/usD and from 1.297/€ to 2.146/€. for this report, exchange rates of GHs1.5/usD and GHs2.1/€ are used.  g h An A ex po rt h orticulture clu ster str Ategic p rofile study Pa r t I - S c o P I n g r e v I e w Prepared for world Bank Sustainable Development network (wB-SDn) africa region, agriculture and rural Development (aFtar), the republic of ghana Ministry of Food and agriculture, and european Union all acP agricultural commodities Programme (eU-aaacP) Prepared by accord associates LLP (jaeger@accordassoc.biz ) 2008 c o nt e ntS 3 Contents 1.  Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.  sector evolution From 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 2.1 Key Aspects of change 2003–2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 2.2 The Crop Portfolio 2003–2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10 2.3 Companies and Investments in 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 2.4 Infrastructure Evolution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 2.5 Private Sector Collaborative Organizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 2.6 Donor Projects Oriented Towards Export Horticulture 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . 20 2.7 The Food and Agriculture Sector Development Policy (FASDEP II) . . . . . . . . . . . . . . . . . . . . . . 21 3.  european Market Research. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 3.1 Pineapples . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 3.2 Bananas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 3.3 Mangoes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 3.4 Papaya. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 3.5 Capsicum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 3.6 Ravaya. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 3.7 Other Vegetables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 3.8 Root & Tubers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 3.9 Summary of Market Statistics. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 3.10 The EU Market for Processed Fruit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 4.  Freight . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 4.1 Air Freight . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 4.2 Sea Freight . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 5.  summary of Ghana’s Potential for Horticultural exports to the eU. . . . . . . . . . . . . . . . . . 37 6.  Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 6.1 Recent Performance of Ghanaian Horticultural Products in Europe . . . . . . . . . . . . . . . . . . . . . . 40 6.2 Why are Ghanaian Products not Achieving their Potential? . . . . . . . . . . . . . . . . . . . . . . . . . . 40 6.3 So Where do Small Scale Producers Fit?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 6.4 What are the Implications for a National Strategy? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 7.  next steps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 7.1 Validation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 Pa rt I - S c o P In g rev Iew 4 c o nt e ntS Annex I  Donors in the export Horticulture Cluster . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 I.1. Horticultural Exports Industry Initiative (HEII) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 I.2. Export Marketing and Quality Awareness Project (EMQAP) . . . . . . . . . . . . . . . . . . . . . . . . . . 48 I.3. Ghana Private-Public Partnership Food Industry Development Program (GHPPP) . . . . . . . . . . . . . . 48 I.4. Trade & Investment Program for a Competitive Export Economy (TIPCEE) . . . . . . . . . . . . . . . . . . 48 I.5. German Technical Cooperation (GTZ) & German Development Service (DED) . . . . . . . . . . . . . . . . 49 I.6. The Millennium Development Authority (MiDA). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 Annex II  overall eU Market trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 Annex III  Impact of eU Policy on Imports from Ghana . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 Annex IV  Retailers’ and other standards on Imports from Ghana. . . . . . . . . . . . . . . . . . . . 55 Annex V  Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 Boxes, Figures, and tables Box 1.3.1. The Fair Trade Opportunity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Figure I.2.1. EU Imports of Pineapple from Ghana . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10 Figure I.2.2. EU Imports of Capsicums by Air . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Figure I.3.1. EU Imports of Pineapples from Different Sources, 2001–2007 . . . . . . . . . . . . . . . . . . . . 22 Figure I.3.2. EU Imports of Bananas from Different Sources, 2001–2007. . . . . . . . . . . . . . . . . . . . . . 25 Figure I.3.3. EU Imports of Mangoes, Guava and Mangosteens from Different Sources, 2001–2007 . . . . . . 26 Figure I.3.4. EU Imports of Papaya from Different Sources, 2001–2007 . . . . . . . . . . . . . . . . . . . . . . 27 Figure I.3.5. EU Imports of Papaya . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Figure 1.3.6. EU Imports of Capsicums from Different Sources, 2001–2007 . . . . . . . . . . . . . . . . . . . . 28 Figure 1.3.7. EU Imports of Ravaya from Different Sources, 2001–2007 . . . . . . . . . . . . . . . . . . . . . . 29 Figure I.3.8. EU Imports of Other Vegetables from Different Sources, 2001–2007 . . . . . . . . . . . . . . . . . 30 Figure I.3.9. EU Imports of Yams from Different Sources, 2001–2007. . . . . . . . . . . . . . . . . . . . . . . . 31 Figure 1.3.10. EU Imports of Whole Cassava for Human Consumption, 2001–2007 . . . . . . . . . . . . . . . . 32 Figure I.3.11. EU Imports of Sweet Potatoes from Different Sources, 2001–2007 . . . . . . . . . . . . . . . . . 32 Figure I.4.1. Unit Value of Air-freighted Capsicums Imported to EU . . . . . . . . . . . . . . . . . . . . . . . . 36 Table I.1.1. EU Imports of Selected Fruit (tonnes) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Table I.1.2. EU Imports of Selected Vegetables (tonnes) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Table I.2.1. Projects with an Export Horticulture Orientation Since 2003 . . . . . . . . . . . . . . . . . . . . . 20 Table I.3.1. The Share of the EU Market for Pineapples from Different Sources, 2001–2007 . . . . . . . . . . . 23 Table I.3.2. Average C&F Value of Pineapples Imported into the EU (E/t), 2007 . . . . . . . . . . . . . . . . . . 23 Table I.3.3. Average C&F Value of Mangoes Imported into the EU (E/t), 2007 . . . . . . . . . . . . . . . . . . . 26 Table I.3.4. Average C&F Value of Capsicum Imported into the EU (E/T), 2007 . . . . . . . . . . . . . . . . . . 29 Table I.3.5. Comparison of European Horticulture Imports from Ghana . . . . . . . . . . . . . . . . . . . . . . 33 Table I.3.6. Prepared Fruit Sales Value and Annual Increase, 2006–2007 . . . . . . . . . . . . . . . . . . . . . . 34 Table I.5.1. Ghana’s Potential Tonnage, Value, and Employment Opportunities from Export Horticulture – 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 Table I.5.2. Summary of the Market Potential for Ghanaian Export Horticulture . . . . . . . . . . . . . . . . . 39 Table I.A.1. Budget for MiDA Agriculture Project Activity (in millions) . . . . . . . . . . . . . . . . . . . . . . . 51 Hort Ic ULtUre exP ort S FroM gH ana : a StrategI c St U Dy c o nt e ntS 5 Table I.A.2. Retail Value of Fruit Sales in the UK, 2000–2002 (£ millions) . . . . . . . . . . . . . . . . . . . . . 52 Table I.A.3. Retail Value of Vegetable Sales in the UK, 2000–2002 (£ millions) . . . . . . . . . . . . . . . . . . 52 Table I.A.4. Value of UK Fruit and Vegetable Sales Through Different Reail Outlets, 2000–2002 (£ millions) . . 53 Table I.A.5. EU Imports of Certain Horticultural Products, 2001–2007 . . . . . . . . . . . . . . . . . . . . . . . 53 Pa rt I - S c o P In g rev Iew 1 — I nt ro D U c t Io n 7 1: INTRODUCTION In the last twenty years Ghana has developed a significant of the World Bank-funded Agricultural Services Sub-Sector export of fresh produce to Europe. Bananas, pineapples, Investment Programme (AgSSIP) within the Ministry of mangoes, and papaya lead the fruit exports while yams, Food and Agriculture. This second appraisal of the industry chillies, and Asian vegetables head the vegetable trade. The led to the development of a strong horticultural component European Union imported almost 90,000 tonnes of fresh pro- to AgSSIP under the Horticultural Exports Industry Initiative duce from Ghana in 2007 which earned the Ghanaian horti- , (HEII) within MoFA. . culture cluster some €80 million CIF These “non-traditional� exports contribute employment, fiscal revenue, and foreign Since 2003 the Ghanaian horticultural export sector has exchange to the economy. As a result, policy makers and de- been subjected to a severe upheaval: European demand velopment partners have looked to support export horticulture for the traditional West African pineapple variety evaporated as a diversification of the export base and an opportunity to and European retailers adopted stricter private standards improve rural livelihoods. The origins of this industry in Ghana for retailing fresh produce. HEII and other donor programs3 lie in the Structural Adjustment Programme and liberalization have been able to support these changes and contribute to strategies of the 1980s. Donors and NGOs provided support infrastructural improvements, and the horticultural export in- through the 1990s and the industry has been integrated into dustry now looks rather different. Tables I.1.1 and I.1.2 provide agricultural and development policy in the new millennium. some headline numbers of progress since 2001.4 The data in- dicate the difficulties in the pineapple trade, the appearance In 1998 the World Bank, in collaboration with the Ministry of of bananas as important exports, and the growth in mango Food and Agriculture (MoFA), commissioned a short study and chilli exports. of the sector1 to review the opportunities, identify the con- straints and suggest strategies and infrastructural improve- At the same time the institutional environment has also ments to take fresh produce exports forward. A similar ex- changed: HEII, which raised the profile of the sector, has com- ercise was conducted in 20032 as part of the restructuring pleted its implementation and evolved into a further program Table I.1: eU Imports of Selected Fruit (tonnes) ToTal Eu ImporTs Eu ImporTs from ghana 2001 2007 growTh 2001 2007 sharE 2001 sharE 2007 C & f valuE 2007 € Bananas 3,801,895 4,682,893 23% 3,458 33,404 0.09% 0.71% 20,304,496 Pineapples 374,748 829,243 121% 33,209 35,463 8.86% 4.28% 37,553,172 Papaya 18,848 36,481 94% 1,937 1,042 10.28% 2.86% 1,910,112 Mangoes, guavas 136,830 211,570 55% 62 983 0.05% 0.46% 2,802,090 and mangosteens TOTAL 62,569,870 Source: EUROSTAT 1. Dixie and Sergeant. 1998. The Future for the Ghanaian Horticul- 3. Notably, the TIPCEE program has been at the forefront of sup- tural Export Industry. Accord Associates. porting change for industry participants. 2. Voisard and Jaeger. 2003. Ghana Horticulture Sector Develop- 4. Start date chosen for a longer time series, but a similar pattern is ment Study. Accord Associates. seen since 2003. Pa rt I - S c o P In g rev Iew 8 1 — Intr oD Uc tIo n Table I.1.2: eU Imports of Selected vegetables (tonnes) ToTal Eu ImporTs Eu ImporTs from ghana 2001 2007 growTh 2001 2007 sharE 2001 sharE 2007 C & f valuE 2007 € Capsicums 25,486 35,833 41% 418 2,947 1.64% 8.22% 5,835,875 (chillies) Other 67,347 74,933 11% 6,511 2,565 9.67% 3.42% 4,140,256 Vegetables Babycorn 4,965 6,509 31% 1 8 0.02% 0.12% 9,283 Ravaya 375 2,438 550% 97 174 25.90% 7.12% 357,125 Yams 16,197 21,268 31% 7,756 11,048 47.88% 51.95% 5,372,009 Cassava 8,525 23,312 173% 117 2,076 1.37% 8.90% 1,388,888 Sweet 16,031 51,619 222% 51 26 0.32% 0.05% 26,891 Potatoes TOTAL 17,130,327 Source: EUROSTAT of support (EMQAP) funded by the African Development A very small portion of Ghanaian horticultural output is aimed Bank; several donors including the World Bank have moved at exploiting more distant markets. For the most part, this towards budget support strategies and, most significantly, means Europe. There are some opportunities in the Middle the U.S. government’s Millennium Challenge Fund has initi- East5 or the Maghreb but these are quite minor, and Ghana ated a $547 million program in Ghana with a strong agricul- has no comparative advantages over other sources supplying tural, indeed horticultural, component. the North American or Far Eastern markets. As subsidiary opportunities, the second phase can look at these markets in What then is the current potential for the Ghanaian horticul- more detail if needed. tural export industry? What is planned in policy, infrastruc- ture, investment, and support to achieve this potential? What This report, then, is focussed on the ability of the Ghanaian strategies will take the cluster forward? To answer these horticultural produce industry to exploit the European demand. questions a two stage exercise has been planned. This sec- The distinction between distant and local/regional marketing tion of the report provides an analysis of the recent evolution is important. The distant export of fresh produce has substan- of Ghana’s horticultural export cluster, which entailed a com- tially higher costs (transport, packaging, marketing, financ- prehensive “scoping� study to take stock of the evolution of ing), higher risks (unpredictable demand, poor market linkage, the horticultural cluster since the HEII was first conceived, counterparty integrity, currency, product deterioration) and both in terms of the supply side in Ghana and the demand higher performance requirements (competition with world- side in Europe. Based on these observations, and the defini- wide suppliers, marketing demand for quality, programmed sup- tion of the problems, issues, and constraints, a strategy was ply agreements, logistic efficiency, business agility). Export then designed in the second stage to take the cluster to the horticulture may have clear macroeconomic benefits, but the next development phase over the following five year period. rewards at the microeconomic level are not secure. This study will not review the entire span of the Ghanaian We consider here whether the Ghanaian horticultural export horticultural industry. Much of the agricultural activity that cluster is achieving its potential in the European market; and could be defined as horticulture is aimed at supplying the if not, then where are the constraints? local market with a range of fruits and vegetables. Some of these products will also find their way into a regional supply chain that takes them beyond the Ghanaian border and there- 5. These markets are more usually supplied from India and Pakistan fore qualify as exports. But these markets are not substan- or East Africa. For example, of the 70,000 tonnes of mangoes tially different from the local markets: the supply chains are imported to the UAE in 2005, India supplied 27 ,700 tonnes, essentially the same; the markets do not differ significantly Pakistan 37,000 tonnes, and Kenya 2,000 tonnes. Similarly, of the 48,300 tonnes of imports of mangoes into Saudi Arabia in 2006, in their particular requirements and the decision to export or Yemen, Pakistan, India, and Egypt collectively supplied 92%. not rests with the traders and market women. Ghana has few advantages in these markets. Hort Ic UltUre exP ort S From gH ana : a StrategI c St U Dy 2 — S e c to r e vo L Ut Ion FroM 2 0 03–20 07 9 2: SECTOR EVOLUTION FROM 2003–2007 This chapter reviews the main changes that have taken place in the cluster over the past five years. Rather than describe the background and underlying structure again, a list of reports and studies of the Ghanaian horticultural cluster is included in the bibliography in Annex VI. 2.1 Key aSPectS oF change 2003–2008 The range of fruit and vegetables produced in Ghana for ability of many producers to grow for export since the export has not altered significantly. However, there have new variety requires a higher level of husbandry and been some important alterations in the output of individual inputs. The TIPCEE program has carried out farmer crops and in the cluster participants. To give an overview, the training and the technology is available although there most important changes are listed below; individual topics is evidence that a proportion of growers have with- are then discussed in more detail. drawn from pineapples. 6. The number of pineapple exporters has dropped dra- 1. Golden Exotics Ltd, a subsidiary of the group matically. In particular, Farmapine, the export opera- Compagnie Fruitière, was incorporated in Ghana in tion owned by smallholders, is no longer active. On 2003 and began production of pineapple and banana. the import side, Schumacher, the German importer The company now dominates the sector and is and distributor formerly responsible for handling the responsible for 88% of banana exports and 40% greater part of Ghanaian pineapple exports, is now a of fresh pineapple exports. minor player. 2. Other foreign investors in the sector include a juice . 7 Mango output is growing with the development of manufacturer, Pinora, and the Swiss fruit distributor, projects around Tamale in the north. HPW. HPW groups five exporters under a market- 8. HEII completed the refurbishment of Shed 9, the fruit ing umbrella and jointly accounts for another 40% of export shed at the port of Tema, with the installation Ghanaian fresh pineapple exports. The approach by of cooling and cold storage facilities throughout the Chiquita to develop a $40 million banana investment shed. Despite completion in April 2007 negotiations failed through lack of interest in Ghana, and Chiquita over management issues delayed the operation. found partners in Angola and Mozambique instead. 9. On-farm pack houses and cooling facilities have been 3. Substantial local investments include the replace- installed by some private players. ment of existing pineapple planting stock, the development of mango plantings and the installation 10. Those pineapple exporters still in business have of cold stores and pack houses. mostly gone over to Fair Trade certification in order to maintain a presence in the European market. 4. Banana exports have expanded from below 5,000 tonnes to around 35,000 tonnes. 11. The GlobalGAP1 standard has been widely adopted in the export cluster. This was imperative for continued 5. The European demand for traditional pineapple access to European retailers. varieties evaporated in favor of the MD2. The new variety has been multiplied and disbursed by the 1. See Annex IV. GlobalGAP is a re-branding of EUREP GAP the , HEII program. The changeover seriously affected the European retailers protocol for good agricultural practice. Pa rt I - S c o P In g rev Iew 10 2 — Sector evo LUt Ion Fro M 20 0 3 – 2 0 0 7 12. HEII funded the upgrading of the Ghana Standards TIPCEE. The HEII program was completed and Board laboratories to a pesticide residue analy- . evolved into EMQAP See Annex I and the section sis laboratory with new equipment. The Ghana “Donor Projects Oriented Towards Export Horticulture Standards Board has published norms and standards � 2008, later in this chapter. for a number of crops. 15. Beginning in 2008 the Millennium Challenge Account 13. A number of the trade associations are in a much of $547 million gets underway with its Agricultural weaker state than previously. In the case of SPEG, this Transformation Program. Horticulture is a significant reflects the difficulties in the pineapple industry, while component. HAG and FAGE need a stronger definition of mission. 16. Processing of fruit for export has further developed A number of new trade associations have been cre- with the expansion of the Blue Skies, HPW and ated. A National Horticultural Task Force now provides PeelCo fresh-cut operations and the development of a forum for private and public oversight of the industry. the Pinora juicing plant. 14. A number of NGOs and donor programs have been aimed at the cluster since 2003, most notably 2.2 the croP PortFoLIo 2003–2008 2.2.1 PINEaPPLES GHPPP2 showed no significant preference between ƒ The last five years have been traumatic for the Smooth Cayenne and MD2 in a sample, albeit small, Ghanaian pineapple industry. The European de- of shoppers. But exporters suddenly found them- mand for the traditional Smooth Cayenne variety selves without a market even as the MD2 program of disappeared in a short time and simultaneously the multiplication was underway. requirement for EUREP GAP certification became ƒ European imports of whole pineapples from Ghana widespread. have fallen from 44,000 tonnes in 2003 to 35,000 ƒ The consequence is a landscape depleted of active tonnes in 2007 (figure I.2.1). In this same period participants. Smallholder export of pineapples has Compagnie Fruitière established Golden Exotics closed down. There are now only eight significant in Ghana and has created export production of exporting members of SPEG where five years ago 15,000 tonnes. In other words, the imports from the there were over 40 active exporters. FIgURE I.2.1: eU Imports of Pineapple ƒ Among the casualties are the smallholder owners from ghana of Farmapine, established by the World Bank on the 60,000 Farmer Ownership Model. ƒ The smallholder pineapple sector has been hit 50,000 particularly hard because they were reliant on export- ers supplementing their own production to make up 40,000 volumes. As these players were unable to maintain a market presence in the switchover there were no buy- Tonnes Sea 30,000 ers for the smallholder output. Further, MD2 requires Air substantial investment: not only are the plantlets 20,000 expensive, but the cultivation requires the use of more inputs. 10,000 ƒ It was the speed of withdrawal of demand for Smooth Cayenne that hit the Ghanaian industry hard. Earlier 0 market surveys had indicated that in a comparison of 2000 2001 2002 2003 2004 2005 2006 2007 Ghanaian and Central American (Costa Rica) products, Source: EUROSTAT importers were less concerned about the variety than 2. Sefa-Dedeh, Prof. Samuel. 2005. Ghana Private-Public Part- the performance of the Ghanaian exporters and the nership Food Industry Development Program Final Report for quality on delivery. Indeed, a consumer survey for USAID. h ortIc ULtU re ex P ortS FroM ghan a: a StrategI c StU dy 2 . 2 th e c r o P P ort F oLI o 2 0 03–20 08 11 established Ghanaian producers fell by 55% to 20,000 ƒ Whole fruit exports finally reached 1,000 tonnes in tonnes.3 2007 up from about 80 tonnes in 2003. Blue Skies ƒ Even exports by air were hit as Smooth Cayenne sup- are buying mangoes for fresh cut exports. The local plies diminished. There is no advantage to shipping MD2 market is also growing. by air since its value lies in the high sugar levels available ƒ Production is divided into three disjunctive zones: the well before full ripeness which allows it to be picked older plantings are in the South while new develop- earlier and shipped but still be sweet to the consumer.4 ments are taking place in Brong Ahafo and the North. ƒ Set against this scene are some positive develop- The NGO, ADRA, have been active in spreading the ments: the roll out of MD2 is largely done and material cultivation of mangoes. is widely available at a manageable cost, the produc- ƒ Production in the South is expanding and there tion protocols are better understood, 100% of exports are now over 600 farms. As of April 2008 a total of are GlobalGAP certified, Blue Skies are buying and 161 farms (covering 983 ha) have been certified to cutting increasing quantities of pineapple. The Blue GlobalGAP under the Option 2 scheme. Further farms Skies exports of 5,000 tonnes of pineapples equate to are going through the process in 2008. One farm 15,000 tonnes of whole fruit. (49 ha) is certified to Option 1. ƒ The industry probably reached a nadir in 2007 From here . ƒ Control measures against anthracnose and also the surviving exporters can go forward: Golden Exotics stone weevil are succeeding. Fruit fly remains a will likely expand. The other SPEG members can build on problem. their increasing technical skills with the new variety and ƒ Southern production is heavily biased towards the on their steadily improving infrastructure (supported by Keitt variety (estimated at 87%) with the consequence EMQAP and MiDA). The smallholder sector can regroup that the harvest and export season is short. around the opportunities for the traditional varieties to ƒ The nucleus farm development of ITFC near Tamale, supply the local market, the processors (the juice yield of with 1,300 smallholders, is beginning to yield. All Smooth Cayenne is significantly greater than MD2) and organic. This should extend the supply season of the still present demand for farm ripened air-freighted “Ghanaian� mango. Smooth Cayenne. ƒ Production in Brong Ahafo is supported by the MOAP programme. 2.2.2 BaNaNaS ƒ The banana export business is dominated by Golden 2.2.4 PaPaya Exotics. Output in 2007 was 35,000 tonnes. The cur- rently planted area of 820 ha could be doubled. ƒ Papaya exports to Europe declined from 1,650 tonnes ƒ VREL have been growing and exporting bananas for . in 2003 to 1,050 tonnes in 2007 Sea shipments were many years in Volta Region. VREL maintain a niche in tried but have fallen away again to insignificant levels. the EU organic banana market. ƒ Golden Exotics took over Paradise Farms and ƒ The attempt by Chiquita to invest in banana production switched entirely to pineapple production: there in Ghana is described below. See Section 2.3.12 below. were already difficulties with the Compagnie Fruitière papaya production in Côte d’Ivoire and the Paradise Farm location was felt to be less than ideal. Jei River 2.2.3 MaNgOES is no longer producing papaya. ƒ Mangoes are finally coming forward after years of ƒ Tropigha, marketing through Schumacher, and Dansak, insignificant sales to Europe. Sea-shipment is grow- remain the major suppliers. ing, and more mangoes were exported by sea in 2007 ƒ Papaya production in Ghana requires irrigation and the than by air. crop is not easily adopted by smallholders. ƒ Any strategy for further expansion of papaya in Ghana 3. An additional 2,500 to 3,800 tonnes arrives each year by “un- known mode� These are not shown in Figure I.2.1 and this ac- . must review the balance between the high-class offer- counts for the small discrepancy between the data in Figure I.2.1 ing of the air-freighted types currently grown, and the and the import data used elsewhere in this report. lower cost alternative of the “Golden� variety which 4. The Smooth Cayenne on the other hand benefits from being al- lowed to attain full ripeness before harvesting and is then better is amenable to sea-freighting and now leads Brazilian shipped by air. output. Pa rt I - S c o P In g rev Iew 12 2 — Sector evo LUt Ion Fro M 20 0 3 – 2 0 0 7 2.2.5 MISCELLaNEOUS FRUITS potatoes are now incorporated into the mainstream ƒ A number of other tropical fruit crops, such as passion supermarket offering, at least in northern Europe while fruit, avocados or lychees, are produced in minor quan- cassava and yams remain in the less regulated, less tities for export or experimentally. selective ethnic markets. ƒ Exports of sweet potato are quite minor, rising in 2.2.6 ChILLIES 2005 to some 600 tonnes but falling away again the ƒ European imports of Ghanaian chillies have risen from following year to 300 tonnes of which only 120 tonnes 500 tonnes in 2003 to 3,000 tonnes in 2007 . were imported to Europe. The variety, Beauregard, ƒ New varieties have been introduced. which has pest resistant qualities and is popular in ƒ The produce is not reaching the higher priced supermarket Europe, has been introduced, but any progress in the sector and the increase in sales may reflect the move of European market will depend on competing directly the Kenya exporters into the premium end of the market, with suppliers from the U.S. and Israel, who share the but it seems also that the demand for air-freighted loose EU market quite evenly. chillies has increased suddenly (figure I.2.2). ƒ Ghanaian yams5 are successful. The unit value is low, and so the product tends to be overlooked in com- FIgURE I.2.2: eU Imports of capsicums by air mentary on the Ghanaian horticultural scene, but im- 14,000 ports to the EU from Ghana have grown significantly, 12,000 from 8,000 tonnes in 2003 to 11,500 tonnes in 2006, 10,000 with an increase in market share from 46% to 52%. Kenya Uganda With further exports to the U.S. the total exports Tonnes 8,000 Jordan exceed 16,000 tonnes. Imports to the EU from Ghana Ghana 6,000 are valued at some €8 million. Israel 4,000 Others ƒ Cassava exports from Ghana have grown quite 2,000 strongly. The EU imported 2,800 tonnes in 2006, up from 800 tonnes in 2003. 0 2000 2001 2002 2003 2004 2005 2006 2007 Source: EUROSTAT 2.2.9 MISCELLaNEOUS VEgETaBLES 2.2.7 aSIaN VEgETaBLES ƒ Of the other minor vegetable exports, ravaya (baby aubergines) may offer some opportunity. Ghanaian ƒ Imports to Europe of Asian vegetables from Ghana exports to Europe have increased gradually from have fallen for the last two years. The cause is not . 113 tonnes in 2003 to 175 tonnes in 2007 Over the clear, but there has been little growth in the trade of same period, imports to Europe have risen from 530 these products. tonnes to around 2,400 tonnes, with Kenya leading the ƒ Mostly, the Asian vegetables are for the UK market, suppliers. and no significant growth is expected here. The trade ƒ Baby corn and herbs may offer some potential and tends to be low value and aimed at the communi- some trials are underway. ties of immigrant population who may now be in the second or third generation with a diminishing interest 2.2.10 PLaNTS, FLOwERS aNd FOLIagE in ethnic cuisine. ƒ Ghana Fresh Produce Ltd, the only exporter of ƒ There has been no significant cross-over of these veg- flowers in 2003, appears to have ceased trading. etables into mainstream shopping or the catering trade. ƒ A Dutch investment, by Gold Coast Foliage Ltd, of ƒ One of the few products that are now in the super- 0.6 million in foliage production in Central Region markets is okra and volumes here may grow. A variety began exports in 2007 . with promising virus tolerance levels has been distrib- ƒ The tissue culture laboratories at Sogakope, formerly uted to farmers and is being monitored. with Tongu Fruits, are now producing plantlets of 2.2.8 TUBERS ROOTS aNd various tropical plant species for export to Holland. ƒ Yams, cassava, and sweet potatoes are included here. Although all three are lower value root crops, there are important differences in the European markets: sweet 5. Including cocoyams, though these volumes are small. h ort Ic ULtUre exP ort S FroM g han a: a StrategI c St Udy 2 . 3 c o M Pa n Ie S a n d Inve StM ent S I n 2 0 08 13 2.3 coMPanIeS and InveStMentS In 2008 Three companies now dominate the pineapple export trade: integrated logistic operation in Africa Express Line,7 which Compagnie Fruitière of France is the largest producer with manages the shipping of 900,000 pallets per year. its investment in Golden Exotics; HPW of Switzerland acts as a marketing umbrella for five Ghanaian producer/export- The deteriorating political situation in Côte d’Ivoire provoked ers; and Blue Skies of the United Kingdom processes some Compagnie Fruitière to invest in Ghana in 2003. The compa- 15,000 tonnes of pineapples at Nsawam for export as fresh ny purchased the holding of Paradise Farms near Nsawam, cut product. In 2007 over 80% of pineapples destined for , which had been focussed on papaya production, and began export, either whole or processed, were handled by these operations as Golden Exotics Ltd. The farm is now planted three companies. with 350 ha of MD2 pineapples and produced 15,000 tonnes . of pineapples in 2007 Another 650 ha are available for There has been a major decline in other players in the mar- development. ket. There remain a handful of SPEG members, such as Koranco and Chartered Impex, still operating independently In 2005 Compagnie Fruitière developed the Kasunya Farm in the fresh pineapple export trade. The switch in demand to the north east of Accra with 820 ha of banana. Production to MD2 and the imposition of GlobalGAP as a requirement in 2007 reached 35,000 tonnes. A further 1,200 ha is avail- dealt a further blow to companies already struggling to com- able for development. As of 2007 Golden Exotics Ltd was pete against the Central and South American suppliers. Their responsible for 88% of Ghanaian banana exports to Europe demise highlights the difficulty of outgrower-based export- and 40% of Ghanaian fresh pineapple exports. Clearly, the ers competing in the fresh produce market: not only are the development at Shed 9 in Tema would be most useful for efficiencies of the grower exporters hard to match but the the company. performance and agility standards are challenging when co- Compagnie Fruitière had invested *25 million by the end of ordinating different suppliers. 2006 in developing their Ghanaian operations. The production Citrus processing has seen investment in Pinora. Existing is fully compliant with GlobalGAP standards and indeed is un- processors such as Coastal Groves and Athena Foods con- usual in being a Gold accredited supplier to Tesco’s Nature’s tinue to operate in the sector. Athena Foods has become a Choice standard. The Ghanaian operation is small compared supplier of pineapple concentrate to Coca Cola Nigeria. to the Compagnie Fruitière plantations in either Cameroon or Côte d’Ivoire, but with political uncertainty in both countries In the vegetable and tuber export trade, the business is car- the Ghanaian investment is an important insurance. ried out by a number of players with little change from the situation five years ago. At present, the AEL shipping line no longer runs to northern Europe from West Africa, but discharges in Port Vendres in The major changes, positive and negative, among the players Southern France. As a result, the Compagnie Fruitière pro- over the past five years are discussed below. This does not duction is rarely sold in the UK since trucking from southern include all those farms that have invested in new planting France is too expensive. The pineapples and bananas from material or upgraded facilities for GlobalGAP certification. Ghana are sold across southern Europe through the multiples under the Compagnie Fruitière brand rather than as Ghanaian 2.3.1 COMPagNIE FRUITIèRE produce. Sales in the UK are mostly of the Fair Trade certified product sourced from HPW. Established in 1939, Compagnie Fruitière6 is one of the ma- jor fresh fruit distributors in Europe. From the early 1970s The Golden Exotics operation is estimated to provide some the company has invested in plantations in West Africa, and 11,000 jobs in Ghana with about 2,200 employed directly in it is now the leading fruit producer in the ACP region with production. The production is likely to expand. The arrival and 350,000 tonnes of bananas, 80,000 tonnes of pineapples and establishment of Compagnie Fruitière in Ghana has been a 10,000 tonnes of papaya and other minor products. In 1992 Dole key development in the horticultural cluster. The scale of the took a 40% share in the capital of the company. Compagnie crisis in the pineapple trade is quite clear when the Golden Fruitière has a UK based distribution operation as well as an Exotics figures are removed from the data, and the presence 6. http://www.fruitiere.fr/ 7. http://www.africaexpressline.com/ Pa rt I - S c o P In g rev Iew 14 2 — Sector evoLU tIon Fro M 20 0 3 – 2 0 0 7 and expansion of the Ghanaian fruit in the European, albeit Fair Trade fruits are principally retailed in Switzerland, the UK, southern, retailers is a boost for marketing Ghana produce. and Belgium. The pineapples are sold through the major mul- tiples such as Coop in Switzerland, Tesco, Asda, Morrison, and 2.3.2 hPw aNd BOMaRTS Marks and Spencer in the UK, and Delhaize in Belgium. There is little current expansion in Fair Trade in these markets, but HPW AG8 is a Swiss based company specializing in the mar- Germany has good potential and the Fair Trade label has sig- keting of Fair Trade and organic tropical produce. The com- nificant further opportunity. That said, Costa Rica also produces pany is owned by its founder Hans Peter Werder, who began Fair Trade product and could swamp the market at any time and marketing Ghanaian product in 2000 through a partnership so HPW is looking to expand into programmed retail sales as with the Ghanaian exporter Bomarts. the technical capability of its operation in Ghana develop. The Bomarts is a Ghanaian company that has been producing individual members have the freedom to sell independently, pineapples since the mid 1980s and started exports not long should HPW be unable to handle the total output. after. The company is a member of SPEG and among the first 2.3.3 wIENCO to introduce MD2 pineapples into Ghana. Bomarts became the main supplier to the government of MD2 plantlets from Wienco9 is a Ghanaian–Dutch joint venture established in its tissue culture laboratories. 1979 to carry out business in the agricultural sector. The core business of the group is the import and distribution of fertil- Bomarts achieved Fair Trade certification at a time when izers but the company is also involved in cocoa, cotton and demand, notably in Switzerland, was growing rapidly. Since warehousing. Bomarts was unable to supply sufficient volume from Ghana, a second Ghanaian exporter, Milani, was taken on to supple- From 1988 the Wienco subsidiary, Volta River Estates Ltd ment supplies. As HPW expanded into supplying the UK as (VREL)10 was the major banana producer and exporter from well, other Ghanaian exporters were brought in under the Ghana, making use of the Ghanaian quota to supply bananas HPW umbrella. to the EU as Fair Trade certified, until production was almost wiped out by storms in 2002. The plantation was subsequent- In 2006 HPW formed HPW Fair Trade Ghana Ltd and employs ly relaunched as organic. While Ghanaian banana exports are 14 agronomists and export specialists. The staff provide tech- now led by Golden Exotics, VREL remains a niche player with nical support to farms, a central quality management service, some 4,000–5,000 tonnes capacity. VREL is also working on centralized procurement of inputs from fertilizer to cartons, developing a capability with organic MD2 pineapple produc- financial support and a small experimental farm to trial other tion using some 30 ha under the independent management tropical fruit production. of some of its staff. HPW now encompasses five Ghanaian operations: Bomarts Wienco has spent eight years developing organic mango out- Farms Ltd, Milani Ltd, Jei River Ltd, Georgefield Ltd, and put in the Northern Region under the subsidiary Integrated Tacks Farm Ltd. All are Fair Trade and GlobalGAP certified; Tamale Fruit Company (ITFC)11. Currently, ITFC has a nucleus Tacks Farm is also an organic producer. Total output of the farm of some 160 ha based on Zill, Amelie, Kent, and Keitt group was over 15,000 tonnes of pineapples in 2007 of which varieties of mango, and about 1,400 outgrowers. About 25% 12,000 tonnes were sent by sea and 3,500 tonnes by air. The of the area is drip-irrigated and there are plans for full cov- latter were Smooth Cayenne for the demand still present in erage. Early problems with the stone weevil appear to have Europe. A pack house and blast-chiller have been installed on been solved and exports are gradually increasing, reaching 300 the Bomarts and Milani farms. There are minor volumes of tonnes in 2007 mostly to the mid East (Lebanon and Egypt). A mango and papaya too, though Bomarts are expanding their target of 10,000–15,000 tonnes by 2015 is planned. mango production in Volta Region. 2.3.4 SChUMaChER HPW has also moved into fresh-cut fruit and now has cutting and packing operations in Ghana, Egypt, and South Africa, Schumacher is a tropical fruit distributor based in south- which is incidentally a similar arrangement to the Blue Skies ern Germany. Previously a force in marketing Ghanaian distribution of processing facilities. 9. http://www.wienco.com/index.php 10. http://www.vrelorganic.com/index.html 8. http://www.hpwag.ch 11. http://www.itfcorganic.com/htm/getpage.asp h ort Ic ULtUre exP ort S FroM g han a: a StrategI c St Udy 2 . 3 c o M Pa n Ie S a n d Inve StM ent S I n 2 0 08 15 pineapples, Schumacher is now barely involved. A change by the German juice processor, blender and dealer, TWG of management in 2006 at Jei River Ltd, once the major Tradework GmbH16 in 2005 in order to secure a supply of exporter of pineapples, broke Schumacher’s principal link pineapple juice. with the industry. Schumacher continues to market fruit from Ghana, mostly papaya, through a connection with Tropigha, The investment to date is estimated at some €10 million and and passion fruit; but the switch to MD2 and the alliance of the company now buys from about 25,000 farmers. South a number of players with HPW has reduced the pineapple African management operates the plant with technical assis- trade. Schumacher also maintains three farms in Ghana and tance from Brazilian technicians. In the course of setting up, has invested in Peelco Ltd12 to produce fresh-cut fruits. the company realized the potential of the extensive orange groves in the Central and Western Regions to provide feed- stock for the factory and have expanded into orange juice. 2.3.5 BLUE SkIES The company buys from a large area from Takoradi and be- Blue Skies13 was founded in 1998 with a factory just outside yond in the West to beyond Kumasi and into Brong Ahafo Nsawam in the pineapple zone. The company was established in the North West. Oranges may be collected or delivered to prepare, pack, and export pineapples for the UK market. direct but securing transport remains a major bottleneck. While Ghana remains the flagship project, Blue Skies has Prices are set weekly or monthly, and the General Manager, Kay developed other facilities in Egypt, South Africa, and Brazil in Jacobs, reports that their prices are now becoming a reference order to provide a portfolio of product throughout the year. The among orange traders. Pinora processed some 30,000 tonnes company has grown to handle some 25% of Ghanaian pine- . of oranges in 2007 It has the capacity to process almost 30,000 apple exports, cutting some 15,000 tonnes per year and send- tonnes of pineapples but supply has become a problem: the ing 5,000 tonnes of prepared product to Europe. The Ghanaian company cannot secure sufficient Smooth Cayenne pineapples operation also supplies mango, papaya and coconut. and only managed some 5,000 tonnes last year. Most of the product is sold through UK retailers and Blue Skies is certified to meet both the general GlobalGAP stan- 2.3.7 gOLd COaST FRUITS dards as well as the individual labels of the different retail- Gold Coast Fruits17 is a Ghanaian–German joint investment in ers, such as Waitrose or Leaf. Fair Trade is not an important a 600 ha pineapple farm in the Nsawam area. The company segment of the fresh-cut market but Blue Skies is a certified also uses outgrowers to supply mango and papaya. The com- producer as well as producing organic product. The company pany supplies fresh fruit as well as fresh-cut products. Gold has recently started to offer a Waitrose Caretrace14 labelling Coast Fruits is registered as a Free Zone.18 service whereby the consumer can trace the individual pur- chase back to the farmer. All fresh-cut products must be air-freighted. In the absence 2.3.8 BIO ExOTICa of appropriate cold store facilities at the airport, Kotoka, Bio Exotica19 is a $2 million Ghanaian-Dutch investment that the company uses two refrigerated shipping containers on has established a farm for producing organic pineapple on the the apron. The produce is moved from the farm in refriger- shores of Lake Volta. The project is in part funded by the Dutch ated trucks to the airport and once cleared for export is held Programme for Co-operation with Emerging Markets (PSOM). in the containers, airside of the cargo terminal, until the plane The aim is an output of some 1,800 tonnes per year. is ready for loading. 2.3.9 gOLd COaST FOLIagE LTd 2.3.6 PINORa Gold Coast Foliage Ltd has established a €600,000 project Pinora15 is a German-Ghanaian venture processing pineapples at Ekumfi Suprodo, near Mankessim in the Central Region. and oranges into frozen juice concentrates for export. The company is based in Asamankase, to the west of Nsawam, in a newly built installation. The company was established 16. http://www.tradework.de/index_gb.html . 17 http://goldcoastfruits.com/ 18. Free Zone companies are companies that operate in Ghana 12. http://peelcofruits.com/ but are outside Ghana’s custom territory. Free Zone enclaves 13. http://www.bsholdings.com/index.aspx?page=1&lang=1 can be located anywhere in Ghana on approval of Ghana Free 14. http://www.caretrace.com/networkprofile.aspx?id=1 Zones Board. 15. http://www.pinora.com/ 19. http://www.bio-exotica.nl/ Pa rt I - S c o P In g rev Iew 16 2 — Sector evo LUt Ion Fro M 20 0 3 – 2 0 0 7 The project, which started production two years ago with a 2.3.12 ChIqUITa work force of 126, aims to grow green foliage for export for Although Chiquita has not invested in Ghana, its interest in the production of bouquets. The project is based on 102 ha and efforts to do so are instructive. Chiquita,21 with annual of land of which 10 ha has so far been developed. revenues of $4 billion, is one of the top three corporate play- ers in the world banana trade. They are the most important 2.3.10 TONgU FRUITS, VIad aNd SBw supplier to Europe and second most important in the U.S. An operation based in Volta Region, Tongu Fruits was an im- Chiquita has extensive plantations in Central America. portant component of the fresh produce landscape in 2003. Chiquita declared an interest in developing some 8,000 ha Previously the company was preparing fresh-cut fruits for of banana production in Africa in order to mitigate the risks exports. That activity is believed to have ceased but the com- of producing in only one geographical region. Chiquita pany is still involved in pineapple and mango production un- has a small plantation in Côte d’Ivoire, but the country der its new owner Volta Integrated Agriculture Development is not currently attractive for expansion. Chiquita came Co Ltd (VIAD). The company also operated a tissue culture to Ghana to investigate the possibility of developing pro- facility and was one of the suppliers of plantlets of MD2. The duction through an alliance with local entrepreneurs. The tissue culture facility is now believed to be owned by SBW company reports that they were most impressed by the International20 of Holland. The laboratory has the capacity to encouragement provided by the government, which evi- produce approximately 12 million tissue culture plants per dently welcomed the prospect of such an investment. It year; large scale production activities are carried out for lily, also reported a very favorable opinion of the infrastructure, Zantedeschia, Gerbera, Anthurium and bromeliads for export with good roads in the Volta Region and an “excellent� to Holland. cold store at the port. Chiquita staff made a number of visits to the country, not 2.3.11 FaRMaPINE only to assess the agro-ecologic factors, but also to seek Nine years after its foundation, the World Bank sponsored out partners. The Chiquita model provides potential part- pineapple producer and exporter, Farmapine, collapsed. ners with plans, technical support, logistics, and a 10 to The pack house closed in 2006 and the newspapers re- 15-year marketing agreement. The partner should be able ported the demise of the company in August 2007 after to use this to secure financing for the development of the some negotiations regarding the debt. In 2003 Farmapine project. was the second largest (after Jei River) exporter of pine- apples. The company, based on the Farmer Ownership Chiquita was unable to find any potential partners in Ghana Model (FOM), appears to have struggled under manage- interested in developing this opportunity. ment issues for some time, not only running a top heavy administration that ate into the farmer’s revenue, but also Chiquita subsequently found partners and financing in Angola suffering from farmer members side selling to other ex- and Mozambique, neither of which have the sea-freight ad- porters. The loss of the market in Europe, as customers vantages offered by Ghana. demanded MD2 in preference to the Smooth Cayenne The scale of this failure should be appreciated. A 2,000 ha that the 300 or so member farmers produced, was evi- development would provide 2,000 direct jobs and 10,000 dently the final blow. indirect jobs throughout the supply chain. The foreign ex- Pinora attempted to mitigate the effects on the local popu- change earnings would be of the order of $29 million with lation by offering to buy pineapples from the members but an annual impact on GNP in excess of $100 million (as- were unable to do so either from lack of agreement or be- suming a five-fold GNP multiplier). The impact on services cause farmers had abandoned pineapples. in terms of trucking, port services, and sea-freight would be very substantial. Given the World Bank backing for FOMs, and the lessons that might be learned of the difficulties of management in Chiquita is still looking for plantation opportunities in Africa this model, a more thorough history should be researched and could yet return to Ghana if a suitable partner were to and written. come forward. 20. http://www.stbw.nl/ 21. http://www.chiquita.com/ h ortIc ULtU re ex P ortS FroM ghan a: a StrategI c StU dy 2 . 4 I n F r aSt r U c t Ure e voLU tI on 17 2.4 InFraStrUctUre evoLUtIon 2.4.1 POwER shed for offloading, palletizing, controlling and holding of pine- The distribution network is clearly improving but on-farm power apples. The World Bank report of 200322 wrote “….Shed 9 is supplies are still reported to be difficult and expensive. a closed warehouse of approximately 4.400 m2, destined to handle export goods, of which SPEG is currently leasing half of the floor space (2.200 m2) from GPHA. The shed was initially 2.4.2 IRRIgaTION designed for non-perishable items and is not adequately venti- There have been no large scale developments of irrigation lated. This results in a differential of +5 deg C with the outside since 2003. Several private initiatives however have been temperature. This has an adverse effect on fruit stored in the completed and Golden Exotics and ITFC have both in- shed prior to the ship’s arrival. …. � stalled extensive irrigation. The MiDA plans some wells and boreholes. The refurbishment of Shed 9 became a key component of HEII. Plans incorporated improved ventilation throughout with a cooling facility at one end in addition to reefer con- 2.4.3 PaCk hOUSES aNd COOLINg FaCILITIES tainer handling, stuffing and plugging capability. As the con- There are now a number of pack houses and cold stores current program of developing MD2 production moved on, it around the southern producing belt. To date, these are all, became apparent that there would be a much bigger need with the exception of Shed 9, private facilities built by a num- for cold storage at the port, particularly with the development ber of companies such as Bomarts, VREL, Milani and Golden of incoming investors such as Compagnie Fruitière and their Exotics. These will be supplemented shortly by EMQAP EDIF , banana production. The HEII plans were amended to convert and MiDA all of whom are planning public facilities. With the the whole of the space at Shed 9 into cold storage (in eight demise of some operations there are also facilities not in use: units of about 500m2 each), and the budget was expanded examples include the cold stores of John Lawrence Farms as by cancelling some other projects within HEII. Among those well as the Equatorial and Farmapine packing facilities. infrastructural components sacrificed were the planned al- terations for Kotoka International Airport (air-freight of pine- 2.4.4 ROadS apples was likely to decline) and the up-country post harvest centres. The poor state of the roads continues to add to the costs of export, not only in direct vehicle costs but also in time Shed 9 is now a world class fruit export terminal. It remains and damage to the produce. The road system is a particular shut, however, while the management and financing of this concern for investors relying on outgrowers, such as Pinora facility is debated by the stakeholders. The situation appears who buy throughout Central Region and into the neighbour- to be that: ing regions. They report the need for head loading to po- sition product where their trucks can collect. EMQAP and 1. GPHA is undergoing privatization. The container MiDA have infrastructural components aimed at upgrading terminal has been taken over by a consortium of roadways. A P Moeller and the Bolloré group (as Meridien Port Services) with GPHA maintaining a minority interest. Similarly, nine private operators are now licensed to 2.4.5 SEaPORT provide stevedoring and shore-handling services. In The major change at the port, and an important achievement the process of privatization, particularly the container of HEII, is the refurbishment of the fruit export shed at Tema, terminal, a number of sheds and warehouses are Shed 9. Cold storage for up to 1360 pallets has been installed. no longer available. GPHA is looking to the man- The major works were completed in May/June 2007 but the agement of Shed 9 to pay a “fair� rent for the land facility has yet to be used. As of April 2008 there were still and structure which it has given up in allowing the some minor works in progress (construction of access steps refurbishment. We do not know the scale of the rent and a toilet block) but the facility was ready to use, and, in- anticipated, but Shed 11 is let to the Cocoa Board for deed, had been for nine months. $102,000 per year. Since the mid-1990s, when sea-freighting of pineapples from Ghana began, Shed 9 at Tema port has been used as the export 22. Voisard and Jaeger. Pa rt I - S c o P In g rev Iew 18 2 — Sector evoLU tIon Fro M 20 0 3 – 2 0 0 7 2. MoFA paid for the refurbishment with funds from Exporters have been offered the use of Shed 10 but this is the AgSSIP loan. The final cost was $5.81 million evidently even less well ventilated than the original Shed 9 (€3.68 million). Issues regarding payment for the and temperatures are too high. use of the facility will be the subject of a concession agreement. Consequently, exporters are either delivering directly to the quayside when a vessel is loading, or, with their own blast 3. SPEG has always charged handling fees to its mem- chillers, are stuffing containers on the farm. Those with Free bers which were part of the service of chartering Zone status (e.g. Bomarts or Milani) can of course complete freight space and handling the port operations. They customs formalities at the farm and do not need to hold prod- wish this to continue and insist on being a part of uct at the port. the management. SPEG has a high overhead, with 10 staff including five still based at Tema, and will Shed 9 must be brought into use as soon as possible. It continue to look for royalty payments. is also imperative that per pallet charges are minimized. 4. Golden Exotics, as part of Compagnie Fruitière and The current high handling charges, with Tema costs, at with logistic experience in Cameroon and Côte $15.5/pallet, are substantially higher than Abidjan ($12) or d’Ivoire, has offered to manage Shed 9 at cost on a Douala ($8), and must be addressed. number of conditions: ƒ There is sufficient throughput; 2.4.6 aCCRa aIRPORT ƒ Costs include maintenance; No significant changes to the handling of fresh produce have ƒ The stevedoring and shore-handling functions are taken place at the airport. Product is still repacked and pal- handled by them to keep costs low; letized on the tarmac of the cargo car park. There is a small ƒ They operate the facility with their own staff; and shelter at one end but this is of limited use. ƒ Vessels loading from Shed 9 have priority to dock at berth 9 immediately outside the shed. Limited cold storage is sometimes available but cannot be relied on so product is generally delivered in a relatively A Joint Venture between SPEG and Compagnie Fruitière short window before loading can take place. Any mishaps (actually between SPEG Fruit Terminal Operations LTD and or traffic on the roads could therefore result in missing Transit Fruits) was established 12 months ago (MOU April the flight. 07) to develop the management of Shed 9 but has so far made no progress. The management situation remains unre- The MiDA program has a component for upgrading facilities solved for any of the above parties. at the airport, but it is not certain that this will go ahead. As of April 2008 the intention is to engage consultants to It would be interesting to assess the scale of losses at the advise on the long-term management of the Shed. This airport: on some occasions consignments must be written would be the second consultancy on this topic. In the mean- off when heavy rain interrupts re-packing or palletizing, but time, the industry is worse off than before. The Shed can- more frequently there is simply deterioration in quality that not be used at all as it is entirely taken up with cold stores. impacts on the reputation and the return to the exporter. 2.5 PrIvate Sector coLLaboratIve organIzatIonS The landscape of trade and industry associations has 2.5.1 UMBRELLa gROUPS changed since 2003 with the appearance of new groups The National Horticultural Task Force (NHTF) was established and the decline in health of others. Overall, there needs to in 2003 as a broad-based private sector led group repre- be rationalization: the capability and potential of the clusters senting produce and marketing organizations, public sector would be greatly enhanced by broadening the scope and institutions and the donor community. The NHTF maintains a tackling problems that are common to all those interested in website (www.ghanafreshproduce.org ) to share information horticultural exports. It is clearly inefficient to maintain sepa- on business opportunities, regulations, markets, and tech- rate secretariats and their overheads. nology. The NHTF has been instrumental in promoting the h ort Ic ULtUre exP ort S FroM g han a: a StrategI c St Udy 2 . 5 P rI vat e S e c tor co LL abo ratIve o rga nIzat IonS 19 National Quality Assurance Scheme leading to the definition The future role of SPEG is unclear. GTZ, through the MOAP of the GhanaGAP standard.23 program, is assisting in redefining a strategy for the or- ganization. The changes in SPEG must mirror the radical The Federation of Associations of Ghanaian Exporters changes that have taken place in the Ghanaian pineapple (FAGE)24 acts as an umbrella group for the various trade industry. associations and continues as the private sector institution for export development. To some extent, the NHTF seems 2.5.3 VEgETaBLE aSSOCIaTIONS to have taken over the role of FAGE in the horticultural sector. The vegetable cluster has now split into two organizations: VEPEAG, the Vegetable Producers and Exporters Association Membership of the Horticulturalists’ Association of Ghana , of Ghana formed in 1997 and GAVEX, the Ghana Association (HAG) is declining and the association now counts about 35 of Vegetable Exporters formed in 2006. GAVEX mostly rep- members. The role of HAG is even less clear now than five resents the larger exporters, who had become disillusioned years ago, although the stated aim is to promote Ghana on with the performance and control of VEPEAG, while VEPEAG the horticultural map of the world. The association seems to is more production oriented. be repositioning itself to organize group export. VEPEAG claims some 500 members but is now trying to restrict membership to those who are active in the industry. 2.5.2 PINEaPPLE aSSOCIaTION The association has formed a marketing company and now The Seafreight Pineapple Exporters of Ghana (SPEG) is exports as a single group. It is operating less as a trade asso- now in poor shape. In 2004 there were some 40 compa- ciation and more as a cooperative. EDIF is supporting with a nies actively exporting pineapples, and membership dues pack house in Central Region, which is under construction, as and per pallet charges for sea-freight gave the organiza- well as power tillers and irrigation equipment, while EMQAP tion healthy revenue. By 2008 there were no more than is providing refrigerated trucks. 12 active exporters; the General Manager reported that of 26 members only a third had paid their dues from the GAVEX seeks to assist its 22 members to operate as indi- start of the year. Reserves, which had been building until vidual export companies. The association looks for support 2006, are now used up and the overhead of offices and 10 for its members in obtaining GlobalGAP certification and employees is burdensome. meeting other standards. SPEG assisted in the switch over to MD2 pineapples with a The vegetable growers and exporters were reluctant to $2 million loan from the Government of Ghana. SPEG mem- co-operate five years ago, and they continue to operate bers travelled to Costa Rica to research the MD2 variety independently now. Both organizations report that the and its production, and brought back plantlets for growing profile of the vegetable cluster was raised by HEII, but and multiplication. Using the tissue culture laboratories of that little progress was made. It is, perhaps, typical of Bomarts Farms, Tongu Fruits, and the research station at the industry that VEPEAG reports that trials of the newly- Binari, the plantlets became widely available at a subsidized introduced variety of sweet potato, Beauregard, were so price. The loan has yet to be repaid, with an average of successful on the local market that no product was avail- $30,000 per member owed. able for export, but one grower reported burying the crop as unmarketable. SPEG insists that they should participate in the management of the refurbished Shed 9 at Tema. To this end a Memorandum 2.5.4 MaNgO aNd PaPaya aSSOCIaTIONS of Understanding was signed in 2007 with Golden Exotics to develop the management of the facility. SPEG has made no Mango producers have created three organizations since progress since in resolving the issues that prevent the open- 2003. Two are regional farmer’s associations—Yilo-Krobo ing of the Shed (see the Seaport section 2.4.5), and indeed it Mango Farmers’ Association (YKMFA) and Dangme-West is not obvious that efforts have been made in this direction. Mango Farmers’ Association (DAMFA)—and one is nation- This raises the question of whether the general membership al—Papaya and Mango Producers’ and Exporters Association is interested in the refurbished facility. of Ghana (PAMPEAG). The growers’ associations have worked closely with the 23. See Annex IV. 24. http://www.ghana-exporter.org/ TIPCEE program, achieving EUREP GAP for all members, Pa rt I - S c o P In g revIew 20 2 — Sector evo LUt Ion Fro M 20 0 3 – 2 0 0 7 establishing good traceability through GIS mapping, and GAP is seen as a secondary goal. The association functions tackling the stone weevil problem. with no external support apart from trade fair attendance. Members are exporting and in 2007 some 300 tonnes were PAMPEAG, formed in 2003, has taken an alternative route sent to the Lebanon and Egypt. and has focussed on achieving quality standards. EUREP 2.6 donor ProjectS orIented towardS exPort hortIcULtUre 2008 Since 2003 there have been various initiatives aimed at programs, either as continuations or new directions, will be the export horticulture sector. Table I.2.1 lists the most attracted to the horticulture sector. This is unfortunate since significant ones and a description of each is provided in the MiDA agriculture project is not well linked either to MoFA Annex I. There are a number of other horticultural oriented or to the larger horticultural producers and exporters, but has programs not included here, for example, the new Northern a strong orientation towards small farmer organizations, ca- Rural Growth Programme, funded by IFAD, AfDB, and the pabilities and credit. Government of Ghana, which although market oriented and adopting a value chain approach, is not specifically There should therefore be concern over the phasing out of concerned with developing exports of high value products. projects such as TIPCEE and MOAP where a substantial and Note also that a number of donors now provide MoFA with valuable knowledge base has been acquired. budgetary support, though none is directed specifically at horticulture. There have been good examples of linkage (HEII with TIPCEE , and MOAP for example) in donor support to the sector, but The export horticulture sector has benefited from substantial it is not clear that there is learning from evaluation of earlier support over the last five years. The support is about to ex- projects. This is a pity. We need to know what works and pand as the huge MiDA program gets underway. The scale what does not; but there is emphasis on targets rather than of the MiDA program raises the question of whether other outcomes. TaBLE I.2.1: Projects with an export horticulture orientation Since 2003 Amount (in uS $ Project Donor objective time millionS) HEII World Bank � Conserve the existing market share of the horticultural export industry 2004–2007 $9.85 � Consolidate the competitiveness � Impel diversification and innovation EMQAP AfDB � Increase the incomes of horticultural crop farmers and exporters and of 2007–2011 $28.6 cassava producers GHPPP USAID � To link Ghanaians with global distributors by assisting producers in meeting 2002–2005 the safety, quality, environmental and labor standards demanded by consum- ers in these markets TIPCEE USAID � To achieve exponential growth in sales of agricultural exports over the 5-year 2004–2009 $30 life of the project by increasing the competitiveness of Ghana’s private sector in international and regional markets MOAP German Government � Improve upon the competitiveness of agricultural producers, processors and 2004–2011 $22.6 traders on regional, national and international markets MiDA MCA � Increase production and productivity of high value cash and food crops in 3 2007–2013 $547 selected zones of Ghana � Enhance the competitiveness of high value cash and food crops in local and international markets. Source: Authors’ research h ortIc ULtU re ex P ortS FroM ghan a: a StrategI c StU dy 2 . 7 th e F o o d a n d agrIc ULt Ure Sector deve Lo PM ent PoLIcy (FaSde P II) 21 2.7 the Food and agrIcULtUre Sector deveLoPMent PoLIcy (FaSdeP II) The first Food and Agriculture Sector Development Strategy will be targeted with interventions to reduce their vulner- (FASDEP) was prepared in 2002 as a framework for the agri- ability and help them improve their productivity. While, at culture sector. A revised policy, FASDEP II, was prepared in the other end of the scale, the commercial sector can be August 2007 and emphasizes the commodity value chain ap- assisted, for example, through linkage with smallholders. proach and greater engagement with the private sector. The policy is complemented by a strategic framework, which, in Policy 4.9 Increased Competitiveness and Enhanced April 2008, was almost complete. Integration into Domestic and International Markets deals most directly with the need to translate Ghana’s compara- FASDEP II is consistent with the national development tive advantages in international markets into competitive objectives specified in the Growth and Poverty Reduction advantages. The policy will tackle the following issues in the Strategy II,25 and has been prepared through an extensive development of agricultural exports: consultation process that incorporates a review of the out- ƒ Majority of agricultural operators do not have the skills come of FASDEP I. The plan notes that the horticulture sec- and knowledge in the requirements of external mar- tor has become the country’s focus for agricultural export kets, contributing to high rate of rejection of exports; diversification, and that the recent shocks to the pineapple industry exposed the country’s lack of agility. The need for ƒ Inadequate access to market information and lack of market intelligence, innovation and skills are highlighted and capacity to access market intelligence; efforts to innovate and reinforce the linkages between agri- ƒ Limited capacity of exporters to meet export volumes; business and smallholders are considered key. ƒ Inadequate and poor management of logistics in com- modity marketing; FASDEP I is criticized for failing to recognize the diversity of ƒ Weak legal environment does not encourage contract agriculture producers and their differing needs. FASDEP II will relationships in production and marketing address this so that risk-prone, largely subsistence farmers 25. It is also consistent with the Comprehensive African Agriculture Development Programme (CAADP) of NEPAD. Pa rt I - S c o P In g rev Iew 22 3 — e uropean m arket r e s ea r cH 3: EuropEan MarkEt rEsEarch 3.1 pineapples Traditionally, the bulk of Ghana’s exports of horticultural produce was established and Ghana’s fresh pineapple exports to the EU to Europe has been based on pineapples. Exports started with increased to a peak of 52,000 tonnes in 2005 – but it has since air-freighted pineapples in the late-1980s and early-1990s and fallen back to 35,000 tonnes in 2007 (figure I.3.1). Ghana became the dominant player in this niche market. By 1993, it was estimated that the market for air-freighted pineap- In the mid to late 1990s, Ghana was clearly the third place ples was about 15,000 tonnes1 of which Ghana supplied about supplier of pineapples to the EU. The main supplier was Côte 9,000. Then Sea-Freight Pineapple Exporters of Ghana (SPEG) d’Ivoire, followed by Costa Rica and then Ghana.2 At the time FigurE i.3.1: eu imports of pineapples from different sources, 2001-2007 1,000,000 800,000 600,000 Tonnes 400,000 200,000 0 2001 2002 2003 2004 2005 2006 2007 Others 13,418 13,723 16,565 19,672 19,470 25,402 24,665 Panama 35 0 3,713 9,658 12,143 31,476 37,627 Honduras 9,306 13,505 13,474 17,670 25,276 26,644 26,336 Ecuador 3,591 7,865 19,681 27,552 32,614 36,702 49,243 Brazil 240 277 835 10,253 12,679 16,400 26,367 Costa Rica 136,809 140,870 181,273 252,231 363,506 501,043 570,291 Ghana 33,209 36,467 44,317 51,726 45,066 40,237 35,463 Côte d’Ivoire 178,140 165,305 141,347 137,528 99,889 94,760 59,251 Source: Accord Associates LLP based on Eurostat data , 2. For example in 1997 Côte d’Ivoire exported 154,000t to the EU, 1. At that time, the total size of the EU pineapple market was about Costa Rica, 83,000t and Ghana 24,000t. The next biggest supplier 300,000t. was Honduras at 10,000t followed by the Cameroons at 4,000t. Horticulture exports from G Hana : a strateG i c st u dy 3.1 pineapples 23 tablE i.3.1: the share of the eu market for pineapples from different sources, 2001–2007 Market share pineapples eU 27 iMports 2001 2002 2003 2004 2005 2006 2007 Brazil 0.1% 0.1% 0.2% 1.9% 2.1% 2.1% 3.2% Costa Rica 36.5% 37.3% 43.0% 47.9% 59.5% 64.8% 68.8% Côte d’Ivoire 47.5% 43.7% 33.6% 26.1% 16.4% 12.3% 7.1% Ecuador 1.0% 2.1% 4.7% 5.2% 5.3% 4.8% 5.9% Ghana 8.9% 9.6% 10.5% 9.8% 7.4% 5.2% 4.3% Honduras 2.5% 3.6% 3.2% 3.4% 4.1% 3.4% 3.2% Panama 0.0% 0.0% 0.9% 1.8% 2.0% 4.1% 4.5% Others 3.6% 3.6% 3.9% 3.7% 3.2% 3.3% 3.0% Source: Accord Associates LLP based on Eurostat data Costa Rica was recognized as a supplier of low quality, cheap is probably the reason why the decline in exports since 2005 “green� pineapples. However, with the advent of the “super- has not been greater. However, the fair trade market is small sweet� varieties and aggressive marketing, Costa Rica now (see box I.3.1) and Ghana is, at best, a second supplier to this , dominates a much larger market. In 2007 the total EU market higher value market behind Costa Rica. Therefore, if Ghana was 830,000 tonnes; which was more than double the size of wants to become a major player in the EU pineapple market the market in 2002!3 Between 2002 and 2007 Costa Rica’s , again, it will have to make more in-roads into the undifferenti- exports increased more than fourfold and their market share ated retail market and supply the multiple supermarkets with has nearly doubled from 37% to 69% in six years (table I.3.1). consistent quality product, i.e., it will have to compete on price, quality, and service. The main loser in the Costa Rican expansion was Côte d’Ivoire, whose market share declined from 48% to 7%. Ghana also The EU market perception of Ghanaian pineapples is that fruit experienced a sharp decline in market share, while Brazil, quality is reasonable when air-freighted but very inconsistent Panama, Ecuador, and Honduras all increased their exports when sea-freighted. Up to the mid 1990s, the EU market pref- and market share. These recent changes in the market supply erence was for the golden smooth cayenne but this changed dynamics have resulted in Ghana now being reduced to the rapidly and the super-sweet varieties totally dominate the de- fifth largest supplier to Europe and, if current trends continue, mand. The production of super-sweet varieties started in Costa it will soon be overtaken by Brazil. Rica and was then introduced into other Central and South American countries. They were not introduced into Ghana until The data clearly shows the very disappointing performance of perhaps 2002, but it now dominates production for Europe. Ghanaian pineapples in the European market. However, the one piece of positive data is that the unit value of the fruit is the tablE i.3.2: average c&f value of pineapples highest of all its major competitors (table I.3.2). This is probably imported into the eu (€/t), 2007 due to two reasons. First, it is estimated that about 20% of the soUrce ValUe (€/t) fruit is exported by air which will have a much higher C&F value. Secondly, a considerable portion of the sea-freight pineapples Brazil 684 are either certified as organic or fair trade; which again will mean Costa Rica 676 that they have higher values. Ghana usually provides 30–40% Côte d’Ivoire 672 of the EU air-freighted pineapples. Other significant suppliers Ecuador 640 include South Africa, Cameroon and Benin. Ghana 1,059 Honduras 736 In fact, achieving fair trade certification has made a consider- able difference to the profitability of Ghanaian pineapples and Panama 686 Others 1,102 3. This is even more impressive since between 1991 and 1995, EU27 705 the EU imports of pineapples only increased from 215,000t to 231,000t. Source: – Accord Associates LLP based on Eurostat data pa rt i - sc o p i n G re view 24 3 — e uropean mark et re s ea r cH Box I.3.1 The FaIr Trade opporTunITy the most recent data from the fairtrade labelling organization show that about 8,000 tonnes of fair trade certified fruit was sold in europe in 2005. this did not include bananas but would include pineapples, mangoes and avoca- dos, citrus, and deciduous fruits. the uk led sales with 4,700 tonnes of fruit while per capita spending was highest in switzerland. sales of fair trade products have grown strongly since 2005, and sales of bananas, for example, have more than doubled. if similar growth rates applied to other fresh fruit the total market remains very small. as a brand, however, fair trade is crossing into the mainstream now and being taken up by the supermarkets. further expansion is likely in this sector, but with the same performance requirements as conventional products: year round supply and guarantees of quality and price levels are to be expected. the Ghanaian exporters in the fair trade sector have been able to obtain a premium for fruit sales outside of the supermarket sector, with some sales in the supermarket sector too. further expansion will require the opening up of new markets or development of supermarket sales. When Ghana started sea-freighting pineapples, it was still Even though Ghana has lost market share and has now fallen growing the smooth cayenne variety. The in-field techniques to fifth place as a supplier to the EU market, there is significant and post-harvest care management were not good enough to interest from the trade to identify a good alternative supplier produce fruit that could be transported by sea without suffer- to Costa Rica. There is often concern in an industry when one ing from internal blackening and other fruit quality problems. supplier has too high a market share because the buyers feel Even though the fruit appeared to be good when packed, that they are susceptible to the exporter’s negotiating position, when it arrived in Europe, it was very variable. Interviews as well as to any interruptions in trade caused by, for example, with importers who have recently purchased Ghanaian fruit adverse weather. Importers want an alternative supplier in would suggest that this problem has not yet been overcome. another geographical area. Traditionally this has been the role that Côte d’Ivoire fulfilled, but its exports are declining rapidly. Ghana has made good in-roads into the Fair Trade market in It should be recognized that Brazil could become the main al- the UK, supplying some of the major retailers such as Tesco ternate supplier; but Ghana is in an excellent position to fulfil and Marks and Spencers. The fruit imported by Compagnie this role; future strategies for the expansion of the pineapple Fruitière is sold in the main supermarkets in Southern France industry should take cognizance of this. However, this will only alongside fruit from Côte d’Ivoire; comments from company happen if it makes considerable efforts to expand production, sources suggest that customers prefer the taste of Ghanaian offer a wider range of shipping destinations, and improve the pineapples over those from Côte d’Ivoire. consistency and quality of the fruit. 3.2 Bananas Bananas dominate the EU fruit and vegetable imports at very successful and that the market demand in France for almost 4.7 million tonnes worth $2.7 billion. Supplies are Ghanaian fruit is good. They claim the taste is better than the dominated by Central and South American countries, but Central American fruit and there is a good market demand for Ghana has a small and growing share of the market. In 2007 , the slightly smaller fruit produced in Ghana, which also gives it exported 33,000 tonnes, up from less than 4,000 tonnes it a distinct advantage. Compagnie Fruitière’s exports are to in 2001. Although it still lags well behind its West African Southern Europe and they market most of the fruit through neighbors, Côte d’Ivoire and Cameroon, Ghana is expanding supermarkets in Southern France. its exports more rapidly than either of those two countries (figure I.3.2). The market data and trade interviews regarding Ghana’s ba- nana exports are very positive. Its trade is very reliant on one Virtually all of Ghana’s banana exports are by one com- company and the logistics for exports are targeted at Southern pany, Compagnie Fruitière. They report that exports are Europe (via Port Vendres). If further expansion of the banana Horticulture exports from G Hana : a strateGi c st u dy 3 . 3 m a nG o e s 25 FigurE i.3.2: eu imports of Bananas from different sources, 2001–2007 5,000,000 4,000,000 3,000,000 Tonnes 2,000,000 1,000,000 0 2001 2002 2003 2004 2005 2006 2007 Others 358,627 277,831 285,511 326,558 302,620 404,630 365,660 Panama 417,420 396,153 381,454 370,835 281,639 312,978 354,056 Ecuador 1,068,550 1,156,983 1,148,753 1,120,761 1,239,220 1,199,320 1,185,551 Dominican Rep 85,910 97,332 111,948 101,337 144,683 176,757 206,216 Costa Rica 680,939 746,290 802,040 856,406 634,511 834,045 971,428 Colombia 735,040 768,037 799,237 766,501 882,395 951,376 1,154,821 Ghana 3,458 3,250 946 1,788 4,207 22,404 33,404 Côte d’Ivoire 226,533 216,718 207,420 210,760 183,752 221,791 189,840 Cameroon 225,419 236,477 298,493 261,231 252,912 252,702 221,918 Source: Accord Associates LLP based on Eurostat data exports can be encouraged, it will help reduce logistic costs Ghana’s banana exports do keep increasing, the extra vol- and, hopefully, will eventually lead to more destinations being ume should help reduce transport costs and increase fre- serviced by the shipping companies. quency of shipments, which will in turn help stimulate other sea-freighted commodities. Ghana, along with other ACP The EU market for bananas is very large and Ghana’s ex- countries, is able to export bananas free of duty into the ports are increasing quickly; it therefore represents a good EU which gives it a significant advantage over Central and opportunity to achieve a significant volume of exports. If South America. 3.3 manGoes Trade statistics combine mangoes with guavas and mango- years of very low exports, Ghana has started to expand and its steens; but imports of guavas and mangosteens are very small exports have now almost reached 1,000t (figure I.3.3). compared with mangoes. In recent years, the EU imports of mangoes have increased from 136,000t to over 210,000t–with The C&F value of Ghana’s mango exports are the highest Brazil, followed by Peru, dominating the supply. After a few of all the countries considered (table I.3.3). This is because pa rt i - sc o p i n G re view 26 3 — e uropean mark et re s ea r cH FigurE i.3.3: eu imports of mangoes, Guava and mangosteens from different sources, 2001–2007 250,000 200,000 150,000 Tonnes 100,000 50,000 0 2001 2002 2003 2004 2005 2006 2007 Others 33,574 34,838 37,908 33,654 31,717 37,429 39,714 Peru 7,774 10,848 15,398 20,059 26,402 41,040 36,689 Pakistan 8,751 6,263 8,682 10,940 12,307 10,120 13,225 Israel 6,638 4,152 8,759 8,286 12,919 11,353 15,006 Ecuador 6,255 2,661 5,821 5,590 5,937 5,686 3,718 Costa Rica 1,752 1,859 2,652 4,009 6,274 7,549 4,664 Brazil 61,127 65,049 92,959 69,931 82,477 85,117 82,866 Ghana 62 64 83 179 268 295 983 Côte d’Ivoire 10,897 11,220 7,194 11,430 9,857 14,433 14,706 Source: Accord Associates LLP based on Eurostat data tablE i.3.3: average c&f value of mangoes imported some are air-freighted and the other countries export mainly into the eu (€/t), 2007 by sea. Air-freighted fruit seemed to be being squeezed out, soUrce ValUe(€/t) but market share has been increasing since 2004 and is now about 28%. Brazil 1,036 Costa Rica 929 If Ghana’s mango exports are going to expand and reach the Côte d’Ivoire 1,881 level of say Côte d’Ivoire, then it will have to develop exports by sea. This will probably mean that the in-field management Ecuador 772 and post-harvest handling will have to improve to ensure that Ghana 2,850 there are no quality problems. Israel 2,361 Pakistan 1,454 Peru 907 Others 1,587 EU27 1,297 Source: Accord Associates LLP based on Eurostat data Horticulture exports from G Hana : a strateG i c st u dy 3 . 4 pa paya 27 3.4 papaya European imports of papaya have nearly doubled from the more expensive air freight failed (figure I.3.5). While sea 19,000t in 2001 to 36,000t in 2007; although imports have freight reduced the costs of getting the fruit to the EU, it actually decreased from a high of 42,000t in 2004. Brazil is negatively impacted on quality, so the policy was reversed. the dominant supplier with currently a 67% market share. Therefore the reduction seen in the export statistics is due to Other significant suppliers include Ecuador and Côte d’Ivoire. a decline in the Brazilian sea freight deliveries. Ghana is the fourth major supplier, but its exports have dropped by almost half during the time that market demand Because the papaya market is responsive to quality, it does doubled (figure I.3.4). present an interesting advantage for West Africa. The papaya produced in Ghana and Côte d’Ivoire is regarded as inherently The recent decline in papaya imports over the last three better quality than the Brazilian fruit. It is for this reason that years is interesting. On the surface it is difficult to be certain Utopia, a major UK fruit-importing company, helped establish whether this is due to a decrease in demand, production dif- a 250 ha papaya orchard in Côte d’Ivoire, which it would like ficulties in the main supplying countries, or other issues. The to replicate in Ghana. The biggest processor of prepared fruit general view in the market is that Brazil’s strategy early in in the UK is also interested in investing in a fruit preparation the decade of shipping more of the fruit by sea and less by business in Ghana. FigurE i.3.4: eu imports of papaya from different sources, 2001–2007 45,000 30,000 Tonnes 15,000 0 2001 2002 2003 2004 2005 2006 2007 Others 1,323 2,036 2,636 1,807 1,663 2,512 2,763 Pakistan 1 1,301 2,007 1,676 1,152 785 885 India 23 1,288 2,004 1,722 1,067 519 622 Ecuador 25 14 1,272 4,367 3,387 4,078 4,740 Brazil 15,304 20,332 29,111 29,344 31,855 26,942 24,623 Côte d’Ivoire 236 340 232 1,164 1,398 1,857 1,806 Ghana 1,937 1,414 1,649 1,860 1,334 1,223 1,042 Source: Accord Associates LLP based on Eurostat data pa rt i - sc o p i n G re view 28 3 — e uropean mark et re s ea r cH FigurE i.3.5: eu imports of papaya 35,000 30,000 25,000 20,000 Tonnes Sea Air 15,000 10,000 5,000 0 2000 2001 2002 2003 2004 2005 2006 2007 3.5 capsicum The category “Capsicum� covers a wide range of items pleasing to report that Ghana’s exports have increased almost including bird’s eye chillies, sweet chillies, Scotch bonnet, five-fold during this period. Its growth has been much more etc. Overall, EU imports in this category have shown a good rapid than Kenya, one of its traditional competitors in this . increase from 25,000t in 2001 to 36,000t in 2007 It is also market (figure I.3.6). It is also pleasing to note that the unit FigurE i.3.6: eu imports of capsicums from different sources, 2001–2007 40,000 30,000 Tonnes 20,000 10,000 0 2001 2002 2003 2004 2005 2006 2007 Others 2,392 1,849 1,737 2,444 3,085 4,845 7,003 Dominican Rep 1,271 1,929 1,776 357 233 429 482 Thailand 323 341 363 375 571 375 478 Turkey 14,058 11,855 12,488 12,279 13,031 12,677 11,520 Zimbabwe 227 312 424 346 201 144 349 Zambia 52 75 53 201 322 652 384 Uganda 288 208 110 280 536 732 1,582 Kenya 689 452 334 195 473 581 1,128 Egypt 134 156 777 860 442 568 578 Morocco 5,635 7,049 7,480 8,168 8,185 8,962 9,382 Ghana 418 650 517 841 1,017 1,955 2,947 Source: Accord Associates LLP based on Eurostat data Horticulture exports from G Hana : a strateGi c st u dy 3 . 6 r avaya 29 C&F value of Ghana’s capsicum exports is one of the high- tablE i.3.4: average c&f value of capsicum imported est; only Kenya, Thailand, and Zambia are higher (table I.3.4). into the eu (€/t), 2007 These countries will have higher unit values partly because a soUrce ValUe (€/t) soUrce ValUe (€/t) significant part of their exports will be pre-packed. The growth Dominican Rep 1,685 Turkey 1,171 in Ghana’s exports and the fact that it is growing faster than Egypt 1,183 Uganda 1,767 countries such as the Dominican Republic, which has cheaper air-freight costs to Europe is particularly encouraging. Ghana Ghana 1,981 Zambia 6,554 has a great opportunity to increase its exports as Kenya’s Kenya 3,333 Zimbabwe 1,207 competitive position is being eroded by increases in air-freight Morocco 838 Others 1,767 rates; however, it is important to recognize that to compete Thailand 4,936 EU27 1,476 effectively, Ghana must offer quality of product and service Source: Accord Associates LLP based on Eurostat data comparable to Kenyan exports. 3.6 ravaya Ravaya, or small aubergine, is not a very significant item in the but Ghana has a significant air-freight cost advantage, and there- EU market, total imports are less than 2,500t (figure I.3.7), but it fore has an excellent opportunity to expand its market share. is increasing quickly and should represent an interesting oppor- The other significant supplier is the Dominican Republic, which tunity for Ghana. Kenya supplies almost half the EU’s demand; has an effective air-freight rate similar to Ghana. FigurE i.3.7: eu imports of ravaya from different sources, 2001–2007 2,500 2,000 1,500 Tonnes 1,000 500 0 2001 2002 2003 2004 2005 2006 2007 Others EST 20 25 30 35 40 45 50 Dominican Rep 87 34 96 65 99 214 698 Thailand 102 103 118 149 194 191 239 Kenya 67 155 163 542 857 1,039 1,209 Uganda 2 3 2 4 24 Gambia 1 11 53 20 19 Cameroon 3 2 9 7 17 10 27 Ghana 97 130 113 130 122 124 174 Source: Accord Associates LLP based on Eurostat data pa rt i - sc o p i n G re view 30 3 — e uropean m arket r e s ea r cH 3.7 otHer veGetaBles Within the Eurostat data, there is a category for “other veg- from Kenya’s decline. However, this has not been the case, etables� which contains Asian and other ethnic vegetables. and now the bigger UK importers are increasingly looking Ghana has traditionally been a significant supplier of Asian veg- elsewhere, for competitive pricing, volume, and performance. etables air-freighted to the EU; however exports have declined from 7 ,000 tonnes in 2003 to 2,500 tonnes in 2007 Kenya’s . There have been some minor efforts at exporting baby corn exports have also declined dramatically since 2001 (figure from Ghana (8 tonnes were exported from Ghana in 2007 I.3.8). The market perception is that the traditional supplier of compared with total EU imports of 6,500 tonnes). The yields of Asian vegetables, Kenya, is becoming less and less competi- this crop are very low and it is normally only viable if it is grown tive because of high air freight costs (in excess of $2.10/kg). As on farms with cattle which can profitably use the by-products Ghana has been reasonably active in this market for a number of the maize plants, or if the baby corn are marketed in mixed of years, some of the buyers expected that Ghana would profit packs of temperate vegetables. FigurE i.3.8: eu imports of other vegetables from different sources, 2001–2007 100,000 80,000 60,000 Tonnes 40,000 20,000 0 2001 2002 2003 2004 2005 2006 2007 Turkey 9,188 3,505 5,388 4,137 5,884 5,891 3,840 Thailand 2,204 2,395 2,400 2,851 4,920 3,456 3,562 Morocco 3,583 3,598 4,409 3,985 4,781 3,843 3,383 Israel 1,262 1,275 1,627 2,178 4,134 3,775 3,486 Dominican Rep 1,233 1,707 2,833 3,778 3,304 4,298 3,831 Bangladesh 4,668 4,089 5,136 5,075 5,211 3,825 3,898 Argentina 110 831 2,249 3,589 8,894 9,911 7,730 R South Africa 2,682 3,462 5,182 3,833 4,233 5,366 5,637 Kenya 16,789 17,655 16,953 9,804 6,328 5,249 4,674 Ghana 6,511 5,949 6,983 5,812 6,005 4,554 2,565 Others 19,118 26,106 29,297 24,479 26,613 25,659 32,328 Source: Accord Associates LLP based on Eurostat data Horticulture exports from G Hana : a strateG i c st u dy 3 . 8 r o ot a n d t uB ers 31 3.8 root and tuBers Figure I.3.9 shows the progress of yam imports to the The trade in cassava is not strictly within the fresh produce EU over the past seven years. Ghana leads the supplies category as the cassava is highly perishable and therefore to this growing market. For the most part the demand peeled, diced into large chunks and frozen to withstand the comes from ethnic West Africans living in Europe. The sea voyage. Costa Rica also supplies “fresh roots� dipped in imports either pass through the wholesale markets or are wax containing thiabendazole which increases shelf-life at am- distributed directly to retailers specializing in West African bient temperature to 6 weeks. Cassava is not valuable enough product. to cover the cost of air freight. However, despite the increase in volumes from Ghana, the EU imports of sweet potatoes have grown rapidly from value of imports from Ghana remains at about €5 million. 16,000t in 2001 to 51,000t in 2007 (figure I.3.11). The sweet potato trade has moved on from being positioned as an ethnic Imports of cassava for human consumption (as opposed to or exotic product and is now firmly in the mainstream super- the large-scale bulk imports of animal feed) have been grow- market trade. Israel and the U.S. dominate the supplies and ing (figure I.3.10). Costa Rica leads the suppliers with 80% of despite efforts to introduce new varieties to Africa, there has the market. Ghana has become the second supplier. been little progress from other suppliers. FigurE i.3.9: eu imports of yams from different sources, 2001–2007 25,000 20,000 15,000 Tonnes 10,000 5,000 0 2001 2002 2003 2004 2005 2006 2007 Others 627 3,331 850 -115 64 246 1,229 St Vincent 183.6 476.9 398 349.6 270.9 382.5 472.8 Nigeria 222.8 232.3 0.4 0 11.5 5.4 0.1 Jamaica 1216.7 468.4 1312.2 1149 1065.6 641.5 422 Costa Rica 2879.3 4080.8 2804.2 2784.5 2815.7 3068.2 4568.3 China 842.7 1440.4 1142 1205.2 1458.1 1799.4 1682.6 Brazil 2469.2 3050.2 3141.1 3325.1 2660.3 2385.5 1844.3 Ghana 7755.9 7889.8 8340 9042.5 10578.4 11569.9 11048 Source: Accord Associates LLP based on Eurostat data pa rt i - sc o p i n G re view 32 3 — e uropean m arket r e s ea r cH FigurE i.3.10: eu imports of whole cassava for Human consumption, 2001–2007 25,000 20,000 Tonnes 15,000 10,000 5,000 0 2001 2002 2003 2004 2005 2006 2007 Others 288 212 309 365 493 611 654 Ecuador 427.6 719.7 345.3 369.5 904 323.4 575 China 5.2 3 0 0 90.9 238.7 363.5 Cameroon 1.3 100.8 245 414.2 521.6 590.4 437.3 Brazil 56.4 535.2 764.5 723.2 370.8 585.7 442.3 Ghana 116.8 310 834.9 1979.1 1770.7 2864.8 2075.6 Costa Rica 7629.8 9212.8 11959.1 13281.3 12890.3 18225 18764.3 Source: Accord Associates LLP based on Eurostat data FigurE i.3.11: eu imports of sweet potatoes from different sources, 2001–2007 60,000 50,000 40,000 Tonnes 30,000 20,000 10,000 0 2001 2002 2003 2004 2005 2006 2007 Others 1,019 1,034 1,562 1,007 1,000 1,343 1,324 Ghana 51.2 353.6 359.5 86.1 359.8 121.8 26 Brazil 227.8 512.2 973.1 1057.1 1126.3 1780.8 976.7 Egypt 2978.4 2830.8 2608.6 2654.1 2650.7 2834.4 2869.8 RSA 2913.2 2996 2710.2 1744.6 1696.8 1230.9 1519.8 Honduras 0 0 40.8 360.8 771.9 2132.2 4750.1 USA 5179.6 6371.1 7285.1 9396.5 15682.9 19910 18592.1 Israel 3662.1 4905.4 6330 10718.3 14125.5 19591.9 21559.8 Source: Accord Associates LLP based on Eurostat data Horticulture exports from G Hana : a strateG i c st u dy 3 . 10 t He e u ma r k et for p roc essed frui t 33 3.9 summary of market statistics A comparison of EU imports from Ghana for 2001 and 2007 Most of Ghana’s horticultural exports have underperformed shows that the value and volume of fruit imports have increased in the period and have failed to keep pace with the increas- significantly and vegetables have not (table I.3.5). However, the ing market demand. The impressive growth in the sector increase in fruit imports is almost entirely due to the expansion total is mostly a result of a single banana investment. in banana trade. As noted above, pineapple exports declined by However, there are some positive trends: apart from the 31% between 2004 and 2007 Despite this decline, pineapples . arrival of Compagnie Fruitière and its pineapple and banana are still the major export crop in terms of value—earning more operations, HPW Ltd has made progress with pineapple revenue than the rest of the fruit together. The volume of veg- exports and the developments of mango exports have been etable exports has declined, but the total revenues are static. encouraging. In the vegetable sector, the move away from The 2,500 tonne increase in capsicum exports compensated for “other vegetables� to the higher value capsicums has also the 4,000 tonne reduction in the lower value “other vegetables� . been very encouraging. tablE i.3.5: comparison of european Horticultural imports from Ghana eU Vegetable imports from Ghana tonnes c&f ValUe € 2001 2007 2001 2007 Capsicums 418 2,947 732,980 5,835,875 Other Vegetables 6,511 2,565 9,740,472 4,140,256 Babycorn 1 8 6,955 9,283 Ravaya 97 174 119,080 357,125 Yams 7,756 11,048 5,242,715 5,372,009 Cassava 117 2,076 83,294 1,388,888 Sweet Potatoes 51 26 33,962 26,891 Sub-Total 14,951 18,844 15,959,458 17,130,327 eU fruit imports from Ghana tonnes c&f ValUe € 2001 2007 2001 2007 Bananas 3,458 33,404 2,897,132 20,304,496 Pineapples 33,209 35,463 30,651,756 37,553,172 Papaya 1,937 1,042 2,272,874 1,910,112 Mangoes, guavas and Mangosteens 62 983 107,291 2,802,090 Sub-Total 38,666 70,892 35,929,053 62,569,870 Grand Total 53,617 89,736 51,888,511 79,700,197 % increase 67% 54% % increase omitting bananas 12% 21% Source: Accord Associates LLP based on Eurostat data 3.10: tHe eu market for processed fruit Ghana has been successful in attracting investors to estab- estimated that Blue Skies exported about 5,000t of prepared lish fruit processing operations. The first significant invest- , pineapples in 2007 which is the equivalent of 15,000t of fresh ment was Blue Skies, which started producing fresh-cut pineapples. More recently there have been investments by (sometimes called prepared) pineapples and has since added Pinora and PeelCo. Pinora produces juice from oranges and fresh-cut mangoes, coconuts and fruit salad mixes. It is pineapples. pa rt i - sc o p i n G re view 34 3 — e uropean m arket r e s ea r cH The market for prepared fruit is one of the most rapidly grow- as the price of jet fuel has increased, Ghanaian processors ing sectors in the EU grocery sector. The biggest market in could face more price pressure from the supermarkets and Europe is the UK, where prepared fruit has doubled in value some of this might be passed on to the producers. since 2004. It is now estimated to be worth €155 million/ year with other countries trailing well behind (table I.3.6). Virtually all of the prepared fruit consumed in the UK is sold However, it is expected that the trend will be similar in other through supermarkets: 25.4% by Marks and Spencers, European countries to that shown by prepared vegetables.4 24.6% by Tesco, 19.2% by ASDA, and 11.1% by Sainsburys. The drivers for consumption of prepared fruit and vegetables In fact, only 3.9% of sales are through non-multiple outlets.5 in the EU are the increase of disposable income, the pro- Therefore, virtually all of the processed fruit has to be grown motion of healthy eating, enjoyment, and convenience–with by producers who have GlobalGAP accreditation. convenience and enjoyment being the most important. Set against this positive outlook is the argument that air-freight- tablE i.3.6: prepared fruit sales value and annual ing food is unduly damaging to the environment. The strength increase, 2006–2007 of this point of view has faded somewhat over the last year coUntry Market size (€M) annUal Growth as the true environmental cost of produce has become better understood. While there is no doubt that there is a significant United Kingdom 155 33.6% environmental cost in air-freighting produce that is not internal- Netherlands 16 28.5% ized in the retail price, the international transport is only one of Germany 12 39.1% many negative impacts in the chain, not least of which is the Source: Accord Associates LLP based on TNS Worldpanel data impact of the European shopper driving to the supermarket. The hypocrisy of penalizing the African entrepreneur while ig- noring the environmental footprint of the European consumer Pineapple chunks are the second most popular prepared fruit seems to have pushed the “air-miles� argument with a “fair- in the UK after the “classic fruit salad� and ahead of the “luxu- miles� case. In the case of prepared pineapple it would be ry fruit salad� Pineapple pieces and pineapple slices are ranked . interesting to know the comparative environmental impact of sixth and tenth and mango pieces are twelfth. Pineapple is sea-freighting three tonnes of fresh pineapple as opposed to also a significant ingredient in many of the luxury fruit salads. air-freighting one tonne of fresh-cut product. What is particularly encouraging for investors in Ghana is the In summary, the market for prepared fruit is growing very rate of increase in the sales of fresh-cut fruits; the increase rapidly and it is very pleasing to note that investors have in sales was about 30% per year. In the UK, the average unit established successful operations in Ghana. There are other price of prepared fruits decreased by 8.4% during the last companies that are interested in making new investments. year which meant that the actual volume of exports of pre- However, a number of other countries have also recognized pared fruit sales increased by 45.9%. The decline in average the growth in this market segment and are starting to target prices could have some significant repercussions; proces- the EU market. In particular, investments have been made in sors will be looking to trim some of their costs, including Brazil, which also grows a significant area of pineapple; this the cost of raw materials and they will also be looking to may become a significant competitor to Ghana. It is therefore include cheaper ingredients in some of the fruit salads. Given important that consideration is given to supporting this sec- the very significant air-freight costs associated with prepared tor to ensure that that the competitive position is maintained fruit in Ghana and the increases over the last 12 months and even strengthened. 4. The UK led the way in the marketing of prepared vegetables and now other European countries are starting to show good growth. However, the UK is still the biggest market for prepared veg- etables. One of the issues that has restricted the uptake of fresh 5. Data from TNS Worldpanel taken from http://www1.messe-berlin. prepared fruit is that fruit requires a different cold chain from de/vip8_1/website/MesseBerlin/htdocs/www.freshconex/de/ prepared vegetables. Event-DB/Edward_Garner_Part_2.pdf Horticulture exports from G Hana : a strateG i c st u dy 4 — F r eI g h t 35 4. Freight The major direct cost associated with horticultural exports is freight. The frequency and destination of the air flights or sea vessels also has a major impact on market access. The structure of the sea and air freight services throughout the world have changed over the last few years and these might impact on Ghanaian horticultural exports. 4.1 aIr FreIght The basis of Ghana’s horticultural exports to Europe was More recently, the substantial increases in the price of oil the air freighting of first pineapples and then Asian veg- have led to significant fuel surcharges on freight. However, etables. Ghanaian exporters were able to compete effec- the importers interviewed did not have a problem with either tively from the early 1990s because of the cheap freight the price or quality of the air freight service out of Ghana. It is that they negotiated. Cargo aircraft that delivered goods reported that the effective freight rates, i.e. including fuel and from Europe into Nigeria started calling at Accra to col- insurance surcharges, are about $1.20 to $1.40/kg. This is sig- lect northbound freight. The space available increased as nificantly cheaper than charges out of East Africa ($2.20/kg) northbound freighters from South America began to call at but slightly more expensive than the Caribbean (Dominican Accra too and competitive rates, in the region of $0.70/kg, Republic was often quoted at between $0.90 and $1.10/kg). were available. The future development of the worldwide air freighted pro- Since the mid-1990s, cargo aircraft have become much duce business faces two threats: fuel prices and environ- larger,1 and countries with smaller volumes of perishable mental concerns. While Ghana has relatively low air-freight goods have found it difficult to maintain good freight connec- costs compared to some competitors, the unit value of the tions. The volume of exports that Ghana built up in the 1990s exports is generally quite low and transport costs make up ensured that it was still a good destination for northbound a greater proportion of the landed value. Figure I.4.1 shows, freight. for example, the unit value of chillies exported from sev- eral origins. Fluctuations in transport prices will have less impact on the pre-packed Kenyan product destined for the 1. In the early to mid-1990s, most of the cargo freight planes used supermarket. to move perishable cargo out of Africa were either Boeing 707s or DC8s; these have now been replaced by much more fuel- Air freight space from Accra to Europe has recently expanded efficient and quieter Boeing 747 freight aircraft. The Boeing 747 fleet are able to carry cargo much more cheaply than the older further with the start of a KLM/Air France service providing smaller aircraft. up to 40 tonnes capacity per week to Paris. Pa rt I - S c o P In g rev Iew 36 4 — F r eIg h t Figure i.4.1: unit value of air-freighted capsicums Imported to eu 3.25 Israel 2.50 Ghana Jordan Tonnes Uganda 1.75 Kenya 1.00 2000 2001 2002 2003 2004 2005 2006 2007 4.2 Sea FreIght Ten years ago the best option for Ghanaian fruit exporters was $55804 from Tema to Northern Europe, equating to a cost to develop sufficient volume of exports to attract refrigerated of around $279/pallet. This is comparable to the rate on the vessels to call at Tema, rather than depending on the more AEL refrigerated boat to Southern Europe of about $220/ expensive reefer containers. Calculations in 1998 projected pallet. a 25% saving using reefer ships as opposed to containers.2 Apart from cost, the container services from Tema are disad- However, the structure of the sea freight industry has vantageous because of the use of hubs in Europe. Maersk, changed in recent years with considerable investment in con- for example, offload all containers at Algeciras in Spain for tainer ships but not reefers.3 This has led to an over-capacity trans-shipment onto feeder vessels. If the schedule of the in containerized transport which has resulted in a reduction in incoming vessel from Africa and the outgoing feeder ves- rates not seen in reefer vessels. While this may give export- sel to other European ports do not coincide, the container ers more flexibility, it is still important to build up the volume remains at Algeciras until the next available sailing. This can of horticultural exports to create competition in the shipping add significantly to the journey time. On the other hand, AEL modes and to develop the selection of destinations. The have dropped their reefer vessel sailings to Northern Europe volume of banana exports from Ghana’s Central and South from Tema and produce shipments must travel by road from American competitors has led to the development of ser- Port Vendres in Southern France. vices to a wide range of European ports. An increase in outgoing volumes of fresh produce would Sea freight rates for refrigerated cargo from Ghana are have a significant impact on the price, availability, and choice comparatively high. A 40-foot reefer container is quoted at of destinations. 2. Accord Associates. 1998. “The Future for the Ghanaian Horticul- . tural Export Industry� MoFA/ World Bank, Agricultural Diversifi- cation Project. 3. The average lifespan of a reefer vessel is generally regarded to be between 26 to 28 years and the average age of the fleet is 4. This is a ballpark figure and would be subject to negotiation on currently 21 years. volume, etc. hort Iculture ex P ortS From ghan a: a StrategI c St u dy 5 — S u m m a ry o f ghan a’ S Pote ntI al for hort Icultural ex PortS to the eu 37 5. S ummary of Ghana’S potential for horticultural exportS to the eu Ghana has underachieved in supplying the EU market. It has In order to spread their risk, buyers would like the alterna- comparative advantages, for example, good climate, reason- tive supply to be on another continent, which means able soils, proximity to the EU market, cheap air freight costs, that their preferred second buyer could be either in West adequate infrastructure and good incentives provided by Africa–Ghana or Côte d’Ivoire–or possibly South America– Government. However, it has lost market share in the pine- Brazil or Ecuador. Brazil and Ecuador have an advantage apple, papaya and other vegetable markets. In contrast, it is because of their more frequent and varied shipping making good progress with yams, bananas, mangoes and destinations. There is considerable goodwill among buy- capsicum (table I.3.5). This section discusses what should ers for trading with Ghana, but there are concerns about be realistic targets for the medium to longer term value and quality, reliability, and frequency of delivery. Therefore, volume of horticultural exports. It is assumed that there will if Ghana is to reverse its decline in pineapple exports, it be significant interventions to help the industry reach its must encourage larger and more technically-competent potential; it is also assumed that these interventions will be businesses to invest in pineapple production. If support focussed on creating the biggest impact within the industry is focused only on small farmers to export fair trade and instead of just helping smaller producers. organic produce, Ghana will remain a secondary supplier to a niche market.1 ƒ Pineapples:The biggest disappointment over the last five years has been the decline in the pineapple ex- Given that the opportunity for non-Costa Rican suppliers ports. While it is accepted that part of this was due to will be more than 300,000 tonnes/year in the medium the rapid change in the market’s preference for super- term, Ghana should be targeting at least a third of this, sweet varieties over the smooth cayenne, Ghana i.e. over 100,000 tonnes/year. This could be done by was possibly slow to react to this change. It was also attracting three of four more large investors to stimulate disappointing to note that Ghana had fallen from being large scale production. With this volume of exports, sea the third biggest supplier to fifth place. However, Côte freight would be more frequent and, it is hoped, there d’Ivoire, as the second place supplier, has lost market would be more varied destinations which would improve share even more rapidly than Ghana and is now a marketing. When the industry has reached this level similar sized supplier as Ghana. and has a small number of major exporters, they could then purchase produce from smaller-scale farmers who In fact there is no obvious main alternative to Costa would be contracted suppliers.2 Rica, a fact that worries importers because Ecuador, Honduras, Panama, and Brazil are all similar sized sup- ƒ Bananas: There is an even greater potential for Ghana pliers as Ghana and Côte d’Ivoire. No buyer likes to to supply bananas to Europe than pineapples. The total be over dependant on one source, not only because market is much larger, Ghana has a duty advantage of the supply risks but also because the negotiating compared to Central and South America, and in the position is weak. Vigorous alternatives are needed. last five years, Golden Exotics has made considerable Markets get nervous when more than two-thirds of 1. One importer noted that their preferred fair trade and organic supply are sourced from one country—which given supplier was Costa Rica. This is not surprising because the com- that total EU imports could soon be 1 million tonnes/ petitive advantage for fair trade and organic production is nor- year, buyers will be looking to source over 300,000 mally in the same countries as for conventional production. 2. It is important that small-farmers are committed to supply one tonnes/year from countries other than Costa Rica, and particular exporter to ensure that the GlobalGAP certification can ideally most of it should come from one other country. be achieved. Pa rt I - S c o P In g rev Iew 38 5 — Summary of ghan a’S P ote ntIal for hort Icultural ex P ortS to t h e e u progress in developing exports to the EU. One of and exporters to exploit. Therefore, it is estimated the world’s major banana companies, Chiquita, has that Ghana has the potential to increase its exports to recently tried to invest in Ghana, but failed because about 8,000 tonnes/year. it was unable to identify an appropriate local part- If Ghana reaches its medium term potential for horticultural ner. However, if Chiquita or another major banana exports to the EU, then it will market over 325,000 tonnes/ company could be persuaded to invest, it should be year of fruit and almost 15,000 tonnes/year of air-freighted possible to develop an industry exporting more than vegetables by 2015 (table I.5.1). In total, this will generate 200,000 tonnes/year in the medium term. To put this over $250 million/year. Almost half the revenue is gener- into perspective, that would still be slightly less than ated by the banana industry and when the pineapples are Cameroon is currently exporting. In addition to the included, the two crops contribute almost 75% of the in- very significant revenues and employment opportuni- come. This highlights the importance of these two products. ties this would generate, it would also vastly improve These two crops are not only important in terms of revenue, the logistics for marketing other tropical fruit. but they will help create the logistical infrastructure required ƒ Mangoes: Ghana has made good progress in developing to transport other higher value fruits such as mangoes and mango exports to the EU since the focus for production papaya. The potential earnings from the vegetables are much was moved away from the coastal plains to drier areas less—possibly about 10% of the fruit exports. in the north of the country. Already exports have almost reached 1,000 tonnes/year and, given that consump- In addition to contributing significantly to Ghana’s trade, horti- tion is increasing rapidly in the EU, it is hoped Ghana’s cultural exports can create a very significant number of good exports will reach 10,000 tonnes in the medium term. To quality jobs. It is estimated that if it reaches its medium term put this target into perspective, that would still be less potential, this could be as many as 20,000 jobs.3 Most of the than Côte d’Ivoire is currently exporting. ƒ Papaya: Ghana’s papaya exports have been disap- table i.5.1: ghana’s Potential tonnage, value, and pointing, but there is an indication that importers employment opportunities from export in the EU are interested in developing professional horticulture – 2015 growers in West Africa because of the inherently good Price ToTal quality. If new investors can be attracted to invest in Tonnage €/t value € emPloymenT this crop, then Ghana could be the country to take Pineapples - sea 100,000 650 65,000,000 5,556 advantage of an expected upturn in consumption of Pineapples- air 6,000 2,000 12,000,000 333 papaya. It is expected that Ghana has the potential to Bananas 200,000 600 120,000,000 8,000 achieve exports of 5,000 tonnes/year. Mango 10,000 1,200 12,000,000 833 ƒ Capsicum: Capsicum exports have shown good Papaya 5,000 1,300 6,500,000 278 growth from Ghana and the EU market is expanding Others 5,000 1,500 7,500,000 278 quickly. This creates a good opportunity for Ghanaian Total fruit 326,000 223,000,000 15,278 exports. It is anticipated that Ghana has the potential Capsicum 5,000 2,000 10,000,000 2,500 to export 5,000 tonnes/year in the medium term. Ravaya 500 2,000 1,000,000 250 ƒ Ravaya: As with capsicums, the EU market is expand- Babycorn 250 3,500 875,000 125 ing rapidly and Ghana should be able to take advan- Other veg 8,000 1,800 14,400,000 4,000 tage of this growth. Therefore, it is expected that the potential is for exports to reach 500 tonnes/year in the Others 1,000 2,500 2,500,000 500 medium term. Total vegetables 14,750 11,800 28,775,000 7,375 ƒ Other vegetables: The EU market for “other vegeta- TOTAL 340,750 251,775,000 22,653 Source: Consultant’s estimates bles� is reasonably constant, but the traditional main supplier, Kenya, is declining because of the high cost 3. In calculating employment creation, some employment assump- of air freight which creates an interesting opportunity tions were made, namely that professionally managed banana for Ghana to exploit. Air-freight rates out of Ghana estates create one job per 25 tonnes of fruit exported, pineap- to Europe are significantly below those from Kenya ples exports create one job per 18 tonnes, and mangoes and other fruit create one job per 12 tonnes. Vegetables create more ($1.20/kg compared with $2.20/kg), so this repre- jobs per tonne exported – in the case of Ghana it was assumed sents a good opportunity for professional growers that one job was created per 2 tonnes exported. h ort Iculture ex PortS fr om ghan a: a StrategI c St u dy 5 — S u m m a ry o f ghan a’ S Pote ntI al for hort Icultural ex PortS to the eu 39 jobs will be in the banana and pineapple industries. The as- also include access to medical services and education, i.e. sumptions for reaching the potential for these crops include they will be good jobs. In addition to the direct employment that they are orchestrated by large professional companies opportunities, there will be many indirect jobs created servic- who are targeting the multiple retail outlets who will demand ing the export industry. Table I.5.2 summarises the market GlobalGAP This will ensure that the employment created will . potential. table i.5.2: Summary of the market Potential for ghanaian export horticulture ProducT TransPorT markeT markeT currenT PoTenTial commenTs main markeT sTaTisTics - 2001 sTaTisTics - 2007 Trend 2015¹ counTry segmenT size (t) share (%) size (t) share (%) Pineapple Air Switzerland/ Wholesale 6,000t* 65%* 6,000t* 65%* ↔/↓ 6,000t Traditional Italy Ghanaian export Pineapple Sea Mainland EU Supermarket 27,000t 8.9%* 29,000t 4.3%* ↓↓↓ 100,000t Potential will only Fair Trade be achieved if sup- ply chain becomes more commercial and fruit quality improved Bananas Sea South EU Supermarket 3,500t 0.1% 33,000t 1.2% ↑↑ 200,000t One company dominating exports, a vital crop to improving logistics Mangoes Air South EU Wholesale 62t 983t 0.5% ↑↑↑ 10,000t Need to enhance export by sea Papaya Air South EU Wholesale 1,937t 10% 1,042t 3.0% ↓↓ 5,000t Needs at least one more serious and professional investor Chillies Air UK Wholesale 418t 1.6% 2,947t 8% ↑↑ 5,000t Need to become more professional Ravaya Air UK Wholesale 97t 25% 174t 7% ↓↓ 500t Need to become more professional and out-compete Kenya Asian veg Air UK Wholesale 6,511t 2,565t ↓↓↓ 8,000t Need to attract serious investors and competent management Yams Sea UK Wholesale 7,750 48% 11,048 52% ↑↑ 15,000t An informal trade, not influenced by certification. Cassava Sea Netherlands Wholesale 117 1.5% 2,076 9% ↑↑ 5,000t Surprising growth Source: Accord Associates LLP based on Eurostat data and trade interviews Key: * Estimate ¹ Assumes that there are positive interventions Part I - S c oP I n g rev Iew 40 6 — ConC l u si o n s 6. C onClusions ƒƒ Theƒpresentƒstudyƒisƒaƒscopingƒexerciseƒtoƒreviewƒtheƒoptionsƒforƒaƒhorticulturalƒexportƒstrategy.ƒItƒaimsƒtoƒidentifyƒtheƒissuesƒ andƒproblemsƒthatƒneedƒtoƒbeƒaddressed. ƒƒ ByƒexportƒhorticultureƒweƒareƒreferringƒinƒthisƒphaseƒtoƒhorticultureƒdirectedƒatƒprofitingƒfromƒtheƒEuropeanƒmarket.ƒThisƒ definitionƒisƒimportantƒbecauseƒtheƒEuropeanƒmarketƒhasƒquiteƒdifferentƒrequirementsƒfromƒlocalƒorƒregionalƒmarkets.ƒ ƒƒ WeƒcouldƒalsoƒincludeƒNorthƒAmericaƒandƒtheƒMiddleƒEastƒhere.ƒNorthƒAmericaƒisƒomittedƒfromƒtheƒreasoningƒbecauseƒ theƒcomparativeƒadvantagesƒofƒGhanaianƒsupplyƒareƒinsufficient,ƒexceptƒperhapsƒinƒyams.ƒTheƒMiddleƒEastƒisƒprovidingƒ someƒdemandƒcurrently,ƒforƒexampleƒinƒfreshƒpineapplesƒandƒmangoes,ƒandƒGhana’sƒpositionƒhereƒcouldƒbeƒexploredƒinƒ moreƒdetailƒasƒanƒadjunctƒtoƒtheƒEuropeanƒmarket.ƒ 6.1 reCent performanCe of GHanaian HortiCultural produCts in europe ƒƒ Ghanaianƒhorticulturalƒproductsƒareƒpresentƒinƒaƒnum- produceƒintoƒEurope,ƒGhanaianƒexportersƒhaveƒlostƒ berƒofƒEuropeanƒcountriesƒandƒareƒmarketedƒthroughƒ marketƒshareƒinƒtheƒperiodƒ2003ƒtoƒ2007.ƒTheƒEuropeanƒ theƒmultipleƒretailersƒandƒwholesalers. marketƒforƒpineapplesƒhasƒalmostƒdoubledƒinƒsize,ƒbutƒ ƒƒ TheƒmajorƒGhanaianƒproductsƒsoldƒinƒEuropeƒareƒ Ghanaianƒindustryƒhasƒbeenƒunableƒtoƒcapitalizeƒonƒ bananas,ƒpineapples,ƒmangoes,ƒpapayas,ƒyams,ƒ ƒ thisƒexpansion. c ƒ hillies,ƒandƒvariousƒAsianƒvegetables. ƒƒ Currentƒexportsƒofƒwholeƒpineappleƒfruitƒareƒ40%ƒ ƒƒ Thereƒareƒsomeƒnotableƒinvestmentƒsuccessƒstoriesƒ focussedƒinƒtheƒFairƒTradeƒniche.ƒThisƒdoesƒnotƒleaveƒ in,ƒforƒexample,ƒfresh-cutƒpineapple,ƒorangeƒjuice,ƒandƒ roomƒforƒrapidƒgrowthƒandƒisƒvulnerableƒtoƒattackƒfromƒ bananas.ƒMangoesƒmayƒbeƒemergingƒnowƒtoo.ƒ CostaƒRicanƒcompetitors.ƒAnotherƒ40%ƒisƒsuccessfullyƒ ƒƒ Yamƒandƒchilliƒexportsƒhaveƒgrownƒwithoutƒsignificantƒ marketedƒthroughƒseveralƒchannelsƒinƒEuropeƒbyƒtheƒ investment,ƒorƒindeedƒsupport,ƒasƒtheseƒareƒaimedƒatƒethnicƒ investor,ƒCompagnieƒFruitière. marketsƒwhereƒGhanaƒhasƒsomeƒadvantagesƒeitherƒinƒair- ƒƒ WeƒconcludeƒthatƒGhanaianƒhorticulturalƒproductsƒ freightƒcostƒ(chillies)ƒorƒinƒtradingƒconnectionsƒ(yams). areƒnotƒachievingƒtheirƒfullƒpotentialƒinƒtheƒEuropeanƒ ƒƒ Inƒtheƒkeyƒproductƒofƒpineapples,ƒwhichƒcurrentlyƒ market.ƒCanƒweƒlearnƒfromƒtheƒachievementsƒofƒtheƒ accountƒforƒ42%ƒofƒtheƒvalueƒofƒGhanaianƒwholeƒ variousƒdonorƒprograms? 6.2 WHy are GHanaian produCts not aCHievinG tHeir potential? ƒƒ WeƒknowƒthatƒGhanaianƒpineappleƒproducersƒhaveƒ largestƒtoƒfifthƒplaceƒinƒtheƒsupplierƒrankingsƒandƒmar- beenƒhardƒhitƒbyƒtheƒswitchƒtoƒMD2.ƒHowever,ƒatƒthisƒ ketƒshareƒhasƒdroppedƒfromƒ10.5%ƒtoƒ4%ƒbetweenƒ traumaticƒtimeƒGhanaƒhasƒdroppedƒdownƒfromƒthirdƒ 2003ƒandƒ2007 . HortiC ulture exports from G Hana : a strateG i C stu dy 6 . 3 s o W H e r e d o smal l sCale p roduCers f it? 41 ƒƒ Otherƒproductsƒhaveƒalsoƒunder-performedƒ(mangoesƒ enterpriseƒisƒtoƒcompeteƒinƒEurope.ƒThisƒisƒevenƒtruerƒ andƒpapaya,ƒvegetables)ƒandƒitƒisƒprovingƒincreasinglyƒ whereƒthereƒareƒfewƒcomparativeƒadvantages. difficultƒtoƒcompeteƒinƒtheƒEuropeanƒarena.ƒ ƒƒ Weƒcanƒthereforeƒsayƒthatƒaƒbusiness-likeƒandƒ ƒƒ Ghanaianƒenterprisesƒhaveƒbeenƒunableƒtoƒconvertƒtheƒ ƒ echnologically-innovativeƒapproachƒisƒneeded,ƒap- t comparativeƒadvantagesƒinƒanyƒofƒtheseƒproductsƒintoƒ propriatelyƒfinancedƒandƒwellƒmanagedƒwithƒtechnicalƒ realƒcompetitiveƒadvantage.ƒTheƒexistingƒcompara- expertise. tiveƒadvantagesƒ(e.g.ƒlocation,ƒfreight,ƒclimate,ƒlabor)ƒ ƒƒ Ghanaƒneedsƒinvestorsƒandƒtechnicalƒmanagementƒtoƒ areƒinsufficientƒtoƒcontinueƒtoƒprofitƒeasilyƒfromƒtheƒ driveƒexportsƒforwardƒandƒtoƒspearheadƒanƒopeningƒforƒ Europeanƒmarket.ƒMeanwhile,ƒtheƒmajorƒcompetitorsƒ theƒGhanaianƒsmallerƒscaleƒproducersƒtoƒutilize.ƒThereforeƒ inƒCentralƒandƒSouthƒAmericaƒareƒexportingƒfromƒlargeƒ weƒneedƒtoƒunderstandƒhowƒtoƒsupportƒcurrentƒinvest- scale,ƒefficientlyƒmanagedƒfarmsƒthatƒareƒcommittedƒ mentsƒandƒhowƒtoƒattractƒfurtherƒinvestment. toƒservicingƒtheƒmarketƒwithƒplannedƒprogramsƒofƒ ƒƒ FailureƒtoƒmoveƒinƒthisƒdirectionƒwillƒresultƒinƒGhanaianƒ supply. outputƒconfinedƒtoƒtheƒdiminishingƒlowƒpriceƒmarketƒ ƒƒ Maintainingƒlowƒcosts,ƒwhileƒachievingƒtheƒEuropeanƒ inƒEuropeƒandƒminorƒniches.ƒLargerƒscaleƒexportsƒwillƒ marketƒstandardsƒofƒqualityƒandƒperformance,ƒrequiresƒ impactƒonƒtheƒsea-freightingƒcapability,ƒwithƒmoreƒ skillsƒandƒcapital.ƒModernƒequipment,ƒefficientƒlogis- frequentƒsailings,ƒmoreƒvariedƒdestinations,ƒandƒop- tics,ƒandƒstrongƒmanagementƒareƒnowƒessentialƒifƒanƒ portunitiesƒtoƒlowerƒcosts. 6.3 so WHere do small sCale produCers fit? ƒƒ Currently,ƒtheƒGhanaianƒsmallƒscaleƒproducerƒisƒ ƒƒ Thisƒdemandƒrequiresƒaƒgreaterƒproductionƒthanƒ strugglingƒtoƒcompeteƒinƒtheƒmainstreamƒEuropeanƒ wasƒachievedƒbyƒsmallƒscaleƒfarmersƒatƒtheƒpeakƒofƒ marketƒwithƒfreshƒproduceƒpassingƒalongƒaƒrouteƒofƒanƒ Ghana’sƒexportƒhistory.ƒHowever,ƒweƒneedƒtoƒunder- aggregatorƒconsolidatingƒproductƒforƒexport.ƒThisƒmayƒ standƒtheƒneedsƒofƒtheƒprocessorƒ(BlueƒSkiesƒrequiresƒ onceƒhaveƒbeenƒpossible,ƒandƒitƒstillƒisƒwhereƒethnicƒ bothƒSmoothƒCayenneƒandƒSugarƒLoaf)ƒandƒreturnsƒtoƒ demandƒisƒconcerned,ƒbutƒforƒtheƒsupermarketƒaƒnewƒ theƒfarmerƒfromƒsalesƒtoƒprocessors.ƒ orderƒofƒsupplyƒisƒneeded.ƒTheƒsupermarketsƒhaveƒ ƒƒ Ghanaƒcannotƒbaseƒanƒindustryƒonƒaƒmarketƒwhereƒ performanceƒrequirementsƒthatƒstretchƒtheƒcapabilitiesƒ theƒdemandƒisƒfocussedƒthroughƒtwoƒcompanies.ƒWeƒ ofƒtheƒbestƒofƒtheirƒsuppliers,ƒwhileƒtheƒcompetitionƒ mustƒbroadenƒtheƒprocessingƒbase.ƒ betweenƒsuppliersƒisƒacute.ƒ ƒƒ Thisƒrequiresƒinvestmentƒinƒprocessingƒplantsƒandƒtheƒ ƒƒ Thereƒisƒaƒsignificantƒcontrastƒbetweenƒtheƒsuccessƒ developmentƒofƒanƒoutgrowerƒbase.ƒThen,ƒsmallƒscaleƒ inƒyams,ƒexportedƒtoƒtheƒEuropeanƒethnicƒmarketsƒ farmersƒwillƒhaveƒanƒimportantƒroleƒtoƒplayƒinƒsupplyingƒ andƒtheƒfailureƒinƒsweetƒpotatoes,ƒsoldƒthroughƒtheƒ processors.ƒSalesƒtoƒlocalƒprocessorsƒareƒmoreƒattrac- supermarkets. tiveƒthanƒexportingƒinƒtermsƒofƒlinkage,ƒcontractingƒandƒ ƒƒ Smallƒscaleƒproducersƒtendƒtoƒsupplyƒtheƒlocalƒandƒ payment. regionalƒmarkets.ƒTheseƒcanƒbeƒveryƒsubstantialƒandƒ ƒƒ Similarly,ƒoutgrowersƒhaveƒaƒroleƒtoƒplayƒinƒsupplyingƒ haveƒaƒnumberƒofƒsignificantƒadvantagesƒoverƒtheƒ nucleusƒfarmsƒandƒsupplementingƒgrower/exporters.ƒ moreƒremoteƒopportunities.ƒ Indeed,ƒsomeƒUKƒsupermarkets,ƒkeenƒtoƒsupportƒtheƒ ƒƒ Withinƒtheƒlocalƒmarket,ƒthereƒareƒopportunitiesƒtoƒ smallƒscaleƒfarmers,ƒareƒpromotingƒthisƒroute.ƒTheƒ supplyƒtoƒprocessorsƒandƒthatƒwayƒtheƒsmallƒscaleƒ modelƒhereƒcanƒtakeƒvariousƒformsƒbutƒmostƒlikelyƒ producersƒcanƒaccessƒtheƒEurope-directedƒsupplyƒ willƒbeƒbasedƒaroundƒaƒnucleusƒofƒproductionƒandƒwillƒ chain.ƒTheƒopportunityƒforƒSmoothƒCayenneƒpine- certainlyƒrequireƒsignificantƒinvestment.ƒ applesƒdoesƒnotƒappearƒtoƒhaveƒbeenƒrealized.ƒThereƒ ƒƒ OnƒtheƒSmoothƒCayenneƒproduction,ƒweƒshouldƒ wouldƒseemƒtoƒbeƒaƒpotentialƒdemandƒforƒ45,000ƒ noteƒthatƒthereƒremainsƒaƒdemandƒforƒ5,000ƒtonnesƒ tonnesƒbasedƒonƒtheƒcurrentƒneedsƒofƒBlueƒSkiesƒ ofƒhigh-endƒpremiumƒair-freightedƒproduct.ƒPerhapsƒ (15,000ƒtonnes),ƒandƒtheƒreportedƒcapacityƒatƒPinoraƒ thisƒcanƒbeƒexpandedƒwithƒanƒappropriateƒmarketingƒ (30,000ƒtonnes). initiative. pa rt i - s Co p i nG re vie W 42 6 — Con C l u si o n s 6.4 WHat are tHe impliCations for a national strateGy? ƒƒ Thisƒstudyƒisƒdirectedƒatƒpreparingƒaƒstrategyƒforƒbuild- clearlyƒonƒsupportƒtoƒtheƒsmallerƒscaleƒproducers,ƒ ingƒexportsƒtoƒEurope.ƒWeƒbelieveƒthatƒitƒisƒimportantƒtoƒ andƒtheƒvalueƒchainƒapproachƒtakenƒbyƒFASDEPƒIIƒisƒ recognizeƒtheƒseparationƒofƒtheƒlocalƒandƒregionalƒsupplyƒ importantƒhere.ƒTheƒworkƒdevelopingƒtheƒsmallƒscaleƒ chainƒfromƒtheƒexportƒorientedƒchain,ƒandƒthenƒaddressƒ farmerƒsectorƒwillƒbeƒcriticalƒtoƒtheƒhealthƒofƒtheƒ theƒneedƒtoƒattractƒinvestmentƒintoƒexportƒhorticulture.ƒ overallƒindustry,ƒsupportingƒtheƒprocessorsƒandƒtheƒ ƒƒ Weƒneedƒtoƒlookƒatƒtheƒopportunitiesƒforƒinvestment;ƒ diversityƒofƒproducersƒwillƒbringƒsturdinessƒtoƒtheƒ whatƒinducesƒinvestment;ƒwhyƒdoƒotherƒcountriesƒ sector. attractƒmoreƒinvestment;ƒwhatƒareƒtheƒexperiencesƒ ƒƒ Europe-directedƒhorticultureƒwillƒimpactƒonƒtheƒruralƒ ofƒcurrentƒinvestorsƒinƒGhana;ƒandƒwhereƒcanƒweƒ economyƒwithƒemploymentƒandƒopportunitiesƒforƒ findƒinvestors?ƒWeƒneedƒrecommendationsƒbasedƒonƒ outgrowersƒonceƒtheƒinvestmentƒinƒaƒcompetitive,ƒ evidence.ƒWeƒneedƒtoƒassessƒtheƒcapacityƒandƒwilling- managedƒindustryƒisƒinƒplace. nessƒforƒinvestmentƒfromƒwithinƒGhanaƒasƒwellƒasƒ ƒƒ Theƒactivitiesƒofƒtheƒministriesƒneedƒcoordination,ƒand,ƒ fromƒforeignƒsources. forƒthis,ƒtheƒNationalƒHorticulturalƒTaskƒForceƒmayƒbeƒ ƒƒ Withƒanƒinvestmentƒorientedƒapproach,ƒtheƒdevelop- theƒappropriateƒvehicle.ƒInƒeffect,ƒitƒcouldƒbecomeƒaƒ mentƒofƒEurope-directedƒhorticulturalƒexportsƒwillƒcutƒ horticulturalƒexportƒdevelopmentƒcouncilƒmergingƒtheƒ acrossƒseveralƒministerialƒresponsibilities.ƒWeƒnote,ƒforƒ currentƒrolesƒofƒtheƒtradeƒassociations. example,ƒthatƒpreliminaryƒdiscussionsƒwithƒexistingƒ ƒƒ Thereƒisƒaƒriskƒinƒtheƒcurrentƒdonorƒenvironmentƒ investorsƒsuggestƒthatƒtheƒmajorƒissuesƒareƒnotƒagro- thatƒmomentumƒandƒknowledgeƒwillƒbeƒlostƒasƒtheƒ nomicƒbutƒconcernƒtransport,ƒcurrency,ƒmanagementƒ currentƒprojectsƒcomeƒtoƒtheƒendƒofƒtheirƒterms.ƒAnƒ skillsƒandƒVATƒonƒimports.ƒTheƒinitiativeƒwillƒrequireƒ arrangementƒneedsƒtoƒbeƒfound,ƒandƒperhapsƒitƒisƒ activeƒco-ordinationƒandƒpromotion.ƒ theƒNHTF,ƒwherebyƒtheƒlessonsƒlearnedƒfromƒtheƒ ƒƒ Asƒregardsƒhorticulturalƒproduction,ƒtheƒmedium- project-basedƒapproachƒcanƒbeƒappliedƒtoƒaƒmoreƒ termƒfocusƒofƒtheƒMinistryƒofƒAgricultureƒshouldƒbeƒ generalƒstrategy. HortiC ulture exports from G Hana : a strateG i C stu dy 7 — n e x t St e P S 43 7. N ext StepS The next stage is to develop a strategy to assist Ghana in maximizing its potential in the European market for produce, both fresh and processed. 7.1 valIdatIon Before we embark in this direction we need to validate our This is a different approach from the current development approach with the sector leaders in Ghana. There needs to orientation that views the smallholder as a competitor in be agreement that although there have been developments the European market. First, a stronger foundation of agri- and achievements in the market, Ghana is not maximizing its businesses is needed. Through these Ghana can gain the potential and positioning itself competitively. macroeconomic benefits of employment, fiscal revenue and foreign exchange that export horticulture offers. Second, the A shift in emphasis is needed to take export horticulture small scale independent producer can be encouraged to join upwards: export-oriented horticulture needs a solid busi- the export supply chain through this structure of processors ness core because it can no longer be expected to grow or estates supplemented by outgrowers. simply out of aggregations of small scale operations. To progress in the European market and achieve the potential The strategy for export horticulture, therefore, focuses on benefits, Ghana must have a foundation of lead firms ca- the agri-businesses or lead firms. Encouraging investment, pable of exploiting the European demand for tropical fruit developing technical expertise, supporting good manage- and vegetables. ment, and upgrading the infrastructure and improving the operating environment will secure the foundation. Without developing a strong business culture, the Ghanaian exports of fresh produce will be confined to low value mar- Support to the small scale farmers growing export crops kets (for example, yams and ethnic market chillies) with would then be directed at their position as suppliers to this limited growth potential, or to niches in the higher value value chain. So, the support must be planned in partnership offerings (such as Fair Trade pineapples) resulting in slow with the businesses with the aim of an increasing return to growth and vulnerable to the aspirations of the South all in the chain from expanding export sales. American competition. If Ghana is to achieve a realistic target of sales to Europe in excess of 300,000 tonnes per Export horticulture is, by definition, a part of the wider Ghanaian year by 2015, then the building blocks of larger investments, horticultural picture but it forms a distinct subset where the is- well-equipped, with efficient logistics, and above all soundly sues are firmly commercial and not problems of food security, managed, will be needed. Pioneers such as Blue Skies, nutritional status, or indeed subsistence. Failing to separate HPW, ITFC, Compagnie Fruitière and Pinora are showing them does not best serve the diversity of producers. Assistance the way forward. and support must be allocated appropriately. Pa rt I - S c o P In g rev Iew 44 7 — ne x t St eP S What capabilities are required to successfully supply the What can we learn from the widespread failures among European/British supermarket trade? SPEG members and in particular from the demise of The performance requirements in terms of programs, vol- Farmapine? ume, promotion, and customer service need to be fully ap- A more detailed analysis of the collapse of some of the com- preciated. Selling into this sector is not only a question of panies and the survival strategies of the remaining ones may conforming to the regulations of the GLOBALGAP but also , provide useful pointers for the industry as a whole. Who has of matching the customer service levels of competing sup- succeeded in the MD2 supply chain and what can we learn pliers. An example mentioned earlier in this report noted the from them? difficulty of competing in the sweet potato market, where significant sales pass through the supermarkets, as com- What can be done to develop capabilities of pared to the yam market, where most sales are outside of management and innovation? the supermarket sector. MiDA has allocated $66 million to training of Farmer Based Organisations and yet there seems to be a shortage of man- Are there other markets and products that might be of agement capability available in agribusiness. We need an interest? appraisal of the currently available training in agribusiness Are there opportunities for small scale producers in other management. Then, a component to augment the present products or other arenas, such as the niche markets of or- capability can be incorporated, if needed, into the strategy ganic, fair-trade, or other geographic destinations? for export horticulture. Who are the lead firms and what are their needs? It is critical that the industry has the capacity to introduce and The industry leaders should be identified and their needs ap- adopt innovation in order to remain competitive. The position of praised. Key improvements include: export horticulture in relation to the other national agricultural products will determine to some extent the resources that can ƒ Infrastructure–roads, airport facilities, be allocated. The requirements for support should be developed power–development; together with the potential customers so that a mechanism, ƒ Transportation access and cost reduction; perhaps involving matching grants, can be developed. ƒ Shed 9 utilization; and ƒ Middle management training and capacity What are the current policy attractants for investment? development. How can they be best adapted for export horticulture? We believe that Ghana has the potential to supply in What are the current requirements for outgrowers? How excess of 300,000 tonnes of fresh produce annually to can we stimulate growth? Europe within the next eight years. This would create over Pinora, for example, is under-supplied with pineapples. 20,000 direct jobs, a far greater number of indirect jobs, How do we expand the opportunities and develop the sup- and have a knock-on effect in terms of developing the in- ply? There is a great base of small scale production in the frastructure and logistical capabilities for produce exports. Ghanaian horticulture sector. With the appropriate linkages The potential rewards justify an assertive policy to encour- these producers can supply the European market, through age investment. the processors and the larger grower/exporters. The diversity of producers provides a broader foundation on which to base How is the export horticulture sector best directed? the industry. What might a development council look like? What would be the Terms of Reference? Might it be responsible for driving Are there potential partners in Ghana? through the opening and management of Shed 9? Would the Having failed to find a partner, Chiquita was unable to proceed National Horticultural Task Force be the appropriate founda- with its plans to establish production in Ghana. However, the tion for this role? How can it be made accountable? door is not closed and they may yet be interested. The possibil- ity of other potential partners should be investigated urgently. The appropriate balance of direction from the various min- istries and boards need to be appraised. There are issues Different investors will use different models but most will beyond agriculture here that concern investment, export, require some kind of partnering in order to establish facilities and treasury. The appropriate institutional support needs to in Ghana. Identify and interview potential players. be defined. Hort Iculture ex P ort S fr om gH ana : a StrategI c St u dy 7. 1 va lI dat Io n 45 Overview of the Comparative and Competitive Position Identify Potential Investors and Interview Them OF Producers Attracting Investment Who are they? There are many examples we could review, but suggest the following: What do they want? Ethiopia – a newcomer on the air-freighted horticulture scene What would make Ghana attractive? and growing quite rapidly through a process that has been Sources of Finance driven by incentives and support from central government What sources are available for agricultural production or and based on the country’s comparative advantages. processing projects in Ghana? The range of sources has ex- Senegal – expanding supplier to Europe, based on low sea- panded significantly over the past ten years, and is no longer freight costs and short shipping times to Southern Europe confined to national or multilateral donor facilities. Can the IFC be incorporated into this strategy? Egypt – development of processing of produce Collate the Information into a Strategy for the Costa Rica–what attracted the investment to create the com- Horticultural Export Sector petitive position? The final strategy report taking the view forward to 2015 will The ability to involve small scale producers in the chain is a be presented in Ghana. key issue to be researched here. Pa rt I - S c o P In g rev Iew 46 ANNEX I — Do Nors IN th E E Xport h ortIcultur E c l u stEr ANNEX I: D onors in the export horticulture cluster A summary of each of the donor projects that have recently been or currently are directed at export horticulture follows. It has not been possible in the time available, nor would it be appropriate in this forum, to provide an evaluation of the plans or achievements of these projects. 1.1 hortIculturAl EXports INDustry INItIAtIvE (hEII) HEII grew out of the recommendations of the 2003 World . 7 Strategic support systems Bank report on the horticulture sector1 and formed a compo- ƒ Strategic studies nent of the much larger AgSSIP program. The broad objec- ƒ Horticulture agribusiness information hub tive was to consolidate the gains in export horticulture by ƒ Market intelligence tools securing the competitive position of Ghanaian producers. ƒ Project monitoring Seven key activities were envisaged: Eventually, substantial changes to the plan were needed. The 1. Post-harvest infrastructure decision to extend the refurbishment of Shed 9 at Tema used ƒ Refurbishment of Shed 9 at Tema a greater portion of the budget than had been forecast. This ƒ Upgrading of perishable handling at Kotoka component was considered to be a priority and other activi- International Airport ties were sacrificed, among them developments to Kotoka ƒ Development of field post-harvest centres International Airport and the field post-harvest centers. With 2. MD2 sourcing and development a running time of barely three years there was little opportu- nity to carry out research and development, but there were 3. Planting Material Sourcing and Dissemination successes in a number of areas such as the introduction of ƒ Trials sweet potato varieties and trials on okra and melon variet- 4. Innovative Research and Development ies. Apart from Shed 9, other success stories include the ƒ GIS rollout of almost 5 million MD2 plantlets for multiplication, ƒ Technical innovation food safety work leading to harmonized lists of registered ƒ Dissemination & extension pesticides, the development of the Ghana Standards Board 5. Food Safety & Quality Management laboratories, and work on GAP certification with TIPCEE and ƒ Pesticide Regulations . MOAP HEII also applied matching grants to support the ITFC ƒ GAP mango outgrower project at Tamale, and developed the stra- tegic support systems for the industry with GIS. ƒ Certification 6. Industry ownership and farmer equity While there has been an overall evaluation of the AgSSIP pro- ƒ Shed 9 gram there does not appear to have been a detailed evaluation ƒ Kotoka Perishable handling of HEII. A more complete assessment of the contributions ƒ Seed sourcing operations would be useful. That said, HEII has succeeded in raising the profile of the sector dramatically, both within MoFA and 1. Voisard and Jaeger. 2003. Ghana Horticulture Sector Develop- to the donor community (TIPCEE, MiDA, EMQAP), bringing ment Study., Accord Associates. substantial support to the sector. h ort Icultur E EXports from Gh ANA : A st rAtEG Ic st uDy 1. 4 t rA D E A N D IN vE stmENt p ro GrA m f or A co mpEtI tIvE EXport E coNomy (t Ipc EE) 47 1.2 EXport mArkEtING AND QuAlIty AwArENEss projEct (EmQAp) EMQAP is financed by the African Development Bank and (i) Production and Productivity Enhancement; (ii) Export . began in 2007 The objective is to increase the incomes of Marketing Promotion and Infrastructure Improvement; horticultural crop farmers and exporters and of cassava pro- (iii) Capacity Building; and (iv) Project Coordination and ducers. It is being implemented in Central, Eastern and Volta Management. There are plans to construct four temperature Regions and Greater Accra and focuses on export fruits (e.g. controlled pack houses, to upgrade over 400km of feeder pineapple and papaya) and vegetables (e.g. chillies and egg- roads, to develop demonstration farms in each region, and to plants), as well as cassava. The project has four components: continue the work of HEII on GAP . 1.3 GhANA prIvAtE-publIc pArtNErshIp fooD INDustry DEvElopmENt proGrAm (Ghppp) GHPPP was initiated in 2002 and ran for 30 months. The program 2. Develop skills and capabilities of all participants in the linked together Michigan State University’s (MSU) Partnership horticulture supply chain. for Food Industry Development, Fruits and Vegetables (PFID- 3. Establish a Ghanaian NGO with the capability to lead F&V) program, Royal Ahold, a Dutch supermarket and food the horticultural industry in sustainable and profitable service company, and the NGOs involved in the USAID Trade development. and Investment Reform Program (TIRP), namely AMEX 4. Provide technical assistance where needed to International, TechnoServe, and CARE International. entities in all segments of the horticultural supply chain. The partnership worked toward five objectives: 5. Develop and market commercially viable nutritional 1. Develop logistical chain to achieve products of speci- products for children and pregnant women and other fied consistency, quality, and safety. natural products. 1.4 trADE AND INvEstmENt proGrAm for A compEtItIvE EXport EcoNomy (tIpcEE) TIPCEE is a five year program funded by USAID and imple- Ghanaian policy and regulatory landscape. To complement mented by Chemonics in a consortium with CARE and its basket of high-value export commodities–pineapple, TechnoServe, among others. The program began in 2004 mango, papaya, cashew, vegetables, and medicinal plants– and the goal of TIPCEE is to increase Ghana’s private sec- and provide greater outreach to smallholder farmers, TIPCEE tor competitiveness in world markets through an improved expanded its approach to include more traditional food enabling environment and a strengthened capacity of the crops–identifying maize, citrus, onions, and tomatoes as new private sector to respond to market demands. The objec- target commodities. tives for TIPCEE can be grouped into four broad categories: The Export Business Development Component comprises expanded market access, more integrated industry/cluster three initiatives: activities, improved performance of enterprises and small- holders, and key policy and regulatory constraints addressed 1. Development of innovations and knowledge tools: and solutions proposed. ƒ The development of crops-specific training Since the project’s inception, TIPCEE’s Export Business materials for good agricultural practice (GAP) and Development (EBD) and Enabling Environment (EE) com- integrated pest management (IPM) in conjunction ponents have made significant progress in implementing with MoFA/EMQAP and GTZ/MOAP practical improvements in the supply chains of various ƒ Improve product quality norms and standards in horticultural industry commodities and in reforming the conjunction with GSB pA rt I - sc o pI N G rE vIE w 48 ANNEX I — Do Nors IN th E EX port h ortIcultur E c l u stEr ƒ Develop GLOBALGAP (EUREP GAP), Fair Trade, ƒ Disseminate market intelligence and other quality assurance systems in collabora- ƒ Build on e-readiness of horticulture sector tion with GTZ/MOAP and MoFA/HEII ƒ Establish and strengthen market linkages ƒ Geographic Information Systems2 ƒ Investor/buyer missions and investor programs ƒ Strengthening supply chain management systems including financial management systems tem- The Enabling Environment component has three categories plates, post-harvest infrastructure designs, and of activity: the Last Mile Initiative (LMI), which uses ICT to 1. Policy and regulatory reform begun under earlier improve the linkage and data exchange between USAID policy programs; farmers and nucleus exporters 2. Policy and regulatory issues relating to the specific ƒ Enhance Financial Management and Facilitate crops of TIPCEE; Investment Support 3. Other policy and regulatory changes. ƒ Strengthen associations 2. Activities to deepen outreach and dissemination, These operate in several sectors: building on the achievements and pilot studies of the past three years to extend the coverage of GAPS, ƒ Trade Sector policy certification and norms and standards; ƒ Financial Sector policy 3. Market access and strategic partnerships: ƒ Agricultural policy ƒ Support to the www.ghanafreshproduce.org web- ƒ “Other� sector activities including macroeconom- site with a market monitor and a logistics bulletin ic, exchange rate, labor market policies among board others 1.5 GErmAN tEchNIcAl coopErAtIoN (GtZ) AND GErmAN DEvElopmENt sErvIcE (DED) GTZ and DED jointly implement the Market Oriented ƒ Value chain development through market analysis, Agriculture Programme (MOAP) funded by the German chain linkage, technology, and capacity building Government. The program improves upon the competitive- ƒ Public sector development through support to plan- ness of agricultural producers, processors and traders on re- ning and policy and donor coordination gional, national and international markets. The program uses ƒ Private sector development through institutional devel- a value chain approach based on pineapple, citrus, mango, opment of associations (e.g. HAG and SPEG), support chilli, guinea fowl, grasscutter and aquaculture. to market access, export promotion, and trade fairs (e.g. Fruit Logistica), quality and certification standards The program began in 2004 and runs until 2013. and product innovation. The components of the program include: 1.6 thE mIllENNIum DEvElopmENt AuthorIty (mIDA) 3 The Millennium Challenge Account compact for a grant of The goal is the “reduction of poverty through economic $540 million was signed in August 2006. The initial disburse- � growth led by agricultural transformation. ment was made in March 2007 and the compact will run for five years (i.e. late 2012/early 2013). 2. A pilot effort using GIS technology to map 3,000 farms in the citrus supply base has helped link the farmers with the major juice processors in Ghana. 3. http://www.mida.gov.gh/index.htm h ort Icultur E EXports from Gh ANA : A st rAtEG Ic st uDy 1. 6 t h E m I l l E N NI um DE vE lop mENt Author Ity (mIDA ) 49 Within this goal are two objectives: 120 ponds and weirs constructed 1. Increase production and productivity of high value cash 5060 ha irrigated and food crops in three selected zones of Ghana; 2. Enhance the competitiveness of high value cash and 34 post-harvest structures constructed food crops in local and international markets. 385,120 tonnes of products passing through post-harvest Three projects will work towards these objectives: treatment (total for five years) 1. Agriculture Project ($241million) The program will operate in 23 districts in three zones: the ƒ Increased farmer and enterprise training in com- Southern horticultural belt, the Afram Basin and a Northern mercial agriculture zone. ƒ Increased irrigation development ƒ Land tenure facilitation Immediate deliverables of the agriculture project will include ƒ Improved post-harvest handling and value chain training of FBOs, credit to nucleus farmers, a pack house at services Kotoka International Airport, construction of pre-coolers on ƒ Improved access to credit on farm and value chain nucleus farms. services ƒ Improved linkages to farmlands and markets = The overall responsibility for the implementation of the rehabilitation of feeder roads (950 km) compact program rests with the Millennium Development 2. Transportation Project ($143 million) Authority (MiDA). MiDA engages ministries, consultants and ƒ Enhanced access to air and sea ports—upgrade to contractors for the execution of the activities. MiDA is sub- N1 sections ject to Government of Ghana audit requirements as well as the audit provisions of the compact. MiDA has a 14 member ƒ Improved trunk road network in Afram Basin board including at least five ministers, representatives of the ƒ Improved Volta Lake Ferry services District Assemblies in each zone, and representatives of the 3. Rural Development Project ($101 million) private sector and NGOs. ƒ Support for Community Services • Energy for Domestic and Commercial uses Implementation of the activities is assigned in the first place • Water and Sanitation Facilities to the Central Management Consultant (CMC) who has • Educational and Vocational facilities a co-ordinating role for the three Regional Implementation ƒ Strengthen rural financial institutions Consultants (RICs). Oversight of the contracts is maintained ƒ Strengthen public sector procurement capacity by the Agriculture Project Manager at MiDA. There are a num- ber of other implementing agencies for various components The targets of the MiDA compact are: such as the infrastructure development project and the rural services. 1,200 Farmer Based Organisations (FBOs) participating in commercial agriculture activity The four roles of CMC and RICS are now filled. However, the third and final RIC was not appointed until the start of May 2008. 60,000 farmers trained in commercial agriculture activity Regarding budgets, the agricultural Project Activity is fore- 120 enterprises trained in commercial agriculture activity cast in table I.A.1. 51,000 farmers adopting new technologies and farming methods To this we can also add a part of MiDA’s Rural Development Project. There is an electrification component that will bring 10–14% post-harvest lost at farm gate (down from baseline power supply to cooling systems in pack houses and agro- 20%) processing plants. pA rt I - sc o pI N G rE vIE w 50 ANNEX I — Do Nors IN th E EX port h ortIcultur E c l u stEr table i.A.1: budget for miDA Agriculture project Activity (in millions) Farmer & Enterprise Training CMC to develop framework for FBO training $66.0 RIC to implement FBO training MoFA to prime FBOs for training Post Harvest Activity Provide 3 public pack-houses in Southern Zone $20.3 Pre-coolers for nucleus farmers Construct perishable cargo centre at KIA Upgrade the institutional capacity of 3 institutions. Small sale grain storage facility Irrigation Development Activity Provide $27.7 10 weirs 110 dams At least 5,000 ha under irrigation Agric credit and other credit Provide short and medium term credit to the agriculture value chain $40 Post harvest infrastructure (storage services) $8 Land Activity Create 9 Title Registration Districts $10.7 Facilitate land transactions via on-demand services Clear backlog of land cases in 10 Circuit Courts Train & build capacity in public/private sectors involved in Land Administration Total $172.7 Source: www.mida.gov.gh h ort Icultur E EXports from Gh ANA : A st rAtEG Ic st uDy A N N E X I I : OvE rA l l EU M A rkE t t rEN ds 51 ANNEX II: Overall eU Market trends Over the last few years in Europe there has been strong table I.a.2: retail value of Fruit sales in the Uk, promotion of the health benefits of consuming more fruit 2000–2002 (£ millions) and vegetables. However, despite increased advertising, 2000 2002 % change consumption has been remarkably static or even declin- Bananas 643 665 + 3.4% ing. Recently published data shows that fruit consumption Apples 613 617 + 0.7% within the EU member states was 107 kg per capita in 2006 (down from an average over the previous five years of 108 Citrus 490 499 + 1.8% kg). The decline was more marked for vegetables: in 2006 Grapes 276 280 + 1.4% the consumption was 98 kg per capita compared to 103 kg Stone fruit 276 278 + 0.7% averaged over the previous five years. This represents a Soft fruit 245 246 + 0.4% decline of 0.7% in fruit consumption and 4.5% in vegetable Pears 153 155 + 1.3% consumption.1 Other 367 410 + 11.7% It is recognized that this is an over simplification of a very Total 3,630 3,762 + 4% complex market, but it does indicate that overall, the EU Source: Mintel data, taken from Fresh Fruit and Vegetables (May 2003) fruit and vegetable market is, at best, mature. In mature markets there are always opportunities, especially in spe- the category that exhibited the biggest increase in sales was cific niches where growth is often driven by innovation and “other fruit�—a group that includes mangoes, pineapples, product development. In the case of fruit and vegetables, and papaya. In other words, even though the spending on convenience foods, pre-packs/prepared and ready-to-eat fruit may only be growing slowly in the UK, the increase is line items have also driven the expansion of different mar- most rapid in the sector where much of Ghana’s exports are ket categories. positioned. In the UK, the retail value of fruit and vegetable sales was Within the UK vegetable sector, sales of salads and greens £8.47 billion in 2003,2 which was a small increase of just over showed the biggest growth while the main losers were on- 2% per year between 1998 and 2003. These data do not ions and root crops (table I.A.3). The growth in salads is re- include the food service supply chain; where the value of lated to the promotion of pre-packs and speciality tomatoes fruit and vegetables consumed has been calculated at £1.5 billion.3 In the UK, retail fruit sales have shown increases table I.a.3: retail value of vegetable sales in the Uk, across all broad categories (table I.A.2), which are attributed 2000–2002 (£ millions) to increased snacking, the consumption of “smoothies� 2000 2002 % change and the realization of their dietary importance for healthy eating. Retail fruit sales are dominated by bananas, apples, Salads 1,162 1,236 + 6.4% and citrus—all of which exhibited small increases in sales Greens 726 752 + 3.6% between 2000 and 2002. Interestingly, in percentage terms, Mushrooms 399 407 + 2.0% Roots 399 391 – 2.0% 1. Data from “Production, Trade and Consumption Monitor 2007 in Onions 218 195 – 10.6% the EU-27�. 2. Fresh Fruit and Vegetables (May 2003), published by Mintel. Other 726 781 + 7.6% . 3. Accord Associates LLP May 2007 .Opportunities for Sub-Saha- Total 3,630 3,762 + 4% ran African Small-Farmers to supply the UK Fresh Fruit and Veg- etable markets. Source: Mintel data, taken from Fresh Fruit and Vegetables (May 2003) PA rt I - sc O P I Ng rE vIE w 52 AN NEX II: OvE rAll EU M Ark Et tr E Nd s and the innovation of the multi-colored pre-packs. The in- in fruit noted above. This was especially noticeable crease in sales of greens (a group that covers cabbage, broc- among younger people. coli, green beans, and peas) was also due to increased sales ƒ Health concerns and the increase in numbers of peo- of pre-packs and baby vegetables. Sales of root crops, which ple in higher income groups. As higher income groups are dominated by carrots, showed a downturn. The value of eat more fruit and vegetables, continued improvement mushroom sales increased despite downward pressure on in the national economy will stimulate the demand for prices associated with imports. The biggest loser was on- fresh fruit and vegetables. ions, despite an increase in the sales of speciality lines such ƒ Supermarkets increasingly recognize that fresh as red onions. The possible impact of these changes in veg- produce is a “destination item� and therefore are etable consumption on market opportunities for Ghanaian putting greater efforts into improving the quality and farmers is difficult to interpret because these vegetables are range of fresh fruit and vegetables and adding more dominated by EU production. However, the biggest growth resources to promote the sector and thereby attract � sector was “other vegetables, a category that would in- more customers. clude many of the vegetables imported from Ghana. Despite all these positive drivers that should be impacting fruit The main supply chain for retailing fruit and vegetables was and vegetable sales, the indications from the above data are multiple-retail chains, accounting for 84% of the retail sales that total sales of fruit and vegetables in the EU are remark- in 2002, an increase of 2.2% over 2000 (table I.A.4). The ably static; often trying to increase market share in a mature category showing the biggest decrease was greengrocers market can be both difficult and expensive. However, Ghana is and independent retailers, which declined by a very signifi- fortunate in that the product lines it produces for export are ac- cant 7.6%. Market stalls and other outlets showed small in- tually showing good growth. For example, the four main fruit creases. From the perspective of the Ghanaian producer, it lines that Ghana exports to the EU showed a 33% increase is important to recognize that the multiple-retailers represent between 2001 and 2007:4 the growth in pineapples and papa- the biggest market and the largest growth. Suppliers to the ya is particularly impressive (table I.A.5). The expansion in the multiple-retailer supply chain should be GlobalGAP certified; four categories of vegetables that Ghana exports are slightly which highlights the importance of this private sector agri- less than the fruit, but still the growth is much better than the standard to Ghana’s ability to access the EU horticultural growth in the overall EU vegetable consumption. markets. There are a number of factors that affect consumers’ deci- table I.a.5: EU Imports of certain Horticultural sion-making when buying fruits and vegetables—even if they Products, 2001–2007 do not contribute to significant overall growth. Imports Into the eU 2001 2007 % growth ƒ Advertising and promotion of the “5 a day� campaign is expected to stimulate the consumption of fruit and Pineapples 374,748 829,243 121% vegetables. Bananas 3,801,895 4,682,893 23% ƒ The increase in “snacking� has increased fruit con- Mango 136,830 211,570 55% sumption—this is probably the reason for the growth Papaya 18,848 36,481 94% Total fruit 4,332,321 5,760,187 33% table I.a.4: value of Uk Fruit and vegetable sales through different retail Outlets, 2000–2002 (£ millions) Capsicum 25,486 35,833 41% Ravaya 375 2,438 550% 2000 2002 % change Babycorn 4,965 6,509 31% Multiple-retailers 6,867 7,021 + 2.2% Greengrocers and 910 841 – 7.6% Other veg 67,347 74,933 11% independents Total fruit 98,173 119,713 22% Market stalls 248 250 + 0.8% Source: Accord Associates LLP based on Eurostat data Other 248 250 + 0.8% 4. The climate in Europe prevents the cultivation of the horticultural Total 8,273 8,362 + 1% products considered in this table; therefore total imports will Source: – Mintel data, taken from Fresh Fruit and Vegetables (May 2003) approximately be the equivalent to total consumption. H Ort Ic UltUrE EXP Orts FrOM gHA NA: A st rAtEgI c stUdy A N N E X I I I — I m pAct of EU p olIcy oN Im ports from Gh ANA 53 ANNEX III: I mpact of EU polIcy on Imports from Ghana The background to the EU’s policy in supporting trade with as Ghana is not an LDC (Least Developed Country), the EBA ACP countries goes back to 1963 when the European initiative does not apply and its horticultural exports could Economic Community initiated preferential trade agreements be levied charges under the General System of Preferences with its former colonies (Treaty of Yaounde). Then, starting in (GSP). For instance, the GSP tariff for pineapples would be 1975, the EU agreed to give ACP countries unilateral prefer- 5.8% of the C&F value, and bananas would have attracted a ences to its markets under the four Lomé agreements with €176/tonne levy. the hope of boosting trade. Ghanaian exporters would have been severely constrained When the last Lomé agreement ended, new incentives to if an EPA was not agreed upon, and therefore on 13 stimulate trade were negotiated and approved (the Cotonou December 2007, Ghana and the EU initialled an interim Agreement). This called for the creation of reciprocal trade EPA which would allow 100% free access to the EU mar- agreements, or Economic Partnership Agreements (EPAs) ket except for rice and sugar, which would have transition between the EU and regional blocks of ACP countries. It periods. The Côte d’Ivoire signed a similar agreement six was expected that regulations covering Ghana’s trade with days earlier. the EU would be incorporated within ECOWAS (Economic Community of West African States) and that the EPAs would It is expected that the bilateral EPA will eventually be replaced be agreed before the end of 2007 The EPAs were expected . by an agreement between ECOWAS and the EU. This will to continue the trade preferences already enjoyed by ACP require some negotiations within ECOWAS to harmonize the exporters and also be a comprehensive agreement to help agreements on imports from the EU, but this is not expected reduce transaction costs for companies, improve transpar- to be a serious issue for horticultural exports as any amend- ency, and help create bigger markets for both ACP and EU ments will most likely revolve around imports from the EU. countries. There is a very slight chance that the initialled agreements might not be accepted by the World Trade Organization Progress in establishing an EPA with ECOWAS did not hap- (WTO), but again this is unlikely. pen as rapidly as expected and towards the end of 2007 , there was a fear that Ghana’s horticultural exports to Europe In summary, there were concerns during late 2007 that the might be subjected to import tariffs. Most sub-Saharan slow pace of negotiating the EPA by ECOWAS might nega- African countries were not overly concerned about the lack tively impact Ghanaian horticultural exports. However, the of progress with EPAs as they could export goods into the initialling of the bilateral EPA between Ghana and the EU has EU under the EBA (Everything but Arms) initiative. However, removed this concern. pA rt I - sc o pI N G rE vIE w 54 ANNEX IV — R EtAI lER s’ AN d Oth ER stANdAR ds ON ImpORts fR Om GhA N A ANNEX IV: R etaileRs’ and OtheR standaRds On impORts fROm Ghana All horticultural produce imported into the EU must meet and the EUREP Board decided to re-brand it in 2007 as certain legal standards. These standards are principally to . GlobalGAP—but it is still often referred to as EUREPGAP3 protect consumer health and to ensure fair trade practices in the food trade. The basic regulations normally applied are The basic aim of GlobalGAP is exactly the same as the mini- the Codex standards.1 Codex is recognized in the relevant mum Codex standards, i.e., to ensure that the fresh fruit and vegetables sold by retailers are safe for human consump- World Trade Organization (WTO) agreements as the interna- tion. Attaining GlobalGAP is not a legal requirement, but it is tional body able to provide the minimum standards required regarded as the minimum standard that exporters must have to protect the consumer. The EU has been negotiating com- before they can supply the main European retailers. munity membership of Codex for some years, and this has now been achieved. , In addition to GlobalGAP some supermarkets demand their own standards. For example, in the UK, these include In addition to meeting the basic Codex standards, imported Tesco’s “Nature Choice� and Marks and Spencer’s “Field to horticultural produce must be accompanied by a phytos- , , Fork� but if an exporter can achieve GlobalGAP then it is anitary certificate issued by the relevant Government depart- not normally too difficult to achieve the standards demanded ment in the exporting country, confirmation of its country of by specific supermarkets. The final variants on private food origin (EUR 1 forms); it must be labelled correctly, each actor standards are organic and fair trade, both of which some in the supply chain must be able to document where the Ghanaian exporters have benefited from. produce was procured from and who it was bought from and finally the produce must not have pesticide residues above One of the key facets of private sector standards is the abil- certain maximum levels. On the whole, most professional ity to be able to trace the history of a product throughout exporting organizations are able to fulfil these requirements the supply chain from field to the consumer. This essentially relatively easily. requires a comprehensive system of record keeping. It is a much higher standard than the minimum EU legal require- In addition to the minimum legal standards, the major EU ment, which is just a record of who it was bought from and supermarket chains have established their own standards who it was sold to. which are more stringent than the Codex based ones. As most of the horticultural produce in Northern Europe is re- There are a number of misunderstandings about GlobalGAP . tailed through the major multiple supermarkets,2 it is im- It is sometimes thought to be extremely difficult to achieve portant that Ghanaian exporters do attain the certification certification and that it is costly. In fact achieving these pri- required to access supermarkets. The mostly widely used vate sector standards is not that difficult and many farmers private sector standard was established in 1997 by the Euro- in Ghana, often with capacity building from donor projects, Retailer Produce (EUREP) working group and this was re- . have already achieved GlobalGAP It can be costly for a small . ferred to as EUREPGAP However, it has grown in importance farmer because they are not able to spread expenses over a large quantity of produce; especially if significant invest- 1. The Codex Alimentarius Commission was created in 1963 to de- ments are required in building toilets and chemical stores. velop food standard guidelines. 2. It is estimated that over 80% of horticultural produce is sold through the big seven supermarket chains in the UK and, in [Section 3.10] it was noted that 96% of the fresh prepared fruit was sold through supermarkets. All this produce must therefore 3. This decision was announced on September 2007 at the 8th meet GlobalGAP standards. global conference in Bangkok. hORt Icultu RE EXp ORts fROm GhANA : A stRAtEG Ic st u dy A N N E X I V: R EtA Il ERs’ AN d Oth ER stAN dAR ds ON ImpORts f ROm Gh ANA 55 The EUREP working group is aware that it is more difficult for GhanaGAP is being developed as more sympathetic to small farmers and in order to reduce costs, a collective certifi- production systems in Africa. It has been pointed out that cation scheme (GlobalGAP Option 2) was established to allow some other countries have established their own stan- groups of farmers to comply as a unit. The cost of achieving dards, e.g., Chile, Kenya, and Thailand. However, it should GlobalGAP Option 2 in Kenya has been calculated at $1,270 for be recognized that ChileGAP was established to harmonize establishment and $350/year for maintenance. Even though an private sector standards demanded by the North American effort has been made to reduce the cost to small farmers, many and European retail markets; it basically took the most Kenyan farmers regard $350/year as too high and many have stringent demands from both markets and established allowed their certification to lapse. Because of the high cost of one standard that was acceptable to both. ThaiGAP has establishing and maintaining GlobalGAP some donors have con- , been primarily established to meet the demands of the EU centrated on assisting small farmers to achieve certification. supermarket chains who are investing in Thailand. As yet, there have been no positive outcomes from the establish- One of the criticisms of GlobalGAP has been that it is fo- ment of the KenyaGAP . cussed on the European market and does not take full cog- nizance of the specific problems of small farmers in Africa. The concept of establishing standards for a local and re- While this might be true, it should be noted that Ghanaian gional market is commendable, but Ghanaian exporters producers are supplying European supermarkets with pro- who want to target the EU should concentrate on attain- duce and Golden Exotics has even been awarded Tesco’s ing GlobalGAP standards as this will help the most with Nature’s Choice gold accreditation. market access. pA Rt I - s c O pI N G REVIE w 56 Annex V — Bi Bl i og rA p h y ANNEX V: BiBliography A selection of relevant, reports, publications and presenta- on a CD-ROM with a hyperlinked index. The CD-ROM is tions are listed below. The collection of reports is collected available at EMQAP. Abt Associates Inc. 2006 Fresh Produce Market Competitiveness Study Accord Associates 2001 The European Pineapple Market Reactions to Different Varieties & Ghana’s Market Position Afari-Sefa, Victor and 2005 The Interlinks Between Agricultural Export Diversification, Food Security and Siegfried Bauer Livelihood of Farm Households in Southern Ghana. Conference on International Agricultural Research for Development Ahold 2002 Ghana. Sustainable horticultural export chain Amex International An Appraisal of the Ghana Pineapple and Mango Industries: Opportunities and Challenges Chamberlin, Jordan 2005 Spatial Perspectives on Development Opportunities in Ghana IFPRI Conley and Udry 2004 Learning About a New Technology: Pineapple in Ghana Danielou, Morgane and 2005 The Rise of Ghana’s Pineapple Industry. From Successful Takeoff to Sustainable Christophe Ravry Expansion Dixie and Sergeant, Accord 1998 The Future for the Ghanaian Horticultural Export Industry Associates FAGE 2007 Ready for Take Off Ghana horticulture Geomar International 2007 Ghana horticulture cluster stakeholders’ workshop. Preparation of a follow-up pro- gramto HEII: methodological framework Henry, Richard and David 2004 BTO – Promotion Mission to Ghana Summers Humboldt University 2006 Poverty Orientation of Value Chains for Domestic and Export Markets in Ghana. JITAP 2003 Diagnostic report and export development strategy for the horticultural industry in Ghana Joosten, Frank and George 2005 Agribusiness Value Chain Analysis. Ghana MSMS Project IFC Ayernor Millennium Challenge 2006 Millennium Challenge Compact between USA and Ghana Corporation Michigan University 2003 Ghana PPP Food Industry Program: Mission Report Analysis of the Ghanaian Fresh Fruits and Vegetables Industry MOAP 2006 Promotion of Value Chain Development Training Owusu, Emmanuel and Eric 2006 Setting up a smallholder quality management system for EUREPGAP option 2 Quaye certification – Ghana’s Story – Presentation 7th EUREPGAP Conference h orticulture exports from g hA nA : A st rAteg i c st u dy A n n e x V — B iB l i ogr Aphy 57 Partnerships 4 2006 Report from kick-off seminar 22 March 2006 competitiveness Sefa- Dedeh, Prof Samuel 2005 Ghana Private-Public Partnership Food Industry Development Program Final Report for USAID Sefa-Dedeh, Prof Samuel 2003 Marketing plan for fresh pineapple exports in Ghana Sefa-Dedeh, Prof Samuel 2005 Mid-Term Impact Assessment of the Ghana PPP for Food Industry Development and Doe Adovor Program Sesay, Mohamed Ahmed 2006 The Expansion of a Pineapple Plantation in Ghana Takane, Tsutomu 2004 Smallholders and Non-traditional Exports under Economic Liberalization: the Case of Pineapples in Ghana African Study Monographs, 25(1): 29–43, TechnoServe 2004 Study of the Mango Industry in Northern Ghana TechnoServe 2003 Pineapple Industry Strategic Plan Trienekens, Jacques and 2004 Innovation through international supply chain development: A case study (Ghana and James Hagen South Africa) Tweneboa-Boateng, Abena 2003 Marketing Plan for Fresh Vegetable Exports in Ghana. Ghana Private-Public Partnership Food Industry Development Program Ghana PP PFID Programme USAID/TIPCEE 2006 Cluster Presentation USAID/TIPCEE 2005 Last-Mile Initiative/Ghana. Proposal USAID/TIPCEE 2005 Ghana’s High Value Horticulture USAID/TIPCEE 2006 Ghana Fresh Produce Sector – Investors Briefing Book Voisard and Jaeger, Accord 2003 Ghana Horticulture Sector Development Study Associates World Bank 2001 Ghana International Competitiveness. Opportunities and Challenges Facing Non- Traditional Exports World Bank BNPP 2005 Review of Ghana and Senegal’s Response to Public and Private Food Safety & Quality Regulations and Standards & impact on smallholders pA rt i - sc o p i n g re View Part II – recommended actIons Prepared for World Bank sustainable development network (WB-sdn) africa region, agriculture and rural development (aFtar), the republic of Ghana ministry of Food and agriculture, and european Union all acP agricultural commodities Programme (eU-aaacP) Prepared by natural resources Institute 2010 c o nt e nt s 61 Contents 1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 2. Key Messages from section III Background Papers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 2.A  Outgrowers  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  66 2.B  Businesses .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .   67 2.C  Competitiveness and Innovation.  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .   39 2.D  Policy and Institutions   .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  70 2.E  External Markets.  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .   72 3. opportunities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76 4. strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78 4.1  Rationale .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .   78 4.2  Land   .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  83 4.3  Infrastructure.  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .   83 4.4  Management.  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .   84 4.5  Innovation  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  84 5. Implementation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85 5.1: Aim of the Authority   .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  85 5.2: Management and Staffing  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  87 5.3: Scrutiny   .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  87 6. Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88 6.1  GCHDA Phase I.  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .   88 6.2  GCHDA Phase II  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  88 6.3  Project Funding  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  88 Boxes, Figures, and tables Figure II.1.1.  Export of Pineapples by SPEG Members   .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  65 Figure II.4.1.  Horticultural Exports from New Zealand (NZD million, fob) .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  80 Figure II.4.2.  Section Plan for Commercial Horticulture in Ghana  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  82 Table II.1.1.  Imports of Selected Tropical Fruit and Vegetables to Europe 2001 and 2008 .  .  .  .  .  .  .  .  .  .  .  .  .  64 Table II.3.1.  Projected Exports from Ghanaian Horticulture in 2017   .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  77 Table II.4.1.  Competitive Strengths and Weaknesses of Different Farm Types .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .   79 Table II.5.1.  Potential Roles for the GCHDA   .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  86 Table II.6.1.  Indicative Budget for Phase I of the GCHDA  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  89 Pa rt I I - re c o m m ended actI ons 1 — I nt ro d Uc t Io n 63 1: INTRODUCTION Our vision for commercial horticulture in Ghana is a flourishing ƒ What can we learn from the widespread failures sector built with businesses that are profitable, sustainable, amongst SPEG members and in particular from the and able to respond effectively to change. Such an industry demise of Farmapine? has great potential to provide employment and so contribute ƒ What can be done to develop capabilities of manage- to the efforts to ameliorate rural poverty. ment and innovation? ƒ What are the current policy attractants for invest- We focus our vision on the commercial since the targets ment? How can they be best adapted for export and priorities for development are rather different. We are horticulture? concerned here with production and marketing of fruit and vegetables as a business for profit. Further, we believe that ƒ How best to direct the export horticulture sector? successful businesses will pull the wider horticulture sector ƒ What are the comparative and competitive positions forward with technological, social, legislative, and economic to producers attracting investment? linkages. ƒ Who are the potential investors and what do they need? ƒ What are the Sources of Finance? Today, commercial horticulture in Ghana is not flourishing. We see year-on-year growth in most products, and there are The process of answering these questions led to the some success stories that show what can be achieved, but development of a strategy for the horticultural export sector. there has been a widespread inability, across the portfolio of However, in taking the first step of validating the findings products, to exploit the export market opportunities competi- with the various actors in Ghana it became clear that there tively and effectively. were many other questions raised that might have a bearing on the strategy, depending on how the concept of a strategy Part I of this report provided an overview of the Ghanaian was defined. In particular, the scope of the strategy has been export horticulture sector to examine the performance of broadened to include commercial horticulture not aimed at the sector between 2003 and 2007 and to review the con- distant export markets. straints. That was the first phase of defining a new strategy for horticulture and Part II will examine the goals and how We have tried in the present report to cover many different they might be achieved. aspects of the Ghanaian horticultural scene as well as the do- mestic and external trade environment. While this contributes Part I suggested a number of steps to be taken: to building a solid business case for the strategy, the diversity ƒ Validation of research would swamp the strategy itself if presented in one long narrative. The research that supports our conclu- ƒ What capabilities are required to successfully supply sions has therefore been separated out as a separate section in to the European/British supermarket trade? of background papers each of which stands alone. From each ƒ Are there other markets and products that might be of paper the key conclusions have been abstracted and are pre- interest? sented here, in chapter 2, as the basis for the strategy. ƒ Who are the lead firms and what are their needs? ƒ What are the current requirements for outgrowers? Before moving on, it is perhaps helpful to have updated data How can we stimulate it? to hand. In the period between the research for Part I and the ƒ Are there potential partners in Ghana? preparation of this strategy, trade data show a continuation of the trends noted earlier (table II.1.1). Pa rt I I - re c o m m ended actI ons 64 1 — I ntr o dUc tIo n Table II.1.1: Imports of selected tropical fruit and Vegetables to europe 2001 and 20081 2001 2008 total eu of whIch from total eu of whIch from Volume (tonnes) Imports Ghana Ghana share Imports Ghana Ghana share Pineapples 374,748 33,209 8.9% 922,855 35,601 3.9% Bananas 3,801,895 3,458 0.1% 4,854,559 45,951 0.9% Mango 136,830 62 0.0% 228,864 1,098 0.5% Papaya 18,848 1,937 10.3% 35,940 1,061 3.0% Ravaya 375 97 25.9% 2,816 375 13.3% Capsicum(Chilli) 25,486 418 1.6% 38,416 2,737 7.1% Babycorn 4,965 1 0.0% 6,442 16 0.2% Yams 16,197 7,756 47.9% 23,273 13,468 57.9% Cassava 8,525 117 1.4% 23,725 2,561 10.8% Sweet potatoes 16,031 51 0.3% 57,082 44 0.1% 2001 2008 c&f Value (euro) total eu Imports of whIch from Ghana total eu Imports of whIch from Ghana Pineapples 281,689,207 30,651,756 593,489,228 33,577,747 Bananas 2,163,548,761 2,897,132 2,909,889,137 29,340,703 Mango 168,186,973 107,291 267,944,723 2,417,928 Papaya 34,302,034 2,272,874 53,031,659 1,732,688 Ravaya 823,854 119,080 6,131,712 692,747 Capsicum(Chilli) 26,337,146 732,980 51,566,607 4,943,055 Babycorn 18,771,271 6,955 21,748,818 42,984 Yams 15,694,609 5,372,009 31,981,551 22,821,413 Cassava 6,160,566 83,294 17,249,844 1,810,458 Sweet potatoes 11,952,031 33,962 35,438,008 31,846 total euro 42,277,333 euro 97,411,569 Source: EUROSTAT In the banana trade, volumes have increased by 50% since 5,000 tonnes per year previously. The 2008 export data show . 2007 The export data for 2008 show that the contribution of banana exports of 48,280 tonnes from Ghana to the EU, of the Golden Exotics Ltd production was the most significant which Golden Exotics contributed 44,580 tonnes. The dis- difference in Ghanaian exports, which had not exceeded crepancy with import data in table II.1.1 is a consequence reporting times and volumes in the pipeline. 1. Euro values are nominal. The number of EU members rose with Pineapples show a modest increase in volume over the pe- the fifth round of accession in 2004 and again in 2007 but for the riod but hidden within is a dramatic change in the fortunes most part the data are complete back to 2001. Data for Poland of the participants. The switch in preference of the European and Slovakia are not included in EU 27 totals prior to 2004 so the imports for earlier years are slightly underestimated. For a major supermarket buyers from the traditional smooth cayenne product such as bananas this might mean an error of up to 5% variety to the MD2 and the impact this had on the Ghanaian but for the minor products (e.g., mangoes and papaya) the error is tiny. There are many other inaccuracies in reporting trade data growers is now well known. The scale of the change is per- that have a more significant impact. haps less well recognized (figure II.1.1). Hort Ic UltUre exP orts from G Hana : a strateG I c stUdy 1 — I nt ro d Uc t Io n 65 FIgURe II.1.1: export of Pineapples by sPeG members gradually improve their capability with the new, more diffi- 50,000 cult crop. The opportunity here however is now significantly greater than in 2003 when Europe imported about 375,000 40,000 tonnes: imports in 2008 exceeded 920,000 tonnes. Others Mango exports have crossed the 1,000 tonne mark with the 30,000 Tonnes Farmapine increased output from northern plantings and are set to rise Jei River 20,000 Bomarts further. Golden 10,000 Exotics Papaya, meanwhile, still dependent on the output of two operations, has fallen back. 0 2003 2004 2005 2006 2007 2008 Chillies have grown well in volume, but these are still ex- Source: SPEG data ported as the most basic bulk packed product and not cap- turing the potential value of selection and pre-packing. The Golden Exotics report pineapple exports of 13,500 tonnes Ghanaian advantage here lies in the cheap air freight which in 2007 and 10,000 tonnes in 2008. SPEG does not capture cannot be matched by other origins, and so the product can all data. be sold in the low value wholesale markets. Not only have volumes dropped away rapidly, but the indus- Among the root crops, yams and cassava are both export- try is now heavily dependent on the output of two compa- ing significantly more and are successful in their own ethnic nies; neither of which, incidentally, were significant players markets, benefiting from the low production costs in Ghana. in the early part of the decade. If it were not for the growth The comparison with sweet potatoes, where Ghana has of exports by Golden Exotics (whose output dropped in 2008 made no headway against key suppliers such as Israel and because of changes 18 months earlier) and Bomarts, the true the U.S.A., is interesting because these are the higher value state of the Ghanaian pineapple industry would be apparent. and the supermarket demand has grown strongly. We expect output to increase in 2009 and then grow gradu- Further updates of the EU market can be found in Background ally year-on-year as the two leaders expand and as others Paper E1. Pa rt I I - re c o m m ended actI ons 66 2 — K ey mes saGes fro m sec tion iii Bac KGrou n d pa p e r s 2: K EY MESSAGES FROM SECTION III BACKGROUND PAPERS 2.A outGrowers 2.A.1 FARMAPINE No attempt should be made The company, FARMAPINE, was established with the assistance of the World Bank in to rehabilitate FARMAPINE 1998 as part of a Bank project to enable several hundred smallholders to sell directly to or recreate the experiment1 the EU market. The company structure was based on the World Bank’s Farmer Ownership Model and by 2002 FARMAPINE was the second largest pineapple exporter in Ghana. Four years later, however, in 2006, the company was declared bankrupt and ceased trading. We reviewed the history and investigated the current status and concluded that the project was a badly designed and badly managed operation whose demise was only hastened by the trauma of switching production to MD2. FARMAPINE’s great failing lay in the manage- ment which not only lacked commercial thinking, but was also top heavy, lacked business experience, managed finances appallingly and had no vision for the future of the business. 2.A.2 CONTRACT FARMING Potential for contract farming The logic behind contract farming is that the buyer gets a guaranteed supply of raw ma- for processing... terial where price, quantity, delivery time, and quality are assured. The farmer benefits because of the assured market. Both parties also benefit because contract farming gives ...especially if there are op- the opportunity for transaction/market costs to be taken out of the chain as well as provid- portunities to implement im- ing a conduit for information flow. proved agronomic manage- ment. We explored the concept and reviewed the application in Ghana. We find that there are a number of benefits as well as disadvantages. There are few examples of contract farming being undertaken in Ghana horticulture with small-scale farmers. There is, in effect, con- tract farming with the suppliers of fruit, almost exclusively with medium and large-scale producers, for the fresh-cut industry, but similar arrangements are not yet seen in juicing. Only ITFC2 with its mango operations shows contract farming for fresh fruit. Contract farming is not seen in the vegetable supply chain. 1. The current status of other Farmer Ownership Model projects in other countries should be re- viewed as there may be valuable lessons. We suspect that not only was the implementation at fault in Farmapine, but the model itself is not suitable for the export of fresh produce where smallholders now struggle to compete. See Paper D2. The m.odel may well have applications in other crops (groundnuts, cocoa, coffee) or markets (local, regional) where production by small- holders can be competitive. 2. ITFC—Integrated Tamale Fruit Company— is a private company cultivating organic mangoes in Northern Region of Ghana. ITFC operates a nucleus farm of some 160 ha supplemented with the production of some 1,300 small scale outgrowers each with 0.4 ha of mangoes. The production is aimed at export. Horticulture exports from G Hana : a strateG i c st u dy 2 . B Bu s i n e s s e s 67 L 2.A.3 OCAL AND REGIONAL MARKETS FOR FRESh PRODUCE Good opportunities... The difficulty of serving the distant export markets brings to the fore the role of local and regional markets. Can these markets provide alternative trading opportunities to support ...but we need a better un- further growth and development of Ghana’s export horticulture industry? This paper at- derstanding through some tempts to answer this question by looking at the current state and future prospects of focused research into the domestic and regional markets. trade and markets. Our review suggests that the markets are growing by 10% per year or more, driven by an expanding population, with increasing wealth supported by increases in the expatriate population and tourism. We propose that there are challenges in servicing these markets that could be overcome if better understood. 2.A.4 ExPORT SUPPLY ChAINS We need to quantify the links The position of the various players in the fresh and processed produce supply chains is in terms of volumes and illustrated graphically. pricing. 2.B Businesses 2.B.1 SOURCES OF FINANCE Funds for financing horticul- During the research many farmers and agribusinesses claimed that their biggest con- tural projects are available... straint was shortage of finance. There are a wide range of sources of finance available from development banks, commercial banks, merchant banks, local equity investors and ...but existing quality proj- even some donor finance. This Background Paper discusses some of the main issues ects with good management raised by interviews with the different financing institutions. are rare. The key conclusion from the review of the sources of finance is that there are funds To accelerate growth... available in Ghana for investment in export horticulture; while interest rates may not be as low as businesses might like, the finance institutions struggle to identify good invest- ...there is a need for finance ments with the quality of management needed to ensure that the business plan targets to open up new areas for ex- are met. port horticulture. However, if the government wants export horticulture to expand, there is probably need for “off-farm� finance to open up new areas of land. Currently there is some reluctance by investors to open up new areas and consequently much of the agricultural and horticultural development is taking place in existing produc- tion areas where there is already electricity, good roads, and other services such as a trained workforce. Serious considerations need to be given to a fund to assist businesses who invest in new, green-field sites and/or investments in plantation crops. 2.B.2 FRUIT PROCESSING Good progress in attracting Processing of horticultural crops provides another opportunity for farmers to market their investment... crops; and sometimes it can be a useful opportunity to sell product that does not meet export market standards. ...but we need innovation and research to... Ghana has made good progress in attracting investment in processing. It is estimated that there is current capacity in Ghana to process about 40,000 tonnes of pineapples and ... reduce raw material about 30,000 tonnes of citrus each year. production cost pa rt i i - re c o m m ended acti ons 68 2 — K ey mes saGes fro m sec tion iii Bac KGrou n d pa p e r s ...improve processing We expect that the fresh-cut industry will continue to expand steadily providing it can efficiency continue to improve quality, processing efficiency and reduce costs to be able to compete with the EU-based factories. Recommendations include efforts directed at innovation and ...identify new markets research into reducing production costs and also innovation and improvements in pro- cessing efficiency and quality to reduce processing costs; market research and marketing missions for potential new niche markets. 2.B.3 POTENTIAL ExTERNAL INvESTORS A number of major fresh pro- Among the constraints on the Ghanaian horticultural export industry we would include duce companies are interest- a shortage of top-quality management and supervisors, poor technical support, and lack ed in sourcing from Ghana... of innovation. The rapid expansion of Compagnie Fruitière and Bomarts demonstrates what can be achieved when management and technical expertise are added to Ghana’s ...coordinated promotional comparative advantages. effort focussed on horticulture will encourage investment. If Ghana is to expand its portfolio of horticultural exports in both volume and range, it needs an increase in the pool of top-quality managers and technical expertise. This can be achieved from within by training, and externally by recruiting foreign investors. To date, importer attempts to establish strategic partnerships with existing exporters have not been successful. It is therefore crucially important that efforts are made to attract large-scale and world-class horticultural businesses to Ghana; along the lines of Compagnie Fruitière investment in Golden Exotics. If this arrangement can be replicated (in both tropical fruit and vegetables), then it will help Ghana attain the economies of scale to become even more competitive. 2.B.4 PROFITABILITY OF CROPS AND FARM SIzE Small-scale farmers, once the Government and development partners have focused much effort on supporting the basis of Ghana’s horticultural smallholder farmer as export horticulture is often seen as a good opportunity to generate export industry, are strug- income, employment and improve the level of skilled workers in rural areas. The export gling in a changed operating pineapple industry provided benefits for significant numbers of smallholders in peri-urban environment... areas around Accra between 1983 and 2005. ...the need for production ef- However, times change. Most smallholders have now disappeared from the export pine- ficiencies, capital, and market apple value chain. The reasons for this need to be fully understood: is it an inability to supply performance has evolved... quality fruit profitably, and if so then why, or did the failure of so many exporters so damage their smaller suppliers that they in turn were unable to continue with pineapples, or does ...an alternative model is export marketing now impose conditions which are difficult for small-scale farmers? urgent if the rural economy is to profit from export In the authors’ opinion all three factors have contributed. The higher costs of production horticulture are difficult for the under-resourced small-scale farmer even though the eventual return maybe higher. The losses incurred from the collapse in demand of Smooth Cayenne undoubtedly discourage the risk of higher losses, not least when the agronomy is only now becoming clearer. Further, it is suggested that the production costs for a large farm are lower than those of his outgrowers. None of the major exporters interviewed ex- pressed any interest in buying pineapples from small farms in the future. Those that use outgrowers stipulate a minimum farm size of 30–40 acres. A minimum threshold might be established by further work. Other papers (C3, D2) explore these problems further, and, while there are issues pecu- liar to pineapples, the authors believe that there are many competitive issues in today’s Horticulture exports from G Hana : a strateG i c st u dy 2 . c co m pe t i t i v e ness and innovation 69 export horticulture market that are unsuitable for the small-scale producer participation unless linked through a professional business with close market linkages in the destina- tion market. An alternative model is urgent if the rural economy is to profit from export horticulture. 2.C competitiveness and innovation 2.C.1 GhANA’S COMPARATIvE POSITION There are comparative advan- Ghana has considerable comparative advantages as an exporter of horticultural prod- tages... ucts. This Paper summarizes the advantages and then considers the country’s recent performance. ... but the industry has not converted these into com- In conclusion, we argue that the reasons why Ghana has not succeeded in establishing a petitive advantage. much larger horticulture export industry include a shortage of excellent managers, insuf- ficient top quality supervisors and middle management; there is a lack of a culture to in- novate, many of the export farms lack professionalism to compete. We believe that there is a need to benchmark the performance of Ghana’s exporters against the competition. 2.C.2 INNOvATION Stimulate with... If Ghana is to succeed in developing a world class and competitive export horticultural industry, it must innovate. We discuss here the meaning and relevance of innovation and ...matching grants... the relative roles of the private and the public sectors. ...tax relief... We believe that there are various needs including: incentives for the private sector to innovate, perhaps with matching grants and also tax-relief; supplementary technical as- ...collaboration... sistance for those companies that want to innovate; a more collaborative approach that ...benchmarking promotes the exchange of ideas and information; benchmarks, in terms of costs and process. 2.C.3 CREATING COMPETITIvE ADvANTAGE In the short-term bring in Following on from the preceding two papers we argue that if Ghana is to create competi- managerial expertise from tive advantage, it will be through high quality, professional and innovative management. outside... Good technical management can be recruited internationally in the short-term, but it will ...in the medium term develop be necessary to improve the agricultural training establishments to ensure that there are a training programme for sufficient good quality Ghanaian managers. practical management.... Government and donors should consider providing finance for on-farm training of super- ...to build a cadre of locally visors and middle-management. Initial developments should consider how to improve trained managers for the the quality of management by easing restrictions for work permits and reducing the tax longer-term. burden on internationally recruited staff. But the longer term solution lies in schemes to provide on-farm training for supervisors and middle-management. We would like to see a scheme for accelerated learning for selected university graduates, probably operating at a regional level in West Africa, which would provide a combina- tion of training programmes in business with placements in companies offering practical management experience. pa rt i i - re c o m m ended acti ons 70 2 — K ey mes saGes fro m sec tion iii Bac KGrou n d pa p e r s ThAILAND 2.C.4 CASE STUDIES OF COSTA RICA, EThIOPIA AND Three success stories in the The export of fresh produce is an important part of Costa Rica’s economy. The industry international fresh produce is valued at over a billion dollars and it is dominated by the banana and pineapple sectors. trade... Until the mid-1990s fresh produce exports were led by the banana sector, and although this still occupies almost 50% of the value of Costa Rican fresh fruit and vegetable ex- ...different drivers have ports, the importance of pineapple has increased significantly. provided each with mom- entum... In the early 1990s, Costa Rica was a minor player in the world fresh pineapple export market, but since then Costa Rica has become the leading exporter in both the USA ...but all three have and European markets. The key factor has been the pivotal position of one transnational Government support for in- company, Del Monte Fresh Produce, which had been fortunate in acquiring a key innova- vestment through favourable tion, a new cultivar that created market differentiation to the extent that it became the operating environment and new market standard. enabling infrastructure Over a short period of time, Ethiopia has become the second largest flower exporting country in Africa, after Kenya. In 2008 exports reached USD118 million from 1,200 ha with 80 growers employing 90,000 people. The Ethiopian flower sector has experienced high growth from a low base over the last five years through significant foreign direct investment attracted by the incentives provided by the Government. In Thailand, fresh and processed fruit and vegetables play an important part in the econ- omy and the export sector, with trade to neighbouring countries in the region providing the main export markets. The Government played a key role in changing policies that had restricted foreign investment, which has stimulated inward investment. 2.D policy and institutions 2.D.1 hAG AND SPEG: WhO hAS SURvIvED? Among the membership... Modern businesses need the agility or ability to respond rapidly and efficiently and thrive in a changing and unpredictable business environment. The change in market demand ...only the largest and most from smooth cayenne pineapples to MD2 required companies to invest rapidly in a new well-resourced businesses product, new production and post-harvest technologies and in knowledge and expertise have survived a decade of for an efficient operation. change... The experience of HAG and SPEG members illustrates that most businesses in Ghana ...and with a depleted lacked the agility to meet these challenges. membership the viability of the trade associations is The lesson from the HAG and SPEG survivor’s story is that any strategy for the future doubtful of the export horticulture industry in Ghana should seek to promote well-resourced busi- nesses that will have the ability to respond pro-actively to change and compete effectively as an alternative supplier to Costa Rica. The futility of some donor efforts to support small exporters was illustrated by HAG who complained that some donors provide a lot of training but the members lack the resources to implement any of the knowledge gained from the training. 2.D.2 PLANS POLICY AND INSTITUTIONAL SUPPORT There have been radical In horticultural exports, support from government and donors to date has for the most changes in the structure part been focused on the small-scale farmer as s/he was the basis of most agricultural of retailing and its supply activity in Ghana. Horticulture exports from G Hana : a strateG i c st u dy 2 . d po l i c y a n d i nst itutions 71 chains in the primary export We believe that it is important now to recognise that the export horticulture sector needs markets... a fundamentally different approach to that which might currently apply to other sectors of agriculture. ...and the competitive chal- lenges now demand perfor- This change has been brought about by the developments in the primary market, Europe, mance that can only be met where the change in structure of retailing and the management of the supply chain has by a well-managed business- resulted in challenges that today can only be met by large-scale farmers. like industry. To derive the economic benefits from the opportunities in supplying the European market, The industry needs institu- we must first develop a large-scale farming sector and use this to penetrate the market tional support... and secure position. This will then open opportunity for the small-scale farmers. The sector-specific needs include: ...that invites and encourages inward investment... From the Government ...and recognizes that large ƒ Policies friendly to investment and the private sector–there has been much scale farming is the engine progress in this arena over recent years and it is clear that Ghana is attracting of growth in horticulture increasing interest from investors. Specific to export horticulture are problems in exports... land tenure, the processes of resolving contract disputes, issues of bureaucratic overhead such as Customs, VAT, tax and so on. ...while supporting small- ƒ Support to the large scale farming sector as the engine of growth in horticulture scale farmers as suppliers exports. This links the Private Sector Development Strategy, the Trade Sector with extension services... Support Programme with MOFA which has been noted as absent. ...and developing a capacity ƒ Support through extension to the small-scale farmers; to collaborate and innovate. ƒ Development of the capacity to innovate–management of research ƒ Support to regional trade–border procedures, infrastructure etc From the Donors ƒ Investment in developing the sector–we need specific attractants for investment, for example developing the infrastructure to bring investment into an area, but also in support of the smaller commercial farmers. From the NGOs ƒ Continued support to the small-scale farmer–ensuring that returns are maximised in the linkage of small farmers into the supply chain; strengthening farmer organi- sations; ensuring that the rewards of commercial horticulture reach the widest range of beneficiaries From the private sector ƒ Maximum collaboration–the present proliferation of trade organisations (HAG, SPEG, VEPEAG, GAVEX, PAMPEAG and five different mango associations) are not cost-effective to their members, lack co-ordination, lack strength for advocacy, and are unable to tackle the bigger issues. In place we propose a single, private sector led authority capable of collaborating with all players (not only private sector but also government, donor, NGO) and driving the development of the commercial horticulture sector–for exports and the local market. The roles are elaborated in the main report here. Socially and environmentally responsible development ensures a sustainable growth in the sector. pa rt i i - re c o m m ended acti ons 72 2 — K ey mes saGes fro m sec tion iii Bac KGrou n d pa p e r s 2.D.3 LAND ACqUISITION In Ghana, land issues To the potential investor in agriculture the availability of land is one of the first ques- are perceived to impede tions to be answered by the pre-investment enquiries. In Ghana, the acquisition of land, investment... and the security of rights to its use, is widely perceived as a significant impediment to investment. ...and current efforts are aimed at a long term The situation in Ghana, with the application of both statutory and customary rights, is resolution. quite typical of many African countries and it is tempting to look elsewhere for solutions. However, the similarities are often superficial and the local socio-economic environment, An immediate, practical ini- the previous history, the pressure on the land can be markedly different. Even at the local tiative is needed... level there are variations in how the customary rights are applied and there can be no ...identifying, demarcating single solution. and securing the title of areas The thrust on land in Ghana is for the most part statutory with an emphasis on land titling for development... and registration. This will be a long and arduous process and our concern here is to find a ...to be offered for process that eases the route for the investor from 2010 onwards, rather than to comment investment on the overall process of reform. The development of a Land Bank Directory is a welcome and practical step, but needs to go further. Larger tracts need to be assembled; the tracts should be properly surveyed and demarcated and agronomic information made available; a clear Government policy should be formulated within the development plans for the provision of off-farm infra- structure such as bringing water supply and power to the edge of the farm. The Government might consider a role in intermediation, for example leasing the land in order to sub-let it to an investor. We propose that a Horticultural Development Fund is established to secure land for horticultural investment. 2.E external marKets 2.E.1 TROPICAL PRODUCTS EU IMPORTS OF SELECTED We provide an update of the trade into Europe of the major horticultural exports of Ghana. ƒ Imports of pineapples to the EU grew by a further 11% from 2007 to 2008. The increment was entirely supplied by Costa Rica where exports to the EU increased by 100,000 tonnes. Sendings from other significant origins were stable or down from 2007. ƒ Imports of bananas to the EU grew by 163,000 tones (3.5%) from 2007 to 2008. Ecuador, Colombia and the three West African origins of Cameroon, Ghana and Côte d’Ivoire all recorded significantly increased sales. Output from Costa Rica fell. ƒ Imports of mangoes to the EU are still growing and reached 229,000 tonnes in 2008. Sendings from Ghana went above 1,000 tonnes for the first time. ƒ European imports of papaya appear to be stabilising. Côte d’Ivoire showed a strong jump in exports while Ghanaian output seems steady. ƒ EU imports of chilli capsicums grew to 38,000 tonnes in 2008 up from 36,000 in . 2007 Ghanaian exporters lost market share with slightly reduced sendings in 2008. ƒ Ravaya (baby aubergine) is a small market in the EU but recording strong year-on- year growth. Exports from Ghana are small, but the potential to substitute both Kenyan and Thai exports with cheaper air-freight is clear. Horticulture exports from G Hana : a strateG i c st u dy 2 . e e x t er n a l ma rKets 73 ƒ “Other Vegetables�: This category includes okra and other asian vegetables, parsley and pumpkins and squashes among others that the customs statistics for imports do not separate out. The UK has shown strong growth in butternut squash imports and this explains much of the growth of imports in this category from southern hemisphere suppliers such as South Africa and Argentina. ƒ Yams are the success story of Ghanaian fresh vegetable exports. The business goes from strength to strength with increasing market share. ƒ Cassava imports to the EU have levelled off. Costa Rica dominates the supplies. Ghana could send more and compete with Costa Rica, but the local market is strong and cassava has particular importance in food security. ƒ EU imports of sweet potatoes have grown further and reached a total of 57 ,000 tonnes in 2008. There is further opportunity for growth in the market. Imports are dominated by product from the U.S. and Israel. The U.S. now leads the exporters. Despite efforts at introduction in Ghana and expansion of the production, exports remain insignificant. 2.E.2 SUPERMARKET AND IMPORTER BUYING PRACTICES The EU supermarket sector The process of becoming a supermarket supplier requires proof that a significant long- offers access to an enormous term contribution can be made to an interdependent web of roles and responsibilities. market... The highly managed fruit and vegetable category sector of western European retailers is ...but the supply chain is controlled by a few very large companies. Access to a supermarket buyer will be through highly managed by a few very these companies, or, if direct access to the buyer is achieved, the potential supplier will large companies... be re-directed to these suppliers to manage the eventual supply. ...and access demands levels Sustainability continues to be the main CSR3 driver for new opportunities. Credible re- of performance from the sup- search and effective advocacy of the findings will enhance the likelihood of a buyer being pliers only found in the best attracted to Ghanaian products as a substitute product for another. However issues of managed companies. quality, price and availability will not be traded for sustainability gains. Sustainability in the produce Ethical sub-brands such as Fair trade or Rainforest Alliance represent aspects of sup- production and transport is ply chain best practices that are attractive. However there is increasing evidence that an important driver of new retailers are embedding these best practices within their own proprietary standards and opportunities... the niche is becoming the norm. Producers and exporters must acquire the capability to sustain the best practices and not simply invest in the label. .. but this is not simply a label and suppliers must be capable of matching best practice 2.E.3 ThE CREDIT CRUNCh AND ITS IMPACT Fresh produce is used by Retailers and brands that can demonstrate empathy with consumers in tough times gain supermarkets to attract cus- loyalty and retain customers who may be tempted to move to a discounted offer else- tomer loyalty... where. As a consequence of this trust relationship, retailers and brands often try to antici- pate consumer concerns or move faster than consumer demand to enhance perceived ...and in-store offers on fruit brand empathy and consequently protect sales. and vegetables were a no- ticeable retailer response to Fresh produce developed through the 1990s as an important own-brand statement. the economic downturn... Fresh produce became a destination category for which shoppers will switch stores. 3. CSR–Corporate Social Responsibility is a business model that requires the deliberate inclusion of public interest into corporate decision-making. pa rt i i - re c o m m ended acti ons 74 2 — K ey mes saGes fro m sec tion iii Bac KGrou n d pa p e r s ...while the organic sector The produce department moved from the back to the front of the store and was given became a casualty of the high priority for constant availability, freshness and value, with shelf area doubled. This consumer response... emphasis continued through the price rationalisation of 2009, with fresh produce being some of the most visible and prolific in store offers. ...which in turn provoked dis- counting and erosion of the One of the major food casualties of the economic downturn was organic fresh produce. ethical premium. Discounting and promotional activity, more common in the mainstream lines, had been applied to the previously premium-priced ethical brands where the consumer would nor- Concerns of climate change mally be aware that they were paying more as an ethical or lifestyle choice purchase. and food security are forecast to impact the fresh produce After a decade of producer investment in standards and ethical sub-brand labels to meet import sector... the evolving EU supermarket needs, it is apparent that ethical niche labels are not pro- tected from the pressure to reduce prices. Similarly, production systems that do not yield ...so, understand the carbon effective commercial volumes or margins cannot rely on a price premium that recognizes footprint and exploit any better stewardship or practices. comparative advantages... The paper concludes that concerns of climate change and food security will impact on the ...and promote Ghana as an long distance food imports: economy capable of export- ing food while supporting its ƒ Climate change is likely to dominate brand messages in the near term. Therefore, own population understand the carbon footprint and exploit any natural advantage in low carbon production. ƒ Food security concerns will force retailers to justify why they are trading food in countries that cannot feed their own population issues. Therefore promote a country profile and awareness that Ghana is capable of sustaining its people and maintaining a professional and vibrant export market. 2.E.4 ALTERNATIvE REGIONAL MARKETS The EU markets present the We review the opportunities that might be available in alternative markets to the mem- major export opportunity. bers of the European Union. Specifically the markets of the Middle East, North Africa and the Lebanon and South East Europe are evaluated. Other markets such as SE Europe, the Middle East and There is potential for sales to all three areas. None of the markets here are particularly Maghreb, provide supple- demanding in standards or SPS requirements (note however that Bulgaria, Romania and mentary possibilities for Slovenia are members of the EU ), but some have quite high import tariffs. It is important profit... to remember however, that the importance of the multiple retailers is increasing in all these markets too, and that a number of European supermarkets are developing a pres- ...but are not foundations ence here as well. They in turn will bring in their own private standards. from which to grow an industry The opportunity in all the markets needs to be seen in its proper perspective: there is neither the scope nor the depth found in the EU and these markets will not form the foundation from which to grow a flourishing export industry. They are however important in two aspects. Firstly, the opportunistic trade, less demanding in standards, can benefit the medium size exporters of Ghana. Secondly, the markets provide the well-established supplier with an opportunity to extend its reach beyond Europe, and no profitable op- portunity should be ignored. 2.E.5 BANANAS Ghana provides an opportu- The world banana market is fragmented, relatively static and highly distorted. The single nity to diversify the sources most important and dynamic market is the EU. Growth in new markets has been rather of supply of bananas... disappointing. The world’s banana market is very concentrated in a few large companies and through very powerful supermarket chains. Horticulture exports from G Hana : a strateG i c st u dy 2 . e e x t er n a l ma rKets 75 ...even if it is not able to Ghana has preferential access to the EU which makes banana production attractive in the compete with the top-rank short-run. If the latest round of WTO negotiations re-starts and is concluded, it is highly producers... likely that this margin of preference would be severely eroded4. ...it remains competitive with Ghana is better placed to produce bananas efficiently than many traditional producers other origins such as the Caribbean countries, but would struggle to compete with the very large-scale and low labour-cost profiles of Latin America. 2.E.6 ALTERNATIvE PRODUCE Babycorn, lychee and aspar- We assess the potential opportunity in the European imports of a variety of products. agus... We have selected the products on the basis of known potential as well as agronomic suitability. All will require a high degree of management for export but the greater propor- ... would exploit the compar- tion would be suitable for small scale cultivation: for example, much of the Kenya export ative advantage of Ghana to of avocadoes is based on small scale farmer output, while the Thai babycorn industry is Europe air-freight rates... heavily dependent on small scale growers. ...while butternut, avocado All the crops could be cultivated in Ghana, and some have been for many years but have and sweet potatoes... not developed far as export crops. ... are sea freighted and can The butternut and sweet potatoes are more durable than other fresh produce and could gain advantage from the be grown further away than the usual two to three hours travelling time from a port that shorter shipping times than most produce requires. competing origins. Trials to establish the profitability of each will be needed if the opportunity is to be devel- oped and this raises the question of who should be responsible for such research and introduction. At present, the private sector has very limited resources to carry out such research on a systematic basis. This underlines the need for a capacity to innovate. The list of crops here is only intended to be indicative: it is neither comprehensive nor are the opportunities for profitability assured. 2.E.7 FRUIT JUICE MARKETING OPPORTUNITIES To more fully exploit the It is estimated that the processing capacity is possibly in the order of 20,000 to 30,000t opportunities and utilise of finished product. We consider the market opportunities and constraints for further installed capacity we need expansion of the fruit juice industry in Ghana. In order to fully exploit the opportunity for to.... fruit juices in Ghana, it is important: ...research the local market... ƒ That the local market is fully researched to understand the demands and estimate the scale of the opportunity for local processors and to estimate when it is likely to ...research the export mar- be satisfied. kets... ƒ To identify export opportunities; both in terms of markets and products that they ...identify strategic partner- could sell. ships with European manu- ƒ To identify potential European-based fruit juice manufacturers who might be inter- facturers... ested in establishing strategic partnerships with Ghanaian processors. ƒ To give assistance to foreign companies that wish to invest expertise and finance ...and encourage inward inve- in either processing and production in Ghana. stment 4. Dec 2009, since this paper was written, a deal has been reached between the EU, Latin America, the ACP countries and the USA. The terms include a reduction in the tariffs on bananas from Latin America to Europe, dropping from €176/tonne to €148/tonne in January 2010, and then falling to €114/tonne in 2016. pa rt i i - re c o m m ended acti ons 76 3 — opp o rt u n i t i e s 3: OPPORTUNITIES Table II.3.1 updates the projections shown in the 2008 re- The rewards for achieving these levels of output are port to include more recent data and a longer time horizon. impressive: These projections are based on the opportunity that we see for product in the export markets. They are not based on 1. Foreign exchange sales of €288 million (C&F) the current capacity of the horticulture industry in Ghana annually and they assume a competitive ability to increase market 2. Direct employment of 23,000 people in the produc- share. tion of these crops. 3. At current minimum wages, the jobs would contrib- We believe that the projected production is achievable both ute $14 million to the rural economy every year. in terms of production and marketing, but it is only realistic 4. The number of jobs created indirectly in servicing if some substantial investments are made. The growth rates the exports and supplying the producers would be required to achieve these outturns will not be incremental substantially greater. improvement in yields or expansion of acreage. The op- 5. With 16,000 tonnes air freighted and 375,000 tonnes portunity can only be realized by the application of finance, exported by sea, the number of sailings and flights management, and technical know-how. would increase markedly, as would the range of There are two important points about the scenario presented destinations served. This would benefit the smaller here: players, providing a range of alternative markets and carriers. ƒ The opportunity is based on existing products that are 6. An estimated 17 ,0002 ha will be in production. The already produced in Ghana. There is not a risk associ- likely total requirement for land will be at least double ated with predictions based on new crops. this figure in order to allow for crop rotations as well ƒ The figures do not take into account other markets, as farm infrastructure. The rental income will be though we believe (see Background Paper E4) that important. these opportunities are rather smaller.1 1. Golden Exotics report total banana exports of 46,910 tonnes in 2. Based on conservative assumptions for yields of the crops listed 2008 of which 44,580 tonnes (over 95%) went to the EU. in Table II.3.1 Horticulture exports from G Hana : a strateG i c st u dy 3 — o p po rt u n i t i es 77 TablE II.3.1: projected exports from Ghanaian Horticulture in 2017 2008 Projected 2017 tonnes annual Volume total eu growth in eu total eu (tonnes) imPorts from ghana ghana share imPorts imPorts from ghana ghana share Pineapples 922,855 35,601 3.9% 4% 1,300,000 92,000 7% Bananas 4,854,559 45,951 0.9% 3% 6,300,000 255,000 4% Mango 228,864 1,098 0.5% 4% 325,000 6,500 2% Papaya 35,940 1,061 3.0% 1% 39,000 2,000 5% Ravaya 2,816 375 13.3% 5% 4,300 1,000 25% Capsicum(Chilli) 38,416 2,737 7.1% 4% 54,600 4,500 8% Babycorn 6,442 16 0.2% 3% 8,400 2,100 25% Yams 23,273 13,468 57.9% 4% 33,000 21,500 65% Cassava 23,725 2,561 10.8% 2% 28,000 3,500 13% Sweet potatoes 57,082 44 0.1% 8% 114,000 6,000 5% 2008 2017 at 2008 Values € c&f Value € total eu imPorts from ghana total eu imPorts from ghana euro/tonne Pineapples 593,489,228 33,577,747 838,500,000 59,340,000 645 Bananas 2,909,889,137 29,340,703 3,780,000,000 153,000,000 600 Mango 267,944,723 2,417,928 380,250,000 7,605,000 1,170 Papaya 53,031,659 1,732,688 60,450,000 3,100,000 1,550 Ravaya 6,131,712 692,747 10,320,000 2,400,000 2,400 Capsicum(Chilli) 51,566,607 4,943,055 73,290,000 11,700,000 2,600 Babycorn 21,748,818 42,984 28,350,000 8,097,000 3,856 Yams 31,981,551 22,821,413 55,902,000 36,421,000 1,694 Cassava 17,249,844 1,810,458 19,600,000 2,450,000 700 Sweet potatoes 35,438,008 31,846 85,500,000 4,500,000 750 total E 97,411,569 E 288,613,000 pa rt i i - re c o m m ended acti ons 78 4 — st rat eGy 4: STRATEGY The export horticulture sector in Ghana is in a serious predicament: if it continues as it is, it may grow gradually but it will lose market share in the face of increasingly severe competition, even with the application of resources to improve infrastructure and support the industry. The alternative is to introduce change, and bring in world-class investors to provide a solid base from which the industry can push forwards towards our projections of foreign exchange sales of €288 million (C&F) annually. We forecast that Ghana could almost treble its earnings from horticulture within a decade: the natural advantages of the work- force, the soil, the water, the climate, the location, and the products are all there already. With the application of finance, expertise, management, and collaboration the necessary scale can be achieved to revitalize the industry. The scale itself brings competitive advantage: it allows investment in research, market development, innovation, training, and value addition. Ghana needs its export horticulture industry: there are families that depend on it and there are many more that could benefit from it. A flourishing industry will support thousands directly and even more indirectly in servicing the industry. New oppor- tunities for contract farming can be opened up and land that currently earns little can be brought into production achieving an income for the communities and employment for the people. We propose a two step strategy: 1. Encourage and support initiatives by international class companies in the fresh produce business to invest in Ghana and to establish significant businesses under their own management. 2. Ensure that Ghanaian investors and producers are able to benefit from the incoming technical and managerial skills, the infrastructure, and the marketing links established by the investing companies. 4.1 rationale The background papers that make up Part III of this strategy a sector of undercapitalized small producers lacking the re- report collate our findings from a wide range of research into sources, and often the capabilities, needed to partner with the export horticulture sector, its markets, and its competitors. European distributors. They become confined to selling into niche markets (e.g., Fair Trade) or commodity markets (e.g., Taken together, the papers indicate an industry toiling hard to bulk-packed chillies for ethnic wholesale markets). make any headway in the export markets. Yet there is ample opportunity available with important economic Serious activity in the major fruits (pineapples, bananas, benefits. There are comparative advantages (of water, climate, mangoes, and papaya) is limited to supply from a handful of and logistics) that give access to that opportunity as well (see companies. Many that were growing or trading pineapples Background Paper C1). It is not the will or the support that is have gone or are debilitated. The success stories in the veg- lacking: farmers have lost their livelihoods trying to service this etable arena are confined to products where opportunities market, innovative farms have failed (see Background Paper for growth are relatively limited (yams and cassava) and there A1—Farmapine), financing has been offered and accepted, and is no attempt to differentiate the product (chillies) from com- donor funds applied to technical and marketing support. modities sold on price alone. The model itself is now no longer appropriate to the oper- In its present state, the horticulture sector is poorly struc- ating environment. Small-scale farmers on their own can- tured to service the major markets in Europe; the reality is not sustain competition in the European markets for fresh Horticulture exports from G Hana : a strateG i c st u dy 4 . 1 rat i o n a l e 79 produce; they cannot achieve the volume and consistency of founded on the labors of small-scale farmers) but the supply that the major distributors require for major products European retailing of fresh produce has undergone a dra- such as pineapples and mangoes. matic change in the last 25 years, and the small supplier is being squeezed out as the traditional production and export Export horticulture is unusual among agricultural endeav- structures no longer fit the supply chain (see Background ours in that it is no longer suited to independent small- Papers E2 and E3). scale operators (see Background Papers B4 and D2). This was not always so (the Ghanaian pineapple industry was Table II.4.1 illustrates some of the competitive issues here. TAblE II.4.1: competitive strengths and Weaknesses of different farm types Smallholder FarmerS Small InveStor- large-Scale non-commercIal commercIal FarmerS FarmIng Land        Finance/Credit       Inputs: access/purchase        Skilled labour: access       Unskilled labour: motivation/supervision          Contacts/network         Market knowledge          Technical knowledge          Product traceability and quality assurance     Risk management        Source: Leavy and Poulton(2007) 1 Key: Non-commercial farmers might sell some produce but do not or cannot make their entire living from farming Commercial farmers tend to be market-oriented and make a living from selling their output  = poorly positioned  = well positioned Growing fresh produce for export involves other challenges These markets, it should be stressed, are substantial (see that further reinforce the competitive superiority of large- Background Paper A3) and provide plenty of opportunity for scale farmers over small-scale operations, including: sales. In addition, there are opportunities to add value in the processing sector (see Background Papers A4, B2, and E7) ƒ Supply management in terms of timing and volume for local and regional markets. Distant market opportunities ƒ Post-harvest handling for processed products are more difficult since the compara- ƒ Logistics management tive advantages, such as seasonality and air-freight rates, are ƒ Export financing lost, but if a competitive product can be offered, then the ƒ Communication opportunities are there. To overcome their competitive failings, the small-scale There needs to be a solid foundation of commercial hor- farmer must be able to operate in collaboration with the ticulture as a business, run professionally, able to access large-scale enterprises that can participate in the over- finance whether it is debt or equity, and achieving the scale seas markets. Without this collaboration the small-scale and service that European distributors need. This will not farmer is confined to the national and regional markets. exclude the small player from participating; rather it will provide the conduit for them to supply the export market. . 1. Leavy, J. and C. Poulton. 2007 Agricultural Commercialisations – Empirically, this is clear from other examples around the A Level Playing Field for Smallholders? Future Agricultures Brief- ing www.future-agricultures.org world. pa rt i i – r e c om m ended acti ons 80 4 — st r at eGy There are other external markets available, either niche or ƒ there is a high economic return from a relatively informal wholesale, or indeed other geographical markets small area: total horticultural area is estimated at (see Background Paper E4), such as the Middle East, which 118,000 ha. offer possibilities; but they offer neither the scale of the ƒ areas are brought into production according to European market, where volume and range of markets their potential: horticultural activities are distributed is unmatched, nor do they achieve full value out of the throughout New Zealand to exploit the full range of comparative advantages where other origins maybe better climates. placed to supply. ƒ there are advantages to be exploited and disad- vantages to be overcome in growing fresh produce A comparison with the horticulture industry in New in new Zealand: there are significant comparative Zealand is interesting here. Industry exports grew from advantages in being a southern hemisphere supplier $110 million (fob) in 1980 to just short of $2 billion in 2007 of temperate crops, producing a counter-season crop, (figure II.4.1). and in its range of climatic conditions. However, it also has significant disadvantages in terms of distance to FIGuRE II.4.1: Horticultural exports from new Zealand market, land values and labor costs. (nZd million, fob) ƒ Total on-farm investment at NZD14 billion and off-farm 3,000 at NZD24 billion. 2,500 If we are to achieve the vision of a flourishing sector in Ghana, built with businesses that are profitable, sustainable, 2,000 and able to respond effectively to change, then we need to 1,500 encourage investment. When the targets of Table II.3.1 are being met, export horticulture will be making a substantial 1,000 contribution to the Ghanaian economy and helping to meet 500 the Millennium Development Goals. We need to see more companies following the example of Compagnie Fruitière 0 and establishing larger scale operations, bringing in finance, 1965 1970 1975 1980 1985 1990 1995 2000 2005 2007 and technical and managerial expertise. We need more ITFCs Fruit—fresh Vegetables—fresh Flowers, seeds and plants to develop outgrower schemes. We need more Blue Skies Fruit—processed Vegetables—processed Wine and Pinora able to add value and manage contract growers. Source: Fresh Fact, New Zealand Horticulture 2007 HortResearch Without such investment, growth will be slow and in time will falter. Points of note include: Other case studies presented here (Background Papers C4, ƒ a huge industry is not dependent on value addi- C5 and C6) all point to the need for investment in larger tion: processed fruit (except wine) and vegetables operations that can bring in the management, technology, make a limited contribution and know-how needed to develop the foundation of an ƒ the industry is not depending on niche opportu- industry. With that foundation, small-scale enterprises can nities: certified organic exports contributed about develop too. 3% of export earnings. This is an important contri- Our researches for this strategy have highlighted the exter- bution to the portfolio but not a foundation of the nal interest in investing in Ghana (Background Paper B3). industry. Following one interview, a Kenyan vegetable producer and ƒ there is a breadth and depth in the marketing: in exporter, Vegpro,2 has established a company in Ghana and 2007 exports were sent to 121 countries. Exports begun negotiating the lease on land. We know of two other to 46 countries exceeded NZD1 million. Japan and potential investors ready to investigate the opportunities at Australia each receive more than 50 products with this time. values exceeding NZD100,000. ƒ only in australia does new Zealand have the ad- 2. Currently farming on seven farms in Kenya but, also buying vantage of relative proximity: the other key markets from 3,500 small-scale suppliers in order to ship to the UK and in Japan, U.S.A, UK, and EU are distant. Europe. Horticulture exports from G Hana : a strateG i c st u dy 4.2 land 81 Our researches into the sources of finance (Background The tremendous growth in the New Zealand horticulture Paper B1) indicate that local funds are available for horticul- industry was powered by investment and directed by in- ture, but lack suitable sponsors. The financial sector is reluc- novation and training. The industry now incorporates a wide tant to invest in small-scale farms to any extent. There are a range of producers: some very large independent operators number of reasons for this: and many smaller growers depend on collaboration in shared infrastructure such as pack houses, combined marketing ef- ƒ The management of the investment has fixed forts, and joint training programs. up-front costs appraising the opportunity and during the lifetime of the investment in management. There The Ghana Investment Promotion Centre (GIPC) was es- is therefore a minimum size of investment able to tablished in order to encourage, promote, and facilitate bear these costs; investments in all sectors of the economy except mining ƒ Any investor will assess the potential profitability of and petroleum. Its mandate is therefore very wide. We a project and then apply a discount according to the believe that for a focussed effort on horticultural invest- perception of risk. Apart from the fact that the param- ment, the GIPC should be supported by a development eters for profitability here are not well understood, the authority specifically dedicated to commercial horticul- small-scale farmer is poorly equipped to mitigate the ture. Such an authority would provide (among other ini- risks, which include climate, pest and disease, market tiatives described in Chapter 5, Table II.5.1) not only the fluctuations, transport, and so on; expertise to attract investors, but also the ability to coordi- ƒ With tree crops there is a long lead time of negative nate the investment efforts with the general development cash flow before the investment starts to generate of horticulture in Ghana. revenues. Inevitably this increases the risk and the We find equivalent authorities in many other producing coun- small-scale farmer is not well placed to offset the tries3 and one of the key benefits for investors is the one- delay with returns in annual or other crops. stop-shop approach where all the investor’s needs in terms of ƒ The small-scale farmers in the Ghanaian horticulture information, forms, applications, and advice are handled out sector are poorly equipped to manage debt, particu- of one office. The GIPC would of course remain the focal point larly where servicing a loan further reduces the poor for government services to investors, but where its current returns on exiting equity capital. mandate covers the range of economic sectors in Ghana, we At present pricing, investment in horticulture must seek ex- are proposing that specialized help is provided by a horticultur- ternal funds. The local cost of borrowing, even allowing for al development authority. That way the GIPC can offer tailored inflation, works against the financial viability of long term expertise and the authority can co-ordinate investment within loans. We envisage an industry structure based on a number the broader scenery of horticulture in Ghana. of larger growers and exporters, technically and financially We see the role of an authority as initially one of investment capable of managing supply chains to Europe. These will in- promotion and development in support of GIPC, managing teract with smaller growers on a number of levels, perhaps the development funds, but quite soon broadening into an au- under contract as suppliers or by sharing resources and infra- thority that leads the sector forwards on all fronts. The back- structure, or through demonstration and training. The smaller ground papers here identify a diversity of actions that will be growers will also benefit indirectly through the additional ser- needed to develop a balanced sector (see figure II.4.2). The vices such as freight or input supply that come with greater role of the development authority will be to manage these volumes, or indeed through supplying the larger growers with activities in a coordinated drive that applies government and specific products. With secure supplies produced efficiently, donor resources to the sector. the economics of the processing sector will improve as well. 3. For example Kenya (www.hcda.or.ke); Ethiopia (www.ehpea.org); Pakistan (www.phdeb.org.pk); New Zealand (www.hea.co.nz). pa rt i i – r e c om m ended acti ons 82 FIGuRE II.4.2: section plan for commercial Horticulture in Ghana Focus Strategies/ Action Background Initiatives Plans Paper Acquisition Process D3 Sector Plan for Commercial Land Development Land I. Production and D3 Demarcation and Preparation Horticulture in Ghana Commercialization Infrastructure Off-farm Infrastructure B3 D4 • Legislation Contract Farming A2 • Infrastructure • Business Environment Environmental Business Mission Vision Goals Production Aspects Technical B4C1C3 • Production of Supply a • A flourishing 2017 fruit and diversity of sector built • A preferred Benchmarking B4 C1 vegetables for markets with with origin for local, regional fresh produce businesses that tropical II. Customers Local and Regional Market and export are profitable, A3 – achieving high produce Research markets sustainable and Research standards of among EU quality and able to respond supermarkets Export Market Opportunities E1-7 • Local Markets service effectively to change. • Supplying >15 • Regional Markets – maintaining national Safety and Standards • Export Markets principles of markets both social and in and outside Market Development Local and Regional Promotion A3 environmental EU care with Brand Ghana • Annual long III. Financials integrity distance Fiscal Tax and Duty Regimes – enhancing the expoerts of reputation of 390,000 t of • Fiscal Aspects Local Investment Promotion B1 Ghana fresh produce • Investment • Annual exports Finance Foreign Investment Promotion B1 • Credit of processed fruit and • Matching Grants Credit B1 vegetables equivalent to Research Co-ordination C2 50,000 t of Innovation IV. Industry fresh product Innovation Fund C2 Capabilities • 30,000 people employed Management Training Scheme C3 directly by • Capacity for Innovation export oriented Donor Partner Co-ordination D2 fresh produce • Technical Capability businesses • Managerial Capability Liaison with Government D2 • Leadership Industry Leadership Crisis Management D2 Umbrella for Special Interest D2 Groups (SPEG et al) Horticulture exports from G Hana : a strateG i c st u dy 4 — st r at eGy 4 . 3 in f r ast r u c t ure 83 4.2 land Horticulture has special needs, and the acquisition and ten- Background Paper D3, therefore, presents a proposal to build ure of land, followed by the provision of infrastructure (roads, on the work of the Land Administration Project, which has power, and water) to the farm gate, are the most problematic. begun a land bank database,5 whereby a fund would be estab- These are reviewed in more detail in Background Paper D3. lished to be applied to demarcating and securing suitable land, in order to attract investment into an area. Initial focus might An investor looking at the opportunities for cultivating fruit and be applied to the Accra Plains on either side of the Volta River vegetables in Ghana will first look at whether suitable land below the Kpong Dam. A survey of potential land use, bearing (usually flat, well-drained soil, close to water) is available and in mind the logistical requirements of perishable produce (say then whether access and power are available. Without these three hours from a port), is urgent. In time, with the develop- characteristics any further exploration is hypothetical. ment of production of less perishable produce, for example We know that the business-enabling environment, and even the sweet potatoes or butternut squashes (Background Paper E6), available incentives, is already in place because Ghana is already more distant regions might usefully be developed. attracting investment in a number of sectors through the efforts We propose that a Horticultural development fund be estab- of the Ghana Investment Promotion Centre (GIPC). In the World lished to secure land for horticultural investment. Depending on Bank’s Doing Business rankings,4 Ghana ranks in seventh place in the area, the costs incurred in demarcating, negotiating, and sub-Saharan Africa (46 countries)—between Zambia and Kenya. leasing the land would not be so substantial and would anyway But there remain questions over the ease with which an in- be recovered by the sale of a lease and the monies revolved. vestor may secure, maintain, and assign the rights to farm Various stages of acquisition could also be maintained, with a suitable holding of land. At present, land acquisition is fully leased or simply under a Memorandum of Understanding handled on a case-by-case basis. Once an investor has iden- signed with the local customary authority or title holder. tified a suitable area, negotiations begin, title searches are While we appreciate that large scale land acquisition is a set in motion, and the process takes an unpredictable, but sensitive topic, more so following the massive investments substantial length of time. If Ghana is to attract investors, this in a number of African countries by foreign companies and must change: any promotional work will be undone by delays funds, the total area required to generate the target volumes in securing the usufruct rights to the land. in table II.3.1 are small by comparison to oilseed or biofuel The difficulties with land tenure have long been recognized investments and have a substantially higher labor require- and the Land Administration Project is taking steps to solve ments. It may even be preferable to involve a government the problem. But the titling and registration of land is a long- agency, such as the Horticultural Development Authority term project and the need for horticultural investment is mentioned above with the GIPC, in a role of intermediation urgent. Further, it is important to appreciate that the number where the agency holds the head-lease and sublets the land of potential investors is limited and there is increasing com- to the investor.6 This topic needs further discussion in the petition among neighboring countries for their interest. The implementation of the strategy. The issues are further dis- availability of land is a key attractant. cussed in Background Paper D3. 4.3 infrastructure The available infrastructure at the farm boundary is an im- be combined within the Horticultural development fund portant determinant of the suitability of the land for invest- noted above. ment. There must be good access to roads and available water and power. We suggest that these should be provided The on-farm infrastructure is, of course, the responsibility of independently of the investor as part of an area development the investor, but elements might be considered in advance plan to attract investment. Funding for this element would and sold as part of the lease. 6. The advantage being that the investor only negotiates with one entity and is protected from spurious claims while the Govern- 4. http://www.doingbusiness.org/economyrankings/?regionid=7 ment can manage the lease and the consideration in terms of 5. http://www.gipc.org.gh/land_bank.aspx ground rent and community development. pa rt i i – r e c om m ended acti ons 84 4 — st r at eGy 4.4 manaGement Background Paper C3 considers how to develop a competitive We propose a scheme for accelerated learning for selected ability in the Ghanaian horticulture sector and concluded that university graduates, probably operating at the regional level it would come from high quality, professional and innovative throughout West Africa, which would provide a combination management. Good technical management can be recruited of training programs in business with placements in compa- internationally in the short term, but it will be necessary to nies offering practical management experience. improve the agricultural training establishments to ensure that there are sufficient well-trained Ghanaian managers. A management training fund will be needed for this purpose. 4.5 innovation In Background Paper C2 we review the issue of innovation. supplementary technical assistance for those companies If Ghana is to succeed in developing a world class and com- that want to innovate, and the use of benchmarking to focus petitive export horticultural industry, it must innovate. We innovative efforts. suggest various requirements to support innovation includ- ing matching grants to encourage companies to innovate, An innovation fund will be needed for this purpose. Horticulture exports from G Hana : a strateG i c st u dy 5 — I mP L e m entat Ion : tHe GH ana commerc Ia L H ort Ic ULt Ure deV eLoP ment aUt H orIt Y 85 5: I MPLEMENTATION: THE GHANA COMMERCIAL HORTICULTURE DEVELOPMENT AUTHORITY The foregoing discussion and the collection of papers appended here identify a number of challenges to developing export horticulture. In summary these are: 1. The need to actively promote investment in horticulture in Ghana through a targeted marketing effort that applies resourc- es to the identification of potential investors and encouragement of their participation in Ghana. 2. The need to find a practical solution to the issues of tenure of plots of land suitable for larger-scale export horticulture. 3. The need to improve the competitive abilities of the industry with world-class management. 4. The need to develop a capacity for innovation to maintain competitiveness. 5. The need to unify efforts in horticulture, both export oriented and locally focussed, as well as harmonizing the efforts of the government, donor partners, NGOs and the private sector. 6. The need to manage resources and apply them strategically to the horticulture sector. We have laid out a strategy in chapter 4 based on the opportunities identified in chapter 3 and using the background papers, summarized in chapter 2, as a foundation. The financial and economic rewards are undoubtedly worthwhile: the employment possibilities, the contract farming opportunities, and the reinvigoration of the industry will benefit the rural population while the tax revenues and foreign exchange earnings will contribute to the national budget. We believe that a new, unified approach is needed to implement the strategy in order to meet the various challenges, and the means for such an approach does not currently exist in Ghana. We propose that the implementation of the strategy be the responsibility of a purposely created authority. For the present, we will call that authority the Ghana Commercial Horticulture Development Authority (GCHDA), but a suitable, shorter title can be selected at the time of creation. The GCHDA will bring together the various existing trade organizations under one umbrella. The GCHDA will coordinate their activities so that they can maintain their sector interests while deriving strength from collaboration.1 It is important to be quite clear that such an agency should not replace the existing institutions: it is intended to consolidate effort through collaboration. The existing institutions whether they are trade organizations, such as SPEG or HAG, VEPEAG, GAVEX, or PAMPEAG; or government agencies, such as GEPC or GIPC; or Ministries; or NGOs all will have a role to play within the authority. Without the coordination and collaboration Ghana horticulture will not achieve the scale necessary to compete internationally. 5.1 aIm of tHe aUtHorItY To convert the potential of Ghanaian horticulture into a sus- term industry support capacity, and in Phase II the GCHDA tainable reality. should be funded by the industry itself. 5.1.1 TIMELINE 1. Similar arrangements are seen various horticultural industries: for There are two distinct phases in the GCHDA. In Phase I, example, in the UK research and development are facilitated by the GCHDA will lead the turnaround of the export horticulture Horticultural Development Company within which are found a num- sector and develop the business environment. Phase I will ber of specialist stakeholder groups by crop. Similarly the continued success of horticulture in New Zealand is led by an authority ‘Hor- continue for five years and will require external funding. At ticulture New Zealand’ that incorporates 22 product groups into a the end of this period, the GCHDA should evolve into a longer single advocacy organisation. There are many other examples. Pa rt I I – r e c om m ended actIons 86 5 — I m PL eme ntatI on: tH e GHana com merc Ia L H ortIcULtUre de V e LoP ment aUt H o rItY Phase II continues for as long as the industry is willing to be to develop the wider aims of the strategy elaborated here. support the GCHDA. A rolling three year business plan will A key early step will be the development and application of provide targets, strategies and monitor progress. the Management Training Fund and the Innovation Fund. Further support can be applied to the processing sector as appropriate. 5.1.2 ROLEs In Phase I the primary focus will be on investment, from both The business plan for Phase II will prioritize the activities foreign and local sources. This role will include not only invest- elaborated in table II.5.1 A number of these will be carried ment promotion, through collaboration with GIPC, but also sup- out as needed by external contractors or organizations, most port to investors in terms of land identification and acquisition likely in response to requests and payment from member and supporting infrastructure. This will be achieved through organizations. For example, the market or technical research the Horticultural Development Fund. The secondary role will can be commissioned and paid as needed. TAbLE II.5.1: Potential roles for the GcHda 1.  Strategy �  Definition �   Implementation �   Revision 2.  Co-ordination �  Allows sector identities to be maintained, while co-ordinating activities �   Co-ordinates donor partner support to the sector �   Manages funding to the sector �   Provides a unified sector response to issues of the day �   Provides networking and linkage opportunities �   Oversight of Shed 9 and other such facilities 3.  Technical �  Innovation in production and processing �   Manages/ co-ordinates research �   Knowledge management �   Technology transfer for production and processing 4.  Economic Investment Promotion � specialised support to the GIPC � outreach Market development � Market intelligence – not only external but also domestic and regional, fresh and processed � Industry promotion � Quality/safety � Standards � Reputation 5.  Social � National development issues � Regional issues  � Nutritional issues � Labour issues 6.  Environmental �  Pesticides �   Water extraction �   Water pollution �   Carbon footprints / air-freight �   Biodiversity 7.  Legal �   Linkage to international organisations – eg WTO, EC � Trade barriers �   Contract farming �   Mediation service for land, contract farming, trade disputes 8.  Political �   Advocacy/lobby �   Linking public and private �   Business enabling environment Hort Ic ULtUre exP orts from G Hana : a strateG I c stUdY 5 . 3 s c r U t In Y 87 With such investment, the sector can grow to achieve its po- training and experience that will contribute to the human and tential not only in the distant export markets but also in local social capital. and regional ones. With the incoming investment will come 5.2 manaGement and staffInG For the first five years the GCHDA will require external fund- but also the lessons of other successful countries such as ing (see chapter 6 below) and we propose an international Argentina, Brazil, and New Zealand. The strategy must also tender for an experienced contractor to set up and run the incorporate the Horticulture Development Fund and a strat- GCHDA for the duration of Phase I. The contractor should egy for easing the acquisition of land. be well experienced in procurement and compliance in the We envisage a general manager supported by a staff of three development sector as this phase will preferably be funded officers with international experience and each working with by a donor. Further there will be a need for a variety of short a counterpart. A small complement of clerical support staff term technical support that should be within the capability of would also be needed. Each of the three officers would the contractor. The contractor must be able to call in advice have a particular area of responsibility, namely Investment on investment promotion as well as property management. Promotion, Investment Development, and Technical Advisor. In Phase I, success depends on the ability to bring in inves- The terms for each will be constructed in due course. tors and mobilize the industry. It is therefore imperative that From year six therefore we plan a smaller secretariat. the GCHDA is led by managers with a working experience of the international fresh produce trade and of a caliber to A rolling three year business plan will provide targets, strate- deal at board level with transnational investors. The GCHDA gies, and monitor progress. should be led and staffed by a relatively small team with a If Phase I has not proved sufficiently successful in rein- background in private sector commerce, preferably the fresh vigorating the export horticulture industry, there will be produce/horticulture industry. insufficient support from the players to continue the work A strategy for investment promotion must be refined early of the GCHDA. At this point, the position will need to be in the program in conjunction with the GIPC. The strategy re-evaluated: either the GCHDA can be wound up or further should take into account not only the experience in horti- external funding must be sought and justified on the basis of cultural promotions of other African investment agencies performance to date. 5.3 scrUtInY The GCHDA should provide clear value for money. It should total of 11 members, including three representatives of the fruit also command respect from those funding it. and vegetable producers, a representative of the GIPC, a bank representative, a lawyer, an academic, a senior official from Oversight throughout should be provided by a board, chaired by MoFA and from MOTI, and a donor partner representative. the Minister of Agriculture, with representatives of the different sectors within commercial horticulture in Ghana. We envisage a As such the board will be essentially non-political. Pa rt I I – r e c om m ended actIons 88 6 — FUNDING 6: FUNDING 6.1 GcHDa pHase I At the outset, the GCHDA will rely on donor funding and sup- . at EDIF It would be advisable to begin the industry funding port in order to turn the industry around. We are recommend- before the end of the donor funding in order to accumulate ing that Phase I is planned to last for five years. If, by that some reserves. time, the commercial horticultural industry is not sufficiently strong to support its own trade organization, then we must We have prepared an indicative budget for the first phase conclude that the industry has no need of it in the private of the GCHDA (table II.6.1). This is a draft indication of the sector format. We envisage that the funding for Phase II potential resource needs of the organization. Its final defini- should come from an industry levy perhaps supported or tion will be elaborated by a tender process when the roles underwritten by government funds such as those available and expectations of the GCHDA are agreed. 6.2 GcHDa pHase II Among the tasks of the GCHDA in Phase I will be the prepa- exports, and that, with a lean secretariat, the financial burden ration of a business plan for Phase II supported by the indus- will not be onerous. try itself. We envisage that this will derive from a levy on the 6.3 project FUNDING The GCHDA will operate a number of funds. They include: needs to be developed. A first commitment to fund should be in place before the contract for the management of the ƒ Innovation fund GCHDA is put out to tender. Further funding may be sought ƒ Management training fund in the course of Phase I of GCHDA and indeed other funding ƒ Horticultural development fund opportunities may arise. These will require external support, for -deed other donor partners. The definition of the funds and financial inputs Hort Ic UltUre exports From GHa Na: a strateG I c stU Dy 6 . 3 p r o j e c t FU N D ING 89 Table II.6.1: Indicative Budget for phase I of the GcHDa US DollarS UnitS CoSt Year 1 Year 2 Year 3 Year 4 Year 5 total Initial Capital Expenditure Establish & Equip an 100,000 Office Fund Management Innovation Fund 50,000 50,000 Set-up Management Training Fund Set-up 50,000 50,000 Sub-total 100,000 0 0 0 0 100,000 Recurring Costs Secretariat Staffing 1,300,000 1,430,000 1,573,000 1,730,300 1,903,330 7,936,630 Office 100,000 110,000 121,000 133,100 146,410 610,510 Travel 50,000 55,000 60,500 66,550 73,205 305,255 Sub-total 1,450,000 1,595,000 1,754,500 1,929,950 2,122,945 8,852,395 Infrastructure Fund Business plans 4 50,000 200,000 220,000 242,000 266,200 292,820 322,102 Sub-total 200,000 220,000 242,000 266,200 292,820 322,102 Investment Promotion Officer Flight 20 1,500 30,000 33,000 36,300 0 0 99,300 Per diems 100 250 25,000 27,500 30,250 0 0 82,750 Conference 4 1,500 6,000 6,600 7,260 0 0 19,860 Promotion 1 50,000 50,000 55,000 60,500 0 0 165,500 Local promotion 1 40,000 40,000 44,000 48,400 0 0 132,400 Local travel 1 10,000 10,000 11,000 12,100 0 0 33,100 Sub-total 100,000 110,000 121,000 0 0 331,000 Investment Development Officer Project Inception 4 25,000 100000 110,000 121,000 133,100 146,410 610,510 10 10,000 100000 110,000 121,000 133,100 146,410 610,510 Sub-total 200,000 220,000 242,000 266,200 292,820 1,221,020 Technical Development Market Research 150,000 56,000 61,600 67,760 74,536 81,990 341,886 / Standards / Processing Sub-total 56,000 61,600 67,760 74,536 81,990 341,886 Others 186,319 186,319 186,319 186,319 186,319 931,597 total 2,192,319 2,392,919 2,613,579 2,723,205 2,976,894 12,000,000 pa rt I I - re c o m m eND eD actI oNs Pa r t I I I - B a c k g r o u n d Pa P e r s Prepared for World Bank sustainable development network (WB-sdn) africa region, agriculture and rural development (aFtar), the republic of ghana Ministry of Food and agriculture, and european union all acP agricultural commodities Programme (eu-aaacP) Prepared by natural resources Institute 2010 c o nt e nt s 93 Contents A.  outgrowers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97 A.1 Farmapine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97 A.2 Contract Farming . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 A.3 Local and Regional Markets for Fresh Produce . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105 A.4 Export Supply Chains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109 B.  Businesses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111 B.1 Sources of Finance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111 B.2 Fruit Processing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113 B.3 Potential External Investors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116 B.4 Profitability of Crops and Farm Size . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123 C.  Competitiveness and Innovation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127 C.1 Ghana’s Comparative Position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127 C.2 Innovation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130 C.3 Creating Competitive Advantage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132 C.4 Costa Rica . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135 The Drivers for Success in the Export Market for Fresh Pineapple C.5 Ethiopia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138 The Drivers for Success in the Export Market for Cut Flowers C.6 Thailand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144 The Drivers for Success in the Export Market for Fresh Produce D.  Policy and Institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150 D.1 HAG and SPEG: Who has Survived? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150 D.2 Plans, Policy and Institutional Support . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152 D.3 Land Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155 D.4 Infrastructure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 158 e.  external Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163 E.1 EU Imports of Selected Tropical Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163 E.2 Supermarket and Importer Buying Practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172 E.3 The Credit Crunch and its Impact on Consumer Purchasing, Supermarket Offering, on Importer Sustainability and Ethical Trade and Trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176 E.4 Alternative Regional Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182 E.5 Bananas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 188 E.6 Alternative Produce . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 190 E.7 Fruit Juice Marketing Opportunities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 197 Pa rt I I I - B ac k g r ound Pa P ers 94 c o nt e nt s Boxes, Figures, and tables Figure III.1.1. Composition of Ghana’s Retail Food Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106 Figure III.1.2. Pineapple Supply Map . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109 Figure III.1.3. Banana Supply Map 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109 Figure III.1.4. Vegetable Supply Map . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110 Figure III.3.1. Pineapple Exports by SPEG Members 2003 to 2008 . . . . . . . . . . . . . . . . . . . . . . . . . 133 Figure III.3.2. Number of Farms in the Ethiopian Cut-flower Sector . . . . . . . . . . . . . . . . . . . . . . . . 140 Figure III.3.3. Pattern of African Flower Exporters to the EU, Except Kenya . . . . . . . . . . . . . . . . . . . . 140 Figure III.5.1. EU Imports of Pineapples from Different Sources, 2001–2008. . . . . . . . . . . . . . . . . . . . 163 Figure III.5.2. EU Imports of Bananas from Different Sources, 2001–2008 . . . . . . . . . . . . . . . . . . . . . 164 Figure III.5.3. EU Imports of Mangoes, Guava, and Mangosteens from Different Sources, 2001–2008 . . . . . 165 Figure III.5.4. EU Imports of Papaya from Different Sources, 2001–2008 . . . . . . . . . . . . . . . . . . . . . . 166 Figure III.5.5. EU Imports of Capsicums from Different Sources, 2001–2008. . . . . . . . . . . . . . . . . . . . 167 Figure III.5.6. EU Imports of Ravaya from Different Sources, 2001–2008 . . . . . . . . . . . . . . . . . . . . . . 168 Figure III.5.7. EU Imports of “Other Vegetables� from Different Sources, 2001–2007 . . . . . . . . . . . . . . . 169 Figure III.5.8. EU Imports of Yams, 2001–2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 170 Figure III.5.9. EU Imports of Whole Cassava for Human Consumption, 2001–2008 . . . . . . . . . . . . . . . . 171 Figure III.5.10. EU Imports of Sweet Potatoes, 2001–2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172 Figure III.5.11. Category Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173 Figure III.5.12. Private Label Trends by Market Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177 Figure III.5.13.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179 Figure III.5.14. Reasons for Choosing “Green� Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180 Figure III.5.15. Imports of Selected Fruit to the UAE 2005 and 2008 . . . . . . . . . . . . . . . . . . . . . . . . 183 Figure III.5.16. Imports of Selected Fruit to Saudi Arabia 2005 and 2007 . . . . . . . . . . . . . . . . . . . . . 183 Figure III.5.17. Origin of Tropical Fruit Imports to the UAE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 184 Figure III.5.18. Origin of Tropical Fruit Imports to Saudi Arabia . . . . . . . . . . . . . . . . . . . . . . . . . . . 184 Figure III.5.19. Imports of Bananas & Plaintains, Fresh or Dried into South East Europe. . . . . . . . . . . . . 186 Figure III.5.20. Imports of Pineapples, Fresh or Dried into South East Europe . . . . . . . . . . . . . . . . . . 186 Figure III.5.21. Imports of Guavas, Mangoes, and Mangosteens into South East Europe . . . . . . . . . . . . 186 Figure III.5.22. Imports of Papaya into South East Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 187 Figure III.5.23. Imports of Bananas to South East Europe Recorded from Non-EU Origins . . . . . . . . . . . 187 Figure III.5.24. Imports of Pineapples to South East Europe Recorded from Non-EU Origins . . . . . . . . . . 187 Figure III.5.25. The Top Five Banana Exporter, 2000–2006 (Tonnes/Year) . . . . . . . . . . . . . . . . . . . . . . 188 Figure III.5.26. Top Four Banana Consuming Countries/Territories 2000–2006 (Tonnes/Year) . . . . . . . . . . 189 Figure III.5.27. Imports of Fresh Asparagus into the EU . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 191 Figure III.5.28. Top 4 Exporters of Asparagus to the EU, 2008. . . . . . . . . . . . . . . . . . . . . . . . . . . . 191 Figure III.5.29. Top Four Importers of Asparagus into the EU 2008 . . . . . . . . . . . . . . . . . . . . . . . . . 191 Figure III.5.30. Unit Import Value of Asparagus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 191 Figure III.5.31. Imports of Babycorn into the EU . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 192 Figure III.5.32. Top Five Exporters of Babycorn to the EU 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . 192 Figure III.5.33. Top Four Importers of Babycorn into the EU 2008 . . . . . . . . . . . . . . . . . . . . . . . . . 192 Figure III.5.34. Unit Import Value of Babycorn 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 193 Figure III.5.35. Imports of Sweet Potato into the EU . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 194 Figure III.5.36. Top Five Exporters of Sweet Potato to the EU 2008 . . . . . . . . . . . . . . . . . . . . . . . . 194 Figure III.5.37. Top Four Importers of Sweet Potato into the EU 2008 . . . . . . . . . . . . . . . . . . . . . . . 194 Hort Iculture ex P orts FroM gH ana : a strateg I c st u dy c o nt e nt s 95 Figure III.5.38. Unit Import Value of Sweet Potato. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 194 Figure III.5.39. Imports of Avocado into the EU . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195 Figure III.5.40. Top Five Exporters of Avocado to the EU 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . 195 Figure III.5.41. Top Four Importers of Avocado into the EU 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . 195 Figure III.5.42. Unit Import Value of Avocado . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195 Figure III.5.43. Imports of Lychees into the EU . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 196 Figure III.5.44. Top Four Exporters of Lychees to the EU 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . 196 Figure III.5.45. Top Four Importers of Lychees into the EU 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . 197 Figure III.5.46. Unit Import Value of Lychees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 197 Table III.1.1. FARMAPINE Export Volumes of Smooth Cayenne for 2000–2009 . . . . . . . . . . . . . . . . . . 97 Table III.1.2. Evolution of the Fresh Pineapple Chain (1960s–2000s) . . . . . . . . . . . . . . . . . . . . . . . . 103 Table III.1.3. Retail Food Sales in Ghana – 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105 Table III.1.4. Summary of Fruits and Vegetables Consumption Patterns in Sub-Saharan Africa . . . . . . . . . 106 Table III.1.5. Size of Sub-Saharan African Agricultural Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . 106 Table III.1.6. Structure of Retail Food Outlets in Ghana . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107 Table III.2.1. Current Capacity and Status of Fruit Processing in Ghana, 2009. . . . . . . . . . . . . . . . . . . 115 Table III.2.2. Characteristics of Potential External Investors in Ghana . . . . . . . . . . . . . . . . . . . . . . . 117 Table III.2.3. Comparison of Smallholder Production Costs for 1 Acre of Smooth Cayenne in Comparison to Current Costs for Small and Medium-Scale Production of 1 Acre of MD2 . . . . . . . . . . . . 124 Table III.3.1. Pineapple Exports by SPEG Members 2003 to 2008 (Tonnes) . . . . . . . . . . . . . . . . . . . . 128 Table III.3.2. Volume (tonnes) of Imports of Fresh Pineapple to the U.S. for the Period 2003 to 2008 . . . . . . 136 Table III.3.3. Volume (tonnes) of Imports of Fresh Pineapple to Europe for the Period 2003 to 2008. . . . . . . 136 Table III.3.4. Sub-Saharan African Vegetable Exports to the EU, 2003 . . . . . . . . . . . . . . . . . . . . . . . 139 Table III.3.5. Value of Exports of Fresh Fruit to Principal Markets . . . . . . . . . . . . . . . . . . . . . . . . . . 145 Table III.3.6. Value of Exports of Fresh Vegetables to Principal Markets . . . . . . . . . . . . . . . . . . . . . . 145 Table III.3.7. Number of GOBALGAP-Certified Producers in 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . 148 Table III.4.1. Summary of HAG and SPEG Members of Export Capacity . . . . . . . . . . . . . . . . . . . . . . 150 Table III.4.2. Comparison of SPEG Members Exports in 2004 and 2008 . . . . . . . . . . . . . . . . . . . . . . 150 Table III.4.3. Competitive Strengths and Weaknesses of Different Farm Types . . . . . . . . . . . . . . . . . . 153 Table III.4.4. Predicting Competitiveness of Farm Types in Different Crops and Markets . . . . . . . . . . . . . 154 Table III.4.5. Summary of Areas Available by Region . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157 Table III.5.1. Shopper Anticipated Responses to Household Budget Squeeze. . . . . . . . . . . . . . . . . . . 177 Table III.5.2. Ad Valorem Duties and Taxes on Import . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 184 Table III.5.3. Imports of Selected Fruits into the Maghreb and Eastern Mediterranean (tonnes) . . . . . . . . . 184 Table III.5.4. Origin of Selected Fruit Imports to Lebanon (tonnes). . . . . . . . . . . . . . . . . . . . . . . . . 185 Table III.5.5. Ad Valorem Duties and Taxes on Import . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185 Table III.5.6. Value and Volume of Fruit Juice Exports from Ghana, 2003 to 2008 . . . . . . . . . . . . . . . . . 197 Table III.5.7. Value and Volume of Fruit Juice Imports into Ghana, 2003 to 2008 . . . . . . . . . . . . . . . . . 198 Table III.5.8. Global Retail Value of Fruit Juice Sales by Category, 2008 . . . . . . . . . . . . . . . . . . . . . . 198 Table III.5.9. Global Retail Value of Fruit Juice Sales by Region, 2008 . . . . . . . . . . . . . . . . . . . . . . . 198 Pa rt I I I - B ac k g r ound Pa P ers a — o u tg r oW e r s 97 A: OUTGROWERS A.1 FarMaPIne A.1.1 InTROdUcTIOn to support the establishment of FARMAPINE as an example Smallholder farmers typically lack the resources required of the FOM concept developed from ideas piloted in Zambia. for direct access to high value export markets. Their pro- The objective of the FOM project was to “Provide for in- duce must therefore pass through an intermediary such as creased participation of poorer households in income genera- a commercial exporter. All exporters are obviously commer- tion through a group approach (WBR-22439 of 2001). The � cial in nature, and some observers have seen the exporter/ WB-ADP provided a loan of $1.4 million repayable over seven smallholder farmer relationship as exploitative, which has to ten years at 7% to establish FARMAPINE, and an addi- fed a desire to find ways to support smallholders to access tional one year’s worth of working capital for the production export markets directly. and operation of FARMAPINE. This loan was administered by IDA (Addo 2003, Graffham 2004, and Yeboah 2005). One such idea is the World Bank’s Farmer Ownership Model (FOM) that was piloted in Zambia in the 1990s. The FOM FARMAPINE was incorporated in March 1999 and opera- concept was transferred to Ghana in 1998 to create a com- tions started in September 1999. According to a report of pany called FARMAPINE, which was intended to enable sev- the World Bank (2001), the original membership was 164 eral hundred smallholders to sell directly to the EU market. farmers with an average of 1.9 acres of smooth cayenne FARMAPINE had a production capacity of 7 ,000 tonnes of planting each. According to Takane (2004), FARMAPINE was fruit per year and initially appeared highly successful. formed with five farmer cooperatives (178 farmer members) controlling 80% of shares, and 20% allocated equally to two By 2001–2002, FARMAPINE was Ghana’s second largest small producer/exporters (Garbo Limited and Kokobin Farms exporter of pineapple with a 17% share of exports, while Limited) merged into FARMAPINE. According to Brown and Jei River was the largest exporter with 18% of the export Sander (2007), FARMAPINE originally had 178 farmers with volume. As a result many papers were written to highlight 150 hectares (371 acres) of smooth cayenne ready for export the success of the FOM concept and suggest replication in in 2000; all growers were situated in the Akwapim range other countries. However, this success was short-lived and within 30 km of FARMAPINE’s base at Nsawam, which is FARMAPINE is no longer operational (table III.1.1). 50 km north of Accra. This paper records the story of FARMAPINE with a view to The five cooperatives and two former exporters were con- highlighting the lessons for future interventions of this type. tracted to supply all production to FARMAPINE and in return FARMAPINE would provide all inputs on credit, technical A.1.2 HISTORy assistance for production and planning, and logistics and In 1998, the Agricultural Diversification Project (ADP) of World administration for export of the crop. FARMAPINE would pur- Bank entered into an agreement agreed with TechnoServe, chase, grade, pack, and market all exportable grade fruits and AMEX-International, and the Government of Ghana (PPRSD) provide payment at market price less deductions for credit. TAblE III.1.1: FarMaPIne export volumes of smooth cayenne for 2000–2009 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Tonnes 3,500 5,865 6,162 4,958 4,766 4,235 1,161 27 0 0 Source: SPEG and GEPC data. Pa rt I I I - B ac k g r ound Pa P ers 98 a — ou tg r oWe r s Non-exportable fruit would remain the property of the indi- of MD2 plantlets to assist FARMAPINE in converting from vidual farmers (Brown and Sander 2007). The FARMAPINE smooth cayenne to MD2 (Danielou and Ravry 2005). system had a core team of 80 staff and a management team of seven: the Managing Director (MD), an Export Manager, Professor Antwi stated that poor fruit quality and high levels a Senior Farm Production Manager, two Field Production of rejections at ports of entry were FARMAPINE’s major Managers, a Quality Control Manager and an Accountant. problems in the latter part of 2004. He took steps to improve In addition, a management board was created consisting of production and post-harvest management, and reported that the MD, representatives from each of the five farmer coop- by January 2005 the level of rejections had been reduced to eratives and two former exporters, and a representative of a minimal level. However, soon after being appointed, Mr. Foli TechnoServe (Graffham 2004). discovered that the previous management team had been very poor at keeping track of outstanding receivables. He By 2003, there were 360 registered growers but only 216 managed to recover €120,000 of outstanding payments from were active and they had 150 ha (371 acres) of production. buyers in the EU, but this went directly to Barclays to service Additional growers were taken on as non-shareholders on the loan obtained in June 2003. Even with the recovery of the an individual basis to supplement the efforts of the original €120,000 of outstanding payments, the Barclays loan had to 178 shareholding farms (Graffham 2004, Jensen 2005). It is be rescheduled; it was converted to Cedis and repayments interesting to note that the 216 farmers who were active in were scheduled for a two-year period starting in May 2005. 2003 had the same area of production as the 178 farmers in However, the rescheduled debt could not be serviced due to 1999–2000, indicating a lack of resources to expand the pro- changes in the market (MD2 replacing smooth cayenne) that duction base. The outlets for FARMAPINE’s produce in the started to impact FARMAPINE between May and July 2005. EU consisted of Germany (40% of sales), UK (15%), Belgium, Netherlands, and Italy. One box of pineapples was selling for In 2004–2005, FARMAPINE explored Fair trade certification $3.50, well below the $15 per box for MD2, making for a as a way out of their financial problems. In September 2004, very poor return, but FARMAPINE lacked the resources to FARMAPINE attained Fairtrade Labelling Organization (FLO) invest in MD2 (Graffham 2004). In August 2003, FARMAPINE certification (Advance Consulting 2008). The first shipment was GLOBALGAP (formerly known as EurepGAP) certified. of FLO-certified produce was sent in October 2004 but The total area of GLOBALGAP certified land was 60.55 ha was rejected on quality grounds. In January 2005, a second (150 acres) or 40% of the production area. Farm sizes ranged shipment of FLO-certified produce was sent to TESCO via from 0.3 to 5.76 ha (0.7–14.2 acres) with an average farm size Compagnie Fruitière. Plans were in place to sell 5,000 tonnes of 1.89 ha (4.67 acres). Fifteen of the GLOBALGAP farmers of FLO-certified fruit per year (from May 2005), but this failed were clustered around one village, while the rest were scat- as TESCO required MD2. tered around ten other villages (Graffham 2004). FARMAPINE lacked the resources and scale of operation for During 2003, funds provided under the original IDA loan successful conversion from smooth cayenne to MD2 (Fold proved insufficient and a second loan, consisting of $250,000 and Gough 2008). West African Fair Fruits (WAFF) worked at 16% interest and 1 billion Cedis (equivalent to $118,217 at with FARMAPINE to support the farmers converting from US$1 = 8459 Cedis) at 33.5% interest, was obtained from smooth cayenne to MD2, but production costs averaged Barclays (GH) Limited. However, FARMAPINE continued $5,000 per ha for MD2, substantially higher than the $2,227 to experience financial difficulties and in September 2004, per ha for smooth cayenne. In addition, MD2 required a much Professor Antwi was replaced by Mr. Chris Foli as MD of higher level of agronomic input. The high production costs FARMAPINE. FARMAPINE was restructured in an attempt to and absence of sufficient agronomic expertise made MD2 put the company on a sounder commercial footing. Measures an unsuitable variety for production by small-scale grow- included restructuring of the WB-IDA debt, reduction of core ers. FARMAPINE could not afford to invest in MD2 and was staff from 80 to 65 to reduce overhead costs, streamlining forced to rely on government and NGO initiatives to obtain farmer membership to focus on 300 proven growers, and free planting materials. WAFF supplied free MD2 planting negotiations with carton suppliers for a schedule of deferred material but this was only sufficient to plant 8 ha over one payments. A deal was done with Akwapim South Rural Bank year. Attempts to source MD2 planting material from the to provide new sources of credit for purchase of inputs. CRIG were even less successful: FARMAPINE obtained only Arrangements were made with the tissue culture laboratory between 250 to 600 plantlets over a six-month period, which at Cocoa Research Institute of Ghana (CRIG) for production was sufficient for less than 0.1 ha. Hort Iculture ex P orts FroM gH ana : a strateg I c st u dy a. 1 Fa rM aP I n e 99 May to July 2005 was crunch time for FARMAPINE as EU Addo (2003) raised concerns over the high administrative buyers were completing the switch to MD2 by procuring overhead associated with FARMAPINE. In 2002, FARMAPINE most of their supplies from Costa Rica. FARMAPINE had employed 80 full-time staff to support 167 small farms to made promising sales in the first quarter of the year, but export 6,000 tonnes of smooth cayenne. The FARMAPINE from May 2005 most buyers either stopped buying from management team had seven staff including a senior aca- FARMAPINE or reduced purchases to a minimal level. By demic. Addo (2003), commenting on FARMAPINE manage- September 2005, FARMAPINE only had three customers in ment, said “There is little vision for the future and little the EU willing to buy smooth cayenne and all of this had to anticipation of changes and risks. The influence of the farmer be FLO-certified. cooperatives in the decision making process is unclear.� In 2006, export volumes dropped to an unsustainably low Interviews with the management of FARMAPINE in 2004 level (table III.1.1). Five unsuccessful attempts were made (Graffham 2004) revealed a company with a rather academic to obtain re-financing, but FARMAPINE’s poor financial state approach to business. FARMAPINE resembled a short-term made approval of loans impossible. In November 2006, news- donor-funded project with elaborate structures, but no clear papers (The Statesman, 2006) reported that FARMAPINE vision for growing the business. In contrast, most other major had been declared “bankrupt� and that creditors were go- pineapple exporters had relatively low levels of infrastructure, ing to court, 400 staff (including 150 casuals) had been laid and management that was much more focused, showed off, and that workers were claiming no wages had been paid more drive to develop the business, and could cope with for seven months. The courts allowed FARMAPINE until changing scenarios such as the market demand for MD2. June 2007 to try and find a solution to their problems. It is Fold and Gough (2008) said a major contributing factor for interesting to note that although several documents refer to the failure of FARMAPINE was a massive overinvestment FARMAPINE’s going bankrupt, at the time of this writing, the in an expensive administration building, grading and packing MD denies it, and claims that FARMAPINE is still technically shed, and trucks for transport. FARMAPINE made the mis- a going concern although no exports have been made since take of using up the working capital on infrastructure; as a March 2007 . result, credit for input was stopped and payments to farmers were delayed by five months or more. Farmers attempted to A.1.3 AnAlySIS recover losses by side-selling which disrupted the business According to a World Bank report (2001) serious flaws existed plan of FARMAPINE. in the FARMAPINE model from its inception in 1998. In par- ticular, no provision was made to cover foreign exchange risks. The IDA loan was made in foreign currency, imported A.1.4 cURREnT SITUATIOn fertilizers were purchased in U.S. dollars advanced as credit, No exports have been made since March 2007 since all of but repayments for inputs were made in Cedis. Inputs pur- FARMAPINE’s customers have switched to MD2, but two chased in 1999 when the exchange rate was 2,647 Cedis of the former FARMAPINE cooperatives are still producing per dollar were repaid in October 2000 when the Cedi had and selling small volumes of smooth cayenne pineapples to been devalued to 5,800 Cedis per dollar. As a result, farmer Blue Skies and Agrofair. FARMAPINE has no assets other repayments covered less than 50% of the original value of than the empty administration block and has not been able the inputs. This had serious implications since purchases of to repay the original IDA loan or subsequent loans obtained the next round of imported inputs were much more expen- from Barclays. sive. Overall the massive devaluation of the Cedi in 2000 The MD of FARMAPINE believes that the business could be resulted in a rapid shrinkage of the value of the loan provided revived if previous debts were cancelled and a new invest- to FARMAPINE farmers for working capital. ment of at least $3 million was made, although this seems According to Brown and Sander (2007), as early as August highly unlikely to occur. In addition, the MD of FARMAPINE 2000 prices paid by FARMAPINE to its farmers were 10–25% believes that each farmer would need at least 60 acres of lower than for other exporters creating opportunities for side- MD2 to be viable. The total area required would be 1000 acres selling. According to Dannson et al. (2003), by late 2002 pay- which would allow 300 acres to be available for harvesting, ments to farmers were delayed by four to five months and and the rest being in production or fallow. This would not loans for input purchases had been stopped. be possible under the original FARMAPINE model which Pa rt I I I - B ac k g r ound Pa P ers 10 0 a — ou tg r oWe r s focused on small-scale growers with 1–5 acres each, and REfEREncES would have to be solved by providing the company with their Addo, C. 2003. Supporting farmers in linking with processors: own land to support the bulk of production. Experiences from a pineapple exporter. Paper presented at the FAO expert consultation “Strengthening farm agri-business � linkages in Africa, 24–27th March. World Agroforestry Centre, A.1.5 OnclUSIOn And STRATEGIc c Nairobi, Kenya. ImplIcATIOnS Advance Consulting. 2008. Ghana Fair trade Organic pineapples. Like other pineapple producers and exporters in Ghana, http://www.advanceconsulting.nl/index.php?id=202 FARMAPINE suffered from the change in market demand . Brown, O. and C. Sander. 2007 “Global supply chains and small- from smooth cayenne to MD2, and it would be easy to at- � holder farmers. Trade Knowledge Network Series. IISD, Canada: tribute the company’s demise to this single factor. However, 1–25. would FARMAPINE have survived in a world without MD2? Danielou, M. and C. Ravry. 2005. The rise of Ghana’s pineapple Unfortunately, all the evidence points to FARMAPINE being industry–from successful takeoff to sustainable expansion. a badly designed, badly managed operation that would have Africa Region Working Paper Series No 93. ESSD Africa: 1–58. collapsed even without the coming of MD2, although the col- Dannson, A., C. Ezedinma, T. Njura, B. Bashashe, J. Kersten, and lapse might have taken slightly longer. K. Satorius. 2003. Country studies on strengthening farm agri- business linkages. Rome: FAO, 1–19. FARMAPINE’s great failing rests with the management, Fold, N. and K. V. Gough. 2008. “From smallholders to trans-nationals: which not only lacked commercial thinking, but was also top The impact of changing consumer preferences in the EU on heavy, lacked business experience, managed finances ap- � Ghana’s pineapple sector. Geoforum 39: 1687–1697 . pallingly, and had no vision for the future of the business. As Graffham, A. J. 2004. “European food standards, issues of compli- early as 2004, it had been noted that FARMAPINE felt more � ance and market access for Ghana’s export horticulture sector. like a short-term donor-funded project than a commercial NRI Report, Chatham, UK: Natural Resources Institute. enterprise and contrasted badly with some of the truly com- . Jensen, M. F 2005. “Capacity building for pro-poor trade: Learning mercial exporters in Ghana (Graffham 2004). � from the limitations in current models. Human Development Report Office–Occasional Paper, No 15. UNDP: 1–34. Experience from many countries has shown that you cannot The Statesman Newspaper. 2006. “Multi-million Cedi World Bank make a group of resource poor smallholders into a big export � Project folds up., November. Accra, Ghana. business for the simple reason that the members lack the Sefa-Dedeh, S. 2005. “Ghana Private Public Partnership Food necessary resources, knowledge, and experience to operate � Industry Development Program–Final Report. Michigan State such a scheme. Where groups have succeeded, it is usually University: 1–152. with the support of a major commercial exporter. Takane, T. 2004. “Smallholders and non-traditional exports under � market liberalisation: The case of pineapples in Ghana. African In developing a strategy for the future of Ghana’s export Study Monographs 25: 29–43. horticulture industry, FARMAPINE should be recognized as World Bank. 2001. “Performance audit reports and sectoral overview: a costly mistake that should be avoided in future. Support � Ghana. World Bank Report 22439, p. 45. should focus on large commercial businesses with proven Yeboah, G. 2005. “The Farmapine model: A cooperative marketing track records and no attempt should be made to rehabilitate strategy and a market development based approach in sub- FARMAPINE as this will simply waste scarce resources. � Saharan Africa. Choices 20: 81–86. A.2 contract FarMIng A.2.1 InTROdUcTIOn market costs to be taken out of the chain, as well as provid- Over the last few years there has been considerable discus- ing a conduit for information flow. sion in Ghana and elsewhere in Africa about the merits of contract farming. The logic behind contract farming is that At its simplest, in a traditional contract farming system the the buyer gets a guaranteed supply of raw material where market intermediary—trader or processor—agrees to buy price, quantity, delivery time, and quality are assured. The product from the farmer—either all the product from a fixed farmer benefits because of the assured market. Both parties land area or a fixed tonnage—at an agreed price providing also benefit because contract farming allows for transaction/ minimum quality standards are met. However, there are Hort Iculture ex P orts FroM gH ana : a strateg I c st u dy a. 2 c o nt r ac t Fa rMI ng 101 many ways that the system can break down. Perhaps the adaptive research. These overhead costs must eventu- most common failure is caused by a disparity between the ally be recovered, but it is hoped that they can be open market price and the contract price: a higher open mar- recovered out of the shorter supply chain and reduced ket price tempts the farmer to “side-sell, while a lower mar- � transaction costs; ket price tempts the buyer to evade the contract by claiming ƒ Side-selling by farmers to evade repayment of loans substandard quality. for inputs, etc.; ƒ If the training and motivation of market intermediaries Contract farming can be very successful, but perhaps or agents or company staff is sub-standard, then their the most significant problem is default by one party. The contracted farmers would not improve their quality real solution is not contract enforcement, but in the small- and yields, thus leading to an unstable supply chain. farmer selection process and the establishment of good and transparent working relationships. Well-organized and well- The national benefits for supporting the promotion of con- managed contract production provides considerable benefits tract farming include: to both the market intermediary and the farmers because it helps secure the quality and quantity of raw material that ƒ The development of a cadre of well-organized, trained is the lifeblood of successful agribusiness and it provides a farmers capable of delivering an ordered supply of guaranteed market for the farmer. appropriate quality produce which is a strong asset for agribusiness development; There are many advantages of well-run contract farming op- erations, including: ƒ If contract farming leads to more efficient agribusi- nesses, it will lead to increased employment and ƒ Shorter supply chain and reduced transaction costs,1 improve international competitiveness; hence lower factory-gate prices and/or higher farm- ƒ Safer pesticide usage and more respect for environ- gate prices; mental issues through improved technical distribution; ƒ Assured market prices which will enable the farmer ƒ More commercially focused farmers. to concentrate on improving yields and quality; ƒ Reliable supply of raw material, which is vital for There are a few factors that are critical to successful contract exporters to fulfill forward contracts or processors to farming, for instance: manage factories efficiently; ƒ All the actors in the supply chain must receive a fair ƒ Farmers can be provided with production credit, often reward for their efforts; if this is not the case, the in the form of inputs; scheme will ultimately fail; ƒ Farmers also benefit from the transfer of new skills ƒ The key to the success is that costs of managing the and techniques because contract farming provides system must be fully recovered in the price structure the basis for establishing effective extension services, to ensure sustainability; either private or public; ƒ Farmers should be located in clusters—which reduces ƒ Facilitation of the introduction of new crops or the cost of servicing the farmers as well as giving varieties; them the benefits of exchanging intelligence; , ƒ Meeting a buyer’s requirement for “traceability� ƒ The cropping should not conflict with farmers other , “due diligence� or a code of practice; obligations, including food security; ƒ A contracted raw material supply is cheaper than ƒ All parties in the chain must honor the terms of the investing in land and own-production; contract. This is especially important for the agribusi- ƒ Reduction of risk of investing in new processing ness if it is going to develop the long-term loyalty of techniques and equipment. the farmer; There are also disadvantages, which may include: ƒ As with all progressive businesses, there needs to be a continuous process of improvement, both in terms ƒ Overhead costs of establishing contracted produc- of the product and in production practices; tion can be significant, e.g., inputs, staffing, training, ƒ Training of farmers is the core of the process; ƒ Farmers’ opinions should be heard; the formation of 1. The farmer will not incur some of the traditional marketing costs, such as transport, aggregation, taxes, cesses, etc. farmer groups is important; Pa rt I I I - B ac k g r ound Pa P ers 10 2 a — ou tg r oWe r s ƒ Above all, the selection of farmers is vital. Farmers important to understand the minimum size of land holding need to be selected on the basis of their required to ensure that the farmer gets an acceptable return • proven track record for reliability; any history of in order to prevent the temptation of side-selling. side-selling could disqualify them, It must be noted that some successful contract farming • farm size, the farm must be sufficiently large to be operations work because there is only one buyer for the an economic prospect for the market intermediary, farmer’s produce, i.e. where there is a monopsony. This • suitable soils and climate has the advantage that farmers are unable to side-sell and that the sole buyer is able to recover the input supplies and Perhaps the most important aspect of contract farming is the extension costs. Examples of monopsonies include tobacco pricing arrangement. Whatever pricing arrangements are and sugar. However, in the case of export horticulture, this used, the application must be transparent. There are a num- does not apply as there is more than one buyer for most ber of systems used to establish prices; each has good and commodities. bad points and care must be taken to decide on the system that is fairest to most actors in the chains, e.g.: A.2.2 EvElOpmEnT Of cOnTRAcT fARmInG d ƒ Fixed prices are commonly used when there is no In THE pInEApplE IndUSTRy alternative market outlet. Typically fixed prices are agreed at the start of the season and for all parties it is When Ghana started to develop its horticultural exports a simple system. However, fixed price systems tend to Europe in the 1980s and 1990s, the exporters relied to have problems when there are alternative buyers on small-farmers being able to supply produce. At the and side-selling/buying occurs. time, the main export was pineapples: the farmers grew ƒ Flexible prices are often based on applying a formula the smooth cayenne variety and there was no demand to global market prices. The global price can be used for certification. The general practice was for the traders to calculate farm-gate and market intermediary prices to buy fruit from farmers and airfreight it to Europe. The using a pre-agreed formula. This system has the ad- relationship between farmers was simply that of a buyer vantage that the agribusiness is always able to market and seller; there were no efforts to establish long-term the end product at a profit—but most of the risk of relationships, develop planting programs or supply techni- price fluctuation is taken by the farmer. cal advice. There were no pre-arranged buying prices; the trader simply agreed on a price with the farmer at the time ƒ local spot-market price can be used but it is impor- of purchase; in other words, this was not contract farming. tant that the price be reviewed periodically—perhaps weekly or every two weeks—and all parties must Over the past decade, there have been a number of changes in understand clearly how it is calculated. The system is market requirements (see table III.1.2). For example, most EU widely used in Thailand by small-scale agribusinesses. buyers expect produce to be GLOBALGAP certified and the One of the key issues with this system is to include market now demands MD2 instead of smooth cayenne. Both a reward for improved quality. It is unlikely that this these changes have made it much more difficult for small- system could be used for export horticulture in Ghana. farmers to supply on an ad hoc basis, but have strengthened ƒ Maximum-minimum price contracts have been the need for the establishment of more formal contract farm- successfully introduced in more developed countries, ing. The need for GLOBALGAP certification makes it much e.g., potato farmers supplying frozen French fry manu- more important to have a pre-determined supply chain and facturers. These are where the agribusiness buys at the switch to MD2 meant that considerable investment was market price between an upper and lower limit. The required in new planting stock, which most farmers could not upper limit is set so the agribusiness can still compete obtain. The growing of the newer variety proved to be much in the market and the lower limit allows the farmer to more difficult than was expected. Therefore, the importance make sufficient margin to cover costs. of small-farmer production of export pineapple production has ƒ Prices on a consignment basis are when the price is diminished, as the problems of FARMAPINE demonstrated based on sale price, sometimes after input costs have (see Background Paper A1). Fortunately, it is still vital in some been deducted. commodities such as citrus for the processing sector. Key to developing the best contract farming relationships is The supply of pineapples for export is more and more concen- trust; hence the selection of the farmer is crucial. It is also trated on large-scale production One exporter noted that as Hort Iculture ex P orts FroM gH ana : a strateg I c st u dy a. 2 : c o nt r ac t Far MIng 10 3 TAblE III.1.2: evolution of the Fresh Pineapple chain (1960s–2000s) 1950s–mid-1980s mid-1980s–mid-1990s mid-1990s–early 2000s early–mid 2000s Geography of Highly concentrated (CI) Highly concentrated (CI) Concentrated (CI, CR) Concentrated (CI, CR) Concentrated (CI, CR) production entry barriers Low Low Medium High High (production) Type of actors Smallholders Smallholders and large Smallholders and large Large and medium-sized Large and medium-sized plantations plantations plantations plantations Variety Smooth Cayenne Smooth Cayenne Champaka MD-2 MD-2 Types of product Whole pineapples Whole pineapples Whole pineapples Whole pineapples Variety of forms (diced, salad, whole), packaging and standards (organic, fair trade, EurepGap, etc.) entry barriers High export quotas High access to freight High logistics and com- High logistics and commercial High standards and (trade) and access to freight mercial innovations innovations brands level of drivenness Low Low Medium High High Pilot Cooperatives and OCAB Large agro-food companies Transnationals Transnationals and maritime transporters retailers Vertical integration Low Low Low–medium Strong Strong institutional Maritime parastatals State withdrawal in CR and CBERA II, Agricultura de Private retailer standards Explosion of private framework and public pro- CI (SAPS), CBERA I (CR) Cambio (CR); Organization of (EurepGap) standards and other ducer organizations the market in Bananas (CI) product differentiation (Ivorisation) strategies Notes: CI = Côte d’Ivoire; CR = Costa Rica; SAPS = structural adjustment programs. Source: Vagneron, I. et al. (2009). recently as 2005, 40% of his exports were from out-growers, of most smallholders: members were well resourced and but now it is all from his own production (from either his own or had alternative sources of income. Thus, there appears to be rented land).2 There have been considerable efforts by donors much less opportunity than there was once for small-farmers to help re-establish small-farmers as a major source of export to participate profitably in the pineapple export value-chain. pineapple production, but Background Paper B4 estimates that the minimum area of export pineapple production required for The Integrated Tamale Fruit Company (ITFC) presents a profitability is about 16 ha; or a total farm area of at least 54 ha. model, unusual in Ghana, of a nucleus estate operating In other words, it is outside the range of most small-farmers. with outgrowers to supplement production. The nucleus farm, established over nine years, has some 160 ha and is One solution to this problem might be the introduction of based on Zill, Amelie, Kent and Keitt varieties of mango. contract farming to groups of small-farmers such as the The 1,400 outgrowers supplement production with a fur- Gomoa Okyereko Pineapple Growers Association (GOPGA). ther 560 ha of which some 25% is drip-irrigated. There are GOPGA has seven members, six of whom are GLOBALGAP plans for full coverage with irrigation. Early problems with certified under option 2. These members have 25 ha under the stone weevil appear to have been solved and exports pineapple production. They have the advantage of being are gradually increasing, reaching 300 tonnes in 2007, close to their market, and a processor which removes the mostly to Lebanon and Egypt. The managerial difficulties in need for expensive investments in a cold chain. Currently such an operation should not be underestimated, and the GOPGA makes acceptable margins, but these will fall drasti- need to also support alternative crops for food security for cally next year when it has to pay for its certification audit. the outgrowers compounds the problems. Nevertheless, It should also be noted that GOPGA members were atypical the project has a target in excess of 10,000 tonnes of pro- duction by 2015.3 2. In Background Paper B4, it was estimated that in 2003–2004 pine- apple production was split between approximately 12 large farms (300–700 ha), some 40 medium sized operations (20–150 ha), and 3. For further review see ITFC: Organic Mangoes Improving possibly as many as 10,000 small farms with productive areas Livelihoods for the Poor in the UNDP series Growing Inclusive ranging from 0.2 ha to 10 ha. Markets (www.growinginclusivemarkets.org) Pa rt I I I - B ac k g r ound Pa P ers 10 4 a — ou tg r oWe r s There is also considerable interest in establishing contract remain competitive in the commodity juice market. However, farming for horticultural processing. In theory, there are a all the indications are that small-farmer production does not number of reasons why this might be sensible: in particu- necessarily deliver cheap raw material unless there are major lar, in order to compete efficiently, processors must have breakthroughs in the technical management of production. a reliable source of cheap raw material—and in many in- For example, in addition to improving management in the cit- stances the quality standards demanded by the processor rus orchards, it has been suggested that it might be cheaper are less than by the export market. However, on further to produce pineapples for processing by leaving the crop in investigation this does depend on the type of process. the ground for a second harvesting season. Obviously these The two main processors of fresh-cut fruit, Blue Skies and ideas need to be proven, but if they are, then it will be nec- PeelCo, buy from 34 and 5 growers respectively and have essary to get the message across to farmers and contract informal contract arrangements. These have been estab- farming could be used. lished because they need assured supply of a minimum A number of recent pineapple juice investments have quantity to be certain of meeting the market demand.4 been made by businesses that already grow pineapples There might be more opportunities for using contract or other fruit, e.g., Milani, Jei River, 2K Farms, etc. These farming for raw material supply to juice manufacturers. investments have been made to make use of the fruit that The supply of oranges to Pinora is almost entirely from cannot be marketed fresh and the short-term aim is to small-farmers. However, despite being the lifeblood of market the output locally. However, the local markets will this factory, Pinora has to pay market prices for the citrus soon be saturated (the price of imported concentrate is because it has to compete with the local market buyers significantly lower) so these businesses will have to seek (market queens), as well as traders exporting to the neigh- export opportunities and may need to utilize small-farmers boring countries. to get sufficient throughput to spread the processing overheads. Pinora has recently taken responsibility for buying the pro- duce of the Coastal Growers Association which consists of 3,000 farmers with an average orchard size of less than A.2.3 OnclUSIOn And STRATEGIc c 2 ha and poor yields. The company recognizes the impor- ImplIcATIOnS tance of helping farmers to improve yields and quality, and reduce costs. However, it faces a problem of how to The main strategic issues that emerge are that: recover the extension costs associated with increasing ƒ There are few examples of contract farming being yields. Perhaps in reality, it should be in a position to use undertaken in Ghana with small-scale farmers. There its dominance in the market to become the industry price is, in effect, contract farming with the suppliers setter. of fruit for the fresh-cut industry; but there is not The dilemma for the juice processing industry in Ghana yet with juicing or with exports, except for ITFC is that once it has exploited niche market opportunities mangoes. The arrangement for supplying fruit for for organic and fair trade, it will have to compete in the fresh-cut is almost exclusively with medium and mass commodity juice market where competitive position large-scale producers. Only ITFC shows contract is often gained by cheap raw material, economies of scale, farming for fresh fruit. Contract farming is not seen and lower transport costs. However, support for contract in the vegetable supply chain. farming might benefit both the small-farmer and processor ƒ There could be some benefits for establishing contract in the longer term. farming for processing, especially if it was proven that it was necessary to implement improved agronomic Background Paper E7 notes that Ghana fruit juice has a management. competitive advantage supplying the organic and fair trade market, but it needs a much cheaper cost base if it is to REfEREncES Vagneron, I., G. Faure, and D. Loeillet. 2009. “Is there a pilot in 4. As the manager of PeelCo stated, “Outgrowers should be of a the chain? Identifying the key drivers of change in the fresh minimum size to have continuous production of an amount to fill � pineapple sector. Food Policy. Available at doi:10.1016/ a 1 tonne truck on a regular basis throughout the year� . j.foodpol.2009.05.001 Hort Iculture ex P orts FroM gH ana : a strateg I c st u dy a. 3 lo c a l a n d r egI ona l M ark ets F or Fres H P roduce 10 5 A.3 local and regIonal Markets For FresH Produce A.3.1 InTROdUcTIOn In terms of value, retail food sales in Ghana in 2006 were esti- Many Ghanaian exporters of fresh produce (mainly fruits and mated at approximately $1.2 billion,7 as shown in table III.1.3 vegetables) are finding it difficult to continue participating in below. According to trade sources, retail food sales have the value chains of the distant export markets. For example, grown at not less than 10% annually since the introduction out of a total membership of more than 20 only 10 SPEG of trade liberalization policies by the Government of Ghana members now actively export.5 The number of active export- in the early 1990s. Based on 11% share (see consumption ers in the ranks of the Horticulturists Association of Ghana is of fruits and vegetables as percentage of food budget in even smaller. As the paper on SPEG and HAG indicates, most table III.1.4) of a value of roughly $715 million, i.e., $540 million small-scale exporters have dropped out of the distant export , increased by 10% for the years 2007 2008, and 2009, for value chains. Smallholder farmers are particularly affected by locally produced food, the local market for fruits and veg- this development.6 etables may be worth close to $80 million in 2009. The difficulty of serving the distant export markets brings to At $80 million the value of the local market for fruits and veg- the fore the role of local and regional markets. Can these etables compares quite favorably with earnings from exports, markets provide alternative trading opportunities to support which stood at €80 million in 2007 (see Part I of the present further growth and development of Ghana’s export horticul- report) However, prices in the local market tend to be lower ture industry? This paper attempts to answer this question by than in export markets. When so-called market ladies buy looking at the current state and future prospects of domestic “residual fruit� from farmers on the spot, the offer price is and regional markets. The paper focuses on fresh fruits and often fairly low. With mangoes, for example, a kilo sold by a vegetables, excluding derivatives such as juice and canned farmer for export is priced around 30 pesewas, whereas the products. “residual fruit� sold to the local market might fetch 10 pesewas (FAGE/USAID-TIPCEE 2008). Anecdotal evidence suggests, however, that but for these markets many smallholder farm- ers and small-scale exporters would perhaps have dropped A.3.2 cURREnT SITUATIOn out completely of the fresh produce industry in Ghana. Market size Local—and presumably regional—markets absorb some of As shown in table III.1.5, the West African domestic market the greater volume of fresh produce that is often called “re- for food staples is $20.1 billion. Assuming a 10% share for sidual� or export “rejects� (FAGE and USAID-TIPCEE 2008) fruits and vegetables, the West African domestic market is Assuming export yields of 80% of production, an export ton- $400 million. A lot of this may, however, actually represent nage of 90,000 implies a residual volume of 22,500 tonnes. in-country trade and consumption. It is more realistic to base This is quite significant volume that is traded in the domestic the size of the West African market for fruits and vegetables markets and perhaps through informal channels in the sub on the total intraregional trade for food staples in West Africa region as well. which is also estimated to be $400 million (table III.1.5). In TAblE III.1.3: retail Food sales in ghana – 2006 TyPe of food ProducT % uS$ million Imported high-value food products (HVP) 32 384 Partly processed and packaged in Ghana 8 96 Totally processed in Ghana 15 180 Locally produced foodstuffs, including fresh 45 540 fruits and vegetables, meat, and fish Total 100 1200 Source: USDA Foreign Agricultural Service based on industry sources (importers) and Ministry of Trade & Industry. 5. See paper on SPEG and HAG, Background Paper D1. 7. http://www.fas.usda.gov/gainfiles/200710/146292659.pdf 6. See paper on profitability of crops and farm size, Background Paper B4. Pa rt I I I - B ac k g r ound Pa P ers 10 6 a — ou tg r oWe r s TAblE III.1.4: summary of Fruits and vegetables consumption Patterns in sub-saharan africa eThioPia Burundi malaWi mozamBique Tanzania rWanda kenya uGanda Ghana Guinea fruiT and VeGeTaBleS Percentage of house- 94 81 96 94 99 94 91 89 99 98 holds consuming quantity (kg/person/ 26.7 34.4 52.8 61.4 57.8 62.8 114.0 64.2 73.7 68.1 year) Value (uS$/person/year) 3.8 11.5 22.7 18.1 13.2 15.3 27.7 10.6 36.3 22.7 Price (uS$/kg) 0.14 0.34 0.43 0.29 0.23 0.24 0.24 0.17 0.49 0.33 Percentage of food 4.5 5.8 14.1 14.7 11.8 15.6 9.8 9.2 11.3 10.6 budget Percentage of total 2.7 4.1 9.3 9.8 8.3 12.6 6.9 5.1 6.9 5.5 budget Percentage of house- 99 72 92 90 91 90 47 88 87 87 holds consuming < 146 kg/person/year SamPle characTeriSTicS Per capita total 145.76 261.88 322.28 221.17 175.60 143.10 497.47 265.35 583.78 480.56 expenditure Per capita food 82.29 190.81 161.80 136.19 116.00 98.98 289.88 124.68 328.04 208.32 expenditure food as percentage of 56 73 50 62 66 69 58 47 56 43 total expenditure Source: International Food Policy Research Institute. TAblE III.1.5: size of sub-saharan african agricultural Markets markeT eaST africa SouThern africa WeST africa ToTal SSa Billion uS$ Traditional exports to non-Africa 2.2 2.4 4.0 8.6 Nontraditional exports to non-Africa 1.3 2.8 2.0 6.1 Other exports to non-Africa 0.5 0.7 0.7 1.9 Intra-African trade 0.4 1.1 0.4 1.9 Domestic markets for food staples 17.6 12.1 20.1 49.7 Source: IFPRI based on trade figures from UN COMTRADE, 2002, and; domestic-market figures from FAOSTAT, 2003. principle, therefore, the size of the West African market for 1% of total retail sales), convenience stores/small grocery fruits and vegetables (assuming a 10% share of the size of stores (30%) and traditional open air markets (69%). intraregional trade in food staples) may be $40 million. This looks quite small. It may, however, be a reflection of the fact fIGURE III.1.1: composition of ghana’s retail Food sector that most of the countries in the sub-region share common climatic conditions and may thus be self-sufficient in the Composition of Ghana’s retail Food Sector production of most of the fruits and vegetables that would Convenience/ otherwise have been traded. It may also be a reflection of the Street shops 30% challenges of intraregional trade. Supermarkets Market structure and trends Traditional/Open 1% Air markets As shown in figure III.1.1 and table III.1.6 below, Ghana’s 69% retail food sector consists of supermarkets (accounting for Source: USDA Foreign Agricultural Service. Hort Iculture ex P orts FroM gH ana : a strateg I c st u dy 1. 3 : lo c a l a n d r eg Iona l M arkets For F res H Prod uce 10 7 TAblE III.1.6: structure of retail Food outlets in ghana reTail ouTleT aVeraGe markeT Size aVeraGe annual STock SerVice TyPe Size (Sq.m) numBer SerVed TurnoVer locaTion leVel meThod Supermarkets 10–200 10 1% $3.5 million Urban Full line Self-serve Convenience stores/ <10 Approximately 200,000 30% $50,000 90% Urban Limited line 10% Self-serve small groceries 10% rural 90% assisted Traditional markets 10–1,000 >3,000 locations 69% $4 million 60% urban Very limited 100% assisted (Aggregate figure for all 40% rural retailers in a given market) Source: USDA Foreign Agricultural Service. The share of supermarkets is particularly low in Ghana A.3.3 KEy ISSUES And REcOmmEndATIOnS compared, for instance, with South Africa (55%) and Kenya In spite of the growing market size, agricultural markets in (10%) (TechnoServe 2004). This has, however, perhaps general, and fresh produce markets in particular, continue to changed with the recent entry of Shoprite onto the Ghanaian be characterized by a number of factors that constrain the supermarket scene. Some estimates suggest that supermar- prospects they would otherwise have offered to producers, kets in Ghana may now have 5% share of retail trade (USDA especially smallholder farmers. The key constraining factors FAS 2007). The low share of supermarkets may also be reflec- include limited and asymmetric market information, lack of tive of the fact that, as is the case elsewhere in sub-Saharan coordination, inadequate markets for storage and finance, Africa, currently their reach extends little beyond the urban lack of contractual arrangements to transfer risk, lack of elite. Their future importance will depend on their ability to smallholder market power, and increased market risk for sell food products to the lower income sections of society. producers. Market institutions (e.g., business associations and farmer-based organizations) that are expected to support On the whole, supermarket growth and penetration is exchange are especially weak, and public policies do little to expected to contribute to the growth and development of help informal trade and small-scale traders. the fresh produce sector. It is important to realize, however, that supermarkets, especially during their development Another key issue, particularly for smallholders, is the rate at phase, take a smaller share of the fresh produce markets which modern retail outlets will grow in the domestic market, than the packaged foods markets (TechnoServe 2004). The and the extent to which smallholder farmers will be excluded smaller scale farmer, generally also, has difficultly accessing . from their “preferred supplier networks� It is obvious, the supermarket segment, but it can be a useful learning pro- however, that most of Ghana’s fresh produce traded in the cess to raise the capabilities of participating suppliers. domestic market will continue to be carried by convenience shops and small groceries and in particular the traditional Generally the key trends in the domestic market, and for fresh open air markets. Smallholder welfare will be more heavily produce, reflect trends elsewhere in Africa. The market, as influenced by developments in these systems than by ac- already noted, is growing at a reasonable rate of 10% per an- cess to the supermarket sector per se. Efforts to increase num. Others project that the size of the market is set to double smallholder access to domestic market opportunities should, by 2015 (Diao and Hazell 2004). This growth is driven largely by: therefore, be seen as a much broader agenda involving im- ƒ A growing population provements in wholesaling and retailing in general. The focus ƒ Rising income levels due to an expanding private should particularly be on four areas: sector 1. Investments to improve traditional wholesale ƒ An expanding middle class where both parents work markets, e.g., the Agbogbloshie and Mallam Atta outside the home fruits and vegetable wholesale markets in Accra. ƒ A relatively large and growing expatriate community Improved logistical efficiency, especially for loading ƒ A trend towards more eating outside the home, and unloading, will reduce costs and improve hy- especially during lunch hours and weekends giene. Additional work to improve hygiene will make ƒ A rapidly growing tourism sector (including a greater these markets more attractive for a broader range of number of hotels and fast food restaurants) retailers. Similarly, improved grades and standards, ƒ Increased rural to urban migration and more easily available information on prices and Pa rt I I I - B ac k g r ound Pa P ers 10 8 a — ou tg r oWe r s volume by grade of product, will increase market In addition, turning the market size into opportunity can transparency and further attract customers. The be achieved through education and behavior-change pro- Ministry of Food and Agriculture may need to revive, grams that promote fruit and vegetable consumption. perhaps in partnership with a private sector operator, Such market development efforts would have to take into he radio price bulletin in order to improve the market consideration the demographic, cultural, and psycho-social information (MIS) system. Cell phones and internet factors that affect consumer choices. The focus should, technology can be important complements—not among other things, be on translating accurate and use- replacements—for radio dissemination. ful information to consumers about the health benefits of 2. The investment to improve the traditional wholesale consuming the abundant fruits and vegetables available to markets should be accompanied by similar invest- them. ments in traditional retail markets to improve cleanli- These recommended interventions apply generally to the ness and logistical efficiency. fresh produce trade in the wider West Africa region as well. 3. Innovations and investments to shorten the fruits and It has been noted, for instance, that poor infrastructure and vegetables supply chain. This may involve promot- institutional barriers are among the major constraints that ing the fresh produce trade to new entrepreneurial prevent African countries from exploiting their comparative wholesalers who can work directly with farmers’ advantages (Diao and Hazell 2004). IFPRI says model ex- groups. This may require providing training to both periments show that reducing African countries’ own trade the wholesalers and farmers’ groups. barriers and improving market efficiency could significantly 4. Promoting selective partnering with the supermarket increase intraregional agricultural trade and per capita agricul- sector and agro-processors to reduce the cost to tural incomes. Intra-ECOWAS trade in fruits and vegetables them of dealing directly with smallholder farmers. will definitely get a boost if the institutional challenges that This may require third party intermediation either by currently militate against the general free movement of a large farmer, an entrepreneurial wholesaler, or an goods and persons are addressed. NGO. This intervention and shortening the supply chain would require careful planning and implementa- tion as the experience with similar nucleus estate/ outgrower schemes have not worked well in Ghana c A.3.4 OnclUSIOn And STRATEGIc and elsewhere in Africa. ImplIcATIOnS The domestic and regional markets are growing rapidly. Another intervention that can help to turn the domestic The opportunities here will be significantly greater than market growth into real trading opportunities, and alterna- in exporting, but will need to be properly understood. It is tive and/or complementary markets, is infrastructure de- recommended that further work and focused research be velopment. Market access infrastructure—both road and undertaken to assess the real prospects of local and regional communication networks linking farms to major centers of markets for fresh produce. It should cover the challenges of consumption—is crucial. Transportation is one challenge serving these markets as well and how to address the identi- that requires particular attention. According to IFPRI, it is fied challenges. not uncommon for African farmers to receive only 10–20% of the market value of the products they sell, with the re- maining 80–90% being lost to transportation and marketing costs. This is largely the case in Ghana with regard to the REfEREncES domestic market. Diao, Xinshen and Peter Hazell. 2004. Exploring Market Opportunities for African Smallholders International Food Policy Research Similarly, production-side investments to improve productiv- Institute (IFPRI). ity and product quality in order to enhance competitiveness � FAGE and USAID/TIPCEE. 2008. “Winning the Processing Game. would be required. These investments should include im- TIPCEE Report, October 2008. proved post-harvest handling facilities, which could process TechnoServe. 2004. Partnerships for Agribusiness Development, fruit and vegetables into forms that can be easily stored; Agricultural Trade, and Market Access: A concept note for and better trucking and haulage services aimed at reducing NEPAD. TechnoServe Report. the risky nature of the fresh produce trade in the domestic . USDA Foreign Agriculture Service. 2007 Available at http://www. market. fas.usda.gov/gainfiles/200710/146292659.pdf Hort Iculture ex P orts FroM gH ana : a strateg I c st u dy a. 4 e x P o rt s u P P ly cH aI ns 10 9 A.4 exPort suPPly cHaIns fIGURE III.1.2: Pineapple supply Map Medium-scale Large-scale Small-scale Farmers Farmers/Exporters Farmers/Exporters Non-export quality < 500 tonnes Export quality 500-5,000 tonnes >10,000 tonnes <100 incl co-ops Bomarts, Milani, Golden Exotics Georgefields, Prudent, Koranco, and other SPEG VREL Juice Local Dried Juice & Concentrate Fresh Cut Sunripe (Coastal Grove) Milani Export Blue Skies Athena Peelco Ebenut Ltd Blue Skies Amoah Pinora Kingdom Fruits Export quality Export quality Artisanal Processors Exporters HPW Services Local Wholesale/ Retail/ Catering Export UK, France, Germany, Switzerland, Spain, UAE, Regional = Fresh Whole Fruit = Cut and Processed Fruit fIGURE III.1.3: Banana supply Map 2008 Medium-scale Large-scale Farmers/Exporters Farmers/Exporters Small-scale Farmers ca.5,000 tonnes Non-export quality >50,000 tonnes <100 incl co-ops VREL Golden Exotics Export quality Export quality Local Wholesale/ Export Retail/ Catering UK, France, Spain, Golden Exotics plans to expand its production capacity to 70,000 tonnes in 2011. Pa rt I I I - B ac k g r ound Pa P ers 110 a — ou tg r oWe r s fIGURE III.1.4: vegetable supply Map Medium-scale Small-scale Farmers/Exporters/ Large-scale Non-export quality Farmers Export quality Buying Agents Farmers/Exporters Importers < 500 Param Farms, Dhillon None Farms, Indigha Local Wholesale/ Farmers, Exporters Regional Export Retail/ Catering Indigha, VEPEAG, Joro Farms, Tacks Farms Export quality Export UK Wholesalemarkets incl Param farms, Dhillon Farms, Paul's, Jimmy Pan etc ƒ Perishable export sectors usually demonstrate quite ƒ Nevertheless, it is apparent to us that small scale simple supply chains, and Ghana is no exception. farmers currently make a rather small contribution in ƒ It would be useful to have secure numerical data for volume to the export sales. This was not always so, each link covering the number of participants as well as where pineapples, for example, grew as an export the volume and value of product. We have made esti- crop from the small scale farmer demographic. mates where possible but these need to be confirmed. Hort Iculture ex P orts FroM gH ana : a strateg I c st u dy B — BusInesses 111 B: BUSINESSES B.1 sources oF FInance B.1.1 INtrodUctIoN specialize in medium to longer-term lending—often about five During the research for the strategy study, many farmers to seven years—and generally for large investments. Ideally and agribusinesses claimed that their biggest constraint was they are seeking investment opportunities of at least a mini- shortage of finance. For example, George Donkor, Director of mum of $5 million (Proparco) to $10 million (DEG). Generally, Georgefields, when talking of marketing fruit in Europe states development banks do not like to take more than about a third that “inaccessibility to the necessary credit is limiting our ability of the project’s financial needs, and often are happier if the to tap into these opportunities.�1 Other farmers interviewed also loans are shared with another bank. Classically, they would made similar comments about needing more loan finance—and expect the sponsor, or sponsors, to provide about 35% to preferably with low interest rates. This did seem to be in con- 40% of finance (mainly as equity) and then a development trast to the development and commercial Banks interviewed, bank along with another bank would share the remaining fi- who seemed to be looking for investments that they thought nancing burden. would be profitable, and could therefore service their loans. Development banks will take small equity positions in compa- It is obvious that any business needs sources of finance nies, especially if it helps with the overall financial repayment from either internally generated funds or sourced externally schedules. If they do take equity, they normally look for an to the business. Businesses normally require equity, as well exit strategy within five to eight years. Proparco also provides as loan finance that can be short, medium, or long-term. funds for Fidelity Capital Partners to invest in Ghanaian com- Agribusinesses in Ghana are lucky in that there are a wide panies as a means of trying to assist smaller companies. range of sources of finance available from development All the Ghana-based development banks state that they are banks, commercial banks, merchant banks, local equity interested in finding agricultural projects to invest in, but have investors, and even some donor finance. This Background been disappointed in the quality of many of the proposals— Paper discusses some of the main issues raised by inter- and often find that they are too small. They are trying to ad- views with the different financing institutions. dress these problems. For example, Proparco manages an- other AFD fund, FISEA,3 which is aimed at smaller projects. B.1.2 cUrrENt SItUatIoN FISEA and DEG have funds available for technical assistance development banks–Ghana is well-served by having a to try to ensure that the investments are successful. number of development banks based in Accra, including The development banks would like to increase their portfolio International Finance Corporation (IFC), DEG (which is a mem- of horticultural investments, but have had problems because ber of KfW banking group) and Proparco.2 These organizations many of the proposals have been below their minimum thresholds, and they have been concerned at the potential 1. Eurofruit Magazine, August 2009, page 54. In the same inter- viability of the proposals. view for the magazine, Mr. Donkor also reports that pineapple prices in Europe “continue to be on the slide�—which presum- ably puts pressure on the margins that are achieved. 3. FISEA—Fonds d’investissement et de soutien aux entreprises 2. Proparco—the Société de Promotion et de Participation pour la en Afrique—is part of the initiative to promote growth in Africa Coopération Economique—is a development finance bank, whose which President Sarkozy announced in South Africa in February main shareholder is Agence Française de Développement (AFD). 2008. This is a €250 million fund and half the projects will involve The French government-owned institution is part of the country’s taking equity stakes in investment funds so that these can in foreign aid and contributes to economic and social progress in turn invest in African businesses. However, the other half will be many developing and emerging market countries including Africa. earmarked for direct equity investment. Pa rt I I I - B ac k g r ound Pa P ers 112 B — Bu sI n e ss e s In addition to the international development banks, Ghana a minimum internal rate of return of at least 25% and ex- also has the Agricultural Development Bank (ADB) and the pects to have a strategy to exit the investment within five Export Development Investment Fund (EDIF), both of which to six years. They will invest up to a maximum of $3 million will supply medium-term loans and will take equity positions. in a project; but may join a consortium up to a maximum of Both organizations want to promote agricultural invest- $10 million. To date they have little involvement with export ments, which include horticultural exports but face a number horticulture though they plan to invest in Sunripe, the fruit of difficulties. Both organizations lack the specific expertise juice processing company. to appraise horticultural export investments; they are more donor support has been important for the development comfortable with traditional farming activities. However, the of some commercial export horticultural investments. The ADB has supported Kingdom Premium Fruits (KPF), which Italian Government has provided fruit processing equipment obtained a grant from the Italian Government to install a fruit , for a number of farms, e.g., KPF Jei River, and 2K Farms. juice processing line. ADB sourced this finance from MIDA Some development banks, e.g., DEG, also provide techni- and, in turn, lent to KPF to secure pineapples from 700 ha. In cal assistance to help businesses they financed address any addition, the ADB also owns a share of Jei River and provides problems they encounter. Obviously, the donors have also working capital; it has also supported Sunripe (with Fidelity been vital in assisting with development of infrastructure. It Capital Partners) and 2K Farms. Therefore, the ADB is active- is interesting to report that Coca Cola has been active in sup- ly involved with sourcing finance for a number of horticultural porting one of the smaller fruit juice companies by providing processing operations. Its interest rates for local currency are equipment and training of staff. Without this support, the 27%, and it lends Foreign Exchange at LIBOR plus a margin company would not have gained the certification needed to to cover risk and the bank’s operational costs. access the EU market. EDIF is a more complicated situation. It is funded by a cess the millennium development authority (mIda) has estab- on imports equivalent to 0.5% of the value of all imported lished a $35 million fund to cover credit requirements for the goods. This money is supplied to commercial banks at 12.5% agricultural value chain. The fund aims to augment the supply interest who then lend to their clients for specific invest- of and access to credit provided by financial institutions op- ments at 27% to 30%. Much of the money has been lent erating in the Intervention Zones, It provides seasonal credit to newly-created groups of farmers who have often failed to Farmer Based Organizations (FBOs) through commercial to repay the loans. These groups often requested loans to and rural banks, as well as through non-traditional channels, cover equipment such as tractors. However, EDIF had dis- such as input suppliers. It also provides medium-term credit bursed no funds in the first half of 2009 because it has not through banks to finance capital goods, such as irrigation and had a full complement of directors. It is expected that five post-harvest processing and storage facilities. To date some new directors will soon be appointed and EDIF will be fully $13 million has been disbursed among over 750 beneficia- operational. It does recognize the importance of supporting ries, made up of agro-chemical and input suppliers, tractor export horticultural projects, and it did sign a Memorandum services operators, smallholder farmers and nucleus farmers of Understanding with a major South African processing with GLOBALGAP certification to export to international mar- company to build a juice factory—but nothing came of it. kets, medium scale farmers in the production of local food EDIF would like to become more actively involved with hor- staples, a fruit processing plant, and a fertilizer production ticulture, but seems to be lacking the necessary expertise to plant, among others. identify sound investments. local investors could be a source of finance to stimulate commercial banks are important in providing short-term export horticulture. There are a number of locally-based com- finance. They mainly lend local currency and demand full panies that have made considerable profits in recent years, collateral. for example the beer manufacturers, suppliers of telecom- merchant banks are a possible source of equity finance. munication services, and soft drink companies. Some of the The development banks listed above will sometimes take companies in these industries might be prepared to invest equity; in addition, Fidelity Capital Partners is a venture some their retained earnings in export horticulture as both a capital and private equity funds management company. It is way of diversification and to gain added publicity for support- financed by development banks (FMO from Holland, SIFEM ing another industry, which is labor intensive. The challenge from Switzerland, and TIL from Tunisia) and the Fidelity is finding good and attractive investments that are well man- Bank in Ghana. It seeks to invest in companies that project aged. Perhaps more so than the development banks, they Hort Iculture ex P orts From gH ana : a strateg I c st u dy B . 2 F r u I t Pr o c e s sI ng 113 will be much more focused on identifying potentially profit- . if new areas of land were “opened-up� If in addi- able investments. tion to installing off-farm infrastructure, the business grows tree crops where there are a number of years B.1.3 oNclUSIoN aNd StratEgIc c before the investment starts generating a positive ImplIcatIoNS cash flow, it is highly unlikely that such an investment The key conclusions from the review of the sources of would be attractive to most investors. Therefore, finance are: serious consideration needs to be given to a fund to assist businesses who invest in new, green-field sites ƒ There are funds available in Ghana for investment in and/or investments in plantation crops. More work export horticulture; interest rates may not be as low needs to be done to establish the principles of the as businesses might like. The problem for the finance fund, but it is suggested that in order to encourage institutions is the difficulty of finding good invest- the private sector to make on-farm investments in ments, with the quality of management needed to certain locations, the government would provide the ensure that the business plan targets are met. Interest off-farm infrastructure. This would not only stimulate rates at most finance institutions reflect LIBOR and the short-term investment by new horticultural enter- the risks associated with export horticulture industry. prises and plantations, but would provide the platform ƒ Perhaps the main strategic conclusion is that if the for smaller farmers and agribusinesses to invest in government wants export horticulture to expand, the medium and longer term. The main aim of the there is probably a need for “off-farm� finance to off-farm fund would be to stimulate commercial in- open up new areas of land. Currently there is some vestments, by attracting new investment. This would reluctance by investors to open up new areas, and probably be foreign investment in the short term, but consequently much of the agricultural and horticultural local investment in the longer term. Before such a development is taking place in existing production fund is established, it will be important to undertake areas where there is already electricity, roads, and a feasibility study to project the benefits of attracting other services such as a trained workforce. The cost new businesses into the rural economy. The study of installing such infrastructure makes it much more would need to take into account the number of jobs unattractive for the private investor. Of course, from a created, the value of bringing in new technologies, developmental point of view, it would be much better the opportunities for associated businesses, etc. B.2 FruIt ProcessIng B.2.1 INtrodUctIoN in the scale of the sector, occurred in 1998 when Blue Skies Processing of horticultural crops provides another oppor- invested in a fresh-cut fruit factory to supply some of the major tunity for farmers to market their crops; and sometimes it UK supermarket chains. This operation has now expanded its can be a useful opportunity to sell product that does not range of markets, and half its output is sold into mainland meet export market standards. Until the expansion of fresh Europe. A German investment in recent years has opened a produce exporting, the only significant processing of fruit second fresh-cut factory, Peelco, which focuses on supplying was carried out at the Nsawam Cannery owned by Gihoc a German supermarket chain. The business strategies of these Distilleries Company Limited (GDCL). There had been other companies are predicated on the all-year-round processing of investments, such as a lime concentrate factory, that had pineapples, but mangoes, papaya, passion fruit, and coconuts come and gone and there were small local operations, but are also processed in order to market mixed fruits. the activity was quite limited. In the mid 1990s, Athena Foods opened a juice factory at Tema based on pineapple for There are now a range of other companies that have estab- the local and regional markets. Other companies followed, lished fruit juice operations, and it is expected that a major but the amount of fruit bought for processing was small as a Spanish fruit juice company will soon be investing in Ghana. percentage of total production. The main fruit processed is pineapple, but some orange juice processing is also developing. Traditionally, most of the proces- The intervention that made Ghana internationally recognized sors used smooth cayenne pineapples, but have now moved as a serious player in fruit processing, and led to the increase to the super-sweet varieties as they are more readily available. Pa rt I I I - B ac k g r ound Pa P ers 114 B — Bu sI n e ss e s In recent years there has been an increase in processing factories in Europe that use imported sea-freighted capacity for juice production. Coastal Groves initially pro- fruit. The competitive advantage for the Ghanaian cessed and exported dried citrus peel supplied both from fresh-cut business is that during the preparation of its own farms and from outgrowers. It then invested in a pineapples, the peel and crown are discarded. The juice factory in 2003. Pinora, a German-Ghanaian invest- discarded material accounts for about two-thirds of ment, was established to process both pineapples and the weight of the fruit. Therefore, even though the oranges. In 2008, it redesigned its processing facilities and fresh-cut product must be air-freighted (at about currently only takes oranges, but may invest in a modern, $1.30/kg) and the whole fruit can be sea-freighted more efficient processing line to process pineapples again. (at about $0.30/kg), the savings associated with not Recently, it has agreed to manage Coastal Grove’s pro- transporting waste material and the cheaper cost of cessing facilities and buy its fruit. Another potentially large labor for processing makes it competitive. However, operation is Sun Ripe, which has a theoretical processing the Ghanaian factories are now facing considerable capacity of 20,000 tonnes of fruit per year, but only expects competition from European-based companies that to procure half this amount. There are a number of other, buy sea-freighted fruit with the crowns removed smaller investments in fruit juice production which are at the source (which improves the packing rate per mainly targeted at the local market including Milani, Blue box) and use mechanical peelers which can compete Skies (which exported fruit juices to Marks & Spencer), Jei reasonably effectively. One advantage that Ghanaian River, 2K Farms (which expects to produce purées), and fresh-cut factories still have is that they are supply- other smaller operations such as Amoah’s. There are also a ing fresher fruit than the European-prepared product, number of cottage-scale operations that process juice and which will have been harvested over two weeks sell in recycled packaging. previously. ƒ Juice. Until recently the main market opportunities In addition to fresh-cut and juicing operations, there is for juice have been the local and regional markets. some interest in producing dried fruit, but this is a small However, the recent investments will mean that market opportunity. The USAID-funded West Africa Trade the industry has to be competitive in Europe. Some Hub (WATH) is trying to help small businesses sell into exporters have been able to supply high-priced niche the American market, and Hans Peter Werder (HPW) is markets such as organics and/or fair trade. As these investigating opportunities in Switzerland and Southern niches become saturated, the manufacturers will Europe. have to compete in the mainstream, or conventional, In summary, there has been considerable investment by a markets. The basis for competition in this market is number of companies in fruit processing capacity, especially price and this is mainly impacted by cheap raw mate- in juice production. No doubt the juice companies will have rial, economies of scale, and transport costs. The considerable competitive advantage over imports on the cheap raw material can either be using rejects from local markets, but when this market opportunity is saturated, the export trade or growing the crop specifically for competing on the export markets will be much more difficult. processing. Companies have successfully sold into the EU niche markets, ƒ dried fruit. The opportunities for exports of dried e.g., organics and fair trade, but have found it much more tropical fruit in Europe are small compared with difficult to compete in the much larger “non-differentiated� fresh-cut fruit and juices. The WATH project is trying segment of the market. to help market dried fruit in the U.S., but report that the Ghanaian product is not competitive; exporters claim they need an FOB price that is the same as the retail price of Costa Rican product. Ghana might have B.2.2 cUrrENt SItUatIoN some competitive advantage in the niche organic and As with any business, it is important to understand the com- fair trade markets, but apart from this, it is difficult to petitive position in different markets in order to project the see where Ghanaian exporters might be able to derive likely success of any investment. competitive advantage. ƒ Fresh-cut pineapples. The main market is in the It is estimated that there is current capacity in Ghana to pro- EU, where there is demand for a convenient pack of cess about 40,000 tonnes of pineapples and about 30,000 prepared fresh pineapples. Ghana’s competition is tonnes of citrus each year (Table III.2.1). National processing Hort Iculture ex P orts From gH ana : a strateg I c st u dy B . 2 F r u I t Pr o c e s sI ng 115 taBlE III.2.1: current capacity and status of fruit processing in ghana, 2009 Fresh produCe Company main produCts proCessing CapaCity (t/yr) equivalent (t/yr) other Comments Blue Skies Fresh cut fruit and juice 5,000 15,000 Juice for local market – Pineapples Export – Other fruit Export Pinora Fruit juice (single strength) 28,000 Line not yet installed – Oranges – Pineapples Sunripe Fruit juice (single strength) 10,000 20,000 Not yet operational – Pineapples Athena Fruit juice, organic and fair 300 1,000 trade – Pineapples Jei River Fruit juice (single strength) For local market PeelCo Fresh cut fruit 1,000 Export – Pineapples Export – Other fruit Coastal Grove Dried peel and juice Managed by Pinora – Oranges Amoah Fruit juice (single strength) 500 Trades as 5 S Fruta juice – Pineapples Kingdom Fruits Fresh cut fruit and asceptic Based in Volta region juice – Pineapples Milani Juice Local market – Pineapples Source: Accord Associates, based on interviews undertaken during the study. capacity will increase considerably when the proposed in- ƒ Increased supply and reduced cost of raw material. vestments by Forewin (Ghana) and Don Simon (Spain) are There is simply not sufficient second quality fruit completed and may be further supplemented by other invest- available to establish a significant juice industry, ments that are planned. However, if these investments do and farmers will have to grow crops specifically for occur, it could put considerable pressure on the availability of processing. If they continue to grow pineapples in raw material; in fact, it is likely that proposed juicing factories the same way as for export, it will result in lower net could not simply rely on residual quality from export crops. returns. Therefore, it is imperative to investigate ways of reducing production costs; for example, keeping the In the Background Paper (E7) on the market opportunities for plants in the ground for a second year which means processed fruit, it is noted that the local and the niche interna- that establishment costs will be over a greater ton- tional markets are small and would easily be flooded by the out- nage and, although the average fruit size will decline, put from the expected investments. Therefore, the Ghanaian this will not impact too dramatically on the fruit juicing production will have to compete in the “non-differentiated� process. Other alternatives might be growing variet- international marketplace. In order to do this, it is imperative to ies specifically for processing that have higher juice have a reliable supply of cheap raw material, as well as econo- contents, etc. mies of scale and efficient processing facilities. ƒ Economies of scale to increase profits. Efforts will be needed to enable farmers to make a profit at lower c B.2.3 oNclUSIoN aNd StratEgIc raw material prices, but it might also be necessary to ImplIcatIoNS encourage some larger-scale plantations to spread the There are a number of important strategic issues that need overhead. to be addressed. These include: Pa rt I I I - B ac k g r ound Pa P ers 116 B — Bu sI n e ss e s ƒ Broader customer base. Ghana should investigate Recommendations for future action are to: regional and other markets to identify markets where Ghana might have more of a competitive advantage. ƒ At the factory level, stimulate processing innovation The European and the American markets are large, and the adoption of new technologies, probably intro- but also very competitive; therefore it is important that duced from outside of Ghana, to improve processing other markets not be overlooked. efficiency and product, probably through the provision of technical assistance and the establishment of a Ghana has made good progress attracting investment in pro- matching grant facility. cessing. We expect that the fresh-cut industry will continue to ƒ At the farm level, encourage innovation and research expand steadily if it can continue to improve quality, process- specifically targeting the reduction of production costs. ing efficiency, and thereby reduce costs to be able to com- This could be achieved by supporting research or en- pete with the EU-based factories. The biggest investments couraging the processing companies to invest in farmer- are being made in the juice sector, but it is likely that there will field trials (possibly through the matching grant facility). have to be a restructuring of the raw material supply base if ƒ Market research and marketing missions for potential all of these businesses are to remain viable. Opportunities for new niche markets. increasing the production of dried fruit are very limited. B.3 PotentIal external InVestors B.3.1 INtrodUctIoN made investments in South America and South Africa Among the constraints on the Ghanaian horticultural export and is comfortable investing in green-field sites. The com- industry we would include a shortage of top-quality man- pany knows that Ghana has great potential for tropical fruit. agement and supervisors, poor technical support, and lack Representatives of Fyffes visited the country on a number of innovation. The rapid expansion of Compagnie Fruitière of occasions three years ago, but believed that most of the and Bomarts demonstrates what can be achieved when current producers do not have the skills and scale to match management and technical expertise are added to Ghana’s their market demands. They are now reviewing their sources comparative advantages. If Ghana is to expand its portfolio from Africa and would consider an investment in Ghana, as of horticultural exports in both volume and range, it needs well as Mozambique and Angola. an increase in the pool of top-quality managers and techni- Fyffes prefers Ghana because it is nearer to Europe which cal expertise. This can be achieved from within by training, should mean shorter delivery times and cheaper freight and externally by recruiting foreign investors, who, besides costs, as well as reducing its carbon footprint. One problem finance, would bring their own managerial, technical, and . is that they “do not know where to start� They explained marketing expertise. that they needed information on incentives, how to establish Issues of training are discussed elsewhere (Background a company, help with collecting climate and soil data, site Paper C3); this paper investigates the opportunities for at- selection, and basic cost data. Their requirement would be tracting external organizations to invest money and expertise for a minimum of 1,000 ha to grow bananas, but they would and the incentives they might require. We have interviewed prefer between 2,000 and 3,000 ha, so they would have the a range of companies with different attributes (table III.2.2). opportunity to expand the banana production and diversify What these companies have in common is that they could all into pineapples. provide business management and major technical expertise Fyffes would be looking for help gathering data to prepare in either production or marketing; and most have the capa- a business plan; they hope that this help could be provided bility of providing some equity, but would not necessarily by an organization that has a good knowledge of horticulture become the main investor. and an understanding of the business/investment environ- Fyffes is a major trader of tropical fruit, having been di- ment in Ghana. Fyffes believes that bananas grown in Ghana vested from Total Produce about three years ago.4 It has tend to be smaller than the market in North Europe prefers, but thinks that this issue can be mitigated by either a bet- ter fertilizer regime or marketing mainly in Southern Europe. 4. For more information about Fyffes PLC, go to www.fyffes. Until a site has been selected and a business plan has been Hort Iculture ex P orts From gH ana : a strateg I c st u dy B . 3 P ot ent I a l e x ternal In Vestors 117 taBlE III.2.2: characteristics of Potential external Investors in ghana Company CharaCteristiCs produCts level oF interest Canavese Based in Marseilles, it already Imports mainly tropical fruit High—supplies technical expertise from Côte d’Ivoire to VREL. Is invests in WREL considering further investment. Fyffes Very major global fruit traders Bananas, pineapples, and other High—reconsidering their procurement and investment strategy. tropical fruit Katope Univeg A French subsidiary of a very large Concentrates mainly on fruits and High—interested in establishing large plantations for pine- multinational has plantations in South Africa apples and bananas; Ghana is in their focus. Rima An expanding importer based in Paris Imports half its produce from High—already imports from West Africa, but not Ghana. Wants Africa, mainly South Africa to start sourcing from Ghana and plans to establish an office in West Africa. South African Producers A number of the larger producers are Wide range, but limited by High—there is considerable interest to diversify risk and climate looking to diversify climate and Ghana would be an option. VegPro Biggest Kenyan vegetable exporter Babycorn, sweet potatoes, High—possible investment in Ghana as a step towards becom- to EU squash, and other vegetables ing a global player. Wants to visit Ghana. Bakkovor Very large fresh fruit processing Mainly fresh fruit, some Medium/high—would like to procure Ghanaian pineapples, but business vegetables have quality and hygiene concerns. Chiquita In the top 3 global players of bananas Bananas and pineapples Medium/high—visited Ghana many times but failed to find a local partner. Sworld Importer based in France and the UK Narrow range of products; Medium—been trading with Ghana for almost 10 years with includes pineapples disappointing results. Recognizes the potential, but needs to find the right partner. Univeg DFM A German subsidiary of a large Wide range of fruit and Medium—used to trade with Ghana but now concentrates multinational vegetables on other countries. Would like to be updated on future developments/incentives. Camellia PLC A large multinational with farms in Wide range of crops, including Low—Ghana not currently on “their radar� but would like Kenya, Malawi, South Africa and pineapples and avocados more information and to be updated on future developments/ India incentives. Kolla Major German horticultural trader Interested in tropical fruit from Low—disappointed with Ghanaian quality and reliability of sea- Ghana freighted fruit. Wish to be informed. Total Produce De-merged from Fyffes Vegetables and temperate fruit Low—prefers to buy and market produce; does not set up green- field operations Duerbeck A family-owned importer based in Concentrates mainly on fruit None—even though the company has made investments in Germany South America, they do not have the resources to work in Africa. Eurobanan Importer based in Spain; does not get Wide range None—has a strong history with Fyffes and Total Produce. Is not involved with production interested in investing outside Spain. Source: Accord Associates, based on interviews during the study. produced, Fyffes cannot estimate the financing requirement, creating about 2,000 on-farm jobs and significantly adding to but would hope that the government would ensure that the the throughput at Tema port. If Fyffes did invest and grew a road, irrigation, electricity, and communication infrastructure significant area of pineapples, it might become a source of would be available at the edge of the farm. They would either reasonably priced raw material to the nascent juice process- like to purchase or have the land on a long lease (50 years or ing industry, because it would have some fruit which did not more) and they would want to be able to bring in their own meet export standards. management. Following the initial interview for the Horticultural Strategy If a company such as Fyffes made an investment in tropical Study, Fyffes requested a further meeting with a number of fruit production, it would organize its own freight logistics. its senior executives and would like to visit Ghana to view Other, smaller, exporters could benefit from another boat possible sites and gather information to develop a business service and route being added. The plan would be to export plan and feasibility study. It would also be important that they a minimum of 75,000 tonnes/year and probably a lot more, understand all the relevant incentives available through GIPC. Pa rt I I I - B ac k g r ound Pa P ers 118 B — Bu sI n e ss e s VegPro is the biggest vegetable grower in Kenya as well as Chiquita’s management has stated that it wants to increase being one of the major fruit and flower exporters.5 VegPro output from Africa by growing an extra 8,000 ha.9 They have is seriously interested in investing in Ghana for a number visited Ghana a number of times and were impressed by of reasons. The climate provides an opportunity to diver- the incentives offered to investors and the infrastructure, sify its cropping range, the cheaper air freight to the EU i.e., the roads and the perishable cargo handling facility at would make some lines more competitive, and the good Tema, as well as the climate. However, Chiquita’s business sea freight links would open up a new range of cropping model stipulates that it provides all the technical and mar- options. VegPro has the technical competence to grow a keting expertise, but a local partner provides all the finance. range of sub-tropical and tropical vegetables for export by Despite a number of visits, a local partner has not been air. In addition, it would develop sea freight for more du- identified, and consequently they are now investing their rable root crops. technical resources in Mozambique and Angola,10 even though neither location has the sea-freight advantages of The company would be looking for about 250 to 350 ha of Ghana. More recently, Chiquita has tried to identify po- cultivatable land with irrigation (center pivots) as a minimum tential suppliers of pineapples for their trading operation. to start and the capacity to at least double or triple that However, Chiquita’s potential involvement as a buyer is less when the first plantings have been successful. It is likely attractive to Ghana than as an investor. that such an investment would create 750 to 1,500 on-farm jobs would increase the average value of air freight exports,6 Chiquita obviously appreciates that Ghana is an attractive and would help justify the building of a cold store at the place to invest, and lessons need to be learned from their airport. However, perhaps the biggest benefit of attracting failure to find a suitable business partner. If there had been a company such as VegPro to invest in Ghana would be an agency that had the specific knowledge and contacts to that it would vastly improve Ghana’s reputation as a serious find appropriate local partners, then the outcome might have supply base for vegetables and therefore encourage other been different. The failure to attract Chiquita has meant the companies to follow its lead. The improved transport and loss of 2,000 jobs and significant foreign exchange earnings.11 marketing links would be a tremendous asset for smaller- Subsequent conversations with Chiquita have indicated that producers to exploit. there is still a chance that they could invest in Ghana, but they would require an invitation and considerable effort to Following the initial interview as part of the Horticultural identify possible business partners. In the past, Chiquita met Strategy Study, VegPro management visited Ghana three with farmers as possible business partners; unfortunately times to evaluate this opportunity. Like Fyffes, they noted they did not have the financial resources or the technical that it would be preferable if there was “one-stop-shop� to and managerial capability. Most of the farms were also too understand the incentives and advantages of investing in small. Ghana, as well as providing background information.7 VegPro noted that Ethiopia is working hard trying to attract foreign total Produce12 separated from its parent company, Fyffes, companies to invest and the Ethiopian government ensures to deal mainly with vegetables and temperate fruit, while that the areas it has designated for development have good Fyffes is more focused on bananas and other tropical fruit. road infrastructure and electricity. Therefore, Total Produce’s interest in Ghana would be as a potential supplier of vegetables. When interviewed, the chiquita is one of the top three corporate companies in- management did not have any great interest in Ghana be- volved with the production and global trade of bananas.8 cause previous investments in green-field sites have not They are the biggest and most important supplier to Europe. been successful and they would prefer to buy existing op- erations. Total Produce has invested in India through a joint venture with the Tata Group, but their involvement is mainly 5. For more information, go to www.vegpro-group.com. to bring their marketing and distribution skills to the new 6. Because air freight is currently dominated by pineapples, the av- operation. erage value is low. . 7 VegPro has also considered investing in Ethiopia and noted that the Ethiopia Investment Agency (EIA) made potential new inves- tors very welcome, and assisted with a wide range of issues from organizing visas to site selection. The EIA also had a very 9. See Part I of this report. good understanding of the business issues associated with hor- 10. Chiquita has recently withdrawn from its Angolan initiative. ticulture and floriculture. 11. See Part I of this report. 8. For more information, go to www.chiquita.com. 12. For more information go to www.totalproduce.com. Hort Iculture ex P orts From gH ana : a strateg I c st u dy B . 3 P ot ent I a l e x ternal In Vestors 119 The conclusion of the interview was that an investment in companies. It has traded regularly with Ghana and the Ghana was probably outside their normal business prac- Côte d’Ivoire and has made investments in production in tices, and they did not have a large demand for the veg- Ecuador and Chile. In recent years, the trade with Ghana etables that Ghana could produce. However, they would has been unsatisfactory and, as a consequence, the com- like to be kept aware of any opportunities in Ghana. pany has no interest in investing. This is partly due to the fact that compared with the big multinationals, they do camellia Plc is a well-established group of companies13 not have sufficient resources. Despite the lack of interest, that includes activities in agriculture/horticulture, banking Dürbeck noted that Ghana would be perhaps the country and finance, food stores and distribution, and engineering. in Africa that he would most like to work with and would It was initially based on tea production and export in India like to be kept informed if there were significant improve- but now has a number of operations in Africa in Kenya, ments in fresh fruit production and/or the investment cli- Malawi, and South Africa. Given that Camellia has a num- mate changed. ber of farms in Africa and expertise in horticultural produc- tion, it is seen as a potential investor in Ghana. univeg dFm (Direct Fruit Marketing) is part of the large Univeg group that concentrates on marketing fruit to Camellia noted that currently Ghana was “not on their Germany and Austria. It regards itself as a small company radar� for investments in the short-term, but they still re- within a large group; it has a turnover of over €1 billion and quested to be kept apprised of any developments and op- employs over 1,000 people.14 It used to import from Ghana, portunities. In particular, they would be interested in under- but has now stopped and concentrates on South America standing more about the economic incentives, especially and South Africa where the quality is more consistent and about free trade zones. They commented that incentives the suppliers are more reliable. However, Univeg noted are particularly important in order to make investments in that all respectable fruit importers must invest in their sup- tree crops attractive. The issue of land tenure would need ply chains to be able to secure reliable supplies. clarification. The Managing Director of Univeg DFM is not currently in- Bakkovor is an Icelandic company that operates over 60 terested in Ghana but suggests that communications be factories processing fruit and vegetables in 10 different coun- maintained with the Operations Director. tries. About 86% of their output is sold in the UK, mainly to the major UK retailers. They have factories in France, Spain, kölla was originally a major importer of commodities such Belgium, and Italy from which they service most of the rest of as tea, coffee, animal feed, and dried fruit, but has now Continental Europe. They have recently invested in the Czech evolved to become one of Germany’s leading fruit and veg- Republic and bought a factory in South Africa. Their interest in etable traders. Its head office is in Hamburg, but it has of- Ghana is as a supplier of fresh fruit for their European-based fices in Switzerland and Spain.15 Its main lines are grapes, factories. In particular, they are interested in having another pineapples, and mangoes which are mostly procured from source of pineapples to supplement their current suppliers South and Central America. It does successfully import air- in Costa Rica. They have visited Ghana and met some of the freighted pineapples from Ghana (through Koranco) for the growers, but were disappointed by the quality standards—in French market. Kölla is primarily an importer of fruit and particular the efforts to maintain the hygiene standards re- is not really interested in making any investments in their quired by multiple British retailers. They are significant buy- supply chains. ers of pineapples (400 to 500 tonne/week) and have agreed to procure trial shipments from one Ghanaian grower. If this GTZ invited the General Manager of Kölla to visit Ghana works well, they could increase their order. If they could be to explore the opportunities. Unfortunately the outcome of assured of quality standards and reliability, there could be an this visit was not positive. They concluded that the growing opportunity to expand their supply base. areas for mangoes were too humid, though they neglected to visit the area around Tamale. They imported about 10 anton dürbeck is a family company located near Frankfurt, containers of pineapples by sea, but the quality of the sea Germany. Even though it is a family business, it is one of freighted pineapples was “rubbish�; the majority of the Germany’s main independent fresh produce importing fruit were spoilt by internal browning. 14. For more information, go to www.univeg.de 13. For more information, go to www.camellia.plc.uk 15. For more information, go to www.koella-online.de Pa rt I I I - B ac k g r ound Pa P ers 12 0 B — Bu sI n e ss e s sworld is based in France and the UK and has been try- In South Africa, Rima has entered into strategic marketing ing to establish links with Ghanaian growers and exporters agreements with a number of large growers. It was suggest- for almost 10 years. The company recognizes Ghana’s po- ed that perhaps some of their South African suppliers might tential but has been constantly disappointed by the erratic like to diversify their production base to another country to quality and unreliable supply base; it now has no desire to spread financial risk. continue trading. Sworld has happily pre-financed inputs for Ghanaian exporters, but its capital and resource base is Rima would like to continue dialogue about establishing an too small for it to make larger investments. Sworld aims to office in Accra. It was suggested that when one of their develop long-term partnerships with their suppliers; a sort procurement managers is next in West Africa, they should of strategic alliance, but the suppliers must be professional meet some Ghanaian producers and see for themselves the and serious. country’s potential. To facilitate this, they have been given contacts with MIDA and TIPCEE projects. eurobanan16 is a large Spanish importer with strong histori- cal links with Fyffes. It only gets involved with Spanish pro- katope univeg18 was originally Malet Azoulay who then ducers and does not invest in non-Spanish farmers. It is not joined with Katope before being bought by the large Univeg willing to invest in production outside of Spain. group (turnover €2.2 billion, making it one of the world’s largest fresh produce companies). Katope Univeg is based rima17 is a rapidly expanding importer based in the Rungis in Paris, and before they were sold had a turnover of about market in Paris. It specializes in importing produce from €250 million. They are predominantly fruit importers who Africa, but does not yet have any suppliers in Ghana. The used to have pineapple plantations in Côte d’Ivoire. Since majority of its imports are fruits from South Africa, but it the political troubles in the country, they now source from has established the Booranga brand to market beans from Costa Rica. They also have plantations in South Africa and Burkina Faso. Its future strategy is based on importing a have a history of sourcing from Ghana. In Ghana, they have wider range of produce from Africa and also to work closely been disappointed by the quality of the suppliers. They rec- with the producers to ensure quality and hygiene. To achieve ognize that they are over-reliant on Costa Rica as a source, these objectives, the company is considering establishing an and would like to have another reliable supplier of good qual- office in West Africa to enable it to oversee production and ity fruit, preferably closer to Europe. The eight to ten days export logistics. This office could also provide technical sup- shipping time from Tema makes Ghana particularly attractive port to the growers to help improve yields and quality. Rima to the Univeg group. They are still concerned about the po- is considering Accra as a potential base for their West African litical situation in Côte d’Ivoire and have considered trying to operations, especially if they can identify some producers source pineapples from Brazil, but have had pest and disease who would enter into strategic partnerships. problems. Therefore, in the right circumstances, they would invest in a plantation in Ghana. Rima’s concept of having a regional office to coordinate and work with producers is imaginative. It is similar to the In addition to pineapples, the Univeg group would also be situation in Zimbabwe in the late 1980s and early 1990s: fol- interested in establishing a banana plantation. Currently the lowing a number years of high tobacco prices, there were group has a small investment in Surinam, but they are reliant many Zimbabwean farmers who had considerable cash on the big multinational banana companies such as Chiquita. surpluses and were looking to diversify the crops they grew Once established with pineapple and bananas, the group and the markets they accessed. Some started to grow cut- might be interested in producing and/or buying papaya and flowers, mainly summer flowers, and very quickly a number mango. of Dutch marketing companies based themselves in Harare to provide technical support to the farmers, coordinate The comparative advantages of Ghana are well appreciated transport, and help with marketing. These Dutch importers by Katope Univeg, i.e., the climate, short shipping times, and were so successful that the Zimbabwean farmers moved the economic and political stability in the country. They also away from the low-value summer flowers to the higher-value understand the need to make their own investment with their roses, and by the early 2000s, the industry was worth $60 own management and control systems. They would need to million/year with a substantial workforce. be able to access large areas of land—a minimum of 2,000 ha, with the potential to reach 5,000 ha as the investment 16. For more information, go to www.eurobanan.com. . 17 For more information, go to www.rimafrance.com. 18. www.univeg.com. Hort Iculture ex P orts From gH ana : a strateg I c st u dy B . 3 P ot ent I a l e x ternal In Vestors 12 1 increased. Ideally they would want two sites, one for pine- in Hluhluwe about 340 km south of the southernmost point apples and one for bananas and they should be within two to of the coastal tropical belt in East Africa. Though these are three hours drive of Tema. They would require title to the land produced all year, winter quality is poor and farmers find it dif- and would expect to have reasonable roads, electricity, and ficult to circumvent the strong tendency to produce a ‘natural’ possibly irrigation water to the farm-gate. They would take crop in mid-summer (flowers are initiated by a combination responsibility for all on-farm finance. of plant size, short days and cooler temperatures). The situa- tion is similar for tomatoes, papaya, and bananas though the The meeting with Katope Univeg was particularly encour- details of the difficulties are different. aging in that they expressed serious interest in investing in Ghana. They stressed that they would need to be sure These circumstances have led to a degree of interest by that they would get good support from the government and some farmers in investing in production in complementary or would need a specific entity to interact with that would assist more tropical climates: in sorting out issues and problems as they arose. ƒ The main South African grower of pineapples is canavese19 is based in Marseille and has been trading with Cassie Badenhorst; because of the climate difficulties, Ghana for almost ten years, importing both bananas and pine- he has explored opportunities in Mozambique on a apples. Currently, the company works closely with Volta River number of occasions. However, Mozambique has an Estates Ltd (VREL). It also has a plantation in Côte d’Ivoire. unfriendly investor environment (see the World Bank Canavese recognizes that there is considerable benefit in Logistics and Ease of Doing Business indices21 for sharing some of their management and expertise; a senior Mozambique). manager from Côte d’Ivoire visits Ghana every two months. ƒ Another company, Colours, had started clearing land in Goba (near Maputo) for midsummer papaya produc- Canavese is interested in increasing their investment in Ghana tion before stopping their investment over phytosani- because they see it as an important source of bananas and tary concerns—they were unhappy about the ability pineapples in their future strategy. They are considering what of the Mozambique government to control the spread form this investment might take, e.g., establishing a new of Bactrocera invadens which was discovered in Cabo plantation or investing in an existing unit. Canavese would Delgado early in 2008. appreciate being kept abreast of any new developments and ƒ In addition, a number of South African banana grow- incentives that could influence its decision. ers in South Africa have successfully invested in south african producers could be another source of poten- Mozambique for importing into South Africa. Mango tial investment in Ghana. The interview and follow-ups with farmers have invested in Central Mozambique to take the Kenyan company, VegPro, demonstrated that there was advantage of the seasonality to sell to Johannesburg considerable interest by African producers in diversifying into fresh fruit processors, who in turn export to the EU. Ghana. South Africa has a highly efficient horticultural sector These are clear examples of South African producers of and is the biggest sub-Saharan exporter of horticultural pro- tropical crops who have actively looked at investing outside duce to Europe. However, exporters have difficulty develop- their country. It is possible that some could be encouraged to ing significant trade in tropical produce because the climate invest in Ghana if they could be given some support. is largely sub-tropical and even temperate, which imposes seasonality and/or quality limitations. South Africa also has It is recognized in South Africa that the investment climate limited water for irrigation (it is one of the most arid countries in Ghana is attractive; the success of Compagnie Fruitière in in the world), marginal market access (surface connections to establishing Golden Exotics is well known to South African Europe are effectively 28 days), and there are considerable horticultural producers. However, it is important that efforts concerns about the effect of AgriBEE.20 Despite the climate are made to promote the potential of Ghana to possible inves- limitations, South Africa produces all-year-round tropical tors in South Africa to ensure that they understand how easy fruit. For example, pineapples (primarily Queen) are grown it is to establish businesses and the support they would get to overcome any administrative barriers. In the World Bank’s 19. For more information, go to www.canavese.fr. comparison of 183 countries,22 Ghana ranks 92 in the ease 20. The “Black Economic Empowerment legislation in Agriculture� which makes demands for the emergence of black majority owned agricultural companies in terms of land ownership, pro- 21. For more information, go to http://www.doingbusiness.org. duction capacity, and improved market access. 22. See http://www.doingbusiness.org/EconomyRankings. Pa rt I I I - B ac k g r ound Pa P ers 12 2 B — Bu sI n e ss e s of doing business; it ranks even lower for the categories commented that there was a lack of professional- “starting a business, “obtaining construction permits, and � � ism among Ghanaian producers and exporters which “employing workers. However, it does do well in “securing � inhibited establishing strategic partnerships. � property. Companies do make use of this website and there- 2. Second, companies recognize that the level of perfor- fore they would need to be assured that they would receive mance of most production units is not “world class� help in establishing a new business. and therefore they want to bring in their own man- agement and expertise and establish a new venture; In addition to promoting investment opportunities to produc- either on a new site or by buying an existing farm. ers, it is also important to recognize that South Africa has It has been noted elsewhere that there is a need to considerable expertise in processing and marketing. Ceres, improve the management and technical capacity of a major fruit juice company, has already considered joint many of the current growers/exporters; it is hoped ventures in Ghana and Shoprite has established a large su- that if some of the “world class� businesses inter- permarket with plans to open more. viewed do invest their skills and experience in Ghana, it might encourage the existing companies to review their managerial and technical capabilities. B.3.2 oNclUSIoN aNd StratEgIc c ImplIcatIoNS To date, attempts to establish strategic partnerships with A number of major companies in the fresh produce industry existing exporters have not been successful, and should have been interviewed. In general, there has been consid- therefore not be a priority for Ghana. The second entry point erable interest in possibly investing in Ghana. Interviewees involving external fresh produce companies wanting to invest recognized the comparative advantages of Ghana; some had in production should be the priority to stimulate horticultural even visited the country to gain a greater understanding. exports. There appear to be two main reasons that exter- Others want to get more information regarding fiscal incen- nal companies are interested in investing in production in tives, ease of obtaining land holdings of sufficient scale that Ghana—to diversify their product range by expanding into a they could expand into, and government help with the provi- different climate and, to reduce their reliance on their current sion of services and infrastructure. production base. In essence, there appear to be two entry points for external It is therefore crucially important that efforts are made fresh produce companies that want to become more actively to attract large-scale and world-class horticultural busi- involved with Ghana: nesses to Ghana; along the lines of Compagnie Fruitière investment in Golden Exotics. If this arrangement can be 1. First, importers want to develop strategic alliances replicated—in both tropical fruit and vegetables—then it with existing producers; they would be prepared to will help Ghana attain the economies of scale to become invest with some pre-finance and specific technical even more competitive. It will also be a good example expertise to help the producer meet quality stan- for existing producers to show that if they improve their dards. Many importers noted that it is increasingly performance, then they too can establish good and more important that they develop a close relationship with profitable relations with importers. However, it is impor- suppliers to ensure that quality standards can be tant to realize that meetings arranged between importers maintained and produce is delivered reliably and on and Ghanaian farmers that have been undertaken over the schedule. In other words they are looking to develop last 10 to 15 years have not been successful and a new strategic relations with suppliers and are prepared approach is needed; too many of the previous attempts to help supply some technical support and provide have focused on trying to establish trading relationships some pre-finance. It is therefore disappointing to between exporter and importer. note that many of the Ghanaian suppliers have not been able to develop such strategic rapport with Given the interest shown by these interviews, it is important EU-based importers.23 Many importers interviewed that the lessons learned from the interviews with potential investors are incorporated in the strategy for the develop- 23. There are some exceptions; for instance, Bomarts has devel- ment of the industry. These include: oped good relations with HPW which probably helped them in- crease exports. Because of the ownership structure of Golden Exotics (i.e., part of Compagnie Fruitière), it has the advantage ƒ It is important that there is a promotional effort that of excellent relations with the market and technical support. has considerable horticultural expertise to be able Hort Iculture ex P orts From gH ana : a strateg I c st u dy B . 4 P r o F I taB I l I t y o F croPs and Farm s IZ e 12 3 to work with potential new investors. Within the many of the people interviewed is whether sufficient Horticulture Authority proposed in the strategy here, land holdings are available, because the external inves- we would expect an investment promotion capa- tors will need large areas so that they can expand pro- bility to collaborate with the GIPC to support new duction. It is important to understand that the issue is investors. not confined to availability: there are questions of cost, ƒ The most important factor in determining whether security of tenure, and transferability. The progress of a company will invest in a new area is whether the the Land Administration Project is critically important agro-climatic and soil conditions are suitable. It is rec- here and it is expected that the investment capability ognized that for many tropical and sub-tropical crops, within the Commercial Horticulture Authority would Ghana is extremely well suited. After the agro-climate assist potential investors to find sites and to deal with and soils, the next most important issue raised by any land tenure issues. B.4 ProFItaBIlIty oF croPs and Farm sIZe B.4.1 INtrodUctIoN of locally available varieties such as smooth cayenne and Ghana’s high value horticulture industry has been built mainly Victoria, which were also sold on the local market. In the around the export of pineapples and much smaller quantities of early days, exporters were forced to rely on existing pro- mango, papaya, Asian vegetables, and yams to markets in the duction which centered on large numbers of small farmers, EU. Quite recently, significant investments have been made in most having less than 2 ha of land (Takane 2004, and Fold the production and export of bananas, but the main focus con- and Gough 2008). Some of the larger and more successful tinues to be pineapple, and for this reason the bulk of this paper exporters also invested in their own farms with much larger will deal with issues concerning production of pineapples. areas of production. However, even the larger exporters still relied on smallholders for between 30 and 40% of their pro- Most traditional agricultural production in Ghana is done by duction in many cases. small-scale growers. These growers are characterized by very limited access to resources, and typically have farm sizes of In 2003–2004, Ghanaian pineapple production was split be- less than 2 ha. Government and donors have focused much tween approximately 12 large farms of 300–700 ha, some effort on supporting the smallholder farmer as this fits in 40 medium-sized operations of 20–150 ha, and possibly as with policies for improving household incomes in rural areas. many as 10,000 small farms with productive areas ranging Export horticulture is often seen as a good opportunity to gen- from 0.2 ha to 10 ha. Most of the smaller farms and some erate income, employment, and improve the level of skilled of the medium-scale operations were loosely associated (no workers in rural areas. Evidence shows that the export pine- written contracts) with one or more of the larger exporting apple industry did provide benefits for significant numbers of farms. In most cases, the smallholders operated individually, smallholders in peri-urban areas around Accra between 1983 but in some cases the exporter encouraged the formation and 2005 (Fold and Gough 2008). However, times change, of farmer groups. In 2004, most of the larger farms were and, according to Fold and Gough, most smallholders have GLOBALGAP (formerly known as EurepGAP) certified as now been excluded from the export pineapple value chain. single farm sites; very few small farms were certified but some large farms were exporting non-certified produce In this paper we explore the reasons for this exclusion and from outgrowers hidden under the exporters main farm ask the question—is there any future for small-scale grow- certificate (Graffham 2004). One exception to the general ers in high value export horticulture? We consider this ques- situation was FARMAPINE (see Background Paper A1), a tion to be particularly important as donors and government World Bank-funded farmer ownership model where some continue to commit resources to try and bring smallholders 300 small-scale growers (32 were GLOBALGAP certified back into the value chain. Is this the right approach, or would in 2003–2004) had been organized to form a farmer-owned these resources be better allocated elsewhere? exporting business. The question might be asked as to why the larger farms B.4.2 BackgroUNd were continuing to source from small and medium-scale The export pineapple industry developed in Ghana between outgrowers? Large commercial exporters have many rea- 1983 and 2005. During this period exports were mainly sons for sourcing from outgrowers. These can include Pa rt I I I - B ac k g r ound Pa P ers 12 4 B — Bu sI n e ss e s access to land, transfer of production risks to a third party, the pressing issue appeared to be the high cost of com- access to water, low-cost labor, quality and attention to pliance with private standards. Graffham highlighted this detail, political reasons, and corporate social responsibility. as an emerging issue and demonstrated that 17 of the 32 Obeng (2004) quoted by Takane (2004) summed up the GLOBALGAP-certified FARMAPINE farmers would be un- advantages of Ghanaian smallholders for pineapple produc- able to pay for maintenance and certification costs without tion as follows: external support. However, we will see in the next section that a more pressing issue was about to emerge that would ƒ 22% lower production cost compared to large farms remove nearly all smallholders from the export chain by 2007. ƒ Low labor cost due to reliance on family labor (do not need skilled labor) B.4.3 cUrrENt StatUS ƒ No requirement for large initial investment to start In September 2001, tragic events in the U.S. forced Costa production Rica to diversify their market for the new MD2 variety of ƒ Cheap locally-available planting material pineapple into Western Europe. MD2 proved a great suc- ƒ Low level of inputs and simple tools for production cess, and the EU markets started to switch from the tradi- ƒ Pineapple is not temperature sensitive tional varieties grown in Ghana to MD2. The switchover was gradual, but by mid-2005 the market for smooth cayenne and According to Takane (2004) the disadvantages of smallholder Victoria had collapsed, leaving only small residual markets for production were small volumes, quality control, and inability organic and fair trade products. A few of the big farm/export- to comply with new customer requirements—such as private ers in Ghana responded early to this shift in market demand voluntary standards. However, these disadvantages were and invested heavily in the new variety. One of the biggest evidently outweighed by the many advantages enumerated farm/export companies reported purchasing $1.5 million of above. Larger exporting farms normally had a higher level of MD2 plantlets from Costa Rica in 2002 at a cost of $0.80 per mechanization, but most still lacked irrigation and none of the plantlet. Another company invested heavily in tissue culture exporters had proper packing facilities or cold chain manage- facilities. Simply investing in planting material was not suf- ment systems. In many ways the larger farms were often ficient; many of the larger farms lost much of their working like big versions of the small operations, with few signs of capital in learning the hard way that the agronomy of MD2 the type of sophisticated management normally associated was different from the traditional varieties. with large commercial farms. These data show the higher yield of MD2 based on pro- Cost data for smallholder production collected in April 2004 duction costs that might be nearly three times higher than (table III.2.3) shows that an acre of smooth cayenne would the traditional varieties. In terms of unit costs, the MD2 is cost approximately $1,228 and yield profits of $891 given cheaper to produce, but evidently requires more inputs and an export percentage of 60% of fruit harvested. Inputs ac- management to achieve these levels of output. counted for ~43% of the costs of production (Graffham 2004). Under these conditions production was affordable MD2 was found to be a more sensitive crop requiring bet- and profitable for most smallholder farmers. At the time, ter production management, careful harvesting, and rapid taBlE III.2.3: comparison of smallholder Production costs for 1 acre of smooth cayenne in comparison to current costs for small and medium-scale Production of 1 acre of md2 smooth Cayenne md2-1 md2-2 md2-3 plant population 20,000 20,000 20,000 30,000 exportable yield kg 9,023 26,047 28,500 36,503 labor cost $ 466 649 1,208 735 input cost $ 531 2,595 1,976 2,168 Fixed costs $ 231 115 Not given 141 total cost $ 1,228 3,359 3,184 3,044 Cost $/Kg 0.14 0.13 0.11 0.08 Source: Smooth cayenne data (Graffham 2004), MD2-1 and 3 (TIPCEE) and MD2-2 (Prudent Farms). Hort Iculture ex P orts From gH ana : a strateg I c st u dy B . 4 P r o F I taB I l I t y o F croPs and Farm s IZ e 12 5 cooling within one to three hours of harvesting. This last fac- Another problem with procuring MD2 from smallholders tor forced the larger exporters to invest in cold chain manage- highlighted by the major exporters was cold chain manage- ment systems. According to Lopez-Ventura and Miller (2009), ment. MD2 is a temperature sensitive product that must be a complete system for cold chain management requires an cooled within one to three hours of harvest. This is a very investment of $838,370. difficult proposition when trying to collect produce from large numbers of small farms scattered over a wide area and ac- The small and medium-scale farms were unaware of the com- cessed by poor quality roads. According to Fold and Gough ing of MD2 until mid-2005 when the market for smooth cay- (2008) every hour of delay in cooling can reduce shelf-life enne collapsed. This was very late in the day for investment by one day in the EU. It is unsurprising that the majority of in a new variety with a lead time of 18–24 months before the exporters are unwilling to source from the smaller farms. first harvest of fruit. The smaller farms also had no resources for investment in new varieties. Farmers had purchased One possible solution is for farmers to form a group and smooth cayenne suckers for the equivalent of $0.01–0.06, manage a collective production area. One such group is the so the investment in MD2 plantlets costing $0.80 per plantlet Gomoa Okyereko Pineapple Growers Association (GOPGA). was realistically unattainable. Smaller farms were forced to GOPGA has seven members, six of whom are GLOBALGAP rely on the government and donors who invested heavily in certified under option 2. GOPGA has 60 acres of pineapple multiplication and distribution of planting material in the hope production, approximately 60% of which is allocated to MD2. that this would solve the problem. The rest is used for sugarloaf and small amounts of smooth cayenne for sale to local and regional markets. GOPGA sup- Unfortunately, access to MD2 planting material was not the plies MD2 to Blue Skies for processing, obviating some of the only problem associated with the new variety. Input costs shelf life issues associated with exports of whole fruits. They increased by four or five times compared to production of have the advantage of being located on the main Winneba traditional varieties (table III.2.3). Production of MD2 re- to Accra road and can reach their main customer within two quires the use of plastic mulch, adding between $300 and hours without going through Accra. Production is well man- $400 to the cost of production for one acre. Additional labor aged, and effort has been made to reduce production costs. costs are incurred for manual clearing of the remains of old For example GOPGA has reduced the cost of fertilizer inputs plastic mulch and laying new sheets. The higher input costs by $175 per acre by replacing chemical fertilizers in the basal associated with growing MD2 are mainly associated with dressing with organic fertilizer purchased in bulk from Blue increased use of fertilizer and pesticides meaning that the Skies. farm must have access to a much higher level of working capital. Production records show that GOPGA is currently making a 40% margin on sales of MD2 to Blue Skies. However, this Had Smooth Cayenne been given similar inputs and care, margin will drop drastically next year when the group has to substantially higher yields might have been achieved; this pay for its own GLOBALGAP certification audit. It is estimated would be an interesting comparison for further work in view that costs for GLOBALGAP certification will account for 31% of the interest that some processors have in maintaining this of current profits. It should also be noted that GOPGA mem- variety. bers were atypical of most smallholder members as they are Overall, the production costs for MD2 are too high for most well resourced and have alternative sources of income. under-resourced smallholders. For the larger farms the initial investments for MD2 are very high: one exporter estimated c B.4.4 oNclUSIoN aNd StratEgIc that establishing MD2 production on virgin land could cost ImplIcatIoNS between $13,000 and $15,000 per hectare. Much donor effort has been spent on supporting small- holder farmers with training, planting materials, agronomic Data provided by TIPCEE indicated that smallholders could advice and payment of costs of GLOBALGAP FLO and , still make a profit from MD2, and this view is supported by organic certifications. For a relatively small number of at least one exporter.24 That said, calculations made with out- farmers like the GOPGA group, donor support has brought growers linked to one of the larger exporters indicated a less real benefits. However, for the majority, production of favorable profitability (table III.2.3). MD2 is too expensive—the input costs and the cold chain require significant resources. It could also be argued that 24. R.N. Attatsi of Winfield Farms Ltd. MD2 is an “industrial� crop developed for production on Pa rt I I I - B ac k g r ound Pa P ers 12 6 B — Bu sI n e ss e s large plantations and is thus best suited for large-scale rEfErENcES commercial production with high levels of mechanization. Fold, N. and K. V. Gough. 2008. From smallholders to trans-nationals: This argument is supported by an observation made dur- The impact of changing consumer preferences in the EU on ing the current mission that the production costs for one Ghana’s pineapple sector. Geoforum 39: 1687–1697 . large farm were 38% lower than those of his outgrowers. Graffham, A. J. 2004. European food standards, issues of compli- Simultaneously, an increasingly competitive market is ap- ance and market access for Ghana’s export horticulture sector. plying downward pressure on prices that only the most ef- NRI Report, Chatham, UK: Natural Resources Institute. ficient production can endure. Lopez-Ventura, E. and T. Miller. 2009. “Out of Africa: Challenges and � opportunities in Ghana. Cold-Facts, Mar-Apr. Publication of the None of the major exporters interviewed expressed any in- Global Cold Chain Alliance, USA, pp. 10–14. terest in buying pineapples from small farms in the future. Obeng, I. S. 1994. Effect of domestic policies on production and export Those that use outgrowers stipulate a minimum farm size of non-traditional agricultural commodities: A case study of fresh of 30–40 acres. Under current conditions there seems to be pineapples in Ghana. M.Phil Thesis, Department of Agricultural economy and farm management, University of Ghana. little role for the smallest farms in MD2 production and donor resources would be better invested elsewhere. An alterna- Takane, T. 2004. “Smallholders and non-traditional exports under � market liberalisation: The case of pineapples in Ghana. African tive model is urgent, then, if the rural economy is to profit Study Monographs 25: 29–43. from export horticulture. Hort Iculture ex P orts From gH ana : a strateg I c st u dy c — c oM P e tI tI V e ne ss and I nnoVat I on 12 7 C: COMPETITIVENESS AND INNOVATION C.1 gHana’s coMParatIVe PosItIon C.1.1 INTrODuCTION than many other countries supplying Europe from, for Ghana has considerable comparative advantages for es- example, East and Southern Africa, and Thailand. This tablishing an export horticultural industry. This Background should be giving Ghana a competitive edge; however, Paper summarizes the advantages and then considers the the Dominican Republic has significantly cheaper country’s recent performance, identifying areas where the freight rates ($0.65 to $0.75/kg) than Ghana currently export horticultural industry has failed to develop compara- enjoys. In recent years, the Dominican Republic’s tive advantages into competitive advantage. vegetable exports have increased significantly at the expense of Ghana’s. ƒ climate - When considering export horticulture, the critical comparative influence is the climate. Ghana The comparative position on sea freight is more complicated. has an excellent climate for tropical and sub-tropical Ghana has an advantage in that it is near to Europe and there- fruit and vegetable production, and the reasonably fore the freight costs should be cheap. However, there is an even temperature throughout the year gives the op- issue of critical mass. Sufficient critical mass is needed to at- portunity for all-year-round production. While there tract larger vessels—which reduce the unit cost—and to en- are temperature variations in the country, especially in sure the frequency of arrivals needed to keep the European some of the higher areas, it must be recognized that markets supplied constantly with fresh product. It is also the temperatures are too warm for temperate crops, important that there be sufficient critical mass to allow boats which is why there have been problems with growing to cover a range of routes to different destinations. Currently, green beans for export. Ghanaian sea-freight exporters have a very limited number of direct destinations in a reasonable voyage time, but if the vol- ƒ Freight - Cheap air freight in the 1980s and 1990s ume of exports can be expanded, it is likely that other routes gave an important advantage to the export of fresh will be established, for example to South-Eastern Europe. produce from Ghana. At the time, Nigeria required a considerable amount of air freighted imports Proximity to Europe also gives cargo from Ghana an advan- from Northern Europe, and the freight operators tage in a smaller carbon footprint for the freight element. needed northbound cargo to fill their empty planes. This allows importers who want to improve their “green cre- There were three main opportunities—West African dentials� to source from Ghana rather than, say, Costa Rica. countries, East African countries (mainly Kenya) or Southern Africa (mainly South Africa). The advantage ƒ Land, soils, and water - Ghana has a significant of collecting northbound cargo from Ghana or another amount of uncultivated land that could be used West African country lay in a much shorter empty for horticultural production. However, a number of leg and the proximity to Europe. Local businesses farmers claim that it is difficult to get land with suf- used this comparative advantage to establish the air ficient infrastructure or near enough to the airport freight of pineapples and some vegetables. Air freight or port. Therefore, it might be necessary to encour- charges were about $0.70/kg compared with $1.50 to age new investment by developing the road and 2.00/kg from many of the other countries supplying electricity infrastructure in some new areas. Issues the EU market with fruit and vegetables. Currently, of land availability are discussed in more detail in average freight rates for Ghana to Northern Europe Background Paper D3. The soils in Ghana are varied; lie in the range $1.00 to 1.20/kg. This is still cheaper some are certainly good for horticultural production Pa rt I I I - B ac k g r ound Pa P ers 12 8 c — coMP et ItIVene ss and In n oVat Io n giving good yields and quality. Currently, Ghana’s C.1.2 CurrENT SITuATION main horticultural export, pineapple, is mostly rain- Although Ghana should have sufficient comparative fed. However, it is assumed that if the production of advantages to compete effectively in the European pineapples is to expand into different areas, then the market, many exporters have found it extremely diffi- introduction of irrigation might be necessary. Also, cult to remain competitive. Most SPEG members have if other higher value crops are to be grown, espe- experienced significant declines between 2003 and 2008 cially vegetables, then irrigation will be essential to (table III.3.1). The exceptions to this have been Golden attain yields and be certain of meeting the market Exotics (Compagnie Fruitière) and Bomarts. In fact, if demands. Ghana has considerable water resources, these two companies are taken out of the SPEG export e.g., the Volta River and Lake Volta. It is important data, exports dramatically declined from 32,294 tonnes that these resources are made available to farmers in 2003 to 9,069 tonnes in 2008—which is indicative of and investors. that failure. Part of the decline is due to the problems ƒ yields and quality - The combination of soils, climate, with FARMAPINE (Background Paper A1), but the exports and water has meant that Ghana is able to produce of every other SPEG member listed in table III.3.1 also good yields and quality and is able to compete with showed declines between 2004 and 2008. Usually this other countries. In fact, Compagnie Fruitière claims that is attributed to the slow switch from Smooth Cayenne to the bananas produced in Ghana are not only good qual- the super-sweet varieties, but it also indicates that many ity (if a little small), they are the cheapest that the group of the SPEG members have not been able to build on their grows in West Africa. There are a number of reasons for comparative advantages; in other words, they have not this including climate, soils, and good management. remained competitive. TAblE III.3.1: Pineapple exports by sPeg Members 2003 to 2008 (tonnes)1 2003 2004 2005 2006 2007 2008 Jei River 6,557 6,431 6,634 6,471 1,635 1,720 Farmapine 4,958 4,766 4,235 1,161 27 Milani 3,555 4,503 3,728 2,999 2,969 2,277 Prudent 3,303 3,820 1,984 2,200 2,414 1,671 Georgefields 2,340 2,889 2,225 1,589 1,027 1,207 Chartered 1,289 2,260 1,381 654 303 424 Silwood 1,200 1,661 699 432 254 271 Phoenix 1,165 875 569 76 Koranco 1,153 1,502 2,083 2,246 1,995 828 Unifruit 1,066 1,406 1,296 1,008 533 Horizon 1,018 1,171 633 167 113 164 Golden Exotics 328 938 3,100 8,048 11,911 8,563 Bomarts 530 2,851 1,618 2,770 4,664 Others 4,690 5,741 2,581 2,324 2,445 507 Total 32,622 38,493 33,999 30,993 28,396 22,296 Source: Accord Associates based on data supplied by SPEG. Ghana’s vegetable exports have also been erratic over the last suggests that it has not yet been able to convert the country’s few years (figures III.5.5–III.5.10). Despite the comparative comparative advantages into a competitive industry. advantage conveyed by cheap freight rates and good climate, Ghana has not established a significant vegetable export in- Unlike Kenya, Ghana as failed to create a substantive indus- dustry based on adding-value to the vegetables. Again, this try adding value to farmer’s crops beyond cheaper freight rates. This is partly because the climate in Ghana does not 1. Golden Exotics reported pineapple exports of 13,500 tonnes in permit the range of vegetables demanded by the indigenous 2007 and 10,000 tonnes in 2008. Hort Icu Lture ex P orts FroM gH ana : a strateg I c st u dy c . 1 g Ha n a’ s c o M Parat IVe P os It Ion 12 9 population in Europe (e.g., fine vegetables and legumes), and finance. The issue of finance is discussed in more detail else- better management is and technology are required before it where (Background Paper B1). However, a distinction should can export competitively. The markets for Asian and other be made between the need for finance required for establish- tropical vegetables that Ghanaian exporters focused on is ing new investments and for financing ongoing operations. smaller and generally lower value than the niches targeted If an established farming company is well-managed, then by Kenyan exporters. However, there are indications that it could be argued that finance should not be a problem for market opportunities for the vegetables that can be grown maintaining its operations and steady expansion. However, in Ghana may be increasing which might present an opportu- access to competitively priced and flexible finance can be an nity to establish a larger and more professional value-added issue if a significant expansion of an industry is required. export vegetable industry. Sometimes a country’s comparative advantages can be ne- gated by a poor enabling environment. In Ghana, it is gener- C.1.3 C ONCluSION AND STrATEgIC ally recognized that the enabling environment for business is IMPlICATIONS generally conducive; the GIPC helps new investors obtain tax holidays, the economy is liberalized, and in general the gov- The simple analysis of Ghana’s comparative position is that it ernment is pro-business. Without doubt, there will always be has sufficient advantages to be a major player in the export actions that governments can take to encourage further invest- industry, but, to date, it has not exploited its position. There ment, and if finance was subsidized and the need for collateral are a number of reasons for this. was reduced, then it is probable that more investment would The first is that the management is not sufficiently good. occur. However, the provision of subsidized finance on its own This applies to both senior management and middle man- does not always lead to the establishment of a sustainable in- agement and supervisors; but the main problem is with dustry. For example, in the case of Ethiopia, it certainly initiated senior management. The companies do not have sufficient considerable interest in the floricultural sector and contributed skills to install a culture of innovation and professionalism. very significantly to the rapid expansion of the country’s flower The issue of innovation is discussed in more detail in the exports. However, a number of the investments have had prob- next Background Paper (C2). Innovation not only applies to lems repaying the loans, and there has been some restructur- the introduction of new products and processes, but also ing of the industry (see Background Paper C5). the determination to continually strive to improve yields and In order to understand exactly how competitive Ghanaian quality of existing crops, as well as finding ways to reduce horticultural exporters are, it is important that bench- costs. An example of not having the culture to continually marking is introduced.2 Benchmarking can involve moni- find ways of improving quality was reported by UK-based toring yields, quality, and costs; but it is also important pineapple buyers who visited a number of SPEG members in that processes are measured and compared. Examples June 2009; they reported that they were disappointed by the of process monitoring can include measuring tempera- lack of effort made to control and maintain quality, yet alone tures at different parts of the cold chain, the time taken having staff specifically mandated to improve standards. The to remove field heat, the number of times the product is lack of professionalism covers all aspects of management, physically handled and the percentage of rejects at dif- from maintaining and improving in-field yields and control- ferent parts of the chain. ling costs, through to establishing good long-term marketing strategies. In fact, one of the key constraints identified by the stakeholders at the 6 June meeting at the IFC offices 2. Benchmarking is an important technique to help companies, and indeed countries, become more efficient. Originally the concept was the lack of excellent management. In addition to a short- of a benchmark was as a reference or measurement standard age of superior management, it was also reported that the used for comparison; it probably originated as a surveyor’s mark on a permanent object of predetermined position and elevation middle management, supervisors, and workforce were not which could used as a reference point. Now it is applied more as experienced as in some of the neighboring countries. This widely to measure the performance of a company’s (or a coun- was explained by the fact that Ghana has a much shorter try’s) costs, outputs, quality, service or process efficiency against best practices elsewhere and it can be vitally important to under- history of export horticulture than, for example Ivory Coast standing the competitive position. Benchmarking an organization and Cameroon. can be used to help establish targets, priorities and improve- ments, leading to competitive advantage and/or cost reductions. Besides management, another reason reported for Ghana’s In addition to using benchmarking data to establish competitive position, it can also be very important for establishing internal failure to make best use of its comparative position is a lack of management targets to drive efficiency, cost savings, etc. Pa rt I I I - B ac k g r ound Pa P ers 13 0 c — coMP et ItIVene ss and In n oVat Io n The review of comparative advantages and the subsequent ƒ There is a lack of a culture to innovate; discussion of why Ghana has not succeeded in establishing a ƒ Many of the export farms lack the professionalism to much larger horticulture export industry show that: compete; ƒ There is a need to benchmark the performance of ƒ There is a shortage of excellent managers; Ghana’s exporters against their competition. ƒ There are insufficient top quality supervisors and middle managers; C.2 InnoVatIon C.2.1 INTrODuCTION C.2.2 WhAT IS INNOVATION? In the previous Background Paper (C1), it was shown that Understanding what is meant by innovation is an important Ghana has made disappointing progress in converting its starting point for identifying its role in the strategic devel- comparative advantages into a competitive trading position for opment of Ghana’s horticultural export industry. One defini- its horticultural industry. A number of suggestions were put tion is “the creation of new ideas/processes which will lead forward as to why this has not happened including a shortage to change in an enterprise’s economic or social potential� of world-class management and lack of innovation. Michael (Drucker 1998). Often, innovation is used as a synonym for Porter (1990) wrote “Companies achieve competitive advan- new products, but crucially it is much more wide-ranging tage through acts of innovation. They approach innovation in than this. It can include: its broadest sense, including new technologies and new ways of doing things.� This Background Paper discusses how inno- ƒ New products, e.g., new crops; vation can be encouraged in Ghana to enable the export horti- ƒ New production technologies, e.g., to improve farm cultural industry to better compete on international markets. yields and/or quality; ƒ Improvements in the supply-chain, e.g., to reduce the The World Bank (2009) has undertaken a review of Ghana’s number of times a crop is handled; Science Innovation and Technology Policy. This review starts ƒ New or enhanced services provided to the cus- by acknowledging that “many analysts feel that the country tomer, e.g., more timely deliveries, more consistent has for decades performed well below its potential.� The quality, etc.; report goes on to say that “there is growing evidence that ƒ New processing technologies, e.g., peeling, slicing effectively harnessing knowledge through the successful products, etc.; application of science and technology and building a strong ƒ New approaches to rewarding and empowering national innovation system are keys to economic growth employees (human resource innovation), e.g., creat- and broader development, improved standards of living, and ing a culture to encourage employees to suggest poverty reduction. To sustain its recent achievements and ac- improvements; celerate progress towards becoming a middle-income econ- omy, Ghana needs to make a concerted effort to strengthen ƒ New ways of financing and investment decisions; its science, technology, and innovation (SCT) capabilities, ƒ New methods of acquiring, storing, transforming, and strengthen its national innovation system and improve its in- transmitting information; novation performance.� The paper reviews much of Ghana’s ƒ New types of organizational structure within the agricultural-based education establishments and research ca- agribusiness; pabilities and concludes that the country’s failure to develop ƒ New tools and techniques for measuring and allocat- an innovation culture is the fault of the public sector. The re- ing costs. port produces convincing evidence that the public sector SCT Innovation is not just a new product, but a range of processes, capability is inadequate, but it should also be recognized that and it is important to realize that all these incremental im- the private sector has a considerable role in creating innova- provements in the process are vitally important in helping tion. In fact, it could be argued that the private sector will be agribusinesses maintain their competitiveness. Generally, the driver for the country’s innovation in the short-term and, the private sector is the main drivers of innovation as com- maybe if the public sector is given more support, it will be panies try to get ahead, or stay ahead, of their competition. able to contribute in the longer-term. Hort Icu Lture ex P orts FroM gH ana : a strateg I c st u dy c . 2 I n n oVat Io n 13 1 If Ghana’s horticultural exports are to expand, it is important ƒ Senior management should encourage all staff to that the export companies out-compete their competition. To come forward with new ideas; each of them must achieve this, it is important to discuss how the public sector be treated seriously by the senior management and and donors can create an environment to encourage this. the company must sponsor some risky, but innova- tive, schemes. ƒ The top management must create a vision for the C.2.3 ThE rOlE Of ThE PublIC SECTOr company that allows employees to understand why As noted in the review of Ghana’s SCT policy (World Bank change and innovation are necessary. The manage- 2009), the public sector has an important role to play, which ment must convey to their employees what are the can include the provision of tax incentives and matching company’s objectives and what issues might be chal- grants for innovation and even the training of company exec- lenging its competitive position. utives in the best way to harness internal innovation. The re- ƒ The company must respect, protect, and reward em- port makes a number of key recommendations, including the ployees who generate or facilitate innovative ideas. establishment of a National Innovation Agency or Foundation ƒ A company must accept risks and mistakes as part to spearhead the formulation and implementation of an ex- of the innovation process. Of course, some of the plicit and coherent national innovation policy, together with financial risk of failure can also be covered by the designing an implementation policy and strengthening the public sector in terms of tax relief and grants for trying legislature in innovation policy-making. While these recom- innovative ideas. mendations will help in the longer-term, the recommenda- tions directed at the private sector are more important for ƒ A company must realize that all employees can consideration for the development of the export horticulture contribute to innovation. It is also important that strategy. One of the key recommendations was to increase middle-management acts a facilitator between investments in improving physical infrastructure. employees and top management and does not filter the ideas. In fact, the companies that best innovate are those that have a very flat reporting system; C.2.4 STIMulATINg ThE PrIVATE SECTOr innovative ideas should go straight to senior The private sector recommendations of the SCT policy re- management. view include: ƒ The company must encourage employees to practice lateral thinking, which is thinking outside of the normal ƒ Building the skills and promoting an entrepreneurial path without preconceived ideas. culture; ƒ Sharpening economic targets and the country’s tech- These examples of what corporate cultural changes are nology focus, for example, through technology assess- required have been included to demonstrate that innova- ment exercises and technology foresight exercises; tion comes from all levels in a company; it is not the sole ƒ Implementing measures to develop the private sector responsibility of the CEO. It is therefore important that and promote innovation in enterprises; and the concept of innovation is considered specifically in the Ghanaian context, and perhaps training can be designed for ƒ Finding ways to ensure greater executive and political agribusinesses. In particular, if companies want to benefit leadership on STI development. from government support, participation in training courses C.2.5 OW TO STIMulATE INNOVATION WIThIN h to implement innovation awareness could be a condition. PrIVATE SECTOr COMPANIES Trying to encourage an innovative culture within a company is difficult. It is not simply a matter of making incentives avail- C C.2.6 ONCluSIONS AND STrATEgy able, but often requires cultural change within the company— IMPlICATIONS often starting with the CEO. There has been considerable If Ghana is to succeed in developing a world class and com- research on the changes in company culture that are needed petitive export horticultural industry, it will not do it simply by to stimulate innovation. While not all the ideas apply to agri- copying other countries’ strategies, but by getting better yields, businesses in Ghana, some certainly do. For example:3 producing better quality at cheaper prices, and producing goods that are not yet on the market. In order to achieve these goals, 3. Based on Puhlmann and Gouy in Pharmaceutical Executive, Vol. 19, Issue 6. June 1999. Ghana can begin by learning from other countries as a starting Pa rt I I I - B ac k g r ound Pa P ers 13 2 c — coMP et ItIVene ss and In n oVat Io n point. But it must be recognized that if Ghana is to overtake technical specialists to visit Ghana to exchange ideas these other countries, it must innovate, not duplicate. and increase the knowledge base of agribusinesses. While it is appreciated that the SCT Policy review has a wide Finally, it is important that the export horticultural industry range of recommendations, there are four specific areas that starts to establish benchmarks; both in terms of costs and need to be focused on: the process. These benchmarks are important to measure Ghana’s performance against other countries and to gener- ƒ The creation of incentives for the private sector to in- ate targets for Ghana to surpass. In addition, benchmarking4 novate. This could be achieved by a matching grant for is extremely useful for companies to set internal targets for innovation. The World Bank promotes such matching them to improve their performance. grants in other countries, e.g., Zambia, and consideration should be given to establishing such a scheme in Ghana. ƒ The provision of enhanced tax-relief for private rEfErENCES sector R&D. . Drucker, Peter. 1998. “The Discipline of Innovation� Harvard ƒ The introduction of specific technical assistance for Business Review, Nov.–Dec. companies that want to innovate. This technical as- . Porter, Michael. 1990. “The Competitive Advantage of Nations� sistance should be a prerequisite before any company The Free Press, New York. can benefit from the matching grant described above. Puhlmann, M. and Gouy, M. 1999. ‘Internal Barriers to Innovation’, ƒ The promotion of an exchange of ideas and informa- Pharmaceutical Review, Vol. 19, No. 6, June, pp. 84–95. tion by encouraging participation in appropriate trade Ghana: Science, Technology, and Innovation Policy Review, World shows, finding opportunities for graduates to work in Bank, UNCTAD and CSIR-STEPRI (April 2009). Draft discussion export horticulture in other countries, and encouraging document. C.3 creatIng coMPetItIVe adVantage C.3.1 INTrODuCTION comparative advantages, but it is good management that In Background Paper C1, it was shown that despite having does this efficiently. It is also management that conveys considerable comparative advantages for export horticulture, the culture for the continual improvement in quality, yields, Ghana has failed to convert those into competitive advan- and the standard of service to the customers. It is also tages. The Background Paper C2 discussed the importance management that is continually looking for ways to reduce of innovation in creating the competitive edge. This paper costs, and develops new products and improvements in the highlights some other areas that can be important in creating business processes. In fact, the lack of a continual drive to competitive advantage. improve is perhaps one of the main reasons why most of the exports of most SPEG members have declined in recent The prime way to create a competitive company out of com- years (figure III.3.1). Most SPEG members claim that the parative advantage is through the way a business is managed, in reduction was due to competition from Costa Rica, which other words, through people. It can be supported by all employ- not only introduced the super-sweet varieties, but also had ees of a company, and the public sector, including donors, can more comprehensive logistics and serviced the market also facilitate or accelerate the advent of competitive advantage. better. However, even though SPEG members now export However, care must be taken to ensure that government or donor almost entirely super-sweet varieties, exports are still de- actions do not mask comparative disadvantages, e.g., through clining, with the exception of Golden Exotics and Bomarts. subsidies. Alternative public sector support should not slow It could be argued that if the management capabilities of down the attainment of competitive advantage, by excessive SPEG members were better, they might either have seen support to an industry which then becomes “lazy� and therefore the advent of the super-sweet varieties sooner, or produced loses the motivation to strive for continual improvement. better quality Smooth Cayenne, so that the decline in the pineapple industry would have been less dramatic. It is so C.3.2 MANAgEMENT Management is vital for creating and maintaining com- 4. For more on the definition and description of benchmarking, see petitive advantage. Any business can start trying to exploit Background Paper C1. Hort Icu Lture ex P orts FroM gH ana : a strateg I c st u dy c . 3 c r eat I n g c o MP et I tIV e adVantage 13 3 fIgurE III.3.1: Pineapple exports by sPeg there is no waste. In other words, it is important to have Members, 2003 to 20085 accurate and timely management information systems. It Exports of pineapple by SPEG members is also necessary to have well-qualified and trained staff to 40,000 deal with all aspects of running a successful business; in Others the case of a pineapple grower, it is not simply enough to Farmapine 30,000 have a farm manager; specially trained people are required Jei River Bomarts to monitor quality and ensure the standards demanded by Golden the European buyers are attained. For example, it is neces- Tonnes 20,000 Exotics sary to have an agronomist who both closely monitors the crops and undertakes trials to improve them. An accountant 10,000 is needed to understand the profitability of the business, as well as to project and update projected cash flows; specialist 0 financial advice might also be needed to ensure that best 2003 2004 2005 2006 2007 2008 sources of finance are utilized. It is often important to employ Source: Accord Associates LLP based on SPEG data. specialized human resource managers. In other words, it is essential that all the key aspects of running a business are important to remain competitive by continually striving for covered by professional and well-trained staff. As with other improvements and innovation. aspects of management and corporate culture, it is impor- tant that as part of the professionalism required to manage Successful export horticultural businesses elsewhere in an export horticultural business, all staff must adhere to the Africa bring in foreign management to ensure that they have underlying drive to achieve better yields, improve quality, and the technical skills to produce the quality and achieve the to reduce costs. Also, they must all contribute towards the yields needed to be competitive. Also, most successful busi- innovation needed to create a world-class business, as well nesses have a very clear marketing strategy. In Ghana, the as responding to the customers’ requirements while respect- most successful pineapple exporters have sensible market- ing all employees and the environment. ing strategies; letting companies in Europe take care of the marketing so the Ghana-based management can concentrate on yields, quality, and costs. C.3.4 hE rOlE Of gOVErNMENT T AND DONOrS Export horticultural businesses need to monitor their per- formance against the competition, especially when they are It is important to recognize that competitive advantage is establishing themselves; in other words some benchmarking created by the business itself, but government and donors information is required. Benchmarking is not only important can help and assist. Assistance is particularly beneficial when for comparing progress with other countries and other com- new industries are being established. For example, at a mac- panies, it is also essential for internal management purposes, ro level, governments can ensure that there are appropriate as it monitors the company’s own standards, which then be- education establishments so that there are plenty of well- comes the target to improve on. trained specialists who can fulfill positions in businesses. Donors can help with training, by either financing training courses or through on-the-job training programs. However, C.3.3 PrOfESSIONAlISM when the industry has become more established, it would Running a very professional business is really a variant of be hoped that it would take over some of the training needs. good management. However, it deserves special emphasis Training to help achieve competitive advantage is discussed because it is so important. For many companies, the attrac- in more detail in the next section. tion of exporting is that the market size is much larger than Government can help establish industries through subsidized local markets. However, to remain competitive, it is impor- finance, fiscal incentives, by providing good infrastructure tant that costs are carefully managed, the applications of and efficient services, as well as an effective investment inputs are optimized, and great care is taken to ensure that promotion agency, etc. In other words, it can create an attrac- tive enabling environment. This does not actually ensure that 5. Golden Exotics reported pineapple exports of 13,500 tonnes in a company will be competitive; they just make it easier for 2007 and 10,000 tonnes in 2008. them to become established. In fact, many other countries Pa rt I I I - B ac k g r ound Pa P ers 13 4 c — coMP et ItIVene ss and In n oVat Io n provide a very conducive enabling environment and Ghana developed, so perhaps there were not as many on-farm job should follow suit to ensure its businesses are not at a dis- opportunities as had been anticipated. advantage. Perhaps the most important supportive action for the Government of Ghana is that it makes a commitment to In addition to running three-year diploma courses, the NZTT respond quickly to the private sector’s requests for help; i.e., also undertook considerable on-farm training for the introduc- it should have a culture which is committed to supporting tion of GLOBALGAP certification and other private standards. export horticulture. The NZTT management claim that the on-farm training to middle managers and supervisors was very successful and perhaps this might be a more effective model for Ghana to C.3.5 TrAININg implement, especially as the benefits should start to accrue to businesses in the short-term. Countries with a much Having well-educated management and trained staff is longer history of export horticulture have already developed vitally important to establishing a successful export horti- a cadre of middle management and supervisors who under- cultural agribusinesses. In the Review of Ghana’s Science, stand the standards and quality needed. A much younger and Technology, and Innovation Policy (World Bank et al. 2009), smaller industry such as in Ghana does not have such a pool specific recommendations were made for research and higher of trained and experienced people to draw upon. education institutions, such as the Council of Scientific and Industrial Research, the Crop Research Institute (Kumasi), Providing training to existing staff will certainly help Ghana the Food Research Institute (Accra), and the University of improve its ability to compete in international markets. Ghana at Legon. These recommendations for enhancing However, it is important that there is a pool of talented these institutions are endorsed, but it must be recognized that managers who are well trained and understand international it will take a few years for the benefits to percolate down agribusiness. An interesting training model has been devel- to the horticultural industry to improve its competitiveness. oped in the UK called Management Development Services These recommendations will benefit the export horticultural Ltd (MDS).7 MDS was established about 25 years ago by a industry in the long-term. However, it will be important for group of about 25 companies who recognized that they had the syllabus of the agricultural education establishments to to attract more top graduates if they were going to remain ensure that appropriate focus is given to courses relevant to competitive. MDS was set up as a non-profit educational en- export horticulture and processing. tity for graduates with management potential who wanted to work in the fresh food and produce industry. MDS provides Some countries have established an institute specifically de- the graduates with an accelerated management training signed for the training of middle-management and supervi- program which consists of four six-month placements in the sors for the horticultural industry. One example is the NZTT6 members’ companies. These placements are real and practi- in Zambia which was established in the 1990s using funds left cal management jobs and the members commit to giving the over from an EU project. Further finance was provided by the students one-on-one training. There is also formal off-the-job horticultural export industry, as well as from the Dutch and training which consists of finance and accounting, negotia- Norwegian governments. This College provides a three-year tion skills, man-management, marketing, business strategy, diploma course with a strong emphasis on practical horticul- etc., and the graduates are expected to do dissertations on tural production. In other words, it will benefit the industry each of their placements. When they have completed the in the medium-term. Undoubtedly, NZTT provided excellent program, they attain a Certificate in Food and Fresh Produce training for the students who were very successful in getting Management validated by a University; approximately 90% good jobs after they graduated. Unfortunately for Zambia’s of the students then gain employment in one of the mem- export industry, very few got jobs on the export farms; they bers’ companies. While being trained, the students get paid a were recruited by NGOs and other agribusiness supporting salary. MDS is funded by the members paying an enrollment organizations. Therefore the training certainly improved the fee, an annual subscription, and a daily charge during the stu- job opportunities of the students, but did not have the di- dents’ secondment. The strength of this scheme comes from rect effect it was expected to have on the agribusinesses. members working in partnership towards a common goal, It should also be noted that the Zambian export horticultural even though some may be competitors in the commercial and floricultural industry did not perform as well as had been world. It is overseen by a board of directors appointed from expected when the initial business plans for the NZTT were within the membership. 6. National Resources Development College/Zambia Export Grow- ers Association Training Trust. 7. http://www.mds-ltd.co.uk Hort Icu Lture ex P orts FroM gH ana : a strateg I c st u dy c . 4 cas e st u dy: costa r Ica 13 5 Given the need to attract good graduates and ensure that management of MDS has already expressed interest in as- their training reflects the needs of the industry, it is recom- sisting in adapting their concept for West Africa.8 mended that a similar scheme be established in West Africa. Initially, if 10 to 15 horticultural-based businesses could be identified as interested in providing placements and even- C C.3.6 ONCluSIONS AND STrATEgy tually employing graduates, and were willing to partly fi- IMPlICATIONS nance the scheme, then graduates could be recruited from If Ghana is to create competitive advantage, it will be each participating country. The number of graduates per through high quality, professional, and innovative manage- country would be the same as the number of members. It ment. Good technical management can be recruited inter- would be necessary to have a small office to administer the nationally in the short-term, but it will be necessary to im- scheme, perhaps in Accra. The office would also organize prove the agricultural training establishments to ensure that the formal off-the-job training using a combination of local there are sufficient good quality Ghanaian managers over and international training. Once the scheme is running, it the longer term. Government and donors should consider might be possible to include short-term placements (two providing financing for on-farm training of supervisors and to four weeks) in EU-based companies to complement the middle management. Specifically, it is recommended that in-Africa secondments. In the UK, the scheme is driven and Ghana: entirely funded by the members. If it was established in West Africa, it is anticipated that it would be funded by ƒ Improve the quality of management by easing restric- donors, as well as by members. It is estimated that to train tions for work permits and reducing the tax burden on 10 to 15 students per year, it would cost on the order of internationally recruited staff. $300,000 to $400,000/year. It is strongly recommended ƒ Establish a scheme to provide on-farm training for that an evaluation is made to confirm the interest from supervisors and middle management. major horticultural export companies in Ghana and other ƒ Establish a scheme for accelerated learning of se- countries in West Africa as well as government and donors lected university graduates in West Africa based on to establishing the equivalent of a MDS in West Africa. The the MDS program described above. C.4 case study: costa rIca THE DRIVERS FOR SUCCESS IN THE EXPORT MARKET FOR FRESH PINEAPPLE C.4.1 INTrODuCTION The expansion and subsequent dominance of Costa Rica in The export of fresh produce is an important part of Costa the export market for fresh pineapples is inextricably linked to Rica’s economy. The industry is valued at over a billion one company and its ability to exploit technological innovation dollars and dominated by the banana and pineapple within a favorable institutional setting. In exploring the rea- sectors, which account for approximately 90% of the sons behind this dominance, the following drivers have been value of the exports of fresh fruits and vegetables identified: (UNCTAD 2007). ƒ Technological innovation; Until the mid-1990s, fresh produce exports were led by the ƒ Governance structure and the role of transnational banana sector, and although bananas still occupy nearly 50% companies; of the value of Costa Rican fresh fruit and vegetable exports, ƒ Enabling environment. the importance of pineapple has increased significantly. In the early 1990s, Costa Rica was a minor player in the world 8. One of the key recommendations for the establishment of such fresh pineapple export market, which was dominated by a scheme would be that it was on a regional basis; there would Côte d’Ivoire (exporting the Smooth Cayenne cultivar). But not be sufficient companies in any one West African country to since then, there has been a dramatic reversal, and Costa make it work. A special forum on the regional training in agricul- ture, including horticulture, in 2006, demonstrated that there is Rica is now the leading exporter in both the U.S. (table III.3.2) now a substantial regional market for training in terms of both and Europe (table III.3.3). supply and demand. Pa rt I I I - B ac k g r ound Pa P ers 13 6 c — coMP et ItIVene ss and In n oVat Io n TAblE III.3.2: Volume (tonnes) of Imports of Fresh Pineapple to the u.s. for the Period 2003 to 2008 2004 2005 2006 2007 2008 Costa Rica 392,323 438,954 522,520 574,954 583,916 Honduras 24,728 34,419 32,988 12,685 22,620 Ecuador 33,608 37,199 35,830 33,411 28,331 Guatemala 2,918 17,563 32,491 33,086 25,790 Mexico 14,974 27,033 27,339 22,073 38,730 Thailand 4,191 3,996 4,548 3,488 4,096 Source: Department of Commerce, U.S. Census Bureau, Foreign Trade Statistics. TAblE III.3.3: Volume (tonnes) of Imports of Fresh Pineapple to europe for the Period 2003 to 2008 2004 2005 2006 2007 2008 Costa Rica 250,425 363,169 500,131 570,034 669,751 Côte d’Ivoire 136,009 99,685 94,409 59,253 58,902 Ghana 51,421 44,984 40,120 35,166 35,583 Ecuador 27,521 32,598 36,553 49,037 48,128 Panama 9,627 12,111 31,394 37,624 38,847 Brazil 10,233 12,675 16,382 26,367 24,688 Honduras 17,571 25,275 26,581 26,336 23,109 Source: Ivanovic (2009). Prepared from Eurostat data. C.4.2 KEy DrIVErS fOr SuCCESS combined with favorable fruit characteristics,11 meant that MD2 Investments in technical innovation: The first key driver (commercialized as Del Monte Extra Sweet Gold) soon became in Costa Rica’s rapid ascendancy has been successful in- the dominant cultivar in the fresh pineapple market. The devel- novations in cultivar development and production technol- opment and exploitation of these new hybrids transformed the ogy. In 1978, a research program into the development of market for fresh pineapples which until then had been based on fresh pineapples for export was initiated by Fresh Del Monte the Smooth Cayenne cultivar, which was not well adapted to Produce Inc.10 through its subsidiary company in Costa Rica fresh fruit supply chains. (Vagneron et al. 2009). Research by the public and private sector to develop new cul- A key outcome of the research was the development of the new tivars, particularly lines of proprietary low-acid, super-sweet cultivars with good quality, appearance, and consumer accep- pineapples, has continued in order to expand market penetra- tance, and high productivity. These new cultivars had their origin tion through product differentiation. For example, Del Monte in the breeding program at the Pineapple Research Institute, launched a new cultivar in 2006, Honey Gold,TM12 which was Hawaii, which conducted research on behalf of Del Monte, developed after five years of extensive research and product Maui Land & Pineapple Company, and Dole. On the dissolution testing. of the Institute in 1986, Del Monte took the hybrids PRI#58-443 governance: Although technological innovation has provided and PRI#5858-1184 (named CO-2 and MD-2, respectively) to its the impetus to develop the export market, a key driver in plantations in Costa Rica for further development. The climate and soil conditions in Costa Rica were found to be ideally suited to the productive potential of these hybrids. This crucial factor, 11. Bright-gold, very sweet, low-acidity flesh, high resistance to parasites and internal rot, skin that turned amber when ripe, and, crucially for long-distance marketing, the ability to survive 10. Fresh Del Monte Produce Inc. is the full name of a fruit and dis- cold storage for up to two weeks, and with longer consumer tribution company that markets most of its produce under the shelf-life and easy storability. brand name Del Monte. Fresh Del Monte Produce Inc. is often 12. Also known as MA2 (Patent Pending), it has a smooth, distinc- referred to as Del Monte and this practice has been used in the tive bright yellow exterior; a slightly sweet flavor; and an in- rest of this paper. It should not be confused with Del Monte tense aroma, and offers consumers a particularly long shelf life Foods, an American food processing and distribution company. at room temperature. Hort Icu Lture ex P orts FroM gH ana : a strateg I c st u dy c . 4 cas e st u dy: costa r Ica 13 7 turning this into a significant market advantage has been the and develop market differentiation with new cultivars and early and continuing dominance of one company, Del Monte, product attributes, e.g., carbon neutral supply chains. able to exploit this innovation (Fold and Gough 2008). In addition to the large transnational companies, there has This exploitation was possible because Del Monte: been a proliferation of pineapple plantations managed by independent small, medium, and large-scale producers in ƒ Obtained ownership of two hybrids of pineapple that Costa Rica and elsewhere, some of whom contract their it could exclusively exploit for a number years, which production at fair prices to the multinationals. However, included a ten-year patent in the U.S. to secure its even in Costa Rica, the level of participation by smallholders dominance in that market, and in France, presumably in in the export markets is low due to high transaction costs in order to block production in Côte d’Ivoire and marketing undertaking the recommended cultivation practices and in in the EU by other companies (Fold and Gough 2008); meeting food safety and quality requirements (Piñeiro and ƒ Had the research capacity to undertake development Díaz Ríos 2007). of the hybrids, particularly the necessary cultivation practices to realize the productivity potential, and to enabling environment: The first stage in Costa Rica assum- exploit Costa Rica’s favorable climatic conditions to ing greater importance in the fresh pineapple trade was the produce the flavor characteristics of the hybrids and decision by Del Monte to move its operations from Hawaii yields required for commercial exploitation; to Costa Rica in the early 1980s (Fold and Gough 2008). The ƒ Had extensive existing banana plantations and infra- choice of Costa Rica was linked to the favorable institutional structure as the basis for expanding into the pineapple environment as part of the structural adjustment programs sub-sector, beginning in 1996 with the planting of one that provided incentives (e.g., tax payment certifications, tax holding of 4,000 ha, with the necessary management exemptions for imported machinery and agricultural inputs, systems and cold chain (Vagneron et al. 2009); and exemptions from income taxes) for transnational compa- nies interested in the export market for non-traditional goods. ƒ Had the economy of scale to continue to invest in intensive agricultural practices and industrial manage- In addition to these internal incentives, in the 1980s the U.S. ment methods throughout their production systems, adopted trade preference programs under the Caribbean and to meet new challenges such as the implementa- Basin Initiatives to support and stabilize countries such as tion of food safety schemes such as GLOBALGAP; Costa Rica. Under these agreements, both bananas and ƒ Had fully integrated production, handling, transport, pineapples can be exported to the U.S. free of any duty and marketing systems; (Mora 2007). Also, WTO most favored nation status allows ƒ Had the capability to mount a marketing campaign to Costa Rica duty-free exports of pineapple. promote their produce and grow the business even though the market price for these hybrids was higher Under the adjustment programs promoted by USAID, the than for Smooth Cayenne (price premium of 75% over World Bank, and the International Monetary Fund, the Costa the Smooth Cayenne price). Rican government introduced a new agricultural policy, � “Agriculture of Change, designed to promote the produc- In this way, Del Monte was able to develop, consolidate, tion of commodities for export. These policies favored trans- and expand its pineapple business in Costa Rica and begin national corporations, particularly local subsidiaries of Del to penetrate the marketplace, beginning in the U.S. before Monte, who benefited from export promotion incentives spreading to Europe. Its dominance through MD2 as the (Hansen-Kuhn 1993, Pomerada 2006). market standard and capacity to manage the value chain up to the retail sector meant that it was able to exert as much, In addition, the Costa Rican land law allows for foreign own- if not greater, governance on the chain relative to that of the ership of freehold land. There is no disincentive to foreign key players in the retail sector. investors acquiring land for commercial agriculture. After the patent expired, other transnational and large com- In addition to supporting private sector development, the panies were able to expand their production and market Costa Rican government has one of the highest levels of in- opportunities with their own sweet cultivars, although they vestments in agricultural research and development in Central had to compete against the established market presence and America, totaling $29.9 million in 2006 (Stads 2008). In Costa reputation of Del Monte and its ability to continually innovate Rica, government research bodies focus on smallholder Pa rt I I I - B ac k g r ound Pa P ers 13 8 c — coMP et ItIVene ss and In n oVat Io n issues while university research addresses medium and rEfErENCES large-scale farmers. However, there are no evaluations to as- Fold, N. and K. V. Gough. 2008. “From smallholders to transnation- sess the effectiveness of this investment compared to the als: The impact of changing consumer preferences in the EU on private sector’s own research undertakings. � Ghana’s pineapple sector. Geoforum 39: 1687–1697 . Hansen-Kuhn, K. 1993. Structural Adjustment in Central America: The Case of Costa Rica. The Development Gap. http://www. C.4.3 CONCluSIONS hartford-hwp.com/archives/47/033.html. In assessing the factors that have propelled Costa Rica to a Ivanovic, D. 2009. Pineapple Trade Focus. http://pineappletradefocus. blogspot.com/2009/06/eu-pineapple-imports-in-2008-1st-part. dominant position in the global market for fresh pineapple, html. the key factor is the pivotal position of one transnational company, Del Monte, which had been fortunate in acquir- . Mora, H. 2007 “Costa Rica Doesn’t Need CAFTA to Benefit from � U.S. Trade Preferences. Public Citizen, September: 15. ing a key innovation—a new cultivar that created market differentiation to the extent that it became the new market . Piñeiro, M. and L. B. Díaz Ríos. 2007 Implementing programmes to improve safety and quality in fruit and vegetable supply chains: standard. Del Monte was able to exploit this fully through benefits and drawbacks. Latin American case studies. Rome: an economy of scale that allowed it to dominate the mar- Food and Agriculture Organization of the United Nations, p. 121. ket in the U.S., followed by ascendency in European mar- Pomareda, C. 2006. Contract Agriculture: Lessons from experi- kets. This was possible because the management and in- ences in Costa Rica. Rimisp-Latin American Center for Rural frastructure systems had already been developed through Development (www.rimisp.org), p. 14. its long-standing and major position in the global banana Stads, G. J. 2008. “Key trends in public agricultural research capacity and markets. � investments in Central America. Agriculture and Science Indicators. International Food Policy Research Institute (IFPRI) and the Inter- The facts that Costa Rica had the favorable climatic and soil American Institute for Cooperation on Agriculture (IICA). November. conditions to realize the potential of these new cultivars, . UNCTAD. 2007 The Implications for Private Sector Standards for Good and a financial environment that attracted transnational com- Agricultural Practices. Exploring options to facilitate market access panies to invest in agriculture, could be considered crucial for developing country exporters of fruit and vegetables: experienc- contributory factors. However, it could be argued that these es of Argentina, Brazil and Costa Rica. United Nations Conference on Trade and Development. UNCTAD/DITC/TED/2007/2, p. 63. were not the primary drivers of success. Vagneron, I., G. Guy Faure, and D. Loeillet. 2009. “Is there a pi- lot in the chain? Identifying the key drivers of change in the � fresh pineapple sector. Food Policy. Available at doi:10.1016/j. foodpol.2009.05.001. C.5 case study: etHIoPIa THE DRIVERS FOR SUCCESS IN THE EXPORT MARKET FOR CUT FLOWERS C.5.1 INTrODuCTION C.5.2 ThE fruIT AND VEgETAblE SECTOr The export of fruit, vegetables, and cut-flowers from Ethiopia In the fruit and vegetable sector, exports are dominated by has a checkered history. Private sector-led trade in the early two state farm operations—Upper Awash Agro-Industry 1970s was superseded by state-run farms and export com- Enterprise (650 ha) and Horticulture Development Enterprise panies after the revolution of 1974 and the introduction of (200 ha)—both established in 1979-80 and mostly cultivating the policies of the Derg. Horticultural exports fell drastically. green beans, with expected export volumes of around 15,000 It was only after the collapse of the Derg and the Mengistu to 20,000 tonnes. Two private exporters cultivate around 50 ha Government in 1991 that new private sector operations be- each of green beans (mainly bobby beans) and have outgrow- gan to emerge, and these sectors began to grow. However, ing arrangements with a limited number of farmers in their there has been a divergence of the fruit and vegetable sector vicinity, an arrangement that is supported by the Common and the cut-flower sector in taking advantage new opportuni- Fund for Commodities (CFC), an EU funded CFC project. In ad- ties for agricultural development. dition to beans, there are some exports of mangetout, chillies Hort Icu Lture ex P orts FroM gH ana : a strateg I c st u dy c . 5 c as e st u dy: et HI o PIa 13 9 and babycorn; there is also some interest in establishing fresh A strategic review of the sector by Joostens (2007) provides herb production units, specifically for the EU market. However, a bleak picture of the sector, including: bobby beans currently represent 99% of the exports to the Limited availability of the right fruit and vegetable varieties EU (Joosten 2007) and Ethiopia performs comparatively badly for exports—directly or as processed products; compared to other sub-Saharan countries (table III.3.4). Lack of adequately developed technical know-how and expe- TAblE III.3.4: sub-saharan african Vegetable exports rience with advanced fruit and vegetable cultivation; to the eu, 2003 VOlUME High cost of importing specific inputs, e.g., pesticides re- COUnTRy (TOnnES) SHaRE OF TOTal (%) quired to meet the necessary standards in high value export Kenya 48,183 41.8 markets, because of special license requirements; South Africa 22,112 19.2 Minimal local advice and assistance available for introducing Senegal 8,551 7.4 and certification of quality assurance and traceability systems required by the export market; Zimbabwe 7,810 6.8 Ghana 7,719 6.7 Lack of competitive advantage compared to existing nearby Zambia 7,132 6.2 suppliers to the high value markets. Uganda 3,189 2.8 C.5.3 flOWEr SECTOr Ethiopia 2,840 2.5 The lack of growth in the fruit and vegetable sector is in stark Burkina Faso 1,375 1.2 contrast to the dynamism present in the flower sector, which Madagascar 1,179 1.0 has experienced growth in both the number of private sector Gambia 1,074 0.9 farms (figure III.3.2) and the increased volume of exports (figure 1,014 0.9 III.3.3). The expansion of Ethiopia’s flower exports has been Ivory Cost exceptionally rapid. In less than a decade, Ethiopia has become Tanzania 842 0.7 the second largest flower exporting country in Africa, after Others 2,146 1.9 Kenya, with 70% exported to the Netherlands and 10–20% to Total 115,166 100 Germany. This growth continued into 2008, with exports reach- Source: Temu and Temu (2005). ing $118 million13 from 1,200 ha cultivated by 80 growers em- ploying 90,000 people14 (full and part-time, with about 70% of Investment levels in the fruit and vegetable sub-sectors for the employment total being women). This compares to export development of export production for the high quality markets earnings in Kenya of $504 million15 in a sector which employs in Europe, North America, and Japan have been restricted to a 100,000 directly and nearly two million, indirectly. The expansion few projects only. The current entry barriers in the international of Ethiopia’s flower exports have been exceptionally. fruit and vegetable markets appear to be a major restricting factor. In order for a new vegetable exporter to enter the mar- Most of the farms are growing roses in greenhouses, but ket in a significant way, it would be necessary to make a major there are five producing cuttings, as well as some carnation, investment in “high-care� facilities, as well as expanding the lily, and open-field summer flower production. range of produce to make the multi-packs demanded by the The success of the sector has been attributed to the follow- main EU supermarket chains. There is less interest in the veg- ing drivers for change (Belwal and Chala 2008): etable sector to the extent that the Horticulture Development Enterprise has reduced its produce range significantly over the ƒ The enabling environment provided by the government; past years, and large areas of its land have been leased out for ƒ Private sector initiatives, with strong foreign direct floriculture. Further disinterest is evident by the fact that Upper investment; and Awash Agro-Industry Enterprise has been for sale for several ƒ Supporting organizations. years without a buyer coming forward. It is expected that any new investments in fruit and vegetables will be targeted for 13. Compared to exports of $20 million for fruit and vegetables. selling on the local market. The government is planning to See also www/guardian.co.uk/business/feedarticle. 14. Africa News, 15 December 2008. open up new areas of land for horticulture and it is expected 15. http://www.javno.com/en-economy/kenya-flower-sector- that much of this will be for the local market. blooms-amid-crises_230887. Pa rt I I I - B ac k g r ound Pa P ers 14 0 c — coMP et ItIVene ss and In n oVat Io n fIgurE III.3.2: number of Farms in the ethiopian cut-flower sector ƒ Attracting investors to Ethiopia with the availability of land to lease from the gov- 70 64 ernment—52 farms (83%) obtained land 60 directly or indirectly from the government. 51 Land is not only cheaply available but 50 .5 also secure for an average 27 years, but 40 extending up to 90 years in some cases. 30 Most of the flower farms are located 30 within a radius of 50 km from Addis 20 Ababa16 and clustered in few areas—on 10 average it takes one hour and 40 minutes 10 5 1 2 for loaded tracks to reach the airport. The 0 land already has roads and electricity, and 2000 2002 2003 2004 2005 2006 2007 the government will continue to invest in year improving the road infrastructure; number of farms start production by year cumulative number of farms in the sector ƒ Establishment of the Ethiopian Source: Gebreeyesus (2008). Investment Agency17 within the Ministry of Trade, which acts as one-stop shop,18 fIgurE III.3.3: Pattern of african Flower exporters to the eu, except and provides a package of incentives to kenya investors (both domestic and foreign), 70.0 engaged in either new enterprises or 60.0 expansion. These incentives include a 50.0 100% exemption in customs duties on floriculture-related imports, transfer of million USD 40.0 such imports to another investor enjoy- 30.0 ing similar privileges, income tax holidays of five years, with a provision of carrying 20.0 forward the loss, tax-free remittances 10.0 for a foreign investor, and an investment 0.0 guarantee. Investments in exports are 1999 2000 2001 2002 2003 2004 2005 2006 2007 exempted from income taxes if at least Year 50% of the output is directly exported, or if at least 75% of the output is indirectly Zimbabwe Zambia Uganda South Africa Ethiopia Source: Gebreeyesus (2008). exported for a period of no less than five years (Joosten 2007);19 ƒ Ensuring that work permits are readily Besides these drivers, it should be recognized that the indus- available for managers and other technical try also benefited from: 16. At altitudes of around 2,400 to 2,600 meters, the Ethiopian ƒ The availability of loan finance without a requirement Highlands around Addis Ababa are characterized by climatic conditions that are very suitable for the production of medium- for collateral; to large-sized rose varieties (intermediates and T-hybrids). Oth- ƒ Considerable donor support to enable exporters to er regions that are located at lower altitudes of 1,100 to 1,800 meters (Rift Valley, Upper Awash and Ziway) are suitable for reach yield and quality standards to be competitive in the production of small- to medium-sized rose varieties (sweet- Europe; and hearts and intermediates), and other flowers like summer flow- ƒ Subsidized airfreight. ers and cuttings. . 17 http://www.ethiomarket.com/eic. 18. It is a very effective one-stop shop that assists potential new Enabling Environment investors in sorting out any problems quickly. The government has been instrumental in stimulating the 19. Despite creating a very attractive investment environment, the Government still exerts considerable control over foreign cur- sector through a package of measures (Gebreeyesus 2008), rency regulations and the foreign exchange rates. The system which include: of foreign exchange is not as liberal as in Ghana. Hort Icu Lture ex P orts FroM gH ana : a strateg I c st u dy c . 5 c as e st u dy: et HI o PIa 14 1 specialists who work on the farms and other associ- farms in Ethiopia in that it leases fully prepared plots—initial ated agribusinesses. Expatriate farm managers can investments including construction of greenhouses, irrigation be employed tax-free for the first two years of a new systems, packing sheds, cold rooms, and other facilities, as well project/investment; as the installation of machinery—to other private investors, and ƒ Providing finance at cheaper interest rates and easing col- provides training and market access (Gebreeyesus 2008). There lateral requirements.20 The Development Bank of Ethiopia are currently about six companies—two domestic and four (DBE) is the first major external source of finance; Dutch—that grow roses and vegetables on the farms leased ƒ The government-owned Ethiopian Airlines provides from Sher Ethiopia. Sher’s strategy for its fruit and vegetable sufficient cargo space for transporting produce to business is an outgrowers scheme, where the company pro- Europe, although some companies are looking at alter- vides local farmers with seeds and teaches them the farming native carriers (see below); techniques, and the latter supply their produce, which Sher ƒ The government, with the support of the Dutch govern- plans to export to international markets. ment, is upgrading Jimma University to offer a special This business model developed by Sher Ethiopia21 allows degree in floriculture. Currently, about 412 college or uni- other companies to start immediately on a large scale, versity graduates are working as supervisors or managers without having to take big financial and technological risks in the flower farms—38% and 27% of whom graduated themselves. Perhaps the real advantage of this Sher model is from Jimma University and Ambo College, respectively. that they take over marketing and logistic arrangements; and the grower can concentrate on obtaining high yields, good Private Sector Initiatives quality and controlling costs, which are essential for running Growth has been driven by the private sector, attracted by profitable operations. the physical attributes of the country—available suitable land, water, etc.—and incentives provided by the government, The private sector has also taken the lead in supplying and other governments and donors. The floriculture industry, managing appropriate agro-chemicals, their disposal, and the which had only two flower growers as recently as nine years tolerance for pesticide residues. Agri-Sher Trading PLC is now ago, has grown in leaps and bounds to a total of 100 companies handling the mass import of agrochemicals (Anon. 2008). (of which 83 are member of EHPEA) and 46 have started to export their flowers to the European market. Supporting Organizations The sector has attracted a relatively high level of foreign direct One of the key enabling factors in the export drive has been investment with 26 flower farms (40.6%) being fully foreign- the formation of the Ethiopian Horticulture Producers and owned, 23 (35.5%) owned domestically, and the rest joint Exporters Association (EHPEA). ventures (Gebreeyesus 2008). Holland, India, and Israel take EHPEA was established in September 2002 as a not-for- the lead with about 34%, 22%, and 12% of the total number profit organization to represent the whole horticulture sector of foreign-owned farms, respectively. Some returning exiles (i.e., vegetables, fruits, and flowers). It is the only national took advantage of the more favorable government support to association representing the sector, and has the overall aim invest in the sector. The industry is characterized by almost all of promoting sustainable growth of Ethiopia’s private sector top-management being foreign, mainly from Holland, Israel, horticulture production and exports. To achieve this, its core and increasingly from India. objectives are: Some companies view Ethiopia as a safer place for investment; ƒ To bring together horticulture exporters in order to pro- their transfer from Kenya to Ethiopia has been instrumental mote the private sector export horticulture industry; in growing the sector. For instance, Sher Ethiopia, the largest flower company, owned by Dutch citizens, started business in ƒ To represent and promote the interests of the private Ethiopia in 2005, while it still had rose production on 300 ha of export horticulture sector at national and regional levels, farming land in Kenya. It sold the farm in Kenya in 2007 and con- such as through discussions in the Public-Private Forum solidated its operation in Ethiopia. Sher now has 500 ha of land and with the Chambers of Commerce as well as with in Ethiopia, half of which has been developed into greenhouses. airlines, cold storage, and airport handling agencies; Its business scheme is different from the hundreds of other 21. In addition to this business approach, Sher has an ambitious so- 20. Howerver, the Government has stopped giviing favorable loans cial responsibility program which includes building a school, hos- to flower projects (Flower Tech 2008). pital, and sports stadium for the local town (Africa News 2008). Pa rt I I I - B ac k g r ound Pa P ers 14 2 c — coMP et ItIVene ss and In n oVat Io n ƒ To help build the capacity of EHPEA members to under- ƒ To ensure the fast and sustainable growth of horticul- stand international markets and to meet their demands; tural production and productivity; ƒ To assist in the promotion of horticulture exports in ƒ To facilitate the export of diversified horticulture products international markets; and which meet international food safety standards; and ƒ To represent and promote the interests of the export ƒ To coordinate the development of supporting services. horticulture sector at the international level. Other supporting organizations/bodies include: EHPEA resolved a lack of airfreight capacity by facilitating the bringing together of 30 flower growers in 2004 to form the ƒ ethiopian export Promotion agency (eePa)—a gov- Ethio Horti Share Company to broker and facilitate the trans- ernment body in the Department of Trade and Industry portation of flowers to their export destinations with Ethiopian that provides a number of services to promote all Airlines (Nair and Coote 2007). The support from the govern- exports, including: training and support to exporters; ment through the national airline has resulted in Ethiopian ensuring that export procedures of various institutions exporters being able to achieve freight rates less than their are relevant and conducive to export development; main competitors, e.g. Kenya. Sher Ethiopia and Trade Path undertaking and disseminating studies of overseas International have recently established Flower Port Cargo Plc markets; linking exporters with foreign importers; facil- in order to rent three Boeing 747-200s and a half-load capacity itating participation by exporters in international trade of one MD-11 aircraft for one year (Meseret 2008); this initia- fairs and trade promotion events; collecting, analyzing, tive might start when the government implements its open and disseminating trade-related information; encourag- skies policy. The importance of these initiatives is illustrated ing coordinated and efficient working arrangements by the report of the Uganda Flower Exporters Association between producers, exporters, and service providers. (UFEA), which indicated that airfreight costs from Entebbe, ƒ ethiopian Investment authority (eIa)—serves as a Uganda, have increased from $1.90 per kg to $2.60 per kg, one-stop shop for all investors and has played a major forcing companies out of business or encouraging them to role in facilitating foreign investments in the horticul- relocate to Ethiopia (Shuti 2008).22 The Ethiopian Government ture sector, providing the following services: is committed to an open skies policy, though this has yet to • Provides the necessary information required by be implemented, and it will probably be postponed until the investors; leases on the Ethiopian Airlines freighters have expired. • Approves and issues investment permits to foreign Another initiative that enhances competitiveness and market investors; access of Ethiopian flowers has been the code of practice • Provides trade registration services to foreign developed by EHPEA containing standards for the imple- investors; mentation of good agricultural practices, protection of the • Issues operating licenses to approved foreign environment, and the employment and welfare of the farm investments; staff. A joint venture between EHPEA and Ethio Netherlands • Notarizes Memorandum of Association and Articles Horticulture provided the training for the first ten flower of Association; farms in 2009 to become certified (Hortinews 2009). • Grades construction contractors; In addition to training, the EHPEA is also able to help mem- • Approves and registers technology transfer bers, and prospective members, access donor funds for agreements; feasibility studies for new investments. • Registers export-oriented non-equity based foreign enterprise collaborations; To further boost the horticultural sector, the Ethiopian • Provides advisory and aftercare services to Horticulture Development Agency was established in June investors; 2008, as an autonomous national agency under the Ministry of Agriculture. Its objectives are: • Approves expatriate posts and issues work permits to foreign employees; • Facilitates the acquisition of land and utilities by 22. Many farmers tend to overbook the airfreight space they need, foreign investors. but do not pay for dead space. This has sometimes made it dif- ficult for the airlines to fill the planes. It is anticipated that the ƒ Public-Private dialogue Forum—chaired by the cheap freight rates and dead space allowance cannot continue. Minister of Trade and Industry. The Forum was Hort Icu Lture ex P orts FroM gH ana : a strateg I c st u dy c . 5 c as e st u dy: et HI o PIa 14 3 established in 2002 and has a sub-group, which In addition to supporting in-country activities, the Netherlands discusses issues relating to the horticulture sector. government has been particularly important in support to the Members of the Forum include stakeholders from Dutch private sector through the Cooperation in Emerging the private and public sectors. Contentious issues Markets (PSOM) program to reduce poverty by supporting affecting private sector operators are frankly discussed sustainable economic development. The aim of PSOM is to and mutually acceptable solutions sought. Among the share some of the initial financial risks that Dutch companies, issues discussed that affect the horticulture sector are or Dutch-Ethiopian joint ventures, will face when investing air freight availability and cost, as well as the high level in emerging markets in developing countries. Proposals of handling charges, the level of withholding tax on amounting to a maximum of €800,000 can be awarded a imports (subsequently reduced), customs procedures, contribution of up to 60% of the financial requirements. and land availability. From 2003 to 2006, 13 Dutch-Ethiopian companies have been awarded PSOM grants of €6.2 million as part of an The Ethiopian export sector has received aid from a number overall investment program of €10 million by the companies of donors, including: (a further five grants were awarded in 2006). ƒ UK/DFID has provided funds for strategic market studies, establishing and supporting the EHPEA with funding provided for the office and full-time C.5.4 ONCluSIONS AND STrATEgy C Executive Director, consultancy support, work- IMPlICATIONS shops and provision of market information, and a There are many valuable lessons to be learned from the European market access tour for horticulture and Ethiopian flower sector. It has experienced relatively high roses. growth from a low base over the last five years through ƒ Netherlands supported a 50-strong trade mission significant foreign direct investment attracted by the incen- from the Netherlands in May 2003 as well as funding tives provided by the government. Government support has Business to Business Partnership for horticulture provided these financial incentives, as well as easy access companies. They have also assisted in the develop- to large fertile tracts of land in favorable locations. Donors, ment of a code of conduct on environmental stan- particularly the Dutch Government, have provided direct dards and the preparation of the Strategic Paper support to the private sector and have also facilitated the and capacity building for farmers. Also, they have development of the sector through supporting key nodal provided a considerable number of PSOM grants for organizations, such as Ethiopian Horticulture Producers and innovation. Exporters Association. Importantly, the private sector has ƒ USAID has established the market-led Ethiopia shown a willingness to work together in resolving issues Agribusiness and Trade Expansion Program to such as freight costs and supply of inputs. Specifically, the energize the horticulture sector, which has provided industry has been supported by: technical and financial support in production, post- harvest handling, transport logistics, GLOBALGAP ƒ An efficient one-stop shop (the EIA) that welcomes certification, and market and trade studies. USAID potential new investors, provides information, and funding concentrates almost exclusively on fruit and quickly sorts out problems. vegetables. ƒ The provision of areas of land with good soils, infra- ƒ ILO has provided assistance for worker welfare and structure, and services. Any land disputes over owner- training in the safe use of pesticides. ships are sorted out by the government. ƒ CBI has provided assistance for improving post-har- ƒ Attractive loan finance provided by the government vest handling and market recognizance. where normal demands for collateral have been ƒ Swedish Chamber of Commerce has provided relaxed. training. ƒ Attractive incentives for new investors in terms of tax- ƒ DAG PSD TWG (Development Assistance Group free status, tax holidays, etc. Private Sector Development Technical Working Group), ƒ Recognition that world-class management is required which is chaired by USAID and the World Bank, has to establish a competitive a horticultural industry. been coordinating and harmonizing the donors in the ƒ Donors’ provision of considerable support for training area of private sector development. supervisors, middle management, and workers. Pa rt I I I - B ac k g r ound Pa P ers 14 4 c — coMP et ItIVene ss and In n oVat Io n ƒ Donor support that has been available for undertak- rEfErENCES ing feasibility studies, operations of the EHPEA, and Anonymous. 2008. Study on the Floriculture Industry in Ethiopia. innovation. Embassy of Japan in Ethiopia See at http://www.et.emb-japan. go.jp/Eco_Research_E.pdf. ƒ The national airline coordinated and organized air- freight for the exporters and charged a rate less than Belwal, B. and M. Chala. 2008. “Catalysts and barriers to cut � flower export. A case study of Ethiopian floriculture industry. neighboring countries. International Journal of Emerging Markets 3(2): 216–235. Above all, in Ethiopia certain locations have considerable � FlowerTech. 2008. “Country file: Ethiopia shows the way in roses. comparative advantages for floricultural production— FlowerTech 11(7): 9. which means that as the support is gradually reduced, the Gebreeyesus, M. 2008. Micro Evidence on the Development of industry should be sustainable. It must also be recognized Cut-flower Industry in Ethiopia. Presentation Initiative for Policy that some of the investments have not been success- Dialog Task force on Africa. July 10–11. ful and the EIA has some non-performing investments. HortiNews. 2009. Ethiopian Horticulture Producers and Exporters These are often associated with companies that replaced Association http://www.ehpea.org.et/event%202%20new.htm. expatriate management after two years to save money, . . Joosten, F 2007 Development Strategy for the Export-Oriented but yields and quality suffered. Also, the professionalism Horticulture in Ethiopia. Wageningen UR, p. 50. of some of the investments was not up to standard and Meseret, E. 2008. Ethioblog. Accessed at http://www.nazret.com/ the management deviated from the original plan without blog/index.php?blog=5&cat=127&page=1&paged=2. EIA approval. Some of the non-performing investments have been taken over by other companies and are now . Nair, M. and H. C. Coote. 2007 Ethiopia: Trends in growth of modern retail and wholesale chains and related agribusiness at Country productive. It is likely that over the next two years, there Level. Regoverning Markets Country Key Papers. March. will be some restructuring of the Ethiopian floricultural Shuti, E. N. 2008. The African. http://www.theeastafrican.co.ke/busi- industry into the hands of fewer larger players, but the ness/-/2560/454214/-/view/printVersion/-/y09ej6z/-/index.html. efficiency of production will increase. It is also likely that Temu, A. E. and A. A. Temu, 2005. How Can the Poor Benefit from some new, higher-value, products will be added to the the Growing Markets for high value agricultural products? http:// range of exports It is still expected that it will maintain its www.fao.org/docs/eims/upload/210989/regional_SSA.pdf. current levels of exports, and importantly, its current level of employment. C.6 tHaILand THE DRIVERS FOR SUCCESS IN THE EXPORT MARKET FOR FRESH PRODUCE C.6.1 INTrODuCTION or 2.52 % of world export (Wannamolee 2008). Much of the value of these exports comes from rice, rubber, cassava; hor- The Thai economy is export dependent, with exports account- ticulture is a relatively small sub-sector, but it is expanding . ing for 60% of GDP Thailand imports more non-agricultural rapidly. Like some other countries in South-East Asia—in par- goods than it exports; however it manages to maintain a ticular Thailand, Indonesia, Malaysia, and Vietnam—Thailand trade surplus because exports of agricultural goods exceed more than doubled their horticulture exports, keeping pace significantly corresponding imports. Hence, the balance of with Central America as a major exporter, producing a simi- agricultural exports plays a key role in the Thai economy and lar line of products, and increasingly competing in the same supports the population’s23 standard of living. markets (Reardon and Flores 2006). The rapid rise in exports In 2007 Thailand was ranked seventh in the world for exports , is due partly to investment in infrastructure and productive of agricultural and food produce24 with a value of $24.7 billion, capacity, and basic improvements in shipping and packaging technology that have since the mid-1980s greatly reduced transport costs for meat, seafood, and fresh produce. In ad- 23. Thailand’s farming community accounts for approximately 38% of the country’s population of 65 million. dition, there have been foreign direct investments, such as 24. Thailand is the largest exporter of rice, rubber, tapioca, pine- Dole (Reardon and Flores 2006). apple products, canned tuna, and shrimp products. Hort Icu Lture ex P orts FroM gH ana : a strateg I c st u dy c . 6 tH aI L a n d 14 5 Approximately 4 million hectares are dedicated to fruit- rambutan, banana, orange, jackfruit, papaya, and pineapple; bearing and perennial trees, while vegetables are cultivated and temperate zone fruits introduced in the northern region, on 210,000 hectares, resulting in 24 million tons of fresh such as apple, grape, pear, and strawberry. Fruits are exported produce and processed products valued at $289 million for in both fresh and processed forms, as frozen, dried, sugared, fresh fruit, $199 million for vegetables and $1.1 billion in pro- vacuum-packed, and in jam or syrup. The top five items are cessed25 fruits and vegetables in 2005 (Hoffman 2007). canned pineapple, modified pineapple juice, fresh durian, fresh longan, and dried longan. C.6.2 fruITS Fresh fruit is exported to wide range of markets, particularly Thailand cultivates a wide range of fruits—indigenous lo- in the region (table III.3.5). cal fruits, such as durian, longan, mangosteen, mango, TAblE III.3.5: Value of exports of Fresh Fruit to Principal Markets HOnG KOnG, OTHER U.S. and TOTal aSEan CHIna JaPan ETC* aSIa EU-15 Canada U.S.$ million 288.5 67.9 98.7 14.9 50.0 10.1 16.7 22.3 % Export market 100 23.5 34.2 5.2 17.3 3.4 5.8 7.7 *Hong Kong, Taiwan, and Republic of Korea. Source: COMTRADE as presented by Hoffman (2007). C.6.3 VEgETAblES coriander, and morning glory; those with edible fruits, such Vegetables are marketed as fresh, processed, and as seeds. as cucumber, chilli, and tomato; and those with edible seeds, About 73 varieties are commercially produced, including such as pumpkin and sugar pea. About 39 varieties of vegeta- those with edible roots and leaves, such as cabbage, carrot, bles are fed into 136 factories to be processed for export. As sweet potato, and potato; those with edible stems, leaves, with fruits, regional markets are important, but increasingly flowers, and shoots that are consumed fresh or as cooking the EU is taking fresh vegetables such as babycorn (table ingredients, such as red onions, onions, garlic, cauliflower, III.3.6). TAblE III.3.6: Value of exports of Fresh Vegetables to Principal Markets HOnG KOnG, OTHER U.S. and TOTal aSEan CHIna JaPan ETC* aSIa EU-15 Canada U.S.$ million 198.8 15.3 0.9 86.2 19.2 5.8 47.8 11.6 % Export market 100 7.7 0.4 43.4 9.6 2.9 24.0 5.8 * Hong Kong, Taiwan, and Republic of Korea Source: COMTRADE as presented by Hoffman (2007). The EU has become an important destination for babycorn, C C.6.4 rITICAl ISSuES AND DrIVErS fOr while asparagus exports are directed mainly to Japan and ChANgE South-East Asia. These commodities are mostly produced by It has been suggested that Thailand, along with other Asian coun- smallholders26 who link to the exporters through packhouses tries, has developed economically by implementing “shared and under contract farming arrangements, sometimes involv- growth strategies� consisting of two components: encouraging ing intermediary traders (Hoffman 2007). high savings and long-term investments, and upgrading orga- nization, technology, and management (Page 2005). Growth 25. Thailand is the fourth largest developing-country exporter of was at the center of the public policy agenda and highly visible processed fruit and vegetables after China, Turkey, and Brazil. 26. The farm size is generally between 0.8 and 1.6 hectares for wealth-sharing mechanisms—such as universal primary educa- asparagus growers, and between 0.24 and 0.32 hectares for tion, land reform, and free basic health care—which were put in baby corn growers. place to induce non-elites to support the growth process. Pa rt I I I - B ac k g r ound Pa P ers 14 6 c — coMP et ItIVene ss and In n oVat Io n In assessing the sector it is apparent that key drivers for Analysis by IFPRI of government spending in develop- change have been government support, the retail sector, ing countries has identified that, at 10 to 15%, Thailand and donors. devotes a relatively high level of its budget to agriculture and an additional 10% to research (reported in Akroyd and Smith 2007). The government supports a number C.6.5 ENAblINg ENVIrONMENT of research institutes, e.g., Chiang Mai University and Until the 1980s, agricultural exports were viewed as a Chanthaburi Horticultural Research Centre. Thailand is also source of government revenue and it was not until 1986 host to the Asian Vegetable Research and Development that the tax on rice exports was removed (Warr and Centre-Asian Regional Centre, which aims to improve nu- Kohpaiboon 2009). Although taxes have been removed, trition and reduce poverty through vegetable research and the government has adopted a market-oriented approach27 development. and has not moved to subsidizing agriculture directly since many important agricultural commodities are net export Land Tenure items. Policies on the various agricultural commodities In Thailand land may be held as freehold or leased. The have been determined individually in response to circum- rights to freehold have various restrictions, and foreign stances that varied depending on the commodity rather individuals or companies may not own freehold land, than forming part of a single, integrated agricultural policy except in particular circumstances. There are a number approach. of different types of title deeds to land in Thailand rang- ing from the top level where the registered holder of the The Thai Government employs a range of measures to re- title has full rights over the land, through an intermediary strict imports of palm oil, rubber, rice, and sugar, including step where there is title but the official measuring of the non-tariff instruments permitting a high degree of discretion boundaries and placing of markers has yet to be carried on the part of government officials (Warr 2008). This set of out, to a situation where the authorities have yet to recog- import controls includes import prohibitions, strict licensing nize ownership. arrangements, local content rules, and requirements for spe- cial case-by-case approval of imports. The commodities for Leases up to 30 years are available and can be sold. For which these restrictions are applied include the four men- foreign companies wanting land for industrial or commer- tioned above as well as onions, garlic, potatoes, pepper, tea, cial purposes, renewable leases of 50 years duration are raw silk, maize, coconut products, and coffee. Apart from available. support to soybeans, sugar palm oil, and dairy, Thailand’s interventions have seldom taken the form of directly inter- These arrangements appear to be satisfactory and do not vening in agricultural commodity markets. Instead, cash in themselves deter investment in commercial agriculture. transfers to village organizations, subsidized loan schemes They are relatively straightforward and transparent. (not linked to agricultural production), and a generally good system of public infrastructure in rural areas have been the Trade Agreements main instruments of intervention for rural development. It is Thailand has negotiated a number of bilateral, regional, suggested by Warr (2008) that “the unusual export orienta- and multilateral free trade areas (FTAs) with developed and tion of Thai agriculture must be an important explanation for developing countries to expand agricultural exports. FTAs this outcome� in agricultural development. have been concluded and implemented with ASEAN for Although the government does not provide any direct financial the ASEAN Free Trade Area (AFTA), Australia, New Zealand, assistance to the agricultural sector, it does actively provide Japan, China (as part of Early Harvest Scheme for ASEAN- indirect support in a number of areas including improve- China FTA), and India. The Early Harvest Program is designed ments to infrastructure and transport, research, negotiating to accelerate the implementation of China-ASEAN Economic market access regulations and trade agreements, training, Cooperation Framework Agreement and has reduced the tar- and improving food safety; the latter aspect being particularly iffs of agricultural products in particular, including livestock, important in accessing high-value markets. meat, fish, dairy products, live plants, vegetables, fruits, and nuts, so that the ASEAN countries can attain early access to 27. Except for price support and input subsidy schemes for soy- China’s huge domestic market prior to the establishment of beans and sugar. the full FTA. Hort Icu Lture ex P orts FroM gH ana : a strateg I c st u dy c . 6 tH aI L a n d 14 7 Following consultations between the public and representa- government has been highly supportive in addressing food tives of the private sector, relevant government agencies, and safety in the agricultural sector. The Ministry of Agriculture academics, the Government of Thailand developed negotiating and Cooperatives, through its Department of Agriculture strategies28 to be used in establishing agricultural agreements: (DOA), has set up a national good agriculture practice scheme and is responsible for control and inspection (Wannamolee ƒ Emphasize Thai agricultural products with high com- , 2008). In support of the national GAP the National Bureau petitiveness, such as rice, tropical fruits, rubber, and of Agricultural Commodity and Food Standards (ACFS) processed food; was established in 2002 to develop national standards of ƒ Allow appropriate timeframes for adjustment for sen- agricultural commodities and food products. Since 2003, sitive agricultural products; ACFS has set up a number of national GAP standards on ƒ Cover market access problems arising from sanitary crops, livestock, and fisheries, developed largely in accor- and phyto-sanitary (SPS) measures and environmental dance with the requirements of FAO/WHO. The Department issues, and establish cooperation to facilitate trade of Agricultural Extension (DoAE) is mandated to promote by entering into Mutual Recognition Arrangements national GAP among smallholder farmers, with a focus on (MRA), which can provide for appropriate technology training those farmers that are producing for—and are con- transfer; nected to—the fresh fruit and vegetables export business. ƒ Determine appropriate standards for agricultural im- In 2006, DoAE launched the project “Promotion of Safe ports to ensure safety for Thai consumers. Agricultural Products� for 31 crops nationwide with the aim of assisting farmers to understand the principles and frame- The Thai Government has become more proactive in chal- work of national GAP . lenging market access regulations. For example, the National Plant Protection Organization (NPPO) of Thailand was suc- By May 2008, DOA had registered 363,946 farms for GAP , cessful in its request to the U.S. government to amend fed- with 169,886 farms being certified with an area of 190,621 eral fruit and vegetable regulations to allow importation into hectares, excluding rice farms (Wannamolee 2008). The ma- the U.S. of longan, lychee, mango, mangosteen, pineapples, jority of the certification for fruits were longan (59,247 farms/ and rambutan (Evans and Nalmpang 2008). 58,178 ha), durian (11,073 farm/18,487 ha), mangosteen (14,295 farms/18,306 ha), and mango (7 ,469 farms/16,465 ha). In addition to government assistance, the sector is supported In addition, vegetables—babycorn (1,382 farms/736 ha) and by the Thai Fruit and Vegetable Producers Association, which asparagus (1,608 farms/533 ha) were also certified. The was established in 2006 by 40 companies, mostly exporters, scheme also trains, inspects, and certifies input suppliers in order to: and food processors. ƒ Enhance good and cooperative relationships between The Thai Government and its institutions provide free ser- exporters, producers, government agencies, service vices, such as training, inspection and certification, to assist providers, and other stakeholders by working together; farmers in complying with the national GAP standard and ƒ Provide knowledge on food safety and quality assur- obtaining certification. While the national program for food ance systems for members and the general public safety has undoubtedly raised standards, the level of cer- through training and seminars; tification is not yet sufficient to guarantee entry into high- ƒ Develop a center for members to share market infor- value EU markets. However, with support from the private mation, knowledge, and other important issues; sector and donors, e.g., GTZ, a program of GLOBALGAP ƒ Provide linkage to other stakeholders, such as implementation and certification has been initiated. The farmers’ groups, cooperatives, and others thereby number of GLOBALGAP-certified producers in Thailand is strengthening the Thai produce industry. high for the region, but lower in total compared to coun- tries such as Chile and India, but comparable in total to Food Safety Kenya (table III.3.7). Of particular note is the high numbers Addressing food safety concerns—particularly levels of for smallholder certifications under Option 2). pesticide residue—has become more important when try- ing to access or maintain access to certain markets. The In addition to direct GLOBALGAP certification, a GTZ proj- ect is working with the Thai Fruit and Vegetables Producers’ Association and Kasetsart University to set up a ThaiGAP 28. http://www.thaifta.com/english/index_eng.html. Pa rt I I I - B ac k g r ound Pa P ers 14 8 c — coMP et ItIVene ss and In n oVat Io n TAblE III.3.7: number of goBaLgaP-certified Producers in 2007 nUMBER OF CERTIFIEd PROdUCERS OPTIOn 1 OPTIOn 2 PMOS TOTal Thailand 25 701 7 726 Vietnam 0 11 1 12 China 75 191 19 266 Chile 956 209 4 1165 India 411 616 13 1027 Kenya 31 575 27 606 Source: FoodPlus, in Hoffman (2007). with the aim of having it benchmarked to GLOBALGAP and for the re-export of food products to markets across the (Hoffman 2007). However, it remains to be seen if the Asian region. European retailers accept this benchmarked standard. This has stimulated the market for raw food materials and has even been suggested as the catalyst for growth in fresh Private Sector produce exports through retailers such as Ahold (Kohli 2007). It has been suggested that agricultural growth in national, re- In 1996, Royal Ahold started a joint venture with the Central gional, and international markets has been achieved through Retail Corporation to form the TOPS chain, which established linking smallholders to firms and financial institutions. A World the World Fresh Distribution Centre to supply retail outlets. Bank report (2005) illustrated these linkages through the ex- The TOPS30 management decided to embrace the certifica- ample of a smallholder potato growers’ cooperative whose tion system for good agricultural practices of the Department members developed a sustainable rice-potato production of Agriculture (Buurma and Saranark 2006). system on holdings of about one hectare per farmer. Local government officials worked with the cooperative to establish Another example of private sector initiatives in the sector links and contracts with potato-processing firms to establish a was the Thai Fresh project initiated in 1999 when Golden sustainable value chain. The farmers ensured a steady supply Exotics Holland and KLM Cargo established a distribution of quality potatoes to the processors. This helped to build trust and packing center in the vicinity of Bangkok airport (Buurma between the value chain actors and to grow this sector. and Saranark 2006). To improve the quality and food safety of the fresh produce and to develop further integration of Another important driver has been the growth in consumer the supply chain, a regional post-harvest center was built in wealth which has stimulated the retail sector. The retail food 2003 in the production region of Ratchaburi Province. The sector was estimated to be worth $31 billion in 2004, with post-harvest center serves as a knowledge hub for the grow- growth at 35% in the previous four years (World Bank 2006). ers, providing extension services and farming inputs so that Thailand’s retail sector has diversified and expanded to in- they can apply good agricultural practices and integrated crop clude hypermarkets (all foreign-owned), shopping centers, management techniques. This integrated value chain project supermarkets, and convenience stores, as well as the more has built competencies in the smallholder sector to ensure traditional outlets, including wet markets, and family-run that the necessary quality assurance (QA) levels are reached stores. This has been accompanied by an increase in growth in accessing high-value EU markets. A key feature of devel- and foreign inward investment in the food manufacturing oping the chain was the need for the private sector technical sector, with companies such as Royal Ahold and Tesco es- staff to train and support farmers in implementing the QA tablishing modern retail formats.29 Many global food compa- systems because the Government-led national certification nies use Thailand as a low-cost center for further processing system had limited financial means, and a lack of capacity restrained it from taking a more prominent role. 29. The Thai government abolished the legal requirement of majority Thai shareholding in response to the economic crisis in 1997. 30. Royal Ahold is no longer involved in retailing in Thailand. Hort Icu Lture ex P orts FroM gH ana : a strateg I c st u dy c . 6 tH aI L a n d 14 9 C.6.6 ONCluSIONS AND STrATEgy C rEfErENCES IMPlICATIONS . Akroyd, S. and L. Smith. 2007 Review of Public Spending to Agriculture. A joint DFID/World Bank study by Oxford Policy Thailand has an agricultural sector that is crucial in maintain- Management. ing a positive trade balance. Fresh and processed fruit and vegetables play an important part in the economy and the Buurma, J. and J. Saranark. 2006. Supply-chain development for fresh fruits and vegetables in Thailand. In Agro-food chains and export sector, with trade to neighboring countries in the region networks for development, eds. R. Ruben, M. Slingerland and providing the main export markets. Government policies to H. Nijhoff, Wagenining, The Netherlands 119–127 . support the sector have centered on indirect intervention— Evans, E. A. and Sikavas Nalampang. 2008. Importation of Tropical providing support, infrastructure, and training—with par- Fruits from Thailand. Food and Resource Economics Department, ticular emphasis on food safety certification, recognizing Florida Cooperative Extension Service, Institute of Food and the increasing demands in this area. The private sector has Agricultural Sciences, University of Florida, Gainesville, FL. played a significant role through developing the retail and . Hoffman, U. 2007 Challenges and Opportunities Arising from food manufacturing sectors aiming to meet the needs of Private Standards on Food Safety and Environment for Exporters an increasingly affluent urban population. The government of Fresh Fruit and Vegetables in Asia: Experiences of Malaysia, Thailand and Viet Nam UNCTAD/DITC/TED/2007/6 pp. 114. played a key role in changing policies that had restricted for- eign investment, which has stimulated inward investment, . . Kohli, P 2007 Cold Chain Infrastructure for Value Creation and Rural Entrepreneurship in Horticulture. http://crosstree.info/Documents/ although there are concerns that foreign-owned businesses summarycc07 .pdf. are too dominant. Page, J. 2005. Strategies for Pro-Poor Growth: Pro-Poor, Pro-Growth In shaping this sector, the following key factors have been or Both? Washington D.C. World Bank. pp. 42. important: Reardon, T. and L. Flores. 2006. Viewpoint: ‘‘Customized competi- tiveness’’ strategies for horticultural exporters–Central America ƒ Governmental support to infrastructure and trans- focus with lessons from and for other regions. Food Policy 31: port systems and general financial support to rural 483–503. communities; Wannamolee, W. 2008. Development of Good Agricultural Practices ƒ Government investment in research and agricul- (GAP) for Fruit and Vegetables in Thailand. Paper presented at Training of Trainers in Good Agricultural Practices (GAP) tural institutions, such as extension and standards and Benchmarking: GLOBALGAP for Fruit and Vegetables, organizations; 14–23 July, Sheraton Subang Hotel & Towers, Kuala Lumpur, ƒ Government lead in developing good agricultural prac- Malaysia. tices and food hygiene certification systems; World Bank. 2005. Agricultural Growth for the Poor. An Agenda for ƒ Development of trade agreements in key market Development. World Bank. pp. 228. destinations; . Warr, P 2008. Trade policy and the structure of incentives in Thai agri- ƒ Increase in national and foreign private sector invest- culture. ASEAN Economic Bulletin. http://www.allbusiness.com/ economy-economic-indicators/economic-indicators/11780940-1. ment in food manufacturing and the retail sector, html. which has opened up opportunities for smallholders in . � Warr, P and Archanun Kohpaiboon. 2009. “Thailand. In: Distortions accessing markets; to agricultural incentives in Asia, eds. Kym Anderson and Will ƒ The establishment by the private sector, with support Martin. International Bank for Reconstruction and Development/ from donors and government, of a large number of The World Bank. p. 606. GLOBALGAP-certified smallholder supply chains. Pa rt I I I - B ac k g r ound Pa P ers 15 0 D — POLICY AND INST I T U T I O N S D: POLICY AND INSTITUTIONS D.1 HAG AND SPeG: WHO HAS SUrVIVeD? D.1.1 INTrODUCTION TAbLe III.4.2: Comparison of SPeG members exports In developing a strategy for Ghanaian export horticulture, it in 2004 and 2008 would be useful to look at the performance of the existing 2004 2008 exporters and to understand the reasons for their success Export volume MT 38,494 21,883 or failure over the last five years. Perhaps the easiest way No of exporters 21 11 to approach this is to examine data for the members of the Source: Derived from data supplied by SPEG. Horticulturalists Association of Ghana (HAG) and Sea-Freight Pineapple Exporters Association of Ghana (SPEG), as virtu- By 2008, the position had changed dramatically: of the 21 SPEG ally all of the pineapple exporters belong to one or both of members active in 2004 only 11 had survived and exports had these associations. dropped to just 21,883 tonnes (table III.4.2). Of the 11 export- ers active in 2008, one has since ceased exporting, leaving just 10 survivors from the list of exporters active in 2004. Although D.1.2 CUrreNT STATUS the number of active exporters has dramatically dropped from In 2004, HAG and SPEG had a collective membership of 54 to just 11 companies, the decline in export capacity was 54 companies who were actively involved in exporting fruit only been 40% as this rationalization was mainly the smaller to the EU. These companies had a theoretical capacity to companies withdrawing from export. (table III.4.1). export 2,215 tonnes of fruit per week. The exporters ranged in size from 1 tonne per week to 250 tonnes per week, but In fact, data from HAG and SPEG indicates that with a few 60% were quite small with capacities of less than 25 tonnes exceptions only businesses with a capacity of 60 tonnes per per week (table III.4.1). Over the course of the year, 21 SPEG week survived. The survivors among the smaller businesses members accounted for exports of 38,494 tonnes of fruit have become FLO (Fair trade) and organically certified and (table III.4.1). About 50% of the exporters had GLOBALGAP are exploiting these niche markets. Of the bigger exporters (formerly known as EurepGAP), FLO, or organic certification. only FARMAPINE has stopped trading and this a special case However, certification to private standards was confined to dealt with in detail in background paper A1. All of the survivors companies with capacities greater than15 tonnes per week. have at least GLOBALGAP certification and 63% of the larger TAbLe III.4.1: Summary of HAG and SPeG members export Capacity Export capacity privatE Standard Mt/wEEk MEMbEr of HaG MEMbEr of SpEG cErtifiEd ExportinG in 2004 ExportinG in 2009 100 to 250 2 8 8 8 7 60 2 4 4 4 2 30 to 40 6 7 7 10 1 20 5 2 4 7 1 15 9 2 4 10 0 10 7 3 0 10 0 1 to 5 5 0 0 5 0 total 36 26 27 54 11 Source: Data supplied by HAG and SPEG, membership and capacity data are also available at www.ghanafreshproduce.org. H OrTICULTUre exPO rTS frOm GHAN A: A STr ATeG I C ST UDY D . 1 H AG A N D S PeG: WHO HAS SU rVIVe D? 15 1 businesses are also FLO certified highlighting the increasing owner was not able to afford this as well as the higher costs importance of private standards for market access. associated with growing MD2 (table III.4.1) and the invest- ment that would be needed in a cold chain. It comes as no The 11 survivors from 2004 have had mixed fortunes: two surprise to find that exporters of this size were unable to of the largest businesses have expanded and their exports invest in MD2. have grown from just 4% of the total in 2004 to 60% of the volume in 2008. The other nine companies have fared badly, HAG said that only a few of their members (two large ex- experiencing drops in export volumes ranging from 45% to porters) could afford to invest in MD2 plantlets, the rest had 88% when compared to 2004 levels. Of these, only five ap- to rely on the government and donors as a source of plant- pear to have prospects of long-term survival. ing material. According to HAG, all their members received planting material from government and donor initiatives dur- The obvious question is why did so many exporters fail ing 2006. However, these plants did not survive and 80% of between 2004 and 2008? The answer lies in the switch in HAG members no longer have MD2 on their farms. This was demand by EU buyers from traditional varieties like smooth simply due to the inability of members to finance production cayenne to the new industrial variety known as MD2. of MD2. Chemical inputs costing five times as much as those Switching to MD2 required multimillion dollar investments for traditional varieties forced most of the HAG members out in planting material, farm mechanization, cold chain manage- of the export pineapple business. HAG said that a few mem- ment systems and improved production, and post-harvest bers still grow some smooth cayenne, some of the larger management and control. SPEG and HAG members were farms are selling pineapple juice on the local market but the affected differently by the coming of MD2. The majority of majority have stopped pineapple production and diversified SPEG’s membership was larger exporters (table III.4.1) that into cassava and maize for the local market. had the best chance of coping. Most of the HAG members were smaller exporters (table III.4.1) and hence had the least capacity to cope with the change, which required high levels of resources for a rapid and efficient response. The D.1.3 ImPACT ON TrADe ASSOCIATIONS In their current state, it is difficult to see how the trade as- The larger SPEG members suffered badly in most cases sim- sociations can contribute to the export horticulture sector. ply because they were ill-prepared for the change to MD2. Certainly, the membership is not strong enough to either With a few exceptions, most did not invest to improve their direct public policy or positively influence the business en- performance several years before the crunch in mid-2005. vironment. At best the associations can provide support to Even those that did invest in planting material and mechaniza- their members with services; but, because the membership tion from 2002 onwards still lost large amounts of their work- is largely financially insecure, this could only be achieved ing capital through costly mistakes due to not understanding with external funding. the different agronomic requirements of MD2. Most of these failures were due to having large areas planted with varieties The trade associations are no longer in a position to drive the that no longer met market requirements. Resources were sector forwards. There have been times, for example, when not available to make the necessary investments required SPEG coordinated vessel chartering, that the associations did for successful production of MD2 and the companies were indeed provide some leadership. But associations emerge forced out of the export pineapple business. from active, expanding, and collaborating businesses; they are not suited to a remedial role in an industry in distress. Ninety percent of HAG members had capacities of less than 40 tonnes per week and lacked the necessary resources to Trade associations can be powerful, but only when the mem- cope with the change to MD2. Many of these businesses bers need them. These needs inevitably change with time had no proper packing facilities and very little mechanization and market dynamics—the role of SPEG is now more of over- on farm. Compliance with private voluntary standards such sight of the operation of Shed 9 than in its original conception as GLOBALGAP was the exception rather than the norm. of sea-freight chartering. Some difficult questions need to For example, Graffham (2004) observed during a visit to a be asked at this stage, not only of the members, but also small exporter with 110 acres of land planted with smooth of the donor partners. The value of the organizations and of cayenne on a farm which little infrastructure; the owner the funding, in particular, needs to be appraised against com- complained that putting farm infrastructure in place to meet mercial return—can trade show attendance and/or exhibiting the requirements for GLOBALGAP would cost $37 ,000. The be justified in terms of sales, for example? PA rT I I I - BAC kG r OUN D PAP er S 15 2 D — POLICY AND INST I T U T I O N S C D.1.4 ONCLUSIONS AND STrATegY Most production in Ghana was from small farms and even ImPLICATIONS the largest farms only had 1,500 to 2,000 acres, which was Modern businesses need the agility or ability to respond small in comparison to Costa Rica. It is interesting to note rapidly and efficiently to thrive in a changing and unpredict- that Ghana’s two success stories are larger well-managed able business environment. The change in market demand operations that have shown a much higher level of agility from smooth cayenne to MD2 required companies to invest than the other exporters in Ghana. rapidly in a new product, new production and post-harvest The lesson from the HAG and SPEG survivors’ story is that technologies, and in knowledge and expertise for an efficient any strategy for the future of the export horticulture industry operation. The experience of HAG and SPEG members il- in Ghana should seek to promote large well resourced busi- lustrates that most businesses in Ghana lacked the agility nesses that will have the ability to respond pro-actively to to meet these challenges. Only the largest and most well- change and compete effectively as an alternative supplier resourced businesses have survived the change and show to Costa Rica. The futility of some donor efforts to support signs of long-term prospects. small exporters was illustrated by HAG who complained that Dawson and Aguiar (2007) studied the comparative levels some donors provide a lot of training but the members lack of agility between the Ghanaian and Costa Rican pineapple the resources to implement any of the knowledge gained industries and identified factors that could impact adversely from the training. on a firm’s ability to respond to change in a timely and cost effective manner, which they called agility gaps. They found that the industry in Costa Rica experienced five agility gaps. refereNCeS In contrast, Ghana’s pineapple industry experienced 30 agil- . Yawson, D. E. and L. K. Aguiar. 2007 Agility in the Ghanaian interna- tional pineapple supply chain. Paper presented at the 17th Annual ity gaps. Costa Rica was better able to meet demands for forum and symposium of IAMA, Parma, Italy, June, pp 1–19. change because the industry is dominated by large well- resourced farms with typical areas of 7 ,500–17,000 acres. D.2 PLANS, POLICY AND INSTITUTIONAL SUPPOrT D.2.1 INTrODUCTION taking exactly the opposite approach by working mostly with international consultancy firms outside the GoG and trying We do not intend to review again the government policies or to establish links between the Ghanaian private sector and the support of donors and NGOs directed at export horticul- large international companies. While it is too early to assess ture. This was summarized in Part I of the present report and a the effects of the projects, experiences from the recent in- more comprehensive, critical review, which covers the wider vestments of international companies in the pineapple and scope of agriculture in Ghana, is provided by Wolter (2008). cocoa sector suggest that the linking of smallholders to inter- In horticultural exports, support from government and donors national companies can be beneficial for both sides…. � to date has for the most part been focused on the small-scale Now it is important to recognize that the export horticulture farmer because smallholders were the basis of most agricul- sector needs a fundamentally different approach than might tural activity in Ghana. Wolter continues: currently apply to other sectors of agriculture. This change “….The horticultural sector has emerged as a favourite has been brought about by the developments in the primary target of donors and the GoG. The examination of several market, Europe, where the changes in the structure of retail- large projects reveals that donors are increasingly taking a ing and the management of the supply chain have resulted value chain approach and trying to link smallholder farmers in challenges that today can only be met by large-scale farm- to exporters via outgrower schemes. Still, even within the ers.1 To derive the economic benefits from the opportunities donor efforts to promote commercial agriculture through out- grower schemes, project approaches vary according to donor preferences. While multilateral donors such as AfDB work 1. We use the terminology of large-scale or small-scale farmers in a relative sense rather than in terms of absolute acreage cul- through government structures and try to avoid areas which tivated; the distinction also refers to managerial capability and are dominated by large international companies, USAID is capitalization. H OrTICULTUre exPO rTS frOm GHAN A: A STr ATeG I C ST UDY D . 2 P L A N S , P O L I C Y AND INSTITUTIONAL SUPPO rT 15 3 in supplying the European market, a large-scale farming sec- Growing fresh produce for export involves other challenges tor must be developed and used to penetrate the market and that further reinforce the competitive superiority of large- secure position. This will then open up opportunities for the scale farmers over small-scale operations including: small-scale farmers. ƒ Supply management in terms of timing and volume; It is important at this point to be clear about the structure of ƒ Post-harvest handling; horticultural production. There are many small-scale farmers ƒ Logistics management; involved in horticulture in Ghana. Those actively involved in ƒ Export financing; growing for export, however, are few. There were times when ƒ Communication large numbers contributed to the export pineapple market, but the difficulty of MD2 cultivation, and the stringencies of Leavy and Poulton (2007) also recognized that the competi- GLOBALGAP production have forced them out of the sector. tiveness of different farm types varies according to which Small-scale producers predominately export products where crops and which markets are involved. These parameters there is no need for GLOBALGAP certification, and therefore then can be incorporated into a table of competitiveness as are subject to low margins and high risk. shown in table III.4.4 below. Large-scale farming operations are ahead in long distance horticultural exports, but the view is inconclusive for the D.2.2 NALYSIS Of CUrreNT SITUATION A competitiveness of small-investor farmers and the commer- The difference between export horticulture and other cial smallholders. Note that this is a relatively recent state of crops and markets lies in the relative ability of categories affairs, brought on by retail market and supply-chain devel- of farmers to compete. Table III.4.3 summarizes the appar- opments in Europe: ten years ago the small-investor farmer ent strengths and weaknesses of different categories of (i.e., SPEG member) was well able to compete. Other crop/ producer. The table identifies the area in which each pro- market combinations will not have changed as much. ducer category might be the most competitive: the small scale-farmer, who makes use of the family and is not an According to Leavy and Poulton the small-scale farmers and employer, is better able to provide low-cost motivated labor the investor farmers can be competitive in the national and than the large-scale farmer, who must manage a workforce. regional markets and this is indeed the experience in Ghana. But where working capital and risk is an issue, the positions These markets offer substantial potential, particularly be- are reversed. cause of the increasing needs of the processing sector. The small-scale farmer rarely leads, but, in the commercial class, The divisions could be finer still, by horticultural crop and is reasonably positioned to meet many challenges. Once weak- market type, for example. A comparison of chillies to EU nesses are identified, for example, technical constraints, these wholesale markets against chillies to EU supermarkets, or can be addressed through extension or project assistance. yam exports compared to MD2 pineapples, might show TAbLe III.4.3: Competitive Strengths and Weaknesses of Different farm Types SMallHoldEr farMErS SMall invEStor- larGE-ScalE non-coMMErcial coMMErcial farMErS farMinG Land P P    P P    P P    P Working capital/Credit P P    P P    P    P Inputs: access/purchase P P P    P P    P    P Skilled labor: access P P    P P    P    P Unskilled labor: motivation/supervision P    P    P P    P    P P    P P Contacts/network P P    P P    P P    P    P Market knowledge P P    P P    P    P P    P    P Technical knowledge P P    P P    P    P P    P    P Product traceability and quality assurance P P    P    P Risk management P P P    P P    P    P P = poorly positioned PPP = well positioned Source: Leavy and Poulton (2007). PA rT I I I - BAC kG r OUN D PAP er S 15 4 D — POLICY AND INST I T U T I O N S TAbLe III.4.4: Predicting Competitiveness of farm Types in Different Crops and markets SMallHoldEr farMErS SMall non- invEStor- larGE-ScalE coMMErcial coMMErcial farMErS farMinG Local, National and Food Staples Yes Yes Doubtful Regional Markets High Value Crops Yes Yes Doubtful Low Value Export Commodities (cas- Doubtful sava, soya, grain) Remote Export Markets Traditional Export Commodities Coffee, cotton, cocoa, Yes Sugar, tea, tobacco tea, groundnuts Horticultural Products Doubtful Doubtful Yes Source: Leavy and Poulton (2007). how each scale of enterprise can fit a particular crop or Without a strong business-like large-scale farming sector the market, but it overlooks the opportunity in mutual support long-distance export of horticultural products will be confined and symbiosis. In other words, the large-scale farmer can to the undifferentiated commodity wholesale markets with benefit from the low-cost supply of motivated family labor consequent low returns. These may still offer a reasonable of the small-scale farmer,2 while the small-scale farmer can outlet, but they will become inexorably more competitive. gain access to markets through the ability of the large-scale counterpart to consolidate product and manage the transac- Building a strong business-like sector is most likely to pro- tion costs efficiently. vide an environment in which the small-scale farmer can develop. He may choose to sell his skill directly as an em- Ghana lacks the community of large-scale farmers in horticul- ployee or indirectly as a contract farmer, but the presence of ture. This deficiency hinders the participation of small-scale the larger-scale intermediary does much to mitigate risk and farmers and indeed farmer investors in the export market. provide support. The counter-argument that the small-scale Hitherto, policy and support has focused exclusively on the farmer risks substitution by the larger investment ignores small-scale farmer. In some respects this is not surprising, the current reality of an uncompetitive sector which is not since not only were the large-scale operations absent (though sustainable. farmer investors have been ignored too), but the small-scale farmers are the foundation of Ghanaian agriculture, have the most needs, and are the least equipped, in terms of technol- D.2.3 ONCLUSIONS AND STrATegY C ogy, credit or skills, to overcome those needs. ImPLICATIONS To develop the potential in export horticulture, efforts should Support for the small-scale farmer seems imperative, eco- concentrate on building a strong, large-scale commercial sec- nomically and politically. But it could be argued that, on the tor capable of leading the industry forward and combining contrary, the absence of a large-scale farming sector has profitably with the small-scale operations. The sector-specific counteracted much achievement in bringing the small-scale needs include: farmers forward. Thus, for example, GLOBALGAP training may help with farming practices, but not with penetrating a 1. From the Government: market of fickle consumers. • Policies friendly to investment and the private sector—there has been much progress in this It is time now to build a more collaborative structure, which rec- arena over recent years4 and it is clear that Ghana ognizes the strengths and capabilities of the different types of farms and provides appropriate support to areas of weakness.3 4. See, for example, World Economic Forum Global Competi- tiveness Report http://www.weforum.org/documents/GCR09/ 2. For example, see Background Paper C6 on babycorn in Thailand. index.html; World Bank Ease of Doing Business http://www. 3. FASDEP II (2007) notes that “The weakness of FADEP I, in terms doingbusiness.org/economyrankings/; Heritage Foundation of targeting, was that it failed to recognise the different catego- Index of Economic Freedom http://www.heritage.org/Index/ ries of farmers… …The pursuit of a modernised agriculture in Ranking.aspx; AT Kearney FDI Confidence Index; IMD World FASDEP II will target different categories of farmers according Competitiveness Yearbook http://www.imd.ch/research/publi- to their needs.� cations/wcy/upload/Overall_ranking_5_years.pdf. H OrTICULTUre exPO rTS frOm GHAN A: A STr ATeG I C ST UDY D . 3 L A N D AC QU I S I TION 15 5 is attracting increasing interest from investors. lack co-ordination, lack strength for advocacy, and Specific to export horticulture are problems in are unable to tackle the bigger issues. Instead a land tenure, the processes of resolving contract single, private sector-led authority capable of col- disputes, issues of bureaucratic overhead, such as laborating with all the players needs to be estab- Customs, VAT, taxes, and so on; lished to drive the development of the commercial • Support to the large-scale farming sector as the horticulture sector—for exports and the local engine of growth in horticulture exports. This links market. the Private Sector Development Strategy, the • Socially and environmentally responsible devel- Trade Sector Support Programme, with MOFA opment that ensures sustainable growth in the which has been noted as absent (Wolter 2008); sector. • Support through extension to the small-scale farmers; • Development of the capacity to innovate— refereNCeS management of research; AfDB. 2005. Ghana: Export Marketing and Quality Awareness Project. Appraisal Report. • Support to regional trade—border procedures, infrastructure, etc. . GEPC. 2007 Non-traditional Export Performance Report 2006, Accra. 2. From the Donors: Government of Ghana. 2003. National Medium Term Private Sector • Investment in developing the sector—specific Development Strategy 2004-2008, Volume I Strategy. attractants for investment, for example, develop- . Leavy, J. and C. Poulton. 2007 Agricultural Commercialisations – A ing the infrastructure to bring investment into an Level Playing Field for Smallholders? Future Agricultures Briefing area, but also in support of the smaller commercial www.future-agricultures.org. farmers. MIDA. 2006. Millennium Challenge Compact with Ghana: Executive Summary, Accra. 3. From the NGOs: . Ministry of Food and Agriculture. 2007 Food and Agriculture Sector • Continued support to the small-scale farmer— Development Policy (FASDEP II). ensuring that returns are maximized in the Ministry of Food and Agriculture. 2009. Agriculture Sector Plan linkage of small farmers into the supply chain; 2009–2015 Second Draft. strengthening farmer organizations; ensuring that National Development Planning Commission. 2008. Draft Long Term the rewards of commercial horticulture reach the National Development Plan. Vol. 1 Executive Summary. widest range of beneficiaries. Wolter, D. 2008. Ghana: Agriculture is becoming a Business. OECD. Available at www.oecd.org/dev/publications/businessfor 4. From the private sector: development. • Maximum collaboration—the present prolifera- . World Bank. 2007 Ghana: Meeting the Challenge of Accelerated tion of trade organizations (HAG, SPEG, VEPEAG, and Shared Growth Country Economic Memorandum, Volume II GAVEX, PAMPEAG, and five different mango as- Background Papers. sociations) are not cost-effective to their members, D.3 LAND ACQUISITION D.3.1 INTrODUCTION to investment. How far these difficulties impact in practice To the potential investor in agriculture, the availability of land is difficult to gauge: there is prolific anecdotal evidence of is of utmost importance. If land is scarce, it will be expensive; constraints and there are numerous documented reports of if land acquisition is difficult, there will not only be additional spurious claims and encroachments, but there are also ex- expense but lost time; and if tenure of the land is not secure, amples of investments that have succeeded in acquiring and then the whole project is at risk. using the land they sought. In Ghana, the acquisition of land, and the security of rights Much depends on the extent of land required and the location. to its use, is widely perceived as a significant impediment Unfortunately for the Ghanaian export horticulture sector, PA rT I I I - BAC kG r OUN D PAP er S 15 6 D — POLICY AND INST I T U T I O N S the need to establish production within a few hours of the ƒ Costly and time-consuming legal support services— port/airport puts potential investment areas in the region of land acquisition can be onerous and defending the highest population concentration, where land for agricultural tenure uncertain; development is difficult to acquire. One outcome is that the ƒ The customary authority may gain personally from a larger holdings are often made up of several smaller proper- lease without benefit to the constituents who may not ties that are not necessarily contiguous. be consulted; ƒ Land administration services that are confronted with a huge organizational task; D.3.2 The CUrreNT SITUATION ƒ An increasingly landless population, which inevitably politicizes the acquisition of land. There are two major classes of land tenure in Ghana: cus- tomary lands and public land. Customary lands are owned Underlying issues behind these problems include: by the stools, skins, or families, under the authority of the chiefs, family, or group heads, for the benefit of that group. ƒ Uncertain boundaries—with no cadastre for reference Public lands, acquired by outright purchase or inherited from and outdated deeds and/or titles, the demarcation of a colonial days, are held by the state for public use. tract of land is inevitably open to dispute; ƒ Compulsory state acquisition of land that may then � The customary lands are said to be “allodial, which is to not have been used or compensated or may have left say that the title to the land is inalienable and cannot be the autochthonous communities landless. taken by any operation of law. The title is held by the chief ƒ The rules of customary tenure are not fully codified— or family head and the land is made available through a but are complex, extensive, and may vary between transfer of the rights to profit from the output of the prop- local authorities; erty (i.e., usufruct). Such rights can be acquired through ƒ Lack of transparency and accountability at the level of various arrangements such as tenancy, lease, share con- the customary authorities. tracts, and loans. Further issues are evolving, including: It is important to note that customary law evolves: it is not static but adapts with cultural interactions, population pres- ƒ Increasing population pressure—through demographic sures, socio-economic change, and political developments growth, which in turn leads to land holdings becoming (including conflict). Naturally, not all systems evolve simul- subdivided—and the movement and urbanization of taneously, and consequently, the customary systems may populations; vary across Ghana. Note also that some 80% of rural land in ƒ The diaspora of extended family members increases Ghana is held by customary authorities. the difficulty of getting agreement throughout the The secondary, or derived, rights to cultivate the land can family (important where there are multiple interests be inherited or traded. As such a complex web of rights has in a larger plot), and a remote relative may return to evolved that has not necessarily been recorded, but will claim earlier rights; often extend to parties who have long since moved away. ƒ A concentration of land-holding as property gains in value. Therefore, the potential investor who seeks to lease a tract of land is confronted from the outset with the multi-headed task of identifying all those holding primary and secondary D.3.3 reCeNT effOrTS AT reSOLUTION rights within the boundaries of the plot in question. In remote A National Lands Policy was formulated in 1999. The areas this may be less difficult, although there might still be long-term goal of the policy was to stimulate economic complicating pastoral rights. In the more populous areas, the development, reduce poverty, and promote social stability issues multiply with diverse rights-holders claiming deeds by improving security of land tenure by simplifying the pro- and titles. cesses for accessing land and making it fair, transparent and efficient, developing the land market, and fostering prudent Problems with the land sector in Ghana include: land management. The policy has since been implemented ƒ Indiscipline in the land market—encroachment, mul- by the Land Administration Project (LAP)5 that was started tiple sales of the same plot, unapproved development, spurious claims to title/deeds, etc.; 5. http://www.ghanalap.gov.gh. H OrTICULTUre exPO rTS frOm GHAN A: A STr ATeG I C ST UDY D . 3 L A N D AC QU I S I TION 15 7 in 2003. The LAP was due to end in 2008, but a two-year However, the similarities are often superficial and the local extension will take it through to the end of 2010. socio-economic environment, the history, and the pressure on the land, among other factors, can be markedly different. The LAP will continue with: Even at the local level there are variations in how the custom- ary rights are applied and there can be no single solution. ƒ Legislative review leading to harmonization of land laws and customary practices; The main effort toward land reform in Ghana is for the most ƒ Institutional reforms and development, including the part statutory, with an emphasis on land titling and registra- creation of Customary Land Secretariats; tion. This will be a long and arduous process and the concern ƒ Demarcation of boundaries of allodial land and titling here is to find a process that eases the route for the investor and registration of land interests; rather than to comment on the overall process of reform. ƒ Systematic titling of land interests; The development of a Land Bank Directory is a welcome and ƒ Improvements to the land administration services. practical step. It needs, however, to go further if investment in agriculture is to be encouraged: The institutional reform component has led to a Land Commission Act gazetted at the end of 2008 which es- ƒ Larger tracts need to be assembled—an investment in tablishes a Lands Commission with divisions for survey vegetable production will require sufficient acreage for and mapping, land registration, land valuation, and pub- long crop rotations; lic and vested lands management. Note that the Office ƒ The tracts should be properly surveyed and demarcated, of the Administrator of Stool Lands remains under the and agronomic information should be more readily Ministry of Local Government and Rural Development and available; Environment. ƒ A clear government policy should be formulated within the development plans for the provision of off- Three Ministries (Land, Food and Agriculture, and Local farm infrastructure, such as bringing water supply and Government) have now collaborated to research and identify power to the edge of the farm. potential lands for investment. These are listed in a Land Bank Directory which is available both on the internet and in print. The The government should consider a role in intermediation, for directory, now in its second edition, lists the tracts of lands avail- example using an agency to lease the land in order to sublet able for investment by region with notes on size, location, owner- it to an investor. This could protect the investor from spuri- ship, and potential use. Some 271,000 ha (see table III.4.5) have ous claims since the government agency has the head lease, been identified by surveys across all the regions. while simultaneously protecting the original lessor from an exploitative investor. The tracts need to be ready for invest- TAbLe III.4.5: Summary of Areas Available by region ment, with at the minimum a memorandum of understand- nUMbEr of nUMbEr of ing (MOU) existing between the lessor and the government rEGion HEctarES rEGion HEctarES agency responsible for developing agricultural investment in Volta 9,435 Northern 204,999 land. An MOU should include not only an understanding of Ashanti 801 Upper West 1,986 the consideration to be paid for the land but also the obliga- tions6 of both lessor and sublessee if any arrangement were Central 4,373 Upper East - to be concluded. Greater Accra 6,631 Brong Ahafo 54,232 Eastern 28,624 Western 9,045 (+?) In order to facilitate this process we propose the formation total 271,317 of a Horticulture Development Fund which, among other Source: LAP. tasks, should seek to identify appropriate lands available for development, set about establishing the title through official boundary surveys and searches, acquire the lease, and pro- C D.3.4 ONCLUSIONS AND STrATegY vide infrastructure up to the plots. The Fund forms a key part ImPLICATIONS of the strategy outlined in Part II here, to attract investment Many of these problems persist and land acquisition remains into export horticulture from Ghana. at best cumbersome. The situation in Ghana, with both statu- 6. Aside from the annual rent, the lessee might also be expected to tory and customary rights, is quite typical of many African provide social benefits to the community, for example. There may countries, and it is tempting to look elsewhere for solutions. be stipulations on the time in which the land is to be developed. PA rT I I I - BAC kG r OUN D PAP er S 15 8 D — POLICY AND INST I T U T I O N S The issue of governance remains however, and the process Butler, S. 2009. personal communication. of acquisition must be made transparent and available for . Cotula L. (ed). 2007 Changes in “Customary� Land Tenure Systems scrutiny. In terms of the practical process of acquiring and in Africa, IIED/FAO. securing land in the present circumstances, scrutiny is prob- IIED. 2006. Innovation in Securing Land Rights in Africa: Lessons ably the single strongest mechanism to support the equitable from experience. Briefing Note International Institute for transfer of rights to use land. The scrutiny needs to involve Environment & Development. not only the local community, but also the regional authori- Muir, M. and X. Shen. 2005. Land Markets Public Policy for the ties, as well as neighboring land owners. Private Sector. Note number 300. World Bank. Available at http:// rru.worldbank.org/PublicPolicyJournal. National Land Policy. 1999. Ministry of Lands and Forestry, refereNCeS Government of Ghana. Bulletin of the Dry Lands: People, Policies, Programmes. 2001. No Sittie, R. 2006. Land Title Registration–the Ghanaian Experience. XXIII 31 Land Rights Under Pressure (pp 8–9); Derived Rights: Gaining � FIG Conference, “Shaping the Change, Munich, Germany. Access to Land in West Africa (pp 12–15), May. D.4 INfrASTrUCTUre D.4.1 INTrODUCTION required as the hydro-generating capacity, which accounts The infrastructure managed by the central government pro- for some 60% of Ghanaian output, is now old and subject to vides a key component of a firm’s ability to compete in the frequent breakdowns. export market. Without adequate infrastructure, the operat- Gas is expected to come ashore later this year at Takoradi ing and marketing costs rise and profitability suffers. The from the West Africa Gas Pipeline originating in Nigeria. This need for good infrastructure is particularly acute in the export will be used for further generating capacity in Takoradi. The horticulture industry since it consists of perishable products imminent arrival of oil from the newly discovered off-shore having high demands for good post-harvest handling. fields is also hoped to have a positive impact on the genera- tion of electricity in Ghana. D.4.2 CUrreNT SITUATION While there is plenty of activity in the electricity generating Power sector in Ghana, economic growth combined with rural elec- Power supplies remain unpredictable. Consequently, diesel fuel trification projects will ensure that demand leads supply for for generators continues to be a major expense with serious some time yet. implications for company profitability. The impact on the com- petitiveness of processors and farming operations that need Packhouses and Cooling pumps, run packhouses, or use refrigeration, is important. The Three of the seven pre-coolers that have been procured for increase in mining and smelting activity in the country is driving SPEG are in operation; one has been fully installed and the demand and it is estimated that Ghana will need an additional other two partially installed. The installed capacity is equiva- electricity generation capacity of 2,000 MW within five years.7 lent to an area of 156 m2. The installations of the remaining four are at various levels of completion. In an effort to deal with this situation, the power sector has been deregulated to create an environment more attrac- Pre-feasibility studies for three public packhouses have been tive to private investment. While tariffs for electricity from carried out in Akorley in Yilo Krobo District, Mariakrom in the grid remain quite low, there remains a disincentive to Akuapim South Municipal, and Otwekrom in Gomoa District. investment. That said, several independent producers are The building should be put out to tender shortly. The con- constructing power plants in the country and there should struction is financed by the MIDA program. be additional capacity in the very near future. This is urgently EMQAP is designing and constructing two field packhouses, one in Volta Region and the other in Central Region. These 7. Frost & Sullivan (2008): Strategic Analysis of the Ghanaian Elec- tricity Industry reported in http://www.frost.com/prod/servlet/ are planned for fruit handling and include pre-coolers, cold report-brochure.pag?id=M36F-01-00-00-00. storage and packing areas. H OrTICULTUre exPO rTS frOm GHAN A: A STr ATeG I C ST UDY D . 4 I N f r AST rU C T Ure 15 9 Irrigation provided via a number of projects, such as the Cashew To date 34 sites with potential for new or rehabilitation of Development Project, EMQAP (involving the improve- irrigation facilities have been identified by the implement- ment and upgrading of 407 km), the Inland Valley Rice ing contractors to MiDA. Of these, six lie in the so-called Development Project, and the Northern Rural Growth Southern Horticultural Belt where most export horticulture Programme among others. is concentrated. Feasibility studies are to be carried out over the next year on a number of these sites and overall a budget of $5.8 million has been allocated. In fact, the extensive water supplies of eastern Ghana are poorly used by agriculture. This situation is probably a conse- quence of insufficient capital, irregular power supplies, and poor returns on inefficient farms. Golden Exotics has dem- onstrated with irrigation from a sluice at the Kpong dam for their banana production what may be achieved. Irrigation projects in the Afram Basin, utilizing Lake Volta, will assist in opening up this under-exploited area. The MiDA Program has a substantial transportation compo- nent which is divided between feeder roads, trunk roads— including the N1 around Accra—and improved ferry services on Lake Volta, linking the Afram Plains to Nkawkaw. Seaports Fresh produce finally entered Shed 9 in the early part of the third quarter of 2009. The long-term operation of the Shed is still not agreed, but the Shed is now open for test running. An agreement was reached between the parties (GPHA, SPEG and Golden Exotics) to run the Shed for one year. Frigo, the original contractors who carried out the re- furbishment works, were engaged to manage the technical Roads and Transportation operations. The Tema Fruit Company (TFC), a joint venture The main trunk roads provide good access from the main growing areas for export horticulture to the air and sea ports. There are problems with the Nsawam–Accra road which is undergoing refurbishment, and the traffic around Accra and on to Tema can lead to inordinately long journey times. The roads into the interior remain a major concern. The rural roads are very variable and add to the costs and losses in moving produce. Donor partners such as the EU and the World Bank contribute to the Department of Feeder Roads within the Ministry of Roads & Highways to maintain and expand the network of 42,000 km of feeder roads. The Department of Feeder Roads works with MoFA to identify commercially important roads that need rehabili- tating. Some of the financial support for the rehabilitation PA rT I I I - BAC kG r OUN D PAP er S 16 0 D — POLICY AND INST I T U T I O N S The Shed appears to be operating well, though at the time of writing there are still concerns over the electricity supply. These relate to the substantial fluctuations in voltage in the Tema port area which impose a requirement for stabilization to protect the refrigeration electricity equipment from surges. At present, there is some protection from a voltage stabilizer but this is felt to be inadequate. Since the problem of voltage surges is mainly concentrated on the week-end, the refrigera- tion equipment can be shut down since it is not needed. Small volumes of fruit passed through the Shed in August since it is the season of lowest production, but volumes will pick-up during September, and the Shed will be more heavily used as more bananas are exported from Golden Exotics. It remains to be seen whether or not other members of SPEG begin to use the Shed as the harvesting picks up again. The between SPEG and Golden Exotics, manage the operations principal exporters currently have their own chilling facilities in the Shed and the shore-handling. and containerize the exports. The operation of the Shed comes under an oversight com- The long delays in opening the Shed and the still unresolved mittee made up of GPHA, SPEG, Golden Exotics and MOFA. issues over management and consideration (rent, royalties, This arrangement ensures transparency and that all parties etc.), raise the question of how the project might have been are satisfied with the operation. better handled. This requires further study, but a superficial The agreement to test the Shed was reached at the end of 2008, analysis indicates that: but there were further delays in beginning operations. In particu- ƒ The parameters that were entered into the business lar there was a need to realign the road behind the Shed, and plan may not have been well defined. there were further issues with the power supply. Finally, Frigo ƒ The eventual management of the refurbished Shed was wanted a start-up payment in order to engage an engineer to not clearly defined in advance. In the course of construc- manage the facility. It is not clear whether the year to test will tion, SPEG, who might have managed the Shed, was run from the date of agreement or the date of first operation. debilitated by declining membership and revenues as There were expressions of both points of view in our interviews. the financial health of the members declined. Differing global boundary road 15 meter from building existing offices 15 meter immediate transfer into cold storage approx. 30 containers cold storage cold storage cold storage cold storage cold storage cold storage cold storage cold storage reefer containers 15 × 26 m 15 × 26 m 15 × 26 m 15 × 26 m 15 × 26 m 15 × 26 m 15 × 26 m 15 × 26 m 2 – high 2 – high 2 – high 2 – high 2 – high 2 – high 2 – high 2 – high stacking = stacking = stacking = stacking = stacking = stacking = stacking = stacking = 340 pallets 340 pallets 340 pallets 340 pallets 340 pallets 340 pallets 340 pallets 340 pallets single = single = single = single = single = single = single = single = 190 pallets 190 pallets 190 pallets 190 pallets 190 pallets 190 pallets 190 pallets 190 pallets waiting area waiting area waiting area waiting area waiting area waiting area Capacity: - 1360 pallets (2 high stacking) - 760 pallets (single layer) H OrTICULTUre exPO rTS frOm GHAN A: A STr ATeG I C ST UDY D . 4 I N f r AST rU C T Ure 16 1 impressive efficiencies in container handling. Volumes for 2009 are forecast to exceed 514,000 teu,8 up from 415,078 in 2008. MPS reports that berth productivity is approaching European levels. MPS currently operates two berths with a combined length of 574 meters. They have not yet been given access to three further berths on the other side of their yard, although this would dramatically increase their capacity. The reason why these additional berths are not part of the privatized terminal is not clear, but hopefully they will be included before long. Airports The situation at Kotoka International Airport (KIA) remains unchanged. Fresh produce is handled out in the open on the interests within the industry contributed further, and the forecourt to the cargo shed. Here, it is common to find veg- HEII project, which had managed the development, also etables arriving in the evening in bulk in the backs of pick-ups ended. The commissioning and start-up became the and mini-vans for boxing, weighing, and palletizing. responsibility of a committee rather than a single entity. Limited quantities of pineapples, all papaya exports, and ƒ MOFA and GPHA have different needs and expecta- some mangoes leave Ghana through KIA. These arrive at the tions from the Shed. The relationship and financial inter- airport ready boxed and often palletized and there are limited ests might have been negotiated at the start but for the delays in handling. However, although limited cold storage is very short time scale that was forced on the project. still available at the airport (albeit outside the Customs area), ƒ The rehabilitation of Shed 9 was financed by the availability is unreliable and product is generally delivered in World Bank-funded AgSSIP program. It seems unlikely a relatively short window just before loading. Any mishaps that the use of Shed 9 can support the repayment of a or traffic on the roads could therefore cause the shipper to loan. The refurbishment should be seen as a govern- miss the flight. ment service to help develop the fresh produce indus- try for the economic benefits that are gained. As noted in Part 1 of this study, a refurbishment was planned in 2003, but abandoned as the budget was reallocated in favor of developing Shed 9 at Tema. As of mid-2009, MiDA The privatized container terminal, now operated by a is preparing a tender to upgrade the facilities and hiring consortium of Bolloré, APM Terminals, and GPHA under the name Meridien Ports Services (MPS), is achieving 8. Teu or Twenty-foot equivalent unit, a measure used to quantify the capacity in container transportation. PA rT I I I - BAC kG r OUN D PAP er S 16 2 D — POLICY AND INST I T U T I O N S consultants. Details of the plans are not known. At this point and Tema port now offers a world-class fruit terminal and it seems unlikely that there will be any developments before container handling. 2010. The arrangements for ownership and operation of the new facilities are not known. There is still much to do. Electricity demand continues to outstrip supply; road maintenance is under pressure from increasing traffic and the rural roads are often problematic; facilities at the airport for perishable cargo remain poor. On a more specific level, the issue of Shed 9 operation needs to be confirmed soon. Assuming the agreement to test run is allowed to continue to July 2010, plans should be put in place now for the future management. Two consultancies have already been carried out on this, in addition to the original legal advice at the outset. At this stage, a mediator should be appointed and tasked to find a mutually acceptable way for- ward: further study is unlikely to lead to a solution. It is also important that lessons learned are applied to other planned structures such as the airport and the public packhouses of MiDA. We believe that as further investors realize the poten- tial in Ghana, the Shed will become fully utilized. With limited resources, and therefore an obligation to C D.4.3 ONCLUSIONS AND STrATegY prioritize, the development of infrastructure by the central ImPLICATIONS government is inevitably reactive and responds to a per- The infrastructure, particularly that concerning export ceived need or trend. But there is also a case for being horticulture, has improved enormously over the past 25 proactive, in particular in order to develop new areas for years. In 2009 Accra, it is easy to overlook the progress agriculture. The supply of power, water, and roads into an that has been achieved since the early 1980s when pine- area where land is known to be suitable for horticulture— apple exports first started. Electricity supply remains a ma- as well as available for lease—will act as a strong attractant jor problem, and there are regular crises, but in terms of to investment. The economic benefits of the development development, the generating capacity has nearly doubled should justify the expenditure on these goods by central since the 1980 and the country is far less dependent on the government. A concept for such development is outlined in cyclical flows of the Volta River for power. Roads are much Background Paper B1. improved over the past 25 years throughout the country, H OrTICULTUre exPO rTS frOm GHAN A: A STr ATeG I C ST UDY e — e Xt e rn a L M ark ets 16 3 E: EXTERNAL MARKETS E.1 eu IMPorts oF seLected troPIcaL Products Update The following charts provide an update to the analysis carried . discussion of the market for each product through 2007 Brief out in Part I of this study1 where there is a more complete notes are appended to the charts where appropriate. FiguRE iii.5.1: eu Imports of Pineapples from different sources, 2001–2008 1,000,000 800,000 600,000 Tonnes 400,000 200,000 0 2002 2003 2004 2005 2006 2007 2008 Others 13,723 16,565 19,672 19,470 25,447 25,460 23,265 Panama 0 3,713 9,658 12,143 31,476 37,627 38,888 Honduras 13,505 13,474 17,670 25,276 26,644 26,336 23,109 Ghana 36,467 44,317 51,726 45,066 40,247 35,463 35,601 Ecuador 7,865 19,681 27,552 32,614 36,702 49,243 48,309 Côte d’Ivoire 165,305 141,347 137,528 99,889 94,760 59,253 58,902 Costa Rica 140,870 181,273 252,231 363,506 501,043 570,291 670,093 Brazil 277 835 10,253 12,679 16,400 26,367 24,688 Source: EUROSTAT & Accord Associates. ƒ Imports of pineapples to the EU grew by a further 11% from 2007 to 2008. The increment was entirely supplied by Costa Rica where exports to the EU 1. Ghana Export Horticulture Cluster Strategic Profile Study: increased by 100,000 tonnes. Shipments from other Part I - Scoping review. significant origins were stable or down from 2007. Pa rt I I I - B ac k g r ound Pa P ers 16 4 e — e X ternaL Ma r ke t s FiguRE iii.5.2: eu Imports of Bananas from different sources, 2001–2008 5,000,000 4,000,000 3,000,000 Tonnes 2,000,000 1,000,000 0 2001 2002 2003 2004 2005 2006 2007 2008 Others 358,627 277,831 285,511 326,558 302,620 404,630 372,545 343,587 Panama 417,420 396,153 381,454 370,835 281,639 312,978 354,056 294,588 Ecuador 1,068,550 1,156,983 1,148,753 1,120,761 1,239,220 1,199,320 1,185,776 1,330,600 Dominican Rep 85,910 97,332 111,948 101,337 144,683 176,757 206,362 170,464 Costa Rica 680,939 746,290 802,040 856,406 634,511 834,045 971,408 895,088 Colombia 735,040 768,037 799,237 766,501 882,395 951,376 1,156,146 1,278,168 Ghana 3,458 3,250 946 1,788 4,207 22,404 34,134 45,951 Côte d’Ivoire 226,533 216,718 207,420 210,760 183,752 221,791 189,438 216,583 Cameroon 225,419 236,477 298,493 261,231 252,912 252,702 221,821 279,530 Source: EUROSTAT & Accord Associates. ƒ Imports of bananas to the EU grew by 163,000 significantly increased sales. Imports from Ghana tones (3.5%) from 2007 to 2008. Ecuador, have increased very dramatically since 2001, albeit Colombia, and the three West African origins of from a very low starting point. Output from Costa Cameroon, Ghana, and Côte d’Ivoire all recorded Rica fell. Hort Icu Lture e XP orts FroM gH ana : a strateg I c st u dy e. 1 e u I M Po rts o F se Lect ed tro PI ca L Prod ucts 16 5 FiguRE iii.5.3: eu Imports of Mangoes, guava, and Mangosteens from different sources, 2001–2008 250,000 200,000 150,000 Tonnes 100,000 50,000 0 2001 2002 2003 2004 2005 2006 2007 2008 Others 33,574 34,838 37,908 33,654 31,717 37,429 39,762 38,172 Peru 7,774 10,848 15,398 20,059 26,402 41,040 36,854 49,702 Pakistan 8,751 6,263 8,682 10,940 12,307 10,120 13,225 12,942 Israel 6,638 4,152 8,759 8,286 12,919 11,353 15,006 12,743 Ecuador 6,255 2,661 5,821 5,590 5,937 5,686 3,718 2,293 Costa Rica 1,752 1,859 2,652 4,009 6,274 7,549 4,664 5,342 Brazil 61,127 65,049 92,959 69,931 82,477 85,117 83,025 95,322 Ghana 62 64 83 179 268 295 983 1,098 Côte d’Ivoire 10,897 11,220 7,194 11,430 9,857 14,433 14,706 11,250 Source: EUROSTAT & Accord Associates. ƒ Imports of mangoes to the EU are still growing and ƒ Shipments from Ghana went above 1,000 tonnes for reached 229,000 tonnes in 2008. the first time. Pa rt I I I - B ac k g r ound Pa P ers 16 6 e — e X ternaL Ma r ke t s FiguRE iii.5.4: eu Imports of Papaya from different sources, 2001–2008 45,000 30,000 Tonnes 15,000 0 2001 2002 2003 2004 2005 2006 2007 2008 Others 1,323 2,036 2,636 1,807 1,663 2,512 2,766 2,724 Pakistan 1 1,301 2,007 1,676 1,152 785 885 669 India 23 1,288 2,004 1,722 1,067 519 622 993 Ecuador 25 14 1,272 4,367 3,387 4,078 4,740 3,646 Brazil 15,304 20,332 29,111 29,344 31,855 26,942 24,660 23,273 Côte d’Ivoire 236 340 232 1,164 1,398 1,857 1,806 3,574 Ghana 1,937 1,414 1,649 1,860 1,334 1,223 1,042 1,061 Source: EUROSTAT & Accord Associates. ƒ European imports of papaya appear to be ƒ Côte d’Ivoire showed a strong jump in exports while stabilizing. Ghanaian output seems steady. Hort Icu Lture e XP orts FroM gH ana : a strateg I c st u dy e. 1 e u I M Po rts o F se Lect ed tro PI ca L Prod ucts 16 7 FiguRE iii.5.5: eu Imports of capsicums from different sources, 2001–2008 40,000 Capsicums (Chillies) 30,000 Tonnes 20,000 10,000 0 2002 2003 2004 2005 2006 2007 2008 Others 1,849 1,737 2,444 3,085 4,845 6,964 4,982 Zimbabwe 312 424 346 201 144 349 486 Zambia 75 53 201 322 652 384 447 Uganda 208 110 280 536 732 1,592 1,759 Thailand 341 363 375 571 375 480 508 Kenya 452 334 195 473 581 1,128 1,976 Egypt 156 777 860 442 568 578 652 Dominican Rep 1,929 1,776 357 233 429 482 1,245 Morocco 7,049 7,480 8,168 8,185 8,962 9,409 10,460 Turkey 11,855 12,488 12,279 13,031 12,677 11,520 13,164 Ghana 650 517 841 1,017 1,955 2,947 2,737 Source: EUROSTAT & Accord Associates. ƒ EU imports of chilli capsicums grew to 38,000 tonnes packed, lower-priced chillies, while growth in exports in 2008 up from 36,000 in 2007 . was seen from Uganda and Kenya where higher value, ƒ Ghanaian exporters lost market share with slightly pre-packed product is exported. reduced volume in 2008. All Ghanaian exports are bulk Pa rt I I I - B ac k g r ound Pa P ers 16 8 e — e X ternaL Ma r ke t s FiguRE iii.5.6: eu Imports of ravaya from different sources, 2001–2008 3,000 2,500 2,000 Tonnes 1,500 1,000 500 0 2001 2002 2003 2004 2005 2006 2007 2008 Others EST 20 25 30 35 40 45 50 80 Dominican Rep 87 34 96 65 99 214 698 885 Thailand 102 103 118 149 194 191 240 320 Kenya 67 155 163 542 857 1,039 1,209 1,052 Uganda 2 3 2 4 24 37 Gambia 1 11 53 20 19 19 Cameroon 3 2 9 7 17 10 27 48 Ghana 97 130 113 130 122 124 174 375 Source: EUROSTAT & Accord Associates. ƒ A small market in the EU, but recording strong year- ƒ Exports from Ghana are small, but exports nearly on-year growth. doubled in one year, and the potential to substitute both Kenyan and Thai exports with cheaper air-freight is clear. Hort Icu Lture e XP orts FroM gH ana : a strateg I c st u dy 5 . 1 : e u I M Po rt s o F se Lect ed tro PI caL P rod ucts 16 9 FiguRE iii.5.7: eu Imports of “other vegetables� from different sources, 2001–2007 100,000 80,000 60,000 Tonnes 40,000 20,000 0 2001 2002 2003 2004 2005 2006 2007 2008 Turkey 9,188 3,505 5,388 4,137 5,884 5,891 3,845 5,443 Thailand 2,204 2,395 2,400 2,851 4,920 3,456 3,567 3,222 Morocco 3,583 3,598 4,409 3,985 4,781 3,843 3,392 4,375 Israel 1,262 1,275 1,627 2,178 4,134 3,775 3,547 2,975 Dominican Rep 1,233 1,707 2,833 3,778 3,304 4,298 3,831 4,293 Bangladesh 4,668 4,089 5,136 5,075 5,211 3,825 3,898 3,309 Argentina 110 831 2,249 3,589 8,894 9,911 10,028 14,406 R South Africa 2,682 3,462 5,182 3,833 4,233 5,366 5,823 6,433 Kenya 16,789 17,655 16,953 9,804 6,328 5,249 4,674 4,228 Ghana 6,511 5,949 6,983 5,812 6,005 4,554 2,565 2,284 Others 19,118 26,106 29,297 24,479 26,613 25,659 30,190 30,080 Source: EUROSTAT & Accord Associates. ƒ This category includes okra and other Asian vegeta- ƒ The UK has shown strong growth in butternut squash bles, parsley, and pumpkins and squashes. imports and this explains much of the growth of imports from southern hemisphere suppliers such as South Africa and Argentina. Pa rt I I I - B ac k g r ound Pa P ers 17 0 e — e X ternaL Ma r ke t s FiguRE iii.5.8: eu Imports of yams, 2001–2008 25,000 20,000 15,000 Tonnes 10,000 5,000 0 2001 2002 2003 2004 2005 2006 2007 2008 Others 627 860 834 1,200 1,297 846 565 1,549 St Vincent 183.6 398 349.6 270.9 382.5 476.9 472.8 344.2 Nigeria 222.8 232.3 0.4 0 11.5 1 5.4 2.9 Jamaica 1216.7 1312.2 1149 1065.6 641.5 468.4 422 377.4 Costa Rica 2879.3 2804.2 2784.5 2815.7 3068.2 4080.8 4575 3808.1 China 842.7 1440.4 1142 1205.2 1458.1 1682.6 1896 1586 Brazil 2469.2 3050.2 3141.1 3325.1 2660.3 1844.3 2386 2138 Ghana 7755.9 7889.8 8340 9042.5 10578.4 11569.9 11100 13468 Source: EUROSTAT & Accord Associates. ƒ Yams are Ghana’s most important fresh vegetable year-on-year growth; exports have almost doubled export. The business continues to show good between 2001 and 2008. Hort Icu Lture e XP orts FroM gH ana : a strateg I c st u dy 5 . 1 : e u I M Po rt s oF se L ect ed troPI caL P rod ucts 17 1 FiguRE iii.5.9: eu Imports of Whole cassava for Human consumption, 2001–2008 25,000 20,000 15,000 Tonnes 10,000 5,000 0 2001 2002 2003 2004 2005 2006 2007 2008 Others 288 212 309 365 493 611 705 970 China 5.2 3 0 0 90.9 238.7 363.5 642 Cameroon 1.3 100.8 245 414.2 521.6 590.4 437.3 136 Brazil 56.4 535.2 764.5 723.2 370.8 585.7 442.3 572 Ghana 116.8 310 834.9 1979.1 1770.7 2864.8 2209 2561 Ecuador 427.6 719.7 345.3 369.5 904 323.4 560 2567 Costa Rica 7629.8 9212.8 11959.1 13281.3 12890.3 18225 18816 16277 Source: EUROSTAT & Accord Associates. ƒ Imports to the EU have levelled off. ƒ Ghana could send more and compete with Costa Rica, ƒ Costa Rica dominates the supplies. but the local market is strong and cassava has particu- lar importance in food security. Pa rt I I I - B ac k g r ound Pa P ers 17 2 e — e X ternaL Ma r ke t s FiguRE iii.5.10: eu Imports of sweet Potatoes, 2001–2008 60,000 50,000 40,000 Tonnes 30,000 20,000 10,000 0 2001 2002 2003 2004 2005 2006 2007 2008 Others 1,019 1,034 1,562 1,007 1,000 1,343 1,325 1,001 Ghana 51.2 353.6 359.5 86.1 359.8 121.8 26 44 Brazil 227.8 512.2 973.1 1057.1 1126.3 1780.8 1000 1389 Egypt 2978.4 2830.8 2608.6 2654.1 2650.7 2834.4 2869.8 2278 RSA 2913.2 2996 2710.2 1744.6 1696.8 1230.9 1560 1691 Honduras 0 0 40.8 360.8 771.9 2132.2 4750.1 5923 USA 5179.6 6371.1 7285.1 9396.5 15682.9 19910 18592.1 25556 Israel 3662.1 4905.4 6330 10718.3 14125.5 19591.9 21797 19200 Source: EUROSTAT & Accord Associates. ƒ EU imports have grown further and reached a total of ƒ Imports are dominated by product form the U.S. and 57,000 tonnes in 2008. There is further opportunity for Israel. The U.S. now leads the exporters. growth in the market. ƒ Despite efforts at introduction in Ghana and expansion of the production, exports remain insignificant. E.2 suPerMarket and IMPorter BuyIng PractIces E.2.1 iNTRoducTioN suppliers, category leaders, and the supermarket itself, even As European retailers continue to build their share of the global though the buyer may often change. Although wider issues consumer market for fresh fruit and vegetables, it is becoming such as positive corporate social responsibility practices and harder to operate without considering them as a prime poten- ethical sub-brands may create potential interest within the tial client. Although private technical standards are often cited wider retailer management structure, the eventual decision to as gatekeepers to market access, finding the commercial trade still remains with the individual supermarket buyer. entry point to the supermarket buyer is an equally challenging initial step. The process of becoming a supermarket supplier E.2.2 cuRRENT SiTuATioN is not simply based on a telephone appointment and provi- sion of a price list, but on proving that a significant long-term Buying practices contribution can be made to an interdependent web of roles The role of the buyer as a specific sector expert, experienced in and responsibilities. These roles will be acted out between procurement and tolerant of the sector supply characteristics, Hort Icu Lture e XP orts FroM gH ana : a strateg I c st u dy e. 2 s uP e r M a r k e t and I MP orter Buy Ing PractI ces 17 3 has almost passed. Some of the smaller national players still FiguRE iii.5.11: category Management value continuity and expertise, but the transnational retailers frequently change the buyer roles. Buyers are highly skilled To determine the products that make up the Category Definition and motivated negotiators who are using the leverage that the category and its segmentation company scale offers to present opportunities to potential sup- The purpose of the category in the retailers pliers who can operate at the lowest or most efficient costs. A Category Role portfolio supermarket buyer may only occupy a particular buying desk for 18 months before achieving a tightly defined set of personal Category Assessment Analysis of category performance targets in order to be promoted, often to a non-related product Category Review area. This short cycle of tenure for buyers prevents personal Category Scorecard Category targets and objectives relationship-building with suppliers and reduces the chance that complacency and emotion will replace ambition and logical eco- Marketing and in-store strategies for the nomics. The daily actions of the buyer are now tactical within Category Strategies category a strategic collaborative framework and the autonomy that the buyer has to make emotive or intuitive decisions has all but Determining optimal products, placement, Category Tactics promotions, pricing and supply tactics been removed. The Chartered Institute of Purchasing2 says that �By altering how goods are categorized and supplied it helps A written plan to ensure tactics achieve the Plan Implementation category role, strategies and meet the scorecard shift sourcing from being an error-prone transaction to creating � value for the business. In order to work within the collaborative Source: Institute of Grocery Distribution framework, an understanding of the fundamentals of category Institute Of Grocery Distribution – Definition of category management management is an essential skill for any potential supplier. effort, and often finance into the strategic development of Category management is a retailing concept that began in the category within the retailer. North America in the 1980s. A decade later, when AC Nielsen3 began publishing supermarket sales information to the sup- The role of Category Captain was often given to the sup- pliers, the category management process began to gain plier with the largest turnover in the category, who would be momentum across the UK, Europe, and Canada. Category expected to have the largest resource capability to commit. management describes the process in which the total range However, recently the role has been increasingly given to the of products sold by a retailer is broken down into discrete supplier with the best private label focus. In order to do the groups of similar or related products; these groups are known job effectively, the supplier may be either granted access to as product categories. Examples of fresh produce categories a greater wealth of data-sharing or will be expected to buy may be: stone fruit, leafy salads, or root vegetables. category data from the data marketing companies. Each category is managed as a business unit, with its own set of Interviews with Frank Brinkman of Bakker BV, who is the cat- financial targets and marketing strategies. The focus of the cat- egory champion for Albert Heijn (part of the Ahold group), illus- egory buyer is the turnover of the total category, not just the sales trated the depth of commitment expected from category cham- of the individual products in the category. Suppliers are expected, , pions. Albert Heijn is committed to BSCI and GLOBALGAP and, and in many cases mandated, to only develop new product intro- according to Brinkman, as an importer, Bakker spend a lot of ductions or drive promotional activity if it is expected to have a money and technical resources supporting the implementation beneficial effect on the turnover or profit of the total category and and monitoring compliance with these programs. They have to be beneficial to the shoppers of that category—not just those comply with what the customer wants.4 that drive sales of their own product in that category. Recently, some retailers have formed such close alliances The retailer will appoint a lead supplier, or ‘Category Captain,’ with the category captains that they have partially brought as a collaboration partner who will often act as the intermedi- the role back in-house, creating joint venture operations. ary between the buyer and suppliers. The Category Captain Asda International Produce5 was created in 2005 as a joint will be expected to have the closest and most regular contact venture with Bakkavör6 to streamline sourcing and raise the with the retailer and will also be expected to invest time, 4. Interview Frank Brinkman 02/09/09 Ridderkerk Netherlands. 5. http://www.internationalproduce.co.uk. 2. http://www.cips.org - Jonathan O’Brien Category Management, 6. Bakkavör Group is a leading international food manufacturing Purchasing IsBn: 9780749452575 company specializing in fresh prepared foods and produce with a 3. http://www.nielsen.com/ turnover of £1.6 billion in 2008. www.bakkavor.com. Pa rt I I I - B ac k g r ound Pa P ers 174 e — e X ternaL Ma r ke t s continuity of fresh produce from suppliers around the world will vary within the recognized regulated classes of fruit and to Asda’s UK stores. Tesco announced a similar intention to vegetables entering the supply chain. For example, when increase direct sourcing in April 2009.7 The category champi- asked about Ghanaian mangoes Frank Brinkman of Bakker ons reduce the cost and complexity of supply chains as seen said that mango is becoming an important product, but is by the retail buyer. Danielle, the buyer at Migros,8 made clear now sourced from Côte d’Ivoire and Mali. When asked about that the time cost of a single telephone call to a large supplier Ghanaian mango, he said that five years ago Ghana was a like Capespan to procure several containers of fresh product major supplier but due to irregular logistics, poor continuity, was the same as a call to a smaller niche supplier who would and inconsistent quality they had looked for other sources. only deliver several pallets of product. Poor skin quality and short shelf-life were cited as reoc- curring major problems. He saw no reason to change his current sourcing policy even if Ghana were able to resolve Retailer types these issues. However, a hard discount retailer may accept Within Europe there are three major types of retailer to con- a larger percentage of skin blemishes or a smaller size of sider regarding market entry: the mainstream retailer, the fruit11 (Class 2) in order to get a better price, but they would discounter, and the cash and carry operator. The convenience not accept products that are over mature or unsafe. Knowing sector (or formerly independent corner shop collaborative which criteria above the basic quality and phytosanitary re- chains) is the latest battleground for many of the bigger su- quirements are important to a particular type of retailer is permarket brands; this moves the sector from purchasing in essential to a sustainable business relationship. the wholesale market into the consolidated central buying streams of the retailers. Cash and carry operations such as Metro sell the fresh fruit and vegetable product in cases and not just as individual or Many of the large retailer groups in Europe operate several pack items. Monique Seidler, Quality Assurance12 depart- fascia brands that occupy slightly different demographic con- ment manager at Metro MGB, explained that when quality sumer positioning. Carrefour, Metro, Tesco, and Wal-Mart inspections and laboratory tests for chemical residue testing are widely considered to be the major global grocery retail- are carried out by the Metro Group quality assurance teams, ers with a combined turnover of approximately €525 billion they also inspect products for the Real supermarket busi- . ($700 billion) in 2007 Wal-Mart continues to dominate, re- ness owned by Metro Group. Not only is the specification porting sales of nearly $350 billion ($ 475 billion) for 2006 the same, but the intake point and inspection process are (fiscal 2007) and $380 billion ($ 515 billion) for 2007 (fiscal consistent. The same buyer will buy a pallet of pineapple for 2008), a sum greater than the combined turnover of the next Metro to be sold by the case and a pallet of pineapple for five global retailers in the league—Carrefour, Tesco, Metro REAL to be sold by individual pieces. Group, and Kroger (U.S.).9 Within each country, national players compete with the transnational players, and national For those wishing to supply the retail sector in Europe there preferences for higher-end retail proposition or discounter is certainly no specific easy door to choose, but there are are commonplace. For example, Migros in Switzerland has choices that better suit the type of supply chain and the vol- a highly developed upper end offer for the Swiss consumer, ume of product that is available. with an emphasis on issues such as social and animal wel- fare and the environment. In Germany, where four of the five leading European discounters originate, the market is more pricing policy than double the size of any other discount sector and worth Pricing policy varies across the retailer types. Traditional an estimated €50 billion ($67 billion) in sales.10 retailers rely on a price that will be regularly benchmarked against competitors. Promotional periods will be used within Despite the differentiation of the retail fascias, the purchas- the category management framework to promote sales, but ing policy generally remains consistent; food safety, cer- not simply shift buying patterns within the category. Sales tification, and product quality vary little across the retailer of the whole category must rise for a promotion to be suc- groups. However cosmetic appearance, size, and maturity cessful and own brand products are protected from Category Cannibalization by the promoted product. . 7 Fruitnet.com—Chris White 16 April 2009. 8. Interview with John Zublin and Danielle at Migros, Zurich, 11. , Regulation (EC) 1234/2007 amended by Regulation (EC) 10 September 2009. 361/2008 & Regulation (EC) 2200/96. 9. IGD—Retailer factsheets. 12. Interview Jan Kranghand, Monique Seidler quality assurance 10. IGD—Discount retailer factsheets. Metro MGB Dusseldorf 20 Sept 09. Hort Icu Lture e XP orts FroM gH ana : a strateg I c st u dy 5 . 2 : s u P e r Ma r k e t and IM Port er B uyIng P ractIces 17 5 Promotions will be scheduled by the buyer with the category Frank Brinkman at Bakker felt that Holland was not so con- captain and often total category margin will be adjusted to cerned about air freight at this time but GLOBALGAP and cross-promote items. Many individual products appear to be BSCI15 were more important to his customer. Fair trade sold at under cost price, but the importer or category captain forms a part of his buying portfolio, but he felt that the cus- will be looking at the overall category return and not the spe- tomer was finding it tough to pay extra for these products in cific product margin. the economic downturn. If a supplier is a niche or specialist supplier within a broader Fair trade and other ethical sub-brands are traded as niche category it is often difficult to survive as an economically- products and the sub-brand component managed by the CSR independent entity within the category framework. or technical departments. The purchase of the sub-branded material is dealt with as any other characteristic in the cat- Combined, Aldi and Lidl accounted for 58.3% of the sales egory assortment. Chiquita offering Rainforest Alliance and of the European Top 10 Discounters in 2007 and are becom- Del Monte Fair trade pineapples are examples of main- ing more significant players due to the current economic streaming an ethical sub-brand offer by category captains. downturn. Discounters are more likely to offer �every day When whole categories like banana16 or tea are passed into low price� strategies (EDLP) and use one-off spot buy of- a scheme like Fair trade or Rainforest Alliance, the major fers, heavily discounted to provide promotional interest for supplier or category captain may be required to manage the consumers. Seasonal promotions—when volumes permit changeover. The category champion will now operate to what a lower price—are reflected as medium-term seasonal was previously a niche sub-brand while the retailer continues price reductions and not short-term promotional offers. The to sell the sub-branded product at the same retail price. The IGD defined the ground rules for supplying discounters as supply chain or category captain must generate savings to �maintaining low cost base and offering low prices, deliver- cover the costs of the premium paid to farmers. � ing high quality and operating an efficient supply chain. 13 According to Danielle, the buyer, Migros was able to source banana that was both Fairtrade and organic from CSR outreach and Small-Scale farmers the same source without paying a double certification Supermarket retailers are under increasing pressure from premium. Although the Fairtrade price was being paid to campaigners, NGOs, and society groups to contribute to the the farmer it must be assumed that the category captain communities that they impact upon. This contribution above was offsetting the additional certification costs of organic the procurement and selling of goods and services applies production within the conventional product offering. Their to the sourcing and selling countries alike. Brand enhance- major competitor Swiss Coop converted all of its bananas ment and protection, affecting share value and relationships to Fair trade in 2004. with governments and legislators are carefully managed by companies with very large global footprints. According to Although small farmers, community projects and topical sub- Johan Zublin, head of social standards and compliance at brands are attractive to the CSR departments of supermar- Migros, the Swiss customer expects them to bring whole kets it is generally only through a lead supplier format that the sea-freighted pineapple to Switzerland and process it locally model works.17 For the supermarket buyer the small farmers on a daily basis. This contrasts sharply with efforts of compa- in the chain are commercially invisible as the products are nies like Blue Skies who support small farmers but process consolidated and managed by the lead category supplier. products in Ghana and air-freight them to Europe for sale to other retailers. Comments made by Hanspeter Werder Increasing skepticism of the ability of schemes like Fair trade HPW reinforce the view that carbon footprint is important in to be managed within the fierce profit-driven structures of the Switzerland. He confirmed that the Swiss Coop is entering major euro retailers continues to emerge. In a recent article into carbon reduction strategy agreements with suppliers.14 15. Business Social Compliance Initiative - http://www.bsci-eu.org. There is clearly a distinction to be made between livelihoods 16. Knowles, James. 2006. �Switching to Fair trade will leave the re- and carbon footprint, but this is not consistent across retail tail price unchanged and create social premiums of £4m� - Sains- bury’s goes bananas for Fair trade food and drink Europe, 14 Dec. customers and as a consequence appears difficult to use as . 17 Justice in UK supermarket buyer-supplier relationships: an a marketing advantage. empirical analysis - Fearne, Duffy and Hornibrook found that best practice was most evident in the two supermarket supply chains where supply base rationalization has virtually ceased 13. IGD—Discount retailer factsheets. and the adoption of lead suppliers and sole suppliers has been 14. Interview with HPW Zurich Sept. 9, 2009. most evident in recent years. Pa rt I I I - B ac k g r ound Pa P ers 176 e — e X ternaL Ma r ke t s the Guardian newspaper reported that ‘there are some tren- ƒ The Metro Group local example, where cash and chant criticisms among economists of the Fair trade model: carry direct sourcing has a much higher local product there are intrinsic problems over how it expands to benefit percentage than traditional retail, could be explored. an entire industry, rather than some farmers at the expense This local sourcing can bypass the hold of the large of others. 18 � multinational category manager teams. Larger supply sizes, as cases rather than packs, and the opening of dynamic but less sophisticated retail destinations, E.2.3 oNcLuSioNS ANd STRATEgy c such as Morocco and Egypt are continuing. The iMpLicATioNS first Metro Cash & Carry wholesale store should be ƒ The highly managed fruit and vegetable category opened in Cairo in late 2009. In the medium term, sector of western European retailers is controlled by the company sees a market potential of up to 10 a few very large companies. Access to a supermarket stores in Egypt with an investment volume of around buyer will be through these companies; or, if direct €15 million each.20 access to the buyer is achieved, the potential supplier ƒ Sustainability continues to be the main CSR driver for will be re-directed to these suppliers to manage the new opportunities. Credible research and effective eventual supply. advocacy of the findings will enhance the likelihood ƒ Many of the large category captain importers have in- of a buyer being attracted to Ghanaian products as terests in particular geographical regions or their own a substitute product for another. However issues of plantation estates and supply chains, and might not be quality, price, and availability will not be traded for wholly objective when assessing a new entrant. sustainability gains. ƒ Some retailers are reaching through the category ƒ Ethical sub-brands such as Fair trade or Rainforest managers to locate interesting projects to meet CSR Alliance represent aspects of supply chain best commitments. Asda recently pledged an extra GBP30 practices that are attractive. However there is increas- million of sourcing from African farmers as part of its ing evidence that retailers are embedding these best millennium development pledge.19 However these practices within their own proprietary standards.21 small projects can only be regarded as a point of entry Producers and exporters must acquire the capability into an already highly developed and highly controlled to sustain the best practices and not simply invest in market sector. the label. E.3 tHe credIt cruncH and Its IMPact on consuMer PurcHasIng, suPerMarket oFFerIngs, IMPorter sustaInaBILIty, and etHIcaL trade and trends E.3.1 iNTRoducTioN E.3.2 cuRRENT SiTuATioN The economic downturn has had a far-reaching effect on the Supermarket penetration of markets in Western Europe food and drinks industry in Europe. The record oil prices of July is high. In Holland, it is as high as 90%, though this falls 2008 and a steep decline in consumer confidence resulted to a relative low in Italy of around 36%.22 Retailers and in a combination of food price rises and declining household brands that can demonstrate empathy with consumers in food budgets. With ever larger percentages of European food tough times gain loyalty and retain customers who may sold through the supermarket retail channels, the decisions be tempted to move to a discounted offer elsewhere. As a that were taken by relatively few retailers and manufacturers consequence of this trust relationship, retailers and brands in response to this chain of events have had significant effects on sourcing across the whole supply chain. 20. METRO GROUP website 19.05.2008. 21. Fair partner as an own brand, with influence over a quarter of a million workers worldwide—M&S website. 18. Renton, Alex. 2009. �Capitalism chews over Fair trade� Guard- . 22. Poole, R., G. P Clarke and D. B. Clarke. 2002. Growth, Concen- ian.co.uk, Sept. 16, 2009. tration and Regulation in European Food Retailing, European 19. Thompson, James. 2008. Retail Week, 6 May. Urban and Regional Studies. Hort Icu Lture e XP orts FroM gH ana : a strateg I c st u dy 5 . 3 : t He c r e dI t c ru ncH and I ts IM Pact on consuMer P urcH asIng, suP erM ark et oFFer Ings, IMPort er 17 7 s u staI n aB I L Ity, and et HI ca L tra de and tre nds FiguRE iii.5.12: Private Label trends by Market The umbrella brand, �real� with three sub-brands—Quality value (standard), Selection (premium) and Bio (organic)—is heav- Switzerland 46 ily promoted on TV and supported by a new strapline real- UK 39 Quality. Die neue Marke für Deutschland’ (real,-Quality. The Germany 34 Spain 29 new brand for Germany).26 Belgium 28 France 27 The combination of a high market share and an increasing Netherlands 24 Canada 21 own-brand demand from consumers is a powerful dynamic Australia 21 on sourcing activities and increases price pressure on the WORLD AVERAGE 20 USA 19 whole supply chain. New Zealand 12 Italy 11 India Many of the European retailers began 2009 with a re- 10 South Africa 8 quest to suppliers to reduce prices. Sir Terry Leahy, Tesco Brazil 6 Japan 4 CEO, stressed the point that consumers were looking for Mexico 3 value, by quoting that sales of Tesco’s discount and budget China 3 Russia 3 ranges were up 65% on the year and a quarter of cus- Source: Planet Retail Private Label Trends Update, 2009. tomers were now buying something from the ranges.27 Mark Price, Waitrose’s Managing Director, said that a fall often try to anticipate consumer concerns or move faster in commodity prices meant that suppliers’ raw material than consumer demand to enhance perceived brand empa- costs were cheaper and the supermarket saw this as an thy and consequently protect sales. Choice editing—where opportunity to pass on those reductions.28 At the IGD con- a retailer makes broad changes to a whole category offer in vention in October 2008, Asda’s Group Marketing Director, response to its perception of consumer demand—is a pow- Rick Bendel, made it clear that his company was intensely erful market driver. Many of the actions taken by retailers focused on price cutting. It was supermarkets’ duty to re- and manufacturers in the period after July 2008 were types duce costs as ordinary people faced financial hardship in of choice editing actions. the UK’s slowing economy, he argued. �People are bleed- ing, and if we don’t do something about it we won’t get The percentage of own-label products in supermarkets � the rewards in the future. 29 across Europe and the U.S. is growing. For example, own label now makes up nearly GBP 35 billion of grocery sales TAbLE iii.5.1: shopper anticipated responses to each year in the UK,23 and projections from the same source Household Budget squeeze predict that this figure will rise to more than GBP 36 billion Response % by 2011. Increase spend on budget brands 33 Currently own-label food accounts for about 40% of total Cut back on treats 26 food and drink spending. But supermarkets have grown their Shop around for offers 25 own-label business to such an extent that in some cases it Cut back on convenience food 22 now represents 50% of sales in the store.24 Switch from brands to own labels 21 It has been reported that 87% of UK households are making Change to discount retailer 13 food purchasing changes with 57% of the sample saying that Cut back on ethical buying 6 they are buying more own-label products now than in the Spend same on food, cut back elsewhere 15 past as a result of the economic situation.25 Source: Institute of Grocery Distribution, Sept. 2008. Metro Group’s hypermarket chain Real in Germany intro- At the same IGD conference some 600 delegates were duced its new private label—Quality—in the fall of 2008. polled about the current relationship between supermar- ket buyers and their suppliers’ account managers. The 23. The Grocer, April 19, 2008, using data from MINTEL. 24. Lewis, H. 2009. Issues, trends and challenges facing the food 26. Private Label Trends Update 2009, Planet Retail, January 2009. and drink industry, Just-Food, March. 27. International Supermarket News, January 30, 2009. 25. Shoppercentric research ‘Grocery shoppers alter habits in re- 28. Fresh info news, March 12, 2009. sponse to recession’, Talking Retail, March 2, 2009. 29. Talking Retail, October 15, 2008. Pa rt I I I - B ac k g r ound Pa P ers 17 8 e — e X ternaL Ma r ke t s largest single group (4 out of 10 delegates) described it non-essentials such as cosmetic packaging materials were as �confrontational, and the majority (71%) said there � removed. Even premium retailers like Waitrose in the UK had been a move to greater short-termism over the past introduced value products in line with the trend. Waitrose in- 12 months.30 troduced 1400 products in March 2009 proclaiming �everyday products with the quality you would expect at prices that you The supplier cost reductions achieved through renegotiation � would not. Upmarket Spanish retailer El Corte Inglés launched by supermarket buyers have been passed on to consumers �Aliada� in October 2008, an own-brand food economy range largely in the form of short-term promotions or multi-buy of- boasting prices up to 25% cheaper than its current product fers, and strong price discounts on own-label products. Swiss offer. This line of 400 items was designed to compete with retail giant Migros is offering customers a CHF10 (US$10.20) Mercadona’s Hacendado and the discounters. Aliada is sold at voucher if they can find a product underselling the rival Swiss El Corte Inglés’ food halls, Hipercor and Supercor stores.34 Co-operative’s core range of 302 lines.31 Fresh produce developed through the 1990s as an important To be an approved supplier to a supermarket, farmers and own-brand statement. Fresh produce became a destination food producers are expected to underwrite the cost of any category for which shoppers will switch stores. The produce special promotions themselves. The supermarkets claim that department moved from the back to the front of the store this benefits the supplier in the long term—because custom- and was given high priority for constant availability, freshness, ers will be tempted to try products they would not normally and value, with shelf area doubled.35 This emphasis continued buy.32 The funding of price cuts and promotions varies be- through the price rationalization of 2009, with fresh produce tween retailers but it can mean that the producer receives a becoming some of the most visible and prolific products in lower price for a larger volume of product supplied. In fresh store offers. �Fresh produce is the main focus of promotions perishable produce this is particularly true, where the capac- as retailers battle it out to offer customers the best possible ity to produce more for short periods is constrained; more � value, said BRC Food Policy Director Andrew Opie.36 so than in non-perishable products that may be stockpiled. According to industry sources this can mean a significant One of the major food casualties of the economic down- reduction in margin. Paying the costs of extra labor, products turn was organic fresh produce. Research from IGD showed bought in from outside, additional freight, and other items that organic sales were the only ethical food sector to fall which may fall outside of the contracted volumes and prices in 2008. According to its survey of 1000 consumers, the with suppliers erodes margin further. percentage buying organic dropped from 24% to 19%.37 Jonathan Banks, Business Insight Director with Nielsen, said In the last decade, European retailers have been developing that organic sales had slowed from an annual growth of 16% own-brand premium lines like Tesco �Finest� based on the to an annual growth of 2% up to November 2008. He said, quality or authenticity of the products. SPAR Austria urged “Organic producers must show their products taste better, consumers to revitalize old cooking habits with traditional are more nutritious, and better for the environment. If they ingredients under its �Just Like In Old Days� private label. � tick all those boxes they can sustain a (price) premium. 38 Carrefour France has a private label solely for ethical products Agir Éco Planète range, which comprises products that are At the beginning of October 2008, it emerged that sales of certified by schemes like the European Ecolabel, Forestry Tesco’s Finest and Organics ranges had stopped growing as FSC, MSC33 or which carry an approved external certification shoppers cut their spending. Chief Executive Sir Terry Leahy support. The range is marketed in four countries: France, said that �while customers still want to buy the products, Belgium, Spain, and Greece. � they don’t feel they can with the economic pressures. 39 The start of 2009 saw the introduction of budget own-label and simple value offers to consumers. The proposition to consum- 34. Private Label Trends Update 2009.Planet Retail, January 2009. 35. MO’Keeffe and A. Fearne. 2002. �From commodity marketing ers was that the quality of these products was the same, but to category management: insights from the Waitrose category � leadership program in fresh produce. - Supply Chain Manage- 30. Talking Retail, October 15, 2008. ment Journal. 31. Migros pays shoppers to police rivals’ prices, Just-Food, July 14, 36. Fresh Produce Journal / Fresh Info, 16th March, 2009. 2008. Source: Peter Crosskey. . 37 Reported by naturalchoices.co.uk , �end of the organic dream?� 32. Blythman, Joanna. Sly tricks of the supermarkets, Daily Mail, February 12, 2009. March 8, 2007 . 38. UK shoppers want ethical food without paying more, Reuters 33. FSC—Forestry Stewardship Council. MSC- Marine Steward- , Online, July 7 2009. ship Council. 39. Ethics: Who cares? Retail Week, December 4, 2008. Hort Icu Lture e XP orts FroM gH ana : a strateg I c st u dy 5 . 3 : t He c r e dI t c ru ncH and I ts IM Pact on consuMer P urcH asIng, suP erM ark et oFFer Ings, IMPort er 17 9 s u staI n aB I L Ity, and et HI ca L tra de and tre nds It is interesting to note that by July 2009, Tesco reported that FiguRE iii.5.13 its Finest, Organics and Fairtrade ranges are all returning to growth. However, Tesco conceded that it has reviewed its range of organic and Fairtrade foods in order to develop “bet- 1998 Pesticide residues in food, worker health and safety ter offers� and increase sales.40 Discounting and promotional Packhouse labor conditions, excess corporate profit activity more common in the mainstream lines had been ap- plied to the previously ethical premium-priced brands where the consumer would normally be aware that they were pay- Buying Local, seasonal products ing more as an ethical or lifestyle choice purchase. The premium juice and smoothies sector was hard hit by the downturn. Innocent Smoothies, one of the companies at the Climate Change Debate vanguard of the eco-social revolution, suffered a 20.2% drop in sales in 2008.41 In April 2008, Nestlé, the food and drinks giant, announced it was set to enter the fruit smoothie market after E.3.3 EThicAL TRENdS TRAdE ANd LAbEL forging a partnership with Australian brand Boost Juice, but four Until the global financial crisis emerged, retailers and manu- months later the products were withdrawn. Nestlé boss Jon facturers had undergone a decade of ethical trade sub-brand- Walsh said consumers were now choosing cheaper options, ing. Although the depth of relationships between suppliers, such as chilled juices. In November 2008, Pepsi abandoned its retailers and manufacturers are different in each case the PJ Smoothies venture, while Unilever withdrew its health drink trend of ethical or provenance sub-brand effect has been con- Adez from the UK just months after its release.42 sistent. Since 1990, food safety has been high on the agenda of brands and retailers, and a number of private standards One sector that has benefited from the credit crunch has and coalition standards have evolved to address the issue of been chocolate. Demand for private label products has pro- post and pre-farm gate food safety, GLOBALGAP being the vided a boost to brand owners who also choose to produce largest pre-farm gate standard and GFSI (The Global Food retailer brands. In Spain, for example, chocolate manufac- Safety Initiative) being one of the largest retail food safety turer Natra reported elevated profits in the first nine months coalitions. This precompetitive chain-wide collaboration for of 2008 to €5.1 million. The company cited growing demand food safety has brought with it whole chain traceability and for private-label products as the primary driver behind the increased source transparency. 46.7% growth. The labor rights agenda which emerged around 2001 was Natra said its business of supplying retailer brand products, based around the core ILO conventions and largely a busi- success in passing through rising raw material costs, plus ness-to-business activity as supply chains became global and the defensive nature of the chocolate sector, which tradi- moved into developing economies. Several initiatives like The tionally sees sales rise in a downturn, had all boosted its Ethical Trade Initiative43 and Social Accountability International cocoa and chocolate division. On a group-wide basis, Natra SA800044 emerged as tripartite or multi-stakeholder initia- said consolidated sales were up 25.1% to €336.1 million. tives. By 2002 Fair trade became the business-to-consumer Confectionery giant Cadbury reported a 30% increase in its message that translated the main points of the labor rights 2008 annual profits. According to Cadbury CEO Todd Stitzer, agenda to consumers and, although it was not the primary consumers are choosing to stay at home more and consume stated purpose of the Fair trade movement, the message of more confectionery products. Upmarket UK chocolate re- fairness resonated with consumers. tailer Thorntons announced profits have risen nearly 20% in 2008, confirming the upward trend. Many retailers moved whole categories into Fair trade, effec- tively �choice editing� for their customers. UK supermarket chain Sainsbury’s launched a GBP1 million fund to enable farmers in developing countries to join the Fair trade initia- tive. The Sainsbury’s Fair Development Fund, managed by 40. Premium and ethical food ranges growing, says Tesco, Talking Comic Relief, was designed to help farmers—especially in Retail, July10, 2009. 41. Innocent sells stake to Coca-Cola, Just-food, April 6, 2009. � 42. Ball, James. �Danone drops beauty yoghurt, thegrocer.co.uk, 43. http://www.ethicaltrade.org. February 3, 2009. 44. http://www.sa-intl.org. Pa rt I I I - B ac k g r ound Pa P ers 18 0 e — e X ternaL Ma r ke t s FiguRE iii.5.14: reasons for choosing “green� Products I Want To Impress My Friends 2% Religious Beliefs Eg Halal, Kosher 3% Endorsed By A Brand Or An Organisation I Like 4% Special Dietary Needs E.G Gluten Free 6% I Will Spend More On Food For My Children 7% They Are Better For The Environment 9% More Ethically Produced 10% Organic/ Natural Ingredients 14% I Know I Will Like Them 21% They Are For Special Occasions 22% I Can Afford Them 25% They Are A Treat 27% Healthier 36% They Are Better Quality 41% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% Source: Institute of Grocery Distribution, 2008. Africa—find new routes to market. Organizations including reach and with a more pragmatic entry point, manufacturers the Fairtrade Foundation, Traidcraft, and Oxfam were encour- are able to use the Rainforest Alliance Frog logo with less aged to help the firm connect with farmers. In the same year, than 100% of content certified. Also Rainforest Alliance48 did according to IGD, almost one in five—18%—of consumers not have price premiums or price guarantees, making the were buying Fairtrade products each month, up from 11% transactional arrangements easier to manage in complicated on 2005.45 supply chains that may include brokers or auctions. Sales of so-called ethical products were rising 7 .5% a year, Unilever through the Lipton’s tea brand, Kraft coffee, and against 4.2% for grocery products as a whole. A recent Nestlé premium brand Nespresso coffee are some of the big report by the Institute of Grocery Distribution showed that manufacturer brand names who saw sustainability as a reso- more than half of British shoppers care about the green cre- nating message for consumers, and have adopted Rainforest dentials of what they buy, creating a £25 billion-a-year market Alliance sustainability logo as a sub-brand. for ‘ethical consumerism’.46 Ethical trade, and in particular fair trade, had become a powerful differentiator for the retailers It is interesting to note that two major chocolate brands in to empathize with the public and achieve brand enhance- Europe have taken different routes. Cadbury announced in ment through an ethical sub-brand and yet in a survey by IGD 2009 that it would take its signature brand �Dairy Milk� into in 200747 only 10% of respondents said that they would pay fair trade. The UK’s best-selling chocolate bar is set to become more for ethically produced food and only 9% said that they Fairtrade certified, increasing the amount of Fairtrade cocoa would pay more for environmentally friendly products. sourced from West Africa. Cadbury’s Dairy Milk will make the move—tripling the amount of Fair trade cocoa sourced It is clear that consumers enjoy the values brought to them from Ghana to about 15,000 tonnes a year—in the summer by retailers through choice editing, but evidence from IGD of 2009.49 Mars announced that it aims to buy enough cer- says that they do not feel that they should be asked to pay tified cocoa so that the Galaxy chocolate bar can bear the more for them. Rainforest Alliance Certified logo by early 2010. The company also has committed to getting its entire 100,000 tons of co- Some major manufacturers have chosen Rainforest Alliance coa supply certified as sustainably produced by 2020.50 as the ethical sub-brand. Possibly seen as having more global 45. The Co-operative Bank’s Ethical Consumerism Report 2007 . 48. http://www.rainforest-alliance.org. 46. Stewart, H. and D. Hesse. 2006. �Corporate UK plays the green � 49. �Cadbury choc to go Fairtrade to help Ghana growers, Reuters, � card, The Observer, July 23, 2006. March 3, 2009. . 47 Table IGD Ethical Shopping, Are UK Shoppers Turning Green?, 50. The Rainforest Alliance and Mars Team Up to Make Sustainable March 26, 2008. Chocolate, RA website, April 9, 2009. Hort Icu Lture e XP orts FroM gH ana : a strateg I c st u dy 5 . 3 : t H e c r edI t c runc H and Its IM Pact on consuMer P urcH asIng, suP erM ark et oFFer Ings, IMPorter 18 1 s u sta I n aB I L I ty, and et HI ca L tra de and tre nds This seamless labeling evolution from labor rights to fair This mixing of what were previously single issues by the trade and onto sustainability and climate change has con- Soil Association has continued with retailers launching con- tinued into carbon labelling. Tesco, the UK’s biggest retailer, solidated standards like Tesco Nurture, M&S Plan ‘A’ and promised in 2007 to put carbon labels on every one of its ‘Carrefour Filiere’ where food safety is included with social, 70,000 products. Walkers cheese and onion crisps had a la- environmental, ethical, and community outreach values. bel warning buyers that their carbon footprint is 75g a packet. However, individual product labelling has since proved to be too difficult or too costly and the pledges made in 2007 have E.3.4 oNcLuSioNS ANd STRATEgy c largely disappeared during the difficult trading times. iMpLicATioNS Analysts at mySupermarket.co.uk, which tracks food prices, The only labels that have remained are the black airplane la- say the three biggest UK supermarkets—Tesco, Asda and bels designating air-freighted products. These labels, which Sainsbury’s—increased their average price for a basket of caused complaints from developing countries exporting goods by 12% last year, adding up to £750 to the average fresh produce when launched, in the end made no appre- UK family’s annual bill.53 Steep food price inflation propelled ciable difference in the volume of product sold, according to the value of the European grocery market to €901.5 billion the importers. in 2008.54 It is interesting to note that these rises are occur- During 2007 the Soil Association, the UK’s largest organic ring against the backdrop of price cut promotions, budget movement, began an open consultation on air-freighted food food range launches, and advertising campaigns pointing to and appeared to consider a ban on air-freighted products. falling prices. Watched by other EU organic groups, the Soil Association In a note to EU Farm Ministers meeting in Brussels on proposed mixing social and development criteria with or- 25 May 2009, Poland complained of increasing disparity ganic certification to mitigate air-freighting organic food. The between producer and consumer food prices, as well as environmental charity’s Policy Director, Lord Peter Melchett, “supermarket clout� forcing suppliers to cut their prices, estimated that only about a quarter of all exporters of or- thus reducing farmers’ incomes. “The observed decline in ganic food met high enough ethical standards to keep their the prices of agricultural products, which is not offset by the all-important organic label at that time. �Farmers must start reduction of production costs, leads to the deterioration of investing in local communities, allow their workers to form � farmers’ financial situation. 55 unions and fund education schemes by 2009 if they want to � keep their status. Some will find it impossible I suspect, he After a decade of producer investment in standards and ethi- commented.51 cal sub-brand labels to meet the evolving EU supermarket needs, it is apparent that ethical niche labels are not protect- In the same newspaper article Ghanaian pineapple com- ed from the pressure to reduce prices. Similarly, production pany, Blue Skies, said that it would be impossible to con- systems that do not yield effective commercial volumes or tinue supplying Waitrose and Sainsbury’s if it could no longer margins cannot rely on a price premium that recognizes bet- air-freight. “To cut a pineapple or mango, take it down to ter stewardship or practices. the port and expect consumers to eat it five weeks later is � impossible, said Blue Skies Director Anthony Pile. His com- The evolution of the consumer agenda is moving faster than pany would comply with the Soil Association’s ethical stan- producers can adapt. In only ten years a producer who may dards and said it would keep its status under the proposals. previously have been asked for a labor standards audit may now be asked to produce a carbon lifecycle assessment, or A green paper was produced52 outlining the concept and sug- both. Driven by the media, campaigners and the new social gested solutions and is evidence of the mixing of standards connective sites like Facebook and Twitter, food sourcing and criteria. Single issue standards and schemes are trying to the brands that provide food are facing strong public scrutiny evolve with consumer demand and are being driven by both that evolves as an issues trend with an increasingly short media and campaigners while trying to remain relevant with lifecycle. the supermarket and manufacturer agendas. 53. Daily Telegraph, January 15, 2008. 51. Daily Telegraph, October 24, 2007. 54. European Grocery Retailing 2009, Verdict Research Group 52. Soil Association Standards Consultation, Air Freight Green Pa- Limited. per 2007 . 55. Reuters FLEX news, May 26, 2009. Pa rt I I I - B ac k g r ound Pa P ers 18 2 e — e X ternaL Ma r ke t s The evolution of not just private label food but private label food sourcing companies worried about stock market brand consolidated standards like Tesco Nurture, M&S ‘Plan A,’ and value damage from campaigners. ‘Carrefour Filiere’ are moving the previously business-to-busi- ness food safety standard into the business-to-consumer arena. There is a move toward retailer differentiation using E.3.5 REcoMMENdATioNS provenance values in the standards marketplace after a de- ƒ Exploit any natural advantage from low carbon produc- cade of harmonization around food safety. tion. Commission LCA studies of carbon footprint compared to competitor nations. Use international For producers in emerging markets, the moving target of institutions and expertise that will demonstrate cred- standards set against falling prices and rising costs is tough. ibility with European markets and customers. Kenya However, opportunities to exploit any advantage of low car- has developed �grown under the sun�57 to counter the bon production methods or prove that products are good for air freight claims and to promote livelihood develop- development will all be attractive to manufacturers and retail- ment through export agriculture. Consider national or ers keen to gain brand enhancement case studies. regional West African initiatives like this. Climate change may dominate the sub-brand message in ƒ Niche market certification premiums have been the coming years but, as concerns about food security rise, eroded and may not return after the global finan- importers and exporters will be increasingly forced to justify cial crisis. Standards and market requirements are why they are trading food in countries that cannot feed their rapidly evolving and appear to be differentiating at own population. Waitrose were targeted by campaigners in retail and brand level. Consider which programs January 2008. Wilf Mbanga, Editor of The Zimbabwean, a meet basic market needs before embarking on UK-based newspaper, said he was shocked that food from capacity building and training programs based on Zimbabwe is being sold in Europe. �How can Zimbabwe be certification. exporting food when people are starving? Food is not avail- ƒ Promote a country profile and awareness that Ghana is able to a large section of the population. When it is, the price capable of sustaining its people and maintaining a pro- � is beyond the reach of many, he said.56 fessional and vibrant export market. Many of the South American countries have export promotion agents in Developing countries, and particularly those countries in the EU58 who are lobbying retailers and facilitating trade Africa who wish to export, may also need to provide better through awareness of the country potential. information on livelihoods and populations to be attractive to E.4 aLternatIve regIonaL Markets E.4.1 iNTRoducTioN None of the markets here are particularly demanding in stan- This paper reviews the opportunities that might be available dards or SPS requirements,59 though some have quite high in markets other than the European Union. Specifically the import tariffs. It is important to remember, however, that the markets of the Middle East, North Africa and Lebanon, and importance of the multiple retailers is increasing in all these South East Europe are evaluated statistically. markets too, and that a number of European supermarkets are developing a presence here as well. They in turn will bring There is potential for sales to all three areas. There is good in their own private standards. growth in some product opportunities, for example, topical fruit to South East Europe; but there are also apparent op- The opportunity in all the markets needs to be seen in its proper portunities, for example mangoes to the Middle East, that perspective: there is neither the scope nor the depth found in are much more limited than at first sight because of the the EU, and these markets will not form the foundation from supply from significantly closer neighbors such as India and which to grow a flourishing export industry. They are, however, Pakistan. important in two aspects. First, the opportunistic trade, less . 57 http://grownunderthesun.com. 58. PRO-EXPORT Colombia—Conduit Street London. 56. Poulter, S. and I. Drury. �We’re eating Zimbabwe’s food as its 59. Note however that Bulgaria, Romania, and Slovenia are mem- � people starve, Daily Mail Online, June 25, 2008. bers of the EU. Hort Icu Lture e XP orts FroM gH ana : a strateg I c st u dy e. 4 a Lt e r n atI v e regI ona L M ark ets 18 3 demanding in standards, can benefit the medium size export- residents. The high per capita income ensures that the retail ers of Ghana. Second, the markets provide the well established market continues to expand and the supermarket sector in supplier with an opportunity to extend its reach beyond Europe particular is growing. This is, however, a market that is very and no profitable opportunity should be ignored. sensitive to pricing, and without the substantial numbers of western consumers and tourists, as seen in Dubai for example, the opportunities for �exotic� produce are rather E.4.2 MiddLE EAST more limited. overview and Market Structure The UAE Market: Of the 4.04 million population, it is esti- The potential for agriculture in the country is severely mated that some 75% are expatriates. It is reported that limited by the scarcity of arable land and water supplies, 40% of the population are from Pakistan, India, Bangladesh, and food imports are correspondingly high. Even so, the Sri Lanka, and Iran. With a significant population of Far government has set itself the ambitious target of becom- Eastern migrants (Filipino and Malay), the number of higher ing self-sufficient in food production, though the practi- spending Western consumers is relatively small. For the cality of this proposition is certainly ambitious. In a more most part the local consumers and the lower paid expatri- recent development, the Kingdom has sought to acquire ate workers from Asia are unlikely to pay for high priced land in Ethiopia as a means of reducing its dependence imported goods. Thus, the retail market for such imports is on the world food markets. A recently announced initia- relatively small. tive is investing $300 million in banana production in the Philippines. There is already limited production of bananas The food market of UAE is well supplied by importers from within Saudi Arabia of about 10,000 tonnes from the Red all over the World. It is a highly competitive market and, at Sea area at Jizan. the top end, at least as sophisticated as northern Europe. Retailers, which include supermarket chains such as the Imports French Carrefour, Géant and Auchan, are gaining ground in re- FiguRE iii.5.15: Imports of selected Fruit to the uae tailing. A particular sector of note however is provided by the 2005 and 2008 hotels as tourism grows from strength to strength. Del Monte established a fresh-cut facility in 2007 to prepare fruit for these Papayas 2005 2008 higher priced markets as well as to neighboring countries. Guavas, Mangoes & Mangosteens With a substantial population from the tropical climates there Pineapples, is clearly a big demand for tropical fruit and vegetables. The fresh or dried supermarkets, stores, and wholesale markets carry an exten- Bananas & Plantains, sive range, and give prominent shelf space to Asian vegeta- fresh or dried bles (mooli, dudhi, tinda, ravaya, etc.) and fruits (rambutan, 0 20,000 40,000 60,000 80,000 100,000 120,000 140,000 tonnes mangoes, papaya, etc.) which cannot be grown locally but Source: UN Comtrade. are available from India and Pakistan with a short shipping time and low cost. ƒ Strong growth in banana and pineapple trade. Pineapples growing from a low base. The Gulf Market: Dubai has for a long time served as a distri- bution point for products from all over the world into markets FiguRE iii.5.16: Imports of selected Fruit to saudi throughout the Gulf Region. Thus the population served by arabia 2005 and 2007 the Dubai trade is in excess of 30 million spread throughout Papayas 2005 the Gulf. Indeed, the extensive air links give the opportunity 2007 of accessing many other markets too. Recently, other Gulf Guavas, Mangoes & States have started direct imports rather than rely on Dubai. Mangosteens This inevitably increases the complexity of trading with the Pineapples, fresh or dried region. Bananas & Plantains, fresh or dried The Saudi Arabia Market: Saudi Arabia’s population is about 0 50,000 100,000 150,000 200,000 250,000 27 million people, of whom about 70% are below the age tonnes of 30. Of the total population some 7 million are expatriate Source: UN Comtrade. Pa rt I I I - B ac k g r ound Pa P ers 18 4 e — e X ternaL Ma r ke t s ƒ Limited prospect for tropical fruit other than Customs Duties bananas. TAbLE iii.5.2: ad valorem duties and taxes on Import Suppliers Bananas pineapples Mangoes papaya FiguRE iii.5.17: origin of tropical Fruit Imports to Saudi Arabia Free Free Free Free the uae UAE 5 5 5 5 100% Others opportunity for Ghanaian Suppliers 80% Kenya Malaysia ƒ There are opportunities here for exports from Ghana, 60% Sri Lanka particularly in pineapples to Dubai. 40% India Pakistan ƒ Alternatively, bananas to Saudi Arabia may be com- 20% Philippines petitive against imports from Ecuador. No doubt, the 0% Chiquita investment in Mozambique is also aiming at Bananas & Pineapples, fresh Guavas, Papayas Plantains, fresh or dried Mangoes & this opportunity. or dried Mangosteens ƒ These opportunities however are not great and are Source: UN Comtrade. unlikely to grow substantially. ƒ Philippines industrial scale production dominates the ƒ It is difficult for Ghanaian produce to compete market in bananas and pineapples. against the supplies from Pakistan and India, and op- ƒ The enormous nearby production of mangoes in portunities will only arise out of the main production Pakistan and India lead in these markets. season there. ƒ Note that the substantial expatriate community from South Asia determines varietal preferences. E.4.3 ThE MEdiTERRANEAN MAghREb ANd FiguRE iii.5.18: origin of tropical Fruit Imports to overview and Market Structure saudi arabia North Africa is a major producer of tropical and sub-tropical 100% Others fruit and so the opportunities for imports here are quite re- 80% Egypt stricted. Only bananas may have some possibilities, although Yemen 60% Egypt has a substantial production of its own. Ecuador is an Malaysia 40% Pakistan important supplier of bananas to North Africa. Ecuador 20% India Lebanon is not able to produce tropical fruit and so imports Philippines 0% when necessary. The opportunities are occasional, and, with Bananas & Pineapples, fresh Guavas, Papayas Plantains, fresh or dried Mangoes & a population of only 4 million, they are not great. or dried Mangosteens Source: UN Comtrade. Imports TAbLE iii.5.3: Imports of selected Fruits into the Maghreb and eastern Mediterranean (tonnes) Tunisia algeRia egypT leBanon 2005 20,798 157,082 2,844 761 Bananas and plantains, fresh or dried 2008 33,513 162,630 93,732 478 2005 77 75 127 373 Pineapples, fresh or dried 2008 60 197 69,270 317 2005 0 37 5 930 Guavas, mangoes, and mangosteens 2008 0 52 559 2005 0 9 Papayas 2008 15,600 2 Source: UN Comtrade. Caution: Data for Egypt 2008 suspect ƒ No data available for Libya. Hort Icu Lture e XP orts FroM gH ana : a strateg I c st u dy e. 4 aLt e r n at I v e reg I ona L M arkets 18 5 Suppliers Banana imports to North Africa are dominated by exports from Ecuador. TAbLE iii.5.4: origin of selected Fruit Imports to Lebanon (tonnes) 2005 2006 2007 2008 Bananas and plantains, fresh or dried Philippines 0 0 0 224 Ecuador 233 41 0 0 Oman 313 99 20 0 Saudi Arabia 0 148 193 183 Yemen 160 33 265 85 Others 54 118 1 46 Total 760 439 479 538 2005 2006 2007 2008 Pineapples, fresh or dried Ghana 297 253 97 137 Philippines 6 19 172 141 Others 69 15 42 18 Total 372 287 311 296 2005 2006 2007 2008 Guavas, mangoes, and mangosteens Australia 101 75 76 127 Brazil 129 85 66 77 Egypt 0 0 181 199 Ghana 64 140 158 128 Sudan 449 0 0 0 Yemen 0 0 0 144 Others 186 87 87 46 Total 929 387 568 721 Source: UN Comtrade. Customs Duties TAbLE iii.5.5: ad valorem duties and taxes on Import Bananas pineapples Mangoes papaya Tunisia 150 200 200 150 Algeria 67 77 47 47 Libya Egypt 60 40 45 60 Lebanon 70 35 35 70 Sources: http://www.douanes.dz/cnis/tarif/positionent.asp., http://www.wto.org/english/thewto_e/countries_e/tunisia_e.htm. http://www.wto.org/english/thewto_e/countries_e/egypt_e.htm., http://www.customs.gov.lb/customs/tariffs/national/tariff1.asp. opportunity for Ghanaian Suppliers E.4.4 SouTh EAST EuRopE ƒ Very limited opportunities for growth here. overview and Market Structure ƒ Ghana already has a good position in imports to Lebanon. Within this one geographical area is a diversity of small mar- ƒ Bananas to North Africa seem to be the principle kets with different cultural backgrounds and widely varying opportunity, to substitute for supplies from economies. Romania, for example, has a population of 21 Ecuador. million with a per capita GDP of $1,700; while the Albanian Pa rt I I I - B ac k g r ound Pa P ers 18 6 e — e X ternaL Ma r ke t s population is fewer than 4 million with a per capita GDP be- as developing local multiple stores. The increasing wealth is low $7,000. Bulgaria, Slovenia, and Romania are all members reflected in greater demand for exotic fruit—though there is of the European Union. A number of the other countries in- some indication that this is at the expense of banana consump- cluded are at various stages of application and accession. tion. Tropical vegetables are not in demand: there is no signifi- cant immigrant population to introduce the cuisine and there is The economies of all the countries here are growing and a strong culture of consuming locally grown vegetables. the retailing sector becoming more westernized, with the appearance of the transnational supermarket chains as well Imports FiguRE iii.5.19: Imports of Bananas & Plantains, Fresh or dried into south east europe Albania 2005 2008 Bulgaria Romania TFYR of Macedonia Slovenia Serbia Bosnia Herzegovina Croatia 0 20,000 40,000 60,000 80,000 100,000 120,000 140,000 160,000 tonnes Source: UN Comtrade. ƒ Total imports of bananas exceed 350,000 tonnes but there is little growth in this market. FiguRE iii.5.20: Imports of Pineapples, Fresh or dried into south east europe Albania 2005 Bulgaria 2008 Romania TFYR of Macedonia Slovenia Serbia Bosnia Herzegovina Croatia 0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 tonnes Source: UN Comtrade. FiguRE iii.5.21: Imports of guavas, Mangoes, and Mangosteens into south east europe Albania 2005 Bulgaria 2008 Romania TFYR of Macedonia Slovenia Serbia Bosnia Herzegovina Croatia 0 50 100 150 200 250 300 350 400 450 500 tonnes Source: UN Comtrade. Hort Icu Lture e XP orts FroM gH ana : a strateg I c st u dy 5 . 4 : a Lt e rn atI v e reg Iona L M ark ets 18 7 FiguRE iii.5.22: Imports of Papayas into south east europe Albania 2005 2008 Bulgaria Romania TFYR of Macedonia Slovenia Serbia Bosnia Herzegovina Croatia 0 5 10 15 20 25 30 35 40 tonnes Source: UN Comtrade. ƒ Very small volumes imported, but the market is expanding. Suppliers FiguRE iii.5.23: Imports of Bananas to south east europe recorded from non-eu origins Guatemala Costa Rica Colombia Ecuador 0 50,000 100,000 150,000 200,000 250,000 300,000 350,000 tonnes Source: UN Comtrade. FiguRE iii.5.24: Imports of Pineapples to south east opportunity for Ghanaian Suppliers europe recorded from non-eu origins The current opportunities are small. However, with a total Ecuador population in excess of 54 million and growing economies Brazil the demand for higher value produce is likely to grow. Panama Thailand Ghana Côte d’Ivoire Costa Rica 0 500 1,000 1,500 2,000 2,500 tonnes Source: UN Comtrade. Pa rt I I I - B ac k g r ound Pa P ers 18 8 e — e X ternaL Ma r ke t s E.5 Bananas E.5.1 iNTRoducTioN FiguRE iii.5.25: the top Five Banana exporter, World trade in bananas is highly distorted. The production and 2000–2006 (tonnes/year) marketing of bananas is concentrated in a very limited num- 6,000,000 ber of multinational companies (five). Production and trading 5,000,000 patterns do not always align with economic efficiency, but of- 4,000,000 Ecuador ten relate to historical relationships between trading partners Costa Rica that date back to colonial times. Labor conditions in the ba- 3,000,000 Philippines Colombia nana estate sectors are often below internationally accepted 2,000,000 Guatemala norms. Following the failure of the �Doha Round� of World 1,000,000 Trade Organization (WTO) negotiations to reach a conclusion, numerous bi-lateral and regional trade agreements have been 0 2000 2001 2002 2003 2004 2005 2006 developed, some of which have particular relevance for trade Source: FAOSTAT. in bananas. The ongoing dispute at the WTO on bananas between the European Union (EU) and others remains the single most important factor likely to impact upon banana pro- Six countries form a second tier of banana exporters with more duction looking forward. This paper discusses these issues in than 100,000 tonnes. These include Ivory Coast, Cameroon, greater detail and draws some policy highlights. Honduras, Brazil, the Dominican Republic, and Panama. key issues: Ghana is a member of a third group of small- to medium-size banana exporters, contributing less than 100,000 tonnes per an- ƒ Ghana currently has a substantial trade preference for num to world trade. Important producers in this group include bananas over major international competitors of €176/ Belize, Bolivia, Jamaica, Lebanon, Malaysia, Mexico, Nicaragua, tonne. Any future investment needs to consider how St. Vincent, St. Lucia, Suriname, Vietnam, and Yemen. the erosion of this preference and exposure to interna- tional competition might be addressed. Ghana’s current share of the total world banana market (as- suming exports of 45,000 tonnes in 2007–08) is less than 1%. ƒ Niche markets such as fair trade and organic bananas are currently oversupplied and in any case will only There is some evidence in recent years of a strategy of supply delay the impact of any fundamental absence of com- diversification by major producing companies to ameliorate petitiveness in banana production. risk and to benefit from EU country quotas. Ghana seems to ƒ Continued preferential market access to the EU is cru- be a beneficiary of this. cial to the continued success of Ghana’s banana sector. ƒ Continued preferential market access to the EU is Consumption not guaranteed and could be lost during future Doha .3 In 2003, the world consumed 57 million tonnes of bananas Round WTO negotiations. of which just 15 million tonnes were traded. Four countries ƒ Ghana’s cost structures probably put it into the middle or areas represented 86% of consumption in 2006: the EU, level of competiveness in banana production behind the U.S., Japan, and the Russian Federation. The EU alone Latin America and the Philippines, but above the consumes 50% of the world’s traded bananas and is, there- Caribbean. fore, the price ‘maker’ on the world market. Within the EU, Germany is by far the largest single consuming country E.5.2 cuRRENT SiTuATioN closely followed by the UK. production Figure III.5.26 shows that the key driver of growth in world In 2006 world trade in bananas was 16.7 million tonnes of which banana consumption is the EU. Growth in banana consump- 72% came from five key exporting countries that each top the 1 tion in other markets, such as the Middle East and China, has, million tonnes a year of exports (see figure III.5.25). disappointingly, not matched economic growth in these areas. Hort Icu Lture e XP orts FroM gH ana : a strateg I c st u dy e. 5 B a n an as 18 9 FiguRE iii.5.26: top Four Banana consuming countries/ typical higher cost producers and Ecuador, Columbia, and the territories 2000–2006 (tonnes/year) Philippines as typical low cost producers. Ivory Cost is, like 9,000,000 Ghana, a middle level cost producer. In contrast Costa Rica, 8,000,000 despite its high wage rates, expensive land and infrastructure 7,000,000 is actually a low cost producer due to the high yields and the 6,000,000 economies of scale associated with the large scale plantations Europe + 5,000,000 (UNCTAD 2008). United States of America 4,000,000 Japan 3,000,000 trade, trade negotiation, and Bananas Russian Federation 2,000,000 The distortions in the world banana market have led to a long 1,000,000 running dispute between the two key consumption regions, 0 2000 2001 2002 2003 2004 2005 2006 the U.S. and the EU, and those producing countries that Source: FAOSTAT. would either lose out from a level playing field (e.g., no tariff barriers or subsidies) in banana trade, such as the relatively prices and terms of trade for Bananas inefficient Caribbean producers, and those that might gain, Bananas prices are largely set at the retail level by large such as the low cost Central American producers. The unfair- supermarket chains. There is some evidence that bananas— ness of the tariffs and quotas applied to bananas imported now considered a critical item in the Western �shopping into the EU from members of the African, Caribbean, and basket�—are consistently sold as a loss-leader to encourage Pacific (ACP) group of former EU colonies has been disputed consumers to purchase other items.60 Nevertheless, bananas at the WTO and its Disputes Panel has accepted the argu- are the highest single item income earner for supermarket ments that the measures are not compliant with key bind- chains in Europe (Vorely 2009:3). ing articles of the General Agreement on Tariffs and Trade (GATT).61 Notwithstanding this finding, the EU continues to There has been a long and fairly unsuccessful history of dispute and has not implemented any new, �fairer� system. struggle to improve the conditions of banana plantation work- ers and small-scale producers by means of fair trade. The net As it currently stands the EU banana regime consists of four result has not been encouraging, with the average price re- elements: ceived for bananas in key markets such as the U.S. and the a. Free access for ACP members and countries that EU having declined in real terms since 1961 (UNCTAD 2008). have signed Free Trade Agreements with the EU; The reality is that bananas are a bulk crop which benefits from b. A single ad valorem tariff of €176/tonne for non significant economies of scale, the wholesale price strongly members; reflects domestic labor costs and international transport costs. c. A tariff quota of 2.2 million tonnes; The world’s five largest producers and exporters of bananas, d. In quota, or so-called Minimum Market Access tariff Dole, Del Monte, Chiquita, Fyffes, and Noboa account for rate quotas, for ACP suppliers at a lower rate of tariff. 80% of all trade (Shah 2009). Margins on banana sales have consistently narrowed in recent years and Vorley (undated) In order to try to settle the dispute the EU has begun to offer estimates that the average value retained by farmers of the lower tariffs to non-ACP members, starting with an offer of total retail value of bananas is at best 12%. €148/tonne and then €114/tonne. This is likely to fall further before the dispute is finally settled. Ghana is probably among the middle level of efficient ba- nana-producing countries with Jamaica and St Lucia being In the meantime, the EU has been negotiating WTO- compatible Free Trade Agreements with groups of ACP coun- 60. Consumers in supermarkets commonly purchase a whole tries to replace the non-WTO-compatible Lomé Convention. weeks food during one shopping expedition. Supermarkets These Economic Partnership Agreements (EPAs) are at an compete to make ‘offers’ that encourage them to shop at a par- ticular store, even going so far as to sell items at below their cost of production because they know that if they lose money 61. For a summary of the dispute and the findings of the Appellate on one item, they will make it up on the whole shopping basket. Body see http://www.wto.org. Pa rt I I I - B ac k g r ound Pa P ers 19 0 e — e X ternaL Ma r ke t s advanced stage. Ghana has already signed an interim EPA market is the EU. Growth in new markets has been rather which gives duty-free access to the EU banana market. disappointing. The world’s banana market is very concen- trated in a few large companies and through very powerful Clearly, since the tariff rate quota into the EU is shared supermarket chains. among ACP countries, companies that spread their produc- tion over several countries will benefit from a higher number Ghana has preferential access to the EU which makes banana of chances to obtain quotas. production attractive in the short-run. If the latest round of WTO negotiations re-starts and is concluded, it is highly likely Recently, the position of the EU has been to link resolution of that this margin of preference would be severely eroded. the banana disputes with progress in the WTO Doha Round. Ghana is better placed to produce bananas efficiently than This linking has two implications: first, it means that while many traditional producers, such as the Caribbean countries, the Doha Round is stalled, there will be no movement in the but would struggle to compete with the very large-scale and current regime, and second, that if the Doha Round suddenly low labor-cost profiles of Latin America. re-opens, then changes in the banana regime may be the ne- gotiating cost of progress elsewhere. This means that there is REFERENcES an inherent risk for Ghana that the EU could drop its banana Gillson, Ian, Adrian Hewitt, and Sheila Page. 2004. Forthcoming regime to make more important gains elsewhere and Ghana Changes in the EU Banana/Sugar Markets: A Menu of Options might be unable to prevent this. The EU have already for some for an Effective EU Transitional Package, Overseas Development time realized that this might happen and have put some effort Institute, UK. into considering how they might address the consequences.62 Shah, Anup. 2009. The Banana Trade War, http://www.globalissues. org viewed 28/7/09. E.5.3 oNcLuSioNS ANd STRATEgy c UNCTAD. 2008. Banana Terms of Trade, http://www.unctad.org iMpLicATioNS viewed 28/7/09. The world banana market is fragmented, relatively static, Vorley, Bill. (undated). Food Inc: Corporate concentration from farm to and highly distorted. The single most important and dynamic consumer, UK Food Group, available at http://www.ukfg.org.uk. E.6 aLternatIve Produce E.6.1 iNTRoducTioN Babycorn, lychee, and asparagus would exploit the compara- The following notes and charts assess the potential opportunity tive advantage of Ghana’s air-freight rates to Europe; butter- for European imports of a variety of products. We have selected nut squash, avocado, and sweet potatoes are sea freighted the products on the basis of known potential as well as agro- and can gain advantage from shorter shipping times than nomic suitability. All will require a high degree of management competing origins. The butternut and sweet potatoes are for export but the greater proportion would be suitable for small more durable than other fresh produce and could be grown scale cultivation: for example, much of the Kenya export of further afield than the usual two to three hours travelling time avocados is based on small-scale farmer output, while the Thai from a port that most produce requires. babycorn industry is heavily dependent on small-scale growers. The list of crops here is only intended to be indicative: it is All the following crops could be cultivated in Ghana, and neither comprehensive nor are the opportunities for profit- some have been for many years, but have not developed far ability assured. We believe that given the right business con- as export crops. Trials to establish the profitability of each will ditions the portfolio of produce exported from Ghana could be needed if the opportunity is to be developed; this raises be broadened beyond the few fruits and vegetables that the question of who should be responsible for such research currently constitute the export offering and the few products and introduction. At present, the private sector has very lim- here show some of the possibilities. ited resources to carry out such research on a systematic basis. This underlines the need for a capacity to innovate as is discussed in Background Paper C2 of this report. E.6.2 ASpARAguS Background–Traditionally, asparagus is a perennial crop that, 62. See for example Gillson et al., 2004. when established, produces asparagus spears for harvesting Hort Icu Lture e XP orts FroM gH ana : a strateg I c st u dy e . 6 a Lt e rn at I v e P roduce 19 1 each spring. It has been grown in Europe and Asia for over FiguRE iii.5.28: top 4 exporters of asparagus 2,000 years where it is regarded as a high-value item. However, to the eu, 2008 more recently it has been introduced into tropical areas such Others as East Africa. The production techniques have been adapted to alter the seasonality so as to time production to coincide Thailand with high prices. The new technique is often referred to as Mexico �mother-fern� production. Outside of the European spring, much of the asparagus is imported from countries such as Morocco Peru or Mexico. Asparagus should grow well in Ghana and the Peru cheaper air freight rates market should make it competitive. 0 10,000 20,000 30,000 agronomic considerations–Asparagus is grown from seeds in tonnes seed beds and the plants (crowns) are transplanted after about a Source: Accord based on data from EUROSTAT COMEXT. year. After transplanting, the ground would need to be mulched. Prior to the successful introduction of the mother fern technol- There is a very big difference in the import values between dif- ogy, it was regarded that the optimum growing conditions were ferent sources: Thailand is almost €7/kg while other countries temperatures between 16 to 24°C and it required a cold winter are about €3/kg. Thailand concentrates on producing a smaller when the crop was dormant. This has now been disproved and thinner spear which is more expensive. asparagus will grow well in tropical climates. It requires irrigation competitive opportunity for ghanaian production–The con- and high levels of management to get the competitive yields sistent temperatures throughout the year would mean that Ghana and top quality. The harvesting season normally lasts for 6 to 12 could position itself as an �all-year-round� producer or target spe- weeks, after which the spears are allowed to grow and develop cific high priced windows. The low air-freight rate compared with into ferns which build up the food reserves in the crowns to many other countries would give it very significant comparative provide the energy for the next crop. It is a labor intensive crop advantage and the low cost of labor would also contribute. especially during harvest when spears would need to be cut twice a day. There could be potential fungal problems caused by FiguRE iii.5.29: top Four Importers of rust, but there is genetic resistance in some varieties. asparagus into the eu 2008 Others The post-harvest handling of asparagus is vitally important. After harvest, the spears should be hydro-cooled to bring the France core temperature down to 1 to 3°C and, if exported, would Netherlands need to be air freighted on almost a daily basis. UK Market–The imports of asparagus into the EU are growing quickly having increased three-fold over the last eight years to Spain over 32,000 tonnes in 2008 (figure III.5.27). Imports into the 0 5,000 10,000 15,000 EU are dominated by Peru (over 25,000 tonnes/year); much tonnes smaller amounts came from Thailand, Mexico and Morocco Source: Accord based on data from EUROSTAT COMEXT. (figure III.5.28). Three countries in Europe account for the vast FiguRE iii.5.30: unit Import value majority of the imports: Spain, the UK and the Netherlands. of asparagus FiguRE iii.5.27: Imports of Fresh asparagus into Others the eu Thailand 35,000 30,000 Mexico 25,000 20,000 Morocco tonnes 15,000 10,000 Peru 5,000 0 0 2 4 6 8 2001 2002 2003 2004 2005 2006 2007 2008 Euro / kg Source: Accord based on data from EUROSTAT COMEXT. Source: Accord based on data from EUROSTAT COMEXT. Pa rt I I I - B ac k g r ound Pa P ers 19 2 e — e X ternaL Ma r ke t s E.6.3 bAbycoRN The crop has to be irrigated, requires good management, and Background–The main supplier of babycorn to the UK mar- is reasonably labor intensive, especially at harvest and during ket is Thailand though some African countries have become post-harvest handling. secondary suppliers, e.g., Zambia, Zimbabwe, and Kenya. In The post-harvest handling of babycorn is reasonably con- spite of its higher air freight rates, Thailand out-competes the ventional. The field heat needs to be removed quickly using African producers because it grows varieties that produce 3 forced air ventilation and the preparation of pre-packs would to 4 cobs per stem, whereas the African varieties rarely pro- be determined in conjunction with the EU-based importers. duce more than one cob per stem. In addition, the varieties grown in Thailand (often called Pacific varieties) only take up Market–The major consumer market for babycorn is the UK, to 90 days from planting to harvest, which reduces growing importing over 90% of volumes coming into the EU. The costs considerably. The problem Zambia and Zimbabwe found European market as a whole is not large (at over 6,500t per when they tried to introduce Pacific varieties is that their win- annum). The major supplier is Thailand, with around 75% of ter temperatures were too cold. However, the temperatures the market in 2008 (figure III.5.32). Zambia and Kenya also in Ghana should be ideal to grow them and 3 to 4 crops per exported significant volumes (although at least one major year could be grown on the same area. Zambian producer has recently stopped growing babycorn). agronomic considerations–Maize grows well in Ghana and Thai produce has a reputation for being reliable and high babycorn is simply immature maize cobs. The plant popula- quality. Despite this, distributors and retailers are keen to tion is high to boost yields and it is sometimes regarded that diversify supplies away from reliance on one market and there are two on-farm factors that contribute significantly to have tried to encourage production in East and Southern gaining comparative advantage. These are having the tem- Africa, but with very limited success as these countries find peratures to be able to grow the higher yielding and quicker it exceedingly difficult to compete with Thailand. Currently, growing Pacific varieties and a good use for the crop residues. most EU importers are buying Thai produce at about FiguRE iii.5.31: Imports of Babycorn into the eu 7,000 6,000 5,000 4,000 tonnes 3,000 2,000 1,000 0 2001 2002 2003 2004 2005 2006 2007 2008 Source: Accord based on data from EUROSTAT COMEXT. FiguRE iii.5.32: top Five exporters of FiguRE iii.5.33: top Four Importers of Babycorn to the eu 2008 Babycorn into the eu 2008 Others Others Ghana Netherlands India France Mozambique Kenya Denmark Zambia UK Thailand 0 2,000 4,000 6,000 0 1,000 2,000 3,000 4,000 5,000 tonnes tonnes Source: Accord based on data from EUROSTAT COMEXT. Hort Icu Lture e XP orts FroM gH ana : a strateg I c st u dy e. 6 : a Lt e r n at Iv e P roduce 19 3 FiguRE iii.5.34: Unit Import Value of Babycorn growing season. A good fertilizer program helps with improv- 2008 ing yields. The plants should be about 90 to 120 cm apart and allow them to spread on the ground. Irrigation is important Others but care is needed not to over-water and cause the fruit to Ghana rot. It can be possible to get 10 to 12 fruit per plant. Given India the uniform temperatures in Ghana, it should be possible to Mozambique establish �all-year-round� production. In order to get the best Kenya quality, it will be important to watch for pest and diseases and apply remedial treatments before the skin is damaged. Zambia The best varieties to grow would be Ponca, Puritan, Waltham, Thailand Harris Betternut, or Zenith 0 1 2 3 4 5 Euro / kg The shelf life of this fruit can be up to 4 or 5 months, if it is Source: Accord based on data from EUROSTAT COMEXT. stored in a cool dry room. The fruit are susceptible to mildew, so good ventilation is required. £3.45/kg; they estimate that this current price is typical aver- Market – Because of the lack of data it is exceedingly difficult age for the year. There is some Indian babycorn on the market to know the market size. One importer interviewed stated at about £3.00/kg. that they imported 100 to 150 tonnes/week. Another import- ed 20 to 40 tonnes/week to supply a company manufactur- competitive opportunity for ghanaian production–Air ing ready meals. The main UK supermarkets estimate that freight rates from eastern and southern Africa are fairly simi- they could sell about 450 tonnes/week of butternut squash. lar to each other ($1.60 to 1.80/kg), while those from Thailand Therefore, it could be concluded that the current UK demand are marginally higher ($2.00/kg). If Ghanaian exporters are is in the order of 2,000 to 3,000 tonnes/annum. able to negotiate rates of about $1.00/kg), it gives them a ma- jor competitive edge. The consistent temperatures through- The main sources of supply are Argentina (February to June), out the year would mean that Ghana could grow the Pacific with smaller amounts coming from Greece, Egypt, RSA, Italy varieties which would give it the competitive edge over East (out of store), Brazil, and Senegal. A marketing strategy could and Southern Africa. be to start producing to market on the shoulders either side of Argentina and then expanding. competitive opportunity for ghanaian production – There E.6.4 buTTERNuT is an excellent opportunity for Ghana to become a leading Background–Butternut squash is a relatively new product to supplier of all-year-round butternut to the EU. It has the ad- the EU market; it is a type of winter squash which has a vantage over Argentina in that it can supply throughout the sweet, nutty taste similar to pumpkin. It has yellow skin and year and has a potentially shorter shipping time. Once the orange fleshy pulp and when ripe, it turns increasingly deep agronomy of this crop has been perfected and a steady mar- orange, and becomes sweeter and richer. It grows on a vine. ket identified, it could be a crop that might be exploited by The demand is almost exclusively from the UK; the market small farmers. on mainland Europe has yet to be developed. The import sta- tistics for butternut are not separated out and therefore the market data were obtained from interviews with importers. E.6.5 SwEET poTATo The main message was that this is a product which might Background –The original range of the sweet potato lies in have a small market at the moment, but there is consider- Central America and the northern parts of South America, but able potential for growth and a serious interest in replacing it is now cultivated throughout the tropics and sub-tropics. the current supplier. The climate in Ghana is suitable for Botanically, the genus Ipomoea belongs to a different family squashes and they can be transported by sea in refrigerated to the traditional ‘Irish’ potato, Solanum, and in the US the containers. sweet potato is referred to as yam although Ipomoea is not agronomic considerations–Like all squashes, it will succeed related to the common yam, Dioscorea, either. The sweet po- in a wide range of soils, provided there is irrigation. It re- tato has become an important staple not only for human con- quires fairly high temperatures, above 25 to 27°C during the sumption but also for animal feed. China is now the largest Pa rt I I I - B ac k g r ound Pa P ers 19 4 e — e X ternaL Ma r ke t s FiguRE iii.5.35: Imports of sweet Potato into the eu 60,000 45,000 tonnes 30,000 15,000 0 2001 2002 2003 2004 2005 2006 2007 2008 Source: Accord based on data from EUROSTAT COMEXT. FiguRE iii.5.36: Top Five Exporters of Sweet producer in the World. Until recently sweet potatoes have Potato to the EU 2008 only featured in ethnic cuisine in Europe and imports have not been large, but in the last 10 years the orange fleshed Others varieties have gained popularity for their color, flavor, texture South Africa and above all, nutritional content. Egypt Honduras The sweet potato is particularly suitable crop for vulnerable Israel farming areas in the tropics with a very high nutritional yield USA per hectare in a relatively short time; the foliage is dense 0 10,000 20,000 30,000 and therefore shades out weeds allowing the farmer more tonnes time for other crops and the foliage itself can be consumed. Source: Accord based on data from EUROSTAT COMEXT. The tubers have a high vitamin component which is being used to combat particularly Vitamin A deficiencies. The Gates FiguRE iii.5.37: Top Four Importers of Sweet Foundation has recently approved a $21 million project to Potato into the EU 2008 produce high-yielding, stress-tolerant varieties of sweet po- tato for Sub-Saharan Africa. Others agronomic considerations – Sweet potatoes are grown in Spain well-drained light textured soils, and are harvested 100–130 Netherlands days after transplanting depending on variety and tuber size. The harvest can be mechanized. The skin of the freshly har- France vested tuber is quite delicate and requires careful handling and UK protection from the sun. Potatoes for storage are then cured 0 10,000 20,000 30,000 40,000 to toughen the skin, being held in a high humidity for up to tonnes seven days at temperatures up to 32C. A storage life of six to Source: Accord based on data from EUROSTAT COMEXT. ten months is possible in cool, well-ventilated conditions. FiguRE iii.5.38: Unit Import Value of Sweet There are hundreds of varieties of sweet potatoes. In the Potato U.S., Covington, Beauregard, and Evangeline are among the Others most popular. Any approach to the EU markets would need to investigate preferred varieties in advance. South Africa Egypt Market–The EU demand for sweet potato has grown Honduras strongly recently with imports quadrupling in seven years. Sweet potatoes have made the crossover from ethnic to Israel mainstream cuisine, and, in the UK, they are widely found in USA the supermarkets. Sweet potatoes have a long storage life 0.00 0.20 0.40 0.60 0.80 and can be transported by refrigerated sea container at 13°C. Euro / kg Ventilation is needed to prevent O2 levels falling which might Source: Accord based on data from EUROSTAT COMEXT. cause internal root fermentation and decay. Hort Icu Lture e XP orts FroM gH ana : a strateg I c st u dy e . 6 : a Lt e rn at Iv e P roduce 19 5 competitive opportunity for ghanaian production–There FiguRE iii.5.40: Top Five Exporters of is a good opportunity for Ghana to develop a strong sweet Avocado to the EU potato business and this is a crop that might do well in the 2008 northern regions where opportunities for commercial agricul- Others ture are limited. Here the crop will require irrigation, but the Mexico plants will benefit from the higher sunshine levels. However, Chile the competition with Israel and the U.S. will be intense, and shipping costs need to be brought down by volume if there Israel is to be the chance of success. Peru South Africa 0 20,000 40,000 60,000 E.6.6 AvocAdo tonnes Source: Accord based on data from EUROSTAT Background–The avocado is well-known in the forest belt COMEXT. of West Africa but has its origins in Central America, from where it has spread out across the tropics and warm temper- FiguRE iii.5.41: Top Four Importers of ate zones. The main producing countries are Mexico, Chile, Avocado into the EU Indonesia and the USA. Three distinct ecological races are 2008 recognized: the Mexican type is quite cold tolerant and the fruit is soft-skinned, small with a large seed; the Guatemalan Others race is large-fruited, with a thick skin of rough texture and al- Spain though originating in the highlands it is not tolerant of the cold; the West Indian race, not native to the West Indies but to the UK lowlands of Central America, is a race of hot, humid conditions France with a large fruit on which the skin is smooth and leathery. Netherlands The two most popular cultivars of international trade are the 0 25,000 50,000 75,000 Hass, a Guatemalan type, and the Fuerte, which is a Mexican tonnes X Guatemalan hybrid. Source: Accord based on data from EUROSTAT COMEXT. agronomic considerations–Avocados can be cultivated on a wide range of soil types, but the trees are susceptible to water-logging and good drainage is essential; a high-water FiguRE iii.5.42: Unit Import Value of table is undesirable. The planting density varies with type but Avocado a density up to 200 trees per hectare is typical. Productive Others life is around 25–30 years, with the first harvest appearing around years four or five. The expected yield of Hass at maxi- Mexico mum bearing after year 12 could be up to 20 tonnes/ha but is Chile likely to be much less. Israel Peru South Africa FiguRE iii.5.39: Imports of avocado into the eu 0.00 0.25 0.50 0.75 1.00 1.25 1.50 1.75 200,000 Euro / kg Source: Accord based on data from EUROSTAT COMEXT. 150,000 tonnes 100,000 Hass is the most widely planted commercial cultivar now, 50,000 taking over from Fuerte. Other popular varieties include Pinkerton, Ryan, and Ettinger. In Florida, the selected cultivars 0 tend to be West Indian type or West Indian X Guatemalan 2001 2002 2003 2004 2005 2006 2007 2008 Source: Accord based on data from EUROSTAT COMEXT. crosses with different cultivars planted to extend the season. Pa rt I I I - B ac k g r ound Pa P ers 19 6 e — e X ternaL Ma r ke t s Thus Pollock, Simmonds, and Nadir are early types while Lychees require a moist environment with up to 2,000 mm Collinson and Hall are later and Lula and Monroe latest. per year of rainfall. The tree cannot tolerate water shortage Market preference in the EU however leans strongly towards but a short dry season helps to induce flowering. the Hass and Fuerte. Lychees will not ripen off the tree and must be harvested at Market–Avocado has long been enjoyed in Europe as a full maturity, which is usually between and 100 and 110 days component of salads and the crop is cultivated around the after pollination. At ambient temperatures, lychee qual- Mediterranean. Spain is ranked ninth in world production ity deteriorates rapidly: within a day or two the skin turns with some 120,000 tonnes.63 EU production however is brown, and the flesh become watery. Skin browning can insufficient and avocadoes are imported to the EU all year be prevented with SO2 treatment, though there are import round. Peak imports arrive in the summer months from issues over residue, and cooling to 2°C; and PVC packing, May to September. Imports from Ghana, as well as those preferably in modified atmosphere, allows storage up to from South Africa, would enjoy a duty preference of 1.6% one month. as compared to 5.1% levied on imports from Israel, Peru, and Chile. Yields of around 5 tonnes per hectare can be expected, though significantly higher yields are not unusual in optimal Imports have grown quite strongly over the past five years conditions. and now stand at 175,000 tonnes per year. Market–Lychees are available all year in Europe but the peak competitive opportunity for ghanaian production–The opportunity is for supplies in the lead up to Christmas. The advantage for Ghanaian production here lies in proximity to red fruit color has seasonal associations and it is therefore Europe and the shorter shipping distance than other origins. important to select varieties with good coloring. The use However, the ability to compete will depend on the exact tim- of sulphur dioxide maintains the coloring. The marketing is ing of the crop: the Ghanaian output is unlikely to be compet- heavily controlled by a few French importers working in as- ing against the southern hemisphere producers of Peru, Chile, sociation with the Madagascan exporters. The supply into and South Africa. Nevertheless, on a similar latitude, Kenya ships some 11,000–12,000 tonnes per year to the EU. FiguRE iii.5.43: Imports of Lychees into the eu 40,000 E.6.7 LychEES / LiTchi 30,000 Background–Lychees are evergreen sub-tropical trees val- tonnes ued for the small red fruits that are eaten fresh or processed 20,000 to a variety of juices, purees, canned goods, and condiments. The species is indigenous to south China and has a long his- 10,000 tory of cultivation that has given rise to many cultivars suited 0 to a range of climatic and seasonal conditions. In the past 2001 2002 2003 2004 2005 2006 2007 Source: Accord based on data from EUROSTAT COMEXT. 150 years commercial cultivation has spread widely: China remains by far the largest producer, but significant produc- FiguRE iii.5.44: Top Four Exporters of tion is also found in India, Thailand, Madagascar and the Lychees to the EU 2007 neighboring islands, South Africa, and Florida in the U.S. Others agronomic considerations–Cultivar selection is important not only to match performance requirements to local condi- Israel tions, but also for fruit quality and harvesting period. Many South Africa of the cultivars are specifically adapted to sub-tropical cli- mates and may not be suitable for Ghana. The cultivar Da zao Thailand (synonym TaiSo) is grown widely in Madagascar, Reunion, Madagascar Mauritius, and South Africa. It is an early variety that crops 0 10,000 20,000 30,000 regularly in the tropics and has large bright red fruits. tonnes Source: Accord based on data from EUROSTAT 63. http://faostat.fao.org. COMEXT. Hort Icu Lture e XP orts FroM gH ana : a strateg I c st u dy e. 6 : a Lt e r n at Iv e P roduce 19 7 FiguRE iii.5.45: Top Four Importers of FiguRE iii.5.46: Unit Import Value of Lychees into the EU 2007 Lychees Others Others Slovenia Israel UK South Africa Netherlands Thailand France Madagascar 0 6,000 12,000 18,000 24,000 0.0 0.5 1.0 1.5 2.0 2.5 3.0 tonnes Euro / kg Source: Accord based on data from EUROSTAT the market is therefore well managed but not all importer/ COMEXT. distributors approve of this arrangement. competitive opportunity for ghanaian production–The Finding areas of sufficient rainfall will not be a problem in market in Europe is not showing strong growth but the fruit western Ghana, but the requirement for a short dry season remains seasonally popular. Ghana offers a short shipping and the need of many cultivars for a cooler resting period time for sea-freighted litchi and low air-freight cost for unsul- could be a challenge. The production in Madagascar is not phured products. If fruit are available the cheap air–freight in based on high elevation production and the cultivars grown weeks 48–52 will confer a major advantage. there might usefully be tested in Ghana. E.7 FruIt JuIce MarketIng oPPortunItIes E.7.1 iNTRoducTioN less than the potential capacity. The TIPCEE is attempting to In the 1990s and early 2000s, Ghanaian horticultural export- quantify the potential and estimate the actual processing. ers made good progress in exploiting export market oppor- The factories claim that they do not reach their potential be- tunities, and naturally looked to add value to some of the cause of a shortage of raw material, but of course, this may non-export quality fruit through processing. Athena Foods be confused with their inability to pay a sufficiently attractive initially started processing for the local and regional markets price to encourage farmers to grow for them. and a number of other companies have since followed (see Background Paper B2). This Background Paper considers the TAbLE iii.5.6: value and volume of Fruit Juice exports market opportunities and constraints for further expansion of from ghana, 2003 to 2008 the fruit juice industry in Ghana. pRoducT 2003 2007 2008 T T T uniT value $/T The juice market can be divided into a number of different products: 100% fruit juice (from concentrate), 100% fruit Orange juice 0.2 1,835 1,100 1,100 juice (not from concentrate), nectar (30–99% juice), fruit Pineapple juice 574 2,035 1,040 1,080 drinks (0–29% juice), and vegetable juice. Source: Accord Associates based on GEPC data. Ghana is a small exporter of fruit juices, just over a 1,000 tonnes E.7.2 cuRRENT pRoducTioN iN ghANA each of orange and pineapple juices in 2008 (table III.5.6). This There are a number of small fruit-processing factories in was about half what was achieved in the previous year. The Ghana (see Background Paper B2). It is estimated that the main orange producer, Pinora, was undertaking factory modi- processing capacity is possibly in the order of 20,000 to fications in 2008 which would explain the decline, but they 30,000t of finished product (i.e., about 20 to 30 million liters). expect output to increase when the improvements are final- However, it is very likely that the actual production is much ized. The decline in pineapple exports is not well understood. Pa rt I I I - B ac k g r ound Pa P ers 19 8 e — e X ternaL Ma r ke t s It is interesting to note that the average export price is about E.7.4 EXpoRT MARKET oppoRTuNiTiES $1,000/tonne; which is very similar to the value of fruit juice In 2008, the retail value of the global fruit juice market was imports. Even though most of Ghana’s fruit juice exports are worth almost $67 billion and is expected to reach $80 bil- organic and/or Fair trade, which carry a price premium, much lion by 2013, an annual growth rate of almost 4%. In volume of the exports are single strength while the imports are domi- terms, consumption in 2008 was 44 billion liters which is nated by concentrates. predicted to rise to 53 billion liters by 2013. Fruit drinks (0 to 29% juice) account for most of the revenues at 28% of the market; however, if both the 100% fruit juice categories are E.7.3 LocAL MARKET ANd iMpoRTS combined, this is the most important category (table III.5.8). The local retail market for fruit juices is dominated by im- The EU is the biggest market that was surveyed, accounting ported concentrated product, which is repackaged in Ghana. for 45% of the global juice market (table III.5.9); it is therefore There are some retail packs from South African and Southern assumed that the consumption within Africa is very small Europe sold in the major shopping centers. compared to the world’s main trading blocks. Most of the re- tail trade is through supermarkets and hypermarkets (55%). Import data of fruit juice suggest that over 21,000t of fruit juice Pepsi-Cola and Coca-Cola are the biggest retailers of fruit (both single strength and concentrate) is imported (table III.5.7). juice accounting for 23% of the trade between them; the Much of this will be concentrate which will be diluted and sold next biggest company is Procter and Gamble which accounts in small retail packs. Coca-Cola, who has recently launched their for less than 4%.64 own brand of fruit juice, estimates that the local retail market is 42 million liter (i.e., about 42,000t) and that one company has about 40% of the market selling under the Calypso and Aquafresh brands. If most of the imported juice is concentrated TAbLE iii.5.8: global retail value of Fruit Juice sales and diluted two or three times, then the estimate of local mar- by category, 2008 ket size does agree with the import data. This could imply that there is significant potential for Ghanaian fruit to be processed value (usd and sold on the local market and given the increase in imports caTegoRy Billions) % between 2003 and 2008, it also suggests that the market is Fruit drink 18.8 28.2 showing significant signs of growth. However, it must be ap- 100% fruit juice (from concentrate) 16.3 24.4 preciated that some of the varieties of juices imported cannot 100% fruit juice (not from concentrate) 15.8 23.7 be grown in Ghana. Nectar 10.9 16.4 TAbLE iii.5.7: value and volume of Fruit Juice Imports Vegetable juice 4.9 7.3 into ghana, 2003 to 2008 Total 66.7 100 pRoducT 2003 2007 2008 Source: Accord Associates LLP based on Datamonitor data. T T T uniT value $/T Total all juices 5,500 21,599 21,443 1.10 TAbLE iii.5.9: global retail value of Fruit Juice sales Source: Accord Associates based on GEPC data. by region, 2008 geogRaphical value (usd Region Billions) % Considerably more work is required to fully understand the Europe 30.2 45.3 local market potential for Ghanaian-grown fruit to supply Americas 25.3 37.9 the local fruit juice market, but it is hoped that much of the existing capacity can be utilized by substituting imported Asia Pacific 11.2 16.8 concentrate. However, to achieve this, it might be necessary Total 66.7 100 to help the factories meet the hygiene and safety standards Source: Accord Associates LLP based on Datamonitor data. demanded by the fruit juice manufacturers. It must also be a target for the Ghanaian horticultural strategy for processors to more seriously target exports so as to create market de- 64. Data in this paragraph from Datamonitor (2009). The Global Fruit mand for farmers’ production. Juice Market; an Industry Profile. Hort Icu Lture e XP orts FroM gH ana : a strateg I c st u dy e. 7 : F r u I t Ju I c e M arket I ng oPP ortun I t Ies 19 9 Ghana is a small player in terms of the international trade acerola, which are perceived (and heavily promoted) as con- of fruit juices, but it is good that most of its exports are taining high levels of anti-oxidants. Furthermore, fruit juices targeted at the EU. Data from the European Fruit Juice are appreciated for their naturalness and their wide range Association show that the total EU consumption of fruit of vitamins. Finally, consumers are switching to healthier juices and nectars in 2007 was 11.2 billion liters, a slight de- drinks such as juices, which they regard as a more natural cline from 2006. Even though there was an overall slight de- and sensible option than soft drinks such as colas, and juices cline in consumption between 2006 and 2007 it was more , are regarded as a more convenient way of achieving recom- marked in Northern Europe and sales were more impres- mended intakes of fruit because there is no hassle associ- sive in Southern and Eastern Europe. This consumption was ated with peeling and preparation. mainly orange juice (38%) followed by multifruit juice (18%), apple (14%) and peach (4%).65 Pineapple only accounted for The European fruit juice industry consists of a few large 3% of the market. However, the good news for Ghanaian (multinational) companies (many based in the UK) and many exports is that, compared with 2001, the consumption of smaller niche players (often based in Germany or Eastern pineapple juice, along with multifruit and peach, increased Europe). According to the Association of the German Fruit at the expense of apple juice. New product development Juice Industry, there are 411 fruit juice producers in Germany. has been most notable in niche areas, such as smoothies, Several fruit juice producers are also located in the United dairy-juice blends, chilled juice, and functional juice-based Kingdom, including Tropicana—which has almost 50% mar- drinks containing added vitamins, minerals, and other in- ket share and is a fast-growing grocery brand. It is also inter- gredients. These sub-categories of the European fruit juice/ esting to note that fruit juice processing increasingly takes nectars market remain small, but have certainly evolved place in East European countries because their facilities of- rapidly from a small base. fer lower costs of production and because of growing local demand. There are some interesting variations in the sales of the dif- ferent categories in Europe. Fruit juice, with 100% juice con- It is often said that comparative advantage for processed tent, remains most popular across Western Europe, with an horticultural produce is created by having access to cheap EU market share of 64% in 2007. In the UK, Ireland, and the raw material and processing economies of scale to spread Scandinavian countries, this share is the highest (80–99%). overheads. Competitively priced transport to the market On the other hand, in most of the Mediterranean and East is also an important factor. At present, it is doubtful that European member countries, nectars, with 25–99% juice Ghanaian factories are able to get cheap raw material; for content, are the most popular. In these countries, not all instance, Pinora reports that the average price for oranges consumers are aware of the difference between juices and is much higher than in Brazil, the world’s leading supplier of nectars.66 Germany is the biggest consumer of fruit juice orange juice. Similarly, the main pineapple juice producing countries, Thailand and the Philippines, have very cheap raw (2.9 billion liters), followed by France (1.6 billion liters), the material as it is often regarded as a by-product from other, UK (1.5 billion liters), and Spain (1.3 billion liters). more lucrative, activities. There have been a number of trends identified in the EU mar- ket which impact on fruit juice consumption that could impact on the opportunities for Ghana. As noted above, the market E.7.5 oNcLuSioNS ANd STRATEgy c for the traditional fruits such as orange and apple is declining, iMpLicATioNS while innovative fruit combinations and colors gain market share. Modern consumers are becoming more open to ex- The Ghanaian fruit juice sector is at an interesting point in its otic, tropical varieties which they have discovered through development. There have recently been a number of invest- holidays abroad. Also, functional drinks, like juices and nectar ments in juice factories, most of which are operating at well with added vitamins, calcium, soy or omega-3, are becoming below full capacity. Most of these factories are targeting the more popular. More recently, one of the main drivers behind local market, where they should have a significant compara- the development of functional juices has been the addition tive advantage conferred by much cheaper transport costs. of super fruits such as pomegranate, aça’, mangosteen and However, until further research is done, the real scale of the opportunity cannot be evaluated. Also, it has been reported 65. CBI Market Information Database. that some of the factories are not able to obtain sufficient 66. CBI Market Information Database. fruit; the TIPCEE project is attempting to understand the Pa rt I I I - B ac k g r ound Pa P ers 20 0 e — e X ternaL Ma r ke t s scale of this shortfall. However, caution is needed because processing plant. This would make Ghana a significant player the shortage might be related to the price that the factory is in the international trade of fruit juice and may well create offering and, in fact, it might be necessary for research to be opportunities for other, smaller investors to take advantage undertaken into reducing the unit cost of fruit or finding more of the logistical connections. appropriate varieties. In order to fully exploit the opportunity for fruit juices in Some Ghanaian factories have made an interesting, if small, Ghana, it is important: start in developing export market opportunities. These have been developed by both trying to supply organic and/or Fair ƒ That the local market is fully researched to understand traded product and by identifying small fruit juice manufactur- the demands and estimate the scale of the opportu- ers in Europe who are able to import directly and package nity for local processors, and to estimate when it is for specific retail outlets. These are neat marketing strategies likely to be satisfied. as the first ensures access to higher-priced market outlets67 ƒ To identify export opportunities—both in terms of the and the second reduces the number of transactions and markets that Ghana is best-placed to exploit and the therefore has lower marketing costs. The disadvantages of products that they could sell. In particular, it is impor- these strategies are that the organic and fair trade markets tant to evaluate whether targeting the more rapidly are small and declining, and carry an inherent risk as they rely expanding markets in South East Europe really does on a single manufacturer. represent a better opportunity for Ghana than the larger markets in Germany, UK, Spain, etc. A Spanish fruit juice manufacturer is interested in establish- ƒ To identify potential European-based fruit juice manu- ing a processing factory and production unit in Ghana in order facturers who might be interested in establishing to secure a supply of pineapple juice; probably in response strategic partnerships with Ghanaian processors. In to supply difficulties that have been experienced in Thailand, particular, to identify the countries that will present where it is reported the pineapple industry has been en- Ghanaian exporters with the best opportunities. countering problems and its cost base is rising. The plan is ƒ To give assistance to foreign companies that wish to to acquire up to 20,000 ha for a pineapple plantation and invest expertise and finance in either processing and production in Ghana. This is vitally important to estab- 67. Which according to Athena Foods can be as much as 30%. lish a significant fruit processing sector. Hort Icu Lture e XP orts FroM gH ana : a strateg I c st u dy ARD AGRICULTURE AND RURAL DEVELOPMENT Agriculture and Rural Development (ARD) 1818 H Street, NW Washington, D.C. 20433 USA Telephone: 202-477-1000 Internet: www.worldbank.org/ard