The Black Star is Shining

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Gilad Andorn

February 12, 2018

During my summer in Kenya, I was amazed by the innovation and the entrepreneurial spirit of local founders. But African entrepreneurship and investment opportunities do not end in Nairobi or Lagos. With a free-market economy and relativity few policy barriers to trade and investment, Ghana was blessed with an abundance of natural resources and access to international markets. Often overlooked due its relative size, Ghana represents an interesting opportunity to execute an investment strategy that emphasizes funding ventures that improve and innovate upon traditional models of agribusiness and agricultural processing. Considered as one of the safest and most stable countries on the African continent, Ghana could become a ‘prototype model’ for investing in Sub-Saharan Africa.

What’s Macro got to do with it?

Ghana’s history of peaceful transitions of power over the last twenty years position it as a natural candidate for mid- to long-term venture investments. The comprehensive victories of Nana Akufo-Addo and his New Patriotic Party in the 2016 elections were followed by an introduction of numerous policies to encourage industrialization and increase investment opportunities at the private sector. Development of natural resources, with emphasis on oil and gas, are projected to support a gradually improving economic prospects in the coming years and beyond. Compared to some other markets around the continent, Ghana has not been faced by domestic instability, political upheavals or terror attacks from extremist.

Ghana could become a ‘prototype model’ for investing in Sub-Saharan Africa

Ghana has a diversified economy, and although agriculture still represents about 20% of its real GDP, sectors such as business and real estate (21%), construction (13%), and Information and communication (13%) are growing at a fast rate. The Ghanaian economy still faces many challenges, such as a growing state deficit, inflation and dependency on global commodity prices, but its long-term potential remains relatively strong and with a positive growth outlook.

The Ghanaian stability should be taken into consideration when exploring agribusiness investments in developing economies. Long term studies found that during periods of conflict and political unrest, agricultural production drops an average of 12.3% each year. Other studies have narrowed the focus to specific crops. For example, Ksoll, Macchiavello and Morjaria (2010) show how post-election violence negatively affected the export volumes of the cut flower industry in Kenya.

Identification of agribusiness opportunities and sourcing of ventures has also improved dramatically, with entities such as The Ghana Investment Promotion Centre and USAID providing unique platforms to investors. For example, this a USAID investment mapping system provides detailed GIS opportunity mapping and initial screening of agro-focused companies in Ghana.

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Why Focus on Agribusiness?

Ghana has a two-pronged agricultural sector: export-oriented agriculture which is growing strongly, while domestic-based food crop production is lagging behind. Ghana is a net food importer, importing ~$500M (600,000 tones) worth of rice alone annually, together with substantial amounts of chicken, meat and dairy products. There is therefore significant domestic opportunity for investment in crop and livestock production. Furthermore, rapid urbanization and rising per-capita income in Ghana are driving significant increases in domestic demand for, and consumption of, staple crops. Cedi foreign exchange trends support the domestic manufacturing and processing approach, allowing producers to reduce dependency on more expensive import goods and possibly enjoy the export upside.

The Ghanaian agricultural sector has been neglected and underinvested, even in export based goods. This has caused a major yield gap, even in high margins products such as Cocoa (60% yield gap) and pineapple (40% gap). By improving Ghana’s yield gap in rice (42%), it could reduce its rice imports by more than 90%. This yield gap could explain the sharp decline in agriculture’s contribution to Ghana’s GDP, as the industry deals with various other challenges such as a lack of access to farming equipment , market information and data — all challenges which present great opportunity for new ventures to transform the industry.

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The Akufo-Addo regime introduced several new initiatives aimed at improving and revamping the sector such as the Planting for Food and Jobs initiative, the Fertilizer Subsidy Program and the Ghana Commercial Agriculture Project. Yet even with fresh government support and plenty of potential, agribusiness and food production suffers from an inherent lack of funds, with only 3.6% of lending capital allocated to the sector. This opens the door for diligent investors, who can capture the current market inefficiencies, implement innovative approaches and capitalize on future, and very realistic, growth.

The agribusiness industry deals with various other challenges such as a lack of access to farming equipment , market information and data — all challenges which present great opportunity for new ventures to transform the industry

Whilst there is a great potential with most food crops, specialty cash crops, such as moringa and shea, are less sensitive to international commodity fluctuations and offer high premiums due to their relative scarcity. These price premiums are even more apparent when these crops are processed, and sold as a raw goods to larger international vendors or as end-user direct products, mostly US and EU consumers. Whilst there isn’t any lack of specialty-cash-crop producers or processors in Ghana, those who will be able to maintain high-quality produce and a reliable supply chain will win the market.

This revamp in the agribusiness sector is accompanied by introduction of new technologies, mainly from younger start-ups, which allow for more efficient mechanisms to scale farm operations, from mobile technologies, usage of data analytics, sharing-economy and distribution channels. These innovations are crucial to capture to full potential of the industry, and could be easily duplicated and scaled across the continent. The Ghanaian AgTech ventures will lead the charge in reigniting the sector, and present a great opportunity to finally capture the full market potential.

What Should We Be Aware of When Investing

The downward spiral of the agricultural sector (as a percentage of GDP) was mainly induced by growth in other sectors of the economy, but there are still fundamental shortfalls in the industry, such as an inherent lack of capital and low levels of mechanization. In order to really scale and monopolize on potential opportunities, many different Ghanaian entities must work together — which is a hard bridge to cross.

The eco-system is very fragmented, with about of 80% of production dominated by small-farm owners. While this might be an opportunity in some cases, it does pose a clear operational threat for small ventures which service the industry — it requires recruitment and onboarding effort vis-à-vis small functions, many times in remote locations. It also requires heavy investment in market education, such as implementing new technologies or meeting export standards, behaviors which are not prevalent with most small farmers. Reaching scale in Ghana’s food sector will require ‘patient capital’ which is not always abundant with investors.

Reaching scale in Ghana’s food sector will require ‘patient capital’ which is not always abundant with investors

Climate is changing, and it could have a detrimental impact on food production. Recent projections for climate change in the region agree there will be an increase in air temperature for all agro-ecological zones in Ghana. Ghana’s vulnerability to climate change in the agricultural sector is largely due to its dependence on rainfall, particularly in the country’s semi-arid north, which is more heavily dependent on subsistence agriculture. These trends have led to concerns over expected production of key crops such as maize, rice, nuts and cocoa. When exploring specific agriculture investment opportunities in Ghana, resilience to climate change must be an important element during the due diligence process.

Tech-Enabled Ventures to Look Out For

Trotro Tractor has an agricultural edge to the ‘gig’/sharing economy. It’s a mobile platform linking farmers with tractor owners and using mobile money to simplify the process. With a founding team that includes a cattle and a vegetable farmers, Trotro has real insight into the daily difficulties of the Ghanaian farmer community. By elevating the Capex burden using an innovative and scalable platform, Trotro Tractor could be a great solution for Ghanaian farmers looking to grow their operation but have only limited resources.

Farmerline allows users to subscribe to weather, crop, and market information services, which they can receive via voice messages, an online platform or a call center. Access to farm mapping, weather forecasts, market prices and GAPs has a direct impact on farms revenues and productivity. By utilizing technology, Farmerline provides the Ghanaian farmer with constant business-crucial information. With data being the new currency Farmerline could be the differentiating factor for many of Ghana’s smaller farms.

The Opportunity is There

As with many other cases in venture investment it all boils down to the old adage that necessity is the mother of invention. As other verticals in the country grow, evolve and receive more capital, agribusiness in Ghana must change as well — becoming more effective, competitive and focusing on the right produce. The required shift invites innovation, implementation of new technologies and novel production mechanisms which will improve yield and productivity.

Ghana’s developing economy also supports an ongoing increase in the middle class, which is followed by a change in consumer behaviour - with emphasis on acceptance of new brands and flavors, allowing for new domestic players to grow. The overall stable macro environment encourages engagements with bigger international vendors and partners, who value stability and reliability of supply. All these factors turn the Ghanaian agribusiness and agricultural processing industries into great investment opportunities, but ones that must be tread lightly.

With one very promising Ghanaian Agribusiness portfolio company, and more in the pipeline, VestedWorld is well equipped to capitalize on Ghana’s agribusiness sector, with its unique access to market, great understanding of the emerging market ecosystem and intimate entrepreneur support.


The Impact of Conflict and Political Instability on Agricultural Investments in Mali and Nigeria, Brookings Institute

Republic of Ghana, Ministry of Finance — Ghana’s turnaround story

Ghana Trade and Livelihood Coalition

Oxford Business Group — the report: Ghana 2017

Overseas Development Institute, Mapping current incentives and investment in Ghana’s agriculture sector, April 2016

USAID, Ghana’s Private Sector Investment Plan for Agricultural Development, May 2012

FAO, Ghana Agriculture Sector Investment Programme (GASIP) — Design completion report, April 2014

The Economist Intelligence Unit, Ghana Country Report

The World Bank, Financing Agribusiness in Sub-Saharan Africa: Opportunities, Challenges, and Investment Models

Quartz Africa, Farmers are the secret ingredient for Ghana’s most innovative startups

PWC, Growth accelerated, Doing Business and Investing in Ghana, April 2014

OECD, Ghana — Seizing New Agribusiness Opportunities

GIPC, Investing in Ghana’s Agricultural and Agro-Processing Industry

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