Written by: Dorothy Takyiakwaa, Kofi Takyi Asante, and Prince Selorm Tetteh

Money – or the lack of it – and disagreements over how it is spent is a universal challenge to personal and professional relationships. In Ghana, a study by Agricultural Policy Research in Africa (APRA) highlights the impact of poverty on farmer-based organisations (FBOs) in five oil palm-producing communities. The study reveals that mistrust among impoverished farmers leads to weak or non-existent associational life and undermines FBO effectiveness.

Ɔdɔ me, na mensu me dɔ mu
Nanso ohia aamma medɔfoyi ɛɛnngyi me ɛɛnndi
[I love her as much as she loves me
But because of poverty, my lover does not trust me]

The lines above are from a popular song titled, ‘Sɛsɛ ɔdɔ yewu da baabi’ [My lover and I live in different places] by Ghanaian music legend, Amakye Dede. Stories of heartbreak and lovers’ conflicts of the sort that Amakye Dede so touchingly chronicles in his music are an enduring aspect of the human condition. Poets tend to have a view of lovers’ predicament that is too romantic, sometimes bordering even on the sacred. However, Amakye Dede’s paints a clear-eyed picture that cuts through all the sentimentality to show that money, or the lack of it, is an important cause of mistrust and heartbreak in relationships. In the song, he insists that even though he longs to be with his lover, he cannot afford to do so. In another song, he declares that all his beautiful intentions require money to execute.

The predicament Amakye Dede describes does not only relate to romantic partners. In the more prosaic world of economic relations, money can also erect barriers to building trust among individuals and groups. Another celebrated Ghanaian musician, Pat Thomas, summed it up thusly: ‘sika yɛ mogya’ [‘money is blood’ (i.e. essential to everything that needs to be done)]. In our study that investigated the effectiveness of FBOs among oil-palm producers in southwestern Ghana, we also found that the high incidence of poverty among farmers was an obstacle to building trust, and that high levels of mistrust has undermined the effectiveness of the FBOs in these communities.

Focus of the study

In our qualitative study, which was implemented in five oil palm-producing communities in south-west Ghana, we sought to examine the broad socio-economic context within which oil palm cultivation takes place in the study area. Specifically, we sought to investigate the relationship between farmers’ livelihoods and their ability to meaningfully participate in FBOs and collective action. In each community, we purposively sampled five oil palm-producing households.

Very weak farmers’ associations

We found that associational life in the study areas was weak or non-existent. There was widespread suspicion among farmers that their peers could not be trusted. This fear that members were trying to ‘reap off others’, as one of our respondents put it, undermined the ability of FBOs to undertake collective action. Thus, because some destitute members genuinely lacked the means to pay associational dues or meet other financial obligations, those who could afford to pay refused to do so out of mistrust of being taken advantage of.

This situation makes it difficult for the associations to undertake any sort of collective action that involves short-term pain, but which promises bigger future rewards. For example, attempts to influence an upward adjustment of the market price for palm oil often fails to work because poorer farmers who cannot afford the wait due to financial pressure end up disregarding the collective decision to sell their produce. Similarly, attempts to pool resources to jointly transport their produce to aggregation centres are unsuccessful because some farmers prematurely sell their produce due to economic distress.

The material dimension of trust

Trust is often thought of as a purely moral phenomenon. However, we show in this newly published paper what is often thought of as a reflection of an individual’s personal honesty, integrity, or virtue is most often a consequence of their economic situation. In our study, farmers who were economically better-off were able to overcome their breakdown of trust by restricting their collective endeavours to smaller groups of equally-endowed farmers, thereby, avoiding the uncertainty involved in dealing with poorer farmers who may not be able to afford the short-term cost of cooperation.

Our paper throws light on a vicious cycle of poverty, mistrust, and associational decline wherein poorer farmers are unable to bear the costs of collective action and are, thus, excluded from livelihood-enhancing collective action schemes. Like the heartbroken lover in Amakye Dede’s song, impoverished farmers have been rendered untrustworthy because of financial constraints.

Our paper can be read here.

Photo credit: © Mike Norton/Flickr

Written by: Louis S. Hodey, Fred M. Dzanku, and Kofi T. Asante

In the green fertile landscapes of south-western Ghana, oil palm farming has long been the backbone of rural livelihoods. Shedding light on existing oil palm marketing arrangements and their welfare outcomes reveals a story that is both promising and challenging. So, is a prosperous future for these farming communities possible? Our forthcoming publication in Oxford Development Studies, reveals our findings.

Oil palm marketing channels in south-western Ghana

One might assume that smallholders in this region, endowed with the presence of two of Ghana’s ‘big four’ industrial oil palm companies, would thrive through formal contracts with these giants. Surprisingly, our findings paint a different picture. The reality is that formal contractual relationships between smallholders and processing companies are rare. Instead, smallholders self-select one of four primary oil palm marketing pathways:

1. Direct sales to companies (with verbal contracts)
2. Selling to companies through agents
3. Selling on the open market (spot selling)
4. Artisanal or small-scale processing

Overall, our study found that, between 2017 and 2019, selling through agents (company intermediaries) and selling on the open market were the most common marketing channels in south-western Ghana. Processing was rarely used by oil palm farmers in the area (Figure 1).

However, some shifts in farmers’ choice of marketing pathways were observed over the period. Selling through agents was the most popular channel in 2017, shifting to spot sales in 2019. Generally, over the study period, farmers shifted away from agents and were moving to one of the other three channels.

So why are farmers shying away from agents? The main reason farmers cited was perceived exploitation by agents. Farmers explained that agents often adjusted their oil palm weighing scales to cheat them, and sometimes bought produce at prices far less than factory gate prices. This perception has resulted in mistrust for oil palm buying agents in the area.

Behind the choices: destitution and constraints

Why do differences exist in marketing choices? The answers are grounded in the stark realities communities face. Household and community-level deprivation plays a pivotal role. Low incomes, low scale of production, distance from industrial oil palm companies, and limited access to mechanised processing equipment are all barriers for contract and processing channels. In addition, other factors including cash flow/prompt payments, presence of adult females in the household (a determinant of the choice of oil palm commercialisation), availability of daily markets and artisanal processing mills, and road infrastructure contribute to marketing choices. For instance, spot market sales dominate in communities that are far away from oil palm companies, but which have daily markets.

Moreover, collective arrangements, where resources are pooled to transport harvests to company mills improve prices, yet these arrangements often collapse due to the breakdown of trust and the inability of poor farmers to meet their commitments. Sadly, this means that the most marginalised farmers, who could benefit the most from collective action, are excluded from these arrangements.

Divergent pathways to profits

The choice of marketing channels are not just a matter of convenience; they hold significant implications for household welfare. Households engaged in their own processing who then sell directly to industrial companies are significantly better off. Households with marketing contracts enjoy significant yearly welfare premiums, equivalent to US$912 and US$1,006 compared to households using agent and spot market channels, respectively. Moreover, agent and spot market pathways lead to greater seasonal food insecurity compared to those that process their own oil palm.

We also found that oil palm commercialisation pathways yield different welfare outcomes for men and women mainly because of underlying gender differences in access to resources. Broadly, male farmers in Ghana and other developing regions mostly have better access to land, labour, credit, and decision-making power, allowing them to fully capitalise on the opportunities offered by contracts and processing activities to attain better livelihood outcomes. For example, the contract farming and palm oil processing pathways are associated with higher asset accumulation for male-headed households but not for female-headed households. For the same reasons, our study also revealed that, overall, households headed by females were significantly more food-insecure than male-headed households. However, when compared to women with contracts, the women-headed households processing oil palm themselves had a significant food insecurity-reducing effect. This suggests that the choice of small-scale processing as a marketing channel is more gender-inclusive than the other choices.

A pathway to a prosperous oil palm future

Our findings elicit important policy implications for inclusive agricultural commercialisation. The channels that enhanced a household’s welfare the most – direct sales to industrial companies, and small-scale processing – should be encouraged through the relaxation of entry constraints. Provision of production capital (including land, seedlings, and other inputs) would encourage smallholder farmers to expand their operations – enabling them to benefit from large-scale production gains.

In addition, expanding access to mechanised processing facilities could empower more smallholders, particularly women, to choose this option. This is especially important as oil palm processing has been shown to significantly reduce gender-related welfare gaps.

Furthermore, rural infrastructure development, particularly improved roads, could significantly reduce transaction costs and enhance engagements between smallholders and industrial processing companies.

To achieve these goals, a quasi-state agency, such as the recently established Ghana Tree Crop Development Authority, could regulate the market for ‘fresh fruit bunches’ and enforce contracts. Such a crucial institution could provide much-needed structure and regulations to ensure that smallholders benefit from the value they create in Ghana’s oil palm sector.

Written by: Kofi Takyi Asante

Ghana’s oil palm industry has consistently fallen short of its potential, despite continuous policy support – but why? This perplexing issue is the subject of an APRA research paper recently published in the journal World Development Perspectives. Through a comprehensive analysis of various data, including key informant interviews and documentary sources, the paper delves into the political economy factors that have hindered development of the oil palm value chain – and sheds light on the policy shortcomings that have perpetuated the sector’s underperformance.

The paper attributes the oil palm sector’s weak performance to a disconnect between the problems facing actors in the value chain and policies formulated to support the sector. This gap is rooted in the structural constraints within which these policies are formulated and enacted. Closely linked is the fact that Ghana’s oil palm value chain comprises two distinct sub-sectors: the smallholder-artisanal sub-sector and the estate-industrial processing sub-sector. However, policies targeting the value chain often treat it as a homogenous whole, disregarding the diverse dynamics and interests within each sub-sector.

A history of ineffectual policy support

To support the argument for disconnection, the paper presents a historical account of the rise and decline of Ghana’s oil palm economy. The crop rose to prominence in the wake of the abolition of the slave trade and the rise of legitimate commerce in the early decades of the nineteenth century. Its production peaked in the 1880s but declined rapidly due to factors including poor world market prices and rise of cocoa production. Later attempts by the colonial government to improve the productivity of the crop proved to be too little, too late, to stem the tide of decline.

Subsequent government attempts to support the sector and promote its growth equally failed to improve productivity. Ghana attained independence in 1957 as a net importer of palm oil, a situation that the founding president, Kwame Nkrumah, sought to change as part of a broader programme of import substitution. After his overthrow in 1966, the country descended into a decade and a half of political instability, during which economic policy swung erratically between protectionism and market orientation. The frequent coups d’état between the mid-1960s and the early 1980s hindered the coherent pursuit of long-term strategies.

When Ghana returned to constitutional rule in 1993, there were great expectations that, under the new democratic dispensation, political stability and a new environment of freedom would usher in a period of developmental politics and economic transformation. However, after three decades of the Fourth Republic, this dream has remained elusive. Instead, there has emerged a competitive clientelist system in which elections are truly competitive and broadly reflect the will of the people, but have relatively little impact on the deeply entrenched system of patronage or the politics of impunity.

The paradox of good intentions

Thus, politics under the Fourth Republic, shaped by what has been described as a ‘strong democracy, weak state’,[1] has impeded effective policy formulation and implementation. It is against this backdrop that the gap between the specific challenges facing the oil palm sector and policies designed to support the sector should be understood.

At the heart of policy failure is the ‘paradox of good intentions’. This arises from the pursuit of economic transformation and poverty reduction in the context of highly competitive electoral politics. The logic of electoral competition shortens politicians’ time horizons, leading them to prioritise highly visible distributive policies (such as input subsidies) over long-term structural reforms (like addressing land tenure issues or resolving market frictions). In the oil palm sector, these prioritisations involve the distribution of subsidised seedlings under policy vehicles like the Presidential Special Initiative on Oil Palm (PSI-Oil Palm) and the Planting for Export and Rural Development (PERD).[2] Consequently, limited resources are often wastefully spent on short-term interventions, which paradoxically undermine the inclusive growth and economic transformation that motivated their introduction.[3]

Other recent studies have come to similar conclusions about the poor performance of different economic sectors in Ghana. For example, a study on the country’s power sector found that ‘good governance reforms’ have failed to resolve longstanding sectoral crises, because of an ideological commitment to high modernist projects in the context of extreme electoral pressures.[4] Without addressing these structural factors, productivity in the oil palm and other economic sectors will remain stagnant, rendering decades of policy support ineffectual.

The full-length journal article is open access and is available at: https://www.sciencedirect.com/science/article/pii/S2452292923000255

Photo credit: Ahtziri Gonzalez/CIFOR

[1] Resnick, D. (2019). ‘Strong Democracy, Weak State: The Political Economy of Ghana’s Stalled Structural Transformation’. In X. Diao, P. Hazell, S. Kolavalli, and D. Resnick (eds), Ghana’s Economic and Agricultural Transformation: Past Performance and Future Prospects. Oxford: Oxford University Press.

[2] Input subsidy has become a fixture of agricultural policy since the introduction of fertiliser subsidies in 2008 in response to food and energy price shocks. Since then, hundreds of millions of Ghana cedis have been spent on these programmes each year, with only modest impact on food productivity. For an overview of the operational challenges plaguing the policy, see Asante, K. T., & Mullard, S. (2021). Social Accountability and Anticorruption in Ghana’s Fertiliser Subsidy Programme. Chr. Michelsen Institute.

[3] Asante, K. T. (2022) Residual capacity and the political economy of pandemic response in Ghana. WIDER Working Paper 2022/44. Helsinki: UNU-WIDER; Sowah, A.N.A., Tetteh, P.S.K., & Asante, K.T. (2023). ‘Inequality and Inclusive Development in Ghana’. In Sabin Bieri and Christoph Bader (eds), Transitioning to Reduced Inequalities. Basel: MDPI.

[4] Dye, B. J. (2022). When the means become the ends: Ghana’s ‘good governance’ electricity reform overwhelmed by the politics of power crises. New Political Economy, 1-21. doi/full/10.1080/13563467.2022.2084517

Written by: Joseph A. Yaro

In past green revolutions, Africa has not fared well. During the 1970s, for instance, efforts were made to modernise practices for enhanced farmer efficacy and productivity – and, in turn, reduce poverty and hunger. During these periods, governments and international development organisations aimed to spread new crop cultivars and introduce new irrigation methods, mechanisations, chemical fertilisers, pesticides, and weedicides – but without significant success. Hindering factors included low uptake of these new farm technologies, while unequal access to subsidised inputs led to social imbalances. Furthermore, investments from both states and outsiders were too low to influence change, and the promoted strategies were inappropriate for most geographical and economic contexts. As a result, those working in African agriculture continued to rely on traditional methods of rainfed farming. Yet, in spite of previous shortcomings, African states and their farmers have not abandoned their quest to experience change – and their efforts are now being rewarded.

Agriculture in Sub-Saharan Africa is currently experiencing rapid transformation, characterised by increasing farm sizes in land-abundant communities and the modernisation of farm practices. Together, these conditions are ripe with opportunities which offer brighter outlooks for farmers than ever before.

A recent APRA study analysed and documented changes occurring in the Fumbisi Valley in the north-east of Ghana, an area characterised by an abundance of fertile yet flood-prone farmlands. Focusing on differentiated peasantry and new commercial farmers, the researchers explored transformations relating to farmland sizes and the use of modern inputs (herbicides, weedicides, and varied fertilisers), along with the reasons for their occurrence. Data was collected using a mixed method approach involving qualitative interviews, GPS mapping, focus groups, farm visits, and a cross-sectional survey.

Growing for good

The study shows that a green revolution in Fumbisi Valley is well underway. Rice cultivation in the region is highly commercialised, occupies a huge land area (and continues to expand), and cultivation techniques are becoming more modernised.

Traditional ways of farming are being replaced by contemporary practices using tractors, drones, combine harvesters, fertilisers, weedicides, and herbicides. Furthermore, a bond system for managing water is being widely adopted by farmers. Bond systems comprise various enclosures which allow for water to be trapped and used as irrigation. Farmers have been able to adopt this approach by employing bulldozers, tractors, and backhoe earth-moving machines – use of which has been largely sponsored by the state, non-governmental organisations (NGOs), and commercial farmers.

However, enhancing rice cultivation and commercialisation and adopting modern technologies requires more land. As such, some small farmers have expanded their farms to sizes of 4 ha and above. In our study, farm sizes were categorised into four groups: small (less than 10 acres/4 ha); lower-medium (11-50 acres/4.1-20.5 ha); upper-medium (51-100 acres/20.6-40.5 ha); and large (100 acres/40.5 ha and above).

Most small-scale farmers have graduated (stepped up) into lower-medium size category, now cultivating 4-20 ha. This group represents the bulk of farmers (54%) in the district, whose production in aggregate accounts for the bulk of total production. Unfortunately, women are seemingly less able to make the transition to larger land cultivation: of the 36% of farmers remaining in the ‘small’ category, 60% are women. This is due to poor access to land and financial capital, compounded by poor attention given to them by state and non-state agencies.

The upper-medium (8%) and large-scale (2%) farmer groups are composed of chiefs, urban farmers, and a few local rich farmers. All large-scale farmers are male, and their number has remained stable in the last 15 years. Most large-scale farmers have stepped in, using capital from other sectors. Together, this top 10% possess the mechanisations, such as tractors and combine harvesters, needed for the huge cultivation area in the valleys in order to be functional and attract agro-input dealers. These dealers make agro-inputs readily available at competitive prices for small and lower-medium scale farmers. The large-scale farmers also lobby government for projects for the area, such as construction of roads and bridges, and inclusion in subsidy programs. This synergy between larger and smaller farmers is an important mark and driver of the new green revolution, since their union creates a win-win situation for now. In spite of differences in land size, all farmers used herbicides, weedicides, improved rice seeds, and varying amounts of fertilisers.

Drivers of change

So why is the green revolution successfully happening in the Fumbisi Valley now? This agrarian transition has been enabled by a collective combination of local, national, and global factors. For instance, the area is sparsely populated, which makes land availability and access less of a problem using traditional tenure systems. Meanwhile, because the land is largely flood-prone, crop cultivation is typically limited to rice – so there’s little-to-no competition from other crops. Accessibility is another key element, with enhanced road networks increasing movement to and from markets. Mechanisation services have also been improved thanks to bridges and new roads shortening distances to trunk roads. Enhanced mechanisation began in the 1990s and is funded largely by the state – who often use loans provided by Chinese and Indian firms that have established sales centres in Tamale and Bolgatanga.

Meanwhile, changes at a global level have also inadvertently supported African farmers. For example, the 2007 food price hikes, combined with the growing urban population in Ghana and neighbouring countries (especially Nigeria, from where most traders originate), has allowed rice farmers to demand favourable prices. 

Looking ahead

The dark days of structural adjustment policies which served to destroy food crop cultivation in Africa are behind us. Now, new policies, local realities, and global trends encourage farmland expansion and the use of modern inputs and mechanisation. Alongside these, subsidy programmes have effectively enabled both the rich and the poor to transform their agricultural practices – albeit somewhat controversially. To support and maintain the positive changes to rice livelihoods in the area, three important strategies are required. First, there is need to design new targeted subsidies for marginalised groups – as doing so will help address gender inequalities and prevent local women and youth from being left behind. Second, socially equitable land allocation rules are required to empower local farmers to step-up and ensure local wealth accumulation and poverty reduction in these communities. However, these should not prevent commercial farmers from investing, as they are politically powerful lobbyists that are necessitated by the local communities. Finally, investors should be encouraged to engage in rice processing and bulk purchasing, along with annual price negotiations with farmer groups – as this will help resolve the current problems of gluts in production, low prices, and challenges with storing paddy.

Written by: Lisa Capretti, Amrita Saha, Farai Jena and Fred Dzanku

Agricultural technologies play an important role in helping smallholders to increase their yields and incomes, and therefore tackle poverty and food insecurity in Sub-Saharan Africa. Using new panel data for oil palm producers in Ghana from the Agricultural Policy Research in Africa (APRA) consortium, a new paper sheds light on the relationship between the use of agricultural practices, food security and nutrition, and what impact women’s empowerment has on these gains.

Agricultural practices supported by technological advances have played an important role in agricultural commercialisation, with critical links to poverty and food security in Sub-Saharan Africa. The use of agricultural technology in oil palm production is widely acknowledged to improve yields. However, there remains limited evidence on women’s access and use of agricultural technology at the local level, and how this translates to improvements in nutrition and household food security.

Our study specifically considered the role of two agricultural practices used in oil palm production in south-western Ghana, namely, irrigation and use of agrochemicals. We explored how these agricultural practices are associated with household food security and women’s nutritional outcomes. We also examined how women’s empowerment (defined as high levels of women’s participation in household decisions and/or a greater control of household resources by female household members) and its interaction with the use of at least one agricultural practice, enhance their nutrition and household food security.

What did we find?

Our findings suggest that irrigation and use of agrochemicals in oil palm production translate into enhanced nutrition for women. In particular, women who employ these practices are more likely to have a more diverse dietary intake.

Empowerment is also shown to be a significant transmission channel through which the use of agricultural practices translates into improved food security and nutrition outcomes. For example, women who participate more in household decisions are more likely to consume 0.4 more food groups compared to those with lower empowerment levels. Women empowerment also appears to have a positive influence on household food security, independent of whether households use either of the agricultural practices. Households where women are more empowered are also less likely to have suffered from multiple and severe forms of food insecurity in the past 12 months.

We also find that women empowerment remains a significant mechanism that links fertiliser use and food insecurity, after accounting for heterogeneity in technology use. This suggests that the use of fertiliser provides significant gains to those households where women already have a strong level of empowerment.

Lastly, households where women have lower empowerment scores appear to have a reduction in household food insecurity after using at least one of the two practices considered, but there were no effects on women’ nutrition. This could mean that when faced with trade-offs between their own nutrition and household food security, and having less control over their household’s resources, less empowered women prioritise their household’s well-being rather than the quality of their own nutrition.

Conclusions and policy implications

Overall, our results imply that while access to technology is relevant to household food security and dietary intake, it is not enough on its own. Women empowerment appears a significant channel through which technology uptake translates into improved food security outcomes. Policy interventions that enhance women’s empowerment would play an essential role in ensuring food security and nutrition outcomes. Such policy interventions can include involving women in agricultural training programmes on oil palm production and helping them access agricultural inputs that they can manage independently. Policy interventions that translate to women becoming more empowered are also likely to facilitate the positive role of agricultural technology in improving household food security and women’s nutritional outcomes.

Photo credit: © Ahtziri Gonzalez/CIFOR

Written by: Fred Dzanku

The seasonal nature of agricultural production under rainfed conditions in most parts of rural Ghana, as in other sub-Saharan countries, makes employment in small-scale agriculture alone inadequate for improving the wellbeing of most rural households. Boosting commercial agriculture could be the key to generating employment – not only within agriculture but also in the non-agricultural sector due to linkages between the farm and non-farm economy. Within this context, this blog reflects on the findings of APRA Working Paper 92, and addresses the following questions: What is the association between agricultural commercialisation and rural employment? What are the returns to agricultural employment in a high agriculture commercialisation zone, and how does it compare with non-agricultural employment? Are farm and non-farm employment counterparts or competitors in a high agriculture commercialisation zone?

Our study looked at commercial agricultural households in south-western Ghana between 2017 and 2019 using panel surveys and qualitative interviews. A key finding from this research was that, in spite of inefficient food markets – whereby high temporal and spatial transaction costs lead to high food price volatility and negative impacts on household welfare – farmers in the oil-palm belt of south-western Ghana are not afraid to risk dedicating most of their land and farm labour to the production of non-food items, such as oil palm and cocoa. For instance, our study found that, on average, 76% of farmer’s land and over 80% of household members were involved in the  commercial agricultural enterprise – often the production of such non-food items, which have to be traded in order to procure food.           

Under-employment in agriculture

Undoubtedly, increasing agricultural commercialisation implies increased market participation; thus, resulting in higher demand for production factors, including labour. Yet, despite households’ high orientation towards commercial agriculture, farming alone does not provide full employment for most working-age household members. Our findings show that farmers only worked about 61 days per year on the farm, on average, indicating the presence of underemployment if agriculture were the only source of rural employment. This suggests that non-farm activities are important for generating employment among rural workers. Additionally, we find that even among highly-commercialised farm households, non-crop income constitutes more than half of total household income, with off-farm accounting for the bulk of non-crop income. More so, rural off-farm employment accounts for the bulk of the observed differences in household incomes among households.

Returns to agricultural and non-agricultural employment

Returns to farm labour were about US$2,000 per worker, and increased by 12% between 2017 and 2019. While these average returns equated to well above the yearly international poverty line of around US$694, one-third of farm workers achieved returns below the international poverty line, showing high levels of inequality in the distribution of returns. What about returns to non-farm employment? It is important to recognise that 45% of households in our study did not earn any income from the supply of labour to rural non-farm employment activities, but rural off-farm employment accounted for 28% of household income. That said, returns to rural non-farm employment – even in the high agricultural commercialisation zone – were nearly 1.5 times the returns to on-farm work.

Farm and non-farm employment: Counterparts or competitors?

Farmers in rural Ghana rarely have access to any agricultural credit, particularly formal credit. They have to finance their farm production activities using income from crop sales and/or off-farm income. In general, however, households that have high levels of crop commercialisation tend to rely less on rural off-farm employment, suggesting that the two activities generally compete. Rural off-farm employment was also found to be more important for households at lower levels of commercialisation than for those at higher levels of the commercialisation distribution.

Reflections for policymakers and practitioners

Our findings highlight certain relationships between agricultural commercialisation and rural unemployment in southwestern Ghana, and indicate key recommendations for policy and development practice. First, rather than exclusively focusing on handouts to farmers, such as purchase input subsidies, we propose that increasing the development of more inclusive infrastructural improvements in rural transport and oil palm processing would bolster smallholder participation in rewarding oil palm commercialisation channels, and potentially yield better household welfare outcomes. Encouragingly, Ghana’s 2022 budget statement and economic policy has facilities that could be harnessed for such welfare-enhancing initiatives.

Furthermore, we suggest that development policies and practices aimed at rural transformation need not focus exclusively on agriculture, but should also pay critical attention to addressing entry barriers to rural off-farm employment such lack of credit, poor road infrastructure and entrepreneurship training. This will be essential for improving rural livelihood outcomes – particularly given the evidence that farming does not provide full employment even among the highly commercialised farm households.

Photo credit: Louis Hodey

Written by: Fred Dzanku

The seasonal nature of agricultural production under rainfed conditions in most parts of rural Ghana, as in other sub-Saharan countries, makes employment in small-scale agriculture alone inadequate for improving the wellbeing of most rural households. Boosting commercial agriculture could be the key to generating employment – not only within agriculture but also in the non-agricultural sector due to linkages between the farm and non-farm economy. Within this context, this blog reflects on the findings of APRA Working Paper 92, and addresses the following questions: What is the association between agricultural commercialisation and rural employment? What are the returns to agricultural employment in a high agriculture commercialisation zone, and how does it compare with non-agricultural employment? Are farm and non-farm employment counterparts or competitors in a high agriculture commercialisation zone?

Our study looked at commercial agricultural households in south-western Ghana between 2017 and 2019 using panel surveys and qualitative interviews. A key finding from this research was that, in spite of inefficient food markets – whereby high temporal and spatial transaction costs lead to high food price volatility and negative impacts on household welfare – farmers in the oil-palm belt of south-western Ghana are not afraid to risk dedicating most of their land and farm labour to the production of non-food items, such as oil palm and cocoa. For instance, our study found that, on average, 76% of farmer’s land and over 80% of household members were involved in the  commercial agricultural enterprise – often the production of such non-food items, which have to be traded in order to procure food.           

Under-employment in agriculture

Undoubtedly, increasing agricultural commercialisation implies increased market participation; thus, resulting in higher demand for production factors, including labour. Yet, despite households’ high orientation towards commercial agriculture, farming alone does not provide full employment for most working-age household members. Our findings show that farmers only worked about 61 days per year on the farm, on average, indicating the presence of underemployment if agriculture were the only source of rural employment. This suggests that non-farm activities are important for generating employment among rural workers. Additionally, we find that even among highly-commercialised farm households, non-crop income constitutes more than half of total household income, with off-farm accounting for the bulk of non-crop income. More so, rural off-farm employment accounts for the bulk of the observed differences in household incomes among households.

Returns to agricultural and non-agricultural employment

Returns to farm labour were about US$2,000 per worker, and increased by 12% between 2017 and 2019. While these average returns equated to well above the yearly international poverty line of around US$694, one-third of farm workers achieved returns below the international poverty line, showing high levels of inequality in the distribution of returns. What about returns to non-farm employment? It is important to recognise that 45% of households in our study did not earn any income from the supply of labour to rural non-farm employment activities, but rural off-farm employment accounted for 28% of household income. That said, returns to rural non-farm employment – even in the high agricultural commercialisation zone – were nearly 1.5 times the returns to on-farm work.

Farm and non-farm employment: Counterparts or competitors?

Farmers in rural Ghana rarely have access to any agricultural credit, particularly formal credit. They have to finance their farm production activities using income from crop sales and/or off-farm income. In general, however, households that have high levels of crop commercialisation tend to rely less on rural off-farm employment, suggesting that the two activities generally compete. Rural off-farm employment was also found to be more important for households at lower levels of commercialisation than for those at higher levels of the commercialisation distribution.

Reflections for policymakers and practitioners

Our findings highlight certain relationships between agricultural commercialisation and rural unemployment in southwestern Ghana, and indicate key recommendations for policy and development practice. First, rather than exclusively focusing on handouts to farmers, such as purchase input subsidies, we propose that increasing the development of more inclusive infrastructural improvements in rural transport and oil palm processing would bolster smallholder participation in rewarding oil palm commercialisation channels, and potentially yield better household welfare outcomes. Encouragingly, Ghana’s 2022 budget statement and economic policy has facilities that could be harnessed for such welfare-enhancing initiatives.

Furthermore, we suggest that development policies and practices aimed at rural transformation need not focus exclusively on agriculture, but should also pay critical attention to addressing entry barriers to rural off-farm employment such lack of credit, poor road infrastructure and entrepreneurship training. This will be essential for improving rural livelihood outcomes – particularly given the evidence that farming does not provide full employment even among the highly commercialised farm households.