Contract farming in Ghana: from public private partnership to private sector leadership
Out-grower schemes and contract farming are not new in Ghana. They can be traced to the Government of Ghana’s Special Agricultural Schemes (SAS) programme which was implemented in the 1970s involving partnerships between the Ghanaian state, donor institutions such as the World Bank and Transnational Corporations. The schemes within the SAS such as the Ghana Oil Palm Development Company (GOPDC), Twifo Oil Palm Plantation (TOPP) and the Ghana Sugar Estates Limited (GHASEL), largely produced oil palm, and in the case of GHASEL, sugar, with some combining production from estates with output from smallholder farmers. In the 1990s, contract farming became associated with the production of horticultural crops as part of a drive to diversify exports and increase foreign exchange.
The need to regulate contract farming is a fairly recent development and did not comprise a core objective of the projects that were implemented under SAS. The participation of farmers in the SAS projects was based on selection criteria which determined the groups of farmers who would be involved and those who would be excluded. In the case of GOPDC, the farms of out-growers and smallholders were required to be within a 25-km radius of the nucleus estate and 400 m of road access. Farmers also entered into contracts with GOPDC for a period of 25 years, the length of time required for the maturation of the palm fruit. Again, farmers were only considered for inclusion if they had registered the land they intended to use. They must be aged between 25 and 50 years and be married with children. The maximum land size that was required to participate in the
GOPDC scheme was 8 ha. However, 20 ha was allowed for men with at least two wives and many children. A sound financial background confirmed by a bank was a key consideration. For its part, GOPDC provided credit and inputs to the participants. It also paid an allowance of 80 per cent of labour costs which included family labour for five years until the oil palm started to yield fruits. However, the cost of labour was covered by the farmer until a certification was undertaken to confirm the extent of work done in maintaining the farm.
The TOPP project was managed by the state-owned Central Regional Development Corporation, the majority shareholder of TOPP Ltd. A similar farm size limit was required by both TOPP and GHASEL. Since GHASEL’s out- grower scheme was between farmers and the funding agency (African Development Bank), both had their own regulations. ADB funding to new farms was limited to 10 ha while old out-growers had a limit of 40 ha. The funding to farmers was not less than five years. If a farmer had to increase the acreage annually, this was not supposed to exceed 20 per cent of the existing acreage. This limit was intended to prevent the use of hired labour. Both GOPDC and GHASEL emphasised family labour use, and this was explicit in the criteria of selection in the GOPDC scheme.
In all the out-grower and contract-farming schemes of the SAS projects, the provision of inputs and seedlings is linked to standardising production where farmers are obliged to use chemicals and seedlings provided by the firms. In terms of marketing, farmers have to follow laid down procedures of harvesting crops, transportation and other related marketing regulations such as exclusive sale of the products to the firms.
Many of these companies were sold to foreign agribusinesses from the 1980s when under the conditions of Ghana’s economic liberalisation, it was no longer considered appropriate for the state to own and manage enterprises. The period also coincided with an expansion of the private sector’s involvement in contract farming that was focused on new export commodities that had hitherto been grown by small-scale farmers for local consumption.
With the more recent global debates about the etfects of large-scale land acquisitions by agribusinesses, contract farming has been proposed as an inclusive alternative and a win-win approach to agricultural development. Institutional proponents such as the FAO, World Bank and others argue that contract farming would link farmers to credit and input markets and also markets for their produce and transfer technology and knowledge to farmers. Besides the positive appraisals, some of these institutions have also provided substantial funding for the implementation of contract farming projects. For instance, the GCAP funded by the World Bank-International Development Association and USAID in Ghana is centred on 31 nucleus farmers who work with 9,400 outgrowers. The World Bank, Agence Fran^aise de Developpement, Germany’s Reconstruction Credit Institute (KfW) and the Government of Ghana provided funding to the Ghana Rubber Estate, the country’s leading rubber producer for the Rubber Outgrowers Plantation Project (ROPP) in 1995. The project resulted in the cultivation of 30,000 hectares of rubber produced by 8,500 outgrowers who produce an average of 19,000 tons of dry rubber annually. As part of the ROPP, 30 per cent of women were targeted for rubber production. Today, many crops are produced under contract farming arrangements—oil palm, fruits, cassava, chili, maize for export and for domestic processing.
In the segment that follows, we present four cases which illustrate the current regulator)' regime for contract farming in Ghana. Products from all the four firms are sold on the domestic market but there are also two firms (Blue Skies and Serendipalm) whose products are sold on the foreign market, including in the United States and in Europe.