Agric sector poised for 5%growth by 2025 – C-NERGY

By Isaac AIDOO, Accra

GHANA’S agricultural sector is set to experience significant growth in the coming years, with projections indicating a rise to 5% year-on-year from 2025 onwards.

This comes from a new economic review published by banking firm C-NERGY, which forecasts an average growth rate of 4.5% for the sector between 2024 and 2027.

The report highlights a promising mid-to-long-term outlook for the agricultural industry, positioning it as a key pillar of Ghana’s economic stability and development.

Planting for Food and Jobs (PFJ) 2.0: A Catalyst for Growth

Central to the sector’s projected growth is the government’s revamped Planting for Food and Jobs (PFJ) 2.0 programme. The initiative, which aims to increase productivity, improve market access, and enhance sustainability, is expected to receive robust government support over the coming years. The PFJ 2.0 seeks to build on the achievements of its predecessor by addressing key challenges within the sector, such as access to credit, modern farming techniques, and better infrastructure for post-harvest management.

While the outlook is positive, the program’s ultimate success will hinge on several critical factors, including effective implementation, sufficient funding, and the sector’s ability to adapt to changing environmental and economic conditions. Rising costs of critical inputs like labor, fertilizer, and other agricultural necessities in Ghana’s current high-inflation environment are key concerns. Additionally, less reliable rainfall patterns across Ghana and Sub-Saharan Africa (SSA) introduce further unpredictability, threatening the predominantly rain-fed farming systems in the country.

Emerging Sub-Sectors: Agro-Processing and Storage Drive Growth

According to the C-NERGY report, some of the fastest-growing sub-sectors within agriculture are agro-processing and food storage, where growth is being driven by both increasing demand and improved access to finance. A growing number of commercial banks have recently announced new credit products targeting agro-processing businesses, marking a shift in the financial sector’s attitude towards agriculture. In the past, financial institutions have been wary of extending credit to the agricultural sector due to perceived high risks, but they are now more willing to engage with sub-sectors like food storage and processing, which are viewed as lower-risk investments.

This increased access to financing could significantly enhance productivity in agro-processing and help address the perennial issue of post-harvest losses, which have long plagued Ghanaian farmers. However, financing challenges remain in other critical areas of the sector, particularly with irrigation systems, which are necessary to counter the increasing unpredictability of rainfall.

Challenges and Opportunities in the Crops Sub-Sector

The report also highlights a projected slowdown in the crops sub-sector, attributing it to the lingering base effect of previous years’ strong growth performance. The high costs of inputs, compounded by inflationary pressures, are further dampening growth in this sub-sector. Despite these challenges, the sector’s contribution to the national economy remains substantial.

Over the last decade, there has been a notable increase in financing for agribusinesses, particularly those focused on food storage and processing, due to their perceived lower risk profile. This trend is expected to continue as the government and financial institutions prioritize key sub-sectors capable of accelerating overall agricultural productivity.

Sector’s Growing Contribution to GDP

Despite the projected challenges, Ghana’s agricultural sector continues to play a crucial role in the economy. Over the past two years, the sector has recorded an average growth rate of 0.04%, and as of the first quarter of 2024, it contributed 23.8% to GDP, a notable rise from 21.4% in the fourth quarter of 2023. These figures reflect the government’s commitment to agricultural development, evidenced by the GH¢3.3 billion budgetary allocation for 2024, which is a substantial increase from the GH¢2.1 billion allocated in 2023.

Looking ahead, the sector is expected to contribute an average of 21.5% to GDP over the next five years, indicating its continued relevance in Ghana’s overall economic structure.

Irrigation: The Key to Unlocking Full Agricultural Potential

One of the most pressing challenges facing Ghana’s agricultural sector is the lack of irrigation systems. With over 80% of all farms in Ghana relying on rainfall, the sector remains vulnerable to climate variability. In recent years, erratic rainfall patterns have posed significant risks, not just to farmers but to the country’s overall food security.

The Ministry of Food and Agriculture (MoFA) has been urged to work closely with the private sector to develop reliable and sustainable irrigation solutions to ensure that farmers can maintain productivity even during periods of drought or irregular rainfall. Investing in modern irrigation infrastructure would not only enhance crop yields but also extend the growing seasons, allowing for increased production and supply to both local and international markets.

Strategic Focus on Sustainable Growth

To ensure that Ghana’s agricultural sector remains on a sustainable growth trajectory, the C-NERGY report emphasizes the need for a coordinated effort between the government, private sector, and financial institutions. Key areas requiring attention include enhancing financing opportunities for smallholder farmers, improving irrigation systems, and fostering innovation in agro-processing and post-harvest storage technologies.

As Ghana aims to diversify its economy and reduce dependence on imports, the agricultural sector stands out as a critical avenue for achieving these goals. The PFJ 2.0 initiative, combined with growing support for agro-processing and storage, could position the sector as a driving force behind Ghana’s economic transformation. In conclusion, while challenges such as climate change, rising input costs, and access to finance remain, the agricultural sector’s growth potential is undeniable. If effectively supported by both government policy and private sector investment, the sector could play a pivotal role in boosting Ghana’s GDP and ensuring food security for years to come.