WEF_GrowAfrica_AnnualReport2014

2013 in Review 2013 in Review
SPOTLIGHT
Premium Foods – Creating opportunities
for young agri-entrepreneurs
CONSTRAINTS
Companies call for improved SME finance,
coordination and infrastructure
The average Ghanaian farmer is 55 years old. With
agriculture as a key economic pillar, contributing 30%
of GDP, and in a country where 15- to 24-year-olds
constitute a quarter of the population and suffer 25%
unemployment rates, there is a compelling need to
inspire a new generation of agricultural entrepreneurs.
But young people see farming as grandma’s work
– laborious, boring and promising minimal financial
reward.
Premium Foods, a leading grain-product supplier and
processor has operated in Ghana within the maize,
rice and soybean value chains for 19 years. It aims to
unlock the economic potential of a cadre of young agrientrepreneurs
through an expansion of its innovative
Go-Farming pilot project.
Ghanaian grain production is typically conducted
by smallholders on farm-holdings averaging 0.8 ha.
Their significant distance from market locations limit
farmers’ access to inputs, technical services critical
to improving their output, as well as locations where
they can sell their produce. Substantial demand
has thus arisen for a system that coordinates the
demand and supply of both on- and off-farm services,
technical know-how and inputs, and which includes the
aggregation of produce for markets to help guarantee
returns for all investments in agribusinesses.
Specifically targeting smallholders, women and
young farmers, “Go-Farming” involves the facilitation,
strengthening and integration of actors in the grain
value chains to create an efficient, profitable and
sustainable grains industry. With support from USAID/
ADVANCE, a pilot was launched across 11 districts of
Ghana’s 3 northern regions to integrate around 5,700
farmers into PFL’s supply chain over a 2-year period.
Under the project, Premium Foods financed 9 nucleus
farmers to provide input credit (seeds, fertiliser and
equipment) to out-growers, repaid in-kind by the outgrowers
with produce on harvest. With 90% repayment
of the input credit reached, the pilot project was highly
successful, due in large part to Premium Foods’ control
of the value chain from seed to sale and its work in
instituting a ready market for the farmers’ produce,
helping to reduce farmers’ postharvest losses by at
least 40%.
The expanded pilot programme will consolidate the
lessons of the initial pilot’s “preferred supplier model”
by scaling up the existing “Nucleus farmer/Outgrower”
approach to obtain more volumes of quality
raw materials (maize, rice and soybean) at competitive
prices. Through 54 nucleus farmers engaged as
aggregators over a 5-year period, the out-grower
schemes aim to reach 50,000 smallholder farmers and
help secure an 80% increase in out-grower incomes.
Premium Foods will continue with its principle of not
taking more than two-thirds of net production off
smallholders, thereby reducing the risk from “sideselling”
by farmers.
As a private-sector and market-driven initiative led
by Premium Foods, the programme in expanding
on the pilot is incorporating innovations to achieve
wider agribusiness efficiency gains. It aims to harness
this greater value by stimulating youth interest in
agricultural enterprise through a Young Entrepreneurial
Service Providers (YESP) development project. The
project anticipates installing 648 young entrepreneurs
(25% being women) at the helm of service provision
SMEs, which will be instrumental in providing
services to the increased number of nucleus farmers
and smallholders registered under the expanded
programme, and result in an anticipated 20% boost in
Premium Foods’ processing capacity.
Companies highlighted the following constraints faced by their investments. If addressed, they could strengthen the
enabling environment and unlock further investment.
1. Access to timely and appropriate financing remains a major challenge. The shortage of capital, together with a lack
of experience on how to develop a solid business and financial case to trigger access to funding, are often the
main barrier to SMEs starting up or developing a business. In addition, agriculture remains a high-risk sector for
financial institutions, leading to very high interest rates that make loans unaffordable for most agri-entrepreneurs.
2. Coordination and alignment of government agencies would benefit from more clarity regarding which agency
(MOFA or GIPC in particular) leads on investments and project implementation. Although there has been some
improvement on this front, more consultation, dialogue and coordination with private-sector organisations (such as
the PEF) would facilitate a better alignment of agricultural investment.
3. Limited infrastructure development, particularly in terms of connecting the northern and southern regions
of the country. The reduced quality and low density of the road network, combined with a lack of storage
facilities, impacts significantly on market access and post-harvest losses for smallholder farmers. This has
seriously hampered economic development and private-sector investment in the northern region, which remains
underdeveloped despite an increased number of government initiatives and efforts (including GCAP and SADA).
Premium Foods is working with young entrepreneurs to boost its processing capacity
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Ghana
Ghana
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