SOO Annex 5- USAID Ghana Market System Assessment COVID-19 Update.pdf

USAID / DAI

Ghana Market Systems Assessment

COVID-19 Update

Addendum to the GMSRA assessment

Final presentation

08 September 2020

General Overview

Prioritization & analysis methodology

Insight from sub-system, enabler and cross-cutting analysis

Key recommendations

Conclusion

Contents

Project context and objectives

• The agricultural sector in Ghana employs nearly 50% of the workforce and contributes to approximately 20% of the country’s GDP but it faces binding constraints that impede its economic growth

• In early 2020, USAID looked to contribute to strengthening the Ghanaian agricultural market system by identifying these key binding constraints as well as interventions to address them

• Given the unprecedented impact of the COVID-19 pandemic on all sectors of the economy, it became essential to understand how the crisis is disrupting the agricultural system and revise the previously developed recommendations accordingly

Context

• Update the key aspects of the previously developed market system assessment to reflect the latest updates concerning

COVID-19

• Identify the pandemic’s possible effects on some cross-cutting topics such as food security and nutrition

• Revise the recommended interventions and ensure their actionability in the COVID-19 and post-COVID-19 context

Purpose of the project

• Support the post-COVID-19 recovery of the Ghanaian agricultural system

• Increase smallholder farmers’ income and curb the impact of COVID-19 on their livelihood

• Further improve private sector engagement in the agricultural system in Ghana

• Improve food security and nutrition

Potential impact

Sources: 2017. World Bank, Washington, DC. “Ghana Agriculture Sector Policy Note: Transforming Agriculture for Economic Growth, Job Creation, and Food Security.”©

• Initial macroeconomic analysis reveals that the COVID-19 crisis will cause a notable slowdown of Gross Domestic Product (GDP) growth for developed and developing countries

• According to the International Monetary Fund and economic impact analysis done locally, the world GDP growth is expected to decrease from 3.3% in 2019 to 2.9% by the end of 2020

• The drop in GDP is anticipated to be even more severe in

Ghana with an expected decrease in growth from 6.8% in

2019 to 2.6% by the end of 2020

• This negative effect of the pandemic on the Ghanaian economy stems from the measures taken to curb the spread of the virus, namely the national lock down, restrictions on movement, closing of borders and ban on public gatherings

• The drop is expected to be induced by the effects of the disease on production, trade and investment within Ghana and between Ghana and the rest of the world (especially China, Europe and the United States), on global commodity prices (crude oil, gold, and cocoa), on tourist flows, and on the fiscal stance

3.3%

Ghana GDP growth

Global GDP growth

Impact on global and Ghanaian economy

6.8%

2.6%2.9%

GDP is expected to plummet in 2020

Sources: Economic impact of the COVID-19 pandemic on the Economy of Ghana, 2020; Economic impact of COVID-19 at a glance, 2020

COVID-19 health crisis has brought on an economic crisis in Ghana projection

• Ghana’s food security is threatened by an increased difficulty in accessing hybrid and fortified seeds, a dependence on imported commodities, a lower agricultural productivity and farmers income losses

• Major losses among short-cycle crops which couldn’t be sold have left farmers without adequate funds to cultivate at previously anticipated scale

• The pandemic caused a 40% - 50% reduction in demand which has led to loss of income and price volatility

• Due to the lack of market information and under-communication on food availability, segments of the population engage in panic buying, causing price surges of ~20% on grains such as rice and ~50% in commodities such as fish and eggs

• Lower demand from key export markets and movement restrictions decreased export earnings and increased price volatility for export crops

• Limited linkages between the regions due to COVID-19-related measures, especially the north-south axis, also inhibit access to end markets

• As some seeds and almost all fertilizers are imported from different countries, the pandemic has slowed production management and processing activities

• Furthermore, labor shortage and insufficient funds for mechanization services have impeded farming activities Production and processing activities

Trade flows and market availability

Demand shock

Food security and social impact

The pandemic has impacted essential aspects in the productivity cycle such as production activities, trade flows, demand and food security

Sources: Impakter, Impact of COVID-19 on Ghana’s Agriculture; Joybusiness; Inflation rate for April hits00.6%, 2020; Stephen Awuah, Ghana amid COVID-19, Facing up to food supply chain problems, 2020/www.commodafrica.com

Insight from sub-system, enabler and cross-cutting analysis

Key recommendations

Conclusion

Preliminary analysis of the COVID-19 impact

Identification of the most impacted areas enablers and cross-cutting themes selected in the original

Sub-systems Enablers Cross-cutting themes

Identify the most challenging and binding constraints

Update and strengthen the analysis of the value chains selected in the original assessment

Analyze the COVID-19 impact on the sub-systems, assessment

Phase I led to the identification of the challenges and to the prioritization of the most impacted areas

Sub-systems

Seeds

Fertilizers

Irrigation

Production management

Collection/Storage/Delivery

Processing

End market

Additional enablers to be added

Prioritized sub-systems

Cross-cutting themes

Cross-cutting themes

Regional integration

Nutrition and Food security

Women inclusion

Enablers

Agricultural policy

Extension and Advisory Services

Agri-finance

Prioritized enablers

Research and development

Our analysis led us to the prioritization of the following sub-systems, enablers and cross-cutting themes which were analyzed in phase II

Health

Ag tech and Ag data

Human capital

Non-exhaustive list

Prioritized for the update

Transport and logistics

In phase II, the following process was adopted and led to the update and the reprioritization of key recommendations

Analysis of the prioritized areas

Sub-systems Cross-cutting themesEnablers

Analysis of the challenges related to

COVID-19

Description of the prioritized areas with a COVID-

19 lens

Identification of key COVID-19-related constraints under each sub-system, enabler and cross-cutting themes

Identification of relevant recommendations

Update of the recommendations from the original assessment and their prioritization

(adding a 4th criteria related to COVID-19)

Identification of short to medium term COVID-19-related recommendations

Updated list of recommendations

Original recommendations COVID-19-related recommendations

Medium to long-term general recommendations identified to improve the agricultural market system performance and resilience

Short to medium term COVID-19-related recommendations to mitigate the immediate impacts of the pandemic on agriculture

Phase III, the addendum will be updated following any potential comments from the presentation of the updated assessment

Conduct desk research and stakeholder interviews using a systemic approach and a

COVID-19 lens

Update and strengthen the value chain analysis to confirm the most impacted sub-systems, enablers and cross-cutting topics

1 2

Update of the assessment Presentation of the updated assessment

Phase 1: Inception Report

(July 2020)

Phase 3: Presentation

(September 2020)

Reassess prioritized sub-systems, enablers and cross-cutting topics

Develop recommendations and ensure the continued relevance of the ones in the original assessment

Present findings to the DAI and

USAID teams and integrate any comments emanating from this presentation to the addendum

3 4 5

Phase 2: Assessment Review

(August 2020)

Insights from sub-system, enabler and cross-cutting analysis

Key recommendations

Conclusion

The agricultural system experienced upstream challenges with repercussions at the market level (1/2)

COVID-19 induced challenge

Production management

• COVID-19 has highlighted the disparity in demand preference for hybrid seeds over

Open Pollinated Variety (OPV) seeds. The inadequate supply of hybrid seeds due to import challenges resulted in a scaled-down of farm size by farmers. Local suppliers who provide

OPV seeds have seen a drastic decline in demand for their seeds, resulting in major losses

Seeds

• Farmer production has been affected by labor shortages, delays in input delivery, a surge in demand for mechanization services, and a decline in already limited extension support. These challenges have been compounded by the decline in market access for farmers limiting their revenue options for reinvesting in their farms. The pandemic has coincided with the start of the planting season for most crops and could affect food security if immediate measures are not instituted

Sources: AFAP, impacts of COVID-19 along the agricultural value chain in Ghana, 2020; Stakeholder interviews; Dalberg analysis

• The pandemic and the initial lockdown measures have exacerbated the farmers’ limited access to stored farming inputs and extension services. Farmers use poor production techniques and post-harvest handling practices, increasing the perishability of fresh produce and resulting in high post-harvest losses

Collection

Storage

Delivery

Prioritized sub-systems

The agricultural system experienced upstream challenges with repercussions at the market level (2/2)

Prioritized sub-systems COVID-19 induced challenge

End market

Processing management

• Farmers’ inability to accurately forecast market demand and the lack of access to precise market data, which characterized the pre-COVID-19 context, are exacerbated by the pandemic.

Value chain actors are affected by a diminishing demand for raw and processed products from local, regional and international markets, a difficult access to existing markets due to the closing of borders and restrictions on public gatherings, and the lowering of sales prices caused by low demand coupled with the lack of access to appropriate storage facilities

• Processors have seen a significant decline in their market with some estimating ~ a 40% - 50% decline in demand for their products. This, coupled with an increase in cost of operations to ensure compliance with COVID-19 protocols, is causing a financial strain which has been largely unmitigated because of their inability to access the government stimulus

Sources: AFAP, impacts of COVID-19 along the agricultural value chain in Ghana, 2020; Stakeholder interviews; Dalberg analysis 13

Impact on the services tailored to supporting the system further contributed in the slowdown of productivity (1/2)

COVID-19 induced challenge

Extension and advisory

Agri finance

• The use of technology has been heightened in the wake of the COVID-19 pandemic.

Various value chain actors have used technology to sustain their operations. Processors have used social media to expand their market base to provide direct customer services. Most non-essential business operations have gone online, and local tech companies have deployed the platforms to provide e-extension services as well as COVID-19-related information services to farmers

Ag tech and data

• The usual in-farms training and advisory support offered by extension service providers is hindered by the prohibition of group meetings, a limited number of extension agents, the lack of extension programs readiness and an unsustainable funding streams to provide COVID-19-related support

• Access to finance has tightened as a result of the pandemic, some financial institutions have scaled back on agreed disbursements to processing companies as a result in the significant change in their operating environment. Furthermore, access to government’s stimulus package has been limited largely to micro and small businesses. Larger organizations have not been able to access the stimulus package because of the scale of their operations

Prioritized enablers

Sources: Stakeholder interviews; Dalberg analysis

Health

• In Ghana, many citizens, especially in remote districts with low literacy rates, including farming communities, do not believe in the existence of the virus. As such, they fail to take the contingency measures seriously. Furthermore, with the dramatic increase in PPE demand worldwide, Ghana suffered from a shortage of PPE from China which is needed to safely resume farming activities. Current government initiatives are working with farmers to train them on preventive measures and provide them with masks and sanitizers

Impact on the services tailored to supporting the system further contributed in the slowdown of productivity (2/2)

COVID-19 induced challenge

• The pandemic has caused a steep decline in passenger air travel, which normally accounts for the majority of air cargo capacity. The number of container ships globally is currently 8% below normal due to COVID-19 restrictions such as limitations on crew changes, additional screening, mandatory quarantines, and reduced demand. Commercial road transport is also disrupted, and truck traffic significantly decreased. As such, Ghana’s international and interregional trade is experiencing an unprecedented decline. Nationally, the disruptions on transport and logistics have lessened with the lifting of the lockdown on major cities, but the remaining measures and fear of contamination have increased the cost of transportation

Transport

Prioritized enablers

Sources: Stakeholder interviews; Dalberg analysis 15

The long-term effects of COVID-19 on food security and regional integration might impede the well functioning of the overall system

Prioritized cross-cutting topics COVID-19 induced challenge

The country-wide lockdown has negatively impacted Northern and Southern integration. The existing supply chains for input such as seeds and fertilizers and the market are based in the southern part of the country while most production sites are in the North.

Furthermore, in some value chains such as the fruit and vegetables, labor usually sourced from the

North has been scarce due to movement restrictions and the halt in activities

Although the pandemic has not yet significantly impacted food security as food trade has remained more resilient than overall trade, it is anticipated that income losses will lower demand for certain crops, low exports will induce job losses among farmers and exporters, and difficult access to inputs will hinder production. These challenges increase the risk of food insecurity, especially in northern Ghana. WFP anticipates that between 286,000 and 385,000 people will be at risk of being food insecure during the 2020 lean season

Regional integration

Food security

Sources: Stakeholder interviews; Dalberg analysis 16

Insights from sub-system, enabler and cross-cutting analysis

Key recommendations

Conclusion

• Original recommendations were developed to have a larger structural impact on the agricultural market systems by improving performance and resilience

• They have been updated and their prioritization revisited using a COVID-19 lens

• The recommendations are expected to be implemented over a longer-term period

• The outcomes and impacts of these recommendations are expected to be global and medium to longer run

The analysis identified two sets of recommendations: one addressing the agriculture market system and the other COVID-19-related challenges

Sub-systems Cross-cutting themesEnablers Updated list of recommendations

Original recommendations COVID-19-related recommendations

• The COVID-19 recommendations are meant to mitigate the immediate impacts of the pandemic on agriculture

• They have been identified based on the desk research, the stakeholder interviews and learnings from other experiences

• The recommendations are intended for immediate implementation in light of the urgencies and presented by the pandemic

• The outcomes and impacts of these recommendations are expected to be short to medium term

The updated system analysis revealed the following prioritized recommendations (1/5)

• Reform the seed subsidy system to improve private sector involvement in seed provision

• Expand existing small-scale irrigation (SSI) systems to seed farmers

Sub-system Prioritized recommendations

• Support the expansion of machinery services and introduction of smaller machinery

• Support the formation of FBOs and FBOs networks

Seeds

Production management

Collection/Storage/

Delivery

Processing

End market

• Support the operationalization of Ghana Commodity Exchange warehouses

• Provide SHFs with small-scale storage and train them on the application of storage practices

• Develop incentive schemes for SHFs to use community or district-level storage

• Support vertical integration of processors to improve value chain performance

• Develop comprehensive value-chain specific policies to strengthen the competitiveness of processors

• Promote the consumption of locally produced crops via intentional public campaigns

• Promote the use of digital technology to facilitate access to market data

Original assessment

COVID-19 impact analysis update recommendations (2/5)

• Support the government in increasing control and regulations in the acquisition and distribution of fertilizers

• Form a private sector-led advocacy and trade platform

Sub-system Prioritized recommendations

• Support private sector participation in large irrigation schemes through Private Public Partnership models

• Support the expansion and the scaling up small-scale irrigation (SSI)

Fertilizers

Irrigation recommendations (3/5)

Enabler Prioritized recommendations

• Support and advance asset lending schemes

• Strengthen the role of VSLAs to promote agriculture financing

• Support innovative forms of finance to gain traction in the market

• Support the development of existing risk guarantee mechanisms

• Set up a business acceleration program for agribusinesses

• Explore ICT solution to improve trade logistics

• Set up road infrastructure to decentralized aggregation centers

Financial services

Farmers

Transport &

Logistics

Extension services

Financial services

Agribusinesses

• Scale-up government’s e-extension program and the use of ICT-based extension services

• Promote/support private sector participation in agricultural extension delivery

COVID-19 impact analysis update recommendations (4/5)

• Improve the quantity and efficiency of public agricultural expenditure

• Increase private sector participation in input provision

Sub-system Prioritized recommendations

• Harmonize the legal regimes under which land is administered

• Improve access to land for women

Government Policy

Land

• Raise awareness on good dietary practices in communities most affected by malnutrition using women as champions

Deep dive Prioritized recommendations

• Develop the interregional transport infrastructure

Nutrition and food security

Regional integration

The updated system analysis revealed the following prioritized recommendations (5/5)

Original assessment

• Promote women empowerment and emancipation in the agricultural sector through female FBOs and home-gardening programsWomen Inclusion

Impacted areas of the market system Recommendations

• Seeds

• Production management

• Processing

• Financial services – Farmers

Support timely access to the government stimulus package to producers and processors and develop stimulus package targeted at large agribusinesses

• Collection/Storage/Delivery

• Financial services – Farmers Put in place financing schemes for smallholder farmers

• Seeds

• Collection/Storage/Delivery Establish temporary cold storage facilities

• Collection/Storage/Delivery

• End market

Increase affordable access to adequate storage facilities and provide virtual training on the adequate use of these facilities

• Production management

• End market

• Extension services

Support access to e-extension technology and ICT-based services to farmers and agricultural

SMEs

• End market Invest in the development of agri E-commerce

• Ag Tech & Ag Data Create special innovation environments to allow ag-tech solutions and government interventions that supplement private sector innovations

The following recommendations have the potential to mitigate the COVID-

19 impacts in the short/middle term (1/2)

New recommendations

Source: 2020 USAID/Ghana market assessment update for COVID-19 24

Impacted areas of the market system Recommendations

• Production management

• Processing

• Health

• End market

Provide PPE to health centers, schools and remote communities as well as sanitation services and farmer sensitization on COVID-19 safety protocols

• Transport and logistics Use a mobile app to monitor and map out the national and international transportation routes that are disrupted by the COVID-19 measures

• Transport and logistics Convene representatives of value chain actors to coordinate the aggregation and transportation of foods

• Transport and logistics Provide transportation and logistical services

• Nutrition and food security Catalog and address the immediate needs of the vulnerable populations

• Nutrition and food security Expand social protection systems

• Nutrition and food security Explore cooperative global solutions

• Health Provide reagents and testing kits to testing facilities to help increase testing capacity in remote districts

• Regional integration Promote the recruitment of locally based labor

• Extension services Promote/support private sector participation in agricultural extension delivery

The following recommendations have the potential to mitigate the COVID-

19 impacts in the short/middle term (2/2)

New recommendations

Source: 2020 USAID/Ghana market assessment update for COVID-19 25

Insights from sub-system, enabler and cross-cutting analysis

Key recommendations

Conclusion