THE ROLE OF THE GHANA COMMODITY EXCHANGE IN IMPROVING GENERAL AGRICULTURAL SECTOR PERFORMANCE IN GHANA

TABLE OF CONTENTS

DECLARATION……………………………………………………………………………………………. ii

ABSTRACT…………………………………………………………………………………………………… iii

ACKNOWLEDGEMENT………………………………………………………………………………. iv

LIST OF ABBREVIATIONS…………………………………………………………………………. vii

LIST OF FIGURES………………………………………………………………………………………. viii

LIST OF TABLES………………………………………………………………………………………….. ix

CHAPTER 1: INTRODUCTION……………………………………………………………………… 1

• Background…………………………………………………………………………………………….. 1
  • Problem Statement……………………………………………………………………………………. 7
  • Research Questions………………………………………………………………………………… 12
  • Research Objectives……………………………………………………………………………….. 12
  • Significance of Study……………………………………………………………………………… 12
  • Methodology…………………………………………………………………………………………. 13
  • Scope of Study………………………………………………………………………………………. 13
  • Limitations of the Study………………………………………………………………………….. 14
  • Organization of the Paper………………………………………………………………………… 14

CHAPTER 2: LITERATURE REVIEW………………………………………………………….. 15

• Overview………………………………………………………………………………………………. 15
  • Commodity Exchange Markets…………………………………………………………………. 15
  • Theoretical Approaches of Measuring Impact of Commodity Exchanges………… 18
    • Time Series Econometric Analysis…………………………………………………………….. 19
    • Developmental Impact Analysis by the United Nations Conference on Trade and Development (UNCTAD)……………………………………………………………………………………………… 21
    • Experiences of commodity exchanges in other parts of Africa……………………….. 22
  • Insights drawn from the experience of commodity exchanges in other parts of Africa.

…………………………………………………………………………………………………………………………… 28

• Gap in Literature…………………………………………………………………………………….. 29

CHAPTER 3: METHODOLOGY…………………………………………………………………… 31

1. Introduction…………………………………………………………………………………………… 31
   1. Research Design…………………………………………………………………………………….. 31
   1. Research Method……………………………………………………………………………………. 31
   1. Area of Study………………………………………………………………………………………… 33
   1. Sampling Strategy…………………………………………………………………………………… 33
   1. Analysis of Data…………………………………………………………………………………….. 34
   1. Limitations of the study…………………………………………………………………………… 34
   1. Reliability and Validity……………………………………………………………………………. 35
   1. Ethical Considerations…………………………………………………………………………….. 35

CHAPTER 4: FINDINGS & DISCUSSION OF RESULTS……………………………… 36

• Respondents’ Background……………………………………………………………………….. 36
  • Benefits farmers obtain from the operations of the GCX……………………………… 37
    • Price Discovery……………………………………………………………………………………… 37
    • Price risk management……………………………………………………………………………. 38
    • Reduction of Transaction Costs………………………………………………………………… 39
    • Transparent Market Environment……………………………………………………………… 42
    • Warehouse receipts to secure financing…………………………………………………….. 42

• Traceability……………………………………………………………………………………………. 43
  • Discussion of Findings…………………………………………………………………………….. 44
  • Challenges the GCX is experiencing………………………………………………………….. 46
    • Infrastructure Development……………………………………………………………………… 46
    • Legal and regulatory infrastructure…………………………………………………………… 48

CHAPTER 5: CONCLUSION & RECOMMENDATION………………………………… 50

• Summary……………………………………………………………………………………………….. 50
  • Conclusion…………………………………………………………………………………………….. 50
  • Recommendations…………………………………………………………………………………… 53

BIBLIOGRAPHIES……………………………………………………………………………………… 55

APPENDIX………………………………………………………………………………………………….. 62

Appendix 1: Interview guide for farmers and members of the GCX…………………….. 62

Appendix 2: Interview guide for personnel of the GCX……………………………………… 63

LIST OF ABBREVIATIONS

ADB	Agricultural Development Bank
CBOT	Chicago Board of Trade
ECX	Ethiopian Commodity Exchange
GCX	Ghana Commodity Exchange
GGC	Ghana Grains Council
GSB	Ghana Standards Board
ICEX	Indian Commodity Exchange
KACE	Kenyan Agricultural Commodity Exchange
MoFA	Ministry of Food and Agriculture
MoFEP	Ministry of Finance and Economic Planning
NAFCO	National Buffer Stock Company Program
NCPB	National Cereals Produce Board
OEC	Observatory of Economic Complexity
RECOTIS	Regional Commodity Trade and Information Systems
UNCTAD	United Nations Conference on Trade and Development
WFP	World Food Program
ZAMCE	Zambian Agricultural Commodity Exchange
ZNFU	Zambian National Farmers Union

LIST OF FIGURES

Figure 1: Percentage Share of Agricultural Sector GDP from 2008 – 2018

Figure 2: Breakdown of Interview Participants

LIST OF TABLES

Table 1: Actual and Potential Crop Yields in Ghana (mt/ha)

CHAPTER 1: INTRODUCTION

•            Background

Ghana is a West African country with a population of about 30 million (Worldometer, 2020). Historically, agriculture was the driver of Ghana’s GDP with the sector dominated by the cocoa industry. As of 2018, the agriculture sector accounts for about 18.27% of Ghana’s Gross Domestic Product (Plecher, 2018), and still continues to be one of the main driving forces behind the country’s economy.

In Ghana, agriculture, understood to mean crop farming or livestock rearing, is predominantly practiced on a smallholder basis. Focusing on crop-farming, approximately, 90% of farm holdings are less than 2 hectares (Ministry of Agriculture, 2013). However, smallholder farming is characterized by price instability, pests and diseases infestation, inability to secure financing, low productivity, and heavy dependence on rainfall, among others (Asafo -Adjei & Buabeng, 2016). This is true despite the fact that the smallholding agricultural sector has the ability to contribute immensely to economic growth, job creation, and poverty alleviation (Asafo -Adjei & Buabeng, 2016). With this background, Ghana realized its need to urgently modernize and transform the current agricultural sector so that the full potential of the agricultural sector in Ghana could be harnessed for development.

On the 5th of November 2018, the President of Ghana, Nana Akuffo-Addo (2016-2020) launched the Ghana (GCX). The President stated that the GCX was intended to be one of the critical drivers of accomplishing his governments’ vision of becoming the agricultural center of West Africa (Ministry of Finance, 2018). Although the official launch was in 2018, discussions on the

establishment of the Ghana Commodity Exchange started in the 1980s (Ngmenipuo & Issah, 2014). Through the then Ministry of Finance and Economic Planning (MoFEP), the concept of a Ghanaian commodity exchange was contemplated and deliberated.

Apart from that, other attempts have been made by other individuals to set up a commodity exchange. There was the Accra Commodity Exchange which was set up in 1995 by a group of entrepreneurs. However, they failed to get others to support the initiative and were, therefore, not able to obtain enough funding to actualize their objectives. There was also talk of a West African commodity exchange in 2008; however, this also ended up as just an initiative and did not come into reality (Ngmenipuo & Issah, 2014).

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