ABSTRACT
Ghana, in a bid to modernize and create an efficient agricultural market, launched the Ghana Commodity Exchange (GCX). The exchange is an organized trading hub intended to link agricultural commodity producers and buyers. However, the benefits of commodity exchanges and their impact in developing countries such as Ghana are not well known. This paper therefore explored the role of the Ghana Commodity Exchange in improving the performance of key agriculture sector players particularly farmers. The relevant question asked was, are farmers currently benefiting in some way from the GCX? Primary data in the form of interviews was collected and analyzed to answer the research question. Players in the market including farmers, buyers, middle men, and personnel of the GCX were interviewed. The findings from this research revealed that, price discovery had been achieved, to an extent, and that, farmers were in a better position to bargain because they now had access to price information which they did not have before. The exchange was also successful in centralizing trade and the transactions costs involved in finding a suitable buyer or seller at a suitable price was reduced my means of the exchange. The paper also revealed challenges which include poorly developed infrastructure such as roads and warehouses. Overall, the GCX is making steps in the right direction to create a more efficient agricultural market. The support of the government of Ghana is however needed to improve the exchanges operations and enable them to obtain their objectives.
I would, first of all, like to give thanks to God Almighty. Borrowing scripture from 1Chronicles 16: 34, I would like to say that the Lord, is good! And his mercies endure forever. I owe all my appreciation to God for seeing me through my time as a student in Ashesi. I am grateful for his mercies and amazed at the wonders he continues to do in my life. To God be the Glory!
Secondly, I would like to thank my supervisor Dr. Stephen Armah for his patience, guidance and continual support. In difficult times, his encouraging words and frequent check-ups made it possible to make this work a success. I would also like to thank Mr. Jacob Abeney for his support and advice during my time in Ashesi. His feedback and encouragement also contributed to making this thesis a success.
I also want to express my gratitude to my parents Dr. and Dr. Mrs. Adu- Sarkodee. They have supported me in every way possible during this journey and continue to do so even now. For your unconditional love mummy and daddy, I honor and thank you.
To my friends Adobea, Deborah, Esi Chrissie, Hannah Adjowa, Marie Dolores, Naa Lamiley, and Sally Peaches, I would like to say a big thank you. Having you all as a support system has made my life easier in Ashesi. Thank you for being friends indeed to me. May God bless you for your time, kindness, and genuine friendship.
Finally, I would like to say thank you to the staff of the Ghana Commodity Exchange and all of the hardworking farmers and individuals who are contributing to make Ghana agricultural hub of excellence. To you all I say Ayekoo! May the good Lord bless you in your endeavors.
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
…………………………………………………………………………………………………………………………… 28
- Gap in Literature…………………………………………………………………………………….. 29
CHAPTER 3: METHODOLOGY…………………………………………………………………… 31
- Introduction…………………………………………………………………………………………… 31
- Research Design…………………………………………………………………………………….. 31
- Research Method……………………………………………………………………………………. 31
- Area of Study………………………………………………………………………………………… 33
- Sampling Strategy…………………………………………………………………………………… 33
- Analysis of Data…………………………………………………………………………………….. 34
- Limitations of the study…………………………………………………………………………… 34
- Reliability and Validity……………………………………………………………………………. 35
- 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
- Benefits farmers obtain from the operations of the GCX……………………………… 37
- 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
| 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 |
Figure 1: Percentage Share of Agricultural Sector GDP from 2008 – 2018
Figure 2: Breakdown of Interview Participants
Table 1: Actual and Potential Crop Yields in Ghana (mt/ha)
- 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 Commodity Exchange (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).
