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Revenue mobilization from the oil sector for Agricultural production in Ghana, a myth or reality?

We are back with Penplusbytes Online Discussion on Oil and Gas. This latest episode, starting from today Monday 6th June,…

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• Comment by Godwill Arthur-Mensah,my take on the mobilization of oil revenues
I strongly believe that the petroleum revenues had not been strategically invested in the agricultural sector and I agree with Dr. Ishmael Ackah, the Head of Research, Monitoring and Evaluation at the Africa Centre for Energy Policy (ACEP), who stated in a forum in Takradi last year that Government have not made strategic investment in agriculture because in 2014 budget, 70 percent of the agriculture budget went into the construction of  four sea defence walls projects, instead of food crop production or aquaculture.
Currently, the cost of cassava is very high in the Western Region and in other parts of the country because the demand had outstripped supply due to decline in production.
Over the years, growth in the agricultural sector had declined, recording growth of 7.4 per cent in 2008 followed with 7.2 per cent, 5.3 per cent and 0.8 per cent in 2009, 2010 and 2011 respectively, according to statistics available to the Ministry of Food and Agriculture.
It is unfortunate that Government had been replacing its normal allocation to the agricultural sector with petroleum revenues allocation as determined by the Annual Budget Funding Amount (ABFA), instead of the Petroleum revenues complementing the usual allocations.
Moreover, some peasant farmers in the Western Region had complained bitterly that oil and gas companies had bought arable land meant for agricultural purposes for the construction of their warehouses and thus, deprived them of their livelihoods.
Godwill Arthur Mensah
GNA, Regional correspondent(Western Region)
mensahgodwill@gmail.com
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June 6, 2016 oilgas
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Comments by Justice Adoboe
Ghana must avoid making the oil and gas sector another enclave economy.
Ghana must avoid making the oil and gas sector another enclave economy as the mining sector has been over the years. The fact that our oil sector is a very small one whose direct  impact on the economy in general is quite negligible so far is the same reason part of the revenue accruing from the sector should be re-invested in agricultural development.
Petroleum can cease to flow tomorrow, but our arable lands which are crying for cultivation will still be  there, investing and the decisions and efforts we make today at investing in the agric sector modernization is what will determine our food security tomorrow.
As Climate Change is becoming a reality in our case with prolonged drought, short periods of rain but causing severe flooding, especially affecting the northern sector which is Ghana’s granary and the source of legumes and many root crops, the need  of investing in  irrigation across the length and breadth of the country is no more a in doubt but an issue demanding immediate action.
If we can invest in a quarter of the 1.9 million hectares of irrigable land the country has, we can be assured of an all-year round production of certain key food crops that we spend scarce foreign exchange importing today
so far only 28,000 hectares of irrigable lands have been irrigated across the country, so you see why we keep importing tomatoes from Burkina Faso.
Beyond investment in crop cultivation, we also need investment in the other portions of agriculture value chain, talking about input production, storage and timely  supply, modern harvesting, drying and storage methods and facilities.
As we see investments coming into cocoa processing so also must we invest into food processing and marketing in order to prolong the availability of our key staples.
If we put these things into practice, the need for GMOs for higher production won’t arise.
Meanwhile, as we do these investments, the number of those going to be in direct cultivation would reduce, but the other portions along the value chain that would be developed, input production, storage and distribution; drying, processing; storage as well as marketing have the potential to yield more jobs that are higher paying than the sector does now.
Taking the first step of putting money into the real needs of the agriculture sector is key. As for the reason it was the agric sector investment that had its budget slashed last year as a result of the oil price drops I think was a decision not well thought-out.
Justice Lee Adoboe
Senior Correspondent Accra Bureau of the Xinhua News Agency
devitor2002@yahoo.com
web: www.xinhuanet.com/enlish-Africa www.fighana.com
 
 
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June 6, 2016 oilgas
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MESSAGE FROM DR ISHMAEL ACKAH:  Revenue mobilization from the oil sector for Agricultural production in Ghana, a myth or reality?(DISCUSSION)
1. Is there a relationship between the fortune of the agriculture sector and a rise of the oil and gas sector?
Answer: Yes. The oil sector affects agriculture in two main ways. First is the labour  mobility effect. The oil sector draws on the agriculture and other sectors for labour. There are instances where the youth especially leave their farms to go and look for non-existing jobs in the oil sector,. Second, increased foreign exchange into the economy can lead to the appreciation of the cedi and make agriculture inputs expensive, which will in turn make agriculture exports expensive and non-competitive. Both channels can lead to reduction in agriculture output.
2. What are the drivers or rationale to move resources from oil and gas to agriculture sector?
Oil resources have two main limitations. First, since oil prices are volatile, revenues are volatile too. Second, oil resources are exhaustible. Due to these reasons, countries that have been successful in managing their oil resources well diversify. Since agriculture provides a competitive advantage to Ghana in terms of fertile land, cheap labour and productive, it is important to build the agriculture sector with oil revenues to serve as a buffer during oil price shocks.
3. Which countries are suffering a decline in agriculture due to the discovery of oil and gas?
Nigeria was once the number 1 palm oil producer in the world before oil production started around 1958.
4. Does Ghana have an inter-sectorial link between the Petroleum and Agriculture ministry?
No.However, the Finance Ministry usually unofficially serve as the link between different Ministries
5. Is it a reality that revenues from the oil sector has been mobilized for Agricultural development or not?  If it is what are the things to show?  How many people have benefited from the Oil revenue in the agriculture sector?
Agriculture is one of the four priority areas that have received oil revenues over the past 5 and half years. Agriculture received about 9.2% of the total oil revenues in the first 5 years. This is relatively low compared to GNPC’s 39%. There is little to be shown for this investment since the sector faces challenges such as oil revenues substituting instead of  complementing traditional sources of funding such as IGF, GOG and development partners. In addition, there are issues of misapplication. For instance, in  2014, 170,62 million Ghana cedis or 43.91 million U.S. dollars was allocated to the agriculture sector from oil revenues.Out of this amount 69 percent went into sea defence projects. Finally, allocation from oil revenues to agriculture has seen a ”see-saw” trend. For example, in 2013, 2.5% of ABFA wa allocated to agriculture. This increased to 31% in 2014 and reduced to 3.5% in 2015. In 2016, it is projected to be 28%. This affects proper planning and productivity. The sector needs an investment plan, guided by effective monitoring and evalutaion and measurable indicators
6. Oil Revenues as Substitutes instead of complement to the Agric. sector
Yes. Oil revenues now constitute more than 90% of the capital and goods and service budget of agriculture. This means agriculture will be affected most when there is low oil prices.
7. Low level  of oil revenues investment in agriculture
Yes. agriculture has received only 9.2% of oil revenues over the past 5 years.
8. Have the oil producing districts shown decline in the Agriculture production?
The oil is produced offshore and the fishermen have been complaining about low catch since the oil production. Alternative livelihood systems have been developed by oil companies.However, it should be institutionalized and properly targeted.
 
Ishmael Ackah, Ph.D
Head of Policy Unit 
Africa Centre for Energy Policy (ACEP)
Accra-Ghana
Email: ackish85@yahoo.com

Website:http://www.acepghana.com/team/
Repec:https://ideas.repec.org/e/pac69.html
Researchgate:https://www.researchgate.net/profile/Ishmael_Ackah
Academia: https://port.academia.edu/IshmaelAckah
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June 6, 2016 oilgas
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Comment from Malise Otoo- THE MYTH OF OIL REVENUE IMPACT ON AGRIC IN GHANA

My take on this issue is that the development of Agriculture in Ghana as a result of oil is purely a myth with very little result to show for.
A 2014 Annual Report of the International Fund for Agriculture Development (IFAD) suggests that West and Central Africa received in excess of US$157.8 Million representing about 22.1% of the total share of  US$713.4 Million funds for financing programmes and projects approved in 2014 alone.
Although IFADs core mandate is to finance the growth of Agriculture and its value chain to ensure food security in countries, it has interestingly started funding natural resource management especially in cities where these God-given resources are found.
The following is how the various sub-sectors were impacted through the distribution.
Agriculture and natural resource management – 32%, Market and related infrastructure – 16%, Rural financial services – 13%, Others 13%,
Policy and institutional support – 10%Community-driven and human development – 8%, Small and microenterprises – 7%
Therefore, in 2014 Ghana received its share of the funds distributed  with a breakdown as follows;
GHANA: Ghana Agricultural Sector Investment Programme (GASIP)
GASIP will work to reduce poverty in rural Ghana sustainably.
It will have three components: value chain development; rural value chain infrastructure; and knowledge management, policy support and coordination. Smallholder farmers and resource-poor rural people will be the main targets, particularly women, young people (aged 15-24 years) and young adults (aged 25-34 years). This national programme will be governed by a demand- and market-driven approach. The initial design and financing will cover the first two cycles (six years).
Approved loan amount: SDR 23.7 million (equivalent to approximately US$36.6 million)
Approved ASAP grant amount: SDR 6.5 million (approximately US$10.0 million)
Total programme cost: estimated at US$113.0 million, of which national government will provide US$7.6 million, beneficiaries US$4.6 million, districts US$1.7 million and participating financial institutions US$17.5 million. IFAD is expected to seek additional financing of US$35.0 million in 2016-2018
Approximate reach: 55,000 households .
Although Ghana discovered oil in commercial quantities in 2010, and attained middle-income status in 2011, the overarching effect of oil revenue on Agric in this regard is yet to be felt with Agriculture contributing only some  0.04% of GDP.
We should perhaps take note that Ghana has also been the largest recipient of IFAD‘s loans and grants in the West and Central Africa region since 1980.
As a journalist, it beats my imagination why these resource nations find it extremely difficult to adequately fund Agriculture which employs the majority of its people. Perhaps Ghana is not alone in this struggle. Uganda, Mozambique and Tanzania can all be fingered. But this should no way be an escape for our leaders to sit up and salvage the situation.
Finally, the recent Panama Papers which exposed two sons of prominent leaders allegedly involved in illicit financial flows and tax havens i.e Former President John Agyekum Kufour and Kojo Annan, son of former UN Secretary General Kofi Annan should not be swept under the carpet.
Civil Society organizations like ACEP in Ghana should not be hypocritical to this and they cannot turn a blind eye on the matter. Ghanaians need to be educated on the truth on the issue and certain outcomes reached in this regard.
Malise Otoo
Managing Editor,
Ghana Daily News
No. 10A Christianborg Castle Road, Osu-Accra, Ghana
P.O.Box DK 817, Darkuman, Accra
listeningp.gh@gmail.com
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June 6, 2016 oilgas
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Comments from Tanko Mohammed Rabiu
OIL FOR AGRICULTURE
As Ghana congratulates and award farmers today in Bolgatanga in the upper east region, a lot of farmers’, agriculture experts and energy experts are calling on the government to invest heavily in agriculture from the oil revenues. This according to them agriculture contributes faster to poverty reduction than does industrial investments. Agricultural spending has wider redistributive effect citing some examples; Indonesia used its oil rents to supply fertilizer to farmers and develop new crops, building the basis for the country’s green revolution. They also invested heavily in agricultural research to identify new commodities that could improve on export potential. Malaysia invested its oil revenues into forestry and palm oil, building very successful industries. Chile, used proceeds from copper to invest into new agricultural commodities, such as salmon, a product that had not been part of the country’s export products before and other countries who are also using oil revenues to improve in agriculture.
At the height of the global financial and economic crises in 2007, Ghana discovered oil and gas in commercial quantities estimated at 1.8 billion barrels reserves. In spite of the modest production levels, oil has now become the second largest export of Ghana – US$2.7 billion in 2011 to US$3 billion in 2012; following gold and overtaking cocoa since then. Ghana is also gradually becoming a net exporter of crude oil with oil imports of US$3.3 billion in 2012 versus oil exports of US$3 billion. Over the last 4 years, Ghana earned about US$2.7 billion in revenues to the state. With new discoveries being developed, Ghana could earn more from its share of crude oil. With increasing oil revenues as a result, many are skeptical if Ghana can avoid the curse of oil and transform its oil wealth into positive development outcomes.
In Ghana, research has shown that at the national level, agricultural public expenditures have the highest returns in terms of agricultural productivity. For one marginal cedi invested in agriculture, GH¢16.8 is returned, feeder roads – GH¢8.8, Health – GH¢1.3. In spite of the potential of this sector to contribute to the country’s development, there continue to exist a wide funding gap in public expenditure. Agricultural share of public spending is currently at 8.5%, which has been insufficient to generate the levels of growth that would reduce poverty levels significantly. This is lesser than the Maputo Declaration of a minimum spending of 10%. If Ghana is to become a full middle-income country by 2015 and see decline in poverty rates of almost 70 percent, the share of agricultural expenditure in public spending would have to almost double from the current 8.5 to 14.1 percent.
Nevertheless, Allocation of oil revenues to agriculture was increased in the 2014 Budget from GHS20 million in 2013 to GHS136 million in 2014. Agriculture share of oil revenues were allocated to investments focused on small holder farming but farmers are asking for more improvement in the sector. In a telephone interview with the 1996 national best farmer Aloko Dongo who is still in active farming expressed his dissatisfaction on the declining state of agriculture saying farmers do not have access to credit facilities to enhance in their activities. He said many a times a lot of farmers commit suicide after failing to pay back loans taken from financial institutions and said lack of access to market, storage facilities and disease control.
Speaking to Dr. Amin Adam, the executive director for Africa center for energy policy, ACEP, in an exclusive interview after his presentation on political economy of Ghana’s oil and gas sector/follow the money at a media training for journalist in the extractive sector, said agriculture is the easiest way to reduce poverty in Ghana looking at the scope of the agriculture industry where the sector has more working force. He said there is the need for more citizen participation in decision making process I the oil and gas sector so as to benefit the poor and the vulnerable.
On the morning of the national farmers’ day celebration, TV3’s morning show “new day” hosted O.B Amoah, a member of the NPP, John abdulai Jinapor deputy minister of power and a member of the CPP. All the panelists reiterated the need for government to invest more of the oil revenue to agriculture and mean while John Jinapor said despite these challenges, government is investing a lot in agricultural industrialization from different funding sources examples like the fomenda sugar factory, shea butter factory at Buipe, rice mills in Tamale and Nasia.
According to the 2015 budget, 3.95% of the total budget went to agriculture and only 1.39% was spent and in the 2106 budget it declined to 3.5% which according to agriculture expert is not encouraging and not good for a developing country like Ghana. An amount of GHC 501,501, 708.00 is allocated to the agriculture ministry representing 3.5%.
Most of the farmers I spoke to want more share of the oil revenue to agriculture because agriculture is the most easiest way to reduce poverty and the only sector where the poor can make livelihood from without huge investments.
The table below shows how oil revenues were allocated to agriculture from 2012 to 2013.
ALLOCATION OF OIL REVENUES TO AGRICULTURE
A DECLINING TREND
                                                                                                                                                                                                                                                                       SECTORS                               ABFA 2012        RANK     ABFA 2013    RANK
Office of the President	65,000,000	2	20,000,000
Parliament of Ghana	5,000,000
Finance and Economic Planning	9,000,000		28,850,000	6
local government	15,000,000		5,000,000
Food & Agriculture	53,000,000	4	20,000,000	8
Lands & Natural Resources	33,840,000
Trade & Industry	13,040,610		5,000,000
Envir, Science & Technology	25,000,000		300,000
Tourism and Culture			5,000,000
Energy	130,000,000	1	130,000,000	1
Water Resources, Wrks & Housing	21,000,000		59,517,043	3
Roads and Highways	40,000,000	5	100,000,000	2
Transport	70,000,000	3	40,000,000	4
Education	20,000,000		10,000,000
Health			29,900,000	5
Employment & Social Welfare	10,000,000		300,000
Youth & Sports	22,000,000
Interior	25,000,000		23,000,000	7
MDAs Total	576,008,674		476,867,043
Source: ACEP
Tanko Mohammed Rabiu
Regional Correspondent, Tamale
TV3 News Network Limited
rabiutanko@hotmail.com
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June 6, 2016 oilgas
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