Cosmetics and Personal Care PRODUCTS CLUSTER Diagnostic

June 2020

Readers Guide:

This is a combination of two reports on a diagnostic study on the cosmetics and personal care value chains in Ghana.

The first part of the report focused on the southern and middle clusters. The scope of the

Cosmetics and Personal Care Products (CPCP) CDS was preceded by a complete Value Chain

Analysis (VCA) of the sector. The diagnostic assessment was to validate the issues identified from the VCA. The CDS covered two selected clusters (i.e. cosmetics products production and black soap processing) within the middle and southern belts of Ghana.

Read details of the Southern and Middle cluster report via link: Southern and Middle Cluster diagnostic report

The study on the Northern Cosmetics cluster focuses on the cosmetic value chain that uses as part of its raw materials, shea butter, baobab oil, moringa oil and other indigenous oils to formulate different kinds of cosmetic products. The study was limited to only two regions in northern Ghana namely; Northern Region and Upper East Region although the other northern regions (Upper West, North-East and Savannah) also produce the same quantities and quality of shea nuts and butter.

Read details of the Northern Cosmetics Cluster report via the link: Northern cosmetic diagnostic study

Thank you.

Southern and Middle Cluster Report

Southern and Middle Clusters Cosmetics Diagnostic Study Report

Table of Contents

List of Figures and Tables...... 6 Table of Abbreviations ...... 8 INTRODUCTION...... 10 Background ...... 10 Scope of the Cosmetics Diagnostic Study (CDS) ...... 11 History of Cosmetics Production ...... 11 Black Soap Making ...... 12 Finished Cosmetics Products processing ...... 12 International & National Scenario ...... 13 Overview of the Middle and Southern Clusters ...... 15 Middle Cluster ...... 15 Figure 2 and 3: Images of Southern and Middle Clusters respectively ...... 16 Southern Cluster ...... 17 Sites visited ...... 17 Products and Activities ...... 19 Classification of the processors ...... 22 Technology and mode of production ...... 22 Raw materials ...... 22 Transportation ...... 23 Packaging ...... 23 Finance and Financing Facilities ...... 24 Promotion Institutions ...... 24 Financial Institutions ...... 24 Policy Institution (Ministry of Trade and Industry -MoTI) ...... 27 Table 4: Overview of Ministry of Trade and Industry ...... 28 Regulatory Bodies ...... 28 Table 5: Overview of the Regulatory Bodies ...... 30 NGOs and Associations ...... 30 Business Development Services (BDS) ...... 34 Research and Development (R&D) ...... 3434 OUTCOME OF THE SURVEY ...... 39 Methodology ...... 39 Human Resources ...... 41 4

Markets and Marketing ...... 43 Brands Ownership ...... 44 Membership of Associations ...... 45 Production and Technology ...... 46 Packaging ...... 47 Finance ...... 48 CLUSTER ANALYSIS ...... 49 Business Operations Analysis (BOA) ...... 49 Black Soap processors ...... 49 Processors of Cosmetics and Personal Care Products...... 52 Value Addition ...... 54 Cooperation in the Cluster ...... 56 Cooperation Between Black Soap and Cosmetics Products Producers ...... 57 BDS ...... 57 R&D Institutions ...... 57 Regulators ...... 58 Supporting and Promotional Institutions ...... 58 Associations, NGOs and other partners...... 58 Porters’ Five Forces ...... 61 SWOT Analysis ...... 63 Vision, Strategic Areas and Potential Interventions ...... 64 RECOMMENDATIONS ...... 66 APPENDIX ...... 67 Appendix I: Shea based Body Butter (180g) Production and MRP Graph ...... 67 Appendix II: Black Soap Bar (150g) Production and MRP Graph ...... 67 Appendix IV: Cosmetics Actors Visited ...... 70

List of Figures and Tables

List and Title of Figures List and Title of Tables

Figure 1: Display of Personal Care Table 1: Middle and Southern Clusters and Products in Structured Distribution Exact Products Channel (SDC) OR Supermarkets

Figure 2 and 3: Images of Southern and Table 2: Overview of Government-owned Middle Clusters respectively Promotion Institutions

Figure 4: Map of Ghana showing key Table 3: Overview of Financial Institutions sites within Middle and Southern supporting the Cosmetics Sector Clusters

Figure 5: Showing Number of Skilled Table 4: Overview of Ministry of Trade and and Unskilled workers Industry

Figures 6 and 7: Showing where Table 5: Overview of the Regulatory Bodies processors sell their products

Figure 8: How processors promote their Table 6: Overview of related Cosmetics products Associations

Figure 9: Brand ownership by Table 7: Overview of BDS and samples of processors containers

Figure 10: Problems with and Table 8: Overview of Research and procurement of raw materials Development Institutions

Figure 11: Source, Quality and Table 9: Summary Table of Respondents Availability of raw materials and contacted during CDS machinery / equipment

Figure 12: Source and Types of Table 10: Showing length and types of business Packaging Materials ownerships

Figure 13: Cooperation Matrix I Table 11: Employment summaries

Figures 14: Cooperation between actors Table 12: Associations processors belong within the clusters

Figure 15: Porters’ Five Forces Table 13: Training and the institutions that provide them

Table 14: Types of finances used by processors

Table 15: Summary of BOA of Black Soap Processing

Table 16: Summary of BOA of Cosmetics and Personal care products processing

Table 17: Value Addition during the Production of 150g Black Soap Bar Soap

Table 18: Value addition during production of 180g Plastic Jar of Body Butter (BB)

Table 19: Porters’ Five Forces Analysis of Middle and Southern Clusters

Table 20: SWOT Analysis of Middle and Southern Clusters

Table 21: Summary of Consultative Discussion by Cluster Actors

Table 22: Similarities and Differences Between Middle and Southern Potential Interventions

Table of Abbreviations

ABBREVIATION FULL MEANING

AGI Association of Ghanaian Industries

AWEP African Women Entrepreneurs Programme

BDS Business Development

CDS Cosmetics Diagnostic Study

COSMAG Cosmetics Manufactures Association of Ghana

CPCP Cosmetics and Personal Body Care Products

FDA Food and Drugs Authority

GEPA Ghana Export Promotion Authority

GMP Good Manufacturing Practices

GNCCI Ghana National Chamber of Commerce & Industry

GSA Ghana Standard Authority

GSA Global Shea Alliance

ISID Inclusive and Sustainable Industrial Development

KNUST Kwame Nkrumah University of Science and Technology

MoTI Ministry of Trade and Industries

MSMSEs Micro, Small and Medium Scale Enterprises

NBSSI National Board for Small Scale Industries

NGOs Non-Governmental Organizations

PKO Palm Kernel Oil

R&D Research and Development Institutions

SDC Structured Distribution Channel

SDGs Sustainable Development Goals

UNIDO United Nations Industrial Development Organization

UG University of Ghana

VCA Value Chain Analysis 8

ABBREVIATION FULL MEANING

1D1F One District One Factory Initiative

WACOMP West Africa Competitiveness Programme

INTRODUCTION

Background

The United Nations Industrial Development Organization (UNIDO) is a specialized agency in the United Nations system that promotes industrial development for poverty reduction, inclusive globalization and environmental sustainability as well as accelerate Inclusive and

Sustainable Industrial Development (ISID) in member states. The relevance of ISID as an integrated approach to all three pillars of sustainable development is recognized by the 2030

Agenda for Sustainable Development and the related Sustainable Development Goals (SDGs).

UNIDO’s mandate is fully recognized in SDG-9 which calls to “Build resilient infrastructure, promote inclusive and sustainable industrialization and foster innovation”.

The 'Ghana Component' Project as part of West Africa Competitiveness Programme

(WACOMP)1 has an overall objective of strengthening the export competitiveness of the

Ghanaian economy through enhanced value-added, low carbon, sustainable production and processing and increased access to regional and international markets. Specifically, WACOMP aims to enhance the performance and growth of the Cosmetics and Personal Care Products

(CPCP) sector by improving the quality of their products, exports and integration into regional and global value chains. These sectors are in line with the priorities of the Ghanaian

Government and have a high potential for industrialization and job creation. UNIDO, in response to the lessons drawn from previous projects, designed WACOMP under a tailored framework with 5 key axes: Coordinate, Compete, Conform, Connect and Credit, termed “The

5 C’s for competitiveness”2.

In supporting the CPCP agro-based Value Chain (VC) in Ghana, actors along the VC will enjoy the following benefits:

1 WACOMP is implemented with a subsidiary approach through nine different components covering ECOWAS and the following countries: Nigeria, Niger, Togo, Cape Verde, Ghana, Côte d’Ivoire, Senegal and Sierra Leone. -WACP Project Document 2019 07 05 Page 7 2 Promote dialogue and synergies within the Value Chains (VCs) through the creation or strengthening of Value Chain Strategic Committees (VCSC) to be used as a forum for discussion (Coordinate), develop competitive manufacturing capabilities by upgrading MSMEs capacities through the implementation of UNIDO clusters methodology (Compete), support quality infrastructure and MSMEs compliance to prove conformity with market requirements (Conform), promote efficient connectivity to markets by strengthening marketing capacities (Connect) and link MSMEs to financial institutions to implement all the improvements required to enhance their competitiveness by accessing appropriate and affordable credit schemes (Credit). WACP Project Document 2019 07 05 Page 9 10

(i) the technical capacities to produce quality and innovative products

(ii) comply with international market regulations and standards

(iii) promote their products and connect to potential markets

(iv) access to financing (credits agreements and/or sub-contracts or investments).

Scope of the Cosmetics Diagnostic Study (CDS)

The scope of the CPCP CDS was preceded by a complete Value Chain Analysis (VCA) of the sector. The diagnostic assessment was to validate the issues identified from the VCA. The

CDS covered two selected clusters (i.e. cosmetics products production and black soap processing) within the middle and southern belts of Ghana.

History of Cosmetics Production

Ancient Africa had access to many natural botanical ingredients that are still used extensively in modern skin care products. They knew the secrets of natural oils such as sweet almond, baobab, marula and moringa; as well as botanical ingredients such as aloe, frankincense, myrrh, rose oil, honey, etc. They were endowed with natural emollients including avocado oil, shea and cocoa butter and these ingredients were used extensively in their beauty regimens3.

Historically, the seeds from Baobab (Adansonia Digitata), Shea Tree (Butyrospermum parkii or Vitellaria paradoxa), Coconut (Cocos nucifera) and Palm Tree (Elaeis guineensis) have been processed into various forms of oils and butters for skin and hair care for ages. The oil extracted from Baobab seeds is used as a rub to relieve pain, rheumatism, and more specifically for treating skin conditions such as eczema and psoriasis. The Baobab leaves are used as a diaphoretic and in the treatment of excessive perspiration. The bark contains a quantity of edible, insoluble, acidic tragacanth-like gum which is used for cleaning sores4.

3 https://www.fromnaturewithlove.com/default.asp 4 ARTICLE FOR COSMETICS & TOILETRIES MAGAZINE ETHNOBOTANICAL PLANTS FROM AFRICA PART TWO Anthony C. Dweck Research Director, Peter Black Medicare Ltd. White Horse Business Park, Aintree Avenue, Wiltshire, UK BA14 0XB 11

Similarly, coconut oil was used as an ointment base, particularly in preparations intended for applications to the scalp and hair growth treatment. Palm Kernel Oil (PKO) on the other hand is obtained from the palm kernel and the extracted oil known locally as 'ude oji', is not normally used in cooking but for traditional medicine and as a pomade for moisturizing the hair and skin5.

Black Soap Making

Locals in pre-colonial Ghana were already making a similar pitch-black version of the soap called ‘amonkye’ or ‘amonkyem’ with palm oil6. There is no documented evidence of how this process evolved into the current Black Soap widely used. Another popular folklore7 is that

Nigerian pepper traders brought it into Ghana and later taught locals how to produce it. Hence the name ‘alata samina’ meaning “Nigerian soap”

Finished Cosmetics Products processing

Although the researcher was unable to cite documents that provide accurate information on how the cosmetics industry began in Ghana and evolved into its current status as a budding industry, the anecdotes from discussions with the processors indicate two significant contributions to the development of the sector:

(i) The use of YouTube videos as learning resources by many processors. A few processors

who also had chemistry or chemical engineering backgrounds apply their knowledge in

the formulation processes.

(ii) The African Trade Hub Project (I & II)8 gave impetus to the growth and expansion of

cosmetics processing (focusing on shea butter processing and production of shea butter

and black soap based products).

5 www.nappilynigeriangirl.com/2014/03/nigerian-black-palm-kernel-oil-aka-pko.html 6 Anecdote from processors in Kumasi 7 Reference the Black Soap Processor Survey (Bawjiase) 8 Since 2003, WATH has been both a prominent and behind-the-scenes player in igniting and encouraging economic growth in one of the world's poorest regions. Partnering with firms, financial institutions, civil society, governments, donors, and entrepreneurs, the Hub acts as an honest broker of deals, policy recommendations, and organizational changes leading to real and sustainable reductions in poverty. 12

International & National Scenario

The cosmetics sector in Sub-Sahara Africa was expected to grow over the decade. Overall, the

African beauty and personal care market was estimated at €9.2 billion in 2017 and it currently increases between 8% and 10% per annum as against a global market growth rate of close to

4%9. It is expected to reach €12 billion in 2020 when the continent's total population - the fastest growing in the world - will reach 1.4 billion inhabitants. The largest market in the Sub-

Saharan region is South Africa which represented over €5 billion of the revenue in 201710. The majority of sales in the country are made within structured distribution channels. In comparison to other countries such as Kenya, only 15% of beauty and personal care products are sold in supermarkets. In Nigeria, the beauty and personal care market could reach €3.2 billion by 2020 making Nigeria the sector's rising star in Sub-Saharan Africa11.

Figure 1: A display of Personal Care Products in a Structured Distribution Channel (SDC) or Supermarket

Working in 21 countries, the Hub laid the groundwork for $191 million in exports, $53 million in investment, and 10,000 direct jobs. Its multiplier effect study showed sales generated by new exports have created several hundred million dollars of additional household income across the region. Two major industry alliances born out of WATH leadership—the African Cashew Alliance and the Global Shea Alliance—are the region’s leading enterprise coalitions for these industries. 9Euromonitor International, 2019 Report 10 Euromonitor International, 2019 Report 11 Euromonitor International, 2019 Report 13

The demand for cosmetics products for hair and body care is growing at a frantic pace especially in fast growing East African economies such as Uganda. Other major markets such as Kenya and Ethiopia that have seen increasing incomes among the middle-class; population growth; and greater urbanization are also driving the markets for cosmetics and personal care products in the East African region12.

12 Euromonitor International, 2019 Report 14

Overview of the Middle and Southern Clusters

The two geographical clusters used in the study are found within the Kumasi catchment

(Ashanti region) and from Accra to Takoradi (Greater Accra to Western regions). Each cluster is predominantly focused on the production of one special product although there are some levels of linkages existing between them despite their geographical locations. With the use of

GPS location addresses, the Goggle Maps below provide the location of all the actors within the clusters.

Middle Cluster

The Middle Cluster organized around Kumasi in the Ashanti region13 and Techiman in the

Bono region has a number of actors. The biggest group within the cluster are the processors of finished cosmetics and personal care products who constitute about 75% of actors. There are aggregators of raw materials (oils, potash and shea butter) constituting about 9%, processors of black soap (close to 5%) and about 1% being processors of essential oils. There are other forward and backward linkages actors such as R&D institutions, Support Institutions, NGOs and BDS constituting close to 15%.

13 The Ashanti Region is the third largest of 16 administrative regions (24,389 km2) being 10.2% of the total land area of Ghana. Ashanti region is most populated region (4,780,380) and of 19.4% of Ghana's total population. Ashanti region is a midpoint for all road and rail between the north and south of the country. Thus, a lot of the processors Shea butter which comes mainly from the north are found in Kumasi the biggest city within the region. A major and sprawling industrial site in Kumasi called “Magazine” where local artisans and fabricators design and built all manner of agriculture, manufacturing and domestic machinery industry is a great fallback position for many of the processors engaged all over the country. 15

Ejisu

Red and Yellow plots are preexisted locations while Blue are added locations on Google Map

Figure 2 and 3: Images of Southern and Middle Clusters respectively

Southern Cluster

The Southern Cluster stretches from Accra (Greater Accra region)14 to Takoradi (Western region) consisting primarily of CPCP processors (98%) and Black Soap processors (2%). Accra also serves as the base for all R&D, Support /Promotional Institutions, financial institutions, head offices, etc. by virtue of its status as the capital city of Ghana. All government Ministries have their national offices in Accra just such as all the banks’ headquarters. Additionally, the regulatory and parastatal agencies who generally coordinate and promote manufacturing and specifically, cosmetics processing are all located in Accra.

Overall, the study targeted 27 processors, a government Ministry, and several BDS and support agencies in Accra.

Sites visited

Specific locations within the two clusters visited were,

1. Accra City within Greater Accra region15.

2. Kumasi City within Ashanti region16.

3. Techiman within the Bono East region17.

4. Takoradi within the Western region.18

5. Twifo Praso in the Central region19.

6. Bawjiase within the Central region

14 The Greater Region is the smallest administrative region area of Ghana's 16 administrative regions (3,245Km2) being 1.4% of the total land area of Ghana. It is the second most populated region, after the Ashanti Region, with a population of 4,010,054 in 2010, accounting for 16.3 per cent of Ghana's total population. The Greater Accra region is the most urbanized region in the country with 87.4% of its total population living in urban centres 15 Accra is the capital of Ghana covering an area of 225.67 km 2 (87.13 sq mi) with an estimated urban population of 3 million as of 2019. It is organized into 12 local government districts – 11 municipal districts and the Accra Metropolitan District, which is the only district within the capital to be granted city status. "Accra" usually refers to the Accra Metropolitan Area (AMA), which serves as the capital of Ghana, while the district which is within the jurisdiction of the Accra Metropolitan Assembly is distinguished from the rest of the capital as the "City of Accra". In common usage, however, the terms "Accra" and "City of Accra" are used interchangeably. 16Kumasi is among the largest metropolitan areas in Ghana and is the commercial, industrial and cultural capital of the historical Ashanti Empire. Kumasi is alternatively known as "The Garden City" and also called Oseikrom. The second largest city in Ghana after the capital Accra, Kumasi known as Ghana's second city. The population of Kumasi Metropolis is 1,730,249 represents 36.2 percent of the total population of Ashanti Region, from the 2010 Population and Housing Census. 17 Techiman is a town and is the capital of Techiman Municipal and Bono East Region of Ghana. Techiman is a leading market town in South Ghana. Techiman is one of the two major cities and settlements of Bono East region. Techiman has a settlement population of 104,212 people in 2013. Techiman is located at a historical crossroads of trade routes and the Tano River 18 Sekondi-Takoradi, a city comprising the twin cities of Sekondi and Takoradi. It is the capital of Sekondi – Takoradi Metropolitan District and the Western Region of Ghana. Sekondi-Takoradi is the region's largest city and an industrial and commercial centre, with a population of 445,205 people. 19 Twifo Praso is the capital of the Twifo-Ati Morkwa District in the Central Region of Ghana. The district also has the River Pra and the Twifo Oil Palm Plantation Limited Company. 17

Middle Cluster

Southern Cluster

Figure 4: Map of Ghana showing key sites within Middle and Southern Clusters

Products and Activities

The table below describes the products and activities at each site within each of the geographical areas.

GEOGRAPHICAL AREA SIZE AND NUMBER CLUSTER ACTIVITIES EXACT PRODUCTS

Accra City Number of processors . Cosmetics products 1. Shea butter-based products processors (creams, lotions and oils) 20 . About a 100 registered with . Machine and Equipment 2. Black soap-based products (bar one or two of the known fabricators soaps, bath/shower gel and associations . R&D Institutions shampoo) . Undocumented processors . Regulatory Institutions 3. Coconut oil-based products (estimated to be about 100) who . Support Institutions are not registered with any of the . Financial intuitions known association . Packaging firms Size Category

. Between 85% and 90% are micro industries, . 5% are small industries . A few are medium scale

Associations21:

. Cosmetics Manufactures Association of Ghana (COSMAG) . African Women Entrepreneurs Programme (AWEP) Cosmetics Sector

20 Using active members on the What’s App Platforms and discussion with Associations (COSMAG, AWEP, EBN Network etc.) 21 Detailed report on all mentioned associations attached as “Profile of Cosmetics Associations” 19

GEOGRAPHICAL AREA SIZE AND NUMBER CLUSTER ACTIVITIES EXACT PRODUCTS

. EBN Network . Global Shea Alliance (GSA) Kumasi city Number of processors . Cosmetics products 1. Shea butter-based products processing (creams, lotions and oils) 22 . About 50 processors . Black soap processing 2. Black soap-based products (bar . Undocumented processors are . Machine and equipment soaps, bath/shower gel and unknown fabricators and artisans shampoo) Size Category . Aggregators 3. Coconut oil-based products . Transport hub . Close to 100% are micro scale . R&D Institutions . Packaging firms Associations:

. Cosmetics Manufactures Association of Ghana (COSMAG) . African Women Entrepreneurs Programme (AWEP) Cosmetics Sector . EBN Network . Global Shea Alliance (GSA) Techiman Number of processors . Carrier oils processing 1. Processes Moringa and Citronella . Aggregating of other oils oils . One registered processor (Neem, Baobab,) 2. Aggregates Coconut oil and Size Category distributes to other processors 3. Processing Shea butter and A small-scale industry extracts of morning into soaps, gels and shampoos

22 Using active members on the What’s App Platforms and discussion with Associations (COSMAG, AWEP, EBN Network etc.) 20

GEOGRAPHICAL AREA SIZE AND NUMBER CLUSTER ACTIVITIES EXACT PRODUCTS

Takoradi Number of processors . Carrier oils processing and 1. Coconut oil processing aggregation 2. Citronella, Eucalyptus, . Two registered processor of oils . Cosmetics products 3. Coconut oil Size Category processing

A micro scale industry

Twifi Praso Number of processors . Black Soap processing 1. Black soap (end product) . PKO processing . One registered processor

Size Category

A small-scale industry

Bawjiase Number of processors . Black soap processing 1. Black soap (end product)

. About 30 to 40 Black soap processors

Size Category

100% are micro scale industry

Table 1: Middle and Southern Clusters and Exact Products

The discussion with the sampled processors, BDS, representatives of Support Institutions generated a lot of anecdotes which have been summarized into the documents seen in the

Appendix. The synthesis of these documents informed the summary below.

Classification of the processors

Using the NBSSI Classification of industries as a guide, more than 85% of the processors engaged were micro industries while less than 5% were small industries (for both Black Soap and Product processors). There were a few others, mainly in Accra, who fit the criteria for medium-sized industries.

Technology and mode of production

Generally, majority of processors were found to be using hand operated equipment (relatively simple and traditional) as well as manual processes to mix, press and pack the products.

Raw materials

All the processors were found to be procuring their raw materials on “upfront cash payment basis” from either the middlemen or market queens (no credit facilities were found to be existing in the cluster). Some of them had developed backward linkages with some producers

(e.g. PKO and Potash producers) to supply directly to them. Because the majority of raw materials used were seasonal in nature (cocoa pod potash, shea butter, and to some extent

PKO), price fluctuations was found to be affecting the cost of production and overall turnover.

The seasonal nature of these key raw materials also had an impact on storage and pricing.

Because many of the processors obtain their raw materials directly from the market as well as through the backward linkages with specific suppliers, the desired qualities of the raw materials tend to be assured over time.

Transportation

Raw materials, semi-processed and finished products are largely transported by existing public transport systems (large passenger buses plying the Kumasi-Accra route carrying both passengers and goods). Liquid products (oils) are sealed in 25 Liter gallons (popularly called

“Kufuor Gallons”) and transported from the processors to either the end users in Accra or exported to the major international markets. Black soap producers transport their products in three distinct modes:

(i) The large volume producers (three producers sited in Kumasi, Twifo Praso and Ejisu)

use 20-foot metal containers to transport their products from their point of production

to the Tema seaport for export.

(ii) Medium volume producers (mainly in Bawjiase as well as in Ejisu and Kumasi)

package finished Black Soap in 50kg “gari” sacks in the granular form. These are

normally intended for processing into other forms such as Liquid Bath Soaps or

Shampoos. These are also transported via public trucks or buses as well as private vans.

(iii) The bulk of locally consumed Black Soap is wrapped in old cement paper and packed

in wicker baskets and transported via roads in trucks to all major markets in the country.

Finished products are also transported via public transport systems. Only a few of the

processors own branded mini vans for distribution purposes and these vans also serve

as a form of moving advertisement as they convey goods from production sites to sale

points or to deliver to wholesale points.

Packaging

Packaging materials currently being used in Ghana are very similar in shape among the processors. These range from plastic containers to glass bottles and a few traditional types such as coconut husks and calabash. Majority of the processors who target the export market depend on imported top range packaging materials. All the products intended for the local market are however packaged in locally produced materials (and pricing is the determining factor). 23

Finance and Financing Facilities

Majority of the processors shy away from bank loans citing very high interest repayments and the cumbersome application/registration processes for these loans. Many of them do not also have the required collateral and the time for completing the processes. A few of the processors indicated that they had been beneficiaries of certain grants disbursed through sponsored programmes. Informal financing from personal savings, family funds and family support is most common.

Promotion Institutions

These are state/central government industries promotion organizations whose task is to implement the industrial policies announced by the government and administer incentives for the growth of industrial activities. They also provide the necessary training for skills and capacity development. This is depicted in Table 2 below.

Financial Institutions

A total of 23 banks that are diversified in geographical origin, corporate character and reach in the global financial markets are operational in the country. Ghana’s financial services sector can be classified into three main categories namely: banking, insurance and capital markets.

Table 3 below highlights the key areas of focus of the two banks (Fidelity Bank Ghana Limited and Exim Bank Ghana Limited) that agreed to face-to-face discussions during the study.

Name Current Collaboration with Cosmetics Sector

National Board for Small . Technical trainings Scale Industries (NBSSI) - Skills in sources of livelihood (in partnership with EQWIP HUBs- https://www.eqwiphubs.org/careers/ ) . Management - Credit management - Customer relationships - Business and Financial record keeping . Linkages - To financial institutions (e.g. Eddis Funds which is no longer available) - Registrar General’s Department . Resourced to provide the appropriate technical and oversight role to Micro Small Medium Scale Enterprises (MSMCEs)

Ghana Export Promotion . Helps them with market access through international trade Authority (GEPA) and exhibitions. . Subsidizes their participation in fairs/exhibitions through stands fees waiver and transporting their wares freely to the fairs. . Links them with access - to other promotional activities outside Ghana - Financial markets (e.g. EXIM Bank) . Provides trade information on current market trends and details on certifications for cosmetics standards for the export market. . Provides training on international marketing and best practices for packaging their products to fit the international markets under the International Trade Center (ITC) support . Collaborates with SheTrades Commonwealth Programme to support local women to export their goods to Europe and other markets of their choice . Provides advisory services and training on the following - tariff and non-tariff barriers - transportation and storage processes

Name Current Collaboration with Cosmetics Sector

Ghana National Chamber . Business advocacy of Commerce and . Capacity building Industry (GNCCI) . Trade fairs, Missions and Exhibitions . Export documentation . Research & Information . Business Match Making (B2B) . Business Support Services

Table 2: Overview of Government’s Industries Promotion Institutions

Name Current Collaboration with Cosmetics Sector Recommended Areas of Support

Fidelity . Has partnered with SNV to support SMEs . Support SMEs to Bank with financial portfolios. redirect their culture of Ghana . Has an SME Academy that provides capacity doing business. Ltd. building and mentoring programmes for . Support SMEs to SMEs. restructure and reduce risks along the VC. . Strengthen marketing strategies and sub- population targeting techniques . Partner other stakeholders to act as advocates to leverage and manage financial resources for SMEs

EXIM The Ghana EXIM Bank (EXIM Bank) evolved . The bank did commit to Bank from the merger of 3 Government agencies any particular area they namely: Export Trade, Agricultural and intend to collaborate Industrial Development Fund (EDAIF), Export with SMEs Finance Company (EFC) and EXIM Guaranty Company Limited.

Its 2017 – 2022 Strategic Objectives are to:

. Increase non-traditional export from its average annual revenue figure from USD 2.4bn to USD 5bn by 2022.

Name Current Collaboration with Cosmetics Sector Recommended Areas of Support

. Develop crops such as avocado, sweet potatoes and coconut into major Non- Traditional export products by 2022. . As agent of Government (Act 911, Function 25), be a key finance partner for effective implementation its Industrialization agenda and special Initiatives such as One District One Factory (1D1F). . Finance and develop strategic import substitute products e.g. poultry and rice. The Bank expects to support the reduction of Ghana’s import bill by a minimum of USD300 million by 2022. . Increase the capacity of the Ghanaian exporter through effective collaboration with key strategic partners such as the Ghana Export Promotion Authority, the Food and Drugs Authority and the Ghana Standards Authority. . Make Ghana an export pillar regionally and globally by providing financing support to complement the efforts of exporters. Table 3: Overview of Financial Institutions supporting the Cosmetics Sector

Policy Institution (Ministry of Trade and Industry -MoTI)

The Ministry of Trade and Industry (MoTI) is the lead policy advisor to government on trade, industrial and private sector development with responsibility for the formulation and implementation of policies for the promotion, growth and development of domestic and international trade and industry. The table below summarizes the current support the cosmetics sector receives from the MoTI (as culled from their website).

Name Current Collaboration with Cosmetics Sector

Ministry of Trade and National Industrial Revitalization Programme with the Industry (MoTI) stimulus package for industries.

. Industrial Revitalization Programme (Stimulus Package) . One District One Factory Initiative . Strategic Anchor Industries . Business Regulatory Reforms . Industrial Sub-Contracting Exchange . Industrial Parks . Development of SMEs . Export Diversification . Enhancing Domestic Retail Infrastructure . Public-Private Sector Dialogue

Table 4: Overview of Ministry of Trade and Industry

Regulatory Bodies

The Food and Drugs Authority (FDA) and the Ghana Standards Authority are the two state regulatory authorities responsible for ensuring compliance with the requirements of relevant laws regarding production processes as well as the quality of the products. They are represented in all regions of Ghana, although all their laboratories are only sited at their headquarters/head offices. This results in long delays and extra expenses being incurred by the processors when they submit samples for testing analysis. The table below summarizes the key areas of collaboration and recommended support from the two regulatory bodies.

Name Current Collaboration with the Cosmetics Recommended Areas of Sector Support

Ghana . Product Certification Scheme . Work with the NBSSI to Standard . Quality Evaluation / Testing of their reduce testing processing Authority Products fees for Micro/Small- (GSA) . Quality systems management services scale Enterprises while those registered with NBSSI are exempted from paying the fee. . Work with the Universities and Technical Universities to obtain ISO Certification for their laboratories to ensure that testing/ laboratory analysis services are closer to the processors.

Food and SMEs in the cosmetics industry that are . There should be a Drugs registered with the FDA obtain the following collaboration between the Authority benefits: GSA and Universities to (FDA) ensure the certification of . FDA Number (unique number for each laboratories to ISO product) that gives authenticity both standards. This will locally and exports to major international enable the universities to markets. undertake content . Manufacturing site inspection analysis tests on behalf of . Label inspection and approval FDA. . Product promotion approval . Protection of product brand as well as against counterfeiting.

Other forms of support to SMEs include:

. Manufacturing site inspection . Label inspection . Trainings for SMEs on: - GMP - Formulation processes and techniques - Certification processes

Table 5: Overview of the Regulatory Bodies

NGOs and Associations

These are existing associations and NGOs that evolved from either previously funded cosmetics projects or the general agro-based sector. Some were also as a result of sustainability initiatives implemented for the beneficiaries to maximize the continued benefits associated with their numbers. These may also offer a few lessons for the current project.

Name Current Collaboration with Cosmetics Sector Recommended Areas of Support

Global Shea Alliance (GSA) . Membership Identified gaps within cosmetic sector: - Active 80 . Packaging of products - In total 100 . Variety of packaging solutions . Auxiliary services on formulation and packing (capacity . Beyond formulation to knowledge of product building for members) efficacy . Practical training sessions for members during international . Producers must know of what their formulations conferences and trade shows can do and include that in their marketing. . In conjunction with Shea Trade Center “International Trade Center” (ITC), organizes technical trainings to address certifications (especially the ECOSET Organic certification) . Organizes Round Tables with FDA, GSA and processors to address certification and registration issues . Promote GMP among members

Association of Women . AWEP has these sectors: . An avenue for reaching out to active members/ Entrepreneurs Programme, - Cosmetics various cosmetics actors along the value chain to Ghana (AWEP, GH) - Food & Agric share information and skills-building opportunities - Services . Members can assess and take advantage of any - Clothing form of collaboration the project offers - Beads & accessories . There are 168 firms registered with AWEP with 68 being very active members - 23 are Cosmetics processors who are into: . Shea butter-based products . Oils (Essential, Carrot) . Black soap

Name Current Collaboration with Cosmetics Sector Recommended Areas of Support

ENGINE BUSINESS Membership Lessons from ENGINE NETWORK (EBN) . 503 SMEs with those into cosmetics being 8% . Most of the cosmetics processors have been taken . Cosmetics sector has been the most progressive sector under through all the startup trainings therefore there is EBN the need for new trainings to be well thought- through and organized . Strategic steps be taken to segregate the “existing and established” from the “budding” business and the appropriate support given. . These businesses (“existing and established”) are looking for “patient funds” that will enable them to expand their processing and market share . There must be more hands-on training and mentoring to address “what can help them grow” rather than single day training sessions

Cosmetics Manufacturing . Started in 2010 and includes processors along the value chain . COSMAG can liaise with WACOMP on trainings Association of Ghana . Has membership in all the major regions of Ghana (Accra- to reduce duplication and complement each other. (COSMAG) 26; Kumasi-; Northern 6-7) . Current MOU with FDA under the Skills Development Fund (SDF) to facilitate collaboration with two Technical Universities (Accra and Tamale) to conduct the following trainings for COSMAG members: - Formulation - Packaging

Name Current Collaboration with Cosmetics Sector Recommended Areas of Support

- Export oriented production and marketing

Table 6: Overview of related Cosmetics Associations

Business Development Services (BDS)

There are a number of BDS that provide forward linkages business activities to the processors.

These include packaging industries, printers of different categories of labels and promotional materials as well as machine /equipment fabrication. Table 7 below provides an overview of the BDS in the cluster and samples of containers used in the cluster.

Research and Development (R&D)

The Research and Development institutions (belonging to either cooperatives or the government) undertake innovative activities such as developing new services or products and improving existing services or products. R&D constitutes the first stage of the development of a potential service or the production process. R&D activities differ from institution to institution as seen in Table 8 below.

Name Current Collaboration with Cosmetics Sector Recommended Areas of Support

Letap Packaging Ltd. . Currently produces varied cosmetics containers for sale . Packaging Industries to jointly access and apply . There is little or no customized packaging order from any of for the Counterpart Funding. the cosmetics processors

KANE-EM Industries Ltd. . Currently serves all customers as they purchase on “upfront cash payment” basis Sampled Packaging Containers

Plastic containers used for solids such as Black Soap. Available in 250 ml and 500 ml sizes May be either one colour or the caps may have different colours

Containers for liquids such as bathing gels, lotions and hand creams. Available in volumes ranging from 30ml to 100 ml

Name Current Collaboration with Cosmetics Sector Recommended Areas of Support

Opaque containers for products that react to sunlight (normally the creams and lotions).

McHammah Engineering Specific equipment manufactured for Cosmetics producers: . This facility can be converted into a learning center Company Ltd. to upgrade, as well as train and certify artisans to . Black soap processors (filling, stamping, etc.) become fabricators who can also service . Soap mixers (liquid and solid soap) machinery for cosmetics processors. . Soap cutters . Rollers . Boiling Kettles

Services provided for SMEs (including the cosmetics sector):

. Manufacturing and installation of all types of processing machines (Agro, Food, Soap and other forms of cosmetics products) . Machinery consultancy . Routine services and maintenance of equipment . Trainings provided for SMEs . Train clients to use and manage equipment (machinery manufactured for them).

Name Current Collaboration with Cosmetics Sector Recommended Areas of Support

Machinery Fabricator . Produces all forms of machinery and equipment for industrial . Can be used to support regular maintenance at (Suame-Magazine, Kumasi) set ups processors’ sites. . Has produced for 5 cosmetics processors . Soap mixers . Black soap stampers . Soap cutters Table 7: Overview of BDS and samples of containers

Name Current Collaboration with the Recommended Areas of Cosmetics Sector Support

University of . Undertake samples testing for . Work with GSA and FDA to Ghana cosmetics processors and prepare audit the laboratories and (Department reports for submission to FDA - ensure that they are upgraded of Chemistry) using GSA standards as a guide. to meet ISO Standards

Kwame . Micro level quality testing services . The laboratories will require Nkrumah (including Toxicology and the following: University of Phytochemistry analysis) - Modern testing Science and . Toxicology is conducted at the equipment Technology Department of Pharmacology and - Modern incubators (KNUST) – the Phytochemistry analysis done at - Safety Cabinet & Kumasi the Department of Herbal Medicine. Lamina flow - Modern sterilization . FDA accepts reports and analysis autoclaves from these Departments of KNUST . Training to upgrade their skills as well as on modern testing techniques.

Table 8: Overview of Research and Development Institutions

OUTCOME OF THE SURVEY

Methodology

Three sets of questionnaires were developed by the WACOMP Team for various actors in the cluster. These included the principal firms (processors), the BDS, and the Support institutions.

A Social media platform (WhatsApp group) was set up for processors who had been attending meetings at WACOMP offices. The platform was further updated to include names of processors who were interacted with at two previous fairs23. Two WhatsApp groups with 57 participants from the Accra Cluster and 20 participants from the Kumasi Cluster were created as the Accra and Kumasi platforms respectively. From these platforms, two lists of sampled interviewees (made up of processors, BDSs, B&D and Support/Promotional institutions) for

Accra and Kumasi respectively were generated and discussed with the WACOMP Cosmetics

Cluster and Network Expert24. Seventy-seven (77) processors listed on the two WhatsApp groups were offered the opportunity to complete a digital version of the “Principal Firms” questionnaire. Seventeen (17) processors were sampled from the Accra Cluster and 6 from the

Kumasi Cluster for face-to-face detailed discussions. The table below summarizes those contacted for the CDS.

Type of Description of those reached Target Reached Respondents Sampled for face-to-face detailed discussions 10 23 WhatsApp Group members requested to fill - 77 Processors and submit digital questionnaire WhatsApp Group members who completed - 27 and submitted the digital questionnaire Policy Makers Ministry of Trade and Industries (MoTI) Regulatory Ghana Standard Authority (GSA) 1 1 Authorities Food and Drugs Authority (FDA) 1 1 Support Financial Institutions 1 2 Institutions Ghana Export Promotion Authority (GEPA) 1 1

23 Reference Accra Fairs Surveys List of participants 24 Reference List of interviewees for Accra Cluster and Kumasi Cluster 39

National Board for Small Scale Industries 1 1 (NBSSI) Ghana National Chamber of Commerce & 1 1 Industry (GNCCI) Association of Ghanaian Industries (AGI) 1 1 Machine & Equipment Fabricators 1 2 BDSs Packaging Firms 1 3 University of Ghana (UG), Legon 1 1 R&D Institutions Kwame Nkrumah University of Science and 1 1 Technology (KNUST) NGOs 1 3 Other Critical Financial Institutions 1 3 Actors Associations 1 3 Table 9: Summary Table of Respondents contacted during CDS

The tables, graphs and charts below provide summaries of the general characteristics of the respondents contacted during the CDS.

Parameter Details Percent

Year of Establishment Less than 5 years ago 44

5 to 10 years ago 28

More than 10 years ago 28

Form of ownership Sole proprietorship 65.2

PLC 21.7

Public enterprise 4.3

Family enterprise 8.7

Productive activities Primary Activity 84 (Primary and Others) Others 16

Table 10: Showing length and types of business ownerships

The data above reflects that close to a third (72%) of the processors were established within the last 10 years (2010 – 2020). There are 28% that have been in existence for longer than 10

40 years and 16% of the respondents considered cosmetics processing as their basic productive activity.

Human Resources

The sector employs a lot more females across all the areas of production than males. 45% indicated that the number of their employees have remained the same over the past three years, whereas more than half indicated the employees have not had any form of technical trainings.

Of those who indicated that their employees were trained and also provided details on the areas and institutions that trained them, no mention was made of any training related to any aspect of cosmetics processing. Table 11 below provides information about human resources in the cluster.

Figure 7 below also indicates that approximately 74% of respondents said there were no skilled workers on market, whilst another 65% rated the skill competency of their staff as average.

80 73.7

70 64.7

26.3 30 23.5 20 11.8 10

0 Yes No Low Average Higher Is the availability of skilled workers in the Skill level of your employee/Managers local market for your enterprise sufficient?

Figure 5: Number of Skilled and Unskilled workers

Employee Structure Status Gender Average Number Total Number of Employees of Employees Technical Permanent Males 6 41 Females 10 52 Temporary Males 5 5 Females 4 4 Administration Permanent Males 2 5 Females 3 20 Temporary Males . . Females . . Assistants or on practice Permanent Males 1 9 Females 2 17 Temporary Males 1 2 Females 2 5 During the last three years, Mean 9 what was the number of employees in your establishment? Min 1 Max 45 Table 11: Employment summaries

Markets and Marketing

Regarding how the processors market their products, electronic marketing mostly through social media platforms is the commonest means (40%) while some also have sales and marketing teams in place (16%). The processors indicated that their biggest markets were within the same regions (62.5%) while products to the export market was about 42%. Figures

6 and 7 below show the marketing modes and markets.

45.0 40.0 40.0 35.0 30.0 25.0 20.0 20.0 16.0 15.0 12.0 8.0 10.0 4.0 5.0 0.0

Figure 6: Marketing

60 70.00%

50 60.00%

50.00% 40 40.00% 30

30.00% Percent 20 Averege Percent Averege 20.00%

10 10.00%

0 0.00% Within the town Within the region Other region of Export market the country

Percent Average Percent

Figure 7: Markets

60% of the respondents indicated that the quality of their products was the most common feature they used in promoting their products. Social media (65%) and Trade fairs (60%) are some of the most widely used avenues for promoting products.

0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% 70.00%

Quality 50.00% Product design 13.60% Price 13.60% Personal contacts 13.60% Other 9.10%

yourcustomers? Closeness to consumers 0.00%

feature used to attract used feature to What is the mainproduct is What the Other (Social Media) 65.00% Trade fair and exhibition 60.00% Business card 25.00% Banners and sign board 20.00%

Radio 15.00% products? Newspaper 0.00%

Television 0.00% How do How your you promote

Figure 8: How processors promote their products

Brands Ownership

92% of the respondents produced under their own brand names which indicates strong ownership of the products on the market.

Figure 9: Brand ownership by processors 44

Membership of Associations

About 73% of the respondents belong to one or more associations but only 7% had been in any association or cooperation for more than 10 years. Significantly, more than 90% had been in one form of association within the last 10 years. Majority of respondents indicated that their key benefit from the associations was training.

Are you a member of any business association? Percent Yes 72.7 No 27.3 Length of years in association Less than 5 years ago 78.6 5 to 10 years ago 14.3 More than 10 years ago 7.1 Do you discuss your problems? Yes 73.7 No 26.3 In what area does the membership in the associations helps your enterprise? Sales promotion (Trade fairs, exhibitions, Group advertisement 12.50% Business information 25.00% Training 62.50% Government policies procedures 37.50% Provision of inputs and services 37.50% Finance 12.50% Other 6.30% Table 12: Associations processors belong

Table 13: Training and the institutions that provide them

Production and Technology

70% of the respondents were very satisfied with their raw material suppliers and almost 95% bought their raw materials on upfront cash payment basis. 99% of the raw materials were bought locally (including regional and national level of sources) whilst about 83% imported their machinery with only 16% procured locally as depicted in Figures 10 and 11 below.

Problems with Raw Materials 120 96 100 80 70 60 40 30

20 4 0 Yes No Cash Credit Does your enterprise have any substantial problems How do you buy the raw material? with its raw material suppliers

Figure 10: Problems with procuring raw materials

Basic raw material Machinery & Equipment

0.0% 20.0%40.0%60.0%80.0%100.0% 0.0%20.0%40.0%60.0%80.0%100.0%

Local 58.8% Local 16.7%

Regional 17.6% Regional 0.0%

National 23.5% National 0.0% national, Imported) national,

Imported 0.0% Imported) national, Imported 83.3%

Source (Local, Regional Source(Local, Source (Local, Regional Source(Local,

Consistent 52.9% Consistent 66.7% Quality

Varies 47.1% Quality Varies 33.3%

(Consistent/ (Consistent/ Regular 76.5% Regular 83.3%

Regular/ Irregular 23.5% irregular)

Regular/ Irregular 16.7%

irregular)

Availability( Availability(

Constant 23.5% Constant 50.0%

nt/ nt/

Irregular 76.5% Irregular 50.0%

Price(Consta Price(Consta

Figure 11: Source, Quality and Availability of raw materials and machinery /equipment

Packaging

The various sources of packaging materials as well as the types used are depicted in Figure 12 below.

73.90% 80.00% 69.60% 70.00% 56.50% 60.00% 47.80% 47.80% 50.00% 40.00% 30.00% 21.70% 21.70% 20.00% 13.00% 8.70% 10.00% 0.00% Local National Import Plastic Jars Carton Glass jars Plastic Other Stainless market market boxes containers (Calabash, steel (distributor ceramic, containers wood, bamboo) Where do you get the packaging What packaging do you use? material?

Figure 12: Source and Types of Packaging Materials

The processors also indicated the challenges they face with the packaging materials which include:

. The quality of the desired packaging materials is low in Ghana (for e.g. the quality of

bamboo finishing in Ghana does not meet the desired standards hence the imports).

. Desired packaging materials are unavailable locally (for e.g. appropriate glass bottles).

. Pricing – imported packaging materials tend to be cheaper. The minimum order

quantities for sustainable packaging is also very high locally.

. Printing of the date of manufacture on certain packaging materials being difficult.

. Lack of variety and options in packaging materials.

. High cost of imports and low quality of locally sourced ones.

. Customers outside the country require biodegradable packaging materials

. Cash delivery basis – lack of credit facilities.

. There are not enough distributors of these plastic containers on the local market.

Finance

70% of respondents use their own equity and resources to finance their businesses with only

5% relying on banks and other financial institutions for support. This data is supported by several anecdotes gathered from the face-to-face discussions with the processors in the middle and southern clusters. The key reason for not accessing financial support from the formal institutions was due to excessive paper work, high interest rates and processing fees (between

2% and 8% per annum).

Parameter Details Percent Type of finance Owner equity (%) 70 Bank Loans (MFI) (%) 5

Family & Relations (%) 15

Other (%) 10 Do you feel your enterprise needs more external Yes 73.7 loan to enhance your business? No 26.3 What is your business position during the last five Going up 55.6 years Stable 33.3 Down 11.1 Do you have formal bookkeeping system in place Yes 68.4 (proper financial management)? Please explain No 31.6 Table 14: Types of finances used by processors

CLUSTER ANALYSIS

The following analytical tools were employed as part of the Cluster analysis.

. Business Operations (Black Soap & Cosmetics Processors)

. Value Addition

. Cooperation in the Cluster

. Porters’ Five Forces

. SWOT

Business Operations Analysis (BOA)

A critical review of the cluster actors’ operations, resources needed to start and remain in operation and the identification of any incompetency that impedes their operations was made.

This eventually served as the basis for recommending strategic approaches to enhance the cluster activities. The BOA was conducted for the two key value chains (Black Soap and

Processors of finished products).

Black Soap processors

Four Black Soap processing sites were visited. The detailed discussion with the actors at these sites provided information for the BOA as depicted in Table 15 below.

Criteria Current Status Challenges or Issues Recommended Interventions

Raw materials . Major raw materials are Palm Kernel Oil . The seasonality of the Potash with . Create a storage hub or business (PKO) and Cocoa Pod potash the associated escalating prices is a where the potash can be bought major concern when in season

. There is no documented standard that . Quality is compromised with . An opportunity to create standard guides the production of these raw impurities (stones, sticks and pieces for the raw potash and PKO and materials of plastics) train the producers to adhere to the standard

Energy consumption . Current 100% use fire wood to boil the . Adverse environmental impact as . The need for improved stoves as ingredients more wood is cut for increased well as introduction of gas burners . Electricity use is limited mostly for production and solar boilers provision of light Machinery & . Use of very basic and mostly locally . Most of the equipment were . There is the opportunity for the Equipment Inventory manufactured equipment for stamping deemed efficient but required a lot making of equipment that require and blocking. of human strength to operate less human strength

Production capacity . Average production capacities range . Inability of individual processors to . There is the need for joint between 60% to 80% of installed meet major international orders collaborations and teaming up to capacities meet production orders

Production process . Three clearly distinct stages of . The processes involve handling . The need for equipment that can production that can be summarized into very hot products process the hot products two: . Adopting safety programmes - Cooking, mixing and drying . Evaluate processing site and its - Molding, packing & packaging immediate environment

Criteria Current Status Challenges or Issues Recommended Interventions

. There are scales for measuring the weight . It is unknown whether the scales are . Measures to ensure that scales are of processed products well calibrated to provide standard well calibrated measurements.

. None of the sites or actors have a PH . The product’s PH is not determined . Train the processors to test PH testing facility or laboratory by any standard levels

Packaging and . Most of the processors spend little on . Concern has been raised with the . An opportunity to “modernize” the Packaging Materials packaging the Black soap. old cement papers hence the reason packaging the Black soap for the . Contractors who have placed orders bring why all exported products are now local markets their own packaging materials packed in plastic rappers. . Products for the local markets are covered in old cement papers (very little cost) . Granulated soap (gari) packed in 50/60kg bags (some are old rice or fertilizer bags) Sales & Marketing . Very few have any form of sales or . Majority rely on those who know . The need for effective marketing marketing personnel them already strategies to be developed and implemented.

Table 15: Summary of BOA of Black Soap Processing

Processors of Cosmetics and Personal Care Products

A total of 18 processors of CPCP were contacted and they ranged from start-ups, micro businesses to small businesses. Their operations varied but were also analyzed using the BOA.

Criteria Current Status Challenges or Issues Recommended

Interventions

Raw Mainly use: . Ensuring the . Support the materials quality of these raw backward . Shea butter materials is linkage suppliers . Black soap paramount of raw materials 25 . Essential & carrier Oils . Regular supply to maintain the . Cocoa butter throughout the year required . Mode of transporting . Elements of the standard. these raw materials also weather affect Shea . Maintaining the affect their quality butter adversely quality of raw materials and inputs used

Energy . All the processors rely on . High tariffs . The need for consumption the national electricity . High fuel alternative supply and backup consumption by sources of generators generator sets energy such as solar . Reduction in tariffs for small businesses

Machinery . Apart from a few . The capacity of . Promote joint & processors, majority are equipment limits ownership of Equipment using small domestic the ability to large-scale Inventory hand-held devices as expand production equipment mixers, whiskers and fillers . A few have imported . These are not being . Equipment can multi-functional factory used to maximize be used by other machines their potential

25 There are Essential and Carrier Oils. An essential oil is mostly volatile hydrocarbons. Essential oils are derived from various sections of plants. The oil is "essential" in the sense that it carries a distinctive scent, or essence of the plant. Carrier oil, also known as base oil or vegetable oil, is used to dilute essential oils and absolutes before they are applied to the skin in massage and aromatherapy. Carrier oils do not contain a concentrated aroma, unlike essential oils, though some, such as olive, have a mild distinctive smell. Neither do they evaporate like essential oils, which are more volatile. 52

Criteria Current Status Challenges or Issues Recommended

Interventions

processors for their contracts.

Production . Producing below . Equipment remain . Promote mergers capacity maximum installed idle for most part of to take up bigger capacity the week after one- contracts to . The micro and small- time production maximize the scale processor produce use of the on demand basis machinery

Production The processes are well . Kaizen process is . Kaizen must be process delineated and segregated. being adopted the standard however there is adopted by all . Raw materials received the need for processors and stored improvements. . Maintaining . Weighting, mixing, employee heating and blending training program . Filling and capping . Packaging . Storage . Many processors to a . Very little ability at . large extent use manual mechanization and labour with simple large-scale equipment like kitchen production scale, mixers etc. . Packaging consists of manual filling in bottles or containers . Most of them carry out . This can lead to . Assuring the the process in small differences in quality and the batches consistency, quality traceability of and traceability of finished products finished products

Criteria Current Status Challenges or Issues Recommended

Interventions

Packaging . Processors have . Processors are . Processors will and enumerated the limited by the small have to team up Packaging challenges with the quantities they to meet the cost Materials locally produced produce of having packaging materials . The processors customized - Limited variety cannot afford packaging - Do not seal very well individual molds materials made . Manufactures also and have maintain they can customized produce same quality materials made for they get from outside. them They must be ready to o pay the associated cost Sales & . The processors have well . The major . Address the over Marketing laid out sales and challenge the S &M reliance on marketing avenues which team face is with similar involve: products packaging - Social media handles counterfeiting materials - Personnel who go out to market the product Table 16: Summary of BOA of Cosmetics and Personal Care Products processing Value Addition

The value chain for cosmetics processing represents a number of activities/processes that deliver value to a transformed product. A number of factors are considered as part of these processes and the value chain analysis considered how they contribute to the final Maximum

Retail Price (MRP) that customers are willing to pay. Two products from the cluster, Back

Soap Bar (15g) and 180g Body Butter (in Plastic Jar) production cost are examined to explain the final retail price paid by the customer as seen in Table 17 below.

Production Components for 150g Black Soap Cost (GH Cedis) % of Cost Bar Raw black soap 8.5 52.15 Raw materials Fragrances / Herbs 1.3 7.98 Processing 2 12.27 Packaging 3 18.40 Storage / Marketing 1.5 9.20

Total cost of producing per Kg 16.3 Cost of producing a 150g of Black Soap Bar 2.72 16.67 (1Kg/150g= 6) Unit Selling Price of 150g Black Bar Soap 3.5 21.47

Margin (3.5 – 2.63) per 150g Black Soap 0.78 4.81 Cost of 150g Back Soap bar delivered to Retail 3.75 23.01 shops Retail Price at SDC 5 30.67

Table 17: Value Addition during the Production of 150g Black Soap Bar Soap

The Black Soap bar processor’s raw materials (black soap and fragrance plus herbs) constitute

60.12% of the total production cost, with packaging being the second highest proportion of the cost of production (18.4%) and together, these factors of production make up over 70% of the total cost of production. The unit cost of 150g bar soap forms 17% of the overall cost of producing a kilogram of the Black Soap. The final retail price at Structured Distribution

Channels is 31% over the cost of production. The second product, a shea butter-based Body

Butter (in a 180g Plastic Jar) from the cluster is analyzed for comparison in Table 18 below.

Production Components Cost (GHȼ) % of Cost Raw materials to Shea butter (4.5Kg) 67.5 13.86 produce 5KG Essential oils (Orange & 46.5 9.55 Body Butter Chocolate) (75mls) (BB) Batch Fixed or Carrier Oils 25.4 5.22 (Coconut, moringa, SAO, Baobab) (540 ml) Cost of Raw materials 139.4 28.63 Processing 46 9.45 ECG (1GH Cedis) Water (0.50 GH Cedis) Space(3.5 GH Cedis)* Labour (30% of raw materials) Packaging 187.5 38.51 180g Plastic Jar (5.8 GH Cedis) Label (1.7GH Cedis per label) Total per Jar 7.5GH Cedis * 25 pieces

Production Components Cost (GHȼ) % of Cost Storage 3.5 0.72 % of monthly rent* Marketing 87.5 17.97 Internet data (1.6 GH Cedis) Paper Bag 2.50 GH Cedis per one * 25 pieces (62.5 GH Cedis) Fliers 1GH Cedis per one * 25 pieces (25 GH Cedis) Distribution cost 23 4.72 Delivery cost to Retail shops Per 5KG

Total Processing & Production of 5 Kg of BB 347.5 71.37

Overall Cost (Raw Materials + Processing) 486.9 5Kg of BB 5Kg /180g = 28 pieces (Optimal production). However, Processor fills 25 pieces of 180g Jars from every 5KG batch Unit cost of producing each of the 25 pieces of 19.48 4 180g Jar BB Factory Selling price per Jar 25 5.13

Margins (between selling & cost of production) 5.52 1.13

Retail Price at SDC (Maximum Recorded) 32 6.57

Table 18: Value addition during production of 180g Plastic Jar of Body Butter (BB) From the examples given in the analysis above, the raw materials costs constitute close to a third of the entire cost of producing the 180g Jar of the Body Butter (29%) as compared to two- thirds of the entire processing cost (71%). The overall Retail Price a consumer pays for the processed Body Buter is 6.6% of the entire cost of producing it.

Cooperation in the Cluster

This section examines the links among the various actors, especially among producers in the cluster; and with other actors within the cluster such as Policy Makers, BDSs, regulators, finance and Support institutions as well as R&D institutions. The types of cooperation are illustrated in Figures 13 and 14 below.

Cooperation Between Black Soap and Cosmetics Products Producers

There are clearly established forward and backward linkages between Black Soap processors and producers of cosmetics and personal care products within the cluster. There are very strong linkages between producers of cosmetics products since they rely on Black soap processors for their key raw materials; however, the backward links from producers to Black Soap processors is not very strong because it is largely based on feedback on quality and frequency of supply.

BDS

There are very strong and significant linkages between BDS and both cosmetics processors and

Black soap processors. This is because of the machinery and equipment fabricated for these actors. Additionally, there are also producers of packaging materials and printers of their labels.

Each of them in a way plays diverse but complementary roles along the chain. Many of the

BDS are privately-owned businesses while the GRATIS Foundation which is state-owned does not receive very good compliments from the few clients (processors) who have patronized their equipment. The linkages with the private sector need to be strengthened to improve the cosmetics sector.

R&D Institutions

There are a number of R&D institutions in the cluster, however the key links have been drawn between processors and the Universities (especially their Chemistry and Pharmaceutical laboratories). These established facilities conduct content analysis on samples that are to be submitted to regulators. Almost all the processors engaged had sent more than 5 samples within the last two years to a university laboratory for analysis. This linkage is further fostered because the FDA has formalized the acceptance of test results from these laboratories26.

26 1. Name of contact person & title: a. Names a. #1: Dr Richard K. Amewu (+233 54 382 3483) b. #2: Dr. Klake (0207523076) c. Title: Senior Lecturers, University of Ghana, Chemistry Department 57

Regulators

The two regulators (FDA and GSA) have clearly defined procedures for standards adherence and certification respectively. It is common knowledge that many of the processors have not fully completed all the stages of certification as well as adherence to standards. This gap provides an opportunity for stronger and more regular engagement with them at all levels.

Supporting and Promotional Institutions

These links are well developed for the promotion of the products for both internal and external markets. Additionally, the financial institutions are also roped into the links as sources of financial packages.

Associations, NGOs and other partners

Over 70% of the respondents indicated that they belonged to an association or an NGO and the links were found to be very well established. Membership to these groups allow for the processors to benefit from group packages for participation in both local and foreign trade fairs to showcase their products; engage with processors; and develop business links.

2. Support to cosmetics producers a. Have been conducting analysis testing since 2014 b. Does not charge commercial charges for the testing done c. The 200 GH Cedis is likened to the Corporate Social Responsibility d. Standards are bought from Ghana Standard Authority (GSA) to guide the test 3. Gaps a. There is currently no Microbial analysis at the laps b. There is no Atomic Absorption Photometer (used for heavy metal analysis) c. The laps are not ISO credited 4. Way forward a. The university is currently in talks with GSA to have the laps become ISO certified and accredited b. The laps are well positioned to discuss with any project to be a testing site with appropriate support to continue conducting test for cosmetics processors c. The laps are also prepared to be undertake testing for organic certifications ( a current need expressed by some of the processors)

Figure 13: Cooperation Matrix I

Figure 14: Cooperation among actors within the clusters

Porters’ Five Forces

Figure 15: Porters’ Five Forces Analysis of Middle and Southern Clusters

The Porter’s Five Forces was used to analyze the cosmetics producers’ clusters as follows:

PORTERS’ FIVE FORCES ANALYSIS

Threats of New Entrants . Easy entry for new actors . Low capital and technical knowledge to enter A very strong impact on the . No patents hence highly innovative products are not cluster (with 3+++) in the patented following ways: . No legal framework to limit entry . Easy access to suppliers

Supplier Bargaining Power . Very large number of suppliers, such that pricing cannot be determined by only a few An equally strong impact on . There are no alternatives to the raw materials they supply the cluster (with 2++) in the . Raw materials are easily accessible following ways . There are no threats to forward integrations from suppliers

Buyers Bargaining Power . There are huge market options both internally & externally . Buyers can switch to other larger international brands A very strong impact on the cluster (with 2++)due to the following reasons:

Threat of Substitutes . Substitutes can offer same satisfaction to clients . Substitutes that are very good tend to be expensive Also has a strong impact on . Low quality substitutes are very common on the market and the cluster (with 2++) due to: are cheaply priced

Competitive Rivalry . Large number of competing processors

Has a strong impact (with 2++) . Market is not yet saturated due to: . Customer loyalty is low

Table 19: Analysis of Porters’ Five Forces in the Clusters

SWOT Analysis

The tool was used to analyze the inherent (strengths and weaknesses) and external

(opportunities and threats) factors that affect the cluster activities. The factors are summarized below.

INHERENT FACTORS STRENGTHS WEAKNESSES . A maturing sector well diversified into . There is poor coordination among members (Black Soap and finished products) of the cluster (no one wants the other to know production what each of them is doing) . There is adequate technical knowledge . Inherent weakness and fragmentations within and supporting manufacturing base and associations capacity. . Inadequate innovation to diversify the . A very rich local knowledge of Black production process (especially with Black Soap making on which the entire Soap) finished products rely. . Small production capacities that cannot take . The sources of the major inputs (Black advantage of the big contracts Soap and Shea Butter) are strong and . Lack of or the low use of laboratories at the well-coordinated processing sites . The sector has a fallback position for . Poor environmental and health /safety machinery and equipment precaution at Black Soap processing sites fabricators/artisans who understands . Limited varieties of packaging materials on the their needs. local market . There are products that are comparable with international brands . There is relatively easy access to labour within the sector EXTERNAL FACTORS OPPORTUNITIES THREATS

. Government stimulus packages . Potential to compromise the standards and including “One District One Factory” adulterate the products through counterfeiting . The increase in global awareness and . Cheap and lower priced alternatives from change in consumption toward natural, international producers handcrafted (and organic) skin and . High interest rates and financial processing personal care products fees . Increased collaboration between the . Long delays in completing certification regulating and R&D institutions to processes increase the outlets for testing . International NGOs and cosmetics experts who want to promote greater 63

diversification of the products from . High level of “untested and uncertified” Shea butter and Black soap cosmetics and personal care products sold on the market

Table 20: SWOT Analysis of Middle and Southern Clusters

CONCLUSION

The CDS sought among other objectives, to make a comparison between the two clusters in order to draw out critical intervention areas for each cluster as well as to identify their critical linkages.

Vision, Strategic Areas and Potential Interventions

At a consultative discussion, actors from the two clusters (middle and southern) outlined their respective visions, strategic areas and recommended potential areas of intervention. The table below summarizes the highlights from the discussion.

Vision Strategic Areas Potential Interventions

Middle Cluster

“To be the 1. Capacity . Stronger networks cooperatives preferred hub building for . Sustainable access to raw materials for quality cluster . Capacity building i.e. Training, certification, cosmetics and members compliance regulations and standards personal care 2. Appropriate . Product formulation and Packaging and branding products” machinery and . Access to markets equipment . Access to reliable finance

Vision Strategic Areas Potential Interventions

. Access to appropriate and modern technology

Southern Cluster

“To produce 1. Raw materials . Capacity building in meeting standards quality 2. Packaging . Develop standards for raw materials that do not cosmetics and 3. Quality & currently have them (for example PKO, Coconut body care Value addition oil and essential oils) products that . Certification, registration and conformity meet customer assessment satisfaction and . Strengthen the cluster of raw material base of international producers (Black Soap) standards”

Table 21: Summary of Consultative Discussion by Cluster Actors

Based on these discussions an analysis is presented below of the differences and similarities between the two clusters.

CLUSTERS FOCAL AREAS MIDDLE SOUTHERN Machinery/ . Simple and efficient . Heavy equipment that promote equipment equipment to enhance mass production production Packaging . Increase the availability of . Appropriate and comparable alternative packaging packaging materials choices Financing . Short- and medium-term . Long term capital capital Market Outlets . Increasing marketing share . Ability to meet international locally and externally demands and increase contract production Capacity building . Increase skills in . Ability to meet international formulation and production certifications and ISO conformity

Raw Material . Regular and sustained . Develop standards for raw access to raw materials materials Linkages . Building strong and . Ability to co-produce and formidable corporative for maximize machinery and networking equipment Table 22: Similarities and Differences Between Middle and Southern Potential Interventions

RECOMMENDATIONS

1. Machinery/ equipment: Promote appropriate retooling and equipping based on the

actors’ capacities.

2. Packaging: Connect BDS to processors to discuss how mass procurement of

appropriate packaging materials can be effectively done.

3. Financing: Support clusters to prepare and apply for short to medium term financial

packages from appropriate financial institutions.

4. Market Outlets: Actively engage and liaise with Promotional and Support Institutions

to identify avenues (locally and internationally) to promote Ghanaian hand-crafted

cosmetics products.

5. Capacity building: Coordinate the activities of all training providers to harmonize the

impact on strengthening their technical capacities to meet national and international

standards.

6. Raw Materials: Collaborate with the regulatory bodies (FDA and GSA) to create

appropriate standards for all raw materials.

7. Linkages: Promote forward and backward linkages among actors to take advantage of

their comparative advantages along the value chain of cosmetics products processing .

APPENDIX

Appendix I: Shea based Body Butter (180g) Production and MRP Graph

Appendix II: Black Soap Bar (150g) Production and MRP Graph

Appendix III: Gallery of Packaged Cosmetics Products

Packed solid soaps (Black Soap and Shea Soaps)

Packed oils, lotions and

Assorted packaged soaps, body and hand creams

Packed bathing gels

Appendix IV: Cosmetics Actors Visited

Actor Display of Products

. Name: LAAM Shea . Location: Kumasi, Ashanti Region . Address: Odeneho Kwadaso Kumasi . CEO: Michelle Dassah (+233 50 225 3500)

. Brand: Name: Yewodze Enterprise, . Location: Twifo Praso, Central Region . Digital Address: CT-0001-8254 . CEO: Mr. Kwesi Duodu-Amponsah (+233 20 815 8332)

Name: 360 Natural

Location: Ashanti Region

Actor Display of Products

McHAMMAH ENGINEERING COMPANY LTD

Name of contact person & title:

Engr. Ebenzer Kakrah Hammah

Title: CEO

Contact: +233 244 771 036

. Name: Bennevile Venture . Location: Kumasi, Ashanti Region . CEO: Bernice Ansah (+233 24 404 7134)

Machinery Fabricator (Suame, Kumasi)

Name of contact person & title:

Name: Mr Kwame Frimpong (Master Eng. Frimpong)

Title: CEO

Contact: +233 244 763 906

Actor Display of Products

. Name: CKB Enterprise . Location: Pakyi # 2, Kumasi, Ashanti Region . Digital address: AW-4074-6857 . CEO: Charles K. Boateng (+233 240 207 8089)

. Name: Ghana Permaculture Institute (GPI)

. Location: Techiman -Baafi, Bono East Region

. Digital address: BX-0378-3463

. CEO: Paul Yeboah (+233 243 702596)

Northern Cosmetics Cluster Diagnostics

Northern Cluster Cosmetics Diagnostic Study Report

Table of Contents

List of Figures ...... 78 List of Abbreviations ...... 79 Executive Summary ...... 80 Introduction ...... 82 Background ...... 82 Scope of the study ...... 82 Objectives of the study ...... 82 Methodology ...... 83 Definition of the Cluster ...... 84 Cluster Products ...... 84 Production Processes in the Cluster ...... 85 The Production Process for Raw Shea Butter ...... 85 Production Process for Cosmetic Products / Black Soap ...... 88 Chapter Two ...... 91 History of the Cluster ...... 91 Phase 1: Before the 1980s ...... 93 Phase 2: 1980 to 2000 ...... 94 Phase 3: 2000 to 2020 ...... 96 International & National Scenario ...... 98 Chapter Three ...... 101 Benchmark and Baseline Analysis ...... 101 Benchmark Cluster Analysis ...... 101 Table 2: Details of Cluster Data Mapping ...... 104 Baseline Cluster Survey ...... 104 Size of Firms ...... 104 Size of the Cluster ...... 105

Labour Force Of Cluster ...... 106 Production Capacity ...... 107 Brands Established ...... 107 Production Capacity of Installed Equipment ...... 107 Volumes of Production ...... 108 Export Market of Cluster ...... 109 Certification Compliance ...... 110 Food and Drugs Authority (FDA): ...... 110 Ghana Standards Authority (GSA): ...... 111 International Organization for Standardization (ISO) ...... 111 Organic Production Certification ...... 111 Good Manufacturing Practices (GMP): ...... 111 Fair Trade / Fair for Life Certification ...... 111 Associations / Institutions ...... 112 Ghana Export Promotion Authority ...... 112 Shea Network Ghana and Global Shea Alliance ...... 112 Chapter Four ...... 113 Analysis of Vital Statistics ...... 113 Number of firms according to size ...... 113 Estimated turnover ...... 113 Table 8: Financing of Business Operations ...... 115 Source: Field Survey, 2020 ...... 115 Estimated Employment ...... 115 Support Institutions ...... 117 National Board for Small Scale Industries (NBSSI) ...... 118 Food and Drug Authority (FDA) ...... 119 Ghana Standards Authority (GSA) ...... 120 Environmental Protection Agency ...... 120 Status of Technical Institutions ...... 121 GRATIS Foundation ...... 121 Tamale Technical University ...... 122 UDS Spanish Lab and SARI Lab ...... 122

Status of Service Providers ...... 123 NGOs active in the cluster ...... 123 Financial Institutions ...... 123 Value Chain Analysis ...... 126 Value Addition of the cluster ...... 129 Nature of Cooperation in the Cluster ...... 131 Analysis of Business Operations ...... 134

Packaging...... 136 Raw Materials and Intermediate Goods...... 136 Figure 21: Raw Materials and Expenditure ...... 137 Production capacity ...... 137 Monthly Expenditure ...... 138 Possibility of Investments / SMEs Growth Plans ...... 140 Areas of Expansion ...... 142 Table 15: Areas of Expansion ...... 142 Porter’s Five Forces – Northern Cluster ...... 143 Cluster Analysis using Analytical Tools SWOT Analysis ...... 145 Chapter Five ...... 147 Vision, Recommendations and Conclusion ...... 147 Vision of the Cluster ...... 147 Table 18: Major Problems faced by SMEs with Proposed Solutions ...... 150 Conclusion ...... 156 References ...... 157

List of Tables

TABLE 1: NORTHERN AND SOUTHERN CLUSTER ANALYSIS ...... 101 TABLE 2: DETAILS OF CLUSTER DATA MAPPING ...... 104 TABLE 3 REGIONAL DISTRIBUTION OF CLUSTER ...... 106 TABLE 4: AVAILABLE PRODUCTION EQUIPMENT ...... 108 TABLE 5: VOLUMES OF PRODUCTION ...... 109 TABLE 6: EXPORT MARKET OF CLUSTER ...... 109 TABLE 7: BASIC DATA OF SMES ...... 113 TABLE 8: FINANCING OF BUSINESS OPERATIONS ...... 115 TABLE 9: STRUCTURE OF EMPLOYEES ...... 116 TABLE 10: FINANCIAL INSTITUTIONS ...... 124 TABLE 11: SUMMARY OF SUPPORT INSTITUTIONS ...... 126 TABLE 12: POTENTIAL SUPPORT INSTITUTIONS ...... 126 TABLE 13: VALUE ADDITION OF SHEA NUTS ...... 130 TABLE 14: CLUSTER COOPERATION MATRIX ...... 133 TABLE 15: AREAS OF EXPANSION ...... 142 TABLE 16: PORTER'S FIVE FORCES - NORTHERN CLUSTER ...... 144 TABLE 17: VISION OF CLUSTER...... 147 TABLE 18: MAJOR PROBLEMS FACED BY SMES WITH PROPOSED SOLUTIONS ...... 150 TABLE 19: MAJOR PACKAGING ISSUES ENCOUNTERED BY SMES ...... 151 TABLE 20: KEY RECOMMENDATIONS ...... 155

List of Figures

FIGURE 1 CLUSTER STUDY METHODOLOGY ...... 83 FIGURE 2 RAW SHEA BUTTER PRODUCTION PROCESS FLOW ...... 86 FIGURE 3 COSMETIC PRODUCTION PROCESS FLOW ...... 89 FIGURE 4 MAJOR GROWTH MILESTONES IN THE CLUSTER ...... 93 FIGURE 5 MAJOR SHEA PRODUCING COUNTRIES ...... 99 FIGURE 6 NORTHERN CLUSTER MAP ...... 102 FIGURE 7 SIZE OF FIRMS IN THE CLUSTER ...... 105 FIGURE 8 CLUSTER REGIONAL DISTRIBUTION ...... 105 FIGURE 9 LABOUR FORCE OF CLUSTER ...... 107 FIGURE 10 EXPORT MARKET ...... 110 FIGURE 11 CERTIFICATION COMPLIANCE ...... 112 FIGURE 12 ANNUAL TURNOVER ...... 114 FIGURE 13 STRUCTURE OF EMPLOYEES...... 117 FIGURE 14 EMPLOYEES ENGAGED OVER THREE YEARS ...... 117 FIGURE 15 VALUE CHAIN ANALYSIS MAP ...... 128 FIGURE 16 VALUE ADDITION MAP ...... 130 FIGURE 17 AVAILABILITY OF SKILLED WORKERS OF CLUSTER ...... 134 FIGURE 18 PRINCIPAL FIRMS' COMPETITORS ...... 135 FIGURE 19 PARAMETERS OF COMPETITION ...... 135 FIGURE 20 CLUSTER PACKAGING ...... 136 FIGURE 21 RAW MATERIALS AND EXPENDITURE ...... 137 FIGURE 22 PRODUCTION CAPACITY ...... 138 FIGURE 23 AREAS OF EXPENDITURE ...... 139

List of Abbreviations CEO Chief Executive Officer CRIG Cocoa Research Institute of Ghana ECOWAS Economic Community of West African States EU European Union FDA Food and Drugs Authority FI Financial Institutions GMP Good Manufacturing Practices GWP Good Warehouse Practices GHP Good Hygiene Practices GSA Ghana Standards Authority ISO International Organization for Standardization ITTU Intermediate Technical Transfer Unit MSEs Micro and Small Enterprises NBSSI National Board for Small Scale Industries NGOs Non-Governmental Organizations PPP Public Private Partnership REP Rural Enterprise Project SARI Savanna Agricultural Research Institute SFC Savannah Fruits Company SMEs Small and Medium Enterprises SNG Shea Network Ghana SNV Netherlands Development Organization UDS University for Development Studies USAID United States Agency International Development UNIDO United Nations Industrial Development Organization WACOMP West African Competitiveness Programme

Executive Summary

The West Africa Competitiveness Programme (WACOMP) is a partnership initiative between the

Economic Community of West African States (ECOWAS) and the European Union (EU) aimed at strengthening the export competitiveness of the Ghanaian economy through enhanced value-addition, low carbon sustainable production, processing and an increased access to regional and international markets. The Project aims to improve the performance and growth of three value chains in Ghana namely: cassava and its derivatives, fruits (mango and pineapple) and cosmetics and personal care products.

The Northern Cluster of the WACOMP project focuses on the cosmetic value chain that uses as part of its raw materials, shea butter, baobab oil, moringa oil and other indigenous oils to formulate different kinds of cosmetic products. Shea is an indigenous crop that is predominately grown in the northern part of Ghana. The northern cluster employs about 80% females who are into picking, production, processing and marketing of shea-based products. The cluster has transformed over the years with the emergence of new international markets and establishment of processing facilities. Despite its massive transformation, the cluster still faces some major challenges such as inadequate modern processing equipment, poor quality of products that do not meet international standards, limited international market access, limited finance to expand production, limited storage facilities, among others. The cluster has a huge rising demand for shea butter and other shea-based products by both national and international clients.

The recommendations of this study include the provision of support to SMEs and production groups to acquire modern technologies and machineries; direct access to international buyers through appropriate labelling; and the improvement of product quality. The establishment of warehouses for SMEs would go a long way to support groups and processors to purchase huge raw materials and to embark on all- year-round production and processing. As an emerging and growing cluster, there is also the need to

80 coordinate the activities of the individual firms to enable them to collaborate more with each other and to develop a good market brand for the cluster. This will create wider opportunities and improve incomes of all actors and stakeholders in the cluster.

Chapter One

Introduction

Background

There are several actors in the shea value chain who play their respective roles well although effective coordination of activities and efforts among the actors do not exist. Because they work individually, they are unable to collectively access opportunities such as access to bigger markets, trainings on modern production techniques, etc. It is against this background that the WACOMP project seeks to support the actors in the northern cluster to consolidate the efforts of these individuals into a well- established cluster that would create wider and better opportunities for all members and ultimately, lead to an improvement in business operations and profit margins. The Northern Cluster of the WACOMP project focuses on the cosmetic value chain actors who use as part of their raw materials, shea and other indigenous oils to formulate different kinds of cosmetic and personal care products.

Scope of the study

A baseline survey was conducted among the relevant stakeholders to obtain information on the true status and potential of the cluster before the implementation of the project. The study was limited to only two regions in northern Ghana namely; Northern Region and Upper East Region although the other northern regions (Upper West, North-East and Savannah) also produce the same quantities and quality of shea nuts and butter.

Objectives of the study

The objectives of the study included the following:

 To use one-on-one engagements with selected stakeholders to gather baseline information.

 To administer the approved questionnaire to the selected stakeholders.

 To have comprehensive understanding of the cluster in the preparation of the report.

 To summarize the findings and develop a vision and strategic plan for the cluster.

Methodology

The study utilized a structured questionnaire (that had both qualitative and quantitative responses) to obtain information from three categories of stakeholders namely:

1. Principal firms

2. Enterprises doing business with the principal firms and;

3. Business Development Service providers and supporting firms.

The questionnaires were administered in the Northern and Upper East Regions and the figure below describes the various stages of the research process.

• Review of approved questionnaire Stage • Selection of cluster stakeholders 1

• Visited and administered questionnaire to selected stakeholders • Principal firms 14, production groups/cooperatives 5, aggregators 2, Technical Institutions 2, University faculty 2, labouratory 2, regulatory Stage bodies 2, support institutions 3, development partners 2, financial 2 institutions 6

Stage • Compilation and analysis of data 3 • Development of report and validation of report

Figure 1: Cluster Study Methodology

Definition of the Cluster

The Northern Cluster is located in the northern part of Ghana and comprises of regions in the Savannah

Ecological Zone that have similar geographical characteristics. One of the most distinct vegetative features of this cluster is the abundance of shea and baobab trees in their natural habitat. The shea tree is one of the most viable and economical trees in this cluster and also serves as the main source of livelihood for most rural women. Shea butter production is a common economic activity among rural women in the northern part of Ghana. Basically, they produce for household consumption and small scale trading. Majority of the cluster members started off mainly as shea butter processors and gradually introduced some level of value addition to their work by making cosmetics, black soap and other shea- based products. The Cluster comprises of enterprises and other support institutions that have penetrated the sector to transform and add value to the shea tree.

Cluster Products

Several cosmetic and personal care products that are produced within the cluster have shea butter as one of their main ingredients. These products include shea body creams, shea shower gel, shea black soap, shea conditioners, shea hair shampoos, shea hand moisturizers, shea hair pomade, shea baby pomade as well as raw shea butter for cooking and other medicinal purposes. The cluster also produces several other indigenous non-shea based products such as baobab oil and powder, neem oil, moringa oil, dawadawa tea and powder, groundnut oil, pawpaw seed oil, pumpkin seed oil, carrot oil, ginger oil, sesame seed oil, black seed oil and hand sanitizers.

All the actors in the cluster produce at least two of the above-mentioned products - no firm is into a single production. On the average, most of the firms are producing three or more products of different varieties of shea-based and non-shea-based products.

Production Processes in the Cluster

Two main production processes were identified in the cluster. The first being raw shea butter production which is mostly done by women’s groups / cooperatives; and the second, the production of varieties of value-added products such as body creams, black soap, conditioners, etc.

The Production Process for Raw Shea Butter

The stages of production for raw butter are as follows:

1. Sorting, washing and drying of the nuts on a clean platform to avoid foreign materials.

2. Crushing, roasting of nuts and cooling of the roasted nuts at room temperature.

3. The roasted nuts are then grinded/milled into a paste.

4. The paste is kneaded using either the kneading machine or manually with the hands. The

kneading is done to separate the fat from the shea cake. The separated fat is then collected, and

the liquid becomes a by-product.

5. The collected fat is boiled in two stages: the first, to remove excess water; and the second, to

completely remove or reduce the moisture content in the oil.

6. The resultant oil is filtered, stirred and allowed to cool and solidify into shea butter and then

packaged.

Step 1 Step 2 Step 3 Sorting, washing Crushing, roasting Grinding of nuts and drying of and cooling of nuts into paste nuts

Step 6 Filtering and stiring Step 5 Step 4 of oil to solidify into 1st and 2nd Kneading of butter and Boiling of fat paste packaging

Figure 2: Raw Shea Butter Production Process Flow

Sorting and cracking of nuts Washing of nuts

Roasting of crushed nuts

Solidified butter ready for packaging Packaged butter ready for export

Production Process for Cosmetic Products / Black Soap

Regarding the production process for shea-based cosmetic or black soap products, most of the partners in this category have direct links with groups or associations who supply them with raw shea butter.

The stages for cosmetic products or black soap production include the following:

1. Mobilization or purchasing of raw shea butter and/or black soap base input materials.

2. Product formulation (i.e. ingredient incorporation).

3. Filling, moulding, labelling, packaging, and marketing of the products.

•Mobilization or purchase of raw Step 1 shea butter and other input materials •Product Formulation Step 2 (ingredients incorporation) •Filling, moulding, Step 3 labelling, packaging and marketing Figure 3: Cosmetic Production Process Flow

Preparation of the black soap Incorporation of shea butter and other ingredients into the black soap preparation

Some finished shea butter-based cosmetic and black soap products

Chapter Two

History of the Cluster

The Northern part of Ghana is categorized into the Savannah Ecological Zone that witnesses only one rainy season annually. One predominant feature in this cluster is the existence of shea trees. Shea is regarded as the ‘cocoa of the north’ – in reference to Ghana’s main cash crop. The tree starts flowering by early November and the picking or gathering of nuts is from April to August every year.

The shea tree known as “vitellaria paradoxa” is an indigenous tree that plays a vital role in the lives of the populace. The tree serves as a source of livelihood for most rural women and it is an essential diet component as well as used for medicinal and cosmetic purposes. The shea tree is drought resistant and can endure harsh climatic conditions. Because it takes the shea tree a longer time to grow, cultivating it in large quantities for commercial purposes becomes very difficult. The tree ceases to bear fruits until it is about 15 years old or more and subsequently, lives for about 200 to 300 years

(www.specialityproduce.com).

Shea Tree

Fruiting Shea Tree

The Northern Cluster, which is the bedrock of the shea value chain has passed through several phases that have helped to transform it into its current state. Per the study, the cluster can be categorized under three major phases which are described below.

Phase 3: 2000 - 2020 Phase 2: 1980 - 2000 Phase 1: Before 1980s

• Introduction of • Introduction of NGOs stainless machines and • Formation of gas roasters • Individual groups into • Establishment of 3 household cooperatives shea major factories Production • Introduction of • Increased gender • Research into shea grinding mills, advocacy activities of by CRIG in 1976 roasters, kneaders NGOs in the North • Limited technology • Establishment of • Presence of SFC/Sekaf

Phase 1 Phase (use of stones as Gratis, GSA, FDA, • Digital marketing and

mills) SNV,TNS, Olam etc trade fairs Phase 2 Phase • No formalized • Formalized market Phase3 • Increased export markets systems and export volumes • Limited export • Storage of butter in • Improved storage calabashes material/cartons, plastics, jars etc • Product diversification (Shea based cosmetics)

Figure 4 Major Growth Milestones in the Cluster

Phase 1: Before the 1980s

Phase one in the development of the sector spanned the years before 1980. The exact dates are difficult state because the shea tree is an indigenous tree that has been in existence for centuries and long before commercial production began. Ghana has two major trees of economic importance - cocoa and shea.

Cocoa is predominantly cultivated in the southern part of Ghana whilst shea tree is exclusive to the northern parts of Ghana. The decline in cocoa production in the early 1970s necessitated the maximization of the economic exploitation of the vast cocoa resources and the search for substitutes.

The then Ghana Cocoa Marketing Board in collaboration with the Cocoa Research Institute of Ghana

(CRIG) took up the responsibility of conducting scientific research into the cultivation and processing of shea nuts. The result of this effort was the establishment of a branch of CRIG at Bole in the Northern

Region in 1976, with primary objective of research into shea production including the improvement in tree yields, variety and conservation.

 Production Groups: In phase one, there were no formalized groups and most of the women

produced them based on their respective household consumption levels.

 Processing / Technology: During this period, production was very rudimentary and on small

quantities mainly for household consumption. There were no grinding mills hence, the nuts

were usually steamed in a pot and stones were used to grind into paste. This prevented people

from producing in large quantities due to the limited production technology.

 Quality Checks: Because the production was not for commercial purposes, very little attention

was paid to quality checks. Quality checks were basically done through observation and hand

touch.

 Storage: Before the 1980s, the processed butter was stored in calabashes. There were no

packaging materials and the nuts were processed based on daily requirements and for that

matter, not stored for longer periods.

 Marketing: Production in this phase was purposely for domestic use and local markets. Shea

butter was mostly in high demand during the dry season when it is considered the perfect skin

moisturizer. Exports to the international market did not exist although the demand for local and

households’ consumption was extremely high during this phase.

Phase 2: 1980 to 2000

This period spans the years between 1980 and 2000. It was characterized by the shift from basic

94 production to modern production processes.

 Production Groups: This phase witnessed an increase in women’s groups / cooperatives in shea

butter production. This was primarily due to activities of Non-Governmental Organizations

(NGOs) that supported the transformation of these individual women into production groups.

The NGOs provided trainings to the groups on production methods and use of modern

technology.

 Processing / Technology: This phase moved from rudimentary machinery to basic and

sometimes higher technological production. The period witnessed the introduction of

mechanized diesel grinding mills to electric grinding mills although there was the challenge of

limited access to the machines due to the distant locations of the milling machines. However,

over time, these grinding mills became easily accessible due to an increase in the establishment

of processing centres.

 Institutions / NGOs: The establishment of the GRATIS Foundation (formerly known as ITTU)

during this period contributed to the manufacturing and introduction of roasters and grinding

machines that supported these production groups. Simple kneading machines were also

introduced during this phase but because they were not stainless, there was little patronage. The

involvement of NGOs in this phase contributed to the transformation of these women’s groups

into cooperatives and they were trained on basic group dynamics and other relevant topics.

Development organizations such as SNV, TechnoServe, DFID, among others contributed to

shaping the sector. The establishment of government regulatory bodies such as FDA and GSA

during this phase also helped to improve the sector with quality standards.

 Quality Checks: During this phase, there was a focus on quality hence the production groups

ensured that only nuts that met quality standards and appropriate production methods were used.

Sustainability standards and certifications increasingly became an integral aspect for access to

markets.

 Storage: Calabashes remained the main mode of storage for both household and commercial

purposes.

 Marketing: This phase witnessed the introduction of commercial transactions where both nuts

and butter were traded in the open market with increased export opportunities.

Phase 3: 2000 to 2020

This phase comprises of changes that happened from the year 2000 to present.

 Production Groups: This phase witnessed the transformation of most of the groups into well-

structured ones with effective leadership systems and additionally, they were formally

registered as cooperatives. Development partners supported these production groups with

improved production methods, improved processing equipment, entrepreneurship trainings and

many more. During this phase, the production groups also had direct and indirect market

linkages to processors, aggregators and exporters. Most of these production groups had trainings

and support (pre-financing) from these international buyers to improve quality and meet

production demands for the international markets.

 Processing / Technology: This phase also witnessed the introduction of modern production

processes and equipment to facilitate high volumes of production and processing. These

included stainless kneading machines and gas roasters. The demand for shea in the cosmetic

industry is growing largely due to its exceptional qualities such as moisturizing, anti-irritant,

regenerative, anti-inflammatory effects and absorbing functions being increasingly recognized

in many industrialized countries (Carette et al., 2009). The phase 3 has also been characterized

by product diversification. Unlike in the previous two phases where the products were solely

raw shea butter, black soap cake and shower gel are currently the major shea-based products.

Other diversified shea products are the use in the manufacturing of chocolate, body lotions, hair

foods and pharmaceutical purposes. The diversification in this phase has made the shea business

a profitable and lucrative business for people, especially women.

 Institutions / Organizations: The establishment of three large scale shea processing factories

saw a massive transformation of the cluster. The factories include Wilmar Ghana, 3Fs and

Ghana Nuts Limited with production capacity of between 40,000mt to 50,000mt of nuts. This,

coupled with the continuous activities of development partners such as SNV, TechnoServe and

others have resulted in massive growth in the shea sector. The introduction of other large-scale

exporters and cosmetic processing companies such as Sekaf and SFC resulted in shea producers

having a reliable market outlet for both shea nuts and shea butter products. This phase also

witnessed research institutions and research consultants expressing interest and contributing to

the growth of the sector.

 Quality Checks: The massive transformation during this phase also encouraged producers and

buyers to pay much more attention to quality issues in order to meet international/export

requirements. Total quality checks from the production to the marketing stages are strictly

adhered to. Large scale processing centres have also instituted well-managed quality checks in

their respective processing centres.

 Storage: Due to high shea demands, many organizations and other individuals have set up a

number of storage facilities and improved on their packaging materials. Per the high demands,

producers buy high volumes of nuts and store for the off-season production. Processed butter

are storage in plastic containers (including buckets), cardboard boxes, jars, among others.

 Marketing: This phase witnessed an ever-increasing market niche for shea-based cosmetic

products and other related uses. Several studies (Fold, 2000; Elias, 2003; Chalfin, 2004) have

noted that shea consumption has increased in the industrialized countries as a result of consumer

shifts from synthetic cosmetics - a phenomenon as the “naturalizing” of consumption and “green

consumerism”. The niche for shea in the cosmetic and pharmaceutical markets demands that

the highest quality standard are adhered to since food safety remains an important concern for

the European chocolate and confectionary industries.

International & National Scenario

Shea Butter originates from the “African Shea Belt” which produces about 1,760,000 metric tons of raw shea nuts annually from its wild trees mainly found in the Savannah and Sahel Regions. However, producers are able to harvest only a fraction, about 35% (about 600,000 tons), which is then transformed into butter or exported as nuts (IITA, 2002). In Ghana, only 40% of the existing potential of shea nut is collected (SNV, 2006). Shea Butter is produced in approximately 21 countries: Benin, Burkina Faso,

Cameroon, Central African Republic, Chad, Ethiopia, Eritrea, Ghana, Guinea Bissau, Ivory Coast,

Mali, Niger, Nigeria, Senegal, Sierra Leone, South Sudan, Sudan, Togo, Uganda, Democratic Republic of the Congo, Kenya and Guinea. Of these countries, the best sources of quality shea butter are from

Ghana, Nigeria and Northern Uganda. Although the traditional uses of shea nuts and butter have declined in importance in homes in Northern Ghana over the decades due to changes in consumer preference and the availability of cheaper substitutes such as other vegetable oils and the adoption of

“western lifestyle”, there is still a growing niche market for shea outside Africa (Scholz, 2009). While

Africa’s share of world exports have declined by about 50% from 1980 to 2007, shea increased in export volumes, linking Sub-Sahara Africa Region to the global economy (LMC, 2006 and UNCTAD,

2008 as cited in Scholz, 2009).

Ghana has a comparative advantage in kernel quality over the other shea producing countries. In a case study of the Shea Value Chain in Mali, Derks & Lusby (2006) found that Mali had a comparative disadvantage to Ghana in shea kernel quality. The authors indicated that Ghanaian shea kernel (nuts)

98 are considered the best quality because unlike the Malian kernels, Ghanaian kernels have consistently lower Free Fatty Acids (FFA) levels, high oil content and are less contaminated by moisture and charcoal from smoke, fires and impurities.

According to Lovett (2004), the current shea market prefers the following kernel qualities (for mechanical extraction and onward refinement in the EU:

 Free Fatty Acids (FFA) <6%

 Kernel fat content 45% - 55%

 Water content <7%

 Impurities <1%.

The study also noted that preferences for the cosmetic industry vary however, they are tilted towards kernel qualities such as non-solvent extraction, natural source (organic if possible), low FFAs, ‘clean’ white to yellow colour instead of grey and high unsaponifiable fraction (3-12% of total extract).

Figure 5: Major Shea Producing Countries

Shea nut picking and butter processing are non-farm activities traditionally reserved for women in northern Ghana. According to a report by SNV (2006), more than 600,000 women in Northern Ghana

99 depend on incomes from the sale of shea butter and other shea-related products to supplement their families’ food budgets as well as to meet medical and educational expenses. Women in Northern Ghana are considered more vulnerable to poverty due to existing gender inequalities (very little resources and assets are available to them). Many studies show that women and children are disproportionately affected by poverty and that empowering women and girls are the most effective ways of fighting poverty (UNDP/JICA, 2010; IFAD, 2001; and Moghadam, 2005).

The promotion of non-farm enterprises such as shea kernel processing and shea butter extraction is critical to reducing poverty among women in Northern Region (Dinye and Deribile, 2004). As a result, there are many NGOs in northern Ghana that have established and or supported women groups to engage in shea butter processing aimed at integrating them into the global shea value chain through collective action.

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Chapter Three

Benchmark and Baseline Analysis

Benchmark Cluster Analysis

The benchmark cluster analysis looked at two different clusters that exist in Ghana – the cosmetic cluster in the northern part of Ghana and the cluster that exists in the southern part of Ghana. These two clusters are not only different in terms of their location, they also have their comparative advantages and unique characteristics.

Area Northern Cosmetic Southern Cosmetic of Analysis Cluster Cluster Location/ Located in the Northern part of Located in the Southern part of Ghana. Distinctive Ghana. Shea trees are predominately This cluster is associated with the Features located in this cluster. cultivation of cocoa.

Products Raw butter, black soap, cosmetic Black soap and cosmetic products; no products. production of raw butter.

Production The northern cluster is largely into The southern cluster is solely into the Process the processing of the raw nuts into processing of cosmetic products. They butter and cosmetic products. About source their butter from the northern 80% of the members in the northern cluster. cluster have production groups they work with to process the butter.

Technology Because the northern cluster has Easy access to modern equipment and technological know-how in butter packaging materials gives the southern production, this gives them a cluster an advantage over the northern comparative advantage over the cluster who travel long distances to access southern cluster. such materials.

Marketing Limited patronage of shea-based According to the processors, the southern cosmetic products from the population patronize most of their population in the Northern cluster. cosmetic products than the northern population. There is a large cosmetic and butter market potential in southern Ghana than Northern Ghana.

Table 1: Northern and Southern Cluster Analysis

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The northern cluster map (Figure 6) depicts all the shea actors operating in the three major regions where shea is mostly produced - Northern Region, Upper East Region and Upper West Region. Each of these regions have their own production capacities and major buyers. Although the Upper West

Region also produces high volumes of shea butter, the study was limited to only two regions (Northern and Upper East). The cluster map below shows the focus areas and the selected stakeholders.

Figure 6: Northern Cluster Map

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Type of Actor No. of Town / District Region Firms Principal Firms 7 Tamale – Tamale Metropolitan (4 Firms) Northern (Processors) Kumbungu – Kumbungu District (2 Firms) Nyankpala – Tolon District (1 Firm) Principal Firms 7 Bolgatanga – Bolgatanga Municipality (3 Firms) Upper East (Processors) Binaba – Bawku West District (1 Firm) Navrongo – Kassena Nankana Municipality (1 Firm) Paga – Kassena Nankana West District (1 Firm) Garu – Garu District (1 Firm) Production Groups 2 Tamale – Tamale Metropolitan (1 group) Northern / Cooperatives Nyankpala – Tolon District (1 group) Production Groups 3 Bongo-soe – Bongo District ( 1 Group) Upper East / Cooperatives Nangode – Nabdam District (1 Group) Kongo – Nabdam District (1 Group) Aggregators 2 Tamale – Tamale Metropolitan ( 1 Firm) Northern Kumbungu – Kumbungu District (1 Firm) Support 4 FDA, GSA, NBSSI and EPA Tamale – Tamale Northern Institutions Metropolitan ( 4 Firms) Support 2 FDA Bolgatanga – Bolgatanga Municipality ( 1 Upper East Institutions Firm) REP - Tongo – Talensi District (1 Firm) Technical 2 Tamale Technical University and Gratis Northern Institutions Foundation Tamale (2 Firms) Universities and 5 Shea research consultant Tamale (1 Firm) Northern Research UDS Spanish lab, SARI lab, UDS Food science Institutions dept, UDS Engineering dept, Nyankpala – Tolon District (4 Firms) Financial 6 Tamale (6 Firms) Northern Institutions Development 2 SNV Tamale ( 1 Firm) Northern Partners World Vision - Tongo – Talensi District (1 Firm) Upper East

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Table 2: Details of Cluster Data Mapping

Baseline Cluster Survey

Size of Firms

The baseline survey for the cluster targeted a sample of the stakeholder population who were identified for the questionnaire administration. The firms in the northern cluster operate at different levels and have different number of years of operation. Some firms have been in operation for over ten years and have therefore been able to grow their businesses over the period.

The cluster was categorized into three operational scales based primarily on the number of permanent employees engaged in a firm and other factors such as level of mechanization, level of marketing, adherence to quality checks and record keeping. The classification considered firms that have more than 20 permanent staff as large scale firms; firms with between 8 to 20 staff as medium scale firms; and firms with less than 8 staff as small scale firms. It was realized that the number of firms categorized as large scale firms was 25%; medium scale firms, also 25%; with majority of the firms representing

50%, operating as small scale firms. The figure below describes the classification of the firms in the cluster:

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Size of Firm

50%

25% 25%

SMALL MEDIUM LARGE

Figure 7: Size of Firms in the Cluster

Size of the Cluster

The actors in the cluster are made up of people from the three major producing regions of shea butter

(Upper East, Upper West and Northern Regions) whose activities are coordinated by SNG and Global

Shea Alliance. Although the table below does not include production groups and cooperatives, it is estimated that there are at least hundred (100) members or firms operating in the cluster and it is possible that there may even be more who were not captured in the survey.

Size of Cluster

NR UE UW

Figure 8: Cluster Regional Distribution

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The table below also depicts the estimated number of cluster actors excluding production groups. They are registered as SNG members in the northern part of Ghana.

Region Registered Type of members Members Northern 63 Shea butter and cosmetic processors, shea nut and shea butter marketers, aggregators, and all players in the value chain. Upper East 24 Shea butter and cosmetic processors, shea nut and shea butter marketers, aggregators, and all players in the value chain. Upper West 13 Shea butter and cosmetic processors, shea nut and shea butter marketers, aggregators, and all players in the value chain. Table 3: Regional Distribution of Cluster Labour Force Of Cluster

The age distribution of the actors in the cluster represents the only permanent staff of the respective firms. 67% of the respondents which included CEOs, technical staff, administrative staff and others were less than 40 years whilst 33% of permanent employees were above 40 years. This means that more youth are engaged in the cluster than older people. On the hand, most casual/temporal workers were found to be above 40 years and were mostly in the women’s production groups as well as the technical staff managing machinery and other heavy equipment. The chart below shows the ages of the permanent labour force in the cluster.

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Ages of Permanent Employees

33% Youth (less than 40 years) Above 40 years 67%

Figure 9: Labour Force of Cluster

Production Capacity

 Brands Established: All the members in the cluster had their products registered in one brand

name. In most instances, the company’s name was the same as the product or brand except for

Sekaf which had different names for its company (Sekaf) and product (Tama). Additionally,

there were diverse products from each company although they were all registered under one

brand name.

 Production Capacity of Installed Equipment: Most of the cluster members process their

cosmetics manually due to limited mechanical processing and availability of modern processing

equipment. The table below depicts the available equipment currently in use by the firms for

cosmetic processing. It is important to note that the equipment listed below are used by different

firms, hence no firm owns all of them although some firms may possess one or two of them.

Available Equipment Maximum Production Capacity

Hydraulic Machine 40 boxes per day

Kneading machine Different sizes with varied capacities

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Roasting machine Different sizes with varied capacities

Crushing machine Different sizes with varied capacities

5 pound soap moulds 124 boxes per day

10 pound soap mould 110 boxes per day

Manual block builder 400kg per day

Tablet soap presser 800 pieces per day

Cold Presser 400 litres per annum

Liquid Filling Machine 1,000 bottles per day

Filtration Machine 1,500 litres per day

Emulsion Mixer 18 metric tons per annum

Hand Press 1,000 pieces per day

Foot Press 800 pieces per day

Wiper (mixer for shea butter pomade) Different sizes with varied capacities

Soap Mixing Machine Different sizes with varied capacities

Table 4: Available Production Equipment

 Volumes of Production: The volume of production was found to vary from one firm to the

other and was also largely dependent on buyers’ demands. Annual production volumes for raw

shea butter ranged between 50mt to 150mt while the annual production volumes for black soap

ranged between 8mt to 12mt. Annual Production volume for general shea-based cosmetic

products ranged between 10mt to 252mt. The table below depicts the production volumes of

shea butter and shea-based products in the cluster.

Product Range of Production Cost of Production Volumes

Raw Shea Butter for 50mt to 150mt per annum GHC 10 to GHC 12 per kg of butter cosmetic processing

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Black Soap 8mt to 12mt per annum GHC 12 to GHC 15 per kg of black soap

Cosmetics 10mt to 252mt per annum Prices varied due to different products and (body lotion, container sizes. hair pomade, baby pomade, hand moisturizers, etc.)

Table 5: Volumes of Production

Export Market of Cluster

The major products exported from the northern cluster are raw shea butter and shea-based black soap.

These exports to different countries are done either directly through the firms or through middlemen

(Exporter / Marketer). As a matter of fact, there are about five firms with direct market linkages in the international buyer/market while majority of the firms use middlemen to reach the international markets. The major export markets for the cluster are USA, Canada, Germany, Netherlands, UK and other countries depicted in the chart below.

Product Volumes Export Destination Remarks Exported

Black 20mt - 360mt USA, Canada, UK, Most of the export is made through Soap per annum Netherlands, Australia, Saudi middlemen. Apart from SFC, Sekaf Arabia, Germany, Poland, and two more firms that do direct Vietnam, Bulgaria, South export, the rest of the firms export Africa, Nigeria through middlemen.

Raw 50mt - 360mt USA, Canada, UK, Most of the export is made through Butter per annum Netherlands, Australia, Arabia, middlemen. Apart from SFC, Sekaf Germany, Poland, Vietnam, and two more firms that do direct Bulgaria, South Africa, Nigeria exports, the rest of the firms use middlemen.

Table 6: Export Market of Cluster

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From the chart below, USA is the biggest market for most of Ghana’s shea-based products especially shea butter and black soap with about 80% their demands being from Ghana while 70% of Canada’s demands are from the cluster. Other export markets are also depicted in the chart.

Export Market

Other Countries (Nigeria, Kenya,… 40% South Africa 30% Saudi Arabia 20% Australia 40% UK 60% Netherlands 50% Germany 60% Canada 70% USA 80%

0% 20% 40% 60% 80% 100%

Figure 10: Export Market Certification Compliance

 Food and Drugs Authority (FDA): All members in the cluster have products that are registered

with FDA, with the majority of them having at least one certified product thereby being licensed

to market their products. Most medium and large-scale firms have almost all their products

certified. The challenge with tracking certification for most of the firms was that’ an FDA

certified product number may be used to label multiple Stock Keeping Units (SKUs) of

products. For example, the unique FDA market license number for an approved shea body butter

product should not be reused on the label of any variants of the brand’s body butter.

Unfortunately, that was the prevailing situation which was directly attributed to the slow nature

of product registration processes which sometimes take about six months to be completed. At

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the time of compiling this report some members were in the process of completing certification

processes for newly developed products while others had not started the process at all.

 Ghana Standards Authority (GSA): Firms do not have their own testing laboratories hence

they are required to submit GSA certified test results prior to registration with FDA. Each

variant of a product is expected to be tested in accordance with the product standards. However,

the high charges associated with the process and the often delayed results by the state agency

compel these small scale firms to resort to visual inspection and the bypassing of regular quality

control tests. Others also submitted their products to unapproved laboratories for analysis.

 International Organization for Standardization (ISO): To become competitive in the

international market, a firm needs an ISO certification. The study revealed that only one firm

(Savannah Fruits Company) had this certification although most of the other firms expressed

interest in acquiring such certification in future to help with their business operations.

 Organic Production Certification: Most clients of the cluster producers are only interested in

organic products hence about 50% of the firms have obtained organic products certification

while the remaining 50% who do not currently have the certification are willing to get them in

due course.

 Good Manufacturing Practices (GMP): Only 40% of the firms that participated in the survey

had acquired GMP certification. The remaining 60% had no certifications although they are

willing to acquire them to improve their business operations.

 Fair Trade / Fair for Life Certification: None of the firms had acquired Fair Trade certification

although most of them indicated that they were aware of it and were willing to acquire it in the

near future. Regarding Fair for Life certification, only two firms had that with the rest being in

the process of acquiring certifications. The chart below describes the certification compliance

of the firms.

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Certification Compliance

98%

80%

50% 40%

5% 10% 5%

FDA GSA ISO ORGANIC GMP HACCP FAIR TRADE / FAIR FOR LIFE

Figure 11: Certification Compliance

Associations / Institutions

 Ghana Export Promotion Authority: Most of the members were registered with GEPA,

however only a few them had been able to establish direct market outlets with international

buyers. Majority of the exports were channelled through middlemen. The firms, however,

indicated that they had been scouting to establish their own reliable direct international market

outlets to avoid the use of middlemen and its associated challenges.

 Shea Network Ghana and Global Shea Alliance: All firms in the cluster were registered as

members of SNG and Global Shea Alliance. These two organizations coordinate activities in

the shea value chain and support members with training, access to market, access to finance and

many more. However, there were other individuals and firms in shea business but were not

registered members of SNG or GSA.

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Chapter Four

Analysis of Vital Statistics

Number of firms according to size

The cluster has different categories of firms that play various activities with the dominant ones being in the production category. This category also employed the most women who act as shea pickers and belong to cooperative groups that produce the raw shea butter. About 50% of the firms used in the survey had been operating for between 5 to 10 years, 42% had been operating for less than 5 years with a mere 8% who had been operating for more than 10years. The main type of business ownership in the cluster was the sole proprietorship (42%). Registered Limited Lability Companies accounted for 33% while the remaining 8% of firms were registered as public enterprises, partnership and cooperatives.

The table below depicts the breakdown of the firms.

Column N % Year of Establishment Less than 5 years ago 41.7% 5 to 10 years ago 50.0% More than 10 years ago 8.3% Form of ownership Sole proprietorship 41.7% PLC 33.3% Public enterprise 8.3% Partnership 8.3% Family enterprise 0.0% Cooperative 8.3% Time dedicated (in Percentage) Shea Butter Production 70.0% Production of pomades and other oils 30.0% Table 7: Basic Data of SMEs

Estimated turnover

Through the interaction with the actors and the analysis of the questionnaire, the estimated turnover of the cluster was realized to vary according to the operational activities of the firms. The estimated turnover of those into cosmetics was also found to vary from business to business. The production

113 seasonal of shea butter and the amount stored or aggregated per season determined the annual income and turnover of the business. From the figure below, from 2017 to 2019 there was an increasing trend for firms’ turnover. In 2017, the average annual turnover for firms was GHC 134,047 which increased to GHC 258,771 in 2019. This was attributed to several factors including greater access to international and bigger markets, economies of scale, availability of raw materials, among others.

Figure 12: Annual Turnover

Regarding financing for business operations and the start-up of new businesses, owners’ equity representing 78% was main source of finance while 22% of the funds were sourced from family and friends. All the businesses stated that they would need external support since as many as 90% of them had experienced growth in the last five years. This is depicted in the table below:

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Parameter Details Mean Percent

Type of finance Owner equity (%) 78% Bank (MFI) (%) . - Family & Relations (%) 22% Other (%) . - Do you feel your enterprise needs Yes 100.0% more external loan to enhance your No 0.0% business?

What is your business position Going up 90.0% during the last five years Stable 10.0% Down 0.0% Do you have formal bookkeeping Yes 75.0% system in place (proper financial No 25.0% management)? Please explain

Table 8: Financing of Business Operations Source: Field Survey, 2020

Estimated Employment

The shea value chain creates employment for about 80% of the rural population in northern Ghana where every woman has knowledge and skills in the production of shea butter for household consumption. It is a traditional knowledge/skill passed down from generation to generation and from mothers to their female children. Apart from job creation in the rural areas, the actors in the cosmetic processing sector employed people at different stages of production. The operating firms engaged both temporal and permanent workers with their total number being 1,728 employees (technical staff).

Administrative staff engaged were 64 (permanent and temporal) and those engaged as Assistants were

64 (permanent and temporal employees) as depicted in the table below.

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Average Number of Employees per Total Number Employee Structure Status Gender Firm of Employees Technical Men 5 48 Permanent Women 7 63 Men 9 66 Temporary Women 259 1551 Administration Men 3 24 Permanent Women 2 14 Men 15 15 Temporary Women 6 11 Assistants/Interns Men 3 16 Permanent Women 5 33 Men 3 13 Temporary Women 2 2 Table 9: Structure of Employees Source: Field Survey, 2020

From the survey, more women were engaged in the technical areas of production, processing and packaging of products. There were as many as 1,614 female technical employees as compared to the

114 males whose roles were basically to manage the machinery aspect of processing. The firms did not engage many administrative staff and assistants as depicted in the chart below.

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1800 1614 1600 1400 1200 1000 800 600

NumberEmployee of 400 114 200 39 25 29 35 0 Technical employees Administration Assistance/ Practice

Male Female

Figure 13: Structure of Employees

Regarding the employment situation over the past three years, majority of business establishments

(84%) indicated an increase in the number of people employed; 8% stated that there had not been any changes in their number of employees while 8% of businesses had seen a reduction in employees as depicted in the figure below.

Remained the same 8%

Decreased 8%

Increased 84%

Increased Decreased Remained the same

Figure 14: Employees Engaged Over Three Years

Support Institutions

There were a number of firms that were engaged directly or indirectly to support the activities of the

117 cluster in several ways. Key support firms were identified and engaged by the researcher to determine their levels of contribution to the growth of the cluster. These support institutions were public institutions who had been working in the cluster for varying periods. About 17% of them had been in there for between 5 years to 10 years whilst 83% had been operating for more than 10years. The support institutions include: the Environmental Protection Agency (EPA), Food and Drugs Authority (FDA),

Ghana Standards Authority (GSA), GRATIS Foundation, NBSSI and Tamale Technical University.

National Board for Small Scale Industries (NBSSI)

Established in 1985, the NBSSI is a public institution operating in all regional capitals in the country.

It currently has operational offices in 178 District capitals. The main objectives of the NBSSI are to contribute to the creation of an enabling environment for the development of Micro and Small

Enterprise (MSEs); to deepen the development of an enterprise culture; and to facilitate MSEs’ access to substantial and high quality Business Development Services. The NBSSI supports SMEs with:

1. Technical Training - Quality and productivity improvement; New technology adoption;

Appropriate technology transfer; and Technical Training for various trade sectors (soap making,

cosmetics, dressmaking, shea butter processing, bakery and confectionery).

2. Common service provision - Bakery Centre in Buipe for Small Scale Bakers; Soya Processing

Centre for Farmer Based Networks in Gushegu; and Start-up kits installed for soap making and

shea butter networks in Sagnarigu. They also support SMEs with advice and funds for obtaining

certification from GSA and FDA.

3. Business development service - Entrepreneurship and Management Training; Entrepreneurial

Coaching and Mentoring; Business Linkages; Financial Management Training; Records

Keeping Training; Business Planning; Marketing Training; Business Management Training;

and assisting SMEs to prepare business proposals and plans.

4. Market research

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5. Cluster development - Provision of service centres; common-user facilities; Group

development training; formation and strengthening of trade sector associations; Network

development; and Group strengthening.

6. Financial support - Provision of grants, linking MSMEs to sources of funds; and the operation

of loan schemes.

7. Consultancy - Desktop business advisory services and on-site business counselling.

Food and Drug Authority (FDA)

Established in 1997, the FDA created its Northern regional office in 2007. It is a public institution whose main objectives include:

1. Protecting consumer safety through the regulation of food and drug products.

2. Ensuring compliance of safe food and drug handling through audits, pharmacovigilance etc.

3. Facilitating the registration of food and drug products.

4. Providing training to companies to ensure that their practices comply with current codes of

Good Manufacturing Practices (GMPs), Good Warehouse Practices (GWPs), and Good

Hygiene Practices (GHPs).

The nature of support from FDA to SMEs included the provision of technical training and there were various constraints to working with SMEs which included the following:

1. The FDA office had challenges with providing laboratory services to clients who were

developing products that required product test analysis.

2. Most clients in the food and drug industry do not adhere to the approved standards thereby

limiting opportunities for expansion into the international market.

3. Most SMEs do not properly label their products hence delay the certification processes.

4. Because the laboratory analysis are only carried out in either the Accra or Kumasi offices of the

FDA, most SMEs in the northern sector found the process expensive.

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Ghana Standards Authority (GSA)

This national statutory body is responsible for the certification and management of quality standards in

Ghana. GSA develops standards for industry players to produce products and services that meet these required standards as well as conducts product certification testing and licensing. The authority supports SMEs with capacity building on good manufacturing practices; inspection of production sites or factories; and the adherence to safety standards from the start to end the of the production process.

GSA also provides technical training to clients to assist them to meet standards requirements and processes for acquiring licenses.

Personnel of GSA had adequate technical capacities and skills needed to support SMEs however, the office was constrained by inadequate laboratory services to clients who were developing products that required test analysis. Specific challenges faced in the GSA’s work with SMEs included:

1. Most SMEs in the North found the cost involved in acquiring the license expensive. In response,

the GSA has introduced flexible payment plans for clients to make payments in two instalments

– payment at the start of the process and the final payment when the process was completed.

2. Most clients did not adhere to the approved standards thereby limiting their access to

international market opportunities for business growth and expansion.

3. All laboratory tests were conducted in Accra hence some SMEs based in the northern cluster

found the process a bit cumbersome. Some SMEs experienced delays when samples were sent

to Accra for product testing which caused some inconveniences to the businesses.

Environmental Protection Agency

The Environmental Protection Agency is the leading public body for protecting and improving the environment in Ghana. The EPA has the responsibility of regulating the environment and ensuring the

120 implementation of Government policies on the environment. However, there were no clearly defined regulations or policies that protect shea trees as compared to cocoa and other trees like rosewood.

Engagement and cooperation between EPA and the SMEs in the shea industry was non-existent.

Status of Technical Institutions

GRATIS Foundation

This public institution was established in 1988 to develop and transfer technology through training and production of equipment. GRATIS provides apprenticeship training to students on internship and the youth in equipment production or manufacturing as well as provide technical training to clients.

GRATIS supports SMEs in the northern cluster by manufacturing equipment such as shea butter kneaders, roasters, grinders, groundnut equipment, equipment for soap production, gari production, threshers, hospital, waste management containers, etc.

The capacity of its personnel was found to be adequate but there was the need for their skills to be upgraded to meet modern technological demands of SMEs through the manufacturing of more efficient and productive equipment. GRATIS receives financial support from its development partners to manufacture certain equipment through an incentive scheme (a grant) for beneficiaries. These grants vary greatly from one partner to the other but the common feature was that funds were not disbursed directly to SMEs - the development partner pre-finances and guarantees for the beneficiaries, and

GRATIS manufactures the equipment as agreed. The major constraints faced by GRATIS as they assist

SMEs include:

1. Generally low levels of education among the owners of the SMEs made it difficult for GRATIS

to train them after installing the equipment.

2. Non-adherence of SMEs to the required operational methods of the equipment, leading to

frequent break down of equipment and less efficacy of the equipment.

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Tamale Technical University

This public technical university equips students with the relevant technical skills and training for the job market. Courses taught include agriculture engineering, mechanical engineering, business, and vocational training. The agricultural engineering department of the Technical University has the potential of supporting the SMEs through the manufacturing of simple agro processing equipment. For example, as part of their academic project work, students are required to develop samples of kneaders, roasters, etc. The SMEs perceive this institution as a learning centre for only students hence did not engage the University to manufacture simple agro processing equipment for their businesses.

Additionally, the University receives limited support to manufacture and showcase equipment to the

SMEs. Very little cooperation and patronage exist between the SMEs and University.

UDS Spanish Lab and SARI Lab

There were two laboratories that could offer laboratory testing of products in the north. The UDS

Spanish Laboratory was operating at full capacity and worked with some SMEs to conduct product testing. The UDS Spanish Lab was able conducts tests such as free fatty acid, iodine value, acidity value, peroxide value, moisture content, total fat content and many more for their clients. However, the lab did not have the capacity to conduct tests on heavy metals, gas, etc. There was also a new lab established by SARI with support from USAID to provide more advanced testing services to clients.

This Lab was not yet fully equipped to carry out the whole range of testing required by the industry.

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Status of Service Providers

NGOs active in the cluster

SNV, World Vision, TechnoServe and other development partners have played major roles and continue to play critical roles in transforming the shea value chain. These development partners support with the needed financial, technical, managerial and market linkages to make businesses more effective and efficient.

Financial Institutions

Financial institutions had different products for SMEs and these included equipment financing, overdrafts, warehousing financing, working capital financing, group or cooperative loans, etc. Almost all the financial institutions required some form of collateral for loan applications. ABSA Bank

(formerly Barclays Bank) provides a collateral-free package for SMEs although there were terms and conditions to it. All the financial institutions had high interest rates of between 19% to 48% (dependent on the type of loan facility and institution offering it).

Name of Bank Types of Financial Products Services Rendered Interest Rates

First Atlantic Overdrafts, loan for salaried The Bank willingly 19% to 28% per Bank workers and SMEs, Warehouse makes presentations on annum financing, Equipment Financing, their financial products depending on working capital support, etc. to SMEs and support the risk when financial assessment management issues conducted. arise. Sinapi Aba Group Loans, Micro Housing Loan, Customer service 45% per annum Savings and Sinapi Aba Festive Loan, Micro training, business advice Loans Ltd. Enterprise Loan, Micro School and financial Loan, Sinapi Aba Education Loan, management training are Sinapi Aba Special Agricultural provided to interested Loan, SME Loan, Business Asset clients. Loan, Susu Loan, Salary loan, overdrafts, etc. ABSA Bank Unsecured loan where no collateral The bank willingly Unsecured loan (Barclays is needed, secured loans where makes presentations to is 30% per Bank) collateral is required, asset or annum whilst

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equipment financing, overdrafts, SMEs on their secured secured loan is education policy, etc. and unsecured loans. 26% to 30% per annum Stanbic Bank Overdrafts, loans for salaried 31% per annum workers and SMEs, Warehousing financing, Equipment Financing, working capital support, etc. Best Point Susu Loans, SME financing, 45.6% per Savings and overdraft, asset financing annum Loans Access Bank Cash back facility, collateral- Looking forward to an 24% to 26% for backed loans, instant business loans opportunity to make commercial (using stock as a collateral), presentations to SMEs clients; 23% for overdrafts, personal loans, etc. on their financial personal loans products. Center for Agribusiness financing for clients 40% of value of Agric and in the Agric and agro-processing land/plot at the Rural sector. prevailing Development market price. (CARD) Table 10: Financial Institutions Associations (Cooperatives, Groups, Shea Network, Global Shea Alliance)

The buyers of the produce prefer to deal directly with producer groups or cooperatives instead of individual farmers because the groups are in better position to provide stable supplies of quality products (Vorley et al., 2007). Buyers’ transaction costs were significantly reduced if they dealt with groups of farmers selling aggregated products of homogenous quality instead of with many individuals selling small quantities of uncertain quality (Shiferaw et al., 2011). In a case study of the shea value chain in Ghana, Scholz (2009) indicated that most of the women interviewed indicated that they formed their producer groups for the following reasons:

 better marketing of the produce through collective action and improved negotiation power

 division of labour and economies of scale

 management and budgeting skills through training

 quality and quantity improvements

 better support of family livelihoods and

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 as a social security system for emergency situations.

The establishment of Shea Network Ghana and Global Shea Alliance help in coordinating the activities of the shea industry and also provide members with marketing opportunities, trainings and international exposure, among others. All the principal firms that were engaged in the study are members of Shea

Network Ghana as well as Global Shea Alliance. Table 11 below gives a summary of all the support institutions existing in the cluster as well as the types of services they provide. Table 12 also depicts the potential support institutions that can assist the cluster.

Support Institutions / Type of Services Provided BDS NBSSI / Rural Enterprise Creation of an enabling environment for the development of MSEs, Projects (REP) and Provision of business advisory services and trainings to SMEs

Food and Drugs Authority Protect consumer safety through the regulation of food and drug (FDA) products, also regulate and ensure compliance to safe food and drug handling through audits, pharmacovigilance etc. Also facilitate the registration of food and drug products. Ghana Standards Authority Develop standards for industry players to produce products and (GSA) services that meet the required standards. The authority conducts product certification testing and licensing Environmental Protection Protect the natural environment through guidelines, policies and Agency (EPA) regulations. Also provide direction and advisory services on business establishment structure and safety measures Gratis Foundation Develop and transfer technology through training and production of equipment such as shea butter kneaders, roasters, grinders, groundnut equipment, equipment for soap production etc Equipment Service Manufacture processing equipment such as grinders, kneaders, Providers (Fabricators) roasters for SMEs Financial Institutions Provision of financial services to clients with interest rates of 19% to 48%

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UDS Spanish Lab and Provision of testing services such as free fatty acid, iodine value, SARI Lab acidity value, peroxide value, moisture content, total fat content and many more. But does not have the capacity to conduct certain test such as heavy metals, gas and others Table 11: Summary of Support Institutions

Support Institution / BDS Type of Services Provided Savannah Agricultural Research into crops and develop improved varieties to increase Research Institute (SARI) / productivity. Cocoa Research Institute of Ghana (CRIG) MOFA Agricultural production Training and promoting agricultural productivity Forestry Commission Regulate and protect wild trees and the forest Graphic design service Designing of labels and other infographic for marketing of products providers Technology and innovation Provision of services such as data management, website development service development, etc. providers Business Brokers Facilitate smooth linkages and provision of services between the value chain actors Research Consultants Expert in the provision of research consultancy services Table 12: Potential Support Institutions Value Chain Analysis

The shea value chain is a growing sector that has seen a lot of advancement in value addition processes.

In the past, the shea value chain was a relatively shorter chain with limited value addition as compared to its current state where the chain is much longer with modern production and processing methods.

The activities of each stage of the production process are critical for the effective functioning of the chain. The activities of the various actors in the chain are intertwined to the extent that the finished product of a particular actor serves as the raw material for another actor. Thus, their activities are interdependent on each other with a lot of backward and forward linkages between them.

The value chain diagram depicts the level of relationship between the various actors. The vital roles played by the supporting firms and the Business Development Services providers are also explained in

the shea

126 value chain. These supporting firms are not directly in the chain but their services and support enable the shea value chain to function effectively. The support include technical support, financial support, advisory services and many more as depicted in the figure below.

127

Figure 15: Value Chain Analysis Map 128

Value Addition of the cluster

Shea nuts go through series of value addition processes depending on the margin of efforts and resources embedded in the production process. The table and chart below describe the various stages of value addition and the respective percentages of value added. The table below also describes the processes involved in refining of a bag shea nuts (85kg) into shea butter of 30kg. From the table, adding a value of 23.8% to raw nuts will help to obtain 30kg of butter. The butter then goes through further value addition processes to obtain diverse products. The processor purchases this 30kg butter from the production groups and increases its value further by processing into black soap and other shea-based cosmetic products. For the 30kg butter the value added to make black soap is 45.9%. The added value varies greatly per product. From the chart, it was the processor who added the most value to the entire shea value chain compared to aggregators and production groups.

Processing Shea Nuts (85kg) into Butter (30kg)

No. Item Qty Unit Price Total Amount Remarks % of (GHC) (GHC) Value Addition Producer Raw Nuts 1 bag 150.00 150.00 85kg bag 0% Firewood 20.00 20.00 10.1% Water 5.00 5.00 2.5% Crushing 2.50 2.50 1.2% Roasting 2.00 2.00 1.0% Milling 2.00 2.00 1.0% Kneading 10.00 10.00 5.0% Box and liner 6.00 6.00 3.0% Total Value 197.50 23.8% Addition 30kg butter from the 85kg raw nuts Production cost 6.6 Cost per per 1 kg one kg Aggregator Transportation 5.00 5.00 One box 2.4% (30kg) Selling Price 30 kg 10 300.00 GHC (30kg) 10/KG Profit Margin 102.50

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Black Soap Production from 30kg butter (85kg raw nuts) No. Item Qty Unit Price Total Amount Remarks % of (GHC) (GHC) Value Addition Processor Raw butter 30kg 10 300.00 0% Palm Kernel 150 150.00 27.0% Cocoa Potash 40.00 40.00 7.2% Neem oil 20.00 20.00 3.6% Firewood 25.00 25.00 4.5% Packaging 210 20.00 20.00 150grams 3.6% materials Total Value 555 45.9% Addition Quantities 210 7 pieces/kg Wholesale Selling 210 4.00 840.00 33.9% Price Retail selling price 210 5.00 1,050 20.0% Table 13: Value Addition of Shea Nuts Source: Field Survey 2020

Value Addition Chart Consumer

Value 20%

Retailer

Value 33.9%

Value 45.9% Wholesaler

Value Processor Value Value 2.4% Value 20% Value 23.8% 33.9% Aggregator Value Producer Value 45.9% Value 2.4% 23.8%

Figure 16 16Value: Value Addition Map Addition Map

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Nature of Cooperation in the Cluster

The business ecosystem in the cluster is largely indigenous and has been attracting many emerging organizations and agencies who provide services aimed at improving the effectiveness of the ecosystem. The shea tree produces nuts seasonally, however, the production and usage demands basically go on throughout the year. Therefore, processors and producers of shea products have built stronger relationships with the sources of their raw materials in order to secure reliable and timely supply of the raw materials and finished products. For instance, processors of cosmetic products have built a strong relationship with their cooperatives or production groups for regular supply, whilst exporters have also built a relationship with producers of raw butter or cosmetic products for their international buyers, thus creating backward and forward linkages.

Development partners have provided support through training of the associations and cooperatives on quality shea production and have also supported some groups with equipment financing to assist them to shift from labour intensive to capital intensive production methods. This has gone a long way to increase productivity in the sector. Development partners and NGOs who have played active roles in the cluster include SNV, World Vision, TechnoServe, Global Shea Alliance, Shea Network, among others.

Technical institutions have gone a step further to manufacture equipment that meet the growing demand of the sector. In the past, kneading machines were not readily available but the GRATIS Foundation and other local fabricators have acquired skills that enable them to manufacture several machines for the shea sector to increase productivity and reduce the high level of human contact and contamination of products.

Financial institutions have joined the shea ecosystem by providing some financial packages through equipment financing, capital financing, asset financing and many more. However, the cooperation between the financial institutions and value chain actors is quite weak due to high interest rates which

131 have discouraged the processors and producers from accessing these resources to expand their businesses.

From the cooperation matrix below, it was realised that processors had very strong cooperation with almost all the actors in the cluster. The processors interact with several actors in both backward and forward linkages to achieve their results. However, the firms that had the weakest cooperation were the

GSA, FDA, Financial Institutions (FI) and Equipment Service providers due to the kind of services they provide. There was some level of cooperation between FDA and GSA in the sense that their activities are interdependent on each other. NGOs also had strong cooperation with the actors because among other roles, NGOs support production groups, processors, work with equipment suppliers either through a grant scheme or equipment financing scheme and also work with NBSSI to provide training to some actors. Shea actors such as processors, aggregators and production cooperatives are members of Shea Network Ghana and Global Shea Alliance and a high level of cooperation exists between these associations and the above mentioned value chain actors.

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Northern Cluster Cooperation Matrix Name Pickers Production Aggre Processors Marketers/ NBSSI/ GSA FDA FI Equipm Shea Global NGOs Total Groups gators Exporters REP ent Network Shea supplier Alliance Pickers X 4 3 3 3 1 0 0 1 s0 2 1 2 20 Production Groups 4 X 3 4 4 2 1 1 2 3 2 1 3 26 Aggregators 3 3 X 3 4 2 2 1 2 1 3 2 2 25

Processors 3 4 3 X 4 3 2 3 2 3 4 4 3 35 Marketers / Exporters 3 4 4 4 X 2 2 2 3 1 2 2 1 27 NBSSI/REP 1 2 2 3 2 X 2 2 2 2 0 0 3 20 GSA 0 1 2 2 2 2 X 3 1 0 0 0 1 14 FDA 0 1 1 3 2 2 3 X 1 0 0 0 2 15 Financial Institutions 1 2 2 2 3 2 1 1 X 1 1 1 2 18 Equipment suppliers 0 3 1 3 1 2 0 0 1 X 1 0 3 15

Shea Network 2 2 3 4 2 0 0 0 1 1 X 4 3 20 Global Shea Alliance 1 1 2 4 2 0 0 0 1 0 4 X 3 17 NGOs 2 3 2 3 1 3 1 2 2 3 3 3 X 26 Total 20 26 25 35 27 20 14 15 18 15 20 17 26

Table 14: Cluster Cooperation Matrix Source: Field Survey 2020 133

Analysis of Business Operations

The business operations of the actors in this value chain was found to vary from actor to actor. An analysis of the responses provided by the principal firms revealed that more than half (58.3%) of the enterprises had adequate skilled workers while 41.7% did not. Majority (75%) of the principal firms rated the skills level of their employees as average. Shea production is an indigenous skill passed on from generation to generation, making it easier for firms to employ workers in the northern cluster.

However, the capacity of the workers was average because these employees were not knowledgeable in modern production technologies and still used the traditional methods.

80 75

70 58.3 60

50 41.7 40

Percent 30

20 16.7 8.3 10

0 Yes No Low Average Higher Is the availability of skilled workers in Please describe the skill level of your employee/Managers the local market for your enterprise sufficient?

Figure 17: Availability of Skilled Workers of Cluster

Competition

The cluster actors used in the study regard SMEs in other parts of the country as their main competitors in the industry. They also see SMEs in the region, Foreign firms and SMEs in their towns as their other competitors. The competition that exist between SMEs in the country was due to the respective comparative advantages of the northern and southern clusters which forces them to produce to meet certain standards. However, there was less competition between SMEs and foreign firms who already

134 had higher brand recognitions. The local SMEs aim for investment opportunities that would enable them to gradually become more competitive for the foreign brands.

90.00% 83.30% 80.00% 70.00% 60.00% 50% 50.00% 41.70% 40.00% 35% 30.00% 20.00% 10.00% 0.00% SME's within the SME's in the region Foreign firms SME's in the town country

Figure 18: Principal Firms' Competitors

The main issues for competition in the market were identified as price (75%), followed by quality/technology (58.3%), sales network (58.3%), volume of output (41.7%), location advantages

(33.3%), cost of skilled (25%), prompt delivery (25%) and finally, sales promotion (16.7%).

Figure 19: Parameters of Competition

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Packaging

The responses provided by the enterprises to the question of where they obtained their packaging materials from, majority (75%) identified the national market (distributors) as the main source, followed by local market (50%) and through imports (16.7%). Plastic containers (83.3%) were mostly used for the packaging. Carton boxes (80%), plastic jars (50%) and glass jars (16.7%) were also used.

Percent (Multiple Response)

0 10 20 30 40 50 60 70 80 90

Import 16.7

National market (distributor 75

material?

Where do Where packaging

youget the Local market 50

Glass jars 16.7 Carton boxes 80

use? Stainless steel containers 0 Plastic containers 83.3

What packaging do you packaging What Plastic Jars 50

Figure 20: Cluster Packaging

Raw Materials and Intermediate Goods

The graphs below depicts the sources of raw materials and the main suppliers of the products. Most

SMEs source their raw materials (basically the shea nuts and shea butter) from farmers. About 83% of the shea nuts or butter are sourced from farmers while 67% are sourced from cooperatives. The SMEs have built strong relationships with their respective sources of raw materials and sometimes pre-finance the farmers and cooperatives. The graph also spells out the average amount used in purchasing raw materials. The season is divided into four quarters with quarter 3 being the main season for purchasing and processing of nuts. Therefore, a lot more resources are needed to purchase the nuts in bulk and to encourage production and processing even in the off-season. That explained the high expenditure made

136 in quarter three. Quarter 4 is the off-season and for that matter, there is limited production and processing which translate into the relatively low amount spent on raw materials (GHC18,392) as compared to the peak season (GHC 91,093). The figure below shows the distribution of raw materials, source of buying raw materials and the annual/quarterly cost of raw materials.

Figure 21: Raw Materials and Expenditure

Average annual/Quaterly costs for raw materials 187,750.00 200,000.00

150,000.00 91,093.75 100,000.00 41,093.75 39,468.75

50,000.00 18,392.86 Average Average GHS - Annual Average Cost of Raw Materials Quarter 1 Quarter 2 Quarter 3 Quarter 4

Production capacity

The diagram below is the distribution of the production capacity of shea butter. About 60% of the enterprises indicated that they lacked Shea butter cleaning/oil refining capacity; 66.7% lacked Shea butter cleaning/grading equipment; 63.6% lacked filtering equipment; 63.6% did not have production processes including bleaching/ odour removal in place at their processing centres; and 63.6% did not have the capacity for certain production processes such as deodorizing.

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Figure 22: Production Capacity

Monthly Expenditure

The diagram below shows the percentages of monthly turnover spent by the respondents on their business operations. On the average, most enterprises spend 34.91% of their turnover on employee salaries, 13.55% on electricity and 7% on water. The payment of employees was relatively high because several people were engaged especially during the peak season and whether there were contract orders or not, the permanent staff were paid on a monthly basis and even in the off-season. Relatively less amounts were spent on utilities because the level of consumption determines the amount paid (high in peak season, low in the off-season).

Percentage Spent Monthly Turnover 40.00 34.91 35.00 30.00

25.00 20.00 13.55 Percent 15.00 7.00 10.00 5.00 0.00 Employee salaries Water Electricity

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Figure 23: Areas of Expenditure

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Possibility of Investments / SMEs Growth Plans

The table below are responses for growth plans for the next three years by the enterprises. These include various investment plans and how far they desire to expand their respective businesses.

Thematic Area of Plans of Investment Explanatory Notes of SMEs Growth Plans Investments Product expansion and Establishment of a shea refinery Two firms had plans of investing in the establishment of Product upgrading a shea refinery with through some external financial support

Access to international To become an international exporter of shea nuts Almost all the firms had growth plans of either accessing market and shea based products in Ghana. or expanding to international markets Would want to move from 5 containers to 15 containers per annum in exporting products

To develop and expand To become one of the lead actors in the Three firms had plans of developing the shea value chain the shea value chain development of the shea value chain in the West to appreciable standards in Africa African sub-region Creation of domestic To gain domestic market share of about 50% Almost all the firms stated that they wanted to increase market demands both within the region and other regions in Ghana domestic demands

To increase sales domestically using the brand name by finding market channels and distributors as well as sales agents

Quality Assurance Certification of products and acquire the needed Most of the firms did not have international certifications regulations and standards. and so as part of their growth plans they would want to acquire certifications like ISO, Fairtrade, etc.

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Product Quality Improve packaging of products All firms aim to improve upon their product packaging in order to penetrate the international markets.

Expand Employment Employ more permanent staff, In response to increasing production demands, five firms Opportunities to increase work force by 20% had plans of employing more workers to support the production and management of their businesses.

Investment in improve To access the right processing equipment and All the firms had plans of investing in modern production production equipment procurement of improved equipment especially equipment to help meet the demands. millers, crushers, Kneaders, mixers, etc.

To fully complete and install state of the art production equipment on permanent premises.

Investment in Establish a large warehouse for storing both raw Seven Firms had plans of establishing warehouses with Infrastructures materials and finished products support from external financial sources

Invest in the establishment of a standard shea Three firms had the aim of supporting their women butter processing centre production groups by assisting with the construction of standard shea butter centres

Access to Finance Acquire a flexible loan to buy shea nut to fill All firms expressed interest in accessing funds to expand warehouses for all year production their production and management

Diversification and Upscaling and the introduction of new products Seven firms had growth plans for diversifying and development of new unto the market developing new shea-based products products

Table 15: SMEs Growth Plans

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Areas of Expansion

All enterprises indicated that they were willing to expand in areas such as Product diversification (new products), Capacity, Improved machinery & equipment, Quality control, Sales promotion (salesroom), new product development and formulation skills in the near future as depicted in the table below:

Areas of Expansion Percent (Yes) Product diversification (new) 100% Capacity expansion 100% Improved Machinery & equipment 100% Quality control 100% Sales promotion (Sales room) 100% New product development 100%

Formulation Skills 100% Table 15: Areas of Expansion

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Porter’s Five Forces – Northern Cluster

THREAT OF NEW ENTRANTS

RIVALRY BARGAINING AMONG BARGAINING POWER OF EXISTING POWER OF SUPPLIERS COMPETITORS BUYERS

THREAT OF SUBSTITUTE PRODUCTS

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Areas Pointers

Threat of new entrants (Low- Regulatory policy barriers to entry, economies of scale, Medium) brand loyalty, capital requirements, access to quality raw materials, high cost of skilled labour

Threat of substitute products Number of substitute cosmetic products available, (Medium-High) relative price performance of substitutes, marketing strategy, buyer propensity to substitute

Bargaining power of suppliers Number and size of suppliers, quality and uniqueness of Raw Material – (Low – Medium) supplier products Packaging – (Medium – High)

Bargaining power of buyers (High) Size of each customer order, price sensitivity, differences between competitors, buyers ability to substitute

Rivalry among existing competitors Number of competitors, industry competition, industry (High) concentration, risk of staff poaching and subsequent formulation copying

Table 16: Porter's Five Forces - Northern Cluster

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Cluster Analysis using Analytical Tools SWOT Analysis

Strengths Weaknesses  Production and processing skills and technical know-how  Outmoded production technology requiring enormous manual labour  Strong linkages and relationship between processors and cooperative groups for the supply of raw materials  Poor post-harvest handling and storage practices undermining product quality  Strong co-existence of group formation or cooperatives  Inadequate capital to support the cooperatives for regular  Proximity to the source of raw material supply of produce  Enough shea trees to still tap into. About 60% of the shea  Limited technology on waste management especially the trees remain untapped liquid waste  Existence of Associations such as Shea Network Ghana,  High literacy level which limit the use of modern Global Shea Alliance, etc. marketing channels such as online marketing  Establishment of modern shea processing facilities  Over-reliance on firewood which poses serious health hazards to workers  Limited storage facilities (warehouses) for products and ensuring all year-round production  Unreliable market outlets and limited direct linkage with foreign buyers

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Opportunities Threats  Emergence of new markets  Increasing demand for shea products locally and abroad  Foreign buyers obtaining raw nuts directly from the local  Government expected to establish the Shea Development market cause artificial shortages Board by 2024  Higher foreign buyer power  Growing interest in shea by independent researchers and  High testing and processing fees for product certification institutions and standardization by the state agencies  High interest rates by financial institutions  Irregularities in market prices due to high inflation and other macro issues  The cutting down of shea trees for charcoal making  Snakes and other reptile bites  Transport constraints  Food crop farming and urbanization  Seasonal nature of the shea tree limits production

Table 17: SWOT Analysis

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Chapter Five

Vision, Recommendations and Conclusion

Vision of the Cluster

The vision of the cluster is to establish a world class collective cluster brand representing top quality shea-based cosmetics, produced in a sustainable way within the next 5 to 7 years. The table below outlines some areas of concerns and some proposed activities:

Vision Strategic Area Potential Activities

Capacity building on labelling, modern production practices and standardization

To improve upon Facilitate cluster members’ access to improved product quality technology and modern equipment such as filtering To establish a equipment, product quality testing kits or equipment world class and many more collective cluster brand Facilitate cluster members’ easier access to packaging representing top materials quality shea- based cosmetics To improve Promoting digital marketing, filers, brochures, produced in a branding of development of websites, proper labelling of products, sustainable way products radio and TV advertisement and social media within five to seven years To intensify market Promote periodic trade fairs access both Promote advertisement nationally and internationally Encourage reference of product Support partners with regulatory compliance To promote impact Promote alternative uses of bye products and inclusiveness Establish a regulatory body for fair pricing of products in the shea sector

Table 17: Vision of Cluster

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Thematic Problems Proposed Solutions Area Access to Financial constraint / inadequate capital to Provision of loan facility with low-interest rates / Provision of Finance support the establishment of processing Grants facilities centres for quality butter processing Difficulty accessing funds from commercial More concentration on medium-term working capital loans banks and venture capitals Price Instability High prices of shea butter / Fluctuation of The establishment of a regulatory body for shea prices similar to prices of raw material the cocoa sector price regulations Lack of Limited diversification of products Identify investors who are prepared to support the establishment Refinery of a shea refinery factory / Construction of state-of-the-art centres production factory Inadequate Inadequate direct Market opportunities Direct linkages to markets especially the export market / Trade Market fairs and social media platforms can increase opportunities and networks Limited marketing opportunities and Build a robust and compelling social media presence to boost sceptical about online marketing online visibility / Online facilitator or broker should be engaged to facilitate actors’ access to online marketing Product penetration in the Western and More marketing activities needed to be done to penetrate other Northern Zones markets Low market information Get a team to design a marketing strategy based on market intelligence and to push the brand in Ghana and internationally Low patronage from our own local markets Facilitate product awareness creation through promotional activities to generate local market demand Limited Inadequate storage facility / Inadequate Support the construction of warehouses to encourage storing of Storage warehouses for storing shea nut for all year raw materials for all year round processing Facilities round production High Fees from High cost of certification processes and high Support SMEs financially for regulatory certification processes regulatory cost of regulatory fees and documentation / Regulatory fees should be reduced or agencies subsidized Longer periods required to successfully Communication with stakeholder institutions should be frequent register new products to reduce the waiting period during product registration

148

High costs of importing packaging materials Duty-free import of agro-processing equipment and other packaging materials / Linkages to international companies to acquire packaging materials that meet international standards / Investors should set up factories to produce standard packaging materials for SMEs Limited Lack of Standard shea butter production Solicit funds to construct standard Shea butter processing centres Production centres that meet the requirements of international buyer companies Centres Limited Lack of ability to manage liquid waste from The SMEs need technology that can best manage the liquid recycling of shea butter producing centres waste generated from the processing groups and centres waste Inadequate Inadequate modern Machinery / Limited Support to purchase more effective and efficient equipment advanced standard equipment for both production and preferably motorized equipment / Gratis foundation should be technology and processing equipped to produce efficient types of machinery for the SMEs innovation for Limited modern Packaging materials / Lack Facilitate easy access and the purchase of quality and standard competing on of quality and standard packaging materials packaging materials either locally or imported at affordable the prices international market Poor Branding Poor branding and marketing of products Improvement on branding and marketing linkages and Marketing Human Inadequate skills in business management Provision of training to SMEs on modern methods of Shea Resource and bookkeeping records production, business management and record keeping skills. Development Training of both SMEs and groups on quality production, record keeping, business strategies, marketing and many more Limited human resources / Inadequate Employ and train all staff on quality standards, record keeping, skilled training or inadequate capacity health and safety measures and many more building High High cost of raw materials and other Greater access to more raw materials and the reduction in production cost operational cost operational costs

149

High cost of utilities Promotion of the use of alternative sources such as power (solar usage) and water (mechanized borehole)

Lack of Lack of Investments from other companies Promotion of partnership and collaborations with companies investments and the private sector with a similar business in the value chain / Promote business case to investors to invest in the sector Inadequate Limited Transportation services to deliver To have access to logistics and larger transporting vehicles to infrastructure products to our target customers access the far-away markets and timely delivery to customers development Unavailability of 2 tons cargo vehicle for the Explore the possibility of sourcing funding for the purchase of a transportation of both raw and finished cargo truck and the completion of the company factory materials/products Water tanker vehicle to supply enough water Explore more opportunities for reliable water supply for production operations in the factory Poor access roads to the production and Request for better roads to be constructed to the factories by the processing factories Municipal Assembly, the Department of Feeder Roads and other development organizations

Table 18: Major Problems faced by SMEs with Proposed Solutions

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Problems Solutions High costs in transporting packaging materials Establishment of a packaging materials factory in from the south to the north which increases the the northern part of Ghana costs of the packaging materials Packaging materials in Ghana are costly and SMEs that can afford usually import high quality mostly not durable and durable ones from China The sealing and packaging of the Shea butter by Butter is provisionally packaged in containers. the machine melts the butter and sometimes cause spillage. A major challenge with packaging has to do with Current efforts at resolving the problem include getting affordable empty cartons to cut down on buying directly from hand-made producers whose the production cost prices tend to be lower and very affordable. Poor Packaging for existing products FDA and GSA certified baobab oil and shea butter need better packaging to ensure greater market share both in Ghana and internationally Sourcing quality containers and soap moulds. Supported to access and purchase modern soap Cutting materials are the major challenges moulds to improve productivity Poor labelling of products Training on proper labelling and designing to meet international standards It is expensive to access customized packaging Specifically-designed packaging materials for each materials business would ease the uniform packaging challenges. High cost of imported packaging materials while Reduction of import duties on agro-processing those sourced locally have quality issues. equipment and materials

Table 19: Major Packaging Issues Encountered by SMEs

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Thematic Area Current Status Challenges Recommendations Production On the average, production is Traditional production skills Research into modern and technologically manually done with traditional with low productivity advanced production methods production methods Raw Materials Raw materials are obtained Seasonality of supply of raw Access to finance to acquire huge volumes of Production mostly from Farmers and materials affects production nuts during the peak season to augment off- Cooperative groups. About season production 91.7% stated the prices of raw materials are irregular and inconsistent Raw materials Most of the packaging High cost in transporting Establishment of packaging materials and inputs materials are obtained from materials and other inputs processing factory in the northern part of Ghana procurement Accra and Kumasi from the south to the north. Lack of packaging materials in the north add up to the production costs of firms Machinery The equipment that are been The locally manufactured Local manufacturing institutions equipped with used by the actors are largely equipment has low resources and technical skills to produce to locally sourced about 50% production capacity and are meet international standards then about 25% of the not durable machinery are imported. The Build the capacities of the technical institutions standard of the machinery was The imported ones are very through exposure visits or training to enable rated by the firms as follows expensive them manufacture equipment that would meet 83.3% as average machinery the needs of the SMEs with the expected high and 16.7% as advanced production capacity and efficiency machinery Storage Limited capacity to store huge Inadequate warehouses Establishment of warehouses through grant volumes of nuts for all year provision or PPP collaboration production Processing Processing is still labour Limited capital intensive Research and development of modern intensive processing equipment to move from labour intensive to capital intensive processing to meet the growing demand

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Product Firms promote their products Limited market outlets and Development of Promotional sales activities to Promotion through word of mouth and limited use of online create demand both national and international trade fairs marketing and through online marketing, televisions, radio, trade fairs etc.

Product quality About 83.3% of firms conduct Limited product testing Support with the provision of testing kits and and assurance some form of total quality equipment equipment issues control measures, whilst 8.3% conduct periodic inspection of products

Apart from Sekaf that had well established quality checks for product testing, most of the firms rely more on observation and product feel as signs of product testing Marketing According to the firms, market Limited market outlets and About 95% of the processing firms are focused intelligence is the main unpredictable market on expanding their markets to the international problem in marketing and demands markets irregularity of prices in the market Distribution Currently selling through Limited direct distribution Expansion to online marketing to promote more channels shops, cosmetic shops, channels, this is usually direct linkages and visibility and patronage of supermarkets and hotels and headed by middlemen with the products. Facilitate direct linkage to some exporting to Canada, all its associated challenges international markets USA, UK, etc. Waste Limited recycling of waste Improper disposal of waste Design waste management intervention models Management from production and generated to recycle and reuse liquid and other solid and Energy processing centers waste Consumption

153

Energy The SMEs depend so much on High production cost due to Development of alternative sources of power Consumption the use of electricity and embedded energy such as solar energy; energy saving stoves firewood consumption replacing fuel; and for mechanized boreholes for constant and cheaper water supply Occupational The understanding of actors Limited adherence to OSH Education of producers and processors on OSH Safety and on OSH management systems management practices and other international safety practices and Health (OSH) is on a medium scale of 58.3% requirements management whilst 41.7% have high OSH systems management systems Health and At the production and The production environment Health and safety education to personnel and safety of processing centers, employees is hazardous with limited provision of Personal Protective Equipment personnel are exposed to harsh working personal protective (PPEs) conditions equipment (PPEs) and safety adherence Financial The shea sector is dominated Limited access to financial Establishment of a grant scheme that would Institutions by women who have limited facilities due to high-interest support businesses to expand their operations / access to productive resources rates and collateral demands Facilitate collateral-free financial services to women NGOs Limited attention is given to Duplication of efforts among Effective collaboration between NGOs to rather some sectors in the cluster NGOs and paying less complement each other efforts to avoid attention to other equally duplication important sectors of the cluster Associations Uncoordinated efforts by the Limited coordination and Strengthen and improve the coordination and private sector collaboration among collaboration between members to draw members in the cluster synergy and learn from each other.

Also, strengthen the relationship between members of the cluster and other stakeholders such as Shea Network Ghana, Global Shea Alliance etc.

154

BDS Providers BDS providers limited Limited investment in the Promote Private Public Partnership in the capacity cluster construction of shea production factories, shea packaging materials factories in the northern part of Ghana Provide support to the UDS Spanish Lab to conduct testing and certification of products for SMEs in Northern Ghana Promote effective collaboration between GSA, FDA and the testing laboratory units which would go a long way to reduce the delays in certification and standardization process Certification Most of the SMEs had the Limited international Facilitate and promote SMEs international basic certification such as certifications that are certification processes GSA and FDA certification. required to penetrate the However they did not have foreign markets other higher certifications such as Fairtrade, ISO, etc. Table 20: Key Recommendations

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Conclusion

“The shea tree is a golden tree; what cocoa can do the shea can also do but cocoa cannot do what the Shea does, but little attention is given to the Shea” (CRIG, 2008). The northern cluster has a comparative advantage in the availability of raw materials (shea nuts) and has expert knowledge in the production and processing of shea butter and shea-based products, however there is limited value addition and processing to meet international requirements. The northern cluster has great potential for expansion and this would be achieved when all the needed support and services are given. This would greatly increase productivity and improve the livelihood of rural women.

This study was successfully conducted through the willingness of actors in the Northern cluster to collaborate and work with UNIDO for the smooth implementation of the WACOMP Project.

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