OUP CORRECTED PROOF – FINAL, 30/7/2019, SPi Ghana’s Economic and Agricultural Transformation OUP CORRECTED PROOF – FINAL, 30/7/2019, SPi OUP CORRECTED PROOF – FINAL, 30/7/2019, SPi Ghana’s Economic and Agricultural Transformation Past Performance and Future Prospects Edited by XINSHEN DIAO, PETER HAZELL, SHASHIDHARA KOLAVALLI, AND DANIELLE RESNICK 1 OUP CORRECTED PROOF – FINAL, 30/7/2019, SPi 3 Great Clarendon Street, Oxford, OX2 6DP, United Kingdom Oxford University Press is a department of the University of Oxford. It furthers the University’s objective of excellence in research, scholarship, and education by publishing worldwide. Oxford is a registered trade mark of Oxford University Press in the UK and in certain other countries © International Food Policy Research Institute (IFPRI) 2019 The moral rights of the authors have been asserted First Edition published in 2019 Impression: 1 Some rights reserved. 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OUP CORRECTED PROOF – FINAL, 30/7/2019, SPi Preface Economic growth accelerated across much of sub-Saharan African (hereinafter called Africa) in recent years, and although outpaced by Asia, the rates of growth achieved were nevertheless unprecedented for many countries. This led to a period of euphoria among many experts who believed African economies seemed finally to be taking off. Some African countries were even characterized as African “lions”, counterparts to the so-called Asian “tigers”. However, unlike the economic transformations of the Asian tigers, rapid urbanization and the movement of workers out of agriculture has not been accompanied by any significant growth in industry or export manufacturing, nor has there been an agricultural green revolution. Rather, workers have moved primarily into a burgeoning but low-productivity service sector, and agriculture has remained largely traditional with only modest growth in land productivity. There are growing concerns that this pattern of transformation may be unsustainable, and at best can lead to only moderate rates of economic growth. This book explores these issues using Ghana as a case study. Ghana is unusual by African standards in that it is blessed with minerals, favorable agricultural conditions, and easy access to international shipping. The country has also been successful in terms of growth in per capita income (PCI) and agricultural output, reductions in poverty, and the achievement of middle- income status and a broadly democratic and peaceful society. Per capita incomes have grown consistently since the mid-1980s, but at 2.8 percent per year on average its growth has been less than half of what China and some other East Asian tigers experienced at similar stages of their economic trans- formation and offers only a slow path to greater prosperity. And despite all of Ghana’s latent advantages, the structural changes in the national economy have been typical of much of Africa, with rapid urbanization without a growing industrial sector, and a rapidly growing services sector. This book aims to explain why Ghana has not transformed its economy more substantially, why its agriculture sector—beyond cocoa—has not played a greater role and explores options for the country’s future transformation. Answering these puzzles and looking prospectively requires both political and economic analysis to ensure that potential technical options are also politically feasible. OUP CORRECTED PROOF – FINAL, 30/7/2019, SPi vi The Ghana experience shows that while enabling policies appear necessary for achieving and sustaining rapid economic growth, they are not sufficient. As late developers, African countries face limited opportunities for export manu- facturing so must depend more on their domestic and regional markets to absorb increases in output. Since demand in these markets is generally less elastic than in world markets, sector growth rates are constrained by growth in demand, which in turn depend on growth in national income and its distri- bution. This calls for a more balanced growth strategy than was the case in the tiger economies, with broad support for productivity growth within all sectors, freeing up regional trade within Africa, and overcoming many market and institutional failures that constrain private sector development and the effect- iveness of market solutions. Governments need to play more proactive roles in promoting and guiding their economic transformations, much as happened in the Asian tigers. However, the ability of governments to play more proactive roles is constrained by their political and institutional contexts. With very few exceptions, African government policies towards agriculture over recent decades have ranged from half-hearted to detrimental, despite enormous opportunities to grow the sector through productivity-enhancing technologies. Ghana, for example, spends very little on agricultural develop- ment beyond its cocoa sector, and changing this political dynamic is not easy, complicated by the varying agendas and off budget projects of both successive executives and different donors that undermine a more coherent strategy. Even where political factors are more enabling, public sector capabilities to take more proactive approaches are limiting, the result of years of institutional neglect by governments and donors. For example, Ghana’s few attempts to partner with the private sector to fix market failures along important value chains for some promising manufacturing and agriculture commodities have not been particularly successful. In the end, whether countries like Ghana can sustain or even increase their past rates of economic growth will come down to government effectiveness in finding solutions to the bottlenecks in key segments of the industrial and agricultural sectors. It will also require government willingness to engage more widely with the private sector, and the development of innovative institutional arrangements for moving the agenda forward despite remaining weak public sector capacities and market failures. OUP CORRECTED PROOF – FINAL, 30/7/2019, SPi Acknowledgments This book draws on the extensive work undertaken by IFPRI’s Ghana Strategy Support Program (GSSP) since 2005. The idea of a book emerged from a conference on Transforming Agriculture held in Accra, November 8–9, 2012. It soon became evident, however, that additional research was needed beyond the conference papers to fully address Ghana’s transformation issues, and this led to a concerted research effort over the subsequent five years. The authors are very grateful to all the contributors to this book for fitting this work into their already busy schedules. They are also grateful to Alejandro Nin-Pratt for providing an update of his earlier work on the relationship between popula- tion density and the purchase of modern inputs and the value of output/ha in different ecological zones in Ghana, which is included in Chapter 4. Special mention must also be made to Peixun Fang and Jane Lole for the excellent research support they provided for various chapters. The authors thank Springer for allowing the re-printing of a map in chapter 4 that originally appeared in Agriculture and Human Values (“Changes in Ghanaian farming systems: stagnation or a quiet transformation?”) and Elsevier for agreeing to re-print some material in chapter 5 that previously appeared in World Development (“Cities and rural transformation: A spatial analysis of rural livelihoods in Ghana”). This book would not have been possible without the sustained funding support for the GSSP provided by USAID (from both the Ghana country mission and the Bureau for Food Security (BFS) in Washington, DC), and from IFPRI and the CGIAR’s Research Program of Policies, Institutions and Markets (PIM). Finally, we would like to dedicate this book to the memory of Eduardo Magalhaes who sadly and prematurely passed away in August 2017. In addition to contributing as an author of Chapter 4, Eduardo provided out- standing statistical support for much of the research underlying this book. He will be greatly missed. OUP CORRECTED PROOF – FINAL, 30/7/2019, SPi OUP CORRECTED PROOF – FINAL, 30/7/2019, SPi Contents List of Figures and Map xi List of Tables xiii List of Contributors xvii 1. Introduction 1 Xinshen Diao, Peter Hazell, Shashidhara Kolavalli, and Danielle Resnick I. GHANA’S ECONOMIC TRANSFORMATION 2. Ghana’s Economy-wide Transformation: Past Patterns and Future Prospects 19 Xinshen Diao and Peter Hazell 3. Strong Democracy, Weak State: The Political Economy of Ghana’s Stalled Structural Transformation 49 Danielle Resnick II. AGRICULTURE’S ROLE IN GHANA’S TRANSFORMATION 4. Ghana’s Agricultural Transformation: Past Patterns and Sources of Change 97 Peter Hazell, Xinshen Diao, and Eduardo Magalhaes 5. Urbanization and its Impact on Ghana’s Rural Transformation 121 Xinshen Diao, Eduardo Magalhaes, and Jed Silver 6.