PFAG’s position on the export and import restrictions of selected strategic commodities

11
Dec

The Minister of Trade and Industry, on 20th November, 2023 presented to Parliament a Legislative Instrument (LI) to: 1. Establish a special import management mechanism to regulate and monitor the importation of strategic products for the economic development of the country 2. Streamline and rationalize the import bill of the country to improve the Balance of Payments and economic stabilization and 3. Provide measures to conserve foreign exchange, safeguard critical imports, and contribute to sustainable development. Ladies and gentlemen of the media, among the strategic products are rice, poultry, animal and vegetable oil, guts, bladders, and stomachs of animals, fish, sugar, and canned tomatoes, among others. As an association whose members will be directly impacted by this LI if passed by Parliament, the PFAG wishes to share its insights on its ramifications and also provide proposals for consideration. First of all, the PFAG wishes to commend the government for conceptualizing this framework to reduce the importation of some of these products, especially rice and poultry, into the country and protect the domestic industry. Over the past few years, rice farmers and members of the Association have bemoaned the unbridled and uncontrolled importation of rice, especially into the country, which disincentivized the local production of the crop. Ladies and gentlemen, within a space of 10 years, thus between 2010 and 2020, Ghana had a rice import bill of over $8 million dollars. In 2022, Ghana spent over GH 6.8 billion cedis ($USD 560 million) to import rice into the country. This is a very disappointing development, and considering the growing importance of the staple in the country, if nothing drastic is done, Ghana is likely to double its import bill for a commodity for which we have a comparative advantage. Over the past years, rice farmers and stakeholders in the country have collectively agreed that the country has no business importing the commodity and that once provided with the right support, infrastructure, and environment, Ghana should be self-sufficient in rice production. According to the Ministry of Food and Agriculture, Ghana, as of 2022, was producing 685,000 metric tons of rice, which is against a national demand of 1,440,000 metric tons. The Ministry estimates that Ghana should be producing about 1,324,000 metric tons of rice by 2023 and 1,701,000 metric tons by 2024, which is expected to surpass the national demand. We are of the view that it is based on these forecasts that the Ministry hopes to restrict rice imports since local production can meet local demand. With this analysis and forecast, we welcome the government’s decision to impose restrictions on rice imports, but based on the fulfilment and manifestation of these conditions, to guarantee that artificial shortages are not created to open doors for massive importation of rice. Rice farmers are still bedeviled with lots of challenges and want to see interventions by the government to address them.  Firstly, the cost of rice production continues to be high and unaffordable for the rice farmer. As of June 2023, the cost of production of an acre of rice costs a farmer not less than GHS 5,000. At the same time, 180kg of paddy rice is sold at GHS 700. With the low prices, farmers are still struggling to get guaranteed buyers. This development is demotivating for local rice production and will make it difficult to attract more farmers to produce to meet domestic demand. Though the PFJ 2.0 and EEP project focus on rice production, we expect to see radical and transformational support for rice farmers to reduce their cost of production, ensure a guaranteed market, and grant credit with low interest to support milling and processing of local rice.  Secondly, to sustain an all-year production of rice, the government needs to improve the irrigation facilities in the country. There are a lot of rice-growing areas with no irrigation schemes, and these limit its production. The government needs to demonstrate commitment by providing adequate irrigation infrastructure to ensure that there is sustainable rice production year-round.  Rice farmers also face major challenges in accessing mechanization equipment, especially combine harvesters. Post-harvest losses constitute a major challenge for rice farmers, and this is mainly due to a lack of harvesting equipment. There should be a clear-cut mechanism to ensure that all ricegrowing districts have access to mechanization equipment, especially harvesters, to reduce losses.  Currently, there are rice farmers across the country with available paddy rice but no buyers. This is because there are limited milling centers across the country, and they are not able to purchase all the paddy rice. To address this, there must be adequate milling facilities across all rice-producing districts in the country, coupled with the development of rice marketing mechanisms to ensure that rice produced is strategically bought and stored by the State. This approach will incentivize rice producers to produce, as they are assured of a ready market for their produce. It will also create an avenue for the country to have a strategic stock of produce to be supplied all year and reduce any incidence of inflationary pressures that may result from this legislation.  To enhance access to finance for increased production of rice, the government needs to intervene to reduce the interest rate. The government’s continued borrowing from the public is crowding out the private sector, leading to low private investment. The monetary policy-to-interest rate of 32% with high interest on the T-bill continues to make private investment unattractive. We call on the government to put in measures that allow private individuals to take loans with low interest to invest in mechanization, milling facilities, and the production of rice. For the poultry industry, according to data from the Observation of Economic Complexity (OEC), in 2021, Ghana imported poultry to the tune of $140 million USD, becoming the 15th largest importer of poultry meat in the world. This is also a very unfortunate situation considering the impressive production of poultry by the country during the past years, coupled with the fact that the country possesses all the right potential and resources for the production of poultry feed, which is the main challenge faced by poultry farmers. According to the data from MOFA, Ghana has a baseline production of 15,000 metric tons as against a national demand of 324,000 metric tons in 2022. The Ministry further projects, based on its interventions, an increase in poultry production to about 23,000 metric tons in 2023 and 43,000 metric tons in 2024. While PFAG acknowledges the current production gap, the country has a high potential to produce enough poultry domestically with the right investment. For instance, the feed and medication cost alone in 2022 was over 70% of the total production cost. Poultry farmers currently have to take credit with an interest rate of over 35%. These factors make it difficult to produce poultry to compete with poultry farmers from the importing nations. We would therefore want to see tangible and demonstrable measures in place to incentivize poultry production if this LI is to be fully supported. The government, as a matter of priority, should show us the immediate, short term and long term plans for improving production to meet national demand and ensure that Ghana is self-sufficient. Unfortunately, the provisions in the budget are not enough to make us achieve that goal. With regard to other strategic commodities considered under the LI, we urge the government to undertake a case-by-case assessment of each of them and accurately design a respective strategic action plan for each. To this end, we also join various stakeholders and call on the sector minister to do proper consultations with the respective industry actors to come up with a tailored approach for each commodity. To protect domestic industries and improve self-sufficiency without risking sanctions from the WTO trade protocols, based on this LI, we are of the view that it is possible to impose higher taxes on importation and use the revenue generated in support of local production and processing. With higher taxes, local production will become more competitive, which will further attract private investors in the medium term. In this way, consumers will be compelled to patronize the locally produced ones, which will be relatively cheaper than the imported ones. Lastly, we are also of the view that the government must also take steps to amend the LI, which appears to create a room that will breed cronyism, corruption, and monopoly. The provisions of the Regulation, which empower the Minister, who is a politician, to make the final decision on who qualifies to import a given commodity, may create an atmosphere for favouritism, cronyism, and corruption.