DBG proposes $200m dollars funding for GCX to help address Ghana’s food insecurity challenge

Development financing institution, Development Bank Ghana (DBG), has proposed a $200m funding for the Ghana Commodity Exchange (GCX) to help the country deal with its food insecurity challenges.

The $200m funding DBG notes, is critical to the implementation of key reforms recommended by the Bank on the back of a multi-stakeholder value chain workshop undertaken with key players in the rice, soya, maize, and poultry sectors.

Challenges identified by the DBG in the four aforementioned value chains and which contribute to the country’s food insecurity problems include low productivity; high post-harvest losses emanating from issues with aggregation; transportation, storage and trading; poor extension services, capacity building and technical assistance; low levels of value addition especially processing within the value chains; and the lack of reliable value chain data for decision making.

Central to the recommendation is the creation of a subsidiary for the Ghana Commodity Exchange (GCX) with the sole task of tackling the country’s food insecurity problem.

According to the DBG, the incorporation of a subsidiary of the Ghana Commodity Exchange (GCX) will tackle the issue of post-harvest losses, reduce the amount of food in storage, and also increase the storage life of commodities.

Further, the Bank recommends the use of technology to advance production, productivity and input pricing, market information through videos and audio recordings, aggregators buying at the farm gate and taking them to the warehouses and continuous trading by GCX.

DBG’s assessment revealed a huge financing requirement for the four value chains and the need for stakeholders to coordinate their resources in order to meet the objectives. In line with this, total financing over five years was projected at $1.04 billion, of which $686 million has been identified, leaving a financing gap of $354 million.

As part of the financing, it is estimated that GCX will need a seed capital of about $200 million to implement the proposed reforms. Although this funding is not readily available, DBG has noted that it will work with GCX, the Shareholder and other interested stakeholders including equity funders to secure this funding which is critical for a successful implementation of the recommendations.

According to Dr. Kwabena Opuni-Frimpong, DBG’s Chief Economist and Head of the Economic Research Department, the GCX has accepted the recommendations that relate to its operations and will be working with DBG to set out the terms of reference, workplan and timelines in order to ensure implementation.

The Ghana Commodity Exchange is a regulated national and regional market linking buyers and sellers of agricultural and non-agricultural products to trade under rules and discover prices while assuring the market quantity and quality of the products and timely settlement.

GCX’s key goal is to link Ghanaian smallholder farmers to agricultural and financial markets in Ghana and across the West Africa Region to ensure Ghana farmers secure competitive prices for their commodities, as well as supply good quality commodities that meet the nutritional needs of the Ghanaian people.

GCX aims to promote the commercialization of Ghana and West Africa’s agricultural sector, improve market access, increase market efficiency, and lower transaction costs.

Food imports are responsible for about half of food inflation in Ghana. With the high import volumes of staple food items, particularly rice, sugar, and poultry, the effects of the cost of living on the average citizen cannot be underestimated.

Food security is therefore an issue in the country and this is confirmed by Ghana’s 83rd ranking in 2022 out of 115 countries on the Global Food Security Index.

According to a World Bank report, high inflation in 2022 significantly worsened food insecurity in the country with a quarter of the population deemed to be food insecure at end-2022.

Per the World Bank report, food insecurity which is currently at a crisis and emergency level, is expected to remain elevated through 2023.

It is in this context and consistent with DBG’s 5-year strategic plan, that the Bank and its key partners undertook deliberate efforts including the multi-stakeholder workshops to unravel the issues in order to be able to address market failures in critical food supply chains of maize, soya, poultry, and rice.