Agricultural Mechanization in Ghana: Is Specialization in Agricultural Mechanization a Viable Business Model?

Abstract

The Government of Ghana (GoG) since 2007 has been providing subsidized agricultural machines to individual farmers and private enterprises established as specialized Agricultural Mechanization Services Enterprise Centers (AMSECs) to offer tractor-hire services to small-scale farmers across the country. Current demand in the country is primarily focused on land preparation services, especially plowing. This paper assesses whether AMSEC enterprises are a viable business model attractive to private investors. Using firm investment theory and field-based data on costs, revenues, and tractor efficiency, this research examines the profitability of specialized agricultural mechanization service provision with a focus on land preparation. Findings suggest that the AMSEC model is not a viable business model, even with the current level of subsidy. Low operational scale is the most important constraint to the profitability of investment in specialized agricultural mechanization service provision. With such a low operational scale, it is essential to consider various options for introducing low-cost, small tractors suited to the current farming scale in the country. Also, a used tractor model is one of the options available for policymakers in the country. Tractor-hire services can play an important role in transforming smallholder agriculture, but with heavy subsidies on big and costly tractors, the subsidy policy can distort supply chain development. As a result, many bettersuited and lower-cost machines are unlikely to be introduced into local markets.

Roaming through the Maze of Maize in Northern Ghana. A Systems Approach to Explore the Long-Term Effects of a Food Security Intervention

“…As a consequence all the farmers sold their bullocks." The decrease of the number of plowboys was also found in a study to animal traction by IFPRI [96]. The census of 2012 [97] confirms that households reported that approximately 91% of school-age children (6 to 15 years) are regularly enrolled in school.…”

“…A number of other studies have also captured the increase in mechanized agriculture. A survey conducted by IFPRI in 2013 in four districts of the three northern regions indicates that about 95% of 173 interviewed maize farmers used hired tractor services for land preparation [96]. Data of the Ghana Living Standard Survey 2005/2006 showed that hired labor is the most costly input for farmers, accounting on average for about 50% of total input cost for a farmer in the Northern regions [99].…”

Characteristics of Private‐Sector Tractor Service Provisions: Insights from Nigeria

“…These figures include both own‐farm and hiring‐out operations and are similar to the private enterprises in Ghana (Houssou et al. ).…”

Farm Transition and Indigenous Growth: The Rise to Medium- and Large-Scale Farming in Ghana

“…Among the policies that were put in place was the establishment of Agricultural Mechanization Services Enterprise Centers (AMSECs) to improve smallholder farmers' access to mechanization services. An evaluation of the AMSEC program suggests that it has led to farm expansion among tractor users (Benin et al 2012), but the program is not viable in the medium and long terms unless AMSECs increase their scale of operations (Houssou et al 2013). The Fertilizer Subsidy Program (FSP) is another public spending program that was initiated in 2009, but the program has not been steady to date.…”