Ghana’s oil palm industry has consistently fallen short of its potential, despite continuous policy support – but why? This perplexing issue is the subject of an APRA research paper recently published in the journal World Development Perspectives. Through a comprehensive analysis of various data, including key informant interviews and documentary sources, the paper delves into the political economy factors that have hindered development of the oil palm value chain – and sheds light on the policy shortcomings that have perpetuated the sector’s underperformance.
The paper attributes the oil palm sector’s weak performance to a disconnect between the problems facing actors in the value chain and policies formulated to support the sector. This gap is rooted in the structural constraints within which these policies are formulated and enacted. Closely linked is the fact that Ghana’s oil palm value chain comprises two distinct sub-sectors: the smallholder-artisanal sub-sector and the estate-industrial processing sub-sector. However, policies targeting the value chain often treat it as a homogenous whole, disregarding the diverse dynamics and interests within each sub-sector.
A history of ineffectual policy support
To support the argument for disconnection, the paper presents a historical account of the rise and decline of Ghana’s oil palm economy. The crop rose to prominence in the wake of the abolition of the slave trade and the rise of legitimate commerce in the early decades of the nineteenth century. Its production peaked in the 1880s but declined rapidly due to factors including poor world market prices and rise of cocoa production. Later attempts by the colonial government to improve the productivity of the crop proved to be too little, too late, to stem the tide of decline.
Subsequent government attempts to support the sector and promote its growth equally failed to improve productivity. Ghana attained independence in 1957 as a net importer of palm oil, a situation that the founding president, Kwame Nkrumah, sought to change as part of a broader programme of import substitution. After his overthrow in 1966, the country descended into a decade and a half of political instability, during which economic policy swung erratically between protectionism and market orientation. The frequent coups d’état between the mid-1960s and the early 1980s hindered the coherent pursuit of long-term strategies.
When Ghana returned to constitutional rule in 1993, there were great expectations that, under the new democratic dispensation, political stability and a new environment of freedom would usher in a period of developmental politics and economic transformation. However, after three decades of the Fourth Republic, this dream has remained elusive. Instead, there has emerged a competitive clientelist system in which elections are truly competitive and broadly reflect the will of the people but have relatively little impact on the deeply entrenched system of patronage or the politics of impunity.
The paradox of good intentions
Thus, politics under the Fourth Republic, shaped by what has been described as a ‘strong democracy, weak state’, has impeded effective policy formulation and implementation. It is against this backdrop that the gap between the specific challenges facing the oil palm sector and policies designed to support the sector should be understood.
At the heart of policy failure is the ‘paradox of good intentions'. This arises from the pursuit of economic transformation and poverty reduction in the context of highly competitive electoral politics. The logic of electoral competition shortens politicians’ time horizons, leading them to prioritize highly visible distributive policies (such as input subsidies) over long-term structural reforms (like addressing land tenure issues or resolving market frictions). In the oil palm sector, these prioritizations involve the distribution of subsidized seedlings under policy vehicles like the Presidential Special Initiative on Oil Palm (PSI-Oil Palm) and the Planting for Export and Rural Development (PERD). Consequently, limited resources are often wastefully spent on short-term interventions, which paradoxically undermine the inclusive growth and economic transformation that motivated their introduction.
Other recent studies have come to similar conclusions about the poor performance of different economic sectors in Ghana. For example, a study on the country’s power sector found that ‘good governance reforms’ have failed to resolve longstanding sectoral crises, because of an ideological commitment to high modernist projects in the context of extreme electoral pressures. Without addressing these structural factors, productivity in the oil palm and other economic sectors will remain stagnant, rendering decades of policy support ineffectual.
The full-length journal article is open access and is available at: https://www.sciencedirect.com/science/article/pii/S2452292923000255
Photo credit: Ahtziri Gonzalez/CIFOR
Resnick, D. (2019). ‘Strong Democracy, Weak State: The Political Economy of Ghana’s Stalled Structural Transformation’. In X. Diao, P. Hazell, S. Kolavalli, and D. Resnick (eds), Ghana’s Economic and Agricultural Transformation: Past Performance and Future Prospects. Oxford: Oxford University Press.
Input subsidy has become a fixture of agricultural policy since the introduction of fertilizer subsidies in 2008 in response to food and energy price shocks. Since then, hundreds of millions of Ghana cedis have been spent on these programmes each year, with only modest impact on food productivity. For an overview of the operational challenges plaguing the policy, see Asante, K. T., & Mullard, S. (2021). Social Accountability and Anticorruption in Ghana’s Fertilizer Subsidy Programme. Chr. Michelsen Institute.
Asante, K. T. (2022) Residual capacity and the political economy of pandemic response in Ghana. WIDER Working Paper 2022/44. Helsinki: UNU-WIDER; Sowah, A.N.A., Tetteh, P.S.K., & Asante, K.T. (2023). ‘Inequality and Inclusive Development in Ghana’. In Sabin Bieri and Christoph Bader (eds), Transitioning to Reduced Inequalities. Basel: MDPI.
Dye, B. J. (2022). When the means become the ends: Ghana’s ‘good governance’ electricity reform overwhelmed by the politics of power crises. New Political Economy, 1-21. doi/full/10.1080/13563467.2022.2084517
This article is published from Agricultural Policy Research in Africa (APRA), a research programme of the Future Agricultures Consortium (FAC). Read the original article.