FINANCING THE PHYSICAL MARKETING ACTIVITIES OF SELECTED AGRICULTURAL COMMODITIES IN GHANA B Y E R N E S T M I N T A H A THESIS SUBMITTED TO THE DEPARTMENT OF AGRICULTURAL ECONOMY AND FARM MANAGEMENT, UNIVERSITY OF GHANA, LEGON, IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF M. PHIL. IN AGRICULTURAL ECONOMICS FEBRUARY, 1 997 University of Ghana http://ugspace.ug.edu.gh 351810 $571 -M & T k c s e s University of Ghana http://ugspace.ug.edu.gh D E C L A R A T I O N I, Ernest Mintah, author of this thesis do hereby declare that the work presented in this thesis "FINANCING THE PHYSICAL MARKETING ACTIV IT IES OF SELECTED AGRICULTURAL COMMODITIES IN GHANA" was done entirely by me in the Department of Agricultural Economy and Farm Management, University of Ghana, Legon, from November,1993 to February, 1997. This work has never been presented either in whole or in part for any other degree of this University or elsewhere. (ERNEST MINTAH) This thesis has been submitted for examination with our approval as supervisors. (DR. VICTOR K. NYANTENG) ^SUPERVISOR University of Ghana http://ugspace.ug.edu.gh D E D I C A T I O N Dedicated to my mother and all who cherish the word of God. ii University of Ghana http://ugspace.ug.edu.gh A C K N O W L E D G E M E N T I am very thankful to my supervisor, Dr. Victor K. Nyanteng, through whose constructive criticisms and valuable suggestions this work was done successfully. I am equally indebted to Dr. George T-M Kwadzo, my co­ supervisor, Prof. J. A. Dadson, Dr. (Mrs.) Ramatu Alhassan and . K. Y. Fosu who made useful comments on the study. I extend yet my sincere gratitude to Messrs. F. 0. Dako, Stephen Mintah, K. Amponsah-Agyeman and Patrick Anumele, all of the Agricultural Development Bank (ADB), for the numerous ways they assisted me. I am also grateful to my uncle, Prof. David Y. Dako, for his encouragement and assistance, and to Kwalitech Computers & Secretarial Services Limited, who typed the script. Finally, I thank the University of Ghana for awarding me a Postgraduate (Staff Development) Research Scholarship to undertake the study. iii University of Ghana http://ugspace.ug.edu.gh ABSTRACT The mode of performance and financing of the physical activities of agricultural marketing in Ghana are examined, by studying the transportation, storage and processing of two major food-crops (maize and yam) by market operators in Accra, Kumasi and Techiman markets. The food marketing channels studied, involved intermediaries such as, farmers, village based wholesalers, itinerant and sedentary wholesalers, processors and retailers. Physical market infrastructure, and transport and storage infrastructure were inadequate or in very poor condition. Estimated transport costs, ranged between 24.0 and 83.2 percent of marketing costs, and were found to be higher for headloading and commodity haulage on poor condition roads. Storage costs also accounted for between 2.2 and 17.2 percent of marketing costs. Credit itseds of yam and maize wholesalers, engaged in transportation, storage and processing, ranged between £707,940 and 0746,304 per round trip or between ffll7,990 and 0220,793 per tonne of produce. Credit needs are higher for the wholesaler who decides to vertically integrate her marketing activities, by operating a transport facility or constructing a storage facility, though substantial gains can be obtained. Sources of finance were informal (family and friends, moneylenders, farmers, other market operators) and formal (the banks). The inability of market operators to adequately finance their credit needs for the physical activities can be attributed in part to agricultural credit shortage. This is evident from the high interest rates charged by the highly patronized informal financial sector. The formal financial institutions, expected to provide adequate financing for market operators, are unable to do so due to: weak legal and regulatory framework; poor banking supervision and administration mechanisms; high tax regime; and low recoveiy performance rate, among others. Improving the mode of performance and financing of the physical activities will depend on, Inter alia, improvement of credit delivery mechanisms, provision of enabling environment for financial institutions, development of transport, storage and physical market infrastructure, and market information collection and dissemination. University of Ghana http://ugspace.ug.edu.gh TABLE OF CONTENTS DECLARATION ___ DEDICATION ___ ACKNOWLEDGEMENTS ABSTRACT ..... 1. INTRODUCTION........................... 1 1.1. An Overview of the Agricultural Sector .... 1 1.2. Food Production and Consumption in Ghana .... 4 1.3. Food Marketing Problems in Ghana ......... 9 1.4. Financing Agricultural Marketing and Problems... 12 1.5. Objectives of the Study.................. 15 1.6. Organisation of the Study................ 15 2. METHODOLOGY ............................ 16 2.1 Method of Analysis ................... 16 2.2 Scope of the Study .............. 18 2.2.1 Selection of Commodities ................ 18 2.2.2 Selection of Markets .................... 19 2.2.3 Selection of Respondents ................ 21 2.2.4 Administration of Questionnaires .......... 21 2.3 Problems and Limitations of Study........ 22 University of Ghana http://ugspace.ug.edu.gh 3 CHANNELS AND ACTIVITIES OF MAIZE AND YAM MARKETING IN GHANA......................... 23 3.1 Food Markets in Ghana.................... 23 3.1.1 Competitiveness and Efficiency of Private Food Marketing System................... 24 3.2 Maize Marketing Channels ............... 26 3.3 Maize Transportation ................... 28 3.4 Maize Storage .......................... 32 3.5 Maize Processing ....................... 34 3.5.1 Corn Dough Marketing Channels ...... 34 3.5.2 Transportation and Storage of Processed Maize.. 36 3.6 Yam Marketing Channels ................... 36 3.7 Yam Transportation...................... 38 3.8 Yam Storage ............................. 41 4. MARKETING COSTS AND MARGINS ................ 43 4.1 Factors in Transportation Costs ............ 43 4.2 Maize and Yam Wholesalers Transportation Costs.. 45 4.3 Commodity Transporters' Operating Cost ...... 48 4.4 Factors in Storage Costs ................... 52 4.5 Maize and Yam Storage Costs ................ 52 4.6 Maize Processors' Costs ....... 56 4.7 Sundry Expenses of maize and Yam wholesalers.. 57 vi University of Ghana http://ugspace.ug.edu.gh 4.8 Cost and Margins of Maize and yam....... 4.9 Financial requirement for Transportation, Storage and Processing ............... 65 59 5. FINANCING THE PHYSICAL ACTIVITIES OF AGRICULTURAL MARKETING IN GHANA.............................. 67 5.1 Sources of Finance for Transportation, Storage and Processing.................................. 68 5.2 Characteristics of Market Operators Affecting the Borrowing Capabilities ....................... 74 5.3 Linkages in Agricultural Marketing Finance..... 75 5.4 Problems of Financing Agricultural Marketing 77 6. CONCLUSION AND RECOMMENDATIONS ............... 84 6.1 Conclusion ................................. 84 6.2 Recommendation............................. 88 vii University of Ghana http://ugspace.ug.edu.gh L IST OF APPENDICES APPENDIX PAGE 1. QUESTIONNAIRE FOR FOOD WHOLESALERS ..... 104 2. QUESTIONNAIRE FOR TRANSPORTERS .......... 109 3. QUESTIONNAIRE FOR PRIVATE STORAGE OPERATORS ............................ 112 4. QUESTIONNAIRE FOR FOOD PROCESSORS ...... 115 5. PROJECTED CASH FLOW ANALYSIS — MAIZE WHOLESALER 119 6. PROJECTED CASH FLOW ANALYSIS — YAM WHOLESALER 120 7. PROJECTED CASH FLOW ANALYSIS — MAIZE PROCESSOR 121 8. PROJECTED CASH FLOW ANALYSIS — PRIVATE TRANSPORT OPERATION .................. 122 9. PROJECTED CASH FLOW ANALYSIS — PRIVATE STORAGE OPERATION .................. 123 10. PROJECTED BENEFIT - COST ANALYSIS OF TRANSPORTATION, STORAGE AND PROCESSING OF MAIZE AND YAM ............................ 124 viii University of Ghana http://ugspace.ug.edu.gh L IS T OF FIGURES FIGURE PAGE 1.1 AGRO-ECOLOGICAL ZONES OF GHANA.... 5 3.1 MAIZE MARKETING CHANNELS .................. 27 3.2 ROAD NETWORK FOR TRANSPORTATION OF MAIZE FROM MAJOR PRODUCING AREAS TO MAJOR CONSUMING AREAS ......................... 31 3.3 CORN DOUGH MARKETING CHANNELS ............. 35 3.4 YAM MARKETING CHANNELS .................... 37 3.5 ROAD NETWORK FOR TRANSPORTATION OF YAM FROM MAJOR PRODUCING AREAS TO MAJOR CONSUMING AREAS .................................... 40 5.1 CREDIT LINKAGES IN AGRICULTURAL MARKETING... 76 ix University of Ghana http://ugspace.ug.edu.gh L IS T OF TABLES T A B L E PAGE 1.1 MAJOR CROPS GROWN IN THE AGRO-ECOLOGICAL ZONES OF GHANA.......................... 7 2.1 MARKET DISTRIBUTION IN GHANA BY REGIONS ... 19 2.2 MAIN FARM COMMODITIES TRADED IN MARKETS SELECTED FOR THE SURVEY .................. 20 2. 3 MARKET ATTENDANCE BY SELLERS AND DAYS FOR SELECTED MARKETS ........................ 20 4.1 TRANSPORTATION COST OF MAIZE WHOLESALERS .. 45 4.2 TRANSPORTATION COST OF YAM WHOLESALERS 47 4.3 ESTIMATES OF OPERATING COSTS OF MAIZE TRANSPORTERS (CEDIS PER ROUND TRIP) ...... 49 4.4 ESTIMATES OF OPERATING COSTS OF YAM TRANSPORTERS (CEDIS PER ROUND TRIP) ...... 51 4.5 ESTIMATES OF OPERATING COSTS OF PRIVATE STORAGE IN TECHIMAN MARKET (CEDIS PER MONTH).. 53 4.6 GFDC MAIZE STORAGE CHARGES (CEDIS PER BAG)... 54 4.7 COMPARATIVE MAIZE STORAGE CHARGE ........... 55 4.8 ESTIMATE OF MAIZE PROCESSING COSTS (CEDIS/BAG) ............................. 57 4.9 SUNDRY EXPENSES OF MAIZE WHOLESALERS (CEDIS/BAG) .............................. 58 4.10 SUNDRY EXPENSES OF YAM WHOLESALERS (CEDIS/100 TUBERS) ................................. 59 4.11 MARKETING COST OF MAIZE WHOLESALING (CEDIS/BAG) .............................. 60 4.12 MARKETING MARGINS FOR MAIZE WHOLESALING (CEDIS/BAG) .............................. 61 4.13 MARKETING COSTS FOR YAM WHOLESALING X University of Ghana http://ugspace.ug.edu.gh (CEDIS/100 TUBERS) ....................... 62 4.14 MARKETING MARGINS FOR YAM WHOLESALING (CEDIS/100 TUBERS) ....................... 63 4.15 MARKETING MARGINS FOR PROCESSED MAIZE (CEDIS/BAG) ............................. 64 4.16 SUMMARY OF FINANCIAL REQUIREMENT OF MARKET OPERATORS (CEDIS/TRIP) ................. 66 5.1 NUMBER OF LICENSED MONEY LENDERS IN ACCRA .. 68 5.2 EXTERNAL SOURCES OF FINANCING FOR TRANSPORTATION, STORAGE AND PROCESSING AND THEIR MAJOR END USE.. 70 5.3 SOURCE OF FINANCING AND INTEREST RATE CHARGED.. 72 5.4 SOURCE OF FINANCING AND PERIOD OF REPAYMENT... . 73 5.5 KEY RATIOS FOR SOME DEVELOPMENT BANKS IN GHANA (31/12/94) ................................. 78 5.6 PLACE OF SAVING FOR MARKET OPERATORS ....... 79 xi University of Ghana http://ugspace.ug.edu.gh CHAPTER ONE 1. INTRODUCTION 1.1 An Overview of the Agricultural sector Agriculture, including forestry, constitutes the largest sector economy, representing 43 percent of Gross Domestic Product (GDP), 50 percent of export earnings and about 70 percent of employment (World Bank, 1993). Between 1970 and 1982 there was a persistent decline in the economy characterised primarily by declining output in all sectors of the economy, high and accelerating inflation and growing macroeconomic imbalances (ISSER,1992). This led the government of the Provisional National Defence Council (PNDC) to implement the International Monetary Fund (IMF) -World Bank adjustment programme, the Economic Recovery Programme (ERP), in April, 1983, and the Structural Adjustment Programme (SAP) in 1986 to reverse the decline and restore economic growth. The resultant effect was a real GDP annual growth rate of 7.6 percent and 5.7 percent in 1984 and 1985, respectively, and 5.3 percent in 1986 (Ewusi, 1987). Agriculture also grew a little under 4 percent in 1986 and accounted for about 60 percent of GDP (MOA,1990). However, the performance of the agricultural sector since 1986, has been very dismal. The sector recorded a growth rate of 1.0 percent and 3.6 percent in 1987 and 1988 respectively, and a further growth of 4.2 percent was recorded in 1989. The sector, experienced a major decline in growth rate of about -2.0 percent in 1990 before rising to 4.8 percent in 1991 (ISSER,1992). During the period 1987 to 1991, the proportion of economically active population of Ghana absorbed by the Agricultural sector also declined from 51.7 percent in 1987 to 49.3 percent in 1991 University of Ghana http://ugspace.ug.edu.gh (FAO,1991). Agriculture's contribution to Government earnings also declined from 26 percent to 10 percent between 1987 and 1992 (Ghana Statistical Service, 1992). In order to consolidate the gains made by the agricultural sector under the ERP and SAP, as well as reverse the poor agricultural sector performance, the Ghana Medium Term Agricultural Development Programme (MTADP,1991-2000) was developed by the Ghana Government in collaboration with the World Bank. In the MTADP, the importance of efficiency in agricultural marketing to lower food costs is emphasised. Improving marketing efficiency, under the MTADP, is to be achieved through the provision of good roads to facilitate commodity transportation; improved handling and storage facilities; and the strengthening of the small scale agro-processing subsector to achieve economies of scale, and secure group credit, among others. In recognition of the role of finance in facilitating agricultural marketing, the programme also sought to provide an enabling environment for the efficient operation of institutions at the interphase of the formal and informal financial sectors for the purchase of productivity enhancing inputs and machinery. In examining the prospects for efficiency in agricultural marketing and finance, then, we need to seek answers to the following major questions:(a) How are the physical activities (viz., transportation, storage and processing) of maize and yam marketing performed in Ghana? ;(b) Who performs these activities?; (c) What costs are incurred in the performance of these agricultural marketing activities? ; and (d) How are the costs financed by market operators in Ghana.?. To address the questions raised above, the present study therefore undertakes a review of food production, marketing and financing problems in Ghana, and puts into perspective the transportation, storage and processing of selected food commodities, in relation to how these activities are financed in Ghana. 2 University of Ghana http://ugspace.ug.edu.gh The justification for the present study lies in the importance of agricultural marketing and finance, for the rapid growth of the agricultural sector, and the economy as a whole. With the exception of maize which is exported in small quantities, most of the agricultural commodities produced in Ghana are consumed domestically. In the case of plantain, there has been substantial imports from La Cote D’Ivoire to meet domestic consumption since 1995. Substantial quantities of rice are also imported annually to meet domestic consumption. Agricultural commodities surpluses, that enter the marketing system are estimated at about 60 percent for yam, and about 50 percent in the case of maize, with over 80 percent of average wage incomes being spent on food (MOA,1990). This, though not conclusive, indicates, inter alia, that a substantial amount of agricultural produce is available for transporting, processing, and possibly storage. In Ghana, transport cost are estimated to cover over 70 percent of the marketing margin (MOA,1990 and Ghanexim,1991). Studies into how market operators finance this activity are also, of much relevance in providing policy options for the reduction of commodity transport costs, and invariably the price of food commodities. The Ghana Living Standard Survey (GLSS) data for 1991/92 indicates that two-thirds of Ghanaian households (average size of nine) buy some form of maize products such as "banku" and kenkey". Studies by Nyanteng (1969 and 1972) revealed that about 62 percent of food storage is mainly at the farm level. However, the GLSS data shows that, in months preceding the maize harvest, about a third of rural households, who produced some maize in the previous season, also purchase maize. Alderman (1991) also indicates that while some seasonality exists in the sales of grain by farmers, there is less agreement on whether households with larger surpluses are more or less likely to store marketable grains for an appreciable length of time. Jones (1972) also provides evidence from studies of African markets which imply that traders do not 3 University of Ghana http://ugspace.ug.edu.gh generally hold appreciable share of interseasonal storage. Who, therefore, stores the grain that is sold in the months preceding the next harvest? and whose money is tied up in the storage activity?. It is in the provision of answers to these, and other questions, that the present study is of much importance. The perishable nature of most agricultural commodities makes it necessary for some processing to be undertaken to reduce loses, improve product quality and increase shelf life. In Ghana, virtually all agricultural commodities reach the final consumer in their raw form, with little or no processing taking place (MOA,1990). The MOA (1990) study indicated processing is normally undertaken by traditional methods which are usually not cost effective. The present study is therefore relevant since it examines the cost components of agricultural commodity processing and how these costs are financed. The study provides suggestions for strengthening the small scale agro-processing subsector. 1.2 Food Production and consumption in Ghana Austin Associates (1990) argues that factors such as the physical environment, climate, technological adoption, economic, social and political considerations have led to the continuing change of the food production pattern of the small scale fanner in Ghana. Therefore, in order to provide a rigorous and comprehensive analysis of food production and consumption in Ghana, the physical environment of the country is discussed below, focusing particular attention on agroecological zones and rainfall patterns of the survey areas, and other parts of the country. 4 University of Ghana http://ugspace.ug.edu.gh Fig. | | AG RO -ECO LOGICAL ZONES OF GHANA BURKI NA F A S O DECIDUOUSFOREST I n t e r n a t i o n a l b o unda r y A g r o t c o l o g l c a d l v l i l o m Ma i n r o a d« Sha l l ow co nc r e t i o n a r y and r o c ky «o l l i souRcc: Fi g . (iq^o) University of Ghana http://ugspace.ug.edu.gh frhana a Sub-Saharan African country occupies an area of about 23.85 million square kilometres with agricultural land forming about 57 percent of the total land area of which about 18 percent is presently cultivated (MOA,1991). The country is divided into six agro-ecological zones (Figure 1.1). The survey areas, Techiman and Kumasi lie in the Forest-Savanna Transitional zone where maize and yam form part of the major crops grown. Accra, the other area of survey, lies in the Coastal Savanna zone and serves as a major consumer centre for the commodities studied, yam, maize and com dough, among others. The climate of Ghana is tropical. Mean annual temperatures in the study areas, Techiman and Kumasi , range between 25 - 27 °C (Badiane et a/,1992). With the exception of the Guinea Savannah and Sudan Savannah zones which have a unimodal rainfall pattern, the rest of the country has a bimodal rainfall pattern (Dickson and Benneh,1988). The survey areas studied have two rainy seasons and two dry seasons. The first major rainy season starts in early March and reaches its peak in June and then decreases gradually through July. The minor season rain starts in the latter part of August and reaches its peak in September-October. There is a relatively short dry period between the two rainy seasons, usually the month of August. The major dry season starts from the end of November through February. The extreme south-western part of Ghana is the wettest part of the country. Kumasi receives about 150cm, with Techiman receiving about 140cm. The bimodal rainfall distribution allows a major and minor growing season. Elsewhere, the unimodal rainfall gives a single growing season. The difference in agroecological zones and rainfall patterns across the country, as explained above, have led to variations in farming systems and food crops produced in various parts of the country, as shown in Table 1.1. Food production in Ghana is mainly by traditional methods, with little use of improved technology. Land preparation is manual, particularly in Southern Ghana where the 6 University of Ghana http://ugspace.ug.edu.gh common implements employed by small scale farmers are the hoe and cutlass. However, in the Guinea and Sudan Savannah zones, oxen are used for ploughing during land preparation. The influence of the physical environment, on agricultural production, is also evident in the cropping systems employed. T Table 1.1 Maior Crops Grown in the Aero-ecological Zone - ' ' i . X'MRY 5" ZONE Cereals Starchy Crops Vegetables Tree Crops Industrial Crops High Rain Forest Maize Rice Cassava Plantain Banana Cocoyam Okro Pepper Garden- Eggs Citrus Coconut Oil Palm Rubber N/A Semi- Deciduous Forest Maize Rice Cassava Plantain Banana Cocoyam Okro Pepper Garden- Eggs Oil Palm Cocoa Citrus Coffee N/A Forest Savannah Transition Maize Rice Sorghum Cassava Plantain Cocoyam Yam Tomato Okro Pepper Garden- Eggs Citrus Coffee Cotton Tobacco Kenaf Ground- Nut Northern Savannah (Sudan & Guinea) Maize Rice Sorghum Millet Yam Cassava Tomato Onion Shea-butter Cotton Tobacco Kenaf Ground- Nut Coastal Savannah Maize Rice Cassava Tomato Shallot Coconut N/A Source: Badiane,0., V.K. Nyanteng, W.A. Seini, 1992, "Food Security, Comparative Advantages and Fertilizer Use in Ghana". International Food Policy Research Institute, USA/Institute of Statistical, Social and Economic Research (ISSER), Legon. Agriculture, in Ghana, is predominantly on smallholder basis. There are, however, large farms and plantations particularly for tree crops such as, cocoa, cotton, 7 University of Ghana http://ugspace.ug.edu.gh rubber, oil palm and coconut. In general, food crops and tree crops have different holdings devoted to their production. In the High Rain Forest and Semi-Deciduous Forest zones, food crops are usually grown intercropped. The common combinations being maize intercropped with plantain and cocoyam or maize intercropped with plantain and cassava. Tree crops are usually grown as sole crops, but sometimes with any of the following cropping systems: intercropped maize/cassava or sole cropped maize/yam/legumes. In the Northern Savannah (Sudan and Guinea) zone the main cropping systems are intercropped sorghum and legumes or rain fed rice in valley bottoms (MC)A,1990). Livestock also plays an important role in the farming system of the Northern Savannah zone. Like cassava, maize is produced in all the agro-ecological zones of Ghana with the areas of concentrated production around Techiman, Nkoranza, Sunyani, Kumasi, Sekyere- Dumase, Mampong, Asesewa, Swedru, Ho and Koforidua in the Semi-Deciduous Forest and Forest Savannah Transition zones. These areas, therefore, serve as net exporters of maize to areas of low maize production such as Takoradi, Cape Coast and Accra, all in the Coastal Savannah zone, as well as to other major consumer and net importing centres such as Navrongo, Bolgatanga and Bawku in the Northern (Sudan and Guinea) Savannah zones. The forest savanna transition and the northern savannah zones, therefore, serve as major consumption centres for yam in the country. The spatial separation of production centres from consumption centres imply that some movement of the commodities from the producer markets to the consumer markets is required, which involves cost and must be financed. The distances involved in commodity transportation arising from the agro- ecological zonation of production and consumption points and the raw form in which most agricultural commodities are transported, as well as lack of storage facilities in the markets, partly accounts for fluctuations in the prices of major food crops in Ghana (MOA, 1990). Alderman and Shively (1991) observed that less than half the variation in reported prices of 8 University of Ghana http://ugspace.ug.edu.gh agricultural commodities they studied - including both reported error and unanticipated price movement - was due to seasonal movement. This, though not conclusive, lends support to the view that factors, other than seasonality, partly accounts for variations in market prices. This study does not however give detailed analyses of price fluctuations, since various studies such as Alderman and Shively (1991) and Alderman (1991),among others, analyse price fluctuations in detail. Alderman and Shively (1991) present evidence of significant fluctuations in the average seasonal movement of prices of selected food crops. Millet was observed to peak in June and reach a low in December. The prices of maize and yam were also observed to peak in June, however, the trough occur in September and October, respectively. Cassava prices were found to show virtually no seasonal pattern. The World Bank (1993) study, "Ghana 2000 and Beyond" indicates that such price fluctuations create considerable opportunity for arbitrage activities to smooth out price movements through trade, both domestic and international, and through storage and further processing. It again notes that the limited extent of arbitrage activities observed may reflect high transaction costs that are difficult to overcome. The relevant transaction costs, it argues, may be influenced by the limited supply of storage facilities, transport and other infrastructural bottlenecks, as well as some institutional constraints. The examination of these are, therefore, of paramount interest to the present study. 1.3 Food Marketing Problems in Ghana. The seasonality of food production in Ghana has some implications, not only for food production and price formation but also for the performance of agricultural marketing functions in Ghana. Marketing is a process which entails a number of economic activities performed as goods and services are moved from the point of initial production to the ultimate consumer. 9 University of Ghana http://ugspace.ug.edu.gh The economic activities performed in the marketing process include transportation, storage and processing which add place, time and form utilities to the product, respectively. These are the physical activities of the marketing process. Other activities or functions are concerned with buying and selling (exchange functions) which are important aspects of price determination, and Facilitation functions, such as, financing, grading and standardisation, market information and risk bearing. Agricultural marketing, therefore, provides a link between the producer and the consumer by moving produce from the initial point of production to the ultimate consumer, in the desired form, place and time. The efficient performance of agricultural marketing in Ghana is however hampered by several constraints. These constraints include, inter alia, a relatively underdeveloped transportation and communication infrastructure, lack of storage facilities, inadequate financing and lack of market information (MOA.1990). a. Transportation Erbynn (1970) cites transportation at the top of the list the inefficient and high-cost methods of marketing farm products. Asenso-Okyere (1985) in contributing to a symposium on: “factors contributing to high transportation costs and their effects on the economy”, indicated that apart from management, transportation forms the largest component of the marketing margin and is therefore a very important factor in the determination of commodity prices. In Ghana, the transportation problem is influenced largely by the poor condition of feeder roads, many of which become unmotorable during the rainy seasons, giving cause to transport owners to charge higher rates. In their report, "improving market infrastructure in Ghana", Asuming-Brempong and Abebrese (1993) concluded that, though no empirical Support exists, it is possible that transport charges are determined lately by the level of operating expenses of commodity transporters. The relevant questions that arise are: how 10 University of Ghana http://ugspace.ug.edu.gh does operating expenses of agricultural commodity transporters influence commodity transport costs?; and what factors actually influence transportation costs in Ghana?. The poor road and high vehicle maintenance costs have led to much of the consumer price being taken by transportation costs (Ghanexim,1991). A study by the MC)A(1990) also revealed that transportation costs accounts for about 70 percent of the marketing margin or about 50 percent of consumer's cedi. The study further revealed that the road even in areas such as Techiman,Nkoranza and Mampong Districts which produce a high proportion of the marketable surplus of food in the country are in very poor condition. Hine et al (1983) also concluded that, the poor transportation network and the long channels involved in the movement of foodcrops have caused the level of transport charges to remain high. This therefore imply rising financial requirement for the performance of the transportation function. It is therefore pertinent to ask: What networks and modes of transportation exist for movement of produce from the initial point of production to the ultimate consumer? and what sources and levels of finance are available to market operators for the performance of the transportation function?. b. Storage Nyanteng (1972) and Sanis (1991), among others, mention storage as a major problem of agricultural marketing in Ghana. To the extent that there is a time lag between the production and consumption of foodcrops, storage is an essential aspect of the agricultural marketing system. The storage activity is primarily concerned with making goods available at the desired time. In other words, it is the deliberate holding of goods and services from the time of production until they are needed for processing or final consumption. Alderman (1991) contends that urban consumers purchase food regularly throughout the year relying little on home storage and that some fair amount of evidence exists that rural households in Ghana, particularly, in the coastal regions, rely on markets in addition to their own production for their food supply. Preliminary findings of studies by the Ghana Grains Development Project, also show that nearly half of the maize held by 11 University of Ghana http://ugspace.ug.edu.gh farm households is sold between March and June, indicating some appreciable level of stockholding (or storage) by farmers, in keeping with findings of Nyanteng (1969 and 1972). Jones (1972) also provides evidence from other African markets which implies that, unlike farmers, traders do not generally hold an appreciable share of inter seasonal storage. Storage of foodcrops is, however, very expensive since it involves the locking up of capital, which has many alternative uses and therefore opportunity cost. Storage is also expensive as a result of the absence of proper facilities to prevent loss in weight and quality deterioration during storage. The study, therefore, seeks answers to the following questions: Who undertakes storage in the country?; What amount of storage is undertaken, both in quantity and time?; What costs are incurred?; and who finances the activity?, or rather, whose money is locked up in storage?. c. Processing --------------- 'MRY In Ghana, little processing of food crops is done and by using less traditional methods (MOA,1990). However, most agricultural products are perishable and therefore processing is required to extend the shelf life of the product. Assuming- Brempong and Abebrese (1993) contended that high capital outlay involved in the acquisition of modem processing equipment may be a hindrance to the acquisition and use of such facilities. The key questions, then, are: Who processes foodcrops?; What costs are incurred in the processing of agricultural commodities; and how do market operators finance these costs?. 1.4 Financing Agricultural Marketing and Problems The most widely cited problem of agricultural marketing facilitation is finance (Von Pischke, 1991 and La Anyane, 1985). Financing is an important facilitating function in agricultural marketing and is closely linked to marketing as an essential aspect in the set of services needed to develop the productive potential of the rural economy. The shortage 12 University of Ghana http://ugspace.ug.edu.gh or low levels of finance would therefore affect the efficient performance of the physical activities of agricultural marketing in Ghana. As suggested by Austin Associates (1990), lack of own operating capital and credit for marketing may have contributed to some farmers and traders from vertically integrating their marketing activities: storage, transportation and processing functions, that add value and utility to the product. The availability of adequate operating capital is however not a prerequisite for vertical integration. The cost - benefit analysis of the marketing activity should form the basis of the decision to integrate, since in the case of some marketing activities, specialization may be more beneficial In line with Government policy to provide credit to smallholder operators in the agricultural sector, the Government in 1965 established the Agricultural Credit and Co­ operative Bank by Act 286, which was amended in 1967 to rename the Bank as the Agricultural Development Bank (ADB). Over the years, however, there has been limited financing of the agricultural sector, because of the high cost of approving and supervising loans to the sector (Ewusi,1984). In an effort to address the persistent problem of lack of own operating capital and the high interest rates charged by the informal money lending sector, the government instructed commercial banks to increase their lending to the agricultural sector. Besides ADB, the commercial banks were obliged, as a matter of policy, to lend not less than 25 percent of their loanable funds to the agricultural sector, and also at subsidised interest rates. These policies were however abolished in 1990 as part of the SAP. Another effort by Government, was the establishment of Rural Banks, in rural areas, to mobilise savings in their areas of operation and provide needed financial support for small scale fanners and rural entrepreneurs who constitute a majority of the country's population. Despite these and other efforts, the problem of inadequate financing still persists partly because income levels are low in the rural areas resulting in low savings (Steel and Aryeetey,1994). 13 University of Ghana http://ugspace.ug.edu.gh The inability of existing lending institutions to extend sufficient finance to the sector, makes it imperative to ask the question of how market operators, engaged in the physical activities of agricultural marketing, finance these activities. That is: what sources and levels of finance are available to market operators who undertake transportation, storage and processing of agricultural commodities?. Steel and Aryeetey (1994) contend that money lenders, a common source of informal credit throughout the developing world, rarely serve as financial intermediaries; they often lend funds from their own business activities and, where they are few or operate illegally, they are an unreliable and often expensive source of finance. However, in the view of La-Anyane (1985), despite the high and usurious interest rates in the informal sectors, the formal sector has not been able to eliminate the money lender because of the high real cost of administering formal sector loans to smallholders. Von Pischke (1991) also argues that the poor performance of formal Rural Finance Institutions (RFIs) results from the maintenance of low and uncompetitive lending rates. These bring up the following key question: what level of interest rates prevail in the informal and formal financial markets?. While lending rates may be a problem in financing agricultural marketing, Yaron (1994) writing on "Successful rural finance institutions" also attributed the failure of agricultural lending institutions to the lack of innovative credit delivery policies and mechanisms. This is in keeping with observations made by Braverman and Guasch (1989). In connection with the perceived inability of existing formal financial institutions to adequately finance the agricultural sector, other relevant questions to ask are: what problems hamper financing of agricultural marketing in Ghana? and what policies and policy changes are required to encourage increased financing of the sub-sector by existing formal financial institutions?. In order, to understand more fully the role and problems of the formal and informal financial sectors and the reasons for the high interest rates that reduce access of market operators to adequate financing, the study focuses on how well both formal and 14 University of Ghana http://ugspace.ug.edu.gh informal financial institutions are performing, with particular reference to supervision, credit appraisal, delivery, monitoring and recoveries, and loan volumes, among others. 1.5 Objectives of the Study The major objective of the study is to examine, inter alia, how the physical marketing activities(transportation, storage and processing) of some selected foodcrops (yam and maize) are financed in Ghana. The specific objectives are: 1. To put into perspective the transportation, storage and processing of maize and yam in Ghana. 2. To estimate the costs and margins of performing the physical activities. 3. To examine how market operators finance the costs incurred in the transportation, storage and processing of maize and yam. 4. To examine the major aspects and problems of financing the physical activities of maize and yam marketing. 1.6 Organisation of the study The study is organised into six chapters. Chapter two, the methodology, gives the method of data collection and analyses, as well as limitations of the study. Chapter three discusses transportation, storage and processing of maize and yam in the country. Estimates of marketing costs and margins, and financial requirements of entrepreneurs engaged in transportation, storage and processing are provided in Chapter four. Chapter five presents an analyses of how transportation, storage and processing are financed, together with the problems of financing these activities. Conclusion and recommendations are provided in Chapter six. 15 University of Ghana http://ugspace.ug.edu.gh CHAPTER TWO 2. METHODOLOGY 2.1 Method of Analysis The study employs specific methods of analysis in addressing the questions raised in Chapter One. To address the question of how the physical activities of agricultural marketing in Ghana are performed and the related costs financed, coded responses from structured questionnaires administered on a sample respondents are employed in the construction of tables of response and matrix ranking of preferences. This is undertaken with the use of the computer software: Statistical Package for Social Sciences (SPSS/PC+). The appropriate data collection technique for any study depends on the type of information required. The Wye College (1991) report indicates that whatever the problem studied, there are at least three methods of data collection: (1) secondary data collection; (2) primary data collection, using a formal sample survey; and (3) primary data collection, using informal techniques. Secondary data collection involves a review of existing literature and the analysis of official statistics. Primary data collection using formal sample survey is characterised by: (a) random sampling techniques used to generate a representative sample from which generalisation can be made to a wider population than that sampled; (b) the use of pre­ designed questionnaires; the focus on quantitative data; and (c) the use of teams of enumerators, required because of the large scale of such surveys. Informal primary data collection techniques, however, involve variations in one or more of these elements, and can include surveys using non-random samples, case studies, semi-structured or open ended interviews or direct observations NRI (1992). The advantages and disadvantages of the use of these data collection techniques are examined in detail by Lipton and Moore (1972) and Casely (1986). To compensate for University of Ghana http://ugspace.ug.edu.gh the short coinings of one method (or technique), this study employs a combination of secondaiy data collection technique and primary data collection technique, involving interviews using structured questionnaires, matrix ranking of preferences and description of phenomena and observations which cannot be captured using questionnaires. For each of the selected market operators (transporters, wholesalers, storage operators and processors), a structured questionnaire specific to that activity is administered (see Appendices). The maize and yam wholesalers questionnaire was designed with the aim of studying the mode of transportation, storage and processing of selected agricultural commodities, as well as ascertaining their costs of operation and how the costs are financed. The transporters questionnaire sought to determine their operating costs, as well as problems encountered in the transportation of food crops. Private storage operators were also interviewed to determine their costs and sources of finance. Similarly, the processors questionnaire was structured to ascertain the cost of processing and transportation of the raw (and processed) product. It also examines the mode of financing of processing and related activities. To allow for some level of generalisation of the results, some degree of randomness is introduced in the survey, through the use of "random encounter" in the selection of respondents. Secondary data employed include publications by the Bank of Ghana, various commercial and rural banks, Price Waterhouse Associates, the Ministry of Agriculture, and existing literature in various libraries. These sources provide data on the nature and levels of financial sector operations, interest rate on lending, production areas and volumes, and estimated marketing costs, and margins, among others. The commodities for which data were collected are maize, yam, and com dough. Data were obtained from selected food markets in Ghana: Techiman, Kumasi and Accra markets. The justifications for the selection of these markets and commodities are presented under Sections 2.2.1 and 2.2.2. 17 University of Ghana http://ugspace.ug.edu.gh 2.2 Scone of the Study A j 2.2.1 Selection of Commodities I * \K> To achieve the stated objectives, the study employs three commodities in the analysis.\ The major food categories consist of (i) grains and cereals; (ii) starchy roots, and tubers and fruits; (iii) legumes or pulses; (iv) oil-seeds and nuts; (v) leafy vegetables and succulent fruits; (vi) fats and oils (vii) beverages; (viii) meat and (ix) food additives (Dapaah, 1989). The food commodities selected in the present study; yam and maize (and com dough) fall in tubers and grains categories, respectively. The importance of the use of a food commodity in the starchy roots and tubers category becomes clear when compared with other commodities. In Nigeria cereals contribute about 70 percent of the per capita consumption whereas in Ghana they contribute only 35 percent, with roots and plantain contributing about 60 percent (MOA, 1988), Although yam has 30 percent calories in wheat equivalent compared to crops like rice, wheat and maize, the price of yam (per calories content) in urban areas in Ghana is, however, two to three times higher than that of maize, and almost equal to that of rice and wheat (Dapaah, 1989). This indicates, among others, a strong preference, as well as excess demand for yam in Ghana, hence its inclusion in the present study. The water content in yam also has some implications for yam transport costs per unit. Water content in cereals is usually about 10 percent, while in root crops and tubers, such as yam, it ranges from 56 to 70 percent. Maize is selected for the present study since about 50 percent of maize surpluses enter marketing channels in Ghana, for distribution and processing (MOA, 1990). In the case of yam and cassava, it is between 25 and 30 percent. The per capita consumption of maize is estimated as 28.7 kg., with that of other cereals averaging 57.1 kg. The per capita consumption of yam and plantain are 13.1 and 26.8 kg., respectively (MOA 1988). Maize is also produced in all the agroecological zones of Ghana. Com dough is also selected for the present study since it is a processed food commodity handled in large quantities in markets of southern Ghana (MOA, 1990). 18 University of Ghana http://ugspace.ug.edu.gh 2.2.2 Selection of Markets Studies by Asuming- Brempong etal (1991) reveals that there are over 900 physical markets scattered throughout the country (Table 2.1), which do not include "roadside markets". Table 2.1: Market Distribution in Ghana by Regions Resions No. of Markets Percent of Total Ashanti 261 29 Eastern 128 14 Central 114 12 Northern 97 11 Brong Ahafo 67 7 Western 60 7 Upper West 56 6 Volta 48 5 Greater Accra 43 5 Upper West 56 6 Volta 48 5 Greater Accra 43 5 Upper East JZ 4 Total 911 100 Source: Asuming- Bempong, et a/.(1991). For the present study, markets were selected from the Greater Accra Region (Malam Ata, Kaneshie, Konkomba, and Agbogbloshie markets), Ashanti Region (Kumasi Central market) and Brong Ahafo Region (Techiman market), as indicated in Table 2.2. These markets were selected on the basis of their importance as major assembly points for the commodities studied, as well as on the level of patronage by market operators (wholesalers, transporters, processors) and consumers, based on information provided in Asuming-Brempong et '■ ' T r a n spo r t a t i o n routes 3 ° 2 ° 1» 1--------------------------------------L _ _ -------------------------------- 1_ SQ uA ce ; Su f t vEY University of Ghana http://ugspace.ug.edu.gh Maize assembled at Techiman and other producing areas are then transported to major consuming centres such as Wa, Accra, Tema, Mankessim, Cape Coast and Sekondi for wholesaling and retailing. Kumasi, in the middle belt, serves as an important maize asspimhling and transit point, for maize coming from Techiman and Sunyani, as well as a major consumer centre. Most of these major consuming centres are served by relatively good. 3.4 Maize Storage Storage of commodities becomes necessary where there is between production and consumption, and also where production is seasonal and consumption is all year round. Storage defined here as deliberately holding a commodity over a of period two weeks or more, was uncommon among the maize wholesalers. This confirms the assertion that storage of foodcrops in Ghana is undertaken largely by farmers at the farm and village levels (Udry, 1990, Asante et al, 1989, Nyanteng, 1972, and Mould, 1971). Traders only maintain stocks to meet their daily sales requirement. About 92 percent of the traders interviewed reported that they keep stocks for only about two week or less. Only 9 percent indicated that they carry stocks beyond two weeks. Storage of maize, on-farm and at the village levels, is undertaken in granaries, various forms of bams, baskets, kitchen ceilings, ordinary rooms as well as other places not specifically designed for maize storage (Nyanteng, 1972). Mould (1971) contends that both traditional and modem sophisticated methods are used by the maize fanner, with the former being largely employed. Mould describes three traditional methods of maize storage, namely: the ' Ewe Bam', a raised circular platform on which cobs are arranged to form a cylinder and covered with thatch; the 'Ashanti Crib’, a raised rectangular structure constructed of bamboo and roofed with thatch; and the 1*016 Type Storage’, whereby cobs are hung from a horizontal pole. 32 University of Ghana http://ugspace.ug.edu.gh Traditional and non-traditional methods of maize storage were observed in the markets surveyed. In the markets, dried shelled, and bagged maize is usually kept in open market spaces, on top of wooden planks raised above the ground with stones and cement blocks, and under sheds. Bag storage of maize in warehouses constructed from a variety of materials is also widely practiced. Silos of burnt brick, concrete, or aluminum are also used in urban areas, by public institutions, such as the GFDC. About 16 percent of the maize wholesalers stored their produce under stalls and sheds in the market, 7 percent stored in warehouses of local storage operators in the markets, 5 percent in enclosed shops and 3 percent stored in facilities belonging to the GFDC. The remaining 69 percent leave the bagged maize in open spaces in the markets covered with polypropulene sheets. Maize held by private operators usually belongs to itinerant and sedentary wholesalers. The itinerant wholesalers usually keep maize for shorter periods of between 2 and 7 days as they await transporters to move the maize to their final wholesale markets. Sedentary wholesalers who keep maize with storage operators, usually store between 10 and 40 bags for an average of about 5 days till the next market day. Private storage operators do not take title to maize under storage but hold them for a fee. Maize is held in 5mx9m enclosed concrete structures with an average capacity of 80 maxi bags (lOOkg/bag) of maize. The storage operators do not fumigate during storage or dry the maize. This is possibly because of the short periods for which the produce is held. As indicated earlier, deliberate holding of maize by maize traders over considerable periods of time was uncommon. About 84 percent of the maize traders kept maize for up to one week, about 8 percent kept it for up to two weeks and the remaining 8 percent held the product for beyond two weeks. The low level of stored maize by traders probably reflects the lack of proper storage facilities. Southworth, et al (1979) and Udry (1990) attributed the absence of maize storage by traders to the fact that they see much return in rapid turnover than in storage. 33 University of Ghana http://ugspace.ug.edu.gh 3.5 Maize Processing Most foodstuffs are traded in their raw form in Ghana. Processing, however, can extend the shelf life of the highly perishable foodstuffs, improve their quality and as a result, make the food available to consumers over a longer period. Food processing is undertaken mainly by women, using simple traditional methods. Maize is processed, mostly, into moist corn flour by men and subsequently mixed with water to produce com dough by women, Yam is, however, not processed into any other final product. 3.5.1 Processed Maize (Corn dough) Marketing Channels Com dough marketing involve very simple channels with fewer intermediaries, compared to maize and Yam, as shown in Figure 3.3. Com dough marketing mainly involves movement of the processed product from the processor to the itinerant wholesaler and then to the final consumer. The thickness of the arrows is used to represent the relative amounts of com dough moving along the particular channel. The itinerant wholesaler may also sell the comdough to the retailer or directly to the consumer. The volume of comdough going through such outlets are very small because of certain peculiar characteristics of the itinerant comdough wholesalers. The itinerant comdough wholesaler, unlike the maize or yam itinerant wholesalers, buy the comdough from the processors and transport the product to the urban market for retailing directly to the consumers. The comdough itinerant trader, therefore, undertakes the important roles of the sedentary wholesaler and the retailer, thereby reducing the number of intermediaries. Comdough marketing consumers include institutions such as schools, hospitals and security units, and individual households. 34 University of Ghana http://ugspace.ug.edu.gh FIGURE 3.3 CORN DOUGH MARKETING CHANNELS P R O C £ g _ S ° f t. .. : ■<: ; ' V ’ I T I N E R A N T N A J H o u E S i^ r u e ^ T k c s e tv \ e . i A Source: From Survey 35 University of Ghana http://ugspace.ug.edu.gh 3.5.2 Transnnrtation and Storage of Corn Dough Comdough is usually transported by porterage from nearby villages to major assembling markets such as Agormanya in the Somanya district, and Dzameni in the Kpando district. Some of the comdough traded in the markets come from the Kwahu North district, and are transported across the Volta Lake in dug-out canoes. From the assembling markets, comdough is transported by road to the major consuming centres in the country, particularly, the Mallam Ata Market in Accra, for wholesaling and retailing. Transportation is usually done using 7-9 tonne trucks. Comdough has poor storage characteristic and therefore not stored for long periods. Where storage is necessary, it is usually kept in baskets, under market stalls. The baskets are usually covered with polythene, to reduce shrinkage through loss of water. Comdough can be stored in this way for 4-7 days without any significant quality deterioration. 3.6 Yam Marketing Channels Yam marketing in Ghana is mainly private sector activity, unlike maize marketing. The marketing channels for yam are presented in Figure 3.4. The producing area of Techiman and surrounding villages have yam farms located at distances of between 0.5 and 8km . The location of the farms and the absence of motorable roads to the farms make it difficult for most of the itinerant traders to purchase directly from the farm without the use of local buying agents. Also, due to the traditional storage practice of leaving yam in the mounds, harvesting is usually undertaken after a buyer has been found, hence the need for local buying agents who undertake purchases for the itinerant traders. 36 University of Ghana http://ugspace.ug.edu.gh FIGURE 3.4 : YAM MARKETING CHANNELS f* Px A, |V\E A. I T l N E ^ f t K T L I VlLLftrQE YJHOLE.S.ALE.R Source: From Survey 37 University of Ghana http://ugspace.ug.edu.gh Of the itinerant traders studied, about 60 percent obtained their supplies through local buying agents and 7 percent purchased yam from the village wholesaler. The remaining 33 percent obtained their supplies directly on the farms. The village wholesaler is not very important because of the active involvement of the farmers themselves. Yam farmers usually deal directly with yam buyers on market days. The yam buyers usually inspect the harvested produce in order to determine and endorse the variety, quality and size. The itinerant wholesaler of the local agent, after inspecting the produce and agreeing on the unit price, assemble their purchases and arrange for transporters to move them to their final markets. In the urban markets, the itinerant traders sell the yam in units of 100 tubers, of about equal sizes, to sedentary wholesalers. It was observed that about 83.5 percent of the yam is purchased by sedentary traders, about 12.5 percent by retailers and the remaining 4 percent directly by consumers. The main source of supply for the retailer is the sedentary trader. Retailers purchase about 92 percent of yam supplied by sedentary wholesalers and the remaining 8 percent by consumers. Consumers who obtain direct supplies from itinerant or sedentary wholesalers are mostly schools, restaurants and hotels, and 'Chop Bars'. The yam marketing channels observed, indicate that yam is mainly purchased by itinerant wholesalers, acting through local agents or village based wholesalers, and then sold to sedentary wholesalers who sell to retailers. The main yam marketing channel has four intermediaries - village based wholesalers, itinerant wholesalers, sedentary wholesalers and retailers - between the farmer and consumer. This confirms the findings of other researchers on yam marketing channels, such as, Nyanteng(1969) and Amedume (1990). 3.7 Yam Transportation The movement of yam from producers or farmers to consumers involves the following stages: (1) movement of yam from farms to the farmer's house or directly to assemble points of the itinerant wholesaler or to the village wholesaler; (2) movement of 38 University of Ghana http://ugspace.ug.edu.gh yam from the farmer's house to the rural market or directly to assemble points of the itinerant wholesalers; and (3) movement of yam from the rural market or assemble point or farmer's house to itinerant wholesaler's final market. Each stage of yam movement involves one or more modes of transportation. The farmer, after harvesting yam, assembles them in units of 100 tubers which may be inspected by the itinerant wholesaler for immediate purchase, or transported to the farmer's house for sale at home or the rural market. Harvesting is normally undertaken a day before the market day. The harvested yam, which are not purchased on the farm are then carried in baskets containing between 5 to 8 tubers to the farmer's house. Porterage of yam is undertaken typically by women and children in the farm household. The adult males sometimes use bicycles to transport yam, especially in the north. Hired labour, employed for yam porterage are usually members of the farmer’s extended family, are sometimes engaged in porterage of yam from the farm to the house. In the case of itinerant wholesalers or local buying agents who purchase yam on the farm, transportation to the assembly points is mainly done by porterage using hired labour. The second stage of yam transportation in the marketing channels involves the movement of the commodity from the farmer's house to the rural market by the fanner or to the assembly point of the itinerant trader by the local buying agent. The rural market is usually a distance of between 0 and 25 km from the farmer's house. Movement of yam to the rural markets are mainly by means of porterage and bicycles. In the market, the farmers arrange yam in units of 100 tubers for inspection by itinerant wholesalers and other buyers. The itinerant wholesaler, after agreeing with the farmer on price, quality and size, usually employs hired labour to headload the yam to the assembly points. The itinerant wholesaler then hires 3-5 tonne tractors or 7-9 tonne trucks, depending on the place of purchase ( farm gate, farmer's house, or rural market) and the road condition. Tractors are used to transport yam from the farmgate to the rural market, while trucks are mainly used for yam transportation from rural markets or farmer's house directly to urban markets. 39 University of Ghana http://ugspace.ug.edu.gh T a m a l e B i mb i l a , S a l a g a K p a n d a i D a m b a iK i n t a m p o A t e b u b uWenchi N k o r a n z aT e c h i ma n Ka d j e b i 1 Hoho e K u m a s i A k o s o m b o D u n k wa T ema A C C R A T a r k w a LEGEND Cape Coas t / Sekondi T o k o r a d i Fic^tr-e. 3 .5 • R oad K e rtw tffVC Move-me-prt. Yc3tw\ W\c^oc Procluc\r\3 C\r*a,£ IVujor T 2 ° 1° B U R K I N A F A S O no- 4 0 8 0 Km I |‘ | ‘ i 'V -i 5 0 Mis. Ma jor producing cent res Major consuming cent res Trans j> o r t o t i o n rou te s___ 0° V f t O M . ° f t O M  University of Ghana http://ugspace.ug.edu.gh The road networks for yam transportation from main supply areas to consuming centres are presented in Figure 3.5. Itinerant wholesalers obtain their supply of yam from major producing areas such as Abaase, Apesika and Zambrama, all in the Nkoranza district, about 25km from Techiman. Some supplies also come from Tamale, Kintampo, Wenchi and Bamboi to the Techiman market. Yam assembled in the Techiman market are transported in 7-9 tonne trucks to consumer centres in the southern part of the country such as Kumasi, Accra, Tema, Mankessim, Cape Coast and Sekondi. Itinerant wholesalers from Wa in the Upper West Region also purchase yam from the Techiman market. Kumasi is a typical assembling and transit market in the southern part of the country from where yam, coming from Techiman and other major producing areas such as Atebubu and Ejura are assembled for wholesale. Yam from main supply areas of Saboba, Bimbila and Salaga are transported directly by road to Accra or by the Volta Lake on ferry (350-400 tonne capacity) from Yeji to Akosombo and then by road to Accra, as shown in Figure 3.5. 3.8 Yam Storage Yam storage is largely undertaken by farmers on their methods and structures (Nyanteng,1971 and 1972). On the farm, yam is stored in mounds, heaped and covered with sand or heaped and covered with grass. In the Techiman and Konkomba market in Accra, yam wholesalers stored yam by arranging them in cone shape on the bare ground or on vines, covered with ‘spear’ grass. Yam stored in this way are exposed to the sun and rain as well as to pests and diseases. Yam, left in the open space of markets, under the care of night watchmen are sometimes stolen posing additional storage cost through losses. Only 20 percent of yam wholesalers interviewed owned storage structures in their final markets of operation. These were, generally, improvised storage structures. In the 41 University of Ghana http://ugspace.ug.edu.gh Konkoraba yam market, the storage structures were mainly wooden structures roofed with asbestos sheets. The lack of proper and adequate storage structures in markets, explain the virtual absence of yam storage by traders. What really takes place can probably be described as warehousing. In the study, about 48 percent of yam traders interviewed held stocks for one week or less, about 10 percent held stocks for up to about two weeks, and 36 percent occasionally held stocks beyond three weeks, but below 24 weeks, when the yam starts to germinate. The absence of deliberate yam storage by about 76 percent of the traders possibly results from the absence of proper and adequate facilities in the markets and the biological nature of yam. Storage losses of roots and tubers are generally high in the country. The study observed losses in transit of about 3 and 1 percent for yam and maize, respectively. The main problem with storing roots and tubers is their high moisture content. They continue to respire and metabolize at a faster rate in storage than cereals (Booth, 1974). They can # however be stored from a few weeks to about six months (Nyanteng, 1972). After six months (24 weeks), losses result mainly from sprouting. Other causes are: destruction by rodents, rotting during storage, and bruising and breakages during loading and off-loading. Losses resulting from these causes were in the region of between 2 and 5 percent, and averaged about 3 percent. 42 University of Ghana http://ugspace.ug.edu.gh CHAPTER FOUR 4 MARKETING COSTS AND MARGINS In the performance of the physical activities of agricultural marketing described in chapter 3, costs are incurred. According to Bell (1979), marketing costs can be analysed at three different levels. The most basic type of marketing cost analysis involves the use of the profit and loss statement prepared for other accounting purposes. In the second method, costs are studied according to the purposes for which they are incurred. The third type of analysis centres on the costs of particular marketing functions (viz., exchange, physical and facilitation). The analysis of marketing costs in the present study centres on the costs of particular marketing functions. Marketing cost is therefore defined as cost incurred in performing marketing functions such as transportation, storage, processing and handling. The gross margin is also defined as the selling price less the purchase price. Carman and Uhl (1973) identified some useful operating ratios for the analysis of marketing costs. These were: 1. Marketing cost to Gross Margin 2. Marketing cost to wholesale price 3. Purchase price to wholesale price 4. Mark-up on purchase price 5. Individual costs to total marketing costs. These ratio's are part of the analysis of marketing costs and margins in the study. 4.1 Factors in Transportation Costs Studies of agricultural intensification in Africa have shown that farmers intensify their production systems only when there are adequate transport links to the market (USDA 1954, and Grolleand and Kohler, 1979). University of Ghana http://ugspace.ug.edu.gh The factors which detennine transportation costs of agricultural commodities are: the spatial separation of markets, the condition of roads, the level of integration of the transportation network, availability of suitable vehicles, maintenance regime of vehicles, running cost of vehicles, availability of cargo for in and out journeys, and the number of security check points, among others. The feeder road density in Ghana averages only 89m/sq km which is only roughly equal to that of India in 1951 (MOA,1990). Most of the feeder roads are not properly maintained and many of them are impassable during the rainy season. It is estimated that only about 3,300km (16%) of Ghana's 21,300km of feeder roads are in good condition (motorable all the year round); about 5,100km (24%) are in fair condition; and the remaining 12,900km (60%) are in poor condition (MOA,1990). Among the trunk roads, 29 percent were in good condition in 1991, 32 percent fair and 39 percent poor. From 1987 to 1991, the percentage of roads in good condition increased by 7 percent, while the number of poor condition roads also increased by 3 percent (World Bank, 1993). The road network in Ghana is therefore, generally poor and adds excessively to the cost of transporting produce from the farm gate to the consumer. The transportation network in Ghana is also not adequately integrated. Lack of information on availability of load leads to situations whereby transporters are compelled to make empty return trips to producing centres, thus increasing their operating cost which is eventually passed on to the consumer. Eicher and Baker (1982) contend that inability to secure backhauls is a major problem influencing commodity transporters' operating cost. The elements of agricultural commodity transporters' operating cost include fuel cost, booking fees, bridge and road toll, income tax, and repair and maintenance costs, among others. Most of the trucks operating on the routes studied are not road worthy and hence fall into constant trouble with the police and other security personnel who guard the numerous check points along the routes. For example, there are 9 check points between Techiman and Accra, a distance of about 390km. This indicates that transporters encounter security personnel every 43km of the journey. As a result of the poor state of their vehicles 44 University of Ghana http://ugspace.ug.edu.gh and the presence of security personnel, transporters are compelled to pay cash tips ranging between 0500 and 05,000 per trip. In addition, they sometimes have to give some of the commodities to the security personnel in other to be allowed to have a smooth journey without undue delays. The transporters reported that they, in some instances, had to pay the traders for produce taken by the security personnel. 4.2 Maize and Yam Wholesalers' Transportation Costs (a) Maize Transportation Costs The itinerant maize wholesalers in this study, as explained in chapter 3, mainly purchased maize from villages such as Abease, Apesika and Zambrama, an average distance of about 4km from main assemblying points in Nkoranza. From Nkoranza, maize is transported by either tractors or trucks to the final markets in Techiman, Accra and Kumasi. The transportation cost estimates for maize wholesalers are presented in Table 4.1. Table 4.1: Transportation cost of Maize Wholesalers Route Distance ( B Y E Transport Cost ()/ tonne- km Farm to Assembly point 25 1, 670 238.40 Techiman Kumasi to 90 3, 000 119.00 Techiman Accra to 390 14,000 128.21 Bimbilla Accra to 392 13,000 118.44 Note: 1,200 tubers with average weight of 280 Kg/100 tubers Source: Survey Data With an average charge of 01,670 per 100 tubers of yam (Average weight of 280kg), the yam wholesaler incurs a transport cost of 0238.40 per tonne-km, using human porterage (Table 4.2). Ghanexim (1991) obtained a transport cost of 0520 per tonne-km for yam transportation from farms to the farmers' homes in Salaga, using tractors. The difference in tranport cost per tonne-km, observed in the two studies possibly results the poor state of farm tracks in the Salaga yam producing area as compared to farm roads and tracks in the Techiman yam producing areas. Transportation of yam from assembly points to wholesale markets in Kumasi and Accra was by means of 7 to 9 tonne trucks. The transportation cost estimates show that moving yam from Techiman to Kumasi and Accra costs about 03,000 and 014,000 per 100 tubers or about 0119 and 0128.21 per tonne-km, respectively. In the Ghanexim (1991) study, the yam wholesaler who transported yam from Salaga to Accra, by means of a 7 to 9 tonne trucks, incurred a transport cost of 053.20 per tonne-km. Nyanteng (1969) obtained transport costs of between N01.34( or 0 61.18 at 1991 CPI-Food) and N04.46 ( or 0 203.63 at 1991 CPI-Food) per tonne-km for porterage of yam from farms to Ejura and Amantin, over distances of between 0.8 km and 16 km, respectively. In the study by 47 University of Ghana http://ugspace.ug.edu.gh Nyanteng (1969), transport costs per tonne-km for itinerant wholesalers who use trucks for transportation of yam from Bimbilla to Kumasi, and Kumasi to Accra ranged from N0O. 29 (0 13.24 at 1991 CPI-Food) to N0O.77 (0 35.16 at 1991 CPI-Food) and N0O.26 (0 11.87 at 1991 CPI-Food) to N01.O5 (0 47.94 at 1991 CPI-Food), respectively. The studies by Nyanteng (1969) and Ghanexim (1991) both indicate high cost for porterage and are supportive of the observation, in the present study, that transport costs are higher for commodity transport by porterage than by truck. In comparison to the Techiman-Accra route, the relatively low transportation cost of 0118.44 per tonne-km for the Bimbilla-Accra route possibly results from the existence of an alternative water transport system ( see Ghanexim, 1991). Another reason is that most of the trucks operating on the Bimbilla - Accra route belong to yam farmers and village wholesalers based in the producing area. Therefore, the transport owners are able to arrange full load for their vehicles without extra cost due to delays. The study further shows that transport cost per tonne-km is generally higher for yam than for maize. This is because, whereas maize is transported in packaged form, in jute sacks, no such packaging is available for yam. Yam, therefore, requires more handling time and occupies more haulage space (or volume) in relation to its weipht Fuel consumption, per round trip, for maize transporters were: Nkoranza to and from Techiman (18 litres); Techiman to and from Accra (146 litres); and Techiman to and from Kumasi (33 litres). The price per litre of diesel was 0360. The transporters could not give the lubricants consumption per round trip hence, a conservative figure representing 20 percent of fiiel consumption was utilised. Average wage of drivers and their mates per round trip were: 015,000 per driver and 06,000 each for two mates for both Techiman - Accra and Techiman - Kumasi routes; and 08,500 per driver and 02,000 for one driver's mate for the Nkoranza - Techiman route. The average haulage capacity per round trip was 80 bags (lOOkg/bag). 4.3 Commodity Transporters' Operating Costs (a) Maize Transporter's Operating Cost 48 University of Ghana http://ugspace.ug.edu.gh The estimates in Table 4.3 indicate that in moving maize from Nkoranza to Techiman, the transporter incurs a higher operating cost of 0135.43 per tonne-km compared with 039.6 and 076.92 per tonne-km for Techiman - Accra and Techiman - Kumasi, respectively, because of the poor state of the Nkoranza - Techiman road. Table 4.3: Estimates of Operating Costs of M aize Transporters (cedis per round trip) Cost Item Nkoranza to Techiman % Techiman to Accra % Techiman to Kumasi % Fuel 6,480 24.9 52,560 42.5 12,150 21.9 Lubricants 1,296 5.0 10,512 8.5 2,430 4.4 Booking Fees 600 2.3 8,600 7.0 3,500 6.3 Wages 10,500 40.4 27,000 21.9 27,000 48.8 Income Tax 1,400 5.4 1,400 1.1 1,400 2.5 Repairs & Maint. 3,926 15.1 16,760 13.6 6,700 12.1 Tips 1, 800 6.9 6,720 5.4 2,200 4.0 Total Operating Cost 26,002 100.0 123,552 100.0 55,380 100.0 Cost\ tonne-km 135.43 39. 60 76.92 Source: Survey Data Repairs and maintenance costs for transporters ranged between 12.1 and 15.1 percent of total operating costs, and were high for the Nkoranza - Techiman road which is a poor road. Tips given to security personnel at the various check-points ranged between 4.0 and 6.9 percent of total operating costs. In general, operating costs per tonne-km were higher for poor roads than for good roads. The difference in transport costs per tonne-km for the Techiman - Kumasi and Techiman Accra routes, with similar road conditions, can 49 University of Ghana http://ugspace.ug.edu.gh be attributed to fixed costs such as Income Tax and Wages which do not depend on distance. They formed between 23.0 and 51.3 percent of the operating costs of transporters operating on these two routes. The trend in operating cost per tonne-km, shown in Table 4.3 for the specified routes, is similar to that observed in Table 4.1 for transport cost estimates for maize wholesalers. The difference in transport cost per tonne-km and operating cost per tonne- km, shows that maize transporters plying between Techiman and Accra obtain a gross margin of 042.45 per tonne-km compared to 031.24 for transporters operating on the Nkoranza - Techiman route. The results presented in Tables 4.1 and 4.3, though not conclusive, are supportive of the fact that transport charges depend largely on road conditions, since road conditions greatly influence the operating costs and margins of transporters. (b) Yam Transporters’ Operating Cost Transporters who move yam from Techiman to Accra (390km) and from Bimbilla to Accra (392km) required an average of 146 litres of diesel (at 0360 per litre) per round trip. About 72 percent of the transporters used vehicles with diesel engines. The booking fees per round trip were 07,300 and 05,700, respectively, for Techiman - Accra and Bimbilla - Accra yam transporters (Table 4.4). Income Tax payments per round trip averaged 01,866 for yam transporters on both routes, and the repairs and maintenance costs averaged 015,963 and 015,923 for Techiman - Accra and Bimbilla - Accra yam transporters, respectively. Tips, in kind and in cash, also averaged 08,650 and 04,733, respectively for vehicles plying the Techiman - Accra and Bimbilla - Accra routes. In addition, the Bimbilla - Accra yam transporter incurred a bridge toll of 0400 for the use of the Adomi Bridge at Atimpoku and the Accra - Tema motor-way. 50 University of Ghana http://ugspace.ug.edu.gh Table 4.4: Estimates of operating Costs of Yam Transporters ( cedis per Round I S f iJ _______ — --------- ------- --------------------- Cost item Techiman to Accra % Bimbilla to Accra % Fuel 52,560 37.9 52,560 39.3 Lubricants 10,512 7.6 10,512 7.9 Booking Fees 7,300 5.3 5,700 4.3 Wages 42,000 30.2 42,000 31.4 Bridge Toll 400 0.3 Income Tax 1, 866 1.3 1, 866 1.4 Repairs & Maint. 15,963 11.5 15,923 11. 9 Tips 8,650 6.2 4,733 3.5 Total Operating Cost 138,851 100.0 133,694 100.0 Total Operating Cost/tonne-km 52.98 50.75 Source: Survey Data An analysis of the operating cost for transporting yam from Techiman to Accra and Bimbilla to Accra shows a per tonne-km range of 050.75 and 052.98. This indicates yam transporters' profit margin of between 067.69 and 075.23 per tonne-km. The results in Tables 4.2 and 4.4 show that the Techiman - Accra yam transporter obtains a higher profit margin than the yam transporter operating between Bimbilla and Accra. The high profit margin of 075.23 per tonne-km for the Techiman - Accra yam transporter is due to the absence of reliable alternative modes of yam transportation from Techiman to Accra. Rail transport facility exist between Kumasi and Accra, this is however not reliable. This accounts for the higher transport cost per unit for Techiman - Accra yam wholesalers. The presence of a reliable alternative transportation facility ( water transportation ) for the Bimbilla - Accra route possibly accounts for the low profit margin for transporters operating on the route. Again, the results in Table 4.3 and 4.4 indicate higher transport charges per tonne- km for routes on which higher vehicle operating costs per tonne-km are incurred. A comparison of cost estimates for yam and maize shows that although vehicle operating costs are generally lower for yam, transport charges are higher for yam than maize, since yam occupies more space during transportation. Unlike maize which is transported in jute sacks, yam is not packaged during transportation. Transport costs are 51 University of Ghana http://ugspace.ug.edu.gh also higher for porterage of commodities and for commodity transportation on poor condition roads. The results have very useful implications for policy makers since they suggest that a reduction in transport charges, and hence food cost, can be achieved through policies that seek to reduce fuel and lubricant costs, booking fees, and repairs maintenance costs. A discussion of these policies is taken up in chapter 6. 4.4 Factors in Storage Costs Agricultural commodities traded in the country are generally perishable in the raw form. The storage of such commodities reduces losses resulting from spoilage, dehydration and germination. The need for storage also arises out of the lack of adjustment between the time of production and consumption of the commodity. It also performs an auxiliary service in assisting in the transfer of commodities from place to place during the marketing process. Traders dealing in maize and yam interviewed during the survey, stored only what they could not sell during a particular market day. This,as explained in chapter 3, is because traders see substantial benefit in rapid turnover compared to storage, and also, proper storage facilities are absent in the markets. About 20 percent of the maize wholesalers interviewed, stored their maize in warehouses owned by private storage operators in the markets. About 2 percent stored with the GFDC, while the remaining 78 percent leave their maize in the open space in the markets or at home. About 70 percent of the maize traders interviewed in the survey, leave their produce in the markets under the care of watchmen who charge a fee of (6100 per bag of maize per night. 4.5 Maize and Yam Storage Costs (a) Maize Storage Costs 52 University of Ghana http://ugspace.ug.edu.gh Private storage operators in the Techiman and Kaneshie markets usually hold maize for short periods, between 4 to 7 days at a time. Between 10 and 40 bags of maize, are usually held for an average of 5 days till the next market day. The average quantity, traders store per day, was 22 bags. Traders who keep maize with private storage operators, while awaiting sale or transportation, paid an average of 080 on a bag of maize per day. The private storage operators keep the maize in 5mx9m rooms with an average holding capacity of 80 maxibags of maize. The cost elements of private storage are, mainly, rent on land, watchman salary, electricity bill, market toll, and Local Council (Assembly) levies. Private storage operators interviewed in the survey do not fumigate maize in storage. The average rent on land was 08,895 per month and a watchman was paid 015,000 per month. Electricity bill for a month averaged 03,880. The private storage operators also paid 0400 market toll and 0500 local council or assembly fees per market day. The average earnings per employee in the agricultural sector, 013,317, obtained from the Ghana Statistical Service (1992) is used in the study as a proxy of the storage operator's wages. The Techiman market has three market days in a week, giving total market toll of 04,800 per month. This brings the total operating costs of the private storage agent to 051,892 per month, as shown in Table 4.5. Table 4.5: Estimates of Operating Costs of Private Storage in Techiman Market ( Cedis per month ) Cost Item Amount Rent 8,895 Electricity 3,880 Watchman Wages 15,000 Operator’s Wages 13,317 Market Toll 4,800 Council Pees 6,000 Total Operating Costs 51,892 Total operating Costs/bag/day(a) 64.9 Source: Survey Data Note: (a) Average of 40 bags stored for 5 days in a week. 53 University of Ghana http://ugspace.ug.edu.gh The average utilised capacity of the storage rooms was 40 bags (lOOkg/bag). The operating cost encountered by the storage operator was 064.9 per bag per day. The storage charge on a bag of maize is, however, 080 per bag per day. This gives a margin of 015.1 per bag per day for the storage operator. The survey also showed that the private storage operators usually demand payment before the service is rendered. The survey indicated that the average cost of erecting a 5mx9m cement structure for use as storage room or warehouse in the market was 0882,787 with a range of between 0600,000 and 02,200,000. The survey also showed that only about 2 percent of traders (itinerant and sedentary) store maize with the GFDC. The storage cost to traders, is estimated using the amounts charged by the GFDC for each specific service provided (Table 4.6). The storage costs of the GFDC, unlike that of private storage operators, include the cost of drying, cleaning, and fumigation by spraying. Fumigation is mandatory for all maize stored by GFDC. Table 4.6: GFDC Maize Storage Charges (Cedis per bag) Item Charge(4) Drying 740 deeming 160 Fumigation 60 Storage 100 Total Storage Charge (1 month) 1, 060 Total Storage Charge (2 month) 1,160 Charge/ bag/ day (1 month ) 35.33 Charge/ bag/ day (2 months) 19.33 Source: GFDC, Accra. The cost of drying was 0740 per bag. The GFDC also charges 0160 per bag for cleaning, and 060 for fumigation. The GFDC, in addition, charges a flat rate of 0100 per bag per month for storage. 54 University of Ghana http://ugspace.ug.edu.gh The storage charge by the GFDC for the first month is 01,060 per bag which implies a charge of 035.33 per bag per day. The storage charge for two months is 01,160 per bag or 019.33 per bag per day. A comparison of the maize storage charges by public and private agents presented in Table 4.7, indicates that a maize trader who stores a bag of maize with the GFDC incurs a lower charge than a trader who stores maize in the other places. Table 4.7; Comparative Maize Storage Charge Place of Storage Storage Charge (cedis/bag) 1 day 1 month 2 month Market Sheds or open space 100 30,000 60,000 Private Storage rooms 80 24,000 48,000 GFDC silos 35 1,060 1,160 Source: Survey Data and GFDC, Accra Maize traders interviewed in the survey, however, preferred storing maize in other places than the GFDC. This is due to the fact that the GFDC's silos are located far away from the markets, and as a result traders incur additional charges and inconveniences in transporting maize from the markets to the storage depots and back. Secondly, the traders also complained of administrative delays in the process of getting maize stored and retrieved at the GFDC depots. (b) Yam Storage Costs Yam storage by traders was carried out by leaving the yam under sheds and in open space in the market under the care of watchmen. Traders kept yam in this way because of the absence of suitable storage facilities in the market. The average fee charged by a watchman at the time of the survey, was 0100 per 100 tubers of yam per day. 55 University of Ghana http://ugspace.ug.edu.gh 4.6 Maize Processors' Costs Processing is the market function concerned with changing the form of raw agricultural produce into forms which extend the shelf life of the product as well as adding value. In the markets studied, no processed forms of yam were found. However, a processed form of maize, namely, com dough, was found in large quantities, particularly, at the Mallam Ata market in Accra. The main cost items of processing maize include: milling, labour, water for soaking the grains, and transportation. In addition to these costs, processors incur other costs such as market tolls and loading and unloading fees. A miller processes an average of a 100kg bag of maize per week at a cost of 04,500 per bag. In all, about 180 litres of water is required for soaking the grain before milling and for mixing the com flour into the dough. The average cost of water consumed for every bag of maize processed was 0350. The total processing cost was estimated as 04,850 per bag. Maize processors at Agormanya incur transport costs in moving the shelled maize from the market to their homes, usually in small lots by truck, and then from their homes to the commill and back by porterage. About 123kg of com dough (15 baskets) are obtained from a bag of maize processed. The average cost of transporting maize from the market to homes averaged 0270 per bag of 100kg weight. The cost of moving a bag of maize to the mill and back was estimated as 0110. The cost incurred in transporting processed maize from Agormanya to Accra, a distance of 62 km, averaged 0350 per basket. The total cost of transportation to the processor was 05,630. The other costs of the processor, sundry expenses, were also estimated. The processors paid an average of 0120 per basket for loading and unloading of the com dough and an estimated average market toll per basket of 022.60, yielding a total cost of 0142.60 per basket. The Sundry expenses of the maize processor totalled 02,139 per week. The average earnings of 03,329 per week for employees in agriculture, is also added to estimate the total processing cost per week (Table 4.8). 56 University of Ghana http://ugspace.ug.edu.gh Table 4.8: Estimate of Maize Processing Costs (Cedis/bag) Cost Item Amount(4) % Milling and Soaking 4,850 30.4 Transportation 5,630 35.3 Processor's Labour Cost 3,329 20.9 Sundry Expenses 2,139 13.4 Total Processing Cost 15,948 100 Total Processing Cost/kg 129.7 Source: Survey Data The total estimated cost incurred per week for processing 100kg bag of maize into com dough, and transporting it from Agormanya to the Mallam Ata market in Accra is 015,948. This gives a processing cost of 0129.7 per kg. Table 4.8 shows that transportation cost is the highest single contributor of the total cost of processing maize. 4.7 Sundry Expenses of Maize and Yam Wholesalers Market operators or intermediaries who perform marketing functions of transportation, storage and processing incur other costs in the performance of these functions. These costs are referred to, in this study, as sundry expenses. The maize and yam wholesaler's sundry expenses include income tax, loading and unloading charges, local buying agents fee or commission, Assembly or local council fees, stall rent, and market toll, a. Sundry Expenses of Maize Wholesalers The estimated sundry expenses of the maize wholesaler operating on the Nkoranza - Techiman route is 01,199 per bag (Table 4.9). These consist of loading and unloading charge of 0300 per bag and agents' commission of 0160 per bag. In addition, a local council fee of 0200 per bag and an average market toll of 0162 per bag are paid by the trader. The depreciated value of a jute sack is estimated as 0300, determined by dividing the price of a jute sack by eight months expected life span of the jute sack. 57 University of Ghana http://ugspace.ug.edu.gh Table 4.9 Sundry Expenses of Maize Wholesalers (Cedis/bag) Cost Item Nkoranza to Techiman Techiman to Kumasi Techiman to Accra Loading and unloading Depreciated cost of 300 400 400 jute sack 300 300 300 Wholesaler's labour cost 55 55 55 Income Tax 22 22 22 Agent's fee 160 160 160 Market toll 162 162 162 Local Council 200 200 200 Total Sundry Expenses 1,199 1,299 1,299 Source: Survey Data The itinerant maize wholesaler handles an average of 60 maxibags of maize per return trip and makes four return trips in a month. With an estimated average monthly earnings of 013,317 for the agricultural sector the labour cost of an itinerant maize wholesaler was estimated as 055 per maxibag of maize handled. The itinerant maize wholesaler who purchases maize at the Techiman market for sale in Accra and Kumasi incurred the same sundry expenses of 01,299 per bag. The estimates in Table 4.9 show that sundiy expenses are lower for traders who move maize within the rural areas, due mainly to the abundance of labour leading to low loading and unloading charges per bag. (b~) Sundry Expenses of Yam Wholesalers The yam wholesalers interviewed, paid an average income tax of 0167 per 100 tubers of yam handled, with a range of 0100 to 0300. The loading and unloading charge per 100 tubers was 0400 for both the Techiman - Accra and Techiman - Kumasi routes and 0350 for the Bimbilla to Accra route ( Table 4.10). Yam wholesalers who employed agents to assemble their purchases from various locations in and around Bimbilla paid an average commission of 0720 per 100 tubers. The average local council fee per 100 tubers was 0335. The average quantity of yam purchased by the itinerant wholesaler on each return trip was 1200 tubers. Using the 58 University of Ghana http://ugspace.ug.edu.gh average monthly earning per employee in agriculture, 013,317, as a proxy for the itinerant wholesaler's labour cost, a labour cost of 0370 per 100 tubers of yam was obtained for the three return trips undertaken, by the itinerant wholesaler, in a month. Table 4.10: Sundry Expenses of Yam Wholesalers (cedis/100 tubers) Cost Item Techiman to Kumasi Techiman to Accra Bimbilla to Accra Loading and unloading 400 400 350 Income Tax 167 167 167 Agent's Fee 720 720 720 Market Toll 200 200 200 Wholesalers labour 370 370 370 Council Fees 335 335 335 Total Sundry Expenses 2,192 2,192 2,142 Source: Survey Data The estimated sundry expenses per 100 tubers of yam totalled 02,192 for both the Techiman - Kumasi and Techiman - Accra wholesalers, and 02,142 for the Bimbilla - Accra wholesaler. 4.8 Costs and Margins of Maize and Yam Wholesalers The wholesale marketing margins for trading in maize, yam and processed maize (com dough) are computed from data collected during the survey. The gross margin represents the difference between the wholesale price and the purchase price of the commodity. The gross margin less the estimated marketing costs gives the profit margin on the commodity. Some useful indicators, such as, mark up on purchase price and Marketing Cost to Gross Margin ratios are also computed in the analysis. 59 University of Ghana http://ugspace.ug.edu.gh (a) Costs and Margins of Maize Wholesalers Transportation costs accounted for between 23.5 and 69.6 percent of maize wholesalers operating costs. Tables 4.1 and 4.11 indicate that itinerant maize wholesalers who move maize from Nkoranza to final markets in Kumasi (90km) and Accra (390km) incur transportation costs of 01,400 and 03,600 per bag, and total marketing costs of 04,098 and 06,298 per bag, respectively. This implies that transportation costs represent between 34.5 and 57.2 percent of marketing costs of traders who move maize from producing areas around Nkoranza to consuming centres such as Kumasi and Accra, respectively. Transport costs of itinerant maize wholesalers accounted for between 55 and 75 percent of the total marketing cost in the study by Oteng (1974), and between 53.72 and 57.37 percent in the Ghanexim (1991) study. Table 4.11: Marketing Costs of Maize Wholesaling (cedis/bag) Cost Item Nkoranza % to Techiman Techiman % to Kumasi Techiman % to Accra Transpor­ tation 400 23.5 1,000 41.7 3,200 69.4 Storage 100 5.9 100 4.2 100 2.2 Sundry Expenses 1,199 70.6 1,299 54.1 1,299 28.2 Total Marketing Costs 1,699 100.0 2,399 100.0 4,599 100.0 Source: Survey Data 60 University of Ghana http://ugspace.ug.edu.gh The analysis of the estimated marketing margins presented in Table 4.12 shows that the gross margin of 02,200 received by the wholesaler who moves a bag of maize from Nkoranza to Techiman, was made up of marketing costs, 01,699 (83.8%) and the wholesaler's profit margin, 0501 (16.2%). Table 4.12: Marketing Margins for Maize Wholesaling (cedis/bag) Item Nkoranza Techiman Techiman to to to Techiman Accra Kumasi Wholesale Price(TO) 7,200 14,500 10,500 Purchase Price(PP) 5,000 7,200 7,200 Gross Margin(GM) 2,200 7,300 3,300 Marketing Costs(MC) 1,699 4,599 2,399 Profit Margin(NP) 501 2,701 906 MC as % of (31 77.2 63.0 72.7 NP as % of (31 22.8 37.0 28.3 GM as % of WP 30.6 50.3 31.4 MC as % of WP 23.6 31.7 22.8 PP as % of WP 69.4 49.7 68.6 HP as % of WP 7.0 18,6 8.6 Mark-up on PP 44.0 101.4 45.8 Source: Survey Data The Techiman - Accra itinerant maize wholesaler who bought maize at the average price of 07,200 and sold in Accra at an average price of 014,500, had a gross margin of 07,300 per bag, or about 101.4 percent mark-up on the purchase price. This means that, by the time a bag of maize from Techiman reaches Accra, the price has increased by over 100 percent because of marketing costs. The total marketing costs and purchase price as percentages of maize wholesale price (Table 4.12) indicate that between 22.8 and 31.7 percent of the maize consumer's cedis is taken up by marketing costs whiles between 49.7 and 69.4 percent goes to the maize farmer. Only between 7.0 and 18.6 percent of the maize consumer's cedi goes to the maize wholesaler. Marketing costs, however, accounted for between 63.0 and 77.2 percent of the maize wholesaler’s Gross Margin. 61 University of Ghana http://ugspace.ug.edu.gh (b) Costs and Margins of Yam Wholesalers The estimated marketing costs of yam wholesaling are summarized in Table 4.13. Table 4.13: Marketing Costs of Yam Wholesaling^cedis/100 tubers) Cost Item Techiman to Kumasi % Techiman to Accra % Bimbilla to Accra % Transporta­ tion 3,000 48.4 14,000 81.4 13,000 80.5 Storage 1,000 16.2 1,000 5.8 1,000 6.2 Sundry Ex­ penses 2,192 35.4 2,192 12.8 2,142 13.3 Total Marketing Costs 6,192 100.0 17,192 100.0 16,142 100.0 Source: Survey Data Table 4.13 shows that transportation costs accounted for between 48.4 and 81.4 percent of the marketing cost of the itinerant yam wholesaler. Transportation costs obtained by Ghanexim (1991) were about 65.53 and 88.90 percent of marketing costs for itinerant yam wholesalers who employed lake and road transport, respectively. Nyanteng (1969) also obtained a range of 62 to 75 percent for itinerant yam wholesalers and about 89 percent for farmers who transport yam from the farm to rural markets in Ejura and Amantin. Thus, transport cost is the most important component of the yam wholesaler's marketing cost. A comparison of the transport cost as a percentage of marketing cost, estimated for yam and maize, shows that it is generally higher for yam than for maize. This high proportion of yam transport cost in marketing cost of yam could be due to its bulkiness in relation to its value. Again, storage cost, as was the case of maize, accounted for a small share of the yam wholesaler's marketing costs, ranging between 5.8 and 16.2 percent. Storage cost accounted for between 9.0 and 11.0 percent of marketing costs for maize wholesalers in the study by Oteng (1974). The estimated yam wholesale marketing margins are presented in Table 4.14. The average wholesale price of 100 tubers of yam in the Techiman market was 045,000, and 62 University of Ghana http://ugspace.ug.edu.gh 080,500 in Accra with a gross margin of 035,500 or about 78.9 percent mark-up on the purchase price. The gross margin of the Techiman - Kumasi yam wholesaler was 017,500 per 100 tubers or about 38.9 percent mark-up on the purchase price. Table 4.14: Marketing Margins for Yam Wholesaling (cedis/100 tubers) Item Techiman Techiman Bimbilla to Kumasi to Accra to Accra Wholesale Price(WP) 62,500 80,500 80,500 Purchase Price(PP) 45,000 45,000 32,000 Gross Margin(GM) 17,500 35,500 48,500 Marketing Cost(MC) 6,192 17,192 16,142 Profit Margin(NP) 11,308 18,308 32,358 MC as % of GM 35.4 48.4 33.3 NP as % of GM 64.6 51.6 66.7 GM as % of HP 28.0 44.1 60.2 MC as % of HP 9.9 21.4 20.0 PP as % of WP 72.0 55.9 39.8 NP as % of WP 18.1 22.7 40.2 Mark-up on PP 38.9 78.9 151.5 Source: Survey Data The purchase price of 100 tubers of yam in Bimbilla averaged 032,000 and the average wholesale price in Accra was 080,500. The estimated gross margin of 048,500 represents a 151.5 percent mark-up on the purchase price. An analysis of profit margin of yam wholesalers shows that profit margins are higher for the wholesaler who sells in urban markets, particularly those located very far away from producing areas. This can be explained by the fact that these urban markets studied also serve as major consumer markets for the commodities, and as a result, demand for the commodities on these markets are generally high. Table 4.14 indicates that at the wholesale level between 39.8 and 72 percent of the consumer's cedi goes to the farmer. Between 9.9 and 21.4 percent is taken up by marketing costs and between 18.1 and 40.2 percent represents the wholesaler's share in the consumer's cedi. 63 University of Ghana http://ugspace.ug.edu.gh (c) Costs and Margins of Maize Processors The processors purchased a bag of maize at an average price of 010,600, and the processed maize (com dough) yielded 027,000. The profit margin of the maize processor, as shown in Table 4.15, was 0452. Marketing margins of processors were computed using the cost estimates shown in Table 4.8. Table 4.15: Marketing Margin for Processed Maize (cedis/bag) Item Amount Wholesale Price (WP) 27,000 Less: Purchase Price (PP) 10,600 Gross Margin (GM) 16,400 Less Processing/Marketing Costs (MC) 15,948 Profit Margin (NP) 452 MC as % of GM 97.2 NP as % of GM 2.8 GM as % of GM 60.7 MC as % of WP 59.1 PP as % of WP 39.2 NP as % of WP 1.7 Mark-up on PP 154.7 Source: Survey Data Processing and marketing costs of maize processors obtained from Table 4.8, represented 97.2 percent of the processor's gross margin. The high share of processing and marketing costs in the com dough wholesaler's gross margin can be attributed to two factors. The first being the low conversion rates characteristic of food crop processing using traditional methods. This is evident from the fact that milling and soaking costs alone accounted for 30.4 percent of the maize processing costs (Table 4.8). The second factor is the high transportation cost which accounted for about 35.3 percent of the processing costs. Other factors which could possibly account for the high processing costs are the few com millers in the com dough producing areas, high cost of electricity, as well as, high cost of spare parts. 64 University of Ghana http://ugspace.ug.edu.gh The results in Table 4.15 indicate that only 1.7 percent of the consumer's cedi goes to the maize processor at the wholesale level, with as much as 59.1 percent being taken up by processing costs. The results also show a high mark-up of 154.7 percent on purchase price of the commodity. 4.9 Financial Requirement for Transportation. Storage and Processing The marketing costs and margins of middlemen performing the physical activities, viz., transportation, storage and processing, were estimated with the objective of finding out the financial requirements for the activities. A summary of the financial requirements of wholesalers is presented in Table 4.16. Table 4.16 shows, among others, that a maize wholesaler who purchases an average of 60 bags of maize at 07,200 in the Techiman market for sale in Accra (390 km) requires 0432,000 for maize purchases per trip, and incurs a transportation cost of 0192,000. In addition, a maize wholesaler requires 077,940 to meet sundry expenses and also pays an average of 06,000 to watchmen in the Techiman and Accra markets, for an average of 5 days. This translates to a financial requirement of 0707,940 per trip or 0117,990 per tonne of produce. The total expenses of the itinerant wholesaler who moves an average of 1,200 tubers of yam, over a distance of 390 km from Techiman to Accra, was 0746,304 per trip or 0221,114 per tonne of produce. From the analysis, the itinerant wholesaler requires 0707,940 and 0746,304 per trip to be able to move maize and yam, respectively, from the main producing areas of Techiman to Accra. A breakdown of the financial requirements showed that itinerant wholesalers required between 0168,000 and 0192,000 for transportation. Storage was not a significant activity in wholesale trade in the country. The storage costs were 012,000 and 06,000 for yam and maize , respectively, for the average of 1200 tubers of yam and 60 bags of maize handled on each trip. 65 University of Ghana http://ugspace.ug.edu.gh Table 4.16: Summary of Maize. Yam and Corndough Wholesalers expenses. (cedis/trio) Item Maize Wholesaler (60 bags) Yam Wholesaler (1200 tubers) Corn dough (1 bag of processed maize) Purchases 432,000 540,000 10,600 Transport Costs 192,000 168,000 5,630 storage Costs 6,000 12,000 - Processing Costs - - 4,850 Sundry Expenses 77,940 26,304 2,139 Total 707,940 746,304 23,219 Source: Survey Data The low financial requirement for yam and maize storage, however, results from the absence of proper storage facilities in the markets which does not allow traders to undertake any appreciable storage. The maize processor also required financing of about 023,219 per week. The cost of processing a bag of maize was estimated as 04,850. Transportation and other costs averaged 07,769 for a bag of maize processed at Agormanya and sold in the Mallam Ata market in Accra. In summary, Table 4.16 shows that the itinerant maize or yam wholesaler required between 0180,000 and 0198,000 to undertake the physical functions of transportation and storage per trip. In all, the itinerant maize and yam wholesaler required 0707.940 and 0746,304, respectively, to undertake the exchange (buying and selling) and physical functions of agricultural marketing. This was financed from the trader's own capital or borrowed money. The mode and sources of financing the physical activities are discussed in Chapter 5. 66 University of Ghana http://ugspace.ug.edu.gh CHAPTER FIVE S. FINANCING THE PHYSICAL ACTIVITIES OF AGRICULTURAL MARKETING Among the widely cited constraints of agricultural production and marketing is finance (FAO, 1965, Opoku-Owusu and Tetteh, 1971, Addo, 1976, La-Anyane, 1985, Kwadzo, 1990, Asuming-Brempong, et al., 1991, and Von Pischke, 1991). Asuming- Brempong, et al (1991) reported that about 70 percent of traders interviewed indicated inadequate financing as their major constraint. In the present study, about 82.5 percent of the respondents mentioned inadequate financing as constraining their ability to expand their operations. The shortage of credit is therefore, one of the major bottlenecks of agricultural marketing in Ghana. The existing shortage of credit for agricultural marketing is evident from the high and often usurious interest rates charged by the highly patronised informal financial sector. An IBRD (1975) report indicated that access to formal agricultural credit has been biased in favour of large agricultural operations. In Ghana, though the MOA (1990) has reported that small-scale farmers access to credit has increased from 7 percent of loanable formal sector credit in 1975 to 40 percent in 1986, there are substantial evidence which point to the contrary. Commercial banks' credit to the agricultural sector declined from 018.7 million in 1983 to about 012.6 million in June, 1991, showing a decline of about 32 percent (BOG, 1991). The shortage of credit to the agricultural sector is not only evident in the low volume and declining proportion of commercial banks' credit, but also in the declining numbers of money lenders. The number of licensed money lenders declined from the 1982 figure of 10 to 2 in 1989 (Table 5.1) University of Ghana http://ugspace.ug.edu.gh Table 5.1; Number of Licensed Monev Lenders in Accra Year 1982 1983 1984 1985 1986 1987 1988 1989 Number 10 6 3 5 3 5 4 2 Source: License Office, (1994), Ghana Police Service (GPS). 5.1 Sources of Finance for Transportation. Storage and Processing Sources of finance available to market operators for the performance of the physical activities or agricultural marketing in Ghana included the informal sources-: friends and family members, money lenders, traders, susu clubs, credit union, farmers, and transporters and the formal sources - commercial banks, development banks and rural banks. In addition, a large number of market operators financed their activities from their own resources. This section examines the finance of transportation, storage and processing in relation to: 1. Sources of Finance 2. Credit Procedures and Requirements 3. Loan Amounts 4. Interest Rates 5. Repayment Periods Tabsoba (1981) reporting on a study in the eastern Upper-Volta (now Burkina- Faso) indicated two types of informal lenders at town and village levels similar to those identified in studies on Ghana by La Anyane (1985). The non-commercial lenders who lent primarily to family members and friends, and the commercial lenders who lent primarily within a town or village and to a few people from neighbouring locations. In Ghana, 68 University of Ghana http://ugspace.ug.edu.gh informal lenders play a vital role in financing agricultural marketing. They provide loans to the market operators at short notice, often demand little or no collateral, and tend to place few, if any, restraints on funds utilisation. However, the average amount of loan given is very small. Information from the survey show that the volume of credit available to market operators, from informal sources, averaged about 0327,158 with a range of between 033,000 and 07,000,000. Informal lending is, however, characterised by a much shorter processing time, demand for little or no collateral, and simple screening techniques. The formal sources of finance, on the other hand, consist of banking and non­ banking financial institutions comprising of the Bank of Ghana, 5 commercial banks, 3 development banks, 7 merchant banks, 126 rural banks, and 10 non-bank financial institutions. From the study, it was observed that institutional credit was not used by most of the 302 respondents interviewed. Only 18 percent of the respondents used credit from commercial banks. About 76.7 percent of the total respondents had never applied for bank loans and 5.3 percent had their applications declined. Credit from formal sources, averaged 0550,315 and ranged from 0200,000 to 03,000,000. Market operators interviewed in the study, employed two main sources of finance - equity and borrowed capital - in performing the physical activities of agricultural marketing. Of the 302 respondents, 150 used their own capital (equity), while 152 employed borrowed capital to finance the physical activities, as shown in Table 5.2. About 53 percent of the 62 market operators who undertook the storage activity used their own capital, 24 percent borrowed from other market operators, about 9.7 and 6 percent borrowed from money lenders and banks, respectively. For the remaining 6 percent the main source of finance for the storage activity was friends and family members. About 55 percent of the 264 respondents who undertook the transportation activity, financed it from their own resources. Nineteen percent (50) used borrowed capital from the banks, 12.8 percent (34) borrowed from money lenders and the remaining 13.2 percent borrowed 69 University of Ghana http://ugspace.ug.edu.gh from other market operators (10%) and from friends and family members (3%). V — o * Table 5.2: External Sources of Financing for Transportation. Storage and Processing and their Major End Use. ACTIVITY M FINACGT HEPAYNH SF FINANCE Banks TOTALFamily/Friends Transporters/Traders/Farmers Money-Lenders Storage 4 15 6 4 29 Transportation 7 27 34 50 118 Processing 1 4 0 0 5 Total 12 46 40 54 152 Source: Survey Data Market operators who process maize finance their activities mainly from their personal resources (86%). Other sources of finance for the processing activity were market operators (11%) and friends and family members (3%). The source of finance, presented in Table 5.2, shows that market operators performing the physical activities of agricultural marketing rely on their own resources, which include income from the sale of land, livestock and other personal belongings, for the financing of the activities. This could be a result of mitigating factors such as prohibitive minimal interest rates and bureaucratic delays associated with the informal and formal sectors, respectively. Information gathered in the survey showed that market intermediaries in Ghana have various reasons for not making efforts to obtain credit from the banks. The usual reasons mentioned by most of the market operators or intermediaries were that, the banks may not grant their requests, even after the long and time consuming bureaucratic procedures they will have to go through. Some also mentioned collateral as prohibitive. Some traders who obtained credit from the Agricultural Development Bank in Techiman had to deposit between 10 to 25 percent of the loan amount with the bank, as collateral requirement for the loan. Cost is incurred on this deposit, which is not available to the borrower, thereby increasing the effective interest rate on the actual amount borrowed. There is a high patronage of the informal financial market, despite the maintenance 70 University of Ghana http://ugspace.ug.edu.gh of nominal interest rates higher than that prevailing in the formal sector. Some market operators interviewed in the survey paid interest rates ranging between 0 and 250 per cent per annum on money borrowed from money lenders. However, the demand for collateral and the long and time consuming procedure in loan approved and delivery in the formal sector is what probably contribute to the high patronage of the informal sector. The informal sources of financing, which pre-date the commercial sources, were expected to lose their significance through an increasing level of modernisation of the economy. However, due to the time consuming and complex loan processing procedures of the formal sector and demand for collateral, among others, the informal sources, despite charging exorbitant nominal interest rates, enjoy a high level of patronage from the market operators. There is little or no formal screening of borrowers and there is virtually no conditions attached to credit obtained from sources other than the banks. The informal sources, however, charge high nominal interest rates to compensate for the high risk, and give only short term loans. A summary of the source of financing and interest rates charged per annum is presented in Table 5.3. Of the 152 respondents who used some form of external finance, about 53 percent were charged interest rates ranging from 16 to 30 percent per annum, and 25 percent were charged interest rates of between 31 and 100 percent per annum. For about 6.6 percent, the interest rates charged were between 101 and 250 per cent per annum. About 14 percent paid interest rates of less than 15 percent per annum. 71 University of Ghana http://ugspace.ug.edu.gh Table 5.3: Source o f Financing and Interest Rates Source of Nominal Interest Rate ( % oer annum ) Total Financing 0-15 16-30 31-100 101-250 Family/Friends 9 3 0 0 12 Transporter/ Traders/Farmer 9 31 2 4 46 Money Lenders 0 8 26 6 40 Banks 2 42 10 0 54 Totals 20 84 38 10 152 Source: Survey Data Nominal interest rates charged by the Banks usually ranged between 16 and 30 percent per annum, with a few market operators being charged as high as 35 percent per annum. Money borrowed from family and friends were found to be the cheapest with the interest rate generally below 30 percent per annum. However this source of finance was found to be unreliable, since such sources have limited cash, mainly from personal resources. It was observed that family relations and friends sometimes charged exorbitant interest rates. Some of the traders who borrowed working capital from friends paid no direct interest but paid a third of the profits to them. The true cost of the loan could be very high in this case. A summary of the source of financing and the repayment period is presented in Table 5.4. 72 University of Ghana http://ugspace.ug.edu.gh Table 5.4: Source of Financing and Period of Repayment Source of Period of Loan (months) Total Financing up to 3 up to 6 up to 9 up to 17 18 + Family/Friends Transporters/ 0 3 7 2 0 12 Traders/Farmers 37 2 5 1 1 46 MoneyLenders 28 6 3 3 0 40 Banks 4 27 9 9 5 54 Total 69 38 24 15 6 152 Percentage 45.4 25.0 15.8 9.9 3.9 100 Source: Survey Data About 45.4 percent of the loans were advanced for a period not exceeding 3 months, 25 per cent were advanced for periods of up to 6 months, about 15.8 percent were to be repaid between 7 and 9 months, about 9.9% of the loans were to be repaid between 10 to 17 months, and the remaining 3.9 percent had credit facilities with repayment period of 18 months and more. Thus, the market operators' access to medium- to long-term financing is quite limited, making it difficult for them to undertake long-term investments. The costs incurred by market operators performing the physical activities are used in a Benefit - Cost analysis of the activities (Appendix 10). The analysis in Appendix 10 shows that for a market operator to own and operate transport and storage facilities, and also undertake the other marketing functions, medium- to long-term credit facilities would be required, possibly from the formal financial sector. This is, particularly, important when viewed against the background that about 86.2 percent of those who received credit had to repay within 9 months. Market operators performing the physical functions of agricultural marketing, therefore, complement one source of credit with another, since the volume of credit obtained from any one source is usually very small and inadequate for the performance of the physical activities 73 University of Ghana http://ugspace.ug.edu.gh 5.2 Characteristics of Market Operators Affecting their Borrowing Capabilities In addition to the problem of agricultural credit shortage, certain existing characteristics of market operators affect their borrowing capabilities decisively. These characteristics are: 1. Market operators tend to operate as individuals and not as a group. Even where market organisations exist; the groups are formed for credit purposes, and are often initiated by market "queens" and leaders, and outside agencies such as banks and non­ governmental organisations. Thus, individuals group members are sometimes not involved in the process of applying for credit, and therefore do not feel a sense of responsibility for repayment of credit, leading invariably to defaults and disintegration of the group. 2. Itinerant maize and yam wholesalers were also observed to borrow from different sources for on-lending to farmers, to guarantee fiiture supplies of produce. As such, in the event of poor yield or any disaster befalling the farmer, the itinerant maize and yam wholesalers are unable to repay the loan thus reducing their credit worthiness. 3. Most market operators are females, often middle-aged , with low education, and have little knowledge about the lending activities and requirements of the formal financial market. 4. Limited asset-diversification opportunities for market operators, result in the lack of acceptable collateral such as fixed deposits, bills ,bonds and notes as well as real estate for the acquisition of institutional credit. The above characteristics of market operators, can affect their ability to acquire credit from, particularly, the formal sector. 74 University of Ghana http://ugspace.ug.edu.gh 5.3 Linkages in Maize and Yam Marketing Finance The present survey on the financing of the physical activities brings to the fore, certain linkages existing in the finance of maize and yam marketing in Ghana. A schematic representation of the linkages observed in the survey is presented in Figure 5.1. The linkages are discussed in relation to the purpose of the credit, the volume of credit extended and interest rate charged, among others. The wholesale traders (itinerant and sedentary) interviewed in the survey finance their activities with funds borrowed from the family, money lenders, banks, friends, and other relatives. Some of the itinerant wholesalers pool their personal financial resources together and lend to one another. Credit from these sources is usually cash for purchases. Some of the itinerant wholesalers, however, purchased their products on credit from the farmers or use loans from market associations. Usually itinerant wholesalers who pool their financial resources take turns in the use of the money, and share profits. Some of the itinerant wholesalers received credit from transporters, in the form of deferred transport charge payment effected after sale of the commodities. No credit linkage was, however, observed between the traders (sedentary and itinerant) and watchmen who keep watch over produce left in the market. Some of the traders were however allowed, by private storage agents, to store produce in their storage rooms, with payments being effected after the sale of the commodities. The itinerant wholesalers sometimes provided credit to transporters in the form of cash to meet operating expenses. In addition to financing the physical activities, some itinerant wholesalers also provided credit to farmers usually during planting, under conditions which can best be described as "forward" buying of the farmers' produce since the farmers are under obligation to sell their produce to the respective wholesalers at a previously agreed price. 75 University of Ghana http://ugspace.ug.edu.gh Fig. 5.1 Credit Linkages in Agricultural Marketing Wholesaler 76 University of Ghana http://ugspace.ug.edu.gh Market wholesalers also financed the activities of retailers by selling produce to them on credit, and at the prevailing wholesale price of the product, thereby excluding any interest charges. Credit extended by market traders were for very short-term with about 69 percent extending credit, for less than a month. Processors also obtain credit from transporters, banks, money lenders and wholesale traders for their activities. They in turn provide credit to itinerant and sedentary wholesalers, for the payment of the cost of transporting the maize. 5.4 Problems of Financing Agricultural Marketing (a) Formal Sector The poor performance of the formal sector in financing agricultural marketing could be attributed to the numerous problems feeing the sector. Reviewing the past and present experiences with agricultural marketing credit in Ghana, the following problems emerged: 1. Inadequate savings mobilisation for lending. 2. High loan delinquency 3. Poor appraisal, supervision and monitoring of credit by the banks 4. Lack of innovative credit policies and programmes. 5. Unfavourable fiscal and monetaiy policies. Inadequate savings mobilisation by the formal financial sector has greatly affected its ability to finance agricultural marketing since banks primarily finance loans and advances from savings mobilised. 77 University of Ghana http://ugspace.ug.edu.gh Table 5.5 shows that in 1994, total loans and advances to the agricultural sector accounted for between 47.4 and 68.5 percent of development banks' deposits. The Agricultural Development Bank (ADB) which lends about 68.5 percent of its advances to the Agricultural sector, for example, mobilised only 5.8 percent of the total banking deposits. In 1991, ADB mobilised only 2.8 percent of the total banking deposits j[Owusu- Ansah, 1993). Table 5.5: Key Ratios for some Development Banks in Ghana - 31/12/94 (percent) Bank Share of Bank in total Bank Deposits Loans & Advances to Agric. Sector/ Deposits Loan Loss Provisions/ Loans & Advances Loan Loss Expenses/ Income Agric. Dev. Bank (ADB) 5.8 68.5 9.8 13.7 Bank for Housing & Construction (BHC) 2.8 65.5 41.4 5.2 National Investment Bank (NIB) 3.6 47.4 17.9 10.0 Source: Price Waterhouse Associates (1995). The problem of inadequate savings mobilisation could be attributed to the lack of confidence in the formal financial sector. The results of this study showed that only about 22.8 percent of the respondents reported saving with the banks. About 10. 9 percent 78 University of Ghana http://ugspace.ug.edu.gh saved with "susu" club, while 11.5 percent saved with credit unions (Table 5.6). About 45.3 percent of the respondents kept their monies only at home, 22.8 percent with banks, 11.5 percent with credit unions and 10.9 per cent with "Susu" clubs. Of the remaining, 6.2 percent kept their monies at home and with the banks, 2.3 percent saved with the banks and "susu" clubs, and 1.0 percent kept their monies at home and at the Bank. Table 5.6: Place of Savings bv Market Operators Place of Savings No. of Respondents Percent (%) At Home 137 45.3 Bank 69 22.8 Credit Union 35 11.5 Susu 33 10.9 Susu and Bank 7 2.3 At Home and Susu 3 1.0 At Home and Bank 18 6.2 TOTAL 302 100.0 Source: Survey Data A further evidence of the low savings mobilisation resulting from the lack of confidence in the formal sector is that, while the number of people operating deposit accounts may have been rising ,though at a reduced rate, depositors do not seem enthusiastic about increasing the size of their deposits. Between 1987 and 1988, the average deposit per rural bank in Ghana increased by only 13.8 percent while the number of account holders went up by 20.4 percent (BOG, 1988). 79 University of Ghana http://ugspace.ug.edu.gh Another problem which has greatly hampered the activities of the formal financial sector is high loan delinquency, particularly, in agricultural lending. The high rate of loan default has resulted in most of the formal financial institutions having large non-performing portfolios. This has adversely affected the ability of the formal financial institutions to extend credit, since large loss provisions have to be made for delinquent loans. Table 5.4 shows that loan loss provision as a ratio of total loans and advances for the three development banks (ADB, BHC and NIB), actively engaged in agricultural sector lending ranged between 9.8 and 41.4 percent for 1994 whilst agricultural lending rates remained below 40 percent in all the three development banks. Loan loss provision also accounted for between 5.2 and 13.7 percent of interest income of the banks. The high rate of loan default can be attributed to weak credit management, lack of follow up on overdue facilities, and slow legal procedures for loan recovery, among others. The failure of agricultural lending institutions to adequately finance the agricultural sector has also been attributed to the lack of innovative credit delivery policies and mechanisms (Yaron, 1994). According to Jacob Yaron, most of these lending institutions have become mere disbursement windows and that existing credit programs have reached only a minority, often the wrong minority of the rural population, with large volumes of credit going to those not actively engaged in agriculture. The issue of concessional lending rates for agriculture under government directive were also found to be counter productive. Lending rates for agriculture are usually low and inadequate to compensate for high risks and administrative costs of lending. This accounts for the unwillingness of the formal financial sector to lend to the agricultural sector operators. Weak regulatory framework governing operations of financial institutions has, also, resulted in the establishment of many short-lived formal and informal financial institutions. The apparent insolvency of these "wonder" banks have tended to further erode 80 University of Ghana http://ugspace.ug.edu.gh the confidence of the general public in the existing financial institutions. The absence of strong legal framework has also compounded the difficulties of loan recovery by the formal and informal sector. Poor bank supervision has contributed to high loan delinquencies. Bank supervisors, usually with very little experience in risk management, are unable to provide early warning signals on the quality of existing portfolios, and often overlook long term risk management issues. The lack of proper central bank supervision has also resulted in improper classification of loans by banks, making it impossible for adequate provision to be made for loan losses. Finally, the absence of appropriate fiscal and monetary policies for the efficient operation of financial institutions has greatly affected their performance. The existing annual corporate tax rate, imposed on banks by the Government of Ghana, is 45 per cent. Annual corporate tax for all other sectors of the economy, excluding agriculture, is 35 percent. To provide a favourable fiscal policy for the formal sector, the high corporate tax for banks should be revised downwards. The maintenance of a high tax rate for the banking industry takes away potential loanable funds, which may have ended up in the agricultural sector, and therefore maize and yam marketing finance. (b) Informal Sector The informal financial sector, which accounts for about 64.5% of the external sources of finance for storage, transportation and processing of maize and yam has several problems, despite the high patronage of the sector. The problems observed from a review of informal sector lending include: 1. Low volume of credit 2. High interest rates SI University of Ghana http://ugspace.ug.edu.gh 3. Lack of legal and regulatory framework 4. Poor documentation of agreements. Informal sector credit to market operators, interviewed in the study, averaged about 0327,158. From the study, one of the main reasons which seemingly accounts for the low volumes of credit from the informal sector is the availability of loanable funds. Informal sector lender's extend credit from their meagre resources which include their personal savings, working capital from their trade and borrowing from other sources. Moreover, most informal sector operators have little or no access to reliable sources of credit, such as formal sector loans. High interest rates exist in the informal sector, partly as a compensation for the high risk involved in informal sector lending and as a result of imperfections in interest rate determination by the informal sector. The prevalence of high interest rates in the informal sector, however, discourages borrowing thereby affecting the performance of the physical activities of agricultural marketing. Informal lenders charge nominal interest rates of up to about 250 percent per annum on borrowed capital which is high compared to formal sector rates of between 15 and 30 percent. The cheapest sources of informal sector credit - friends, family and other market operators - charge interest rates below 30 percent per annum. Interest rates charged in the informal sector, such as moneylender's ranged between 16 and 250 percent. About 65 percent of market operators who obtained loans from moneylenders paid interest rates of between 31 and 100 percent Although the informal sector plays a vital role as a reliable source of finance for the performance of the physical functions of agricultural marketing, it has not operated effectively due to the non-enforcement of existing legal and regulatory framework for their operations. Informal sector lenders such as moneylenders and susu clubs are required by law to obtain licence from the Ghana Police Service (GPS) for their operations. However, from casual observation, this regulation is not complied with by most money lenders 82 University of Ghana http://ugspace.ug.edu.gh operating in the villages. The absence of adequate legal and regulatory framework to govern and protect informal sector lenders makes it difficult for informal lenders to extend large volumes of credit. Another constraint faced by informal sector lenders concerns the quality of credit recovery agreements and their documentation. Market operators in the study complained about non adherence to agreed conditions by informal lenders. Informal lenders increase interest rates on borrowed capital without tangible reasons, while others demand repayment of borrowed capital before the agreed due dates. None of the 98 respondents, who obtained some form of informal sector credit, were required to sign any document indicating their commitment to the lenders. Agreements between formal lenders and borrowers are mainly verbal, making legal interpretation and enforcement of such agreements very difficult. 83 University of Ghana http://ugspace.ug.edu.gh CHAPTER SIX 6. CONCLUSION AND RECOMMENDATIONS 6.1 CONCLUSION The study has reviewed the physical activities and channels of maize and yam marketing in Ghana, and estimated the marketing cost and margins as well as the financial requirements for performing the physical activities. The study also examined how the costs are financed. In addition, the study reviewed the major problems associated with formal and informal sector financing or agricultural marketing activities in Ghana. Marketing of maize and yam in Ghana was observed to be a purely private sector activity, dominated by women. The maize and yam marketing system for the selected markets in Ghana was observed to be generally competitive with price formation depending largely on the forces of demand and supply. There were, however, commodity specific market ''queens" or leaders who engage in some price determination activities and also impose some barriers to entry on, particularly, itinerant and sedentary traders operating in the markets. Markets in Ghana were generally observed to lack proper storage and warehousing facilities. They also lacked stalls and sheds, and parking space and platforms, for loading and unloading of agricultural commodities. The markets were, generally, without good drainage systems and proper ventilation. Standardisation, a facilitating function which reduces risk faced by market participants (viz., farmers, market operators, and consumers) was not properly undertaken in the markets. The units of measure were found to vary considerably from market to market. Yam was wholesaled in units of 100 tubers irrespective of their weights, and maize was measured using different containers. Grading of maize and yam into categories was rudimentary. Yam was sorted on the basis of variety and size. Traders relied on transporters and fellow traders for market information. Use of market information disseminated through the broadcasting and print media was not common with traders. University of Ghana http://ugspace.ug.edu.gh The review of existing maize and yam marketing channels showed that at the initial point of production, there exists village based local buying agents who assemble crops for itinerant traders and charge commissions on quantity assembled. The itinerant traders then arrange for transportation to haul the produce from the various assembly points, usually on poor condition roads to their markets. Maize and yam are then wholesaled to sedentary or market based traders who also sell to institutions and the general public or the ultimate consumers. Itinerant and sedentary traders, sometimes, wholesaled the commodities to processors and feed mills for processing into poultry feed, corn dough and kenkey. The marketing channels of maize were very complex, unlike that of yam which were quite simple, involving fewer intermediaries. Storage of agricultural commodities occurred only when some of the products meant for a particular market day are left unsold. Only about 2 percent of the traders ever stored produce in the GFDC silos, which were generally located some distance from the market. The products were usually left in the open under the care of watchmen or kept in privately owned storage rooms in the markets. The marketing costs estimated in the study indicate that transport costs ranged between 23.5 and 81.4 percent of the total marketing costs for maize and yam wholesalers and 35.3 percent for maize processors. Estimates obtained in the study showed that transport costs account for between 23.5 and 69.6 percent of the maize wholesaler's marketing cost and between 48.4 and 81.4 percent of the yam wholesaler's marketing cost. The marketing costs were also generally higher for traders who operated in urban markets. Transport costs per tonne - km were high using human portage and tractors, and also high on poor condition roads. The transport costs per tonne-km were also higher for yam than maize. This was probably because, unlike maize which is packaged in jute sacks before transportation, there is no packaging of yam during transportation. Transportation costs were also higher for commodity transportation by portage, than by trucks. Yam and maize wholesalers do not undertake processing of the commodities they 85 University of Ghana http://ugspace.ug.edu.gh trade in. Storage costs were very low and accounted for between 2.2. and 5.9 percent of maize marketing costs and between 5.8 and 16.2 percent of yam marketing costs. Inadequate operating capital and access to credit were the major constraints affecting the performance of the physical fonctions in the marketing system. The financial requirement of yam and maize wholesalers averaged about 0746,304 and 0707,940 per trip, respectively. In the case of the yam wholesaler, this included the cost of purchasing the commodities (0540,000), transportation (0168,000), storage (012,000) and sundry expenses (026,304). Similarly, the financial requirements of the maize wholesaler included the cost of purchasing (0432,000), transportation (0192,000), storage (06,000) and sundiy expenses (077,940). The inability of market operators (maize and yam wholesalers, transporters, processors and private storage operators) to adequately finance their activities can be attributed in part to inadequate availability of agricultural credit. This was evidenced by the high interest rates charged by the highly patronised informal financial sector. Identified sources of credit to market operators were, among others, family and relatives, friends, money lenders, farmers, banks and other market operators. The volume of credit, obtained by market operators, from the various sources was very small relative to their credit needs. To obtain adequate funds the market operators borrow from several sources. The volume of credit available to market operators, from informal sources averaged about 0327,158 with a range of 033,000 to 07,000,000 whereas credit from formal sources averaged 0350,315 with a range of 0200,000 to 03000,000. Projected cash flow analysis of how market operators in maize and yam trade finance their credit needs showed that the period for the repayment of loans were usually very short for any significant return to be made from use of the credit. Moneylenders charged interest rates as high as 250 percent per annum (20.8% per month). Credit from family and relatives, friends, and other market operators generally 86 University of Ghana http://ugspace.ug.edu.gh attracted zero or very low interest rates. The formal sector lenders like the banks however charged interest rates between 15 and 35 percent per annum. The growing patronage of the informal money markets despite the high interest rates is a result of the time consuming bureaucratic procedures and requirements of the formal markets, among others. Market operators financed by the formal sector are required to provide collateral for the loan. In some instances, savings deposits of between 10 and 25 percent of the loan amount were demanded by formal sector lenders, as collateral for the loan. In addition to these problems of delays and collateral requirements, certain characteristics of market operators also adversely affect their borrowing capabilities. The market operators were mostly middle-aged (31 and 50 years - 66.9%), with little or no formal education, and had virtually no knowledge on the operations of the formal financial sector. As many as 46.6 percent of the respondents had no formal education, whiles only 37.4 per cent had formal education up to the middle school level (i.e, 10 years of formal education). As a result of the problems explained above, 76.7 percent had never applied for formal sector (bank) loans. About 49.7 percent of them financed their physical activities from their meagre personal resources and from the sale of personal properties, such as livestock, vehicles and land. Only about 18 percent were financed by the formal sector, whiles 32.5 percent were financed by the informal sector. About 5.3 percent had their applications declined. The study also examined the operations of the formal and informal financial sector to find out the problems which affect their ability to finance agricultural marketing. A review of the credit delivery mechanisms of formal financial institutions showed that, in an attempt to improve on their loan recovery and administration, certain customer screening procedures were put in place which did not only increase the length of time 87 University of Ghana http://ugspace.ug.edu.gh required to process credit applications, but also frustrated market operators who wanted to borrow from the formal sector . Borrowers from the agricultural sector are made to go through discriminative procedures, since most of them do not possess acceptable collateral demanded by the formal sector. Market operators are sometimes required to be introduced by their market queens or community leaders before being considered for credits. Those who provide personal guarantors, as a form of collateral, are unduly delayed since their guarantor's background must be investigated by the lending institution. Also, as a result of poorly designed and implemented credit delivery and administration mechanisms, most of the banks have ended up with non-performing portfolios, particularly, for the agricultural sector. In addition to the problem of poor credit delivery, the inability of the formal sector to adequately finance agriculture in general is also caused by problems such as, poor banking supervision, inadequate credit information gathering and dissemination, slow enforcement of legal agreements on credits, lack of skilled personnel, high bank tax rates, weakened public confidence in the banks and maintenance of high reserve ratio. 6.2 RECOMMENDATIONS Reviewing the problems of financing the physical activities of maize and yam marketing in Ghana, it becomes apparent that, any strategy to reduce marketing costs of the selected commodities and improve on the financing of the physical activities should include: (a) Improvement of credit delivery and recovery mechanisms. (b) Provision of enabling legal and regulatory environment. (c) Increased mobilisation of domestic savings. (d) Transportation infrastructure development. 88 University of Ghana http://ugspace.ug.edu.gh (e) Storage infrastructure development. (f) Development of physical market infrastructure. (g) Standardisation and grading of agricultural commodities. (h) Improvement of market information collection and dissemination. These recommendations can also be extended to agricultural commodities with similar biological, socio-cultural and economic characteristics. (a) Credit Delivery Mechanisms Credit delivery mechanisms are crucial to the success of agricultural marketing finance. To address the problem of poor credit delivery it is recommended that an improvement of the credit delivery mechanisms of formal financial institutions be undertaken through: 1. Reducing the time for the processing of applications by shifting the responsibility of identifying market operators to community leaders and market "queens" and commodity associations. 2. Lending through well constituted commodity or activity specific small market groups with tangibly demonstrated commitment to long term cohesion and self-help. 3. Lending through organised informal sector lenders like money lenders, susu clubs and credit unions, who have collateral and are willing to bear the risk of default, at negotiated interest rates, to market operators who have limited opportunity for asset-diversification. The banks can lend at, say, a 5 percent points reduction in lending rates to the informal lender who can then lend to market operators by adding about 10 percentage points. This would help reduce the high interest rates charged by the informal sector. 4. The responsibility of banks, to educate borrowers on credit 89 University of Ghana http://ugspace.ug.edu.gh management and repayment, could be given to experienced non­ governmental organisations (NGOs) and other agencies. 5. Formal financial institutions should provide adequate training opportunities to improve on the skill of bank staff in project identification, appraisal, supervision and monitoring, and loan documentation. 6. Formal financial institutions should also increase follow-ups on customers, since informal lender, such as money lenders, are able to improve on their recoveries through frequent contact with their customers. 7. The banks should also employ the services of external solicitors to help enforce legal agreements on credits as a way of reducing over reliance on their usually few, internal solicitors. 8. Formal financial institutions should establish internal units to recover problem loans. (bl Enabling Legal and Regulatory Environment The ability of the formal and informal financial institutions to finance the physical activities of agricultural marketing is unlikely to be enhanced without a significantly improved environment under which reduced lending risks and improved operational efficiency can be achieved. The role of the Bank of Ghana (BOG) in the proper supervision of the general credit operations of formal financial institutions is vital for the improvement of credit management and administration. The BOG should supervise and ensure compliance with the provisions of the Banking Law (PNDC L225,1989) as regards capital requirements. 90 University of Ghana http://ugspace.ug.edu.gh The BOG could also collect and disseminate credit information obtained from Banks, pertaining to the credit worthiness of borrowers in order to encourage the formal financial institutions to engage in consortium lending, for the financing of the physical activities, such as, acquisition and operation of commodity transport vehicles. The government should also encourage Commercial Banks to lend to the agricultural sector by downwardly revising the high bank tax rate of 45 per cent. The banks could promote public confidence through, strict adherence to the Banking Secrecy Provision of the Banking Law. The role of the informal financial sector could be strengthened through financial support and the provision of a legal framework for their operations. This would help increase their coverage, and minimise fraud. The government could, by legislature, establish a Banking Ombudsman, as pertains in the United Kingdom, to hear complaints from Banks and their customers concerning the breach of the Banking Law (PNDC L.225) and Banker-customer contracts. This would help reduce time involved in seeking redress from the courts. (c) Mobilisation of Domestic Savings The existing potential for domestic savings mobilisation can be relied on to build the self-financing capability of the market operator. Susu collectors can be organised and provided with a legal framework for their operations. The susu collectors would then be able to provide credit to market operators, at short notice, and enforce repayment through deductions from daily deposits made by the market operators. Secondly, the formal sector can also employ a mobile savings system to collect the small daily savings of market operators, in their various markets of operation. This would help improve the problems of inadequate savings mobilisation, feeing the banks. 91 University of Ghana http://ugspace.ug.edu.gh (d) Transportation Infrastructure Development Lack of transportation infrastructure has contributed to the high marketing cost incurred by market operators. Transport cost were higher for the movement of agricultural commodities by human porterage and on poor roads. Recommendations for the development of transportation infrastructure in Ghana, therefore, includes : 1. Rehabilitation and maintenance of existing feeder roads, and construction of new roads. Construction of feeder routes and farm access roads will enable itinerant traders to go directly to the farms to buy and transport their purchases. This would reduce the high transport cost of using human portera^^ST well as, the number of intermediaries in the marketing channel. / o 2. Improvement of rail and lake transport systems. Extension of rail transport beyond Kumasi to producing centres like Techiman would help reduce transport cost. Similarly, since lake transport offers a cheap mode of transportation, ports could be constructed at the major producing centres along the Volta Lake to improve access of traders and fanners to lake transport. 3. Human porterage is slow, risky and expensive. Ghana can therefore draw on the experiences of developing Asian countries, in solving the transportation problem at the producing centres, through the acquisition of bicycle driven trailers and pushers-carts for rural transportation. 4. Strengthening of public and private institutions engaged in agricultural commodity transport. Public transport institutions, such as the State Transport Corporation (STC), the State Express Service, and the Omnibus Service 92 University of Ghana http://ugspace.ug.edu.gh Authority (OSA) could be supported by government to acquire freight trucks for the transportation of agriculture commodities. The support could be in the form of import relief on the imported freight trucks and parts. Private transport institutions such as the Ghana Private Road Transport Union (GPRTU) could also be given credit by the banks to acquire and operate freight trucks. The credit could be delivered and supervised along similar channels, as exists for the acquisition and operation of passenger vehicles, by the GPRTU, with the assistance of ADB and the Ghana Co-operative Bank. 5. Government could also provide technical assistance to improve the skill of local artisans, in the manufacture of simple vehicle running spare parts, and farm transport facilities such as carts and trailers. 6. Government could also reduce commodity transporters' operating costs through a reduction in the number of security check points along the routes in the country. (e) Storage Infrastructure Development The lack of deliberate storage of commodities and losses resulting from spoilage and pilferage could however be attributed to the lack of adequate storage facilities in the market. For a reduction in marketing costs, there is the need for the following to be undertaken: 1 Provision of proper storage facilities in the market. The District Assemblies could make it a priority to rehabilitate and construct large-scale storage and warehousing facilities in market, for lease by private entrepreneurs, after proper 93 University of Ghana http://ugspace.ug.edu.gh feasibility studies have been conducted. 2. Provision of financial support to market operators, to own and operate storage facilities in the Market. Financial assistance for the construction of small-scale storage facilities in market, could be granted through the Agricultural Sector Investment Project (ASIP), and the District Assemblies, who would be directly responsible for cost assessment, financing, supervision of construction works and recovery of credit. 3. Strengthening of institutions engaged in agricultural commodity storage. The GFDC could be encouraged to locate some of the silos in and around the major commodity assembly and wholesaling markets. Most traders do not store with the GFDC since the silos are generally located far from the markets. (f) Development of Physical Market Infrastructure The lack of proper market infrastructure greatly influences the way agricultural commodities are handled in the market and, as a result, marketing costs. Proper market sheds and stalls should be provided in the markets in order to reduce the incidence of commodity spoilage and quality deterioration resulting from exposure to the sun and rain. Secondly platforms for loading and unloading of food crops, as well as, parking space for trucks, could be constructed in the markets to reduce congestion and commodity loss resulting from improper handling. Lack of such facilities result in high level of spillage and mutilation of agricultural commodities, since itinerant traders are compelled to load and unload goods in the often congested markets. The markets could also be provided with good drainage system and health services in order, to ensure that commodities are handled under very hygienic conditions.. 94 University of Ghana http://ugspace.ug.edu.gh (g) Standardisation and Grading The lack of standard weights and measures in the marketing system reduces the pricing and operational efficiency of the markets. Agricultural commodities are also of heterogeneous quality, and, therefore, need to be sorted and graded to allow for meaningful price quotation. To benefit from the numerous advantages cited above, government could introduce for adoption, a legal and institutional framework for the standardisation, grading and packaging of commodities in the food marketing system. A standardisation and grading unit could be established under the Ghana Standards Boards (GSB). The unit, so established, could be made responsible for the education of market participants on the methods and advantages of standardisation, grading and packaging. (h) Market Information Market information gathering and dissemination plays an important role in improving the efficiency of performing the physical activities of agricultural marketing. Market information should therefore be collected and analysed for dissemination in a form which is clearly comprehensible to market participants, since market information gathered by the Statistical Services and the Ministry of Food and Agriculture are not readily accessible to market participants. Information collected by the Ministry of Food and Agriculture are also disseminated, through radio broadcasting and print media, in the English language only. With the low level of education among market operators, widely spoken Ghanaian languages in various localities could be used for the dissemination of market information. In addition, bill boards and public address system could be provided in the markets to improve on dissemination of market information. 95 University of Ghana http://ugspace.ug.edu.gh REFERENCES Addo, S. T. (1976) "Impact of transport costs on agricultural development in developing economies: A Ghanaian example". 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Asuming-Brempong and P.A. Bruce (1989). Ghana Grain Marketing Study. Ministry of Agriculture / World Bank, Accra. 96 University of Ghana http://ugspace.ug.edu.gh Asenso-Okyere, W. (1985). "Factors contributing towards high transportation costs and their effects on the economy". Paper delivered at a symposium organised by the Christian Movement for Social Reform, Accra. Asuming-Brempong, S., E.O Asante, V.K. Nyanteng, and G.T-M. Kwadzo (1991). Agricultural Marketing Development in Ghana: Strategies and Proiects. Ministry of Agriculture / World Bank, Accra. --------------- and Y. Kusi Abebrese (1993) "Improving marketing infrastructure in Ghana" Working Paper No.2 ASIC / World Bank. Austin Associates (1990). "Agricultural marketing in Ghana: Status and recommendations for improvement". Report Prepared for the USAID. Badiane, O., V.K. Nyanteng, W.A. Seini (1992). advantage, and fertiliser use in Ghana". 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"Population and agriculture in Ghana". Paper presented at the National Workshop on Population, Resources, Environment and Development in Ghana, 10th-12th October, 1989, Accra. Dickson, K. and George Benneh (1988). A New Geography of Ghana. Macmillan New York. Eicher, Carl K, and Doyle C. Baker (1982). Research on Agricultural Development in Sub-Saharan Africa: A Critical Survey. MSU International Development Paper No.l, Department of Agriculture Economics, Michigan State University, East Lansing. Erbynn, K.G. (1970). "Marketing of agricultural products in Ghana" Paper presented at a seminar organised by the Crop Research Institute (CSIR), Kumasi. Ewusi, Kodwo (1987). Structural Adjustment and Stabilisation Policies in Developing Countries: A case study of Ghana's Experience in 1983-1986. Ghana Publishing Corporation, Tema. ------------ (1984). The dimensions and characteristics of rural, poverty in Ghana", ISSER Technical Publication No. 43. 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Kwakye (1983). Accessibility. Transport Costs and Food Marketing in the Ashanti Region of Ghana. Transport and Road Research Laboratory Crowthome, Berkshire. ISSER. (1993). The State of the Ghanaian Economv.1992. Institute of Statistical, Social and Economic Research (ISSER), Legon. Jones, William (1972). Marketing Staple Foodcrops in Tropical Africa. Cornell University Press, Ithaca, N.Y. Kwadzo, G.T.M. et a! (1990). Agricultural Marketing in Ghana- Status and Recommendations for improvement. A study conducted for USAID, Accra. La Anyane S. (1985). Economics of Agricultural Development in Tropical Africa. John Wiley and Sons, New York. 99 University of Ghana http://ugspace.ug.edu.gh Lipton, M. and Moore (1972). “The methodology of village studies in less developed countries”. IDS Discussion Paper No. 10. Institute of Development Studies, Brighton. Mckim, W.(1972). "The periodic market system in northeastern Ghana". Economic Geography .48(3): 333-44. Ministry of Agriculture (1988). "Use of population variable for modifying agricultural production targets and policy decisions ". MOA Project GHA/88/P04, Ministry of Agriculture, Accra. Ministry of Agriculture (1990). Ghana Medium Term Agricultural. Development Programme. Ministry of Agriculture (MOA), Accra. ------- (1991). Agriculture in Ghana: Facts and Figures. M.O.A., Accra. Mould, H.A.(1971). "Grain storage in Ghana". A paper presented at a Seminar on Grain Storage in the Humid Tropics, organised by the Tropical Products Institute, at Ibadan, Nigeria, 30th July. Nyanteng, V.K. (1969). "The economics of yam marketing in Ghana". M.Sc. thesis presented to the Department of Agricultural Economy and Farm Management, University of Ghana, Legon. -------------- (1971). "Distribution of returns from the sale of yams in Ghana" Research Report No.2, Department of Agriculture Economy and Farm Management, University of Ghana, Legon. ---------------- (1972)." The Storage of Foodstuffs in Ghana" Technical Publication Series ISSER, Legon. ---------------- (1972). "Traditional storage structures and their distribution in Ghana". A Paper Presented at a joint seminar organised by ISSER/Sociology Department, Legon 100 University of Ghana http://ugspace.ug.edu.gh and G.J. Appeldoon (1972). The fanner and marketing of foodcrops in Ghana". Technical Publication Series 27, ISSER. Legon. Opoku-Owusu, K. and William Tetteh (1992). "An experiment in agricultural credit; The small farmer group lending programme in Ghana (1969-1980)". Savinas and Development Quarterly Review. VI (1). Oteng, N.K.(1974). "Maize marketing in a rural area and in three urban centres". M.Sc. Thesis Presented to the Department of Agricultural Economy and Farm Management, University of Ghana, Legon. Owusu-Ansah, Mark (1993). "ADB's rural financing programme and experiences" A paper present at a workshop on rural finance, ADB, Accra. February. Sarris, Alexander H. (1991). "Options for public intervention to enhance food security in Ghana". Report prepared for the Cornell University Food and Nutrition Program, Cornell University, Cornell. Southworthy, Roy, William Jones, and Scott Perrson (1979). "Food crop marketing in Atebubu District, Ghana". Standford University, Food Research Institute Studies. 17(2). Steel, William F., and Ernest Aryeetey (1994). "Informal savings collectors in Ghana; Can they intermediate?" Finance and Development. 33 (1): 36-7. Tapsoba, E. (1981) "An economic and institutional analysis of formal and informal credit in eastern Upper-Volta: An empirical evidence and policy implications". Ph.D. dissertation presented to the Michigan State 101 University of Ghana http://ugspace.ug.edu.gh University, Lansing, Michigan. Udry, Christopher (1990). "Credit markets in northern Nigeria: Credit as insurance in a rural economy11. World Bank Economic Review. 4(3): 251-70. USDA (1954). Marketing: The Year-book of Agriculture. U.S. Government Printing Office, Washington. Van Appeldoom, G.J.(1970). "A list of market places in Ghana". Technical Publication, No. 137, ISSER, University of Ghana, Legon. Von Pischke, J. D. (1991). "Finance at the frontier; Debt capacity and the role of credit in the private economy". EDI Development Studies, Washington. D.C. Whethem, E.H.(1972). Agricultural Marketing in Africa. Oxford University Press, London. Wilock, D. C.(1978). The Political Economy of Grain Marketing and Storage in the Sahel. MSU Working Paper No.24, Department of Agriculture Economics, Michigan State University, East Lansing World Bank (1993). Ghana 2000 and Bevond. Africa Regional Office, Western Africa Department. World Bank Republic of Ghana. Wye College.(1991). Methodology for Assessing Economic Efficiency of Markets and Market Policy. Wye College, Kent. 102 University of Ghana http://ugspace.ug.edu.gh Yaron, Jacob (1994), "Successful and finance institutions1' Finance and Development. 31(1): 32-35. Yaron, Jacob (1994). "What makes rural financial institutions successful". World Bank Research Observer. 9(1): 49 - 70. 103 University of Ghana http://ugspace.ug.edu.gh UNIVERSITY OF GHANA DEPARTMENT OF AGRICULTURAL ECONOMY AND FARM MANAGEMENT QUESTIONNAIRE FOR MAT7.F/Y AM WHOLESALERS 1 . MARKET AND MARKET TRADER CHARACTERISTICS 1.1 Gender (Male = 1 /Female = 2)....................... 1.2 A ge.................................... (years) 1.3 Level of Education...................................................................... Year spent in school..................................................................... 1.4 Name of this market...............................Town.................................................. 1.5 Year(s) in business....................................(years) 1.6 Name the principal product you handle........................................... 1.7 What other economic activities do you engage in ? ..................................... 2. EXCHANGE TRANSACTIONS 2.1 Where do you purchase your principal products? (Tick) On the farm ............................................................ On the roadside ............................................................. At the market............................................................. Storage depot................................... ......................... 2.2 Do you use agents? (y=l / n=2)......................................................... How much do you pay?...................................... (per maxibag or 100 tubers) 2.3 Do you always purchase from the same person or people? (Y=I /N = 2 )................... 2.4 If yes (1), w hy............................................................................................ 2.5 If Yes to 2.3, how many suppliers do you have? ................... (Number) 2.6 Do you have any special purchasing arrangement with your suppliers? (Y=l /N=2) APPENDIX 1 Specify 104 University of Ghana http://ugspace.ug.edu.gh 2.7 When do you pay for your principal product? (Tick) Before harvest ...................................... After harvest ...................................... At time of purchase ...................................... After Sale of product .................................... 2.8 How many times do your handle the principal products in a month?.........................(Number of trips). 2.9 What quantity of the principal product do you usually handle on a trip?.....................(Maxibag / tubers). 2.10 What is the purchase price of the product per unit? 0.....................(per maxibag or 100 tubers) 2.11 Where do you usually sell your principal product? Distance from market/place of purchase ......................................... (km) 2.12 At what price do you sell the product in the market of sale?.............................(per maxibag/100 tubers) 2.13 When do you receive payment for the products you sell At time of selling .............................................. Days after sale of product .............................................. Before purchase of product ................................................ 2.14 To whom do you usually sell your products?....................................... 2.15 Marketing costs Source of cost Amount paid 3. STORAGE 3.1 Do you store your produce (Y=l / N=2). 3.2 If yes to 3.1., where do you store? (Tick) 105 University of Ghana http://ugspace.ug.edu.gh On the farm -------------------- At the market-------------------- Other places (Specify) ........................................................................................ 3.3 What is the cost of storage? £ .................................(Per unit) 3 .4 On average how much is stored?................ (Maxibags/tubers) 3.5 How long do you store your product?........................................ (Days/Weeks/Months) 3.6 When do you store your products?................................................. 3.7 Do you record spoilage or quality deterioration during storage? (Y=l / N=2)........ 3.8 How many parts out of ten of your principal product was not sold because of spoilage or quality deterioration, and losses in transit?............................. 4. TRANSPORTATION 4.1 How do you usually transport your produce to your market of sale? By foot (head load) ................................ By bicycle ................................ By animal ................................ By bus or car ................................ In small lots by lorries ................................ In bulk by lorry ................................ By tractor ................................ By train (rail transport)................................ By ferry (lake transport) ................................ 4 .2 How much does it cost to transport the product?.....................(per maxibag/100 tubers) 4.3 How much do you pay for loading/unloading your product........................ (per maxibag/100 tubers) 4.4 Place of purchase................. place of sale................. Distance................. Km 4.5 Do you hire your means of transport? (Y=l/N=2).............................. If YES, what are the terms................................................................................................................. 106 University of Ghana http://ugspace.ug.edu.gh 5. PROCESSING 5.1 Do you process your major products (Y=l/N=2)............... 5.2 What quantity of the major product do you process on the average ............. (maxibags/tubers) Per ................. day; o r .................week; o r......................Month. 5.3 How much does it cost to process 0....................... (per maxibag/100 tubers) Processing Activity Cost 6. FINANCING 6.1 Do you belong to any market association or organisation? (y=l /N = 2 )............... If YES, what services does the association provide? (Tick) Loans or credit ............................. Information on prices and supply................. Cooperative buying ......................... Transport ................... Cooperative lending ........................ Other (specify) ................... 6.2 What is your source of financing? (Tick) Self.............................. Co-operative/Association.............................. Bank.............................. Money lender................................................. Other traders........................ Other (Specify)............................................ 6.3 What rate of interest do you pay for borrowed money?...........................(percent) 6.3.1 Source of borrowed money...........................Amount borrowed 0............................. Amount to repay ji...................................... 6.3.2 How long do youhave to repay borrowed money.................................(Months) 6.4 Did you have to provide collateral (security) for the loan or credit? (Y=l / N =2)........................................... If YES, what type?.............................................................................. 6.5 Have you ever sold any personal possessions or belongings to finance your business? (Y=l /N=2) 107 University of Ghana http://ugspace.ug.edu.gh 6 .6 If YES, to 6.5., specify item (s) sold.......................................................... 6.7 Do you save (Y=l /N=2)....................... 6 .8 If yes to 6.7., where? At home.................................. Bank ............................. Credit Union........................... Susu ............................. Others (specify)..................................... 6.9 How far is the nearest bank from your permanent place of activity? (km) 6.10 Have you ever applied to a bank for financing? (Y=l /N=2) 6.11 IfNo to 6.10 why not?.......................................................... 6.12 IfYES, to 6.10, was your request granted? (Y=l N=2)....... 6.13 Are you giving credit to others? (Y=l /N=2). IfYES, to whom............................................ 6 .14 On what conditions do you give credit?........ 108 University of Ghana http://ugspace.ug.edu.gh UNIVERSITY OF GHANA DEPARTMENT OF AGRICULTURAL ECONOMY AND FARM MANAGEMENT n QUESTIONNAIRE FOR MAIZE/YAM TRANSPORTERS I. TRANSPORTER CHARACTERISTICS 1.1 Age................................................................ (years) 1.2 Gender (Male=l /Female=2).................................. 1.3 Level of Education........................................ Years spent in school............................ 1.4 Name of Principal product you transport..................................................... 1.5 Number of years in business.................................................. (years) 1.6 Are you a member of any association? (Y=l /N =2)............................... Specify........................................................................ 2 COST STRUCTURE 2.1 From where do you usually transport the principal product? .......................... ................................Distance.................................... (km) 2.2 What quantity of fuel do you use for a return trip? .......................... gallons of applicable one) 2.3 What other costs do you incur on a trip? Source of Cost Amount paid APPENDIX 2 2.4 How many return trips do you make in a month?.......... 2.5 How Many mates or helpers do you have on your truck? and to where? petrol/diesel (Tick 109 University of Ghana http://ugspace.ug.edu.gh 2.6 What is the loading capacity of your truck?................................. 2.7 How much do you charge to transport the product?^.................... 2.8 How much did it cost to buy this vehicle? £................................. 2.9 How much do you pay for repairs and maintenance in a month ? £ (maxibags/tubers) (per maxibag/100 tubers) per Month 3. FINANCING 3.1 If you belong to any association, what services does it provide? (Tick) Loan or Credit .................................. Transport charge determination .................................. Co-operative Transportation ................................. Information ..................................... Other (specify) ...................................... 3.3 What rate of interest do you pay for borrowed..................(percent). Amount borrowed 0................... Amount to repay j t ...................................... 3 .3 .1 Source of borrowed money............................................................... 3 .3 .2 How long do you have to repay borrowed money?.......................... (months) 3 .4 Did you have to provide collateral (security) for the loan or credit? (Y=l/N=2). If YES, what type 3.5 Have you ever sold any peronal possessions or belongings to finance your business? (Y=l / N=2)................ 3.6 IfYES to 3.5, specify items (s) sold.................................................. 3.7 Do you save? (Y=l/N=2).................................................................... 3.8 IfYES to 3.7, where? (Tick) At home .......................... Susu................................. Credit Union .......................... Other (specify)............................ Bank 110 University of Ghana http://ugspace.ug.edu.gh 3.9 How far is the nearest bank from your permanent place of activity?...................(km) 3.10 Have you ever applied to a bank for financing? (y=l/N=2).......... 3.11 If No to 3.10, why not?............................................................. 3 .12 If YES to 3.10, was your request granted? (Y=l /N=2).................... 3.13 Do you receive credit from the traders whose products you transport? 3.14 When do you usually receive payment, for transportation of the products? ..... ........................... after the traders have sold the products (Tick applicable). 3.15 Are you giving credit to others? (Y=l /N=2)..................................................... If YES, to whom.............................................................. 3 .16 On what conditions do you give credit?......................................................... r=l / N=2) Before; or 111 University of Ghana http://ugspace.ug.edu.gh UNIVERSITY OF GHANA DEPARTMENT OF AGRICULTURAL, ECONOMY AND FARM MANAGEMENT ID OUESTIONNIRE FOR PRIVATE STORAGE OPERATORS I MARKET AND STORAGE OPERATOR CHARACTERISTICS 1.1 Gender (Male=l/Female=2).................................................... 1.2 A ge.......................................................... (years) 1.3 Level of Education............................ Years spent in school............................ 1.4 Name the principal product you store.................................................................. 1.5 Number of years in business.................................................................................. 1.6 What other produces) do you store?........................................................................ 1.7 Name of this market................................................................................................. 2. OPERATING COSTS 2.1 Do you own the structures in which you store the produts (Y=l/N=2)................... 2.2 If YES to 2.1., how much did it cost to build/erect? 0 ................................................. 2.3 How much do you pay for renting the land?............................................... per month. 2.4 If No to 2.1., do you rent the structure/store ? (Y=l/N=2)................................................. If YES, how much do you pay per month £............................................................... 2.5 What kind of labour do you employ? Kind of labour Amount paid/day APPENDIX 3 112 University of Ghana http://ugspace.ug.edu.gh 2.6 Do you provide any ofthe following during storage?...................... Storage Activity Drying (Yes=l /No=2) Cost (_£) Fumigation ...................... ............ Drying ...................... .......... 2.7 Do you have any other costs? (Y=l /N=2 ) ........................................... Source of Cost Amount paid 3. STORAGE TRANSACTIONS 3 .1 Which people bring their products for storage? Fanners Other storage operations................. Traders Other (specify)................................... Transporters ....................................... 3.2 On average how long do people leave their produce in storage?...................(days/weeks/months) 3.3 How much do you charge per day?................................... (per maxi bag/100 tubers). 3.4 Do you record quality deterioration or spoilage during storage? (Y=l / N =2).............................. 4. FINANCING 4.1 Do you belong to any association (Y=l/N=2)...................... 4.2 If YES to 4.1, what services does the association provide? (Tick) Loans or credit ..................................................... Storage charge determination ..................................................... Co-operative storage ...................................................... Other (specify) ..................................................... 4.3 What is your source of financing? {Tick} Self......................................................Bank............................................. 113 University of Ghana http://ugspace.ug.edu.gh Family/fiiends......... Traders .................... Other storage Agents Association Money lenders Other (specify) 4.4 What rate of interest do you pay for borrowed money? 4.4.1 Source of borrowed money...................................... 4.4.2 How long do you have to repay borrowed money? .. Amount to repay..... ..................(months) 4.5 Did you have to provide collateral (security) for the loan or credit? (Y=l/N=2) IfYES, what type? ...................................... 4.6 Have you ever sold any personal possession of belongings to finance your business? (Y=l / N=2) 4.7 IfYES, to 4.6, specify item(s) sold............................................ 4.8 Do you save? (Y=l / N =2)........................................................ 4.9 IfYES to 4.8., where [Tick] At home ............................... Susu............... Credit Union............................. Other (specify) Bank.......................................... 4.10 How far is the nearest bank from your permanent place of activity?........ 4.11 Have you ever applied to a bank for financing? (Y=l / N =2)................... 4.12 IfNo to 4.11., was your request granted? Y=l/N=2)............................... 4.13 If YES to 4.11., was your request granted? (Y =l/N =2)......................... 4.14 Do you receive credit form those whose products you store? (Y=l /N=2). 4.15 When do you usually receive payment, for products you store?........... before; or (km) after the traders have sold the products. 4.16 Are you giving credit to others? (Y=l / N=2). IfYES, to whom........................................... 4.17 Under what conditions do you give credit? 114 University of Ghana http://ugspace.ug.edu.gh UNIVERSITY OF GHANA DEPARTMENT OF AGRICULTURE ECONOMY AND FARM MANAGEMENT IV QUESTIONNAIRE FOR MAIZE PROCESSORS 1. PROCESSOR CHARACTERISTICS 1.1 Gender (Male=l/Female=2).................................................................. 1.2 A ge............................... (years) 1.3 Level of Education..........................................Years spent in school........................... 1.4 Name of the principal product you process for sale........................................................ 1.5 Name of years in business............................................................................................ 1.6 What other products do you process for sale?................................................................ 1.7 Name of the market......................................................................................................... 1.8 Where do you process your principal product? ....................... Distance from this market ............................................(km) 2. PROCESSING COSTS 2.1 What quantity of the major product do you process at a time?..................................... (maxibags/tubers) 2.2 What quantity of the processed product do you usually obtain form the quantity stated in 2.1 above? ........................................ (basket). 2.3 How much does it cost to process the quantify stated in 2.1 above? Processing Activity Cost d ' ) APPENDIX 4 2.4 How do you transport the produce to the market for sale? [Tick] By foot (head loading)................in small lots by lorries.......... By bicycle................................. In bulk by lorry.................... By animal.................................. gy tractor............................. 115 University of Ghana http://ugspace.ug.edu.gh By bus or ca r..............................B yfeny ....................................................... 3. F.yrHANGE TRANSACTIONS 3 . 1 Where do you purchase the major product you possess? On the farm ................................. On the roadside ................................. At the market ................................. Other places (specify) ................................. 3.2 Do you always purchase form the same person or people? (Y=l/N=2)............... 3.3 If YES to 3.2., do you have any special purchasing arrangement with your suppliers? (Y=l / N=2) .............................................Specify............................................................................................................. 3.4 For the last purchases you made, what was the price of the major product processed? 0....................................... (per maxibag/100 tubers). 3 .5 When do you pay for the major product you process? Before harvest ..................................... After harvest .................................. At time of purchase .................................. After sale of processed form.................................. 3.6 For the last processed product you sold, how much was the price of one unit? 0............... (per basket) 3.7 When do you usually receive payment for the processed products you sell? Before the product is processed ...................................... After the product is processed ..................................... At times of sale ..................................... After buyer sells the product ..................................... 3 .8 What marketing costs do you incur? Source of cost Amount paid/basket 116 University of Ghana http://ugspace.ug.edu.gh 4. STORAGE 4.1 Do you store your produce? (Y=l /N =2).......................................... 4 .2 IfYES to 4.1., where do you store? (Y=l /N =2).............................. At home ................................ On the market ................................ Other places (specify) ................................ 4.3 How much do you pay for storage per day.............(per basket) 4 .4 On average, how many of the processed products is stored in a week.............(basket). 4.5 Do you experience spoilage or quality deterioration duration storage? (Y=l / N=2)...................... If YES, what quantity of the stored products do you lose in a week.................... (baskets). 5. TRANSPORTATION 5.1 How do you usually transport you processed product to the market? By foot (head loading) In small lots by lorries................................................. In bulk by lorry.................... By bicycle........................... By Tractor............................ By animals By Ferry ............................. 5.2 How much does it cost to transport the major product you process form the market of purchase to the place of processing?........................... (per maxibag/100 tuber). 5.3 How much does it cost to transport the processed product to the market for sale? ..................................... (per basket). 5.4 How much do you pay for loading/unloading the processed product? .................... (per basket). 6. FINANCING 6.1 Do you belong to any association or co-operative? (Y=l /N =2)...................... If YES, what services do these associations provide? Loans on credit ..................................................... Information on prices ..................................................... 117 University of Ghana http://ugspace.ug.edu.gh Transport ..................................................... 6 .2 Do you save? (Y=l / N=2) ............................. If YES, where? At home ...................................................... Bank ...................................................... Credit Union ...................................................... Susu ...................................................... Other (specify) ...................................................... 6.3 Have you ever applied for financing from a bank? (Y=l / N=2)....................... 6 .4 If No to 6.5., why?.......................................................................................... 6.5 If YES to 6.5., were you given the credit facility? (Y=l / N =2).................If your application was declined, what were some of the reasons given?.......................... 6 .6 What are your source of financing? Self .......................................................... Relations .......................................................... Bank (specify) .......................................................... Co-operative / Association .......................................................... Money lender ........................................................... Susu ........................................................... Other (specify) ........................................................... 6.7 If you obtain financing from the bank or money lender, how do you borrow at a time? ........................................After how long do you have to repay the loan? ...................................... month o r ........................................ Years. 6.8 What rate of interest do you pay?............................................ (percent). If you do not know the rate give, Amount borrowed ^............................................ Amount to repay 0.............................................Period....................... (months) 6.9 Did you have to provide collateral [or security] for the loan or credit? (Y=l / N=2) ....................................If YES, what type?.................................................. 6.10 If you are a member of a susu/credit union, how much do you contribute per week? ............................................(amount). 6.11 Have you ever sold any personal possessions belongings to finance your business? (Y=l / N=2) .......................................specify item(s) sold............................................... 6.12 Do you finance your regular suppliers? (Y=l /N=2)............ 118 University of Ghana http://ugspace.ug.edu.gh APPENDIX 5 AVERAGE PROJECTED CASHFLOW ANALYSIS FOR MAIZE WHOLESALER (CEDIS) PARTICULARS MONTH 0 MONTH 1 MONTH 2 CASH INFLOW Sales 0 3445000 3445000 Total Cash Inflow 0 3445000 3445000 CASH OUTFLOW Purchase of Goods 432000 1728000 1728000 Transport Costs 192000 768000 768000 Storage Costs 6000 24000 24000 Sundry Expenses 74000 296000 296000 Contingency -5 % 35000 141000 141000 Total Cash Outflow 739000 2957000 2957000 NET GAIN/(LOSS) (739000) 488000 488000 CASH SUMMARY Cash at beginning 0 11000 132000 Add Net Gain/(Loss) (739000) 488000 488000 Tentative Cash Balance (739000) 499000 620000 Add Loan/ Deduct Rept. 750000 367000 409000 Closing Cash Balance 11000 132000 211000 DEBT SITUATION Opening Loan balance 0 750000 400000 Interest Charged - 27%p.a. 0 17000 9000 Cummulative Interest 0 7000 9000 Loan Repayment(Prin/Int) 0 367000 409000 Loan Disbursement 750000 0 0 Closing Loan Balance 750000 400000 0 Internal Rate of Return - 20.73% per month 119 University of Ghana http://ugspace.ug.edu.gh APPENDIX 6 AVERAGE PROJECTED CASHFLOW ANALYSIS FOOR YAM WHOLESALER (CEDIS) PARTICULARS MONTH 0 MONTH 1 MONTH 2 CASH INFLOW Sales 0 2811000 2811000 Total Cash Inflow 0 2811000 2811000 CASH OUTFLOW Purchase of Goods 540000 1620000 1620000 Transport Costs 168000 504000 504000 Storage Costs 12000 36000 36000 Sundry Expenses 22000 66000 66000 Contingency -5 % 37000 111000 111000 Total Cash Outflow 779000 2337000 2337000 NET GAIN/(LOSS) (779000) 474000 474000 CASH SUMMARY Cash at beginning 0 21000 77000 Add Net Gain/(Loss) (779000) 474000 474000 Tentative Cash Balance (779000) 495000 551000 Add Loan/ Deduct Rept. 800000 418000 409000 Closing Cash Balance 21000 77000 142000 DEBT SITUATION Opening Loan balance 0 800000 400000 Interest Charged - 27%p.a. 0 18000 9000 Cummulative Interest 0 18000 9000 Loan Repayment(Prin/Int) 0 418000 409000 Loan Disbursement 800000 0 0 Closing Loan Balance 800000 400000 0 Internal Rate of Return -14% per month 120 University of Ghana http://ugspace.ug.edu.gh APPENDIX 7 . • • * V > \ AVERAGE PROJECTED CASHFLOW ANALYSIS FOR MAIZE PROCESSOR (CEDIS) PARTICULARS MONTH 0 MONTH 1 MONTH 2 MONTH 3 CASH INFLOW Sales 0 108000 108000 108000 Total Cash Inflow 0 108000 108000 108000 CASH OUTFLOW Purchase of Goods 11000 42000 42000 42000 Transport Costs 6000 22000 22000 22000 Storage Costs 5000 19000 19000 19000 Sundry Expenses 2000 9000 9000 9000 Contingency -5 % 1000 5000 5000 5000 Total Cash Outflow 25000 97000 97000 97000 NET GAIN/(LOSS) ( 25000) 11000 11000 11000 CASH SUMMARY Cash at beginning 0 5000 5300 5850 Add Net Gain/(Loss) (25000) 11000 11000 11000 Tentative Cash Balance (25000) 16000 16300 16850 Add Loan/ Deduct Rept. 30000 10700 10450 10230 Closing Cash Balance 5000 5300 5850 6620 DEBT SITUATION Opening Loan balance 0 30000 20000 10000 Interest Charged - 27%p.a. 0 700 450 230 Cummulative Interest 0 700 450 230 Loan Repayment(Prin/Int) 0 10700 10450 10230 Loan Disbursement 30000 0 0 0 Closing Loan Balance 30000 20000 10000 0 Internal Rate of Return -16% per month 121 University of Ghana http://ugspace.ug.edu.gh APPENDIX 8 AVERAGE PRIOJECTED CASEIF L O V ANALYSIS FOR PRTVATE STORAGEOPERAiTION( t '