The government’s annual purchase of groundnuts from farmers is not a long-term viable strategy. It is fiscally draining, has been short-changing farmers, and is a commercial activity for which government entities are ill-suited. It is high time the country implements a strategy that meets the modern needs of the Gambian economy, and of farmers in particular.
Gambia’s cultivation and exportation of groundnuts started as a result of the colonial administration shaping the economies of its colonies for its own benefit. This system would be worth keeping if it still benefited the country. But it does not. It persists only through a combination of inertia, lack of imagination, and poor leadership. The farmers that bear the brunt of this effectshave not receiving the required level of support from the government to make groundnut cultivation economically worthwhile. This would not be a major problem if the crop were grown by a small number of people and its cultivation was not based on an unwritten contract.
The proximate reasons for the limited returns to groundnut farming stem from high input costs and low market prices for harvested groundnuts. The low returns for Gambian groundnut farmers come from many sources, including natural effects (i.e., aflatoxin infestation), policy failures along the entire value chain, and lack of visionary leadership.
The good news is that it is not difficult to envision an implementable strategy that can simultaneously accomplish the following: 1. reduce fiscal pressure on the government, 2. develop local value addition through agro-processing, 3. contribute to food security, 4. improve balance of payments, and 5. increase returns for farmers. Such a strategy entails viewing groundnuts mainly as an input for local agro-processing and discarding the long-held view of the crop as primarily an export commodity.
One of the major food staples in The Gambia is vegetable oil, and most of what we consume is imported. Groundnut-based vegetable oil is considered high quality and therefore should be well desired for local consumption. A well-implemented strategy that prioritizes local production of vegetable oil for domesticconsumption is long overdue. This will require several conditions to work.
First, investment incentives should be provided for private sector-led agro-processing. Local demand for vegetable oil is high, and this market alone should make investment in this line of business quite appealing. Limited incentives such as tax holidays should further enhance commercial viability and thus attract more investors. The current limited groundnut processing by the public sector at Saro is not a viable long-term strategy and therefore not a suitable model for maintaining or scaling.
Input supply for the vegetable oil production should not be a problem. The local production capacity for groundnuts is sufficient to meet the country’s vegetable oil demand. Once the right investors are available, such a business could justify some limited industrial protection to allow the local manufacturer to become properly established. But such incentives need to be time-bound and linked to well-chosen performance targets.
Local processing of groundnuts needs to be coupled with a strategy to ensure all by-products are properly commercialized. For example, the groundnut cake that results from vegetable oil processing is a valuable ingredient for animal feed. And it is not the only useful by-product that can be further processed. Most or all of the products that depend on groundnut-processing by-products as inputs are presently imported but could be manufactured locally.
Private sector-led agro-processing can allow a competent government to better allocate resources to increasing agricultural productivity not only in groundnut cultivation but for other key crops as well. This will reduce fiscal pressures and allow the government to concentrate on areas where it is better suited, such as infrastructure investments, and reduce involvement in activities for which it is ill-suited, such as commercial buying or processing of farm produce. In general, public intervention in this sort of area is more useful and needed at the upstream segment of the crop’s value chain rather than the downstream segment.
Reduction of vegetable oil importation will reduce import pressures. The Gambia’s combination of high level of importsand low exports, and the resulting deficit are some of the driving forces behind our balance of payment problems. This import dependence exposes the country to all kinds of shocks, with adverse consequences for our rising cost of living. The removal of this source of shocks would also improve food security.
Promoting local agro-processing will diversify our economy toward more value addition, which will increase the economy’s resilience and contribute to the generation of better-quality jobs. This is all the more urgent as our economy is currently dominated by low-productivity agriculture and services, which have not been creating the opportunities that our growing and young population needs.
Implementing such a plan is quite feasible. It requires coordination across sectors, including agriculture, industry, and energy. Unfortunately, one can hand a perfect development plan to a poorly-led government and it will remain only a plan. It goes without saying that competent leadership is needed to execute such a plan. This key prerequisite cannot be over-emphasized.
The fact that the current administration decided to rename the state-owned Gambia Groundnut Corporation (GGC) to the National Food Security, Processing and Marketing Corporation (NSFPMC) gives an indication of its poor understanding of the challenges we face in the sector. When there is no proper leadership, there is almost no hope.
Dr. Ousman Gajigo,Economist Formerly with ADB
