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Agricultural mechanization in Ghana: Is specialization in agricultural mechanization a viable business model?

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  • Houssou, Nazaire
  • Diao, Xinshen
  • Cossar, Frances
  • Kolavalli, Shashidhara
  • Jimah, Kipo
  • Aboagye, Patrick Ohene

Abstract

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

Suggested Citation

  • Houssou, Nazaire & Diao, Xinshen & Cossar, Frances & Kolavalli, Shashidhara & Jimah, Kipo & Aboagye, Patrick Ohene, 2013. "Agricultural mechanization in Ghana: Is specialization in agricultural mechanization a viable business model?," GSSP working papers 30, International Food Policy Research Institute (IFPRI).
    • Handle: RePEc:fpr:gsspwp:30
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    References listed on IDEAS

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    1. Hayami, Yujiro & Kawagoe, Toshihiko, 1989. "Farm mechanization, scale economies and polarization : The Japanese experience," Journal of Development Economics, Elsevier, vol. 31(2), pages 221-239, October.
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    1. Takeshima, Hiroyuki & Edeh, Hyacinth & Lawal, Akeem & Isiaka, Moshud, 2014. "Tractor owner-operators in Nigeria: Insights from a small survey in Kaduna and Nasarawa states:," IFPRI discussion papers 1355, International Food Policy Research Institute (IFPRI).
    2. Gulati, Kajal & Lybbert, Travis J. & Spielman, David J., 2017. "Diffusing to level fields: Evolution of laser land leveling technology markets in India," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 258387, Agricultural and Applied Economics Association.
    3. Amagoia Sagasta & José M. Usategui, 2015. "Purchase and rental subsidies in durable-oligopolies," Hacienda Pública Española / Review of Public Economics, IEF, vol. 213(2), pages 11-40, June.
    4. Houssou, Nazaire & Chapoto, Anthony, 2015. "Adoption of Farm Mechanization, Cropland Expansion, and Intensification in Ghana," 2015 Conference, August 9-14, 2015, Milan, Italy 211744, International Association of Agricultural Economists.
    5. Diao, Xinshen & Agandin, John & Fang, Peixun & Justice, Scott E. & Kufoalor, Doreen S. & Takeshima, Hiroyuki, 2018. "Agricultural mechanization in Ghana: Insights from a recent field study:," IFPRI discussion papers 1729, International Food Policy Research Institute (IFPRI).
    6. Houssou, Nazaire & Chapoto, Anthony & Asante-Addo, Collins, 2016. "Farm transition and indigenous growth: The rise to medium- and large-scale farming in Ghana:," IFPRI discussion papers 1499, International Food Policy Research Institute (IFPRI).
    7. Giger, Markus & Mutea, Emily & Kiteme, Boniface & Eckert, Sandra & Anseeuw, Ward & Zaehringer, Julie G., 2020. "Large agricultural investments in Kenya’s Nanyuki Area: Inventory and analysis of business models," Land Use Policy, Elsevier, vol. 99(C).
    8. Ghebru, Hosaena & Khan, Huma & Lambrecht, Isabel, 2016. "Perceived land tenure security and rural transformation: Empirical evidence from Ghana:," IFPRI discussion papers 1545, International Food Policy Research Institute (IFPRI).
    9. Houssou, Nazaire & Aboagye, Patrick Ohene & Kolavalli, Shashidhara, 2016. "Meeting Ghanaian farmers' demand for a full range of mechanization services," GSSP policy notes 9, International Food Policy Research Institute (IFPRI).
    10. Houssou, Nazaire & Chapoto, Antony, 2014. "The changing landscape of agriculture in Ghana: Drivers of farm mechanization and its impacts on cropland expansion and intensification:," IFPRI discussion papers 1392, International Food Policy Research Institute (IFPRI).
    11. Diao, Xinshen & Cossar, Frances & Houssou, Nazaire & Kolavalli, Shashidhara, 2014. "Mechanization in Ghana: Emerging demand, and the search for alternative supply models," Food Policy, Elsevier, vol. 48(C), pages 168-181.
    12. Geneviève Nguyen & Julien Brailly & François Purseigle, 2020. "Strategic outsourcing and precision agriculture: towards a silent reorganization of agricultural production in France ?," Post-Print hal-02942720, HAL.
    13. Houssou, Nazaire & Diao, Xinshen & Kolavalli, Shashi, 2014. "Can the private sector lead agricultural mechanization in Ghana?," GSSP policy notes 4, International Food Policy Research Institute (IFPRI).
    14. Hiroyuki Takeshima & Hyacinth O. Edeh & Akeem O. Lawal & Moshudi A. Isiaka, 2015. "Characteristics of Private-Sector Tractor Service Provisions: Insights from Nigeria," The Developing Economies, Institute of Developing Economies, vol. 53(3), pages 188-217, September.

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    Keywords

    Agricultural machinery; Land preparation; mechanization; Private investment; Small farmers;
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