Financing Agriculture for Agro-Industrialization: What Lessons can Uganda Learn from Ghana?
Despite Uganda and Ghana having a similar economic structure—especially the reliance on agriculture for employment and presence of dominant cash crops—overall agriculture in the two countries differ markedly. Ghana allocates a substantially higher share of its budget to the agricultural sector. This policy note examines the reasons behind Ghana’s higher public spending on agriculture and what lessons Uganda can learn as it prioritizes agro-industrialization during the implementation of the National Development Plan (NDP) III (2020-2025). We find that the two countries have taken diverging paths in the quest to support agriculture. Starting in 2007, Ghana re-introduced major subsidy and support programs for: fertilizer, mechanization, block farms, and marketing. Most important, Ghana spends a large portion of her public agricultural finance towards supporting the state controlled cocoa industry. The coffee sector in Uganda is yet to receive support of similar magnitude. In addition, unlike Uganda, Ghana has since 2006 attracted larger share of development partner financing towards its agriculture sector by prioritizing growth and the development of the country’s productive sectors and undertaking several political and economic reforms. Finally, Ghana has also demonstrated superior abilities in attracting high foreign direct investments into its agriculture sector both through its natural geographical locational advantages but also through establishment of a competitive business environment. The favourable business environment has come through undertaking regulatory reforms that ease doing business in Ghana.