Growing agriculture from Oil

Google “Dutch disease” and it will most probably include the following definition: “the apparent causal relationship between the increase in the economic development of a specific sector (for example natural resources) and a decline in other sectors like the manufacturing sector or agriculture).”

The term was coined in 1977 by The Economist to describe the decline of the manufacturing sector in the Netherlands after the discovery of a large gas field.

In the 1970s, Nigeria also found large reserves of oil and gas. Before that, however, it used to be one of the world’s largest exporters of palm oil. However  the “Dutch Disease” struck and now most of Nigeria’s revenue comes from oil only. The trouble with this is that because commodity prices are volatile, over reliance on one commodity carries huge risks for any country’s economy. Natural resources are finite and so somewhere in the not-too-distant future, their exploitation comes to an end. And then what?

Ghana, which is relatively new to commercial oil, has the experiences of other countries to learn from. It is widely understood that if you don’t diversify your economy and instead choose to rely solely on one sector, you will soon find yourself suffering the “Dutch disease”. Oil brings in so much money that it is easy to forget the importance of economic diversification. Oil revenue in business terms is classified as a cash cow; meaning it brings in a lot of money that really should be prudently used to diversify the economy. Dubai is a first class example of economic diversification. They invested their oil revenues in world class tourism and are a

Oil brings in so much money that it is easy to forget the importance of economic diversification. Oil revenue in business terms is classified as a cash cow; meaning it brings in a lot of money that really should be prudently used to diversify the economy.

Dubai is a first class example of economic diversification. They invested their oil revenues in world class tourism and are a favourite destination for visitors from all parts of the globe. When you think Dubai, you don’t think oil. The key is to leverage oil revenues to grow other sectors.

That is where the Kosmos Innovation Center (KIC) comes in. The company has positioned its Social Investment strategy to make real impact in economic sectors other than oil and gas. Established in 2016, the KIC uses high impact programs to foster innovation in Ghana. The company aims to be a catalyst that helps to diversify the economy. Thinking about sectors where diversification could have the greatest impact, one cannot look beyond agriculture. 

The company aims to be a catalyst that helps to diversify the economy. Thinking about sectors where diversification could have the greatest impact, one cannot look beyond agriculture. 

Trotro Tractor Limited and Ghalani Ltd are both companies that have been launched as a result of these efforts. Trotro Tractor is a Global Positioning System (GPS) enabled mobile platform that connects farmers to tractors within their vicinity on demand, enabling farmers to request, schedule and pre-pay for tractor services.

Ghalani develops enterprise resource planning software that helps large agricultural businesses to efficiently manage thousands of farmers for less risk and better productivity.

Through the KIC, the entrepreneurial spirit of tech-savvy youth is being channeled into the agricultural sector. The company has provided capacity building support and seed funding of $100,000 to these young agricultural entrepreneurs. The company’s goal is to facilitate the emergence of small and mid-sized enterprises and then make them

The company’s goal is to facilitate the emergence of small and mid-sized enterprises and then make them investor-ready. The plan over the next five years is to have at least 10 Ghanaian enterprises owned and operated by young Ghanaians in the agriculture value chain.

If agriculture could be de-risked for commercial finance, an altogether new paradigm shift would occur and the depletion of oil and gas would not mark the end of “good times” for the country.

Dubai took its oil revenues and diversified into tourism. Ghana too can use oil revenues to achieve economic diversification. It could boast a new economy when oil and gas are no more; one that is driven by agribusiness on a major scale focusing more on adding value to agricultural produce.