The Private Enterprise Foundation (PEF) has concluded the draft of a National Agricultural Fund Bill for the nation.
The bill, first mentioned in the 2008 budget to Parliament, seeks to bridge the financing gap between what government and banks currently give to agriculture and what is actually needed by the sector that holds the biggest share of the nation’s gross domestic product.
Out of government’s total discretionary spending, the agricultural sector presently takes just two percent – while the share of agriculture in domestic money banks’ total loan portfolio stands at between four and five percent.
Mr. Moses Agyemang, Chief Economist at PEF made it known in an interview with B&FT that the draft bill will be forwarded to the Ministry of Food and Agriculture for onward submission to cabinet.
He said - taking into consideration government’s declared commitment to the sector and having conducted a series of stakeholder consultations, the structure proposed for the bill and recommendations therein represents just what the nation needs to bring about the required transformation in the sector.
As part of sources of funding for the Fund, the Bill has proposed seed-money from government, using the proceeds from increasing the annual budgetary allocation to the agricultural sector from two to 10 percent, and one percent of the prevailing Value Added Tax (VAT) rate.
Other sources earmarked are floatation of the Fund by the Ministry, a portion of the quarterly amounts paid into the Export Development and Investment Fund (EDIF), a portion of amounts paid by way of royalties in relation to petroleum production activities, and willing donations.
Even though the Minister of Finance and Economic Planning suggested in the 2009 budget that the National Agric Fund should be joined with the EDIF to begin extending its financing activities into agriculture, Mr. Agyemang said, the two needed to be separated.
“EDIF’s focus is to support exporters through all ranks of exportation, which must be maintained; the Agric Fund’s focus is to support agricultural production – whether this is to meet domestic demand or enhance the nation’s agricultural export competitiveness, “he said.
The bill is therefore earmarks the Fund to provide credit facilities for agricultural operations and business at single-digit interest rates loans, and double-term repayment periods. A term is to be determined by the gestation period of the agricultural production activity or the agric-related business.
Specific uses for the Fund proposed are: for problem-solving in agricultural research, providing guaranteed minimum price for all agricultural produce – including fish, and support for agro-processors.
“Research has shown that when more value is added to produce at the farm-gate, profit margins go up; this then enables farmers to be paid higher prices for their produce- in turn triggering increased production of food, which is desirable from the point of achieving national food security” Mr. Agyemang explained.
Other uses outlined include human capital development across the value-addition chain, provision of market information, production of infrastructure for irrigation, rural roads and inland valleys; provision of storage facilities; farm disaster recovery, and advertising / promoting patronage of local agricultural produce.
By:Business & Financial Times [Monday, August 24, 2009]
