By: Sara Gustafson
In an effort to slow the spread of the COVID-19 pandemic, countries around the world have enacted various policies to restrict people’s movement and physical contact. These have included both general social distancing measures and more draconian border closures and lockdowns of businesses and economic sectors where risk of infection is high. While well-intentioned from a public health perspective, these policies have had significant socioeconomic impacts, particularly in developing regions such as Africa South of the Sahara where a large portion of the population does not have the capacity to withstand sudden income shocks.
A new working paper from IFPRI’s Ghana Strategy Support Program (GSSP) uses a Social Accounting Matrix (SAM) multiplier model to estimate the economic costs of COVID-19 and related policy responses in the West African country. This model allows for measurement of short-term direct and indirect impacts of unanticipated, rapid-onset demand- or supply-side economic shocks, such as those caused by the COVID-19 pandemic. The study examines a scenario in which COVID-19 policy measures are lifted quickly (fast recovery) and one in which they are lifted slowly (slow recovery). Under both scenarios, the study finds significant negative impacts on household income and value-added in the agri-food industry in both urban and rural areas.
Ghana’s first cases of COVID-19 were reported on March 12, 2020. The government responded with the introduction of social distancing measures, travel restrictions, and border closures, followed by a two-week partial shutdown in the urban areas of Accra and Kumasi. These lockdown measures closed all but essential businesses, manufacturing, and service operations and prohibited non-essential travel and transportation to other cities. The lockdown was briefly extended but later lifted on April 20; social distancing measures and border closures remain in effect.
When the lockdown began, Ghana’s Ministry of Finance estimated that the country’s annual GDP growth would fall from 6.8 percent to 1.5 percent. The GSSP study presents a more pessimistic outlook, forecasting GDP growth for 2020 to range from -2.3 to -6.3 percent depending on the recovery scenario.
Importantly, Ghana’s lockdown measures largely did not apply to the agri-food sector. The government recognized the importance of the agricultural sector to Ghana’s economy and the need to protect the country’s vulnerable food system to prevent worsening food insecurity. Farmers, input suppliers, food processors, and retailers were allowed to continue operations, and uninterrupted transportation of agri-food inputs was permitted both within lockdown zones and across the rest of the country. In addition, the country’s Planting for Food and Jobs program continued to provide subsidized fertilizer and seeds to producers.
However, despite the fact that the agri-food sector was exempt from the strictest measures, it has still experienced negative effects. The GSSP study found reports of local food unavailability and increased food prices; food losses due to supply chain failures and slowing purchases from consumers were also reported in some areas.
Global trade could decrease by as much as 32 percent in 2020 as a result of COVID-19. This slowdown in global trade carries harmful implications for Ghana’s agricultural and food sectors, and thus its food security. The GSSP report suggests that disrupted global food supply chains could have a direct impact on Ghana’s food availability, as the country has come to rely increasingly on food imports in recent years. Domestic food supply chains could be hard pressed to step in and make up for shortfalls in global supplies.
Certain agricultural sectors will likely be harder hit than others. Ghana’s cocoa sector, for example, is tied strongly to global markets and will suffer more significant losses from disrupted supply chains or declines in demand and trade. The cashew sector could also be hard hit; the report finds that cashew farmers saw prices drop by 50 percent in the first quarter of the year, due largely to foreign investors’ inability to travel to the country.
Ghana also imports 75 percent of its annual fertilizer needs. Disruptions to global supply chains could thus impact Ghanaian producers’ access to this important input. In addition, international fertilizer suppliers may be more hesitant to provide fertilizers on credit, which could hamper the Ghanaian government’s ability to procure inputs for its Planting for Food and Jobs subsidy program.
While the government’s policy response to the pandemic specifically tried to protect the agriculture and food sectors, these sectors proved to be too strongly linked to other economic sectors and global markets to isolate. Overall, the GSSP report finds that the combination of Ghana’s domestic COVID-19-related policies and external shocks from global markets could cause as much as a 19.5 percent loss in value-added in the country’s agri-food system.
These losses translate into household income losses of as much as 19.8 percent for the poorest households. An estimated 3.8 million Ghanaians could be pushed into temporary poverty as a result, with many vulnerable households continuing to suffer even as the country’s economy begins to recover.
Interestingly, the report also found that despite the fact that Ghana’s lockdown applied only to two major urban areas, the country’s rural population has also been effected. More than one-third of the 3.8 million Ghanaians expected to fall below the poverty line live in rural farm households. The report emphasizes that social support programs aimed at reducing the impact of Ghana’s COVID-19-related policies need to include rural households, as well as targeted support measures for the country’s food system as a whole.
Sara Gustafson is a freelance writer.