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Playing Chicken: Ghana vs. the IMF

by Linus AtarahSpecial to CorpWatch
June 14th, 2005

cartoon by Khalil Bendib


Francis Kumajor runs up and down a busy road in the center of the Ghanaian capital Accra. The 17-year-old is trying to sell chickens to commuters in the sweltering heat. The drivers, sealed in air-conditioning, cast sullen glances as they drift by. Very few of them stop.

"For the whole day I have not managed to sell enough to pay my rent, less than ten chickens�" Kumajor complains, stopping mid-sentence to catch a rare stopped vehicle. He still has three cages full of birds standing by the roadside.

The cause of Kumajor's plight is not difficult to locate. In fact, he articulates the problem well. "Walk into any of the supermarkets and you will find that they are bulging with imported frozen chicken," he says. "People don't want to buy local chicken because the imported ones are much cheaper," he adds, trying to force a smile.

For the last few years the Ghanaian market has been flooded with cheap
imported chicken from the European Union and the United States. These are usually fatty chicken parts that come in packages without labels. Nonetheless, demand for local poultry has collapsed, threatening the livelihoods of over 400,000 poultry farmers in the small West African nation. In 2002 alone, more than 26,000 tonnes (one tonne is roughly the same measurement as a US ton) of chicken was imported into the country, mostly from the European Union where farmers receive generous subsidies for their products. In 2004, that figure was estimated to be as high as 40,000 tonnes.

Frozen Assets

Ships laden with frozen chicken sail regularly from the Dutch port of Eemshaven to Ghana and Nigeria. Packed into the giant containers on board are blue boxes with frozen chicken gizzards from Zevenhuizen in south Holland, orange boxes with chicken legs from Nunspeet in
central Holland and yellow boxes full of chicken wings from Epe in northeastern Holland.

"We ship more poultry than any other company in Holland," says Jakob van Bek of Socar, a Dutch company in Lelystad which owns the Eemshaven terminal. "Every week we send ten to twenty containers of poultry, beef and pork, each weighing 28 tons. But 80 percent of the meat is
chicken."

Socar is just one of several traders that buy whole chickens and parts from Dutch poultry producers to ship to West Africa. They started direct shipments to Ghana a decade ago, simplifying the export chain for producers like Gecombineerde Pluimvee Slachterijen (GPS), based in Nunspeet. Today the bulk of the 150,000 chickens that GPS slaughters every day, is exported to other European nations, while the cheaper cuts are exported to Africa.

"European customers prefer the fillet to the chicken legs because of the bones," says Patrick Lordet, a French salesman working at the Rotterdam-based K�hne + Heitz, another large chicken exporter to Ghana. "I prefer the chicken legs myself but the fillet has a higher sales price." Unlike Socar, K�hne + Heitz raise their own chicken at five locations around the country.

Poultry is a huge business in Holland - for every person in the country, there are roughly five chickens. Although Holland is one of the smallest countries on the European continent, it is also one of the most densely populated nations in the world with about 500 people per square kilometer. This adds up to a total of 16 million people and 80 million chickens in the country.

Almost a third of European poultry exports come from the Holland, according to statistics published by the Dutch Agricultural Economics Research Institute (LEI) and Eurostat.

What may seem surprising is that, like Ghana, the number of farms and farmers in the Netherlands are also declining rapidly. Over the last half century the number of farms have declined from over 315,000 in 1950 to a quarter that number today, employing just over three percent of the Dutch population.

The answer to the statistical puzzle is the fact that the chickens are almost entirely raised by giant agri-businesses and then exported to the rest of Europe and the world.

Nutreco, one of the world's largest agri-business companies, headquartered in the tiny town of Boxmeer, with global sales of almost 3.85 billion Euro, is the biggest producer of chickens in the country. Pingo, the company poultry division, employs just over 1,000 people.

These companies squeeze thousands of chickens into tiny production facilities, which is the cause of rapid spread of diseases. The avian flu outbreak in 2003 forced Nutreco alone to slaughter 30 million birds.

Chicken factories are on the way to Africa, however. Indeed, the only poultry business in Ghana that is expanding is Darko farms, which has set up a joint venture with Tyson Foods from the United States.

Today the company says it produces five million day-old-chicks, 30 million table eggs, 780,000 chicken units, and 30,000 tons of animal feed, making it Ghana's largest fresh poultry producer.

Reverend Kwabena Darko, the principal shareholder in the family enterprise, says the company has achieved this by introducing new technology. "Previously we had about 600 staff but for now due to automation, our staff strength has been reduced. At the moment we are 260," he told World Investment News recently.


This phenomenon is known as "dumping." Developed countries -- such as the EU and the US -- will often take excess product, whose production has been heavily subsidized and sell it to the developing world at prices that are so low, they ruin local markets.

In 1992 domestic poultry farmers supplied 95 percent of the Ghanaian market, but by 2001 their market share had shrunk to just 11 percent. The imported chicken is available (wholesale) at a price that is only slightly more than half of the wholesale price of local chicken.

The accompanying loss of jobs has also been remarkable. The industry has lost 150 jobs in the past few months alone, say the Farmers Associations. Commercial poultry farms -- which do not include small rural producers -- employ up to 5,000 people. Any job loss has far reaching implications for Ghana's 20 million people because each worker often provides support for numerous others in their household.

Foreign producers currently pay a 20 percent tariff or tax on the poultry they send to Ghana. Two years ago, the Ghanaian Parliament passed a law allowing an additional 20 percent tariff to be imposed on imported chicken, bringing the overall tariffs to 40 per cent.

In a dramatic move, just two months after the law was passed, the Customs and Excise Preventive Services (CEPS), the body responsible for implementing the tariffs, issued an order reversing the decision. The new tariffs were said to be in conflict with regional tariffs. In other words, the proposal have been blocked by the International Monetary Fund (IMF), an institution in which the Ghanaian government has less than 0.5 per cent of the vote.

The National Association of Poultry Farmers, a body representing small and medium-sized local poultry farmers, has cried foul and has taken the CEPS to court, in order to force application of the law.

But Kumajor and his fellow poultry farmers in Ghana did not know the power of the IMF. Although it is an unelected body, it can overrule judicial processes in their country.

The Ghanaian government let go of the new tariffs because it had already reached an agreement with the Fund to suspend the higher tariffs on poultry during the government's Article 4 consultations - an annual dialogue the IMF has with member countries.

The IMF made it clear that it was opposed to the higher tariffs on the grounds that it will hurt Ghana's poverty reduction program. Alphecca Muttardy, the IMF's current representative in Gahna claimed that Ghana could only increase the tariffs under a special dispensation provided to successful businesses only. Speaking to Olivia McDonald from the non-governmental organization (NGO) Christian Aid in Ghana, Muttardy said, "we pointed it out to government that this [raising of tariffs] was not a good idea, they reflected on it and we agreed."

"The actions of the government show clearly the desperation with which they seek to please the World Bank and the IMF," says Dominic Ayine, the director of the Center for Public Interest Law (CEPIL) and a lawyer representing the poultry farmers. "The opposition of the Bank and the IMF to increased tariffs is based on pure ideological reasons and it has little or no connection at all to the welfare of Ghanaian poultry farmers or the consuming public," said Ayine.

Moreover, as Ayine argues, the action of the Ghanaian government, under pressure from the IMF, has greatly undermined the tenets of good governance and the rule of law, which are said to be promoted by world financial institutions all over the world. "Overriding a judgment obtained through normal judicial processes does nothing but undercut the confidence with which citizens perceive the judicial process," he adds.

In its defense, the government argued that the decision to suspend the increased tariffs stems from its obligation to adhere to international treaties, referring to World Trade Organization (WTO) agreements on agriculture which, the government says prevents it from proceeding with the measure.

But trade experts say the increased tariffs do not breach official WTO agreements. Under the organization's Agreement on Agriculture(AoA) Ghana's tariffs on agriculture products can be as high as 90 percent.

The WTO agreement on Subsidies and Countervailing Measures also permits member countries to impose increased custom duties on products that have been subsidized in their countries of origin, if such subsidies have caused or threatens injury to a domestic industry in the importing country. The European Union, the source of most of the imported chicken provides 43 billion euros to its farmers annually.

Ghana imports almost one third of the EU frozen chicken that goes to Africa. Cameroon, Togo, Senegal and South Africa are among the other nations receiving imported frozen chickens and chicken parts. As much as 87 percent of the poultry in Cameroon, comes from Belgium and Spain. In the case of Senegal, the Netherlands and Belgium combined account for 60 percent.

In Cameroon, French activists, have taken up their case to lobby the EU for a better protection of African farmers. And in Senegal, according to reports by the Agence France Presse (AFP), 40 percent of the nation's poultry farmers have gone out of business because they are unable to compete with EU imports.
Level Playing Field

There is some question as to whether a 40 percent tariff on the chicken would actually solve the problem. According "For Richer or Poorer" an April 2004 report released by Christian AID, it was estimated that "tariffs would need to be 80 percent, four times their current level" to allow local producers and processors to compete fairly with EU imports," because "European producers gave enjoyed decades of subsidies, support and protection from their government."

The world playing field, Domonin Ayine believes, is not even close to level. "Cut-throat competition is not countenanced anywhere in the world, not even in the so-called industrialized market economies," he argues. "These countries have spurned a spider's web of elaborate anti-competition laws to counteract the effects of anti-competitive market behavior." Kenneth Quartey, President of the Poultry Farmers Association and the owner of Sydal Farms, agrees. "You don't build your local industries by opening the floodgates for cheap imported goods to come and compete with locally produced goods that, through no fault of the producers, are bound to be more expensive." Quartey says has 15,000 broilers in his cold store which he is unable to sell.

"It is through no fault of ours that our production costs are high," he adds. "Just look at electricity and water tariffs, as well as the price of petrol and diesel. So, in plain terms, our government is telling us to fold up."

In fact, most members of the once thriving 400,000 member National Association of Poultry Farmers have folded up. And Ghana's rice and tomato industries are equally threatened.

All over the capital city, large billboards are advertising American long-grained rice, which, thanks to huge subsidies from the US government, has displaced local Ghanaian rice from the shelves. Most of the subsidies are paid to big rice farmers in states such as Arkansas. According to Oxfam, the British NGO, one company alone, Ricelands of Arkansas, was the recipient of US federal government agricultural subsidies totaling $490m between 1995 and 2003.

Ghana was on the way to becoming self-sufficient in rice production in the 1970s and 1980s. But the IMF structural adjustment program halted farm subsidies to rice farmers. Ghana now produces a mere 150,000 tonnes of rice, or 35 percent of its domestic need.

No longer able to farm because of the high prices of agriculture inputs, many young people are flocking to the urban centers searching for non-existent jobs. More displaced people from the rice and poultry sectors are bound to increase the numbers drifting to the urban centers, causing social problems. Mr Ernest Debrah, Minister for Agriculture admits the gravity of the situation and yet says he does not favor increasing tariffs.

Sub-standard quality

Over-reliance on imported chicken also has its health hazards. The poorly-resourced Ghanaian health service does not have the capacity to detect and prevent an outbreak of salmonella which might accompany imported chicken.

In Cameroon, which has been importing frozen poultry for a number of years, two local associations have studied the quality of product, itself. The Service of Assistance to Local and Developing Initiatives (SAILD) and the Association for the Defense of Common Interests (ACDIC) came together in 2004 in the city of Yaounde with ten participating countries to study a grouping of 200 chicken samples. 15 percent of it was infested with salmonellae

In a report called "Farming Dynamics," the Belgian NGO SOS Faim reported on the impacts of the transit of the poultry, which tends to thaw out between freezing several times from the EU to Africa. According to the report, "Deep frozen chicken parts have no value with in the EU, as there is no demand and no market for these products�If traders sell the product in Africa, it is because the price�is higher than the price offered by pet food producers."

Between a rock and a hard place

On March 18th, the Ghanaian Parliament officially overturned the two-year-old act to raise tariffs on poultry and rice. Although the act had never been put in effect, a Ghanaian judge had ruled, just one week earlier, in favor of a group of farmers trying to force the government to enforce the higher tariffs.

The farmers had brought a case against the government body in charge of enacting the increase, and Judge Ivy N Ashing-Yakubu had ruled in their favor. When the act on which it was based was overturned, however, Ashing-yakuba's ruling was made irrelevant.

"Her ruling was a historic moment for Ghana," Dominic Ayine told Christina AID, "because it was the first time that the government was censured by the courts for not putting into practice what parliament had approved. Her ruling means that the government has effectively defied the constitution."

Indeed, the Ghanaian government is in a challenging position. By obeying the dictates of the IMF, it has also drawn the anger of many citizen groups around the country who have rallied to the cause of the poultry farmers. A sign-on statement campaign sponsored by the Economic Justice Coalition is trying to force a parliamentary hearing on the issue and possibly oblige the government to follow through on its decision to implement the tariff increase. According to the statement the government should not abdicate its primary responsibility toward the people of Ghana just to stay within the policy strictures and instructions of foreign bodies like the World Bank and the IMF.

A number of activists in the EU and elsewhere are also rallying to change policy. In April, 10 million people in 80 countries came together for the Global Week of Action. Launched by trade activists world wide, the week sought to highlight the plight of poor people in developing countries affected by skewed trade rules.

Meanwhile, the poultry farmers and their lawyers have vowed to send the matter to the Supreme Court, because the they believe the action violates the nation's constitution.


Pratap Chatterjee and T. Eve Greenaway contributed to this article.