Cold storage and transportation
Cold storage and transportation
Business Model Description
Develop and operate cold storage facilities and refrigerated transportation systems for farmers for perishable foods, such as fruits or animal products.
Expected Impact
Address post-harvest losses saving perishable food items
How is this information gathered?
Investment opportunities with potential to contribute to sustainable development are based on country-level SDG Investor Maps.
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Country & Regions
- Ghana: Northern
- Ghana: Savannah
Sector Classification
Food and Beverage
Development need
Agriculture accounted for 17% of gross domestic product (GDP) and 29% of total employment in 2019 in Ghana, and it constitutes most informal sector employment.(1) Total sales amounted to USD 13.2 billion in 2019, with estimated average growth of 5.6% between 2020 and 2025. Consumption was USD 10.4 billion in the same year and is estimated to grow at 4.9% between 2020 and 2025.(2)
Policy priority
Ghana's agricultural policy focuses on raising the productivity and value added in agriculture, via government initiatives such as Planting for Food and Jobs, and One Village, One Dam.(3)
Gender inequalities and marginalization issues
Women constitute the majority of agricultural employees and are most active in agro-processing and food distribution, and face numerous challenges. These challenges include poor access to land (female farmers own two times less land than their male counterparts) and credit (for every 100 men obtaining credit only 47 women do).(5b)
Key bottlenecks
Key sector challenges include poor farmer education and management skills, business atomization, poor supply chains, limited access to capital and inputs, lack of storage and poor handling practices, low access to information and information and communication technology (ICT) services, and an ageing farming population.
Agricultural Products
Pipeline Opportunity
Cold storage and transportation
Develop and operate cold storage facilities and refrigerated transportation systems for farmers for perishable foods, such as fruits or animal products.
Business Case
Market Size and Environment
< 5%
Average loss following harvest ranges from 5% to 45% depending on the commodity.
The Middle East and Africa cold storage market is estimated to have a compound annual growth rate (CAGR) of 7.4% between 2020 and 2025. Current value is expected to grow from USD 23.8 billion to USD 35 billion.(V)
The gross profit for Ghana's agriculture sector was valued at USD 8.1 billion and is expected to grow by 4.6% between 2020 and 2025.(2) Food spending in Ghana is rising, recording an annual growth rate of 17.6% in 2019. It is expected to grow at an average rate of 11.5% between 2020 and 2024.(9)
Average losses following harvest range from 5% to as much as 45%, depending on the commodity.(II) Post-harvest loss of maize, rice, millet and sorghum accounted for waste of around USD 160 million in 2018.(8)
Indicative Return
> 25%
A solar-powered cold storage facility tested in a regional benchmark project achieved an internal rate of return of 48% over a 3-year period.(VII)
Investment Timeframe
Short Term (0–5 years)
Cold storage can provide a return on investment in a short period. The studies suggest the probabilities of making profits in the first four years are high - 50%, 75%, 90%, 97% for each year respectively.(VI)
Smaller projects can achieve payback in around 3-5 years.(VI),(VII)
A regional case study in Nigeria could pay back its investment in storage costs in 1 year if fully utilized.(IX)
Market Risks & Scale Obstacles
Business - Supply Chain Constraints
Capital - CapEx Intensive
Business - Business Model Unproven
Impact Case
Sustainable Development Need
According to estimates, using cold storage solutions can reduce an early post-harvest losses by up to 50%.(IV)
Agriculture supply chains create jobs in transportation, particularly for women traders who supply local markets directly from farms.(7)
In Ghana, up to 45% of agricultural production is lost depending on the food crop.(II) With COVID-19 contributing to food shortages, the investments in storage facilities are needed to prevent food losses.
Gender & Marginalisation
Women are the key actors in Ghana's food sector. Currently, women hold more than half of jobs in the sector and produce more than two-thirds of the country's food stock. Almost all employees in agro-processing and food distribution are female (95% and 85% respectively).(15)
Expected Development Outcome
Reduced post-harvest losses, increased opportunities for agro-processing and value adding, increased resilience during price fluctuations
Increased access to off-season food, increased access to non-local food for remote communities
Gender & Marginalisation
Enhanced income generation opportunities, especially for women
Primary SDGs addressed
2.3.2 Average income of small-scale food producers, by sex and indigenous status
2.4.1 Proportion of agricultural area under productive and sustainable agriculture
12.3.1 (a) Food loss index and (b) food waste index
Secondary SDGs addressed
Outcome Risks
More locally produced food may be exported, which can reduce the amount of food in local markets.
Food may spoil faster if it defrosts due to electricity outages.(16)
Prolonged exposure of employees working in cold storage to low temperatures may lead to some health issues. (XI)
Impact Classification
What
Constructing cold storage is likely to have a positive impact because it will contribute to a reduction in post-harvest losses and a higher rate of food processing.
Risk
Although the model is market proven, the loss of the electrical power network supply can significantly damage the stored output.
Impact Thesis
Address post-harvest losses saving perishable food items
Enabling Environment
Policy Environment
Investing For Food and Jobs (IFJ): Post-harvest activities will be supported to reduce losses. Incentives for the private sector to invest will target sustained raw material supply to markets, and small and medium-scale agro-enterprises.(5)
Medium-Term National Development Policy Framework: This policy seeks to improve post-harvest management by: supporting selected products beyond the farm gate in post-harvest activities; and providing incentives to the private sector and District Assemblies to invest in post-harvest activities.(3)
Financial Environment
Fiscal incentives: Agrobusiness enjoys a 5-year tax holiday (1% corporate income tax instead of 25%) for businesses with cash crops. (13). To be eligible for any tax incentive, the company must operate entirely and exclusively in Ghana.
Regulatory Environment
Food division of Food and Drug Authority (FDA): This body is responsible for inspecting processing, storage and retail facilities for animal products. This includes cold storage facilities, honey packing, meat shops, dry storage facilities and meat processing facilities.(VIII)
The Food and Drug Authority provides Guidelines for Licensing Cold Storage Facilities.(VIII)
Marketplace Participants
Private Sector
Export Development and Agricultural Investment Fund, Agricultural Development Bank, Matec Frozen Foods, Kuhnesi Cold Stores Ltd, Amaadi Coldstores Ltd, Parker Food and Cold Store
Government
Food and Drug Authority, National Board for Small Scale Industries
Target Locations
Ghana: Northern
Ghana: Savannah
References
- (1) World Bank database. https://data.worldbank.org/
- (2) IHS Markit. Comparative Industry Forecast Tables, Agriculture, ISIC Classification Rev. 4.
- (3) Republic of Ghana (2017). Medium-Term National Development Policy Framework: An Agenda for Jobs: Creating Prosperity and Equal Opportunity for All (First Step) 2018-2021. https://s3-us-west-2.amazonaws.com/new-ndpc-static1/CACHES/PUBLICATIONS/2018/08/23/Medium-term+Policy+Framework-Final+June+2018.pdf
- (4) Sachs, J., Schmidt-Traub, G., Kroll, C., Lafortune, G., Fuller, G., Woelm, F. 2020. The Sustainable Development Goals and COVID-19. Sustainable Development Report 2020.
- (5) Ministry of Food and Agriculture (2018). Investing For Food and Jobs (IFJ): An Agenda for Transforming Ghana’s Agriculture (2018-2021). https://mofa.gov.gh/site/images/pdf/National%20Agriculture%20Investment%20Plan_IFJ.pdf (5b) Send Ghana (2014). Women and Smallholder Agriculture in Ghana - Policy Brief 2014. https://www.sendwestafrica.org/phocadownload/Women%20and%20Smallholder%20Agriculture%20in%20Ghana%20Policy%20Brief%20-%20Copy.pdf
- (6) Darfour, B. and Rosentrater, K.A. (2016). Agriculture and Food Security in Ghana. https://lib.dr.iastate.edu/cgi/viewcontent.cgi?article=1482&context=abe_eng_conf
- (7) Abroquah, S. (2020). 'Impact of COVID-19 on Ghana’s Agriculture – In the Eyes of a Youth Farmer'. Impacter, 29 June.
- (8) APHLIS Database. Dry weight loss: Ghana - All crops - All years. https://www.aphlis.net/en/page/20/data-tables#/datatables?tab=dry_weight_losses&metric=fin&country=279&valuechainstep=1
- (9) Fitch Solutions (2020). Ghana Food and Drink Report, Q2 2020.
- (10) Ghana Investment Promotion Centre (2017). Doing business in Ghana - To Know and Invest in Ghana.
- (11) Ghana Investment Promotion Centre. Ghana incentives inventory. https://www.gipcghana.com/press-and-media/downloads/promotional-materials/33-ghana-incentives-inventory/file.html
- (15) Send Ghana (2014). Women and Smallholder Agriculture in Ghana - Policy Brief 2014. https://www.sendwestafrica.org/phocadownload/Women%20and%20Smallholder%20Agriculture%20in%20Ghana%20Policy%20Brief%20-%20Copy.pdf
- (16) Food and Drug Authority (2020). Food and Water Safety During Power Outages and Floods. https://www.fda.gov/food/buy-store-serve-safe-food/food-and-water-safety-during-power-outages-and-floods
- (I) Savannah Accelerated Development Authority (2016). Toward Inclusive Agriculture-led Economic Transformation of The Northern Savannah Zone of Ghana. December. (II) Ridolfi, C., Hoffmann, V. and Bara, S. (2018). 'Post-Harvest Losses: Global Scale, Solutions, and Relevance to Ghana'. International Food Policy Research Institute. http://ebrary.ifpri.org/utils/getfile/collection/p15738coll2/id/132322/filename/132532.pdf (III) Godamwale (2020). Starting a Cold Chain logistics - An Alternative approach. https://medium.com/@Godamwale_/is-starting-a-cold-storage-business-in-india-profitable-12a489301baa (IV) Shell Foundation (2019). The ‘Cold Chain’ Opportunity: Reducing Postharvest Losses and Increasing Market Access for Rural Farmers. https://shellfoundation.org/feature_posts/the-cold-chain-opportunity/ (V) Market Data Forecast. Middle East And Africa Cold Chain Market. https://www.marketdataforecast.com/market-reports/middle-east-and-africa-cold-chain-market (VI) Yilmaz, D. and Yilmaz, I.C. (2020). 'Comparative Cost Assessment of Cold Storage Plants and Natural Storage Structures for Potato'. Potato Research. https://link.springer.com/article/10.1007/s11540-020-09454-0 (VII) Badelt, G. (2019). 'De-carbonizing the post-harvesting phase of the agri-food chain Viability and smart business modeling'. GeoCode International. https://unfccc.int/sites/default/files/resource/UNFCC_pptHandout.pdf (VIII) Food and Drug Authority Ghana. https://www.fdaghana.gov.gh/food.php (IX) Alliance for a Green Revolution in Africa (2019). The Agribusiness Deal Room at the 2019 African Green Revolution Forum (AGRF). https://agrf.org/dealroom/wp-content/uploads/2020/07/Agribusiness-Deal_Room-AGRF-booklet_020919.pdf (X) German Corporation for International Cooperation (2016). Promoting Food Security and Safety via Cold Chains, https://energypedia.info/images/2/2d/GIZ_%282016%29_-_Promoting_Food_Security_and_Safety_via_Cold_Chains.pdf (XI) Badger Australia. Is Working in Cold Storage Bad for your Health? https://www.badgeraustralia.com.au/blog/is-working-in-cold-storage-bad-for-your-health/