Ghana Rubber Estate Limited (GREL) is the rubber production company that owns the largest industrial rubber plantation of the country, controlling 98 percent of the domestic rubber market. It holds a 36-year concession on 15 000 ha, of which 9034 ha are under tapping (of 13377 ha are planted). GREL’s processing plant produces 15 MT dry rubber content (DRC) of rubber per annum with 5 TM DRC coming from outgrowers. It is a typical case of a nucleus estate with smallholder outgrowers. This case study explains why GREL and the Government of Ghana (GoG) decided to launch an outgrower scheme.

Rubber was introduced in Ghana in 1898 as an ornamental tree in the botanical garden in Aburi, near Accra. In 1930 some trial plantations were established in the Western region and in the 1950s the first industrial plantation was set up there via a joint-venture with a Danish firm.

A few years later (1968), GREL was born as a joint venture between the GoG and the American-based Firestone Tyre Company (45-55 percent, respectively). According to the agreement, the firm built a tyre factory and the GoG established a rubber plantation. However, the agreement with Firestone was withdrawn in 1981and GREL became a State enterprise.

In 1988 GREL rehabilitated the first 3000 ha and built a new processing plant. Four years later, it established the Rubber Outgrower Purchases Unit (ROPU) to buy rubber from “external growers” to whom it provided technical assistance and production inputs. In 1997, GREL became a private company.

In 1995, the first outgrower scheme called the Rubber Outgrowers’ Plantation Project (ROPP) was launched in order to increase GREL’s supply of raw material. The scheme had the support of the GoG (including the Ministry of Food and Agriculture [MOFA] and a State bank called the Agricultural Development Bank of Ghana [ADB]) and development partners, such as the French Development Agency (AFD), Germany’s Reconstruction Credit Institute (KfW) and the World Bank.

The ROPP scheme includes 5 450 farmers with a total planted surface of about 21 500 ha. It has a tripartite structure that includes:

• The buyer (GREL);
• Organized producers: the Rubber Outgrowers Agents Association (ROOA); and
• The bank, ADB, which grants individual farmers long-term loans for rehabilitating their rubber plantations.

The ADB/GREL/ROOA agreement has a duration of 15 years, which is the same duration of the financing loan provided by ADB.

The contract stipulates that farmers participating in the outgrower scheme with GREL:

• need to prove tenure rights on the land (at least over four hectares)
• agree to deliver the rubber twice a month;
• have to cultivate the rubber plantation in accordance with GREL technical advice;
• should allow representatives of GREL and ADB to inspect the plantation;
• have to repay the loan to ADB with interests;
• have to pay in full for the planting materials to GREL, using part of their loan package.
• are encouraged to look for alternative income sources either on-farm or off-farm to avoid side-selling and jeopardizing the investment, by for instance intercropping the rubber trees with food crops following GREL’s technical advice;
• are not allowed to dispose of the plantation without prior consent of GREL and ADB.

GREL’s obligations include:

• providing inputs such as high quality seedlings, fertilizers, chemicals and tapping tools,
• offering technical assistance for the application of inputs, integrated soil management techniques and cropping patterns options (cassava and peppers).
• purchasing rubber at the established price: 64 percent of the prevailing monthly average price indexed on the Singapore Commodity Exchange (SICOM). Farmers’ representatives are engaged in annual price negotiations with GREL.

paying for the sourced materials by bank transfer or checks. From these weekly payments, GREL deducts extension services and planting materials provided to the farmers, a part of loan repayment and transport if provided.

Finally, the contract states that ADB:

• provides long-term loans to outgrowers as well as cash advances, if needed, to maintain the plantation before it becomes productive (at seven years);
• is engaged in the selection of farmers jointly with GREL; and
• offers financial training to farmers in the form of record keeping, farm budgeting and cost analysis.

The scheme offers several benefits for the farmers and the buyer. Farmers have access to a guaranteed market, credit, high quality seedlings and training on input use and new production techniques to improve production levels. As a result of the adoption of improved agricultural and management practices and access to improved planting materials and efficient assistance, farmers’ yields increased from 0.8 to 2 tonnes. Additionally, GREL provides social infrastructure, such as school and village clinics to the neighbouring local communities.

On the other hand, thanks to the scheme, GREL was able to benefit from a steady supply of raw materials of the desired quality for its processing plant, thus bringing down the unitary production cost, without investing in setting up or rehabilitating plantations. It was also the best way to access land, as land acquisition is very difficult in Ghana.

One measure of success of the ROPP scheme was the respect of contractual terms. The prevalence of side-selling was significantly reduced due to the fact that:

• Keeping a long-term business relationship made sense for farmers because they managed to increase both the yields and the quality of the rubber produced and sold to GREL.
• Farmers had an adequate cash-flow as a result of prompt payments made by GREL and sound access to finance via ADB (both long-term loan and cash advances).
• The company provided technical assistance and regular monitoring, with the collaboration of ROOA (the outgrower organization).