Assessment of farmed tilapia value chain in Ghana

Transcription

1 DOI /s Assessment of farmed tilapia value chain in Ghana Gifty Anane-Taabeah 1 Kwamena Quagrainie 2 Steve Amisah 1 Received: 4 February 2015 / Accepted: 24 November 2015 Springer International Publishing Switzerland 2015 Abstract The study assessed the value chain of farmed tilapia in Ghana. A survey conducted in 2012 provided data on key actors, flow of products and information, costs and margins, and relationship among actors. The study showed that all key actors in the value chain: input suppliers; fish farmers; traders; and food services had positive margins except fish farmers. Input suppliers accrued most of the margins generated along the chain. The performance of chain actors was assessed using a factor evaluation matrix, which showed that product offering may be the strength at each stage of the value chain. The efficiency and profitability of tilapia value chain in Ghana can be improved by having well-defined payment transaction with customers, persistent relationships with customers, and good information management such as keeping good records on costs and revenues. Fish farming could be more profitable if farmers reduced their variable costs, priced their fish using a cost plus or percentage markup approach, and adopted target marketing. Keywords Aquaculture Cost benefit analysis Factor evaluation matrix SWOT analysis Tilapia & Gifty Anane-Taabeah giftya85@vt.edu Kwamena Quagrainie kquagrai@purdue.edu Steve Amisah steveamisah1@yahoo.co.uk 1 2 Department of Fisheries and Watershed Management, Faculty of Renewable Natural Resources, Kwame Nkrumah University of Science and Technology, PMB KNUST, Kumasi, Ghana, West Africa Department of Agricultural Economics, Purdue University, 403 W. State Street, West Lafayette, IN , USA

2 Abbreviations BCR Benefit cost ratios CBA Cost benefit analysis FEM Factor evaluation matrix SWOT Strengths, weaknesses, opportunities, threats VCA Value chain analysis Introduction Aquaculture production has the potential to contribute to alleviating hunger and poverty in Sub-Saharan Africa (Kaliba et al. 2007). Ghana has made tremendous improvements in the aquaculture industry with large commercial production of tilapia (Oreochromis niloticus) from cage culture and the traditional earthen pond culture. The aquaculture industry in Ghana has therefore demonstrated improvements in competitiveness, producing tilapia species that feed low on the food chain in well-adapted, environmentally friendly, and profitable farming systems. However, a good performance of the tilapia value chain in Ghana is important to achieve sustainable food production and poverty alleviation through improvements in market access and competitiveness. For example, smallholder fish farmers through linkages among the different stakeholders such as the input suppliers, processors, traders, and other retailers can manage the flow of goods and services to enhance their economic wellbeing (Christiaensen et al. 2011). Proper linkages could result in increased productivity and efficiency and provide access to new markets. Aquaculture in Ghana is dominated by many smallholder fish farmers who have weak linkages among themselves with even weaker linkages with aquaculture input suppliers. Apart from some very large scale operators who have well-developed value chains from production through marketing (Antwi-Asare and Abbey 2011), many of the fish farmers would not be competitive without a strong value chain network. Value chain linkages improve information flow and learning capacities and also help to reduce transaction costs (Trienekens 2011). An improved value chain is important, especially for the aquaculture sector, because many chain actors develop products and services mainly for the sector. Improved value chain performance has the potential to increase productivity in terms of value and profitability in a sustainable manner for all value chain actors in the farmed tilapia sector. Value chain collaboration then becomes very important for smallholder producers in developing countries like Ghana to ensure access to new and profitable markets (Trienekens 2011). The objectives of this study, therefore, were to; (1) characterize the current tilapia value chain in Ghana, (2) analyze the tilapia value chain performance in terms of economic efficiency, and (3) identify areas for improvement in value chain. Theoretical framework The study employed three theoretical approaches: value chain analysis (VCA); cost benefit analysis (CBA); and strengths, weaknesses, opportunities, and threats (SWOT) analysis to achieve the outlined objectives. A value chain is a sequence of related business functions that transform inputs to final products (Kaplinsky 2000; Kaplinsky and Morris 2001). The

3 VCA provides information for improvement in products and services and can be an effective tool to link fish farmers and their markets. VCA maps show the flow of goods and services in the chain and illustrate how behavior plays a role in success (Kaplinsky and Morris 2001). The maps provide information on specific activities and services at each stage of the chain, key players, flow of product and information, nature of transactions among stages of the chain actors, and other external influences to the chain performance (Humphrey 2005; Jamandre et al. 2011). Data on prices, costs, and revenues from the major chain actors permit estimation of the distribution of margins along the chain. A number of measures were used in this study to assess the economic efficiency of the various value chain actors. A CBA was used to measure all costs and benefits in financial/monetary values (US dollars) to assess performance in the form of a benefit cost ratio (BCR). Ideally, the present values are used under the assumption that money available now is worth more than money in the future, and the value of the ratio of the present value of benefits to costs greater than one indicates profitability (Campbell and Brown 2003; Watkins 2010). A return on investment (ROI) measure was also used to assess the return of each of the actors relative to their investment cost. The distribution of the cumulative margins was also assessed. SWOT analysis involves assessing the external factors for perceived opportunities and threats at each stage in the value chain as well as evaluating the internal strengths and weaknesses (Zhang et al. 2007). Within the SWOT framework, factor evaluation matrix (FEM) is commonly used to quantify and summarize qualitative SWOT analysis (Ehlers and Lazenby 2004). SWOT analysis in the form of FEM has not widely been used in agricultural studies, but it is a very useful tool with many applications (Hashemi et al. 2011; Nouri et al. 2008; David et al. 2009; Ommani 2011; Capps and Glissmeyer 2012; Ndanga et al. 2015). This study used FEM to compare the competitiveness of the different value chain participants in terms of five marketing factors, i.e., product, place, price, promotion, and procurement (process). Product refers to product offered by the value chain participant; place refers to the location of the business in relation to strategy; price refers to the respondents negotiating power and method of price determination and margins; promotion is whether or not participants perform any promotional and advertising activities; and procurement (process) refers mainly to raw material purchases as it affects production. Materials and methods Previous studies in Ghana show that aquaculture is concentrated in five major regions: Ashanti, Brong-Ahafo, Western, Eastern, and Volta regions (Anane-Taabeah 2012). Cage aquaculture is predominant in the Eastern and Volta regions, whereas the other three regions have predominantly pond-based aquaculture. This study therefore covered these five regions to provide an overview of the farmed tilapia value chain in Ghana. Additional data from the Department of Fisheries and Watershed Management, Kwame Nkrumah University of Science and Technology (KNUST), and interaction with relevant stakeholders revealed that the farmed tilapia value chain involved five key chain actors: those who supplied inputs such as fingerlings and feed to farmers; fish farmers; processors; traders; and food services. Information was also obtained about the major market centers for farmed tilapia, as well as telephone numbers and location of other key value chain actors in Ghana. Primary data were collected in two phases using personal surveys. The first stage involved surveying fish farmers from the Ashanti, Brong-Ahafo, and Western regions who participated in a national workshop on pond aquaculture best management practices. The

4 second stage involved surveying cage farmers in the Eastern and Volta regions and the other key actors in the value chain including input suppliers, fish marketers, and food services. Five questionnaires were designed for the actors identified as key players in the farmed tilapia value chain in Ghana. The first few questionnaires were pretested with a small sample of actors, and their responses were used to revise and produce final versions. The questionnaires which incorporated both close- and open-ended questions were designed to obtain information regarding key players and their major activities, major routes of products, information flow, payment flow, costs and revenues, and SWOT. To conduct the FEM, value chain participants (with the exception of processors) were asked to rate the importance of the five marketing factors to their business (on a scale of 1 5, where 1 is not important and 5 is very important). With a separate score, respondents were also asked to evaluate their business and rate their performance in terms of the five marketing factors (on a scale of 1 5, where 1 is poor and 5 is excellent). Flow chart analysis and supply chain maps were used to characterize the farmed tilapia value chain. Descriptive statistics, qualitative, and quantitative analyses were used to assess the performance of the value chain. Results and discussion Characterization of the farmed tilapia value chain in Ghana The key chain actors identified in the farmed tilapia value chain in Ghana were input suppliers; producers; processors; traders; and food services. We obtained a response rate of 80 % and above across the groups surveyed with language barrier and busy schedules being the primary reasons for non-response. The total number of respondents surveyed in the study is presented in Table 1. The key chain actors and a summary of their major activities are shown in Fig. 1. Input suppliers The input suppliers consist of brood stock developers (who also sell fingerlings), fingerlings producers (hatcheries), feed producers/suppliers, pond and cage constructors, and fishing net suppliers. Input suppliers market their products and services mostly through Table 1 Number of survey respondents in the farmed tilapia value chain Key players Number of respondents Input suppliers 19 Producers 93 Processors a 2 Wholesalers/distributors 5 Retailers b 53 Food services b 46 a The processors surveyed were members of a particular group, but they provided responses representative of the activities of other groups b Of the number presented for retailers, six traded only farmed tilapia, whereas 47 traded both farmed and wild tilapia, and two did not know the origin of the fish. For the food services, 29 purchased only farmed tilapia and 17 purchased both farmed and wild tilapia

5 Input suppliers Producers Processors Traders Food services Traders (wholesalers, distributors, retailers) Input suppliers Cage / pond constructors Net suppliers (nets, ropes, & twines) Feed (producers/suppliers) Brood stock developers/ Hacheries Processors (gutting/scaling) Producers (ponds/cages) Table size tilapia Food services (restaurants, tilapia joints) Grilling Frying Cooking Hacheries Fig. 1 Key players and their major activities in the farmed tilapia value chain delivery and/or wholesale and retail outlets. Apart from the fishing net suppliers whose primary target market are fishermen, fish farmers are the primary target markets for all the input suppliers. With the exception of the brood stock developers and hatcheries, which are a mixture of government and private businesses, all other input suppliers are private individuals and organizations. Majority of the feed producers and suppliers are relatively younger in the aquaculture business compared to the other input suppliers. Over 85 % of the feed suppliers started their business between the years 2010 and The input suppliers are optimally located in four regions: Ashanti, Brong-Ahafo, Eastern, and Greater Accra regions, close to where major aquaculture operations are situated. The pond and cage construction business is composed of individual businesses as well as group or cooperate businesses. The pond constructors have been in the business longer than cage constructors, which is expected considering that cage aquaculture is relatively new in Ghana compared to earthen pond aquaculture. For a 300 m 2 pond, it takes a single individual about 1 month to complete a manual construction. Mechanical excavators can reportedly do the same job for a relatively shorter time. For cages, it takes about 3 weeks for an individual to construct a 25 m 2 fish cage. Both pond and cage constructors were located close to the respective hot spots of aquaculture. Commercial fishing net supply to fish farmers is still a burgeoning business depending heavily on the development of cage aquaculture, since most earthen pond farmers use few fishing nets. Fishing net suppliers retail imported products such as nets, ropes, and twines mostly from Korea and Vietnam. Only one feed supplier produces fish feed locally. All other suppliers import fish feed mainly from Brazil, the Netherlands, and the USA. The fish feed suppliers provide feed suitable for use by brood stock developers, hatcheries, and fish producers. Both the brood stock developers and the hatcheries provide aquaculture training and general technical advice to farmers and the public. Depending on the nature of training and

6 duration, these services could be free or attract fees. Some large-scale fish producers develop brood stock and produce fingerlings, but only for their own use. Only one commercial brood stock developer was encountered during the study, who also supplied fingerlings to farmers. Majority of the hatcheries produce and supply sex-reversed tilapia fingerlings of about 5 g to farmers. However, the supply of 2 g of fingerlings, especially to cage fish producers, is common since demand is high and it takes about 7 8 weeks to obtain 5 g of sex-reversed fingerlings. Typically, farmers have to place orders for fingerlings, and depending on the size of orders, it may take weeks to have their orders fulfilled. Since one major brood stock developer is responsible for producing and supplying the improved Akosombo strain of the Nile tilapia to hatcheries across the country, it can be assumed that the Akosombo strain of the Nile tilapia is the major strain cultured in Ghana. Producers Two primary categories of producers were identified: pond and cage grow-out farmers. However, a few cage farmers also operate ponds. Cage farmers produce only tilapia, whereas some pond farmers culture additional species such as Clarias sp., Heterotis niloticus, and Parachanna obscura in a polyculture system. Cage farmers are characterized by intensive production and may be grouped into small-scale (\10 cages), medium-scale (10 50 cages), and large-scale ([50 cages) operations (Anane-Taabeah, unpublished results). Pond and cage grow-out farmers focus on producing table-size tilapia for sale to traders, food service providers, and final consumers. Some grow-out tilapia producers also double as hatcheries, marketing fingerlings to fellow grow-out farmers. It usually takes cage farmers about 6 months to grow fish to obtain 2 3 pieces of fish per kg. However, pond farmers may obtain 4 5 pieces per kg for the same period of time. The difference in productivity can be attributed to a number of factors. Cage farmers grow sex-reversed fingerlings, and though 100 % all male fingerlings are presently not attained in Ghana, similar to what is reported elsewhere in Africa (Macfadyen et al. 2011), the cage environment does not support prolific breeding of tilapia. Conversely, pond farmers use both mixed and sex-reversed tilapia and have problems such as overpopulation and reduced growth in their ponds. Whereas cage farmers use high-quality commercial fish feed, only a limited number of pond farmers consistently use commercial feed because of capital constraints. Cage farmers have relatively shorter and specialized marketing channels compared to pond farmers. Ninety-five percentage of the cage farmers surveyed sold their fish exclusively at the farm gate and mostly to retailers, whereas many pond farmers have varying customer types (neighbors, retailers, and distributors), and only about 31 % sold exclusively at the farm gate. Thus, cage farmers may have a high efficiency than pond farmers because of the reduced transaction cost in their marketing. Processors Farmed tilapia is mostly marketed fresh compared to wild tilapia, which may be smoked, dried, or salted. There appears to be no demand for live fish in Ghana. Thus, processors of farmed fish, who are predominantly women, are engaged mainly in gutting and scaling of the fish. The processors are central to the value chain because, apart from the input suppliers, they interact with all key actors in the value chain. Even though they do not purchase the fish themselves, they provide ready services to traders, food service providers,

7 and consumers at the point of sale. Gutting is usually done on the farm for a fee. Scaling may be done together with gutting if the buyers are food service providers or consumers. Otherwise, the service is usually offered at distribution points or sales outlets. These processors may be local residents around farms and sales outlets or may commute to such places to offer their services. They are mostly individuals accountable to themselves, but may work in a group. A group of 10 female processors is not uncommon, and one can observe up to 4 of such groups at Galilea market, a busy tilapia (both wild and farmed) sales outlet close to Kasoa in the Central Region. Even though processors major strength in the value chain is the ability to operate a niche market, their current processing activities show a significant lack of adequate food safety knowledge. This poses a threat to their business, particularly as the aquaculture industry grows and food safety regulations become mandatory. Traders Marketing of farmed tilapia occurs through three key traders: wholesalers (who may also retail), distributors, and retailers. Wholesalers buy large quantities of fish. Some tilapia producers also wholesale their fish at sales points. Wholesalers sell at designated locations in owned or rented stores. Typical wholesalers supply fish to both distributors and retailers and are usually the traders who deal directly with the farmers. Distributors typically sell smaller quantities of tilapia compared to wholesalers and usually deliver to retailers, sell at cold stores, or deliver to restaurants. Retailers trade in small quantities of tilapia and usually sell in the community markets directly to consumers. Retailers sell in stalls (owned or rented), on table tops or in pans. Some retailers also hawk their wares as a means of increasing sales. The main value addition performed by all the traders is packaging and facilitation of product movement from supply centers to demand centers. However, retailers also scale fish free of charge to customers as a sales-increasing strategy. Customers may also obtain limited free ice from wholesalers, distributors, or retailers to preserve their fish. Foods services Food service providers surveyed were restaurants, tilapia joint operators, and chop bar operators. A supermarket was identified that traded in both frozen and processed (grilled) farmed tilapia, but they were not available for the survey. Restaurants are either standalone entities or within hotels. Most restaurants perform a variety of value addition activities including cleaning, dressing, and seasoning. All the restaurants surveyed had grilled tilapia and banku, a new Ghanaian delicacy, on their menus. The restaurants are noted for requiring large-size tilapia (400 g and above) because of their customer base. Consequently, cage farmers tend to be advantaged when they target restaurants compared to pond farmers. The tilapia joint operators are the individuals or groups that specialize in grilling tilapia and like the restaurants, serve it with banku. Tilapia joints may be found at roadsides of busy towns and operate typically between 1600 and 2300 h. Tilapia joints are increasingly being situated near pubs and drinking bars to take advantage of the customers that frequent there. Compared to restaurants and tilapia joints, chop bars are affordable eating places where one can purchase cheap tilapia. Most chop bars are noted for their wide range of local Ghanaian dishes. Thus, chop bar operators tend to boil or steam tilapia in contrast to grilled tilapia.

8 Value chain flows Product flow The major supply centers for inputs in the value chain are the Ashanti, Brong-Ahafo, Eastern, and Greater Accra regions. The inputs are supplied across the entire country to producers, but fish production activities are concentrated within the Western, Brong- Ahafo, Ashanti, Eastern, and Volta regions. Majority of the marketable fish produced in the Western, Brong-Ahafo, and Ashanti regions are consumed within these regions. Since these regions are predominantly pond-based aquaculture, it is possible that the quantity of fish produced is not enough to allow export outside these regions. In the Eastern and Volta regions where cage aquaculture has a strong presence, production volumes are significantly higher than the other major supply centers. Within the Eastern Region, the town of Akosombo is a major demand center. Other demand centers in the Eastern Region include Akuse and Asutuare. Interestingly, the bulk of fish produced within the Eastern and Volta regions are sold outside the regions. This is because some farmers have wholesale and distribution points within the Greater Accra Region where demand for banku and tilapia is relatively high. Specifically, Accra, Tema, and Ashaiman, major metropolitan areas, are the major demand centers within the Greater Accra Region (Fig. 2). Kasoa in the Central Region is another important demand center for fish from the Eastern and Volta regions. The presence of a vibrant market for fresh tilapia at Kasoa has attracted farmers and wholesalers alike to this demand center where distributors, retailers, and consumers converge to transact business. MAJOR SUPPLY CENTERS MAJOR DEMAND CENTERS Western region Input suppliers Producers Ponds farmers Western region Brong Ahafo region Ashanti region Fresh, whole, marketable tilapia Brong Ahafo region Ashanti region Greater Accra region Kumasi Accra Tema Ashaiman Ashanti region Brong Ahafo region Eastern region Greater Accra region Cages farmers Eastern region Volta region Central region Eastern region Volta region Kasoa Akosombo Fig. 2 Major supply and demand centers of products in the farmed tilapia value chain

9 Payment flow Payment for products and services along the value chain is mostly cash and carry or cash in advance of service. Payment flexibility such as buying on credit for a few days and doing business on contractual basis exist among few chain actors that have well-defined trust relationships. The nature of the payment flow has direct bearings on the efficiency of the value chain as far as relationship strengths of chain actors are concerned. The relationship among chain actors is discussed in a later section in the article. Figure 3 shows the major payments transaction modes existing among chain actors. Information flow Figure 4 shows a description of information flow among the key actors in the farmed tilapia value chain. Face-to-face interaction and mobile phone use are primarily the means of communication between key actors in the value chain. The major information required by key actors includes prices, quality, sizes, availability, and sources. Prices of inputs are generally unstable due to the fluctuations of the local currency to the US dollar. In recent months where the cedi has seen constant depreciation, producers had to contend with high prices of imported feeds. However, unlike traders, majority of whom use cost plus to determine their prices, farmers face the unpleasant situation of maintaining Feed suppliers Cage/Pond constructors Brood stock developers payment in 2 or 3 consignments Net suppliers Formal/informal contracts Hatcheries Trader (Wholesaler / Distributor) Producers Food services deposit before delivery or installment Processors Producers Trader (Retailer) Consumers and/or 1 7-day credit, informal contracts Trader (Wholesaler / Distributor) Fig. 3 Payment transactions in the farmed tilapia value chain

10 marginal profits. Quality of inputs such as feed and fingerlings is essential to produce quality marketable fish. Feed is the single most expensive input (Drakeford and Pascoe 2008), and suppliers have to ensure that quality feed is available to farmers for the production of marketable fish sizes. Quality feed helps fish to attain market sizes in the shortest possible time. For traders, the ability to convince customers of the freshness and quality is central to their sale success. Size requirements are important to everyone in the value chain. For instance, feed sellers supply feed of specific sizes for different stages in the growth of the fish and must ensure that the required sizes are available. For the producers, the appropriate fingerling sizes would determine the production duration and well-being of the fish. With increasing demand for fingerlings, especially among cage farmers, producers often have to settle for smaller-size (2 g) fingerlings. The costs incurred under such conditions include higher cost of feeding and/or mortalities. Wholesalers and retailers, as well as the food services all have their size requirements for the fish, and they furnish the producers with that information before fish is supplied. Availability and quantity of products that can be supplied are essential for efficiency in the value chain. When feed suppliers and hatcheries renege on supply agreements, the entire chain is affected. For instance, traders are affected when producers are unable to provide the desired quantities of fish and may result in wild fish trade, which affects the aquaculture industry. The source of products is tied closely to quality and greatly influences the flow of products in the value chain. An important consideration is that of the type of fish, whether Fig. 4 Information flow among the key actors in the farmed tilapia value chain

11 farmed or wild-caught. Some distributors and retailers are indifferent to the source of the fish. However, others consider the source of the fish because their customers demand it. Taste, texture, price, and availability are four important factors that were found to affect the choices traders and food services made regarding source. Some opined that wild fish was tastier, more available, and firmer than farmed fish; thus, they only traded in wild fish. Price apparently favored farmed fish. Nonetheless, traders of farmed fish face some marketing challenges because of rumors that farmed fish are boosted with chemicals to grow abnormally faster than wild fish. Relationships among key actors The types of relationships among actors in the value chain influence the efficiency of the chain. A common relationship between actors is a business relationship referred to as a linkage, which may be vertical or horizontal (M4P 2008). The former occurs between actors along the value chain, whereas the latter occurs between actors at the same level of the chain (M4P 2008). Both vertical and horizontal linkages are important for efficient movement of products through a value chain. However, due to competition, and subsequent lack of information flow among actors at the same level in the chain, vertical linkages are the primary linkages existing in the farmed tilapia value chain in Ghana. Figure 5 shows the possible relationships existing among key actors in the farmed tilapia value chain in Ghana. Continuous lines in the figure indicate persistent network relationships, whereas broken lines indicate spot market relationships. Trust building, which is responsible for efficiency in the value chain because of reduced transaction cost, depends solely on vertical linkages. In this study, strong linkages that exhibit trust among key actors appear to be encouraged by factors such as having flexible contracts and payment plans between suppliers and customers, preference for dealing with a particular individual among actors at one level of the chain, and efficient flow of information (M4P 2008). Therefore, the lack of contracts, and the inability to obtain products and services on credit, constrains the building of trust and stronger relationships among actors in the value chain. Moreover, because the mode of payment of goods and services in the value chain is mostly cash, many chain actors have short interaction time among themselves. Apart from input suppliers and producers, who show preference for particular actors within their groups, many of the chain actors appear not to have strong preferences for dealing with one Producers Input Suppliers Payment & Information flow Processors Food Services Traders Fig. 5 Relationships among key actors in the farmed tilapia value chain

12 another. The relationships between actors in the value chain may, therefore, be described as weak relationships, somewhere between spot market (where interactions are shorter) and persistent network (where interactions are continuous) relationships. Weak linkages between chain actors may result in weak market power in the value chain, which may be a significant contributor to profit losses for fish farmers. The formation of strong horizontal linkages through avenues such as farmer cooperatives could benefit farmers and improve their overall market power in the tilapia value chain (Ssebisubi 2010). Economic efficiency measures From Fig. 3, almost all transactions are conducted as spot market with cash; therefore, BCRs were first calculated without discounting the revenues and costs. However, Ghana s economy generally experiences positive inflation and the average inflation reported by the Ghana government in October 2012 was 9.2 %. Thus, BCRs for the value chain participants were adjusted with inflation rate for revenues reported in Table 2. The major costs incurred by all chain actors include stocks (fingerling costs), transportation, space rental, staff emoluments, electricity or ice, and packaging. Input suppliers, traders, and restaurants/food vendors also incurred tax costs. Other costs incurred by fish farmers include licensing, machinery/farm equipment, harvesting, fishing net repair, and feed processing. Table 2 reports estimates of the BCRs and ROIs, as well as the distribution of the cumulative margin for the value chain actors. Apart from fish farmers who had a BCR of 0.7, all other value chain participants had a ratio higher than 1, with input suppliers and distributors/wholesalers having a ratio higher than 2 (Table 2). The margins obtained from the different actors possibly resulted from the different marketing strategies they employ for their business. Therefore, the ROI was also calculated to provide some insights into the profitability of the various segments in the value chain (Table 2). Input suppliers have an estimated ROI of 124 % followed by distributors/wholesalers of 111 %. Retailers and restaurants/food vendors have an estimated ROI of about 30 %. Both BCR and the ROI measures for fish farmers indicate that they appear to be operating at a loss, while all other value chain participants had positive margins. Looking at the results cumulatively, input suppliers accrue most of the margins generated along the chain followed by wholesalers, while the retailers and food vendors do not obtain any of the cumulative shares of the margins. The net effect is that profits obtained by retailers and food vendors are offset by Table 2 Economic efficiency measures among farmed fish value chain participants Revenue (USD) Cost (USD) Gross margin (USD) Benefit cost ratio (BCR) Return on investment (ROI) (%) Share of margin (%) Input suppliers 96,120 42,993 53, Fish farmers 15,904 22, Distributors/ 11, wholesalers Retailers Restaurants/food vendors Source Author s estimation from survey data. Exchange rate in 2012 was US$1.00 = GHC1.95

13 losses made from fish farming, while input suppliers accrue all the profits along the value chain (Table 2). Thus, fish farming appears unprofitable, contrary to what other studies found (Asmah 2008; Macfadyen et al. 2012), whereas input supplying seems very profitable. Further analysis conducted to explain why fish farmers may make losses compared to the other chain participants revealed that the method of price determination used by fish farmers could be a major contributor to their inability to make profit. About 64 % of fish farmers priced their products using the prevailing market price, compared to 19 % or less for all the other chain participants. Conversely, only about 18 % of fish farmers used either cost plus or percentage markup to determine their pricing, compared to 74 % and above for the other chain participants. By using the prevailing market price approach, fish farmers face the risk of pricing their fish without taking into consideration the full cost of production per fish. This is particularly problematic for small-scale farmers, especially pond farmers, who do not have the advantage of economies of scale. The cost structure for fish farmers also contributes to loss of profits for farmers. While it may be beyond fish farmers to reduce input cost such as fingerling and feed costs by themselves, reducing labor costs could significantly reduce total variable cost, making fish farming worthwhile. Labor cost alone contributed between 25 and 90 % to total cost for over 30 % of the fish farmers, majority of whom were pond farmers with three or fewer ponds. To improve the profitability of fish farming, producers may need to revise their mode of pricing tilapia, which accurately accounts for all costs incurred in the production process. Additionally, fish farmers with relatively few ponds should devise ingenious ways to reduce labor cost, such as hiring persons who work part time on the fish farm and cultivate vegetables adjacent to the fish farm. This model is increasingly becoming attractive for integrated fish farmers and can be adopted by farmers who may not necessarily cultivate the vegetables themselves. Fish farmers also need to invest time and effort into market research aimed at identifying best strategies for trading with their segmented markets. Customer differentiation has the potential to increase profit margins for business, especially small businesses such as pond fish farming. Fish farmers currently trade with fish retailers, distributors, food vendors, and consumers. This mode of selling their products could be contributing to their losing profit in the value chain since they trade with all customers more or less in a similar way. Fish farmers may need to identify the trade channel that brings them the most profit and discontinue trading with potentially unprofitable customers, which has proven invaluable to other businesses (Zeithaml et al. 2001). Lu et al. (2008), in a study to understand how traditional network relationships support smallholder vegetable farmers in China, found that farmers with strong social relationships with other actors in the value chain were more successful. The key reasons why input supply appears to be more profitable relative to the other chain activities include: (1) welldefined customer payment transactions, (2) strong customer base, and (3) good record keeping. Input suppliers ensure that they receive prompt payments for the goods and services they provide. In addition to operating on a cash and carry basis, input suppliers are the only chain actors who reported that they receive cash in advance of goods or service provided. This is especially the case for fingerlings producers who receive orders and payments months in advance before they deliver the products. Well-defined payment transaction with customers is also consistent with having contracts whether formal or informal with customers. This in turn strengthens the relationships between input suppliers and their customers, making them more efficient, and their business more profitable. Compared to the other chain participants, input suppliers also had better records in terms of their revenues and costs which helped them track their profit

14 margins. It appears that chain participants who dealt with fewer items kept better records. This is probably another reason why fish farming appeared to be unprofitable since farmers had many items to keep record of. SWOT framework in the form of factor evaluation matrix (FEM) The FEM quantified qualitative SWOT measures to compare the competitiveness of the different value chain participants in terms of product, place, price, promotion, and procurement (process). The average self-evaluated performance ratings for the marketing factors were used as weight to assess the importance of the marketing factors indicated by the actors. The weights were calculated as the average performance rating of each marketing factor divided by the total performance rating of all factors. The weight was then multiplied by the average importance rating indicated by the actors to obtain the weighted score. All weighted scores for each factor are summed to give the total weighted score of that factor. Higher scores indicate a better performance of the value chain group (Ehlers and Lazenby 2004). These indices help to evaluate the strengths and weaknesses in marketing mix of the businesses. Data on performance ratings and perceived importance of marketing factors are not available for fish processors; however, the FEM provides useful insights into the business performance of the other chain actors. From Table 3, all chain actors had scores of above 1 for product, which suggests that they have what customers want. Thus, product offering appears to be the strength at each stage of the value chain. This observation is not surprising because the actors face the threat of competition, making it necessary to provide quality products to remain competitive. For place, farmers had the highest score because many fish farmers sell their fish at the farm gate; location is therefore very important to them because of accessibility. Place is also important for restaurants/food vendors who also had weighted score of 1.03 and may be attributed to visibility and accessibility since they tend to market tilapia in the finished form. Farmers scored price, product, and procurement high. Tilapia is a popular Table 3 Factor evaluation matrices Input suppliers Fish farmers Distributors/ processors Marketers/ retailers Restaurants/food vendors Place Price Product Promotion Procurement Weighted score Weighted score Weighted score Weighted score Weighted score Total weighted score Weighted score for each factor = importance rating of the factor 9 performance weight of the factor

15 fish in Ghana, and prices have remained quite high, which has been one of the main incentives for the growth in fish farming. Promotion is scarcely done for tilapia because it is a known commodity and probably explains why all actors have scores below 1.0. Input suppliers generally had a relatively higher weighted score, above 0.80 consistently. That stage in the farmed tilapia value chain is highly specialized with a target market. Apart from the fishing net suppliers who also sell to fishermen, all the input suppliers target fish farmers. Thus, their products are tailored for fish farmers, which ensures that good-quality products and services are supplied. Moreover, the increasing need to produce large-size fish and in great volumes, especially for cage farmers, has provided a justification for the supply of premium products, particularly feed. Conclusions and recommendations This study indicates that apart from fish farmers, all other major chain actors identified: input suppliers, traders, and food services, had positive profit margins. Both BCR and the ROI measures for fish farmers indicate that they appear to be operating at a loss, suggesting that fish farming is less profitable compared with the other value chain activities. Input suppliers appeared to make the most profit and had a strong sector within the value chain. The lack of limited market information often hinders price negotiation, which affects especially farmers. The method of price determination, relatively high input costs, and lack of customer differentiation and record keeping all appeared to contribute to the apparent losses incurred by fish farmers. To improve the value chain and ensure that the chain is sustainable, we recommend that key actors be encouraged to have well-defined payment transactions with customers and adopt flexible payment methods. Fish farmers would also benefit from forming strong persistent linkages among themselves, such as identifying particular actors and dealing consistently with them. This would improve the market power of fish farmers and ensure efficiency in the value chain. It was apparent from this study that prioritizing record keeping of costs and revenues would enable fish farmers to track their performance in terms of profit margins. We therefore recommend that further research be conducted into how information management could be enhanced to improve the value chain. We also recommend that further work be done to investigate how stronger vertical linkages in the value chain could improve efficiency and profitability through the reduction in costs. As far as institutional support is concerned, we recommend that the Fisheries Directorate of Ghana set and enforce standards that will regulate the activities of chain actors, especially hatcheries and processors, to ensure quality products and services are supplied along the chain. Additionally, food safety training should be provided for key chain actors, especially processors, to ensure the fish products supplied to consumers are safe. Acknowledgments Funding for this work was provided by the Aquaculture and Fisheries Collaborative Research Support Program (AquaFish CRSP), a program funded in part by United States Agency for International Development (USAID) through Purdue University, USA. The authors would like to thank Abena Amponsah, Abigail Tarchie, Iris Fynn, Raphael Ahiakpe, and Ignatius Yawlui for their assistance with the field surveys. The authors also express sincere appreciation to survey participants, without whom this study could not have been executed.

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