What next after Ghana-Cote d’Ivoire cocoa boycott?
GHANA and Cote d’Ivoire last week amplified their voices on the international stage when they boycotted the World Cocoa Foundation’s Partnership Meetings at Brussels in Belgium.
Ministers and executives of the cocoa sector regulators of the two West African neigbours abstained from the meeting for the first time since it was instituted in 2012.
Advertisement
The boycott was in protest over the alleged limited commitment from the global cocoa sector to the joint living income differential (LID) introduced in 2019 to cushion farmer incomes.
The Cote d’Ivoire-Ghana Cocoa Initiative (CIGCI), which is championing the improved incomes for farmers, said it was disappointing that the cocoa and chocolate industry was trying to negotiate the rates down, hence the decision to boycott the meeting.
Implications
As the two lead producers, accounting for more than 60 per cent of global supplies, with Ghana being the only grower of premium cocoa beans, the absence of the two countries from the meeting is a loss to the industry and the WFC in particular.
It deprived the gathering of chocolatiers, cocoa buyers and suppliers, among other ideas and policy perspectives from the two countries as far as the forward march of the sector is concerned.
Indeed, the President of the WCF, Chris Vincent, described the absence of the two countries as a missed opportunity for further progress on cocoa sector sustainability.
Sour relations
Beyond creating a gap and bruising the relationships of the countries and the players, the boycott has opened a fresh wound in a partnership that is as old as cocoa production itself.
Chocolatiers and cocoa buyers are a critical part of the cocoa value chain everywhere. They purchase the cocoa, which is a raw material for their factories, fund various cocoa related programmes and sometimes initiate and implement social interventions in host communities.
A sour relationship with them obviously does great harm to the industry and farmers, but so is a pretentious one that is orchestrated to favour only one side.
In spite of the implications, the boycott is a necessary bold step that has reverberated throughout the cocoa sector.
It has refocused attention on what the global cocoa sector, which makes billions of US dollars from the toils of farmers, is doing to improve the lot of the rural folks.
While that is good, the boycott is not enough. What the two countries do afterwards will determine the gains or losses their action and the motive will yield.
Process more
It is now a painful cliché that West Africa produces more than 60 per cent of global cocoa but earns less than two per cent of the US$150 billion chocolate industry that it generates and sustains.
Yet, more domestic processing is a big win for the producing countries.
It will improve the revenue earned, create adjoining industries and jobs and reduce reliance on the global buyers for the survival of our cocoa sectors.
Unfortunately, Ghana and its West African neigbours have been fixated with raw exports of the beans.
For Ghana, the foreign exchange earned is seen as a lifeline to the economy: It improves the reserves of the Bank of Ghana and cushions the local currency, the cedi, against depreciation.
The situation is complicated by the funding arrangement that the Ghana Cocoa Board (COCOBOD) has used to fund cocoa production since the 1993/4 season.
The board relies on the syndicated cocoa loan, sourced from multiple global financiers, to fund cocoa production every season.
The loan is repaid with the raw cocoa beans from the farms that the funds fund.
It is these beans that are shipped to Europe and America as raw material for factories to produce chocolate and candy for an industry valued at more than US$150 billion.
Economic model
Hailed for its so called ingenuity, this arrangement of a commodity-backed facility makes it difficult for Ghana to alter its economic model around cocoa.
It is such that the country sometimes denies local factories of beans for processing in order to meet export supply contracts.
Whenever the beans are available, they are sometimes priced above the reach of the local factories to enable COCOBOD to raise enough foreign currencies and funds in general to repay the loan.
This has led to limited domestic processing and the idling or collapse of plants.
While there are other contributing factors, the state of the largely state-owned processor, the Cocoa Processing Company (CPC), speaks volumes.
This is in spite of the fact that the higher one goes in the cocoa processing chain, the more the earnings.
The limited availability of storage facilities and the impact of a supply glut on price declines also means that the countries always have to mark time on when to sell.
Conclusion
Thus, for Ghana and Cote d’Ivoire to make a head way in improving the livelihoods of their farmers, they need to process and consume more cocoa.
For Ghana, a good starting point could be to tweak the contracts on the cocoa syndicated loan such that instead of raw beans, semi-finished products can be used to repay the loan.
This will boost domestic processing, improve the value the country earns, increase business for local processors and gradually build capacity for local processing of cocoa.
In the long run, these should help reduce the current overreliance on global buyers for the survival of the cocoa sector and put the livelihoods of the farmers right in the hands of the governments of Ghana and Cote d’Ivoire.
Achieving that will not be easy but maintaining the status quo is even worse.
