Friday, December 9, 2022

Perspectives On The Cocoa Sector in Ghana

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Diplomat Magazine
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DIPLOMAT MAGAZINE “For diplomats, by diplomats” Reaching out the world from the European Union First diplomatic publication based in The Netherlands. Founded by members of the diplomatic corps on June 19th, 2013. "Diplomat Magazine is inspiring diplomats, civil servants and academics to contribute to a free flow of ideas through an extremely rich diplomatic life, full of exclusive events and cultural exchanges, as well as by exposing profound ideas and political debates in our printed and online editions." Dr. Mayelinne De Lara, Publisher

By H.E. Francis Danti Kotia, Ambassador of Ghana to the Kingdom of the Netherlands.

Cocoa production is essential to the health of Ghana’s economy. It contributes significantly to the country’s total foreign exchange earnings, second only to the extractive industry. While the cocoa sector’s overall contribution to gross domestic product (GDP) is about 3.5 percent, it makes up about a quarter of total export receipts, while also providing about two-thirds of cocoa farmers’ incomes. The sector currently supports the livelihoods of over four (4) million farming households. Ghana represents the gold standard for cocoa quality and is one of the world’s largest producers, yet the sector’s yields in monetary terms remain stubbornly and sadly low. Young people are a key part of the solution to revitalising Ghana’s cocoa sector as the average cocoa farmer in Ghana is over 50 years old.

Ghana, essentially shares in the vision of ensuring that the cocoa value-chain are promoted in a sustainable manner.

Ghana is a leading producer of cocoa in the world, producing a record 1.4 million tonnes of cocoa beans in 2020/21 season, as such sustainable cocoa production with respect to addressing deforestation, child labour and farmer well-being are of paramount importance and interest to the Government of Ghana.

Addressing Child Labour in the Cocoa Industry

On the issue of reported child labour in the industry, this appears grossly exaggerated or profoundly misconstrued in view of the lack of appreciation of Ghanaian cultural norms and practices. Nevertheless, the government is committed to ensuring that every Ghanaian child is offered the opportunity to develop their talents to the fullest and should not be disadvantaged through exposure to excessive or inappropriate work.

Among the interventions implemented by the government in tackling the issue of the perceived child labour are the capitation grant, which eliminates fees for primary schooling and government’s policy on Free Education for Senior High Schools. In the cocoa sector, the government has assumed the responsibility for some of the hazardous work that had previously been conducted by farmers and their children, such as the spraying of pesticides.  More importantly, the government is concerned about farmer wellbeing and the need to protect the farmer from fluctuations in international cocoa prices, by maintaining a regulated farm-gate prices at elevated levels hence the joint introduction of the Living Income Differential (LID) by the governments of Ghana and Cote d’Ivoire.

For one thing, most farmers in Ghana do not want their children who give a helping hand, to remain on the cocoa farm; rather most prefer their children to complete their education in order to secure gainful employment in urban areas. That notwithstanding, the poorest farmers may ask their children to work after school hours or during vacation.

Key Findings on Child 1Welfare in Cocoa Growing Areas of Ghana and Côte d’Ivoire

A recent survey by the independent National Opinion Research Centre (NORC) at Chicago University covering children under 18 years living in agricultural households in the cocoa growing areas across Côte d’Ivoire and Ghana during the 2018-19 cocoa harvest season, using a sample size of 2,809 households, 5,552 child surveys, 158 community surveys, 372 cocoa shed surveys, and 260 established the following key findings, among others:

Cocoa is a key part of agriculture in the cocoa growing areas of both countries, as can be seen from the fact that in 2018-19, 84% of agricultural households were growing cocoa.

School attendance among children in agricultural households in cocoa growing areas increased from 58 to 80 percent in Côte d’Ivoire and from 89 to 96 percent in Ghana between 2008-09 and 2018-19. In the case of Ghana, the high school enrolment was because of government’s policy on free education in Ghana from the basic level to Senior High School.

It was further noted that when multiple interventions were implemented in a community, they led to a statistically significant reduction in the rates of child labour in cocoa production areas.

Based on these findings, the report underscored the need for engagement with community leaders, including representatives for women and the youth, early in the design of interventions to ensure that objectives and implementation plans are realistic and relevant to the community.

H.E. Mr. Francis Danti Kotia, Ambassador of Ghana.

Higher cocoa prices

The idea that cocoa farmers should receive a higher price is not a new concept, although it has been operationalised in several different ways. For instance, some stakeholders advocate for the establishment of a cocoa cartel for intervening in international markets and in the creation and management of buffer stocks. While others believe that national marketing boards should be the ones paying farmers a higher share of the price they receive on the international market. Higher prices are sometimes operationalised through a premium model, which rewards farmers for engaging in sustainable production. In some countries, quality differentiation (such as for fine flavour cocoa) has also enabled price differentiation. Some proponents of higher cocoa prices argue that cocoa farmers should receive a greater share of the value of a chocolate bar. However, opponents argue that a chocolate bar contains many other ingredients and goes through a substantial process of value addition, rendering comparisons problematic. Competition within the cocoa chain also means that most value-chain actors also face tight margins, necessitating high volumes of trade to achieve profitability. The question of who should bear the cost of higher cocoa prices remains a sensitive one.

There is also the question of how farmers may respond to a higher price signal. There are valid concerns that farmers could clear more land for cocoa, contributing to deforestation. Others may convert land from less profitable food crops to cocoa, thereby increasing global cocoa supply and potentially depressing prices. Nevertheless, these arguments do not address the core issue of fair price to cocoa farmers.

Low Cocoa Prices and Implication for the Cocoa Sector in Ghana

Consequently, it is disheartening to note that Ghana only earns less than 5% of the value of the global chocolate and confectionery retail industry, which is worth more than USD100 billion. It was against this background that the member countries of the Cote D ‘Ivoire-Ghana Cocoa Initiative (CIGCI) as well as the Secretariat itself decided not to participate in the World Cocoa Foundation partnership meetings held in Brussels, Belgium on 26-27 October 2022.

The decision of non-participation in the Brussels meeting was to register the displeasure of the cocoa producing member states against the unwillingness of the cocoa and chocolate industry to pay fair prices for cocoa. The immediate consequence of the posture of the chocolate industry was the deterioration of the beneficial Living Income Differentials (LID) on the price guaranteed to the millions of small cocoa producers in Ghana and la Cote d’Ivoire in meeting their overhead costs in cocoa production.   

It would be recalled that earlier in 2022, Ghana and Cote d’Ivoire, through the CIGGI, took the decision to publish the origin differentials for greater transparency in the pricing of cocoa. In July 2022, a further decision was taken to no longer sell their cocoa with negative income differentials, which buyers had been applying to offset the cost of the LID, since it came into effect at the beginning of the 2020/21 season. At the same time, a process was also launched with the industry to build a path for an economic pact that was signed by all the major cocoa purchasing companies. Despite these initiatives, the cocoa importing companies have not shown good faith in upholding mutual respect to cocoa producing states in ameliorating the plight of the cocoa farmers.

As a result of the low producer prices to cocoa farmers, some cocoa farmers have resorted to leasing their cocoa plantation lands to small-scale miners. This development would have an overall adverse impact on cocoa production in Ghana.

Improving cocoa productivity

Generally, improving productivity results in raising incomes for cocoa households. However, most cocoa farms are far from achieving potential yields due to poor agronomic practices, and low, inappropriate or untimely use of inputs. Therefore, training on good agronomic practices (GAP) is often seen as a way of remedying the situation. Advocates for boosting farmer yields also see this as one way to slow or reverse deforestation. Some actors have also expressed concerns that improving productivity could contribute to oversupply in the future, resulting in lower prices.

Access to Finance, Skills training and education

For young people who do acquire land, rehabilitating such lands is becoming expensive. In view of soil degradation and climate change, greater investment in fertilizer, pesticides and other inputs is essential to achieve desired yields. Furthermore, cocoa trees take up to five years to yield beans, leaving farmers with no cocoa income during that time lag. Aside the foregoing challenges, cocoa farming requires more sophisticated farming skills to manage soil fertility losses and climate change. In addressing the skills gap, Ghanaian Universities and the Ministry of Food and Agriculture of Ghana are promoting agro-economic education or skills training for young farmers.

Conclusion

Permanent solution to concerns about the phenomenon called child labour in the cocoa sector can be achieved when the importance of price and ‘decent living income’ for cocoa farmers are given due and adequate attention by all the key stakeholders in the cocoa value-chain, including multinational chocolate companies. The fact that sustainable cocoa production is a win-win concept cannot be overemphasised. Furthermore, it is abundantly clear that if the three key elements namely the social, economic, and environmental dimensions of the industry, underpinned by the well-being of the cocoa farmer are managed in a fair, balanced and holistic manner, cocoa producers and multinational companies alike would work in a very harmonious way to bring smiles to the faces of consumers of chocolate and other cocoa products.  

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