Fully liberalise cocoa sector will boost yields, revenue

The World Bank, in its 8th economic update on Ghana on July 22, 2024, noted that the world’s second-leading producer of cocoa will not exceed 500,000 metric tons in the 2023/24 crop season.

This is not surprising as COCOBOD itself had noted on March 25, 2024, that the country’s 2023/24 cocoa harvest will only be between 422,500 metric tons and 425,000 metric tons, about half of the country’s initial forecast and a staggering 22-year low.

Over the past 10 years, Ghana’s cocoa production has predominantly been below a million metric tons, only crossing it in the 2020/21 crop season. Cote d’Ivoire, our close competitor, with a fully liberalised cocoa sector has consistently produced above 1.5 million metric tons over the past 10 years.

Even in the wake of the harsh weather conditions, pests and disease, Cote d’Ivoire forecasts to harvest 1.8 million metric tons of cocoa in the 2023/24 crop season. Presented in the graph below is the comparison of Ghana and Cote d’Ivoire’s total cocoa production over the last 10 years.

Decline

The continuous decline in Ghana’s cocoa production is affecting the country’s ability to raise syndicated loans for the purchase of the crop as lenders demand high premiums due to the sector's perceived higher risks.

It is also worrying to note that COCOBOD made losses in five straight seasons from the 2017/18 to the 2020/21 crop seasons. In the 2020/21 crop season where the country’s cocoa harvest crossed one million metric tons, the board made a whooping loss of GH¢395 million.

Thanks to the restructuring of Ghana’s cocoa bills worth 7.9 billion cedis, the board is reported to have made a profit of 2.3 billion cedis in the 2022/23 crop season.

Presented in the graph below are the losses/profits of Cocobod from the 2017/18 crop season crop season to the 2022/23 crop season.

The state-owned PBC Limited, responsible for the purchase of cocoa beans and shea from farmers, is also having its fair share of losses and is unable to pay the salaries of its 33,000 workers. 

Specifically, PBC Limited is in debt of about GH¢490 million and has not been able to pay its workers for about eleven months and counting.

It is instructive to note that beyond climate change, pests and disease, Ghana’s cocoa production is negatively impacted by illegal mining, popularly known as galamsey.

Many smallholder cocoa farmers find giving their lands to illegal miners more profitable than proceeds from their cocoa farms.

The farmers cannot be faulted because they only get about 25 per cent of the international market price of cocoa from the government.

Specifically, the Ghanaian Government offers cocoa farmers GH¢33,120  per ton (that is US$2,143.69/ton), while the international market price as of July 23, 2024, is GH¢135,851.08 per ton (that is US$8,792.95/ton).

Cheated

Beyond giving some of their farms to illegal miners, many cocoa farmers also feel cheated by the government based on the price it offers them. Therefore, they are not motivated enough to maintain their cocoa farms.

Some cocoa farmers go to the extent of smuggling their cocoa beans to neighbouring countries for higher prices.

This practice of not allowing farmers to enjoy the full international market price keeps most farmers and their dependents poor and does not allow them to properly take care of their farms to boost their yields and revenues.

In the end, the farmers lose and the country also misses the opportunity to get more foreign exchange from the sale of raw or processed cocoa beans.

One wonders why successive governments have not been interested in fully liberalising the sector and deliberately keeping smallholder cocoa farmers and their dependents of over six million poor and hopeless. 

Political crop

Invariably, cocoa has become a political crop and a source of ‘free money’ for corrupt and uncaring governments who continue to ignore the welfare of smallholder farmers.

It is now apparent that keeping the cocoa sector partially liberalised is not profitable for both the government and cocoa farmers. Now more than ever, the cocoa sector should be fully liberalised to enable the farmers to earn enough revenues for themselves and invest more in the maintenance of their farms for more yields.  

The focus of COCOBOD must be shifted to facilitating the processing of most, if not all, of the cocoa beans produced locally.

After all, the global chocolate industry is worth over six times the sale of raw cocoa beans on the international market.

The writer is an economist & rural development advocate.
E-mail: pdadzie03@gmail.com

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System Summary

The article advocates for the full liberalization of Ghana's cocoa sector, arguing that it would lead to higher yields and increased revenue. It critiques the current regulatory system and highlights the potential benefits of allowing more competition and private sector involvement, ultimately calling for a policy shift to enhance the sector's growth.

The piece emphasizes that with more competition and innovation, cocoa yields could be significantly boosted, ultimately increasing revenue for both farmers and the country as a whole.