Book Review §1: Chocolate Nations – Living and Dying for Cocoa in West Africa

Title of the book:

Chocolate Nations – Living and Dying for Cocoa in West Africa  

Author:

Orla Ryan 

Date of publication:

03.03.2011 

Book Review Author:

Teodor Kalpakchiev

Sectors/areas of interest:

International Trade, Fair Trade, Agriculture, Food Security, Cocoa, West Africa, Development, Child Labour    

Summary

Chapter one: Ghana is Cocoa. Cocoa has been the main vocation of the population in Ghana ever since 1925, when the exports reached 0.5 million metric tons (compared to 77.000 in 1925) and when the Gold Coast became the leading exporter of the commodity. Owing to Nkrumah, a west-educated arrestee, it became the first country to gain independence (1957) and heralded change in the region. Already in 1947, out of fear of popular unrest the government established the Ghana Cocoa Board /Cocobod/, which fixed the farm-gate price and dealt with multinational buyers and eased the government in adjusting the tax. However, the access to liquidity meant its abuse by the political leadership ($18m. British Frigate) and led to a coup in 1966, which was backed up by UK/US. His successor was Lt. Rawlings, who designed a repressive regime, which defined broadly “economic crimes” (lowering prices, borrowing, selling land/property) in order to clampdown corruption. However, the inflation and overvaluation of the cedi led to a slump in prices and volumes (from 0.5m. tones in 1965 to 160.000 tones in 1983) of cocoa, which began to be smuggled to Cote d’Ivoire. Socialist policies began to lose ground and western powers offered money in exchange for market reforms. They turned out painful in Ghana – public servants were sacked, enterprises privatized and the cedi devaluated. In 2000 Rawlings made way to John Kufuor and 2002 the first democratic elections took place. Despite increase in volumes and farm-gate price rise, wealth concentration in the capital, power cuts and water shortages are regular and smallholders remain poor. 

Chapter Two: Cocoa Wars. Roughly 1/3 of the world’s produce comes from Cote d’Ivoire, where industrialization was not favoured by Boigny. The government adopted instead an open door migrants policy, liberal land laws and the abolishment of forced labour (1946), and independence in 1960. France had strong influence and invested heavily in the country and the French population quintupled to 50k in 1990. The money that came from agriculture was invested in public works and agriculture and per capita income rose from $70 in 1960 to $610 in 1988 and CdI became the largest cocoa producer in 1979. The elite profited hugely and spent lavishly here too (e.g. Boigny’s $12m Palace) and by late 1980s the country’s debts rose to $8bn. and it stopped serving it in 1987. Furthermore, the growing discontent with land distribution allowed L. Gbagdom, a well-perceived figure, to become a president. The Ivorian politics is a bewilderingly complex, permanently shifting set of alliances.  The increased migration flows (1/4 of the population) at Boigny’s time often remained with unclear legal status and fed the struggle on conceptualizing the Ivorian identity. Ouattara, a muslim political rival from the north, was discarded as ineligible and then his constituencies were attacked. In 1990s the land disputes had to be solved by the mapping and registration of the rural land rights, leading to clashes and 10.000 expulsions. Politicians often manipulated the identities, and in the end it was the papers one owned that decided whether he was entitled to land ownership rights. The displacement led to a war in 2003 and the existence of an artificial border until 2007, when the peace with the rebel leader Soro was signed. 

Chapter Three: Child Labour. The topic was sensitized in 2000 with newspaper reports on slavery, malnutrition, little or no pay and regular beatings to children. Fearing the impact on production the chocolate industry promised to investigate in the matter. A decade later it became clear that the reduction of the children on plantations would require the reform of the whole cocoa business. In reality, the kids have to manage studying and helping out domestically, as to learn the tools of the trade. The Harkin-Engel protocol (ILO Covention 182) defines child labour as hazardous work (15-17 years) or overtime (12-14 years old). According to IITA their number is 300k., the Tulane University – 800k. (and 1m in Ghana), while breaches of min. wage and working hours were also high – 263k in CdI and 270k in Ghana. Children in School – 60% in CdI and 90% in Ghana with numbers falling outside cocoa areas – 45% vs. 58% in CdI cocoa areas and 74% vs 89% in Ghana. UNICEF – 34% of 5-14 y. old do work. However, these numbers obscure a complex cultural reality. If boycotted, unsold production would only make families poorer. A credible inspection system is hard to create and companies reassuring against malpractices fail to reach their own standards, which makes the consumer initiative solution unviable (ICCO). It is not uncommon for kids to leave school only to be exploited afterwards. Primary school taxes were abolished in 2005, but people find it hard to pay for the mandatory books and uniforms. About 95% of the world’s cocoa is produced in small farms (up to 3 hectares) and even death in the family is a costly business that can lead to bankruptcy. Despite the calls from US senators for more international financial commitments, it is the stark political mismanagement that created the low education and revenues trap. 

Chapter Four. Follow the Money. The chapter begins with the story of the abduction of Guy Andre in Cote d’Ivoire, an idealistic leftist bank of facts on the commodities industry, who

worked for international newspapers. There is also a big divide between the the poorer in Abijdan and its international guest, which by no means found a safe haven there. The introduction of a digital payment system to strengthen Caistab, a government stabilization fund was protested, as everybody on the chain has his own interests, but ultimately reforms were pushed through in exchange for a debt waiver. As a consequence of removing the minimum prices, new bodies were set up and funded by 9 times bigger levies in 2004 vs 1999 with a negligible amount going to the farmers and the head of the Bourse £31000. Another use of the cocoa taxes was to buy arms and a punishment measures towards the rebellious in the north (who began to sell their beans in Togo instead). The illicit trade amounts to nearly $30m. Since the disappearance of Mr. Andre, the discredited cocoa institutions were abolished and investigations of the destiny of investments in chocolate factories remained unfruitful, as the government was hard to reach.

Chapter Five. From Beans to Bar. The story begins with Mr. Wallace, who visited Uganda at the age of 16 and fell strongly for the country. After that he invested in education and decided to open up a chocolate production facility in Uganda, only to discover the numerous difficulties one ought to face. With the market for chocolate production being estimated at the $75billion, 43 pence of every £1 were going to the manufacturer and only a negligible amount to the producers themselves. In Ghana the local chocolate costs 30 US cents, but he wanted a gourmet. Africa was largely left behind in manufacturing value-added products, as out of $6532 billion, $4532 came from advanced industrialized economies and $1892.5 from developing world and $45.8 billion from sub-Saharan Africa. However, he had to face up to problems such as the lack of factories (know-how and capacity, only 1/5 of the beans are ground on the continent), rising demand (MENA 3%, Eastern Europe 12% of global sales). The problems the manufacturer has to face are: develop an appropriate recipe, government protectionism, difficulty in finding skilled labour for the grinding factory, lack of a diary industry, no production of wraps, storage, tendency for outsourcing manufacturing of chocolate. The President Kufuor encouraged the establishment of processing factories, which are albeit dependent on local production and therefore on crop failure, diseases and have little low labour costs. With about 100 jobs being created, Ghana mills half of its beans (60.000 tons) and large companies have shown little interest in a Ghana-based production chain. Thus gourmet chocolate has become the only viable option for selling at no loss with a price tag of £3.5 for 50 grams, which covered transportation, import duties, difficult negotiations for EPAs and the fact that food retailers receive 75-85% of the retail price and bargaining leverage. 

Chapter Six. Fairtrade Myths and Reality. Endorsements of politicians, celebrities have been endorsing fair-trade and indeed in 2000 it secured a $1600+150 price per ton vs. the $714 given by the market, but in 2011 was already exceed the price set by the government – $2242. Kuapa Kokoo is also owned 100% by its 40.000 farmers and gives them 50% in the company, but has however managed to increase its market share only twice for 12 years to 5.28%. The fair-trade began actually with coffee in Mexico due to Netherland’s oppressive treatment to producers in Indonesia. Generally, apart from cash, beans producers receive also material goods, such as instruments or schoolbooks, but hard cash and loans for the next year are preferred, even if less than what’s promised. Kuapa itself sells only 2500/35000 tons of fair-trade beans, with the rest being bought by large companies. It finances itself with the 150200$ addition and has a thorough external audit process. Its members also possess companies such as Divine Chocolate, etc. and Cadbury remains one of the biggest buyers of Ghanaian beans. The transparent breakdown of the costs is offered by neither company. 

Chapter Seven. Trading games.  A steady increase of demand has resulted in a growth from 1.1 m. tons in 1960 to 3.7 million tons in 2007, worth $75billion. Generally sweet sales follow the economic growth or downturn, but the traders in stock exchanges have to follow also other factors, such as environmental disasters, temperature fluctuations, proneness to disease, etc. The need for information on supply has been transliterated into many correspondents going on the growth to drill for information (as the author). Officials tend to hide information on the supply of cocoa on the port and what shipments are made in order to avoid fluctuations. On the demand side, a small number of companies are holding 75-85% of the European market and the processing business is dominated by Cargill, Barry Callebaut and ADM, accounting for 41%. Prices remain subjected to commodity market performance and thus volatile. Considering the large world share Ghana and Cote d’Ivoire have, it is bewildering that they have not organized themselves to increase bargaining power (as did OPEC). Attempts began already in the 1970s, but crises and lack of uniformity in joining international agreements have hindered them. Instead, the Board is trying to retain production, so as to increase world prices, but also appoints external quality control checks, sprays, controls diseases and gives scholarships. Ghana introduced partial liberalization, owing to which buyers purchased directly from farmers and sold to the board, but in Cote d’Ivoire flaws such as resistance due to rent seeking from the system at all levels, as well as heavy taxation, corruption and lack of clear negotiating party on behalf of the producers, are existent. Ghanaians also clearly benefit from selling the cocoa in advance. However, the regulator maintains the minimum prices as it finds for well. 

Chapter Eight. Building a sustainable future. As cocoa is a delicate smallholder plant prone to diseases, such as black pod, fungal infections and insects and due to the humid climate, the producers suffer from heavy losses (30-40% worldwide) and scenarios such as the witches broom outbreak in Brazil that destroyed its role in the international market are not excluded.  This is also why most of the organic farming is done in Caribbean and Asia. The cocoa boom of last century was made possible due to the availability of land and labour and not technology advancements. Furthermore, 46% of the country’s trees are more than 20 years old and yield less produce. On the other hand, everybody is involved in the labour intensive business – either as landowner or as caretaker, with their shares distributed according to the abusa/abunu systems. Also disputes over land ownership, despite it cannot be sold, are not rare. The cocoa comes also at a heavy environmental price, because producers have switched land instead of using fertilizers, which has led to deforestation. The future might lie in training initiatives (benefited by 95000 farmers), where experienced farmers can share good practices for taking care of the plants (such as the STCP), as yields are said to increase 15-25% owing to them. Increased productivity might be brought also with diversification of the crops planted, which would enrich the soil. The discovery of oil would also harder bring any benefits, as exhibits imbalances, creates few jobs and brings migration workers. However, the biggest challenge remains alluring investments for competitiveness improvement.

Takeaways and Recommendations to DG International Development and Cooperation:

  1. Improve bargaining power – create cooperatives in other countries and cater for local ownership of structures, initiatives
  2. Set a monetary payment minimum – at least 75% of the price to be paid via monetary exchange
  3. Cater for the plants resistance to diseases – foster dialogue on preservation methods and invest in research
  4. Ensure that there is gap between the fair price and the governmentally fixed price to ensure that labour intensity pays off
  5. Create a system for transparency – costs breakdown, sources of the beans, where are they sold
  6. Create a specific blending mechanism for SMEs support – to produce cocoa on the ground and establish market chains and delivery mechanisms
  7. Be careful when travelling into rural areas with accompaniment – abductions are frequent
  8. Promote usage of fertilizers and seasonal interchangeability of crops – a growing number of plats are 20+ years old and thus yield less produce, deforestation is permanent
  9. Invest in economically viable business plans for closed (chocolate) production based in West Africa – many people are ready to cover the difference that comes from economy of scale, achieved by bigger companies
  10. Create watchdog agencies / filial of international anti-corruption organizations – ensure that the collectibles reach out to stakeholders
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