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Re-inventing Ghana’s cocoa industry

February 1, 2019
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COCOBOD is currently deeply engaged in a fundamental restructuring of the economic model on which Ghana’s cocoa industry runs. The profound changes about to be introduced, on a foundation which the industry’s regulator and facilitator has begun to put in place since 2018, are the first major changes in decades, but the customary resistance to change of any sort – an intrinsic characteristic of human nature in any circumstances – is not the only reason these ones will be firmly resisted by many stakeholders in Ghana’s cocoa industry.

The bigger reason is that few will see any real reason to effect change on the grounds that, as the old adage goes, there is no need to fix what is not broken. Indeed, Ghana’s cocoa industry seems to be doing very well as it is.

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Afterall it remains one of Ghana’s three biggest export revenue earners, and perhaps even more importantly is the one whose positive impacts are felt most widely; by some 800,000 predominantly indigenous rural households in stark contrast to the foreign dominated, predominantly enclave industries that the mining and the oil and gas industries are. The good health of the industry is clearly illustrated by the fact that COCOBOD borrows between US$1.3 billion and US$1.8 billion on the strength of its own balance sheet every year from a consortium of international banks, and at barely half the interest rate that its owner, the Government of Ghana itself, borrows at.

Indeed, the only transformation that most stakeholders agree is needed is with regards to the lack of local processing and consequent value addition capacity that Ghana’s cocoa industry suffers.

But in actual fact, all is by no means what it seems. Both the labour force in the industry and the cocoa tress that are its main natural resource, are aging and thus are becoming less and less productive without sufficient effort to replace them. Added to this is the rising incidence of disease on cocoa farms. Indeed, it is most instructive that many cocoa farming households have, in recent years, either sold or long term leased their farm lands to illegal small-scale miners, indicating that the latter activity is far more rewarding to practitioners than the former. This is reflecting in the depressed production volumes Ghana has had to cope with for much of this decade.

COCOBOD itself is seeing its debts, arising from its financing gap incurred from its support to farmers and its farm gate produce purchase costs combined being higher than its revenues, rising by the year. Indeed, if something is not done about this, it will eventually increase the perceived credit risk of COCOBOD and thus the cost of its annual borrowing.

Therefore, we welcome the new strategy being introduced by COCOBOD which aims to increase farmer productivity and enable the farmers to pay for all their inputs on commercial terms from private sector suppliers. (See front page story).

However, expect lots of opposition. From farmers who will not want to consider anything beyond a loss of state input subsidies and free extension services; and from the political opposition who will see an opportunity to demonize the government, even though they will see the economic sense in the new strategy.

This newspaper can only plead with Ghana’s cocoa farmers to try to understand the necessitating circumstances and more importantly, the economic potentials brought about by higher productivity. And we can only plead with the political opposition to put economics above politics in this issue of crucial national importance.

 

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