Ghana’s trouble with chocolate

November 8, 2012

The production of cocoa—the basis of chocolate—has been a pillar of Ghana’s well-documented economic success. In fact, Ghana is currently the second largest cocoa producer in the world. However, recent challenges are making Ghanaians nervous. The world wants chocolate more than ever, and global demand for cocoa is up, but dryer weather is causing Ghana’s production to decline. In addition, there is concern that the recent discovery of off-shore oil reserves in the country–which may lead to higher exchange rates and land and labor prices—will threaten the competitiveness of the cocoa sector, hurting farmers.

Key players in Ghana’s cocoa production and marketing are meeting this week to look into these challenges, and IFPRI research is playing a role in finding solutions.

The director of IFPRI’s Eastern & Southern Africa Regional Office, Kwadwo Asenso-Okyere, joined stakeholders in Ghana’s cocoa production and marketing at the Second National Cocoa Stakeholders’ Conference this week in Accra to discuss challenges to the sector and recommend solutions.

Asenso-Okyere, whose previous connection to the country includes a position as vice chancellor of the University of Ghana, emphasized the importance of incentives for increased production. To maintain the high quality that attracts premium prices, he suggested a new focus on the emerging niche markets of organically produced and traceable cocoa. Overall, he recommended developing long-term production strategies for a sustainable cocoa economy. “It will be a pity if the discovery of crude oil results in the neglect of the cocoa sector, which has in the past provided a large share of the needed investments for Ghana’s development,” he said, as reported in news coverage of the conference.

A recently published IFPRI discussion paper, The Partially Liberalized Cocoa Sector in Ghana: Producer Price Determination, Quality Control, and Service Provision, further analyzes the competitiveness of Ghana’s cocoa sector, specifically looking at how the powerful and all-encompassing Ghana Cocoa Board (COCOBOD) can revise its strategy to ensure high quality and export prices that trickle down to the farmers.

IFPRI Senior Research Fellow and leader of IFPRI’s Ghana Strategy Support Program Shashi Kolavalli and his co-authors studied the institutional arrangements of cocoa production and marketing in Ghana, from how producer prices are determined to the role of COCOBOD in maintaining quality and providing goods and services for cocoa farmers. They found that political pressure has so far ensured that cocoa producers receive a large share of the export prices, but there is no other mechanism in place to maintain high producer shares. They also found that although COCOBOD’s centralized marketing and quality control have given Ghana a reputation for quality cocoa, partial liberalization may be negatively affecting cocoa quality as producers rush the process in response to demand. The authors also suggest that COCOBOD could spend and deliver services to farmers more efficiently.