News — Cocoa

A year ago, Ghana’s President Nana Akufo-Addo became the first African leader to be invited in about 60 years on a state visit to Switzerland. But his visit may not have gone as his host would wish as he announced that his country will soon end the process of selling raw materials to trade partners for onward value addition.

Although Akufo-Addo’s visit was about 12 months ago, the details of his announcement have been rekindled by conversations sparked by recent impediments placed by rich countries on a World Trade Organization (WTO) proposal. The proposal would have seen coronavirus vaccines produced in large quantities widely in other countries if pharmaceutical corporations can waive off intellectual property claims.

Richer nations like those in the European Union as well as the United States have blocked this proposal although, in terms of global numbers, they are in the minority. Akufo-Addo’s statement to the Federal Council of Switzerland is seen by many pro-African interest observers as well as Pan-Africanists as a possible route through which Africa can win on trade on the global scene.

Ghana’s quest to hold back on exporting raw materials is an agenda independent of what is happening with the WTO’s proposal on COVID-19 vaccines. The agenda was even stated before the pandemic thus, it requires us to understand it within the context of Ghana’s developmental ambitions.

One of the raw materials that Ghana is not looking to export any much longer includes cocoa beans, a commodity for which Ghana happens to be the second-largest producer in the world after neighbors the Ivory Coast. Switzerland, a great manufacturer of chocolates, buys its cocoa from the two West African neighbors although Ghana is Switzerland’s biggest trading partner in sub-Saharan Africa.

President Akufo-Addo told the Federal Council of Switzerland, then headed by President Simmoneta Sommaruga:

“Ghana is currently Switzerland’s largest trading partner in sub-Saharan Africa, largely from the export of gold and cocoa to Switzerland and the import of chemical and pharmaceutical products…However, as I have stated on many occasions, Ghana no longer wants to be dependent on the production and export of raw materials, including cocoa beans. We intend to process more and more of our cocoa in our country with the aim of producing more chocolate ourselves”

Akufo-Addo tied in the movement towards value addition to Ghana’s national pride as well as poverty alleviation. Even though it can be read as an approach antithetical to what free-marketeers like Switzerland have advocated over the last few decades, protecting Ghana’s interest in short ot long term would be difficult to argue against.

Last year, both Ghana and Ivory Coast halted the sale of cocoa to United States manufacturers accusing the U.S. confectionary giants Hershey’s and Mars of avoiding paying a bonus that will help improve the economic fortunes of poor farmers.

The Coffee Cocoa Council (CCC) and the Ghana Cocoa Board (Cocobod) in a statement said the two of the world’s top chocolate sellers were not paying the living income differential (LID).

The LID gives cocoa farmers a bonus of $400 per tonne in addition to the market price and envisioned to cushion many farmers who live in poverty. The $400 a tonne LID on cocoa sales for the 2020/2021 season was introduced by the West African nations last year.

That trade war did not last long as Ghana and the Ivory Coast won their way. It was the second time in two years that the two countries had manufacturers to concede on deals. With Ghana’s move towards processing its own cocoa, the world, and not just Switzerland, will experience a massive shortage since Ghana is responsible for about 45% of the world’s cocoa.

With this, it is understandable how Akufo-Addo’s promise to the Swiss people, who are one of the world’s largest producers of chocolate, falls within the trajectory of hopes of those who wish Africa well.

Two of the world’s largest producers of cocoa, Ghana and Ivory Coast, have accused U.S. confectionary giants of avoiding paying a bonus that will help improve the economic fortunes of poor farmers.

The Coffee Cocoa Council (CCC) and the Ghana Cocoa Board (Cocobod) in a letter on Monday accused Hershey’s and Mars, two of the world’s top chocolate sellers, of not paying the living income differential (LID), according to AFP.

The letter also accused Fuji Oil Holdings’ Blommer subsidiary of aiding Hershey.

The LID gives cocoa farmers a bonus of $400 per tonne in addition to the market price and envisioned to cushion many farmers who live in poverty. The $400 a tonne LID on cocoa sales for the 2020/2021 season was introduced by the West African nations last year.

According to the CCC and Cocobod, a large purchase of cocoa on the U.S. futures market by Hershey recently clearly indicates the company’s “intention to avoid paying the living differential income.” The producers added that they had been “been left with no choice but to cancel all sustainability programs with which your company is involved”.

The joint letter also denounced Hershey’s and Mars’ “breach of confidence” in the scheme intended to help millions of African farmers. The schemes certify that the chocolate is ethically sourced, that is, production must be free of child labor and avoid environmental destruction. This allows companies to sell their chocolate at a higher price.

In a statement to Reuters, Hershey, producers of Hershey chocolate bars, Hershey’s Kisses and Kit Kat, said it is fully participating in the LID. “Our concern is that by cutting off industry sustainability programs, cocoa farmers will no longer receive the benefits provided by our programs… (like) the price premium for certified cocoa,” the company said in a statement.

It was “unfortunate” that the countries had decided to “distribute a misleading statement this morning and jeopardise such critical programmes that directly benefit cocoa farmers,” AFP also quoted Hershey as saying.

Ghana and Ivory Coast are the world-leading producers of cocoa. Jointly, the two West African nations produce two-thirds of the world’s cocoa. However, cocoa farmers from the two countries continue to wallow in poverty even though their produce sustain the economies of the two nations.

In 2018, Bloomberg reported that these farmers make “only about 5.5 per cent of a global supply chain worth more than $100 billion”. This is even less than 15% of governments take as the value-added tax on the sale of chocolate products in Western countries where chocolate is most consumed.