OBG talks to Anthony Fofie, CEO, Ghana Cocoa Board (COCOBOD)

Interview: Anthony Fofie

How can Ghana maintain its current high level of cocoa bean output and production?

ANTHONY FOFIE: COCOBOD has put in place a number of programmes to maintain high production levels over the coming year, in a bid to reinforce the significant growth and gains in 2011. Among the various initiatives on the table is the distribution of 20m hybrid seedlings, which are disease resistant and early bearing. These will be extremely helpful once the rains begin. However, the priority at the top of the agenda is incentivising local output of processed cocoa. Some 280,000 tonnes of cocoa were processed last year, but there is a need to increase this, either via new investors or existing processors, who have a capacity for expansion.

Processors currently receive a discount for beans, particularly light crop size ones, and there are a number of other ancillary rebates available for processors that relocate to certain areas. International processors which have opened in these areas also benefit from other incentives. Local small and medium-sized enterprises are playing an increasing role as well, particularly for certain products such as cocoa liqueur and butter.

What are the challenges of cocoa production?

FOFIE: The poor quality of our cocoa tree stock is a major challenge that we are aiming to solve. Currently, tree stocks have a certain percentage of non-performing acres, due to dead, diseased or non-tended areas. As a result, COCOBOD is providing fertilisers, often at highly subsidised prices, as well as the hybrid seedlings. Boosting the quality of tree stock is crucial because land area under cocoa production is small, so maximising output is very important. This is especially the case when one takes into consideration the fact that 800,000 farmers are involved in producing cocoa and roughly one-quarter of the population is indirectly dependent on this crop. Low productivity is a consistent problem, particularly when dealing with smallholders.

Another focus for the short-term is improving and tightening up certification for applying rules-of-origin to Ghanaian cocoa beans. This is crucial for the producers to maintain standards and improve consumer receptiveness. Ghanaian beans are known for being high quality, but there is a need to improve production quality. Part of this will rely on improvements elsewhere, such as greater warehousing capacity, particularly at the ports, or an improvement in roads and other associated infrastructure to reduce complications within the distribution chain. While these are significant concerns, COCOBOD is optimistic about them.

Which protective measures are taken to minimise losses when global cocoa prices fall?

FOFIE: Given that it is a commodity, cocoa prices – not unlike oil – need to be maintained within certain limits: a price band. This should not be a cost-plus approach, but one based on forecasts, with estimates determining supply and demand. Farmers are then paid according to the prices set by the forecasts, and if, for some reason, the price COCOBOD receives for the beans is higher than the price paid, the difference is paid back to the original farmers as a bonus. This is a different system to that of Côte d’Ivoire, which is based on export levels and costs as opposed to futures. However, Ghana and Côte d’Ivoire have been in discussions to improve collaboration on marketing distribution systems, to ensure there is less discrepancy.

How can illegal cocoa smuggling be addressed?

FOFIE: COCOBOD is looking to reduce the impact of the black market, which has long plagued the sector. One way to do this is to address the pricing system differentials with neighbouring countries, such as Togo and Côte d’Ivoire. The higher prices offered for certain beans in Côte d’Ivoire results in illegal cross-border shipments. Smuggling can be so bad that a country, could export more cocoa than it can produce. Smuggling goes the other way as well, with growers and distributors bringing in low-quality beans from elsewhere and blending them into local high quality stocks.