Ghana boosts local cocoa processing to increase value added

As the world’s second-largest producer of cocoa after neighbouring Côte d’Ivoire, Ghana watches its production levels and its position in the global market closely. The country’s smallholder farmers produce an estimated 20% of the world’s cocoa, and cocoa accounts for 8-12% of Ghana’s GDP and 40% of its foreign exchange earnings, according to the UN Conference on Trade and Development. In 2017 global cocoa prices were forecast to increase slightly over 2016, although challenges, such as oversupply and lower prices than those of the early 2010s, are expected to continue in the short term.

By The Numbers

In the record-breaking production year of 2011, Ghana’s cocoa revenue totalled $1.9bn, comprising 7% of GDP, according to the African Development Bank (AfDB). The Ghana Cocoa Board ( COCOBOD), the sector regulator, reports that the industry employs 800,000 families in six of the 10 regions. In 2016 the global drop in prices made it a challenging year. In June 2017 Hackam Owusu-Agyeman, COCOBOD’s chairman, told local press that due to the fall in global cocoa prices, Ghana had lost $1bn in revenue during the first six months of 2017. Local press also reported that Owusu Afriyie Akoto, the minister of food and agriculture, predicted a further drop after a 10% year-on-year decline in revenue from cocoa exports in the 12 months to February 2017. This trend is likely to persist in the medium term. June 2017 estimates from Bloomberg indicate that cocoa futures had fallen 33% in the past year, and average prices were not expected to rise by more than 10% over the following 12 months.

The goal is to boost production levels back to Ghana’s record-setting capacity of 1m tonnes in 2011. In June 2017 media reported that 2016/17 domestic cocoa production had reached 882,175 tonnes, the highest level in six years. While higher production capacity is encouraging, it could result in oversupply, which – if not properly managed – could lead to a further fall in prices.

In the long term, increasing temperatures and climate change are expected to affect the segment as cocoa is highly vulnerable to drought. “Climate change is the one of the most critical factors for the long-term sustainability of Ghana’s cocoa production,” Charity A Sackitey, managing director of Barry Callebaut Ghana, told OBG.

Government Action

The government instituted new policies in 2017 in an effort to increase cocoa production and mitigate volatile global prices, including subsidising fertiliser and providing free cocoa seeds. Joseph Opoku Gakpo, a journalist on the environment desk at Multimedia Group, told OBG that this provision of new seeds is important as old trees lose productivity. “We are not seeing new cocoa farms springing up; rather farmers are using the same farms that have been in operation for the last 10-15 years.” The government also announced that it would provide financial support to farmers cutting down old trees, by supplying seeds and offering extension services.

In mid-2017 the AfDB expressed willingness to provide Ghana and Côte d’Ivoire with a $1.2bn loan to increase output and guarantee stable revenue, providing a cushion during low-price periods. Part of the funding would go towards storage facilities that would allow for flexibility when crops are released into the market. Ghana was also reportedly planning to tap its stabilisation fund to pay cocoa farmers constant prices.

Beyond The Bean

Furthermore, exportation of beans alone adds little value to the economy. As noted in the “Africa Agriculture Status Report 2017”, published by Alliance for a Green Revolution in Africa, increased capacity for smallholder farmers to partake in processing and advancement in the value chain will contribute to the development of the agriculture sector in general and the cocoa segment in particular. The report notes that even the smallest degree of local processing leads to better access to markets, technology and financial services for agricultural players. President Nana Akufo-Addo announced in 2017 a commitment to improve refinement processes and ensure that over 50% of domestically produced cocoa beans are processed.