“ The Economic juggernaut on brown gold” - Political Economy of Cocoa Value Chain in Ghana

Sep 25

“ The Economic juggernaut on brown gold” - Political Economy of Cocoa Value Chain in Ghana through the prism of world’s omnipotent sweet tooth.

Introduction

Ghana’s cocoa sector has historically been the backbone of the Ghanaian Economy. It contributes significantly to Gross Domestic Product (GDP), foreign exchange, and employment. Aspects of the cocoa industry, such as input supplies to farmers and cocoa pricing, feature prominently in national and local politics. However, there are very few studies on the benefits that pertain to various actors in the cocoa sector to socio-economic development is affected by tenure insecurities, inadequate labor supply, lack of accessible credit, shortage of farm inputs, climate change, income and gender inequalities and corruption in the cocoa sector.

Political settlement analysis in the cocoa value chain of Ghana

In alignment with the political settlement apparatus, interactions among various interest groups have created different rents for different actors in the cocoa sector. Policy development in the industry went through four periods. The first phase ( 1920-1957) was the colonial era, characterized by a reasonable corporate governance system and a struggle between European traders and farmer cooperatives for monopoly over the internal marketing of cocoa. The second period (1957 -1980) was the early post-independence era with a state-controlled economy, characterized by neopatrimonialism and over-taxation of cocoa farmers to create rent for maintaining power. The third period (1980-2000) marked the introduction of economic reforms and liberalization adopted in response to international pressure and the financial crisis. Propelled by the reforms, a gradual increase in producer prices contributed to rising production costs for farmers as subsidies were removed. The fourth period (2000-present) is characterized by further liberalization and public-private partnerships, thereby gearing towards modernization of cocoa farming, promoting environment-friendly farming activities, women empowerment, and protection of children in cocoa growing areas. However, these partnerships have yet to significantly improve outcomes for the cocoa sector's youth, women, children, and other marginal groups.

Social differences in the cocoa value chain

Significant social differences exist across the entire cocoa value chain. Individuals in the production wing, particularly the farmers and farm laborers, are generally more poverty-stricken than those in the processing and marketing fields. There are also significant ‘ horizontal ‘ social differences amongst representatives of the same value chain segment. In the production segment, for instance, large-scale cocoa farmers tend to be wealthier and have better chances of receiving technical and financial support from both the administration and private stakeholders than smallholder farmers. Young farmers struggle to get sizable financial grants because they generally do not have assets to serve as collaterals. Vulnerable groups such as women, the youth, and migrants also find it challenging to access farming lands.

Challenges with the Cocoa value chain

All segments of Ghana’s cocoa value chain are tentacled by severe loopholes that could significantly impact the sustainable delivery of cocoa to both domestic and international markets. Cocoa production is affected by tenure insecurity, labor shortage, pests, diseases, lack of access to credit, climate changes, and inadequate supply of raw materials, especially fertilizers and agrochemicals. The significant challenges in the internal marketing apparatus are inefficient economic infrastructure, such as poor transportation networks and the meager price of cocoa beans. Recently, the financial hardships have been aggravated by the COVID-19 pandemic. In the production segment, the closure of land borders has affected farmers’ access to inputs, as some of the cocoa processing companies that depend on imported materials for packaging, reported that the closure of international borders made it difficult to transport their goods to the rest of the African nations. The pandemic and associated lockdowns also affected some of the companies' implementation of marketing and product promotion campaigns, as a considerable number of events at which the products were sold were called off.

Looking forward

While Ghana’s cocoa sector has the potential to contribute to economic development, there arises an urgent need to address various constraints ranging from tenure insecurities, inadequate labor supply, absence of accessible credit, shortage of farm inputs, changing weather patterns, socio-economic abysm, rent-seeking behaviors, and the emerging COVID-19 related economic hurdles.