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Moving toward a sustainable cocoa sector in Ghana

Cacao pods are collected and heaped on the forest floor, where fermentation begins. Photo by J. Raneri/Bioversity International
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FTA COMMUNICATIONS TEAM

A farmer in Ghana prunes a Carabobo cacao tree, which is originally from Venezuela. Photo by R. Markham/Bioversity International

Ghana is the second-largest producer of cocoa in the world and in recent years has emerged as the world’s principal supplier of Fairtrade-certified cocoa — about 6% of national production falls under that scheme. Multisector collaboration is needed to address persistent challenges and to support Ghana’s overall move to a sustainable cocoa sector.

The world’s favorite treat has never been more popular. In the past decade, the chocolate industry’s demand for cocoa has increased by 12% and production has barely been able to keep pace. Growing demand, particularly from emerging economies like China and India, is good news for the industry.

At the same time, about 6 million cocoa producers — more than 90% of them smallholders — face significant challenges: low productivity, poverty in the producing communities, and limited infrastructure to connect producers with buyers. Improved and diverse planting stock that can resist pest and diseases, thrive in poor soils and grow in changing climatic conditions is in short supply.

With an annual production of about 750,000 to 1 million tons, Ghana is the second-largest producer of cocoa in the world. In recent years, Ghana has also emerged as the world’s principal supplier of Fairtrade-certified cocoa, with about 6% of national production falling under that scheme.

Yet a new report carried out for Fairtrade Africa by the World Agroforestry Centre (ICRAF) and Bioversity International, supported by the CGIAR Research Program on Forests, Trees and Agroforestry (FTA), concludes that monetary benefits derived from Fairtrade cocoa remain low, contributing on average an additional 2% of cocoa income for certified farmers. At the same time, cooperatives use part of the Fairtrade Premium to provide their members with farming inputs and training, and to fund overall community development.

Read more: Fairtrade cocoa in Ghana: taking stock and looking ahead

Cacao pods are collected and heaped on the forest floor, where fermentation begins. Photo by J. Raneri/Bioversity International

This relates to the fact that only part of the Fairtrade Premium of US$200 per ton is channeled through the cooperatives to the producers as a cash bonus (16 to 65% of the premium), while the remainder is given as farming inputs like fertilizers, agrochemicals and planting materials (up to 38%), or allocated to fund trainings, cooperative administration, and certification fees (20 to 84%) and overall community development (up to 15%).

One way that voluntary standards like Fairtrade try to empower producers is through the creation of new business organizations such as rural cooperatives. These efforts can go hand-in-hand with those of the cocoa industry, which supports farmers in rejuvenating their aging cocoa plantations.

For the cocoa sector to become sustainable, it will also be critical to attract younger farmers to become cacao producers, empowering them to generate enough income to sustain their families and communities. Rural cooperatives can support this aim but, as the report points out, increased membership of these organizations is only sustainable if sales under Fairtrade terms grow at least at the same rate, which is currently not happening.

The report also points at the importance of diversified production systems, allowing the farmers to be less reliant on cocoa as a principal source of income. Cacao can be planted together with other crops, in particular fruit and timber trees that provide shade for the young cacao saplings and help improve nutrition and income.

Cacao pods are seen on a tree in Ghana. Photo by J. Raneri/Bioversity International

Such diversification makes for more resilient production and livelihood systems. For example, a study* of the relationship between cocoa cultivation and the conservation of biological diversity found that “cacao farms with diverse shade have the potential to support greater local diversity and act as a more effective refuge for some tropical forest organisms than alternative lowland tropical crops, particularly annual crops and cattle pasture.”

The third main finding was that Fairtrade farmers have improved access to training compared to non-members — 99% of cooperative members reported having received training on good agricultural practices, such as pruning and replanting, versus 51% of non-members.

Still, average productivity on Fairtrade-certified farms is within the range of the national average and additional efforts are needed to increase cacao productivity.

Read also: Sweeter deals: Prospects for expanding Fairtrade cocoa in Ghana

Dietmar Stoian from Bioversity International, one of the authors of the study added: “This study provides Fairtrade International, the four recently Fairtrade-certified cocoa cooperatives sampled, and other stakeholders in Ghana’s cocoa sector with a baseline for future impact assessments. The indicators developed for household- and cooperative-level measurements point at potential areas of impact and allow for continuous improvement.”

“In a follow-up study in Ghana, we are now taking a broader look at the country’s move toward a sustainable cocoa sector by identifying the actual and potential role of impact investment, social lending and other responsible finance schemes and their interactions with diverse certification systems to ensure environmental and social impact in addition to financial returns.”

The report was well received by Fairtrade International, and their management’s response concludes that: “We recognize that the coops have many support needs and we agree that key challenges include growing sales, increasing cocoa productivity, supporting agricultural diversification, and strengthening of cooperatives to be able to achieve greater member engagement and gender equality.”

As a result of this study, Fairtrade International will be reviewing the Fairtrade Premium.

Originally published on the website of Bioversity International


The report Baseline for Assessing the Impact of Fairtrade Certification on Cocoa Farmers and Cooperatives in Ghana, jointly elaborated by the World Agroforestry Centre and Bioversity International, is based on data gathered from 422 households belonging to four Fairtrade-certified cooperative unions, and 80 households from non-certified cooperatives. Data was collected based on indicators from Fairtrade’s Theory of Change and the 5Capitals methodology for assessing the poverty impacts of value chain development developed by the Tropical Agricultural Research and Higher Education Center (CATIE), the World Agroforestry Centre and Bioversity International.

This research is part of the CGIAR Research Programs on Forests, Trees and Agroforestry (FTA) and Policies, Institutions and Markets (PIM) and is supported by CGIAR Fund Donors. We thank Transfair Germany and Fairtrade International for funding the project and the donors who support FTA and PIM through their contributions to the CGIAR Funds. We extend our gratitude to reviewers from Fairtrade International, the Fairtrade Foundation, Fairtrade Africa and Transfair Germany. We also appreciate the willingness of representatives of Cooperative Unions and Licensed Buying Companies COCOBOD, who generously shared their insights and experiences.

*Rice, R.A. and Greenberg, R., 2000. Cacao cultivation and the conservation of biological diversity. AMBIO: A Journal of the Human Environment 29 (3): 167-173.

  • Home
  • Fairtrade cocoa in Ghana: taking stock and looking ahead

Fairtrade cocoa in Ghana: taking stock and looking ahead

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FTA COMMUNICATIONS TEAM

Overview

Some of the global chocolate industry’s biggest players, such as Ferrero, Mars, and Hershey, have expressed their commitment to achieve a sustainable cocoa sector by the year 2020.

As the world’s second largest producer of cocoa, Ghana is also interested in moving towards sustainable cocoa production. Voluntary standards systems, such as Fairtrade, play an important role in providing independent third-party evidence of progress towards sustainability. Fairtrade does so by offering a framework for producers and buyers to engage in more equitable business relations, with reduced price risks for farmers and opportunities for cooperative and community development through investments enabled by the Fairtrade premium.

Over the past years, Fairtrade has significantly advanced in Ghana’s cocoa sector. Between 2009 and 2014, annual volumes of Fairtrade cocoa produced in the country increased from 481 MT to 54,600 MT. This impressive growth is linked to the evolution of Kuapa Kokoo as leading cocoa cooperative, and to the creation of numerous new cooperatives that obtained Fairtrade certification over the past few years. Founded in 1993 and Fairtrade certified since 1995, Kuapa Kokoo has grown into the world’s largest Fairtrade certified cocoa cooperative.

Journal article published in Sweet Vision, Vol. 61 (3), p. 14-17.

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  • Sweeter deals: Prospects for expanding Fairtrade cocoa in Ghana

Sweeter deals: Prospects for expanding Fairtrade cocoa in Ghana

Photo: Dietmar Stoian/Bioversity International
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FTA

Photo: Dietmar Stoian/Bioversity International
All photos: Dietmar Stoian/Bioversity International

An important focus of the CGIAR Research Program on Forests, Trees and Agroforestry (FTA) lies on governance, trade and investment in value chains and the effects on smallholders and small-scale rural businesses. A value chain of particular importance to FTA is cocoa, both for its economic implications (roughly US$100 billion annual sales) and relevance for rural livelihoods (about 60 million people derive a significant part of their income from cocoa).

As global chocolate manufacturers increase their commitments to achieve a sustainable cocoa sector in the near future, there is a growing need for third-party evidence of progress towards this goal. Voluntary standards systems, such as Fairtrade, provide such independent testimony, but they themselves require science-based evidence of their contributions to enhanced sustainability.

FTA researchers at World Agroforestry Centre (ICRAF) and Bioversity International have examined the contribution of Fairtrade to support cocoa smallholders in their pursuit of sustainable livelihoods and cocoa cooperatives to develop into viable businesses. This blog presents first findings emerging from a baseline study in Ghana that lays the foundation for assessing the impacts of Fairtrade on cocoa growers and their cooperatives.

Ghana, the world’s second largest cocoa producer, has ratcheted up its contribution of Fairtrade certified cocoa to world supplies within 5 years: production rose from just below 500 tons in 2009 to 54,600 tons in 2014. Around 6.1 percent of the total cocoa production in Ghana now runs under the label Fairtrade (up from less than one percent five years ago). Roughly 5,000 farmers are organized in Fairtrade-certified cocoa cooperatives.

 

Ghana2“From a global perspective the numbers look even more impressive,” says Dietmar Stoian, Principal Scientist at Bioversity International and one of the FTA researchers involved. “In 2014, Ghana contributed 38 percent to global sales of cocoa under Fairtrade terms.”

“Definitions of sustainable cocoa vary though,” knows Divine Foundjem, Scientist at ICRAF who led the fieldwork in Ghana. “Voluntary standards systems, such as Fairtrade, are critically important as they provide third-party evidence of the industry’s move towards sustainability.”

What makes Fairtrade stand out?

The Fairtrade label stands for more equitable business relationships between cocoa growers, their cooperatives and buyers purchasing from them. Special arrangements allow farmers and their cooperatives to reduce price risks and to benefit from premiums that can be used in many ways. For example, Fairtrade guarantees a floor price (of currently US$ 2,000 per metric ton) that kicks in when the world market price falls below that level.

Since December 2007, though, the latter has constantly been above US$2,000/MT (it currently stands at about US$3,100/MT) and, consequently, growers’ monetary benefits have principally materialized in form of the Fairtrade premium (US$200/MT), which is paid directly by international buyers. Cooperatives decide how to use the premium according to Fairtrade regulations. In many cases, they invest part of it in cooperative and community development and use the remainder for topping up the price paid to their members. Fairtrade growers also benefit from technical assistance provided by local Fairtrade staff and NGO partners who build capacities for good production practices and awareness for eliminating the worst forms of child labor.

What are some challenges for cooperatives and farmers?

 

Ghana5The biggest challenge faced by the cooperatives in terms of Fairtrade is the limited volume of certified cocoa that is effectively sold under Fairtrade conditions – a prerequisite for commanding the Fairtrade premium. The current share of a bit less than 50 percent of Fairtrade-certified cocoa effectively sold as such is clearly below expectations.

Given the considerable expense to establish and maintain a well- functioning cooperative it is of high priority for the cocoa cooperatives and Fairtrade to establish reliable market outlets for the whole volume of Fairtrade-certified cocoa, so as to enable the growers to fully benefit from their efforts.

A further challenge for the cooperatives is their high dependence on a limited number of service providers—in most cases, a single NGO. The service offer of any such provider will hardly do justice to the complex and varying service needs of the cooperatives in different stages of their development. Overreliance on a single service provider puts cooperatives in a risky position for developing them into self-sufficient, viable businesses.

“Cooperative development will strongly depend on improving their financial and overall business management,” says Jason Donovan, Leader, Value Chains and Transformational Change at ICRAF who leads the study. “The newly formed cooperatives lack basic infrastructure and business skills, and they rely on the Fairtrade premium as only source for covering their basic operational costs,” he adds.

So far, only one of the 11 Fairtrade-certified cooperatives in Ghana, Kuapa Kokoo, has been authorized to purchase cocoa on behalf of the Ghanaian Cocoa Board (COCOBOD) and, thus, cover its costs through commercial activities.

The basic functions of the newly formed cocoa cooperatives include linking their members with buying companies licensed by COCOBOD that can establish links with Fairtrade markets, and with NGOs and others that provide services to cocoa growers. For some, Kuapa Kokoo, which was established in 1993, may serve as an example of how cooperatives can develop into an established licensed cocoa buyer with several thousand members.

 

Ghana3“Such processes often take decades, though, and considerable amounts of resources,” says Foundjem. “It is therefore critical for local stakeholders and Fairtrade to define if future efforts should aim at building cooperative capacity to engage as licensed cocoa buyers, or to keep investments low and aim at building agile organizations that facilitate links with buyers, Fairtrade, NGOs and others, without engaging in the purchase of cocoa,” he adds.

Asked about the outlook for Fairtrade cocoa in Ghana, the scientists express “cautious optimism”. Cautious – because building viable cooperatives implies significant investments of human and financial resources over longer periods of time. Optimism – because the unique institutional setup of Ghana’s cocoa sector could facilitate more coordinated and larger scale interventions in support of poor households who grow cocoa.

A central role accrues to COCOBOD, a government agency that supports farmers with regard to seed production, pest and disease management, quality control, research, and marketing. This extensive service function, supported by NGOs and development projects, would make it possible to establish a relatively simple, low-cost cooperative model focused on facilitating relations with buyers, service providers, and Fairtrade.

“This would require better coordination between governmental and non-governmental service providers,” says Donovan. “A national cocoa roundtable, or similar mechanism, could be the way ahead,” he adds. “We also recommend an innovative system of monitoring, evaluation and learning between cooperatives, Fairtrade and their partners. Such a system would allow joint analysis and reflection among key stakeholders. Our baseline study provides a sound basis for such a system which, in turn, facilitates continuous improvement,” concludes Stoian.

What’s next?

In line with the recommendation to establish an integrated system of monitoring, evaluation and learning, future research can support a process of continuous improvement by answering questions like:

  • How can benefits from Fairtrade be expanded among existing and additional cooperatives and their members?
  • Which collaborative models between Fairtrade and other service providers are most promising towards this end?
  • What additional enabling conditions are needed to address broader challenges faced by cocoa cooperatives and their members, particularly those that impede viable pathways out of poverty?

“Such questions could be addressed in follow-up studies, including impact assessments using the baseline data for comparison, and we are keen to continue this work with Fairtrade International and partners in Africa and beyond,” says Donovan. The ICRAF and Bioversity team is currently finalizing the Ghana report and a similar report on Côte d’Ivoire, and will condense the findings in a journal article that discusses commonalities and differences between these two leading cocoa producers as well as opportunities for scaling the findings beyond West Africa.

This work is supported by CGIAR Fund Donors.

For more information:

Jason Donovan (ICRAF): [email protected]

Divine Foundjem (ICRAF): [email protected]

Dietmar Stoian: (Bioversity International): [email protected]

 

 


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