Cocoa is often called ‘brown gold’. To the 3.2m cocoa farmers in Côte d’Ivoire who live on less than $3 a day that nickname must seem painfully ironic.
In June, the country’s government tried to do something about this. In cooperation with Ghana – between them, the two countries produce around 65% of the world’s cocoa – this former French colony agreed that it would not sell a tonne of ‘brown gold’ for less than $2,600.
That is easier said than done. (For some weeks, the price has been hovering around $2,240-2,300.) Nathan Hayes, Africa analyst at the Economist Intelligence Unit, says it is unclear how – or whether – the governments will get purchasers to buy-in to this minimum price. Neither country, he suggests, has enough cold storage and warehouse facilities to store beans for any length of time. Other members of the World Cocoa Producers Organisation, which were not consulted about the minimum price, do not support it.
With both countries’ governments facing elections in 2020, the political rationale for the measure is obvious – and in August, Ghana raised the price it pays to farmers by 5.2%, the first increase in four years. Industry analysts have criticised the pricing pledge as heavy-handed and possibly counterproductive. They may have a point but most people concede that more has to be done to protect farmers’ income from market volatility.
What kind of volatility are we talking about? In the short term, the price of cocoa can vary immensely. The International Institute for Sustainable Development estimated that between 1983 and 1997, the world price fluctuated between 60% and 170% of its average. The price has been driven up or down by such events as civil war in the Côte d’Ivoire, spikes in production and market speculation. In 2010, an anonymous investor, dubbed ‘Chocolate Finger’, bought $1bn of cocoa, 7% of the world’s supply, enough to make two bars of chocolate for every person on the planet. The gamble backfired as outraged investors pulled out and prices crashed.
Such trends partly explain why many Ivorian cocoa farmers’ earnings have not increased in recent decades. As Jacques Morisset, the World Bank’s lead economist for this West African republic notes, other trends are even less encouraging, whether it be supply or demand. “On the demand side, new social and environmental concerns among consumers (opposition to child labour and the destruction of forests) will increase costs for producers who must now certify their cocoa through increasingly sophisticated monitoring systems.” A shift to luxury brands could be problematic because, Morisset says, “Ivorian beans are generally not of the highest quality”.
If anything, the supply-side challenges look even more daunting. There is little new land available and the land already being used is likely to become less fertile as climate change takes effect. Epidemics and old age will, Morisset estimates, force farmers to replace one in three cocoa trees in the coming years. Age is a problem for the workforce too. The average age of an Ivorian cocoa farmer is now around 45.
So what is to be done? In the industry itself, Morisset calls for the widespread introduction of new techniques (already being piloted by the country’s Centre for Agricultural Research) which have quadrupled yields on certain farms, improved traceability by enabling producers to talk directly to buyers via mobile phone (Cargill has already successfully tested such a scheme) and investment in the processing industry to keep a greater share of the revenue in the domestic economy.
Some of these ideas are already being implemented. The government is studying the feasibility of a plan to trace every bean, which it hopes to introduce by December 2020. With investment from the likes of Cargill, the country expects to grind a record 847,000 tonnes of cocoa beans by 2022.
Morisset’s final proposal is the most controversial: for the state to help modernise the sector rather than, as he puts it, “viewing cocoa production merely as a source of revenue and a means of filling its coffers through extensive taxation and less-than-transparent marketing processes”. Such an attitude is reflected in the fact that Ivorian farmers only receive 60% of the export price for cocoa, whereas their counterparts in Cameroon and Nigeria are paid 80%.
The broader challenge for Ivorians is to avoid the so-called ‘resource curse’. In effect, this is the tendency for abundant natural resources – oil being the classic example – to unbalance the economy and stimulate political corruption as the elite fights over the spoils. The availability of a lucrative, seemingly inexhaustible, natural resource can obscure economic realities and discourage attempts to diversify the economy. At the moment, cocoa accounts for 15% of Côte d’Ivoire’s GDP.
President Alassane Ouattara, like the leaders of many countries in a similar predicament, is banking on tourism. Earlier this year, the government asked the African Development Bank to support a $5.8bn plan to develop aviation, a leisure park and a large conference centre in Abidjan, the country’s principal port and, with a population of 4.7 million, largest city. One flagship project for this strategy is Ile Flotante – French for ‘Floating Island’ – a seaside resort in the Abidjan laguna made from 700,000 discarded plastic bottles and other debris.
The digital economy, which already accounts for 7% of the country’s GDP, may prove a more reliable boost for diversification. Tax and duty-free zones are being set up for tech companies near Abidjan and further tax cutting measures are planned, but will this be enough to achieve the government’s target of doubling the sector’s size by the end of 2020?
A better goal might be to target corruption, which, even in its petty manifestations, protects incompetent domestic companies from foreign competition. In one recent example, highlighted by Morisset, an Ivorian husband bought a birthday present for his wife from China for $36 plus a $100 DHL delivery fee. Ivorian customs then charged him $360 in duties to release the package. The husband did not file a complaint because the appeal could take weeks and DHL would charge him $17 for each extra day in storage.
As a former IMF economist, Ouattara knows better than most that the sooner the country’s impressive economic expansion – GDP is expected to grow 7.5% this year – benefits the 40% of the workforce employed in agriculture the better. Though poverty levels have improved slightly – down from 51% to 46.3% – the country still has a low rank (170 out of 189) on the Human Development Index. Literacy rates are stubbornly low – just over half of men can read, compared to 37% of women – as is life expectancy (53.58 years, compared to 58.07 years in Cameroon and 67.15 years in Senegal).
Morisset’s hope is the government does not waste the imminent crisis and seizes the opportunity to build a new economy. The uncertainty of elections in October 2020 – there is an outside chance that Ouattara’s presidential predecessor, Laurent Gbagbo, who lost a brief, bloody civil war in 2011, may be able to stand – may distract the government from long-term challenges. That said, Ouattara knows that Côte d’Ivoire cannot bank on ‘brown gold’ forever.
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