Reform and liberalization essential for the cocoa sector of Ivory Coast
The pivotal nature of the cocoa business in Ivory Coast means that its operational dynamic is worthy of reflection and scrutiny. For some time there have been concerns about degrees of influence in the sector, with a widespread belief that multinational chocolate buyers/manufacturers have a disproportionate amount of power, such that this results in unfair competition. Local exporters continue to face a range of challenges, chiefly the way the current system favours large foreign players to the detriment of local operators.
Indeed, the business landscape, especially that of the supply chain in Ivory Coast, raises legitimate concerns as it is largely dominated by foreign stakeholders, generally the multinationals with the financial and logistical muscle backedup with influential business and political networks. As a consequence the entire market of cocoa providers (producers, cooperatives and contractors) is drawn to the multinationals, which secures the latter lucrative secure sustainability partnerships. Thus at the present time the most significant industry in the country finds itself concentrated in the hands of a few, chiefly foreign, players. No one should ignore the hidden realities of the Ivorian cocoa sector. We would do well to reflect on the implications of the prevailing system.
Ivory Coast, like Ghana and other major cocoa producers has a number of cocoa cooperatives, naturally they will endeavour to take their beans where they will be able to sell the largest volume for the best possible price. So if they can achieve those objectives through working with a multinational they do it even if they know that their action will result in a market concentration that in the medium to long term stifles competition and thus is unhealthy for the industry as a whole.
Unfortunately, such interest very often conflicts with those of the intermediaries (generally the Ivorian exporters) who often reap sizeable profit margins without a real commitment to farmers/growers issues, by arbitrating on prices between the farmers and the multinationals/chocolate makers. It is worth noting that the multinationals are invariably willing to pay higher prices to ensure the effective implementation of sustainability programs in respect of the farmers and the environment. Currently it is de rigeur for major chocolate manufacturers to trade on their ethical credentials.
Sadly, the quest for green credentials sometimes results in ‘green washing’ where companies go through the motions of being committed to ethical practices that are kinder to the environment. Very often, certification processes involve fake cooperatives with fake farmers and being certified nowadays as a cooperative in the Ivory Coast can sometimes resemble a dodgy business deal rather than a real independent and transparent process. There is anecdotal evidence that some local exporters often fuel such practices for their own benefit without a real involvement on the ground among the farming communities. Moreover, there is the added concern that some cocoa beans are actually being grown and harvested on land that has been designated as protected forests and so this in turn raises serious questions about certification, traceability, provenance and fraud.
As things stand the likes of Ivorian farming cooperatives are prevented from having direct access to the international market, without the appropriate export or processing licences they are unable to sell their produce whether this be raw or manufactured for better prices. Local exporters are in a key position, and yet there is a certain amount of irony in the fact that they often complain about seeming unfair competition from the multinationals, whilst also praising the same multinationals in order to maintain their own position as intermediaries between the said multinationals and the farmers/growers through the allocation of certified cocoa contracts.
The conditions vis-à-vis financial and operational capability requirements for acquiring an export licence are quite challenging for cooperatives which can hardly meet such requirements unless they have solid connections via local exporters and multinationals into funding mechanisms and the political corridors of power. Cooperatives and farming organizations are almost absent from the processing industry and lose out financially by being marginalised by the prevailing system. This lack of a voice for farmers and growers is not only bad news for the industry, but ends up being a key factor in certain ethical practices being poorly implemented or in some instances near non-existent. Tackling issues such as the use of child labour or the use of banned pesticides and herbicides require a holistic approach, one that is considerably strengthened if farmers and farming cooperatives are given a real voice, and what is more are actually listened to.
Whilst it is fair to say is that certain conflicting forces and vested interests exist, the solution to this issue lies not in confrontation with the Ivorian exporters or the multinationals or between stakeholders in the supply chain but instead by a progressive decentralization of the market. This decentralization would require easier access of local organized farming organizations to the international market and a genuine reform of the cocoa sector with a view to a structured liberalization. Liberalization is necessary in order to prepare for the advent of a free trade market with added value involving the creation of a label of origin and an emphasis on quality, processing, traceability, and social and ecological impact. Every stakeholder would conduct its business activities in a way that suits its own interests by taking into account the fluctuations of the international market and the private agreements sealed between business partners. By this reform, it would be possible to end the stabilization system (fixed prices) by implementing a free price system agreed between the stakeholders. There is no reason why such model would not be profitable to every single stakeholder of the supply chain including the Ivorian exporters and the multinationals if they know how to satisfy the farmers and pay them a fair price to carry out ethical growing and working practices. With cocoa making up 15% of Ivory Coast’s GDP according to the African Development Bank it is clear things cannot be permitted to bump along as they have done for years. Reform and liberalization could well prove beneficial for a range of stakeholders.
Mark T. Jones LL.M
Consultant Futurist
Twitter: @marktjones500
You must be logged in to post a comment.