Ghana And Ivory Coast Signs Cocoa Agreement

Ghana and the Ivory Coast, two of the world’s largest cocoa producers, signed an agreement on cooperation regarding its production. Together, they account for more than 40 percent of the world’s cocoa exports, but they only receive around 3% of global revenue. The new agreement targets some of the most pervasive issues in the cocoa industry, child labor, child slavery, and low pricing. The agreement also stipulates cooperation around research.

The Cocoa industry is estimated to be worth 80- 100 billion dollars annually. Despite this, cocoa farmers in Africa are poorer today than they were in the 1970 and 1980s. According to Fairtrade, “when cocoa prices were high in the 1970s, cocoa accounted for up to 50 percent of the value of a chocolate bar. This fell to 16 percent in the 1980s.” Today, cocoa farmers are estimated to live on 1.2-0.78 dollars a day in Ghana and the Ivory Coast. This includes substitution through the state. Farmers receive about 6.3% of the money of a chocolate bar that is sold. The low price of cocoa is tied to increased child labor, slavery, trafficking, and deforestation. In the ivory coast, 90% of the forest has disappeared in the last 60 years, according to the Forest and Wildlife Inventory of Ivory Coast.

In 2018, Ghana and the Ivory Coast joined forces in an effort to raise the prices of cocoa.  They signed the so-called Abidjan Declaration on cocoa on 26 March 2018. The declaration stipulates cooperation between both countries on issues in the cocoa industry, but does not specify how. The declaration requires them to coordinate on production levels, a sales policy, and research efforts. It also aims to increase local production (processing rather the growing) and regional consumption of cocoa. Moreover, the countries are required to build storehouses to avoid flooding the markets with cocoa beans which have previously resulted in lowered prices. In 2019, the countries managed to get international companies to agree to raise future prices. This premium is called “living income differential” (LID).

The premium entered into force in 2020. However, the demand for cocoa beans dropped, and it is supposedly due to COVID-19. International companies claim this is the reason they are either buying less from the region or refusing to pay the premium. There are contradicting numbers that suggest the consumption of chocolate actually increased during the pandemic. This might suggest that producers are using alternative channels to buy cocoa in an effort to avoid paying the premium, or are buying more from South America than they did previously. The company Hershey has previously been accused of trying to avoid paying the premium. Companies like Mondelēz International Inc are being accused of the same. The Coffee and Cocoa Council (CCC) has said they will be “naming and shaming” companies that fail to honor the agreement. An official from CCC told Reuters “[U]nlike Hershey, this time we are going to be tough on chocolate makers who want to bypass the LID. For us this is unacceptable.”

The cocoa industry cannot run on beans only from South American or Indonesian farmers. The industry depends on the African beans in the long term. Therefore, the countries could be able to push the prices up and give the framers a livable income. Especially if they, as researcher Michael E Odijie has suggested, join forces with other cocoa-producing countries to control and restrict the supply of cocoa. The newly signed agreement and CCC’s increased willingness to name and shame companies signals that Ghana and the Ivory Coast are serious about this issue.