Ghana: chocolate sector marches ahead
Cocoa is Ghana’s third highest economic contributor after gold and oil and makes the nation the world’s second largest producer of the ‘brown gold’. While Ghana’s in situ cocoa bean treatment business has been patchy at best, government authorities have recently made local cocoa transformation and consumption official priorities. This new policy approach appears to be yielding results both domestically and as regards a rising tide of Ghanaian artisan chocolatiers who are seeking to capture value from the ‘Made in Ghana’ stamp.
Data from the Cocobod (Ghana Cocoa Board), the State entity in charge of managing the country’s cocoa industry, indicate that approximately 80,000 farming families (different sources put the number of cocoa-growers at between 700,000 and 1,000,000) are employed across six of the country’s ten regions and that the industry is providing a living for several million others, including cocoa trading company staff and those working in both the production and farm inputs businesses. Most of the coco growers are tenant farmers working areas of on average 2 hectares and generating yields of approximately 400 kilos per hectare. Cocobod calculates Ghana’s total cocoa surface area at 2.7 million hectares but with only 1.9 million actually productive. The nation’s cocoa bean harvest generates revenues of approximately $2 billion (€1.76 billion, FCFA 1,154 billion), accounts for roughly 15% of its exports, and contributes close to 10% of national GDP. Annual production volumes have risen in recent years to 850,000 tonnes, or 20% of global production, and the government goal is to exceed 1,000,000 tonnes by 2020.
Latest numbers from the cocoa regulator indicate continued rising cocoa production volumes. Between 01 October (the start of the 2018/19 campaign) and 31 January 2019, Ghana will have harvested 644,319 tonnes of officially graded and stamped cocoa, 11% ahead of the same period in the previous 2017/18 campaign. Farm gate purchases are also expected to have risen by 10% to 674,725 tonnes.
Observers expect the numbers to continue to rise in the months ahead, not least because of favorable production environment.
Boosting local transformation
In early 2019, Joseph Boahen Aidoo, Chief Executive of Cocobod, stated that Ghana was seeking to treat at least 50% of its national cocoa harvest locally. The senior administrator believes this lofty goal is achievable because Ghana’s transformation capacity has grown significantly in recent years to just under a third of total production volumes. He explained, “We are currently in a position to treat approximately 300,000 tonnes of cocoa domestically, up 19% from the previous number of 252,000 tonnes.” This goal was officially set in 2017, and reiterated again in 2019, and is evident within the spirit of the joint Abidjan Declaration (in French) signed by Ghana and Ivory Coast on 26 March 2018. The declaration states that both nations ‘affirm their commitment to process a major part of cocoa domestically, (…) and invite the private sector, notably the African private sector, to invest massively in cocoa processing in Africa’, in order to secure more influence in the global cocoa economy and better protect themselves from market fluctuations.
Cocoa transformation within Ghana is facing several hurdles. Firstly, and despite the start of a turnaround, local demand for cocoa-based products remains weak, and secondly, transformation and production costs are quite high with tariffs imposed on semi-finished products imported from Europe on the rise. In light of this, the Ghanaian authorities have recently implemented a series of initiatives aimed at developing a local cocoa treatment industry, notably by way of a package of incentives including the removal of import taxes on relevant factory machines and equipment, a ten-year corporation tax freeze, and a 20% price reduction for local purchasers of small harvests who grind cocoa beans domestically.
Ghana has also decided to partner with China in an additional move to boost domestic transformation rates. In November 2018, Ghana signed a protocol agreement with the China National Complete Engineering Corp. that notably includes loans for the equivalent of $1.5 billion (€1.32 billion, FCFA 866 billion) that are geared to boosting cocoa treatment and production. According to the online publication B&FT that specializes in raw materials, Ghana and China are intent on building a mega-transformation factory in the western Ghanaian district of Sefwi-Wiawso that will be capable of treating a target 450,000 tonnes of cocoa. The cost of this project is set to be $60 million (€53 million, FCFA 35 billion), with 35% being financed by the Export-Import Bank of China. If this project succeeds, then Ghana will have skyrocketed its transformation ratio from 30% to 80%.