Côte d’Ivoire: a cocoa industry at a crossroads

Engaged in a battle to impose more favorable compensation on local cocoa producers, Ivorian authorities must learn from their past failures, believes our columnist Micée Dare.

By Michée Dare

For attentive observers of history, the battle fought for months by the various players in the Ivorian cocoa industry is reminiscent of the years 1987-1988. At that time, the late President Félix Houphouët-Boigny, anxious to obtain a better price for producers, tried to impose his conditions on the international market by holding back hundreds of thousands of tons of beans for more than a year. Without success. The Ivory Coast resold its cocoa stock at a loss.

Unfavourable terms of trade

A third of a century later, the fight for fairer compensation for farmers is more topical than ever: out of the $100 billion generated annually by the global cocoa industry, bean producers receive on average only 6.6% of the income from the entire value chain, according to the latest Cocoa Barometer, an annual sector study financed by a consortium of NGOs (Oxfam, Südwind Institut, Public Eye…). Most of the revenue is still generated by the chocolate manufacturers, who process the cocoa themselves.
In order to reverse this unfavorable balance of power for their producers, Côte d’Ivoire and Ghana decided in 2020 to form a kind of « Cocoa OPEC ». Last June, the world’s two largest producers of beans, which account for 2/3 of the world’s production, announced that they would no longer sell their cocoa below $2,600 per ton and that they would insert a « decent income differential (DRD) » clause in export contracts in the order of $400 per ton.

It remains to be seen whether, more than three decades away, the similar nature of the Ivorian authorities’ motive - to impose a deal that is more favorable to their producers - will not come up against the same result, the failure of the action taken. For in the meantime, the economic crisis born of the Covid-19 pandemic has passed through, massively contracting the international demand for beans. An unfortunate situation that has left several cocoa farmers with their crops under their arms. As a result, from Abidjan to San Pedro, the largest cocoa port in the sub-region, stocks of cocoa beans are now counted in hundreds of thousands of tons. Worse, there is now a risk of damage due to lack of conservation. The latter, most often multinationals, are now offering a price well below 1,000 CFA francs per kilo (1.5 euros), including DRDs. Many observers of the sector even estimate that the realistic price level today would be between 750 and 800 CFA francs/kg (between 1.1 and 1.2 euros). A price which, if it were to continue, would represent a real slap in the face for the Ivorian State.

Transformation, a sustainable solution

Under these conditions, processing remains the best solution to bring about a lasting change in the situation, as it is the only way to benefit from a redistribution of cocoa revenues that is still largely in favor of actors downstream in the value chain (traders, processors, distributors, etc.). Axel Gbaou, founder of the brand « Le Chocolatier Ivoirien » says nothing else when he states that « the human resources to process cocoa locally exist […] ». A strong advocate of this approach, he has been involved in this path for several years, convinced that the current crisis facing the industry is an opportunity to reverse the model. He is not the only one who believes this: after the launch at the end of September of the construction of two new cocoa processing plants in Abidjan and San Pedro (each with an annual capacity of 50,000 tons), another cocoa bean grinding unit with a production capacity of 72,000 tons was inaugurated at the end of November in Duékoué, in the Guémon region. This will eventually double the current processing capacity of the Ivory Coast (from 500,000 tons to 1 million tons per year) and perhaps, finally, win the battle for a fairer compensation to producers, initiated more than thirty years ago. At the beginning of the 21st century, the Ivorian cocoa industry is at a crossroads.