Stricter sustainability rules in the EU and Switzerland could exclude West African cocoa from European markets.
However, a cocoa farmers’ database in Ghana could be a game changer.
Held every three years, the sixth European Union-African Union in February was an occasion for African leaders to drum up investment in their countries and for European players to show they haven’t abandoned the continent to China.
The event, held in Brussels this year and postponed several times due to the Covid pandemic, raised €150 billion (CHF156.5 billion) in investment pledges for energy, transport and digital infrastructure in Africa.
It was also an opportunity for the heads of two of the world’s biggest cocoa producers – Ghanaian President Nana Akufo-Addo and his Ivorian counterpart Alassane Ouattara – to get something off their chests. Both expressed their concerns to the president of the European parliament, Roberta Metsola, about proposed new EU rules on deforestation that could hurt their cocoa exports; Ghana and Ivory Coast together account for over 60% of global cocoa bean production.
In November 2021, the EU Commission tabled a proposal for a regulation on deforestation-free supply chains. Cocoa was one of one of five global commodities (along with beef, palm oil, soy and coffee) selected for more regulation. The report states that cocoa alone is responsible for 7.5% of all EU-driven deforestation globally.
One of the options on the table is a complete ban of cocoa products linked to deforestation from entering the EU market. The proposal admitted that such a regulation “will affect sectors that are essential for the economies of particular countries” such as Ghana and Ivory Coast and that it would require “intensified bilateral engagement”. The legislative proposal has to be agreed on and adopted by the Council of the EU and the European parliament, which can take up to three years.
Like the EU, Switzerland also has sustainability targets for cocoa even though they are not binding. The goal, pledged in 2017, is for 80% of all cocoa imports to come from sustainable sources by 2025. This is achieved via two means: through verified sustainability programs run by Swiss companies themselves or through direct purchase of certified cocoa products.
Just like EU regulations, these targets impact cocoa farmers in producer countries like Ghana and Ivory Coast.
Europe is the biggest buyer of cocoa beans for further processing in the world. Close to 40% of the annual global cocoa bean harvest was processed in Europe into cocoa mass, cocoa butter, cocoa powder, chocolate or other cocoa products.
Compared to the EU, Switzerland imports relatively small amounts of cocoa beans directly from West Africa but Swiss-based multinational companies like Nestlé source around 60% of their supply from the region.
Swiss companies, to comply with the EU’s and Switzerland’s deforestation targets, have also made individual commitments to completely end deforestation in their supply chains: Nestlé by 2020 (pushed back to 2025) and both Lindt & Sprüngli and Barry Callebaut by 2025.
The corporate drive for zero deforestation cocoa – along with that of European Union – is having serious consequences in West Africa. In November 2020, Nestlé announced that it was excluding 4 300 coca farmers in Ghana and the Ivory Coast from its supply chain to meet its sustainable cocoa commitments. Their fault: growing cocoa in protected areas and designated forest land.
In Ivory Coast, 3,700 farmers were excluded as their fields were located in classified forests which are lower grade forests compared to national parks but still no-go zones for certification agencies. In Ghana, 668 cocoa farmers were found to be cultivating 912 fields in national parks and forest reserves.
“Some of these farms have been established for over 20 years but fall within what is officially designated as ‘forest’,” said Nestlé.
Just a few months after Nestlé’s move to exclude non-compliant farmers, Ghana’s cocoa board (COCOBOD) announced their plans to develop a nationwide Cocoa Management System (CMS) digital database project. It aims to capture comprehensive data on cocoa farmers such as the location of their farms, household composition and farm size with a view to bring greater transparency to country’s cocoa sector including data needed to identify deforestation risks.
Currently, a bag of cocoa procured in Ghana can only be traced back to a cocoa growing community and not to the farm where the beans came from. This lack of in-depth transparency has made private players like Nestlé invest in their own traceability schemes. This is the first time a government body is developing such a traceability database for its commodities.
“For the first time, every programme, every policy intervention, plan and projection, every infrastructural project needed in cocoa-growing areas will be based on verified data,” said the Ghanaian Vice President Mahamudu Bawumia who was present at the launch on October 23, 2021.
COCOBOD wants to register 1.5 million cocoa farmers into the CMS and estimates the project to cost a little over US$10 million. It will be financed from the US$200 million second tranche of a US$600 million loan to finance productivity enhancement measures signed by Ghana in 2019 with a loan syndicate that includes the African Development Bank, Japan International Cooperation Agency, the Development Bank of South Africa and investment banks including Credit Suisse, Cassa Depositi e Prestiti Spa and the Industrial and Commercial Bank of China Limited.
The investment is expected to pay off in the long run as the database will also be used by COCOBOD for all payment related transactions. Registered farmers will be issued a Cocoa Identification Card that is also expected to serve as a credit card to buy inputs like fertilizers. Farmers will also be paid for their cocoa beans via the CMS reducing the risk of corruption and theft associated with cash payments.
“In fact, our goal is to make Ghana the most digitized economy in Africa within the next two years,” said Vice President Bawumia at the CMS announcement ceremony in 2021.
The CMS will be an important tool as it will allow farmers – especially those whose farms are on the boundaries of forest areas – to contest the exclusion of their cocoa from international supply chains. Nestlé itself had remarked that the excluded local farmers may contest the classification of their lands as forests. However, until the CMS is in place, they have no means to prove their claims.
Farmers already struggling to make ends meet without having to contend with proving their innocence as far as chopping down forests is concerned. Take 54-year-old Kyei Baffour, a father of nine who has been farming cocoa since the early 1980s. He has now risen to the position of Chief Farmer in Ataase Akwanta, a village in New Edubiase.
This hasn’t counted for much as, in the good years, his 25-acres worth of farmland nets him about 15 bags of cocoa per acre and CHF923 ($987) a year. This is an amount he considers insufficient.
“It is not enough that you work for a whole year and make just GHS 7 000. It is basically a loss.” Baffour didn’t bother to compute what he makes in sub-par years. “In a bad year, what I make doesn’t take me anywhere,” he laments.
Pension promise
Baffour is concerned about the lack of communication on the CMS scheme. He doesn’t have a Cocoa Identification Card and is waiting for his community’s farmers to be registered. He says, it is almost like the launch of the scheme never happened.
“Since we attended the launch ceremony, they (the government) haven’t said much about the scheme, and we have not given it much thought,” he says.
To win the support of farmers like Baffour and to convince them to register with the CMS, COCOBOD proposed to link pension payments to the CMS database. Despite being enshrined in law since 1984, most cocoa farmers, like the bulk of Ghana’s informal sector, have no pension to look forward to.
A proposed pilot project linking the CMS to pensions for cocoa farmers was thus a big deal for the country. The president himself turned up at the announcement ceremony held in Kumasi in the cocoa-growing Ashanti region on December 1, 2020.
It was six days to a general election and President Nana Akufo-Addo, was chasing a second term. Some viewed the launch as an attempt to court favour with cocoa farmers, whose welfare has not matched Ghana’s standing as the world’s second-largest producer of cocoa (accounting for 17% of global production of 4.8 million tonnes in 2019).
Under the pilot project, each time a farmer sells cocoa to COCOBOD, a minimum 5% deduction will be paid out into a special fund. Farmers will receive an alert on their mobile phones once the amount has been credited. The government will also credit 1% of the value of the cocoa sold to the farmer’s account. Seventy-five percent of contributions will be invested in a retirement account that will be accessible only after the farmer’s retirement. The remainder will be in a savings account the farmer will be able to access when necessary.
The Chief Executive of COCOBOD, Joseph Boahen Aidoo said the CMS will also facilitate the prompt payment of claims to beneficiary farmers.
In 2021, the CMS and pension scheme was finally piloted in the New Edubiase district, the highest cocoa producing district in the Ashanti Region in southern Ghana. It was expected to be fully operational nationwide by the end of 2021.
Despite the initial promise, Ghana’s cocoa farmers, most of whom are smallholders, and make about $1 a day, have doubts the pension scheme will kick off this year. This is despite the CHF 9.82 million ($10.53 million) allocated to it for the 2021/2022 cocoa harvest season.
Some of it is due to reluctance by a segment of cocoa farmers like Anane Boateng, the president of the Ghana National Cocoa Farmers Association that boasts over 100,000 members. His association split from the official Ghana Cocoa, Coffee and Sheanut Farmers Association in 2019 and bills itself as “the voice of the ordinary small holder cocoa farmer in Ghana”.
Boateng was not happy when the CMS and pension pilot began in New Edubiase because he wanted the government to immediately roll out the scheme nationwide rather than in a pilot zone. He is also frustrated by the failure of successive governments to deliver pensions for all cocoa farmers that was promised to them in 1984.
“We said we will not agree to the pilot. This is because, they have forfeited the law,” he stressed.
Fiifi Boafo, COCOBOD’s head of public affairs acknowledged the delays in implementing the CMS and pension scheme.
“What is clear is that the structures were just not there, and, of course, the commitment of the government to also make it work,” Boafo says of the almost 40-year delay to implement the pension scheme. He, however, insists that the board is on track to roll out the pension scheme by the end of 2022.
Registration for the CMS is also making progress. Over 90% of the estimated 1.5 million cocoa farmers in Ghana have started the registration process for the cocoa management system, according to Boafo.
