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Strategies for sustainable upgrading in global value chains: the Ivorian and Ghanaian cocoa processing sectors

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  • Austrian Research Foundation for International Development

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This policy note presents policy recommendations for a sustainable development strategy targeting the Ivorian and Ghanaian cocoa processing sectors. Against the backdrop of a comparatively small share of processed cocoa exports and limited opportunities in the cocoa global value chain, industrial policies should primarily seek to leverage the increasing opportunities in the local and regional as well as in niche global export markets to further promote local value added and linkages through the processing of cocoa beans. This is particularly important in the context of the Economic Partnership Agreements (EPAs) that both countries have negotiated with the EU.
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Strategies for sustainable upgrading in global value chains: the Ivorian and
Ghanaian cocoa processing sectors
Jan Grumiller, Hannes Grohs, Werner Raza, Cornelia Staritz, Bernhard Tröster
This policy note presents policy recommendations for a sustainable development strategy targeting the Ivorian and Gha-
naian cocoa processing sectors. Against the backdrop of a comparatively small share of processed cocoa exports and
limited opportunities in the cocoa global value chain, industrial policies should primarily seek to leverage the increasing
opportunities in the local and regional as well as in niche global export markets to further promote local value added and
linkages through the processing of cocoa beans. This is particularly important in the context of the Economic Partnership
Agreements (EPAs) that both countries have negotiated with the EU.1
24/2018
Overview of the Ivorian and Ghanaian cocoa process-
ing sectors
Côte d‘Ivoire (43%) and Ghana (20%) are by far the larg-
est producers of cocoa beans with around 63% of the glob-
al cocoa beans production in 2016/17, producing mainly
Forastero cocoa beans (‘bulk cocoa’) (ICCO 2017). Both
economies are highly dependent on the exportation of co-
coa, exemplified in the export share of cocoa products in to-
tal merchandise exports of 43% in Côte d‘Ivoire (2015) and
18% in Ghana (2016) (UN Comtrade 2017). The sectors
in Côte d‘Ivoire and Ghana are regulated by the Conseil du
Café-Cacao (CCC) and the Cocoa Marketing Board (COCO-
BOD) respectively. The Ivorian cocoa sector was deregulat-
ed during the 1990s in the context of structural adjustment
programs (SAPs). Since 2011, the sector has however been
re-regulated, whereas Ghana has withstood the deregulation
and the abolishment of COCOBOD, respectively.
After cocoa beans production, the cocoa global value chain
(GVC) has two major processing steps: grinding – i.e. pro-
ducing intermediate products such as cocoa liquor, butter
and powder, and the manufacturing of chocolate and cocoa
confectionery. Fold (2002) describes the cocoa value chain
as having a bi-polar governance structure, since the relative
absence of vertical integration along the whole chain and the
high level of concentration in both processing segments put
forward two sets of actors with strong control over the value
chain. Retailers set the price of chocolate products in the
consumption market and decide whether certain products
are included in their offer. However, their control over the
supply chain is rather limited compared to the dominant role
of chocolate manufacturers and cocoa processors.
Grinding adds comparatively little value relative to chocolate
manufacturing (Gilbert 2006; Cocoa Barometer 2015) and
has smaller linkage potentials (Grumiller 2018). Since grind-
ed cocoa products are priced with different mark-up ratios
based on cocoa bean futures prices, they have a similar price
volatility as beans (Araujo Bonjean/Brun 2016). The price
volatility of ready-to-eat chocolate products, on the other
hand, is much lower since chocolate manufacturers and re-
tailers do not necessarily pass through short-term changes
of the price of beans. Origin countries with an economy de-
pendent on cocoa exports can thus only reduce income vola-
tility by increasing the export share of ready-made chocolate
products or by exerting greater control over the export price
of cocoa beans.
Cocoa processing used to be located almost exclusively in
key consumption markets (esp. the EU and the US), but mul-
tinational grinders have increasingly relocated their grinding
facilities to producer countries (origin grinding) in the con-
text of changing sector regulations, technological advances
in transportation and shifting strategies of lead firms (Fold
2002; Gilbert 2009; Araujo Bonjean/Brun 2016).
In this context, Côte d’Ivoire and Ghana were able to promote
the development of grinding sectors with different success
and with foreign-direct investment (FDI) oriented industrial
policies playing an important role (see Grumiller 2018 for
more details). Hence, the process has been FDI-led with
multinational grinders exploiting tax- and price-incentives
dominate the sectors. The expansion of grinding capacities
and output since the 1990s in Côte d’Ivoire and the mid-
2000s in Ghana (Figure 1) shifted their integration in the
cocoa GVC from supplying cocoa beans to supplying cocoa
beans and intermediate products.
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Strategies for sustainable upgrading in global value chains: the Ivorian and Ghanaian cocoa processing sectors
Figure 1: Growth of grinding output in Côte d‘Ivoire and
Ghana (thousand tons, 1972/73-2016/17)
Source: Grumiller 2018: Figure 2.
In Côte d’Ivoire, the key incentive for processors is a condi-
tional tax break on the single export tax (droit unique de sor-
tie, DUS) for processed cocoa products and tax incentives
of investment zones. The DUS (14.6% at the time of writing)
has been reformed repeatedly, but today it offers conditional
tax breaks between 1.4 and 5 percentage points for inter-
mediate products (cocoa mass, butter and powder) for pro-
cessors who agree to increase their capacities within five
years – depending on their size – between 7.5% and 15%
(ibid.). Côte d’Ivoire is also a comparatively attractive location
for processors due to low electricity prices, but the political
instability of the 2000s and beyond has constrained growth.
In Ghana, origin grinding has been furthered by a discount
on light crop beans, export-processing zone benefits and in-
directly by the political instability in Côte d‘Ivoire. Processors
in Ghana benefit from a 20% price discount on light beans.
Since light crop beans trade at a lower price on the interna-
tional market, the real discount is equivalent to around 7.5%
(COCOBOD 2017). The key challenges for the Ghanaian
grinding sector are the limited availability of light crop beans
as well as high electricity prices and unreliable power supply
(Grumiller 2018).2
In both countries, the governments seek to increase the
share of locally processed cocoa beans to 50%, but GVC
dynamics and local sector conditions severely constrain the
growth potential of the grinding sectors. First, the growth of
grinding capacities in producer countries has led to overca-
pacities and reduced margins for grinders. Second, invest-
ment and operational costs are comparatively high in Côte
d‘Ivoire and particularly Ghana, making tax- and price-incen-
tives and the subsidization of the grinding sectors at the cost
of reduced smallholders and/or governments’ income a ‘ne-
cessity’. The global overcapacities and high operational costs
have led to low capacity utilization rates in both countries.
Chocolate manufacturers continue to be primarily located
in key consumption markets. The chocolate manufacturing
sectors in Côte d‘Ivoire and Ghana are small, since export
opportunities beyond regional and niche markets are limited.
The recent growth of local and regional chocolate and cocoa
confectionary consumption together with protective tariffs
have however furthered upgrading processes into chocolate
manufacturing of both locally owned and more locally em-
bedded foreign grinders. The growth of ‘origin manufacturing’
will thus mainly be determined by the future development of
local and regional demand for chocolate products in the low-
and lower-middle income countries of (West)Africa and the
ability to capture market shares in niche export markets.
In sum, we conclude that the scope for the development
of additional forward linkages to processing in the Ivorian
and Ghanaian cocoa sectors is limited, particularly in GVCs
geared to traditional overseas end markets. Nevertheless,
there are opportunities in local and regional markets that
need to be leveraged by strategic industrial policies, which
go beyond FDI-oriented and incentive-based export promo-
tion policies and focus on the opportunities in local and re-
gional markets and related value chains (ibid.).
Policy recommendations
Based on field research conducted in 2017 as well as
a GVC- and SWOT-analysis presented in Grumiller et al.
(2018b) and Grumiller (2018), a cocoa sector development
strategy in Côte d‘Ivoire and Ghana should seek to promote
forward linkages to processing via strategic industrial poli-
cies that go beyond the FDI-oriented and incentive-based
export promotion policies. In addition, locally embedded
grinders and chocolate manufacturers need to be supported
more directly in order to benefit from the opportunities in
local and regional markets and related value chains.
1. Carefully promote a ‘grinding hub’
The promotion of ‘origin grinding’ can be beneficial but the
development of global grinding capacities and the cost of
incentives need to be carefully monitored and evaluated.
Developing ‘origin grinding’ has been comparatively costly
for Côte d´Ivoire and Ghana due to the price- and tax in-
centives, particularly as the apparent benefits in terms of
further linkages and employment creation have been small.
Many multinational grinders active in Côte d´Ivoire and Gha-
na are also not expected to functionally upgrade into choc-
olate manufacturing since they are specialized in the trade
of cocoa beans and grinding and only to some extend in the
production of industrial chocolate. The promotion of grinding
should thus carefully consider the costs relative to the long-
term benefits, and in particular promote Ivorian and Ghana-
ian grinders that are more likely to functionally upgrade into
higher value-added chocolate manufacturing in the future.
The goal of both countries to grind 50% of the total cocoa
bean production in the next few years thus needs to be criti-
cally examined particularly in the case of Ghana, where elec-
tricity costs are high and the sector needs to be subsidized.
Côte d´Ivoire and Ghana currently have different incentives
in place to promote ‘origin grinding’. In Côte d´Ivoire, the DUS
reform of 2011 removed the costly incentive to entertain or
increase grinding capacity in Côte d´Ivoire. The DUS reform
600
500
400
300
200
100
0
1972/73
1974/75
1976/77
1978/79
1980/81
1982/83
1984/85
1986/87
1988/89
1990/91
1992/93
1994/95
1996/97
1998/99
2000/01
2002/03
2004/05
2006/07
2008/09
2010/11
2012/13
2014/15
2016/17
40
35
30
25
20
15
10
5
0
Grinding in Côte d‘Ivoire (lhs)
Grinding in Ghana (lhs)
% of locally processed beans in Côte d‘Ivoire (rhs)
% of locally processed beans in Ghana (rhs)
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Strategies for sustainable upgrading in global value chains: the Ivorian and Ghanaian cocoa processing sectors
at the end of 2016 however re-introduced tax reductions
in the case grinders commit themselves to increase their
capacities. The current incentive scheme is likely to have
positive impacts on the grinding capacity and will thus argu-
ably benefit Côte d´Ivoire in the longer term. Policy makers in
Ghana have less policy flexibility due to comparatively higher
electricity costs, which makes grinding unprofitable. Ghana
offers a discount on light beans and tax incentives, which
are the main reasons for increases in grinding investments
in the last decade. The need to maintain the discount in order
to sustain the grinding sector in Ghana has been very costly.
Its longer-term benefits will depend upon an eventual de-
crease in electricity prices, the latter allowing for the reduc-
tion or abolishment of the discount and the further develop-
ment of linkages to chocolate manufacturing. A transparent
monitoring and evaluation system for the long-term benefits
and costs of the incentive structures and the introduction of
conditional incentives as in the case of Côte d´Ivoire could
improve the net benefits. The conditionality of the incentives
could be linked to additional investments, capacity utilization
rates, employment creation or the creation of further linkag-
es to chocolate manufacturing.
Locally-owned grinders should furthermore be support-
ed with credit lines in order to reduce the working capital
requirements for the purchasing of beans. Credit lines for
grinders are of major importance, since non-multinational
firms face high costs of finance. In Ghana, such a scheme
had to be abolished after various – mostly Ghanaian – grind-
ers did not repay their debts in 2014/15. This led to several
of these firms going bankrupt. Multinational grinders should
furthermore be incentivized to foster linkages with the lo-
cal grinding sector, in particular with respect to technology
transfer. The limited bargaining power of the government vis-
à-vis multinational grinders might however impede such a
strategy, particularly in the case of Ghana.
The growth of the grinding sector would be particularly ben-
eficial, if a ‘critical mass’ were to be achieved in the longer
term and the import of cocoa beans from different regions at
a competitive price became feasible, thus easing the ‘single
origin challenge’ (see ACET 2014). The global and national
overcapacities in the grinding sector however call for careful
expansion planning. A government-backed import scheme –
potentially in cooperation between Côte d´Ivoire and Ghana
– would potentially mitigate the volatility of local bean supply
and enable grinders to globally source best-priced and dif-
ferently flavored beans (ibid.).
2. Extend chocolate manufacturing for the local
and regional market
The manufacturing of chocolate products (incl. branding) is
– apart from retailing – the segment with the highest share
of value added in the cocoa value chain. Côte d´Ivoire and
Ghana should promote chocolate manufacturing for the lo-
cal, regional and – potentially – African market. The poten-
tial for chocolate manufacturing in Africa has grown due to
increasing consumption of chocolate products particularly in
the context of urbanization processes, a rising middle class
and the expansion of supermarkets (Tamru/Swinnen 2016).
The recent trend has been accompanied by grinders in Côte
d´Ivoire (the French chocolatier Cémoi and the Ivorian grind-
er Tafissa) and Ghana (the Ghanaian grinder Niche Cocoa)
functionally upgrading to chocolate manufacturing, and the
development of a lively artisanal manufacturing sector. Most
multinational grinders are however not expected to invest in
chocolate manufacturing, since they do not see their core
competencies in this activity.
Chocolate manufacturers should particularly focus on the
local and regional ECOWAS-market and should grow in line
with local and regional demand. The ECOWAS-market has
the advantage of being protected by a 35% common exter-
nal tariff (CET) for chocolate product imports (WTO 2017).
The tariff has not been affected by the different interim or
regional EPAs concluded with the EU over the last years
(ECOWAS-EPA 2015; Ghana-iEPA 2016; Côte d´Ivoire-iE-
PA 2009). It is likely that the expansion of ‘origin manufactur-
ing’ in the future will be driven both by multinational choco-
late manufacturers, Ivorian and Ghanaian grinders and small
artisanal manufacturers for niche markets. Côte d´Ivoire and
Ghana as well as other West African countries with a grind-
ing industry (such as Nigeria) are key competitors in the
potential future development of a regional chocolate man-
ufacturing hub. From the perspective of multinational firms,
Côte d´Ivoire has an advantage over Ghana in developing
chocolate manufacturing for regional exports due to lower
electricity costs. Ghana, on the other hand, is particularly val-
ued for its political stability.
Local chocolate manufacturers should also try to obtain
market shares in other African markets, though such an en-
deavor will have to deal with international competition from
multinational firms, which benefit from economies of scale
and scope as well as well-established brands and marketing
strategies. The EU (and companies manufacturing in the EU)
will also gain a competitive advantage vis-à-vis Côte d´Ivoire
and Ghana with respect to chocolate exports to African coun-
tries outside the ECOWAS region, in the context of the liber-
alization of chocolate products in various EPAs. Apart from
the ECOWAS EPA, only a few other EPA tariff schedules (e.g.
incl. for the EAC region, Madagascar and Zimbabwe) exclude
chocolate products from tariff liberalization.
Hence, the key question in the development of chocolate
manufacturing in Côte d´Ivoire and Ghana is the growth in lo-
cal, regional and African consumption of chocolate products
in a region where a culture of consuming cocoa products
is lacking and non-tariff measures (e.g. infrastructural and
bureaucratic obstacles) impede regional exports. In general,
the promotion of chocolate consumption should target ur-
ban consumers with middle class lifestyles and increasing
purchasing power, since cocoa products are luxury products
in Africa. The promotion of consumption in Côte d´Ivoire and
Ghana should be leveraged to support local chocolate man-
ufacturers to learn and gain experience for regional exports.
Marketing campaigns and public procurement programs
could also support local consumption. The new Cocoa Strat-
egy in Ghana, for example, will likely aim to include cocoa
products in school cafeterias to introduce young Ghanaians
to cocoa products.
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Strategies for sustainable upgrading in global value chains: the Ivorian and Ghanaian cocoa processing sectors
Further, in order to promote cocoa product consumption in
(West) Africa successfully, significant R&D will be necessary
to develop products suitable for different regional tastes and
the hot climate. Particularly Ivorian and Ghanaian chocolate
manufacturers need to enhance their respective know-how
in product development. Governments as well as develop-
ment cooperation programs could therefore support R&D
of local chocolate manufacturers. The increase in local and
regional demand to support ‘origin manufacturing’ could be
leveraged by increasing ECOWAS tariffs on chocolate prod-
ucts, e.g. by triggering infant industry clauses included in
the WTO-rules and the EPAs in order to support local man-
ufacturers and reduce imports particularly from the EU, in
the case that chocolate product imports from the EU would
increase despite the 35%-CET. Non-tariff measures in the
ECOWAS region also need to be reduced in order to pro-
mote the growth of regional exports of chocolate products.
Industrial policy in Côte d´Ivoire and Ghana should further-
more incentivize local chocolate manufacturing. In Ghana,
the currently reviewed new Cocoa Strategy could introduce
a 2% discount on the main crop for local chocolate man-
ufacturing. In Côte d´Ivoire, the export tax reform of 2017
introduced a discount on export taxes for companies that
are willing to expand their capacities with a 0% export tax
on ready-to-eat chocolate products. In addition, industrial
policies should particularly promote functional upgrading of
Ivorian and Ghanaian grinders. Functional upgrading should
be promoted via subsidized credit lines and measures to
support the transfer of know-how. Côte d´Ivoire and Ghana
might also consider investing in education programs in order
to be able to supply a skilled labor force necessary for choc-
olate manufacturing. Ghana also needs to invest further in its
electricity infrastructure in order to reduce production costs
in capital-intensive industries such as grinding and chocolate
manufacturing.
3. Follow a niche strategy for global chocolate exports
Chocolate manufacturing in Côte d´Ivoire or Ghana for ex-
ports to global key consumption markets on a large scale is
economically unviable. However, Ivorian and Ghanaian com-
panies could develop niche strategies to participate in key
consumption markets and other markets with similar climate
conditions. The latter would include the exportation to mar-
kets with demand for more heat-resistant chocolate prod-
ucts. But it has to be taken into account that these markets
also have become contested by multinational firms and/or
are protected by tariffs (cf. van Huellen 2014).
The former strategy would be to market special brand-
ed products for high-priced markets. In order to be able to
compete on the highly competitive and increasingly sat-
urated market for high-priced and -quality niche products,
the brands/products need to be original and differentiate
themselves from other niche products. Examples of such
brands or products include chocolate that is manufactured
in Côte d´Ivoire or Ghana (e.g. by cooperatives) as well as
branders and marketers owned by Ivorian or Ghanaian co-
operatives, thus particularly benefiting farmers beyond fair
producer prices (e.g. the company Divine Chocolate). In the
latter case, the differentiation of the product goes beyond
traditional certification (UTZ, fair trade, rainforest alliance)
and farmers also benefit from the value added in chocolate
manufacturing.
Significant market research and marketing is necessary in
order to being able to penetrate the increasingly saturated
market of high-prices and high-quality niche markets. The
marketing of chocolate products, where farmers participate
in value creation of chocolate manufacturing, could be as-
sisted by the creation of a new certification model. Devel-
opment cooperation could assist in setting up joint ventures
between farmers’ cooperatives and investors in developing
such brands and niche strategies benefiting farmers and
their cooperatives.
4. Support input sectors for grinding and
chocolate manufacturing
The export-oriented and FDI dominated grinding sectors in
both countries had for many years an enclave-like character
with limited employment and linkage creation, but the recent
functional upgrading processes of grinders has furthered
the growth of the chocolate manufacturing sectors. The
grinding sectors have some backward (e.g. to the transport-
ing and cardboard packaging industry) and forward linkages
(esp. to chocolate manufacturing) to the local economy (see
Grumiller 2018).
Chocolate manufacturing (incl. marketing and branding) has
broader linkage potentials relative to grinding, but the link-
age effects of the manufacturing sectors in Côte d’Ivoire and
Ghana have been almost negligible due to the small scale
of the sectors. Potentials for backward linkages exist to the
milk (milk powder is generally imported), sugar (Côte d’Ivo-
ire has sugar production) and more sophisticated packaging
(which is generally imported from China) industries, also in
order to reduce input prices. Forward linkage potentials exist
with respect to design, branding, marketing and distribution.
The potential to develop backward linkages to chocolate
manufacturing, such as the creation of a milk industry, might
however be curtailed by the recently ratified EPAs between
the EU and Côte d´Ivoire as well as Ghana, which will further
liberalize the importation of bulk milk powder from the EU,
albeit from low levels.
5. Continue support of cocoa production and strategies
to raise producer and export prices
In addition to the development of forward linkages to pro-
cessing, it is also important to continue the policy focus on
cocoa production and trade per se in order to ensure higher
and sustained income for cocoa producers, particularly by
promoting process and product upgrading. The regulation
systems in both countries have generally benefited the live-
lihood of farmers. COCOBOD and CCC should continue to
improve the livelihood of farmers via the promotion of pro-
ductivity and quality as well as the diversification of income
sources via education programs, the promotion of farmers’
organizations, improvements in the efficiency and effective-
ness of government institutions and improvements in the
supply of inputs and access to credit in order to enhance
the application of good agricultural practices and promote
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Strategies for sustainable upgrading in global value chains: the Ivorian and Ghanaian cocoa processing sectors
the rehabilitation of farms to improve soil and tree quality.
Social and environmental issues, such as child labor and
deforestation processes, need to be addressed, when for-
mulating policies targeting cocoa production. The promotion
of certification should also play a role in this regard, but the
problem of high costs relative to the limited recognition of
different certificates has to be dealt with.
6. Foster regional cooperation to support processing
and linkages
Expanding regional cooperation could be beneficial for Côte
d´Ivoire and Ghana in the production, processing and market-
ing of cocoa beans. Cooperation between the two countries
could include knowledge transfer on the governmental (e.g.
research and development, policy experience, etc.) and pri-
vate sector level (e.g. regarding product development, mar-
ket analysis, etc.) and joint policies such as the promotion of
local and regional demand for chocolate and cocoa confec-
tionary products. A regional initiative (ACET 2014) to import
beans from different origins could also benefit the grinding
sector to mitigate the ‘single origin challenge’. The further
development of backward linkages such as in the packaging
industry for the grinding or chocolate manufacturing sector
or inputs such as fertilizers and pesticides for cocoa produc-
tion would also benefit from regional cooperation.
Ideally, the cooperation between the two major producers
Côte d´Ivoire and Ghana could be fostered in order to exert
market power and reduce their dependency on international
markets and prices for example via the regulation of cocoa
production or buffer-stocks. A ‘cocoa cartel’ that tries to go
beyond increased cooperation and coordination is likely to
face various difficulties (see Grumiller et al. 2018b), in par-
ticular since cocoa is easier to substitute and produce rela-
tive to oil. There have been recent signs that the cooperation
between Côte d´Ivoire and Ghana as well as industrial policy
measures in the respective cocoa sectors are expanding in
the context of the ‘Abidjan declaration’ and a USD 1.2 billion
loan request from the African Development Bank (AfDB) in
2017. The loan could finance – amongst other things – the
building of storage and warehousing facilities necessary for
buffer stocks, the promotion of local and regional processing
and consumption, with a particular focus on chocolate man-
ufacturing and branding as well as the establishment of a
stabilization fund and a cocoa exchange commission for the
management of production (AfDB 2017).
Conclusion
This policy note argues that the scope for process and prod-
uct upgrading in the cocoa sectors in Côte d’Ivoire and Gha-
na remain constrained by local sector conditions and global
GVC dynamics. Existing opportunities should nevertheless
be leveraged by strategic industrial policies. The growth of
the grinding sectors is particularly hampered by high oper-
ational and investment costs, global overcapacities and the
dominance of multinational firms who mainly seek to exploit
tax- and price incentives in origin countries. The growth of
the chocolate manufacturing sector is mainly held back by
the limited economic viability of manufacturing chocolate in
Côte d’Ivoire and Ghana for the main overseas export mar-
kets. Opportunities thus reside mainly in the development of
domestic regional consumption of chocolate products, given
the emergence of an urban middle class in African coun-
tries. Given these framework conditions, industrial policies
should go beyond the global export- and FDI-oriented tax-
and price-incentive structure. In addition, locally embedded
grinders and chocolate manufacturers need to be supported
more directly in order to benefit from the opportunities in
local and regional markets and related value chains
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Strategies for sustainable upgrading in global value chains: the Ivorian and Ghanaian cocoa processing sectors
1 The policy note builds on the findings of two comprehensive studies con-
ducted by the Austrian Foundation for Development Research (ÖFSE)
on the potential impact of the EPAs. Grumiller et al. (2018a) provide a
comprehensive analysis of the EPAs with regard to the potential macro-
economic effects as well as its implications on the Ghanaian cocoa as
well as mango sectors. Grumiller et al. (2018b) present more compre-
hensive policy recommendations for a sustainable development strategy
for the two respective sectors in Côte d’Ivoire and Ghana based on a
Strengths-Weaknesses-Opportunities-Threats (SWOT) analysis. A more
detailed discussion of the cocoa processing sectors is published in Gru-
miller 2018.
2 In Ghana, a reform of the Cocoa Sector Development Strategy in order
to intensify support for local processors (e.g. a 2% discount on the main
crop for chocolate manufacturers) and increase demand in the local
market (e.g. school feeding programs) is currently discussed.
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Sensengasse 3, 1090 Wien Tel.: + 43 1 317 40 10 E-Mail: office@oefse.at URL: www.oefse.at
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ty-based value chains: the Ivorian and Ghanaian cocoa processing sectors.
In: Journal für Entwicklungspolitik, 34(3), forthcoming.
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(2018a): The economic and social effects of the Economic Partnership
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Disclaimer:
The research project “Preferential market access and sustainable development: the case of value chains”, of which this policy note is a
result, has been facilitated by the German Federal Ministry for Economic Cooperation and Development (BMZ). All views expressed in this
policy note are the sole responsibility of the authors and should not be attributed to BMZ or any other institution or person.
Bernhard Tröster
Researcher ÖFSE
b.troester@oefse.at
Jan Grumiller
Researcher ÖFSE
j.grumiller@oefse.at
Cornelia Staritz
Senior Researcher ÖFSE
c.staritz@oefse.at
Hannes Grohs
Research Assistant ÖFSE
h.grohs@oefse.at
Werner Raza
Director ÖFSE
w.raza@oefse.at
Authors information
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Technical Report
Full-text available
The European Union (EU) has recently concluded or is currently in the process of negotiating a number of bilateral free trade agreements with both industrialized countries, e.g. Canada and Japan, and developing as well as emerging economies. Negotiations with the latter group include inter alia the Mercosur countries, Vietnam, as well as the African countries of the African, Caribbean and Pacific (ACP) group and Tunisia. Negotiations on the EU-Tunisia Deep and Comprehensive Free Trade Agreement (DCFTA) were launched in 2015 and are still ongoing. Trade agreements between advanced and developing countries like those negotiated by the European Union and the ACP countries as well as with Tunisia, respectively, pose both opportunities and threats to the partner countries involved. While results from model-based economic impact assessments typically indicate that the macroeconomic effects of such agreements tend to be small, the long-term effects depend on the structural change triggered by the agreements. It is a well-known contention in the development economics literature that the marked differences in economic capacities and capabilities between advanced and developing economies pose particular problems that need to be dealt with, if longer-term impediments to late economic development are to be avoided. Thus, in this report, the focus is directed towards discussing the challenges of productive development as well as of export promotion in selected EU partner countries and export sectors in the context of trade liberalisation. To this end, four export sectors in three African countries are analysed, namely (i) the cocoa and mango sectors in Côte d’Ivoire and Ghana, and (ii) the olive oil and the textile and apparel sectors in Tunisia. With the exception of the mango sector, the other sectors – cocoa, olive oil and textile and apparel – are well-established sectors in the respective countries. Attempts to functionally upgrade into processing for the agriculture-based cocoa and olive oil sectors are however recent, while important consolidation processes have been under way in the context of increased global competition and political instability in the context of the Arab Spring in the textile and apparel sector in Tunisia. Mango exports have only recently become a thriving export sector in Côte d’Ivoire and Ghana and have profited from strong demand growth in advanced and increasingly also emerging countries. All sector case studies are located in African countries, which figure among the prioritized partner countries for EU development cooperation. For each scrutinized sector, key policy recommendations for upgrading and diversification into higher value-added products are proposed. Zurück zur Übersicht
Technical Report
Full-text available
The European Union (EU) has concluded or currently is in the process of concluding Economic Partnership Agreements (EPAs) with the group of African, Caribbean and Pacific (ACP) countries. Instead of the unilateral approach prevalent until the Lomé Agreements, the EPAs are bi-regional reciprocal agreements, which commit both parties. Unsurprisingly, the negotiations on the EPAs have thus proofed challenging and highly controversial. Given their political sensitivity, the EPAs must deliver tangible benefits to the African partners. Thus, the trade liberalization and further changes facilitated by the agreements must trigger sustainable economic development for the African partner countries, i.e. economic growth that is socially inclusive and respects ecological boundaries. EPAs are therefore primarily to be judged against this yardstick, which is the approach adopted in this study. Apart from assessing the impact of the EPAs and investigating export potentials, the study also aims at providing policy recommendations for EU Development Cooperation in the latter’s efforts to support development-friendly implementation of the EPAs. The report starts with an assessment of the main provisions of the three EPAs covered – the South African Development Community EPA (SADC-EPA), the Economic Community of West African States EPA (ECOWAS-EPA) and the East African Community EPA (EAC-EPA), thereby focusing on the market access offer and the provisions in the agreement which potentially limit the developmental policy space as well as offer a potential to strengthen sustainability aspects in African partner countries. Then the implications of the three specific EPAs with a focus on Mozambique, Ghana and Uganda, respectively, are scrutinized. The respective analyses provide assessments of the economic impact of the three regional EPAs on Mozambique, Ghana and Uganda, based on simulations with the ÖFSE Global Trade Model. Based on interviews with stakeholders during field research in the three countries, implementation challenges associated with the agreements are discussed. Further, different sectoral case studies are analyzed to investigate the potential of the EPAs on the export side, highlighting the opportunities and challenges for export promotion policies in the context of global value chains and related lead firm strategies as well as local competitiveness conditions. The five sectoral case studies include the cotton, textile and apparel sectors in selected SADC countries with a focus on Mozambique, the cocoa and mango sectors in Ghana, and the coffee and fish sectors in Uganda.
Article
Full-text available
World cocoa production and exports are dominated by West Africa. Post-independence governments inherited and maintained marketing board or caisse de stabilisation institutions which organized and, in certain cases also monopolized, both internal and external marketing of cocoa exports. These institutions were dismantled or otherwise reformed in a move towards liberalized marketing which started in the mid nineteen eighties. The liberalization objectives were to increase competition in the marketing chain, reduce the costs associated with bureaucratic administration, to ensure that cocoa marketing ceased to be a burden on the state and on donors and to obtain a higher share of world prices for the farmers. I assess the extent to which these objectives have been realized and comment on the current policy agenda.
Article
Full-text available
Value chain analysis extends traditional supply chain analysis by locating values to each stage of the chain. This can result in a “cake division” fallacy in which value at one stage is seen as being at the expense of value at another. Over the past three decades, the coffee and cocoa industries have witnessed dramatic falls in the producer (i.e. farmer) share in rental price. Both industries are highly concentrated at the processing stage. Nevertheless, developments in the producer and retail markets are largely unconnected and there is no evidence the falls in the producer share are the result of exercise of monopoly-monopsony power. The explanation of declining producer shares is more straightforward – processing, marketing and distribution costs, incurred in consuming countries have tended to increase over time while production costs at the origin have declined.
Article
This paper presents a comparative analysis of the development of forward linkages to cocoa processing in the Ivorian and Ghanaian cocoa sectors. The paper argues that Côte d’Ivoire and Ghana were able to promote the grinding sectors with varying success in the context of shifting Global Value Chain (GVC) dynamics, foreign-direct investment (FDI) oriented industrial policies and ongoing distributional conflicts. The grinding sectors in both countries should not currently be selected as high priority sectors for strategic industrial policies, due to their enclave-like character and limited opportunities for additional linkage development, with the important exception of forward linkages to chocolate manufacturing. The recent growth of local and regional chocolate and cocoa confectionery consumption, as well as protective tariffs, have furthered functional upgrading into chocolate manufacturing of locally owned and more locally embedded foreign grinders and chocolate manufacturers. The paper concludes that the opportunities for additional forward linkage development to cocoa processing in the Ivorian and Ghanaian cocoa sectors are limited, particularly in GVCs geared to traditional end markets. Hence, the paper argues that the growing opportunities in local and regional end markets, as well as related value chains, need to be leveraged through strategic industrial policies that go beyond tax or price incentives and focus on supporting locally owned and locally embedded foreign companies.
Article
Like most global agro-industrial commodity chains today, the global cocoa - chocolate industry is buyer-driven. However, the chain is characterized by the lead role of a few transnational companies in two different segments: the grinders (processors of cocoa)and the branders (manufacturers of chocolate), a structural pattern identified in other so-called turn-key industries consisting of contract manufacturers and brand-name firms. The paper examines two important spatial sub-systems of the chain: the national cocoa bean supply system in Ghana and the regional cocoa trading-storing-grinding complex in the Zaanstreek, Amsterdam. The structural patterns and relationships in these sub-systems suggest that the dynamics of ‘bi-polar’ buyer-driven chains is best comprehended in terms of various types of containment strategies of the leadfirms, i.e. efforts to defend and improve their positions on the global market by creating competition among their suppliers and expanding their customers.
Back to the Roots: Growth in Cocoa and Chocolate Consumption in Africa
  • S Tamru
  • J Swinnen
Tamru, S./Swinnen, J. (2016): Back to the Roots: Growth in Cocoa and Chocolate Consumption in Africa. In: Squicciarini, M./Swinnen, J. (eds.): The Economics of Chocolate. Oxford, 439-456.
West Africa's Cocoa Sector. The Need for Regional Integration and Value Addition at Origin. In: Background paper for the African Development Bank
  • S Van Huellen
van Huellen, S. (2014): West Africa's Cocoa Sector. The Need for Regional Integration and Value Addition at Origin. In: Background paper for the African Development Bank.
Disclaimer: The research project "Preferential market access and sustainable development: the case of value chains", of which this policy note is a result, has been facilitated by the German Federal Ministry for Economic Cooperation and Development (BMZ)
WTO (2017): Tariff Download Facility. http://tariffdata.wto.org. Disclaimer: The research project "Preferential market access and sustainable development: the case of value chains", of which this policy note is a result, has been facilitated by the German Federal Ministry for Economic Cooperation and Development (BMZ). All views expressed in this policy note are the sole responsibility of the authors and should not be attributed to BMZ or any other institution or person.