Pricing is a debating point in the cocoa sector, dominating stakeholder conversations, especially among African cocoa producers. This is a result of the historically low cocoa prices that do not provide a fair income to farmers involved in cocoa production.
Despite the announcement of the living income differential (LID) — a wage support programme implemented to improve the living circumstances of impoverished cocoa farmers — by both Côte d’Ivoire and the Ghana Cocoa Boards, there are still questions on the sustainability of this intervention. Stakeholders in the African cocoa industry need to rethink its strategy to improve farmers’ livelihood, by increasing their earning potential through value chain efficiency, facilitated by public-private sector partnerships.
Interventions aimed at lifting farmers out of poverty are often based on the assumption that the interventions, alone, are enough. On the surface, the decision to increase the farm gate price of cocoa and LID by an additional $400 a tonne on all cocoa contracts appears to be a solution to lifting farmers out of poverty. However, even if farmers’ incomes were to increase through increased farm gate prices, other structural issues such as small farm sizes and low productivity levels will still keep these farmers below the poverty line.
For cocoa farmers to earn a fair wage from their input, issues such as ageing plantations, lack of adequate training and financing as well as direct access to the market need to be addressed. These structural issues pose a more significant threat on the livelihood of cocoa producers in Africa. Price increases on their own are not enough to lift the poorest farmers out of poverty.
Price interventions like the LID must go hand in hand with other policies and programmes to increase the volume and quality of beans produced. Achieving this will require a multi-stakeholder collaboration involving both the private and public sector aimed at not only improving farmers’ quality of life but ensuring that the cocoa value chain is optimised.
To enable smallholder farmers to benefit in an egalitarian way from the cocoa industry, the focus should be on improving value chain efficiency while addressing structural challenges in the sector. This is achievable through a public-private collaboration that will drive private sector operations to deepen financial markets, scale up infrastructure investments and enhance productivity and quality through training and input supply.
Through collaborating with cocoa cooperative societies – providing training, input financing and market access, AFEX has enabled smallholder farmers to increase their productivity, while producing to international standards. With technology like AFEX Workbench — a value chain management platform that facilitates input sourcing, loan administration and sales — a transparent and efficiently executed cocoa process is achieved.
A public-private sector-driven model will create a sustainable approach that will revitalise and boost cocoa production in Africa, creating jobs and improving living standards of farmers. While the government takes the driver’s seat to develop policies and the infrastructure to catalyse this growth across the cocoa ecosystem, private-sector organisations will ensure value chain efficiency, increasing the benefits stakeholders gain from the industry.
Ayodeji Balogun is the CEO of AFEX Commodities Exchange Limited (AFEX), where he is leading a team of experts leveraging technology, innovative finance, and inclusive agriculture to connect smallholder farmers to commodity and financial markets