Is Cocoa still our economic backbone?

As the nation marks 57 years of attaining independence, the vital question still remains: has the Cocoa industry proven to be an effective vehicle for poverty alleviation and sustainable national development? Ekow Essabra-Mensah, probes.

No country comes to mind more than Ghana when one speaks of cocoa. Likewise, one cannot think of Ghana without thinking of its cocoa sector, which offers livelihoods for over 700, 0000 farmers.

Long on, Ghana’s main export commodity, cocoa has been central to the country’s debate on development, reforms, and poverty alleviation strategies since independence in 1957.

Although there is agreement on the crop’s potential of the country, there is much no disagreement about the importance of the contribution of crop to the country’s national economic development.

Observations are that the sector has remained highly labour intensive. No aspect of it is mechanized, except for the use of motorized sprayers to apply insecticide. The farm households form the core of the labour force on predominantly small scale cocoa farms.

The debate becomes intense with respect to the contribution of cocoa activities to poverty reduction efforts, particularly in local communities where cocoa activities are carried on.

Dating back to the era, around the 1893s when Ghana officially exported two bags of cocoa beans to the international market, after Tetteh Quarshie had successfully introduced and planted the seed in the country.

The country was once the world’s largest exporter of the beans and provided almost half of the world output between 1910 and 1980. Cocoa production, actually started off well in the early 20th century, then plummeted in the 1990's, and is currently on a high production scale. 

Yet, future predictions have it that production will decline in 2030 and worsen by 2050 due to changing weather conditions.

It produced 835,410 tonnes of cocoa during the 2012/13 crop year, down 5 percent on the previous season, cumulative provisional data from industry regulator Cocobod showed. 

An unprecedented one million tonnes of cocoa was produced during the 2010/11crop-year, thanks to good weather and improved farming techniques -- but production declined to about 850,000 tonnes in the 2011/12 season. Cocobod said cocoa production tends to fall slightly after a bumper year.

Issues and challenges

Cocoabod, the country’s industry regulator annually raises not less than US$1.2 billion from the international market to support its purchases and intervention programmes. This investment is in addition of government annual budget targeted at growing the sector.

But the question still remains the direction of the funding, over the years, this has become profound as the sector has been identified with a number of threatening issues including poor farmers’ livelihood, lack of infrastructure, inadequate extension officer and low productivity among others.

Low productivity has been identified as the main problem and the causes according to experts were classified into biological and socioeconomic factors. 

The biological factors include the incidence of pests and diseases, most of which have received extensive research attention, and have been neglected. 

The socioeconomic causes were indirect and include the low producer price and the lack of amenities like electricity, which leads to migration, with as a result labour shortages and high labour costs. 

The biological and socio-economic causes of low productivity are inter-related in such a manner that tackling them separately will not overcome the problem unless the socio-technical nature of the causes are recognised and tackled in a holistic way.

Over-aged tree stock

Undoubtedly, there has been wide spread observations that the country’s cocoa tree stock is over aged and must be a call for mass strategy for their replacement to ensure maximum output levels in the coming years and sustain production lines.

The old trees also face the risk of being attacked by diseases and pests which have the tendency of dwindling crop yields.

If steps are not taken to replace the trees with free hybrid seedlings, production targets will reduce in the next few years. The old trees also face the risk of being attacked by diseases and pests.  “The majority of our cocoa tree stock is over 60-years while some are over 100-years.

This doesn’t give us good yields and that is why government needs to cut and replant new trees with hybrid crops to help restore over-aged tree stocks, improve yield and boost national revenue.” 

It is important to state that although, fertiliser use in the country has increased significantly since the 1990s, and it is still on the low side, if the sector really has to improve on its production margins.

Statistics indicates that the quantity of fertilizer applied to the cocoa farms decreased between 1991/92 and 1997/98, the proportion of farmers applying fertilizer increased possibly from liberalization of input market in 1996/97, which eliminated subsidies but improved private distribution.

Adoption of improved varieties: Hybrid cocoa varieties were introduced in 1984 through the government Cocoa Rehabilitation Project. This is indeed a great achievement in moving the sector and sustaining the production trend to meet the international demand.

There is evidence that Hybrid varieties outperform the older varieties in the two ways by producing trees that bear fruits in three years compared with at least five years for the older varieties and by producing more pods per tree.

But hybrid cocoa trees require optimal weather conditions and competitive farming practices such as the application of chemical input, adoption of new planting procedures, pruning, and spraying.

Hybrids varieties also require that farmers make more harvest rounds at the beginning and the end of the season, something they are reluctant to do when it conflicts with other farming or trading activities. Cocobod must intensify its adoption strategy to cover all farmers in all growing regions.

Diseases and pests, swollen shoot virus among others have all been a major threat to the country’s cocoa crop although there has been improvement significantly in their control in recent years.

After Cocobod initiated free mas spraying programme in 2001, 93 percent of cocoa farmer who participated in a survey conducted in 2002 linked their yield improved to the effects of the programme.

The country’s coca sector again faces a number of challenges, for one, productivity levels are lower than they are in other countries. The country’s yields are low compared to those of its leading competitors like the Cote d’Ivore and Indonisia which produce 600 kg/ha and 1,000 kilogrammes per hectare (kg/ha) respectively. Farmers have said output could rise to between 800 to 1,000kg/ha from 400 kg/ha presently.

This development indicates that cocoa farmers have the ability to double productivity, if they receive the appropriate incentivising income and benefit from improved agronomic practices and extension services.

Recommendations

There will be less suitable land available to expand future cocoa production, one alternative is to shift the emphasis and focus on rising the low level of productivity to sustain or increase cocoa production in the future. 

For effective utilization of limited suitable land, old and abandoned farms is areas which can still support successful cocoa cultivation would have to be replanted or rehabilitated. 

The sustainability of cocoa production in the future requires that the industry be rejuvenated with respect to both aging farms and farmers. 

Replanting and rehabilitation of old and abandoned farms with high yielding hybrid varieties should form an important part of the solution, since establishment of new farms will be constrained by lack of suitable land.

Although farmers are less attracted to replanting and rehabilitation of old farms, but with adequate incentives farmers may find it in their interest to pursue replanting and rehabilitation of old an abandoned farms in future.

The cocoa industry will die a natural death if the predominantly aged farmers are not replaced by younger farmers. 

The younger generation of Ghanaians is not only avoiding cocoa cultivation, they are moving away from agriculture and rural life to the urban areas.An improvement in the rural economy therefore could enhance the future of the country’s cocoa industry.

Traditional labour-intensive systems of cultivation, using mainly non-mechanized equipment would not attract young people into pursuing cocoa production. Some form of mechanisation of the cocoa sector production will be necessary to sustain the industry.

Generally, maintenance of existing farms is either poorly done or neglected altogether, causing substantial reduction in output. This situation is persisting due to substantial factors including lack of essential inputs such as insecticides, spraying machines and even cutlass.

Improving the situation will require availability of essential inputs in adequate quantities and at the farm gate. A policy reform is needed to be extended to benefit cocoa industry and to enhance supply and distribution of farm inputs at the farm gate. 

Insect pest and disease pose serious problems in the future development of the cocoa industry. Generally, as cocoa cultivation in an area advances in age, so as do the problems of pest and control. 

Replanted and rehabilitated farms in older growing areas do not escape these problems for long.

This reinforces the reason why Cocoabod must increase its investment drive in the various interventions to ensure that Ghana regain its top-most potion as cocoa grower in the global commodities market. 

Goldfields suspends community development

Goldfields Ghana Limited’s (GGL) Tarkwa Mine has suspended some of its community development projects due to cash flow difficulties resulting from the slump in gold price on the world market.

 

Some of the suspended projects include construction of a hostel facility for the University of Mines and Technology (UMaT) and a maternity unit for Huniso Clinic.

Mr. Robert Siaw, Sustainable Development Manager at GGL, said this when the company met with representatives of the beneficiary communities on the new development.

He said it is almost impossible for the company to continue financing the development projects in view of its financial situation.

He said the fall in gold price has also increased cost of production, and has consequently led to dwindling of the company’s resources.

Mr. Siaw emphasised that though the year 2013 was challenging, GGL Tarkwa Mine was able to complete most of its projects including constructing junior high school blocks, up-grading of community centres, rehabilitating portions of roads, potable pipe-borne water, Information Communication Technology centres, canteens, supply of furniture, connection of the Tarkwa Nsuaem education office to the National Electricity Grid, and tarring of the Samahu-Pepesa Road.

Mr. Siaw indicated the company spent US$2.4million was spent on education, health, water and sanitation, agriculture and other projects last year.

He assured stakeholder communities that the company will complete all the suspended projects and even add more when the situation improves.

Gold Fields Ghana (GFG) is presently the number-one gold mining company and largest gold producer in Ghana, with annual production in excess of 935,000 ounces from its two operating mines at Damang and Tarkwa.

 Gold Fields Ghana spends over US$2million annually in direct support for its community development activities in the key areas of agriculture, health, water and sanitation, education and general infrastructure.

This is in line with the company’s policy on environment, the Tarkwa and Damang Mines are ISO 14001 certified.

Gold Fields manages gold mineral resources in Damang and Tarkwa totalling16.9 million ounces as at December 31, 2013 as against 23.0 million ounces during the same month the year before. ­­

Its gold mineral reserves in the Western Region as at last year was 8.3 million ounces compared to 14.2 million ounces in 2012. ­­

The mineral reserves at Damang were reduced from 4.1 million ounces to 1.1 million ounces during 2013, as production from the Main Pit Cutback 2 is not economically viable at US$1,300 per ounce in its current configuration.­­

At Tarkwa, the exclusion of underground mineral resources and downsized pit shells due to a lower gold price impacted adversely on the declaration, it said.­­

The Group’s operations cover Australiasia, South Africa, the Americas and West Africa.­­ Gold Fields Limited’s overall managed gold mineral resources totalled 136.7 million ounces and mineral reserves 52.6 million ounces as at December 31, 2013. ­­

Cedi’s bane is import-addiction

The cedi will continue its slideagainst the major foreign currencies unless Ghanaians curb excessive addiction to foreign goods, says Kenneth Thompson, Chief Executive Officer of Dalex Finance and Leasing Company.

“The cedi will continue to fall, and that is [the] reality. Any remedy through the banks will not work because we have an addiction,” he said. “In our economic behaviour we are addicted to foreign goods and services, and no amount of measures can salvage the rapidly-depreciating cedi against the major foreign currencies.”

He was speaking at the Chartered Institute of Marketing Ghana’s (CIMG) Evening Encounter series under the theme “In a Volatile Economy, Fortune Favours the Bold”.

The cedi has since the beginning of the year depreciated by more than 12 percent against the dollar as demand for the greenback by local firms importing goods to drive the growing economy heavily outstripped supply, worsening the country's inflation outlook.

Mr. Thompson explained that the continuous fall of the cedi can be blamed on the insatiable taste for exotic foods and services, as well as the growing acquisition of luxurious cars.

He said Ghanaians’appetite for imported goods and services such as Chinese furniture, clothes, bags, electronic gadgets, four-wheel drives, holidays abroad, foreign schools for rich kids and other luxuries have skyrocketed, and this has created the effect the economy is experiencing.

He indicated that businesses in the country are today facing challenging times with regard to the economic and business environment. 

“Among these challenges are the steep depreciation of the cedi, decline in business confidence and significant reduction in consumer spending,” he said.

Mr. Thompson cautioned government that any attempt to combat the falling cedi using restrictions and bans is doomed to fail. 

The central bank has already issued new regulations to improve liquidity on the interbank currency market and shore-up the local currency.

The regulations among others outlaw transfers from one foreign exchange account to another, and prohibit over-the-counter withdrawals of foreign currency except for travel purposes. They also require all commercial banks in the country to quote a two-way pricing of currency exchange and limit the spread on corporate transactions to a maximum of 200 percentage points.

Mr. Thompson was doubtful about the effectiveness of the Bank of Ghana’s measures, saying not even President Mahama’s exhortation to Ghanaians to consume locally produced goods will work.

He proposed a trade and economic policy that advocates replacing foreign imports with domestic production, adding that opportunities abound in the current economic environment which business can take advantage of to grow.

“There should be incentive programmes designed to attract more firms into exporting by offering them help. Entrepreneurs need to develop detailed analyses of the turbulent situation and adopt strategies that grow their business to create more jobs.

“Government also needs to take practical steps to promote export and implement import-substitution measures, as well as provide incentives to programmes designed to attract more investment into exports,” he said.