Daily archives: October 18, 2017

Cocoa Thoughts

I attended a State Dinner in Accra a couple of nights ago in honour of President Ouatttara of Ivory Coast. Ghanaian President Nana Akuffo Addo made a speech which included the striking fact that Ghana and Ivory Coast produce between them 65% of the world’s cocoa, and yet receive only 5.5% of the income of the world chocolate industry.

This simple fact sums up much of the dilemma of Africa; stuck in primary commodity production and still, after decades of concentrated effort, unable to develop value added or to obtain a price for commodities – and particularly for farmers – that reflects their importance to the global value chain.

Cocoa has been one of the most successful areas of endeavour for the Fairtrade movement, but all of that has only resulted in that 5.5% figure, which without Fairtrade would be still lower. It is possible to buy Ghanaian made finished chocolate product in British supermarkets now, and excellent it is too, but it has a very small market share. Producing finished chocolate in Africa has its problems; chocolate is a much more delicate cargo than cocoa beans and reacts badly to either heat or refrigeration. Recipes which overcome this problem result in a certain harshness.

There has been some progress made in processing of the raw cocoa beans in Africa into butter and solids, but not on a scale which fundamentally affects the market.

The current Ghanaian government has made a major point of this issue. Here is Finance Minister Ken Ofori Atta addressing it at the G20 Summit for Africa earlier this year. There is however no desire by the political and corporate establishment of the developed world to assist in any way.

Cooperation with Ivory Coast is obviously key to progress, but the two countries lack the financial reserves that would be required to initiate effective cartelisation; while I have to admit, against my own inclinations, that a free market in sales by the cocoa farmers has provided a much better living to them than the decades of efforts at state monopoly or various forms of price intervention. In Ghana both the Minister of Trade and the Chairman of the Cocoa Board at the moment happen to be old friends of mine and I hope to discuss the possible ways forward with them over the next week or so.

The situation is even further complicated by the hypothecation of Ghana’s cocoa revenue some years ago to repay China for the Bui Hydroelectric dam project. This was always a very poor project in terms of design and available water in the Volta watershed, and has had a number of disastrous wildlife consequences. There has been a huge amount of trumpeting of Chinese “aid” projects in Africa, but my experience has been that they are even more designed to help the “donor” country than Western aid, and almost always turn out to be loan rather than grant. As with the Bui Dam project, this is usually disguised in a lack of transparency about the underlying financial arrangements, and the Chinese surge into Africa has ramped up levels of corruption still further.

All that is true throughout Africa. There has been a further development specific to Ghana. Chinese convict labour was imported to build the Bui Dam. Many of the workers absconded into the countryside, taking the earth moving equipment with them, and started illegal gold-mining. The result was the collapse of the rule of law in much of the Ghanaian countryside, and the Chinese criminal gangs introduced the widespread use of firearms to protect their illegal workings, know in Ghana as Galamsey. Word spread back to China and thousands of Chinese gang members started to arrive to join the illegal trade – of course facilitated by Ghanaian administrative corruption. The result has been a massive expansion in illegal working in Ghana with environmental consequences which include the complete devastation of several key watersheds and the wholesale pollution of community drinking water supplies.

I have known the Ankobra river for 20 years and I can assure you that, astonishing as it may be, the change is due not to seasonal factors but to illegal mining. The Pra was also until recently limpid.

As so often, Al Jazeera produces the best documentaries.

Western involvement in Africa has been a disastrous history of exploitation over six centuries, and still is. It is therefore very fashionable, particularly on the left in the West, but also in some African nationalist circles, to hail China’s surge into Africa as some sort of redress. It has always looked to me on the ground as the arrival of yet another group of rapacious neo-imperialists to exploit Africa, and every year of observation has confirmed my view, which like most of my views is not fashionable.

A recent study concluded that Chinese aid is as effective in African development as Western aid. All I can say is, that is an extraordinarily low bar.

I don’t eat much chocolate nowadays. My alarming girth is entirely the product of the drinks industry. But the other day little Cameron gave me one of his chocolate buttons, and I was absolutely shocked by the unpleasant oily texture that instantly developed, and the lack of cocoa flavour in the overly sweet taste. I have never been a chocolate snob and always enjoyed the Cadbury’s Dairy Milk flavour. But the concoction of sugar and palm oil that so quickly developed in my mouth bore no relation to Cadbury’s Dairy Milk before Kraft/Mondolez took it over. A quick google revealed they deny they have changed the recipe.

Despite all the problems, the emerging economies of Africa continue the trend of the last 20 years of growing at a faster rate than Europe or the United States. My rather unconventional suggestion is that the African states concerned should look to their improved capital formation and ability to borrow, to buy in to the major western chocolate manufacturers in a big way. Perhaps in collaboration with China, which is sitting on trillions of dollars. It will take that sort of radical shift in market conditions for the problem Nana Addo so rightly identified, to be addressed.

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