Business News of Mon, 19 Dec 20168
Incoming government gives cocoa sector chance of fresh start
Ghana's incoming government could give the country's $2 billion cocoa industry a boost if it installs a more transparent executive at industry regulator Cocobod and implements reforms, industry sources said.
The New Patriotic Party (NPP) said its priority is to push annual cocoa output in the world's second-biggest producer above 1 million tonnes when it takes power in January under President-elect Nana Akufo-Addo using a series of fresh measures.
A big issue is the role of Cocobod chief executive. Industry officials said CEO Stephen Opuni's position is vulnerable because he publicly supported President John Mahama who lost the Dec. 7 election.
Traders and buyers credit the regulator for maintaining the premium quality of Ghana's cocoa and increasing the guaranteed minimum price paid to farmers to 70 percent of net free-on-board but they say greater access to Cocobod is crucial.
"For the last two years, it has been very closed and very difficult to meet with Cocobod," one senior Ghana cocoa operative said in a comment echoed by several others.
Cocobod plays a unique role both regulating the sector and exporting beans through its Cocoa Marketing Company as well as distributing fertilizer, pesticides and seedlings.
Few were willing to speak openly for fear of antagonizing Cocobod and some said that in itself reduced accountability. Buyers said they were unwilling to challenge the regulator for fear of damaging business relationships.
"Nobody dares to stand up to Cocobod," said one buyer, who declined to be named.
Cocobod CEO Opuni did not respond to requests for comment.
Ghana accounts for up to 25 percent of global cocoa supply and the industry also contributes around 7 percent of GDP as well as up to one quarter of the country's export earnings.
The NPP has established a transition team but is yet to name a finance minister, one of whose statutory roles is to oversee Cocobod.
Its manifesto outlines policies including re-activating mass spraying, replanting farms with high yield trees, improving local processing and compensating farmers for diseased trees.
The party will "ensure that farmers receive increased producer prices plus bonuses high enough to encourage them to produce more cocoa for export (and) ensure that the value that farmers receive for their produce is not diluted by depreciation of the cedi against the dollar".
Industry sources calculate Cocobod controls around half a billion dollars in funds per year, and must therefore increase its financial transparency and move towards depoliticising its dealings with farmers.
Several farmers said supporters of the outgoing National Democratic Party government gained better access to seedlings and inputs in the run-up to the vote than supporters of the opposition. Cocobod denied this.
At the same time, the regulator's promise of free fertilizers, pesticides, spraying and seedlings had discouraged private sector participation and made farmers unhealthily dependent on free products rather than buying on the market.
"It's not an effective system. It's expensive and in the end not all farmers have access to these kinds of products. Because of the free elements the farmer has no opportunity to buy if he would have wanted to," one senior market source said.
Others said it would be better if Cocobod's role was reconfigured to focus solely on regulation, opening space for the private sector.
Ghana's cocoa production peaked in the 2010/11 season at more than 1 million tonnes, dipped to under 750,000 tonnes in 2014/15 season before rebounding slightly last season.
One senior cocoa analyst said current production was running around 10,000 tonnes higher than the same point in the previous season. It would fall back in January and February but the mid-crop was expected to be strong, the analyst said.
However, the country needs to improve productivity per hectare. A step towards this is to map the size of each farm and count the number of farmers to get a more precise figure than the 800,000 that is often mentioned.
"We are looking forward to seeing all the things they (the NPP) have been promising," Nana Johnson Mensah, a chief farmer of Western region south, told Reuters