CHAPTER 12 Cocoa in Ghana:Shaping the Success of an …

1 No other country comes to mind more than Ghanawhen one speaks of Cocoa . Likewise, one cannotthink of ghana without thinking of its cocoasector, which offers livelihoods for over 700,000 farmers inthe southern tropical belt of the country. Long one ofGhana s main exports, Cocoa has been central to the coun-try s debates on development, reforms, and poverty allevia-tion strategies since independence in 1957. The Cocoa sectorin ghana has not been an unmitigated Success , emerging as one of the world s leading producers ofcocoa, ghana experienced a major decline in production inthe 1960s and 1970s, and the sector nearly collapsed in theearly 1980s.

2 Production steadily recovered in the mid-1980safter the introduction of economywide reforms, and the1990s marked the beginning of a revival, with productionnearly doubling between 2001 and 2003. These ups anddowns offer interesting administrations in ghana , including the colonialone, have used Cocoa as a source of public revenue, and inso doing the Ghanaian experience offers a recurrent exam-ple of a policy practice followed by many other Africancountries: taxing the country s major export sector tofinance public expenditure (Herbst 1993). Revenue extrac-tion by the state has had varying effects on productiondepending on global prices, marketing costs, explicit taxeson the sector, and macroeconomic conditions such as infla-tion and overvaluation of exchange rates and inelasticity ofcocoa supplies.

3 Regardless of the level of extraction, theneed for sound macroeconomic management, of inflationand exchange rates in particular, becomes evident for con-tinuing to offer incentives for production. The other is theneed for ghana s Cocoa pricing policy to arrive at a market-ing arrangement that does not kill the goose that lays thegolden eggs. ghana appears to have achieved such asarrangement without fully liberalizing the sector as otherproducers in West Africa ACHIEVEMENTS IN THE Cocoa SECTORS ince the introduction of Cocoa in ghana in the late 19thcentury, the crop has undergone a series of major expansionsand contractions.

4 Ruf and Siswoputranto (1995) suggest thatcycles are intrinsic to Cocoa production because Cocoa isinfluenced by environmental factors such as availability offorest land; ecological factors such as deforestation, out-breaks of disease, and geographic shifts in production; andeconomic and social factors such as in ghana : shaping the Successof an Economy Shashi Kolavalli and Marcella VigneriCHAPTER 12 Shashi Kolavalli is senior research fellow and leader, ghana Strategy Support Program, International Food Policy Research Institute. Marcella Vigneri is avisiting scholar, Department of Economics, University of as a leading producerFour distinct phases can be identified in regard to cocoaproduction in ghana : introduction and exponential growth(1888 1937); stagnation followed by a brief but rapidgrowth following the country s independence (1938 64);near collapse (1965 82); and recovery and expansion, start-ing with the introduction of the Economic Recovery Pro-gram (ERP) (1983 to present).

5 Figure shows long-termtrends in levels of growth (1888 1937). Cocoa was introducedin the southern region of the Gold Coast in the mid-19thcentury by commercial farmers from the Eastern region dis-tricts of Akuapem and Krobo, who had moved west towardthe adjacent district of Akyem to purchase mostly unoccu-pied forest land from the local chiefs for Cocoa cultivation(Hill 1963).The conditions that encouraged these farmers to migrateand buy land for Cocoa are well documented: a fall in theworld price of palm oil after 1885, which pushed farmers tosearch for alternative export crops; a boom in rubberexports in 1890, which provided the capital for the purchaseof new land; increasing population pressure in theAkuapem area, which encouraged commercial farmers togo further afield in search of alternative export agricultureopportunities.

6 And the establishment of European produce-buying companies on the coast of West Africa that were pre-pared to trade the new crop (Hill 1963; Amanor 2010; andGunnarsson 1978).Three social classes: land-owning farmers, peasants, andlaborers emerged among Cocoa producers as a second wave ofmigrants from Akyem moved to the region. Without sufficientmoney with which to buy land, these migrants sharecroppedwith earlier settlers under a system called abusa, in whichlaborers were paid one-third of the sales price of the harvestedcocoa. Simultaneously, there was a large influx of migrantsfrom relatively distant Upper Volta (now Burkina Faso), Niger,and Mali, who were attracted by the generous remunerationthat Cocoa production offered in southern growing population of Cocoa farmers reinvested itsprofits in Cocoa production in the western end of ghana sForest Zone, rapidly shifting the production frontier intothe Ashanti and Brong Ahafo regions, and consolidatingGhana as the leading world producer between 1910 and1914.

7 Facilitated by the rapid expansion of the road and railnetwork which began in 1920 and the organization of cocoamarketing by Ghanaian middlemen, Cocoa earningsaccounted for 84 percent of the country s total exports by1927. By the mid-1930s, production reached 300,000 and growth postindependence (1938 early1964).The interwar period marked a slowdown in cocoa202 CHAPTER 12: Cocoa IN ghana : shaping THE Success OF AN ECONOMYF igure ghana s Cocoa Production, 1900 2008010020030040050060070080019001903190 6190919121915191819211924192719301933193 6193919421945194819511954195719601963196 6196919721975197819811984198719901993199 61999200220052008 Production, thousands of tonsSource:Gill & Duffus Group, various issues; ghana Cocoa Marketing Board, various , caused by decreasing demand and growing dif-ficulties in transport (Gunnarsson 1978).

8 Outbreaks ofpests and diseases (swollen shoot virus in particular)reduced production in the Eastern region in the early 1940s,pushing Cocoa cultivation further into the western BrongAhafo frontier (Amanor 2010). Production picked up againduring the second half of the 1940s but was now concen-trated in the Western region. In 1947, the colonial govern-ment established the Cocoa Marketing Board (CMB) andgave it a monopoly over the purchase of beans. Until 1951the bulk of profit made by the CMB went into its reserves,which were then used for public investment (Brooks, Crop-penstedt, and Aggrey-Fynn 2007).

9 In 1961 a cooperativesociety was given the monopoly right to purchase cocoareplacing the network of private agents, brokers, traders,and middlemen who until then had controlled Beckam (1976) noted, the Convention People s Party(CPP), founded by Kwame Nkrumah, benefited fromextremely favorable postwar market conditions and accu-mulated Cocoa income on a massive scale: following thesharp increase in market prices in the 1950s, farmers werepaid two to three times more than they received before thewar, and between 1947 and 1965 the government collectedalmost one-third of the total value of Cocoa export as exportduties.

10 In 1950/51 the government increased export dutiesand began to take a much larger share of Cocoa revenue bymeans of a graduated ad valorem tax that increased with theincrease of the average selling price per ton of Cocoa . Toextend its influence to the rural sector, in 1953 the Nkrumahregime also created the United ghana Farmers Council(UGFCC), which was mainly concentrated in the Cocoa -growing regions despite its remit to cover the interest offarmers all over the country. The UGFCC was made themonopoly buyer of Cocoa to create a platform for organizingthe farmers behind the government and its the second elections in 1954, the Cocoa exporttax was further increased while the producer price remainedat the same level for four years.