Ghana's role of government in assisting small producers of cocoa and helping reduce hunger

June 5, 2015


BELOW IS FROM PAGE 120 :In Ghana, the price producers are paid for cocoa is currentlyset at the beginning of the harvest season for the entirecrop year by the Producer Price Committee.3 The price isbased on the price Cocobod expects to receive, havingalready sold nearly 70 percent of the crop. To this price,Cocobod adds the costs of its operations and the export taxto arrive at what it calls “net free on board (f.o.b.) price.”The share of the net f.o.b. price received by cocoa farmersin Ghana has increased to nearly 80 percent after havingfallen below 20 percent before the economic reforms of the1980s, and as low as almost 5 percent between 1975 and1981. By 1987/88, real producer prices in Ghana hadincreased threefold compared with 1983/84, largely as aresult of Cocobod’s revised policy of paying higher prices tothe farmers, in response to pressure from multilateralorganizations to streamline its operations (Brooks, Croppenstedt,and Aggrey-Fynn 2007). Figure 12.4 shows theshare of f.o.b. prices paid to producers, the share retained byCocobod (shown as direct taxation), and the share of indirecttaxation imposed by the exchange rate.4 Exchange ratedistortions can further erode the share producers receive.These distortions were high in the mid-1980s but have completelydisappeared.REASONS FOR SUCCESS OF THECOCOA SECTORA number of factors have contributed to the success ofGhana’s cocoa sector: a favorable price regime, both interms of the f.o.b. share passed on to producers and the realprice received by farmers; improved marketing through partialliberalization; and Cocobod’s interventions to raisecocoa productivity.BELOW FROM 204The recovery and second expansion phase (1983–2008).The turnaround in Ghana’s cocoa sector began with theimplementation of the ERP in 1983, which included a specialprogram to revive the sector (the Cocoa RehabilitationProject). Policy changes included increasing the farm gateprices paid to Ghanaian farmers relative to those paid inneighboring countries, thus minimizing the incentive tosmuggle, and devaluing the cedi, thus reducing the level ofimplicit taxation of farmers.As part of the Cocoa Rehabilitation Project, farmerswere also compensated for removing trees infected withswollen shoot virus and planting new ones. This effort ledto substantial rehabilitation, with a large number of farmsplanting higher-yielding cocoa tree varieties developed bythe Cocoa Research Institute of Ghana. Productionrebounded to 400,000 tons by 1995/96 and productivityincreased from 210 to 404 kilograms per hectare. Anotherimportant reform took place in 1992, when Cocobod (asCMB was renamed in 1984) shifted responsibility fordomestic cocoa procurement to six privately licensed companies(commonly known as licensed buying companiesor LBCs) and reduced its staff by 90 percent between 1992and 1995.Shashi Kolavalli, and Marcella Vigneri, "Cocoa in Ghana, Shaping the Success of an Economy," eds. Punam Chuhan-Pole, Manka Angwafo, World Bank,

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