• The ICCO estimates that there are approximately 14 million people directly involved in cocoa production.
• West African economies are critically dependent on cocoa. Cocoa revenues account for more than 33% of Ghana's total export earnings and 40% of the Ivory Coast's total export earnings.
• West Africa has been the centre of world cocoa cultivation for the last sixty years, today producing over 67% of the world's crop. Ivory Coast is the giant in world production -- with a 95% increase in output over the 1980s. It now holds 43% of the world market. (ICCO)
• 90% of the world's cocoa is grown on small family farms of 12 acres or less.
• According to the European Fair Trade Association, farmers get barely 5 percent of the profit from chocolate, whereas trading organizations and the chocolate industry receive about 70 percent. This means that producers get only 5 cents from every dollar spent on chocolate, while the companies get 70 cents - 14 times more!
• The US State Department's year 2000 Human Rights Report acknowledged that some 15,000 children between the ages of 9 and 12 have been sold into forced labour on cotton, coffee and cocoa plantations in northern Ivory Coast in recent years.
From a peak of 197 US cents per lb. in July 1997, the price of cocoa has steadily declined - to a low of 36 US cents per lb. in December 2000. Most of these years, the price that these farmers have received has not even covered their costs let alone provided basic needs.
Like other commodities, there are only a handful of giant multinational that control the $13 billion chocolate/candy industry:
• Hershey's and M&M/Mars control two thirds of the US market
• Cadbury, Mars and Nestle control 75-80% of the market in the U.K.
And the millions of cocoa producers are at the mercy of the big corporations who seek out the cheapest suppliers around the globe. With modern technologies, it is possible for the manufacturers to do more with low-grade cocoa rather the better quality "fine or flavour (FF) " cocoa. The market share of FF cocoa has dropped dramatically from 40-50% at the start of the 1900's to only 4% (120,000 tonnes) per annum now.
In spite of this history poor yields in Ghana and an ever growing middle class world wide has grown demand for chocolate. In 2011 the cocoa price hit all time highs, benefitting farmers worldwide.
Fair Trade Cocoa
Cocoa was the second commodity to be labeled as "Fairrade Certified" in the Netherlands under the "Max Havelaar" label in 1993.
• The Fair Trade Certified production criteria guarantee a minimum price and work to insure that no child, slave or forced labor is used. The criteria also stipulate that farmers' organizations should be organized democratically, and that plantation workers should be able to participate in trade union activities. Fair Trade producers are monitored at least once a year.
• Fair Trade cocoa is produced by cooperatives representing about 42,000 farmers from 8 countries: Ghana, Cameroon, Bolivia, Costa Rica, Nicaragua, Dominican Republic, Ecuador, and Belize.
• In 2000, Fair Trade cooperatives produced 45 million kilos of cocoa, but only 1.5 million kilos were sold at Fair Trade prices.
A Study from the Ivory Coast
Coopérative Agricole Kavokiva de Daloa, known as Kavokiva, was founded by 600 farmers in 1999. It is located in the Daloa department of the Haut Sassandra region in southeast Côte d’Ivoire, where more than 40% of the country’s cocoa is produced. Kavokiva’s mission is to improve the social and economic position of its members by supporting the production and marketing of their cocoa and coffee. This includes paying a higher price for members’ beans than local traders and providing credit for farm inputs such as fertilizers and pesticides, school fees, and medical expenses.
Of the 800 or so co-operatives in the country’s cocoa and coffee sectors, Kavokiva has a reputation with the government and others as one of the strongest in terms of its administrative structure, the quantity and quality of its cocoa, and the support and services provided to members.
After almost 40 years of post-independence stability and relative prosperity, government corruption, economic mismanagement and poor governance led to a bloodless military coup in 1999. This was followed by a decade-long period of political crisis, including civil war in 2002/03. Poverty levels climbed to nearly 50% in 2008, compared to 10% in 1985, along with a slow deterioration of basic social and economic infrastructure such as health and education, which were once well above regional standards.
Laurent Gbagbo was declared president in the disputed election of 2000 that split the country. A failed coup by mutinous government soldiers in 2002 led to a rebellion with insurgents seizing the northern half of the country to protect the rights of the predominantly Muslim northern population, who complained of discrimination and harassment by the Christian and animist southern tribes that dominate the government.
In January 2003, President Gbagbo and rebel leaders created a 'government of national unity'. It has failed to provide stability and the country remains split in two, with the north controlled by the New Forces (FN) and the south by the government. Elections due to be held in 2005 have been repeatedly postponed, most recently those due on 29 November 2009 when government announced a ‘slight delay’ while technical and legal requirements related to voter registration are sorted out. Rescheduled elections are now unlikely until early 2010.
Kavokiva structure and production
Kavokiva has more than 3,400 farmers, including 216 women, with an additional 2,000 applicants waiting to join. The members are organised geographically into 45 sections and 135 sub-sections across the region.
Cocoa is collected at section or sub-section level and transported to one of the 10 section warehouses, each with a capacity of 20 tonnes. It is then transported by a fleet of 3.5 tonne trucks to one of the two central warehouses at Gonaté and Zoukougbeu, each of which can hold 1,000 tonnes. Here, the beans are assessed for quality and a code number is allocated to each producer to enable traceability of the beans. Finally, the cocoa is transported to the ports at San Pedro or Abidjan for export.
Kavokiva’s production department employs 50 workers (20 permanent and 30 temporary) in the areas of manual sorting and processing of cocoa beans, warehousing and transport, and administration. The export department employs a general manager and a further 10 permanent workers.
Members of Kavokiva have a production capacity potential of around 12,000 tonnes but the majority is sold to local traders rather than to the co-operative. Like other co-operatives, Kavokiva suffers from lack of liquidity or working capital - this means they can’t always borrow sufficient cash from banks to pay farmers when they deliver their cocoa but instead have to defer payment until they receive payment from their buyers. This is particularly problematic at the beginning of the main harvest in September when farmers are desperate for cash and are therefore sometimes forced to sell for a lower price to pisteurs, local traders who can make immediate cash payment because they are financed by the multinational export companies which are not themselves allowed to buy directly from farmers. The pressure on growers to sell quickly means that beans are often sold before they have been properly fermented and dried, resulting in poorer quality beans.
The department of Daloa is made up of rural villages and hamlets where agriculture is the main activity. The average cocoa farm is 3ha in size. Cocoa is the main source of cash income for most farmers, many of whom also grow robusta coffee. Fruit and vegetables are grown for home consumption and women sell bananas and other crops at the local market on Fridays.
The government is failing to provide adequate infrastructure, with poorly maintained roads a particular problem. Many villages have no electricity, with drinking water only available from the village well. Access to healthcare is inadequate and the nearest clinic or hospital can be more than 10km away. The illiteracy rate among agricultural communities is as high as 95%, with many schools poorly equipped and too far away for children to attend each day.
Kavokiva and Fairtrade
Kavokiva was Fairtrade certified for cocoa in 2004. It was also certified for robusta coffee in 2005 but so far has had no sales to the Fairtrade market due to the lack of market demand in Europe for Côte d’Ivoire’s coffee which is mainly sold to North Africa.
Under Fairtrade standards Kavokiva receives a minimum price of $1,600/tonne for its cocoa beans, or the market price if higher. After crashing to around $750/tonne in 2001 the market price has hit highs of over $3,500 in recent years because of concerns over supply. Producers also receive the additional Fairtrade premium of $150/tonne reserved for community, business or environmental improvements.
Fulgence Nguessan, President of Kavokiva,said: ‘Life is tough here, people are suffering, so consumers need to pay the best possible price.’
His colleague Mr George Kwame, General Secretary of Kavokiva added, ‘We have been busy for years growing good quality cocoa for their chocolate. So if we are doing our best to give consumers the best quality cocoa, they should give the best possible price.’
Fairtrade Premium use
In the face of ineffective government, members look to Kavokiva to provide their basic social needs. Even with large sales volumes, Kavokiva would be unable to finance all the necessary services. But Fairtrade is providing an opportunity for Kavokiva to put some of these urgently needed services in place - and the benefits of building clinics and improving schools are extended to the whole community, not just Kavokiva members.
The Fairtrade Premium has meant Kavokiva has been able to make key benefits available to members, including an annual bonus and investing in improvements to services such as education and health.
Clean water and healthcare are priorities – farmers can’t work on their farms if they are sick - and three new wells have been constructed equipped with motor pumps.
One of the co-op’s biggest achievements has been investing the premium in the construction of its own health centre at Gonaté, with a doctor, midwife, and two nurses available to offer a range of treatments and procedures to patients without the need to travel to a public hospital. They have also bought their own ambulance car to collect patients from their villages if necessary. This is complimented by a free health insurance scheme with affordable medicines available to all members.
Fulgence Nguessan, President of Kavokiva, said: ‘The health centre and health insurance scheme are the most important benefits. Mortality rates have come down. Previously we lost 30 farmers a year but this has been reduced to just four this year. These improvements are thanks to health insurance. Thirty-six operations were carried out which meant that those farmers are still alive, when at least 20 would have died otherwise. Without the insurance, there would be little else for a farmer to do, for example if they had a hernia, but die.’
Mr Kouakou, a member of Kavokiva, added: 'Without Fairtrade or the medical centre, I would not be here today. I had an accident and was sick and the medical centre helped me.'
Kavokiva distributes scholarships to members' children so that they can pay the fees to attend school. The premium has also helped to build schools in some villages where the government school was too far away and where school fees are twice the cost of schools run by the co-operative. Part of the fee parents pay for each child goes towards teachers’ salaries.
With the Fairtrade premium money the co-operative can provide some very basic classrooms and equipment such as blackboards. Education is considered so important that where other schooling isn’t accessible some members have built temporary classrooms out of bamboo and teach children themselves. Kavokiva has also purchased supplies for remote schools.
A qualified agronomist has been hired to improve farming techniques and yields.
A women's literacy programme has been set up.
Bicycles have been distributed to farmers so that they can get to and from their farms more easily.
The co-operative is planning to promote conservation through community education and power-saving technology. It is in the process of establishing an organic conversion programme.
The co-operative plans to set up a savings accounts scheme for its members.
Cocoa in Cote d'Ivoire
Côte d’Ivoire produces an average of 1.34m tonnes of cocoa a year, accounting for around 40% of global production, making it the world’s largest cocoa producing country.
Cocoa is a pillar of the economy, representing 15% of GDP and 35% of Côte d’Ivoire’s export income - worth $1.4bn in 2008 – and contributing 20% of government tax revenues. Around 1 million cocoa farmers each produce an average of 1,300kg on 3ha of land and cocoa provides a livelihood for around 6 million people, nearly a quarter of the population of 21 million.
Côte d’Ivoire’s crop levels have a huge influence on world cocoa prices – concerns about disruption to cocoa production and export during the civil war caused New York prices to soar to a 16-year high of $2,335/tonne in October 2002. The 2009/10 crop is expected to be equal to or a little lower than the previous year's total of around 1.2 million tonnes, which was the worst harvest in five years. Concerns that this would cause a shortfall in global supply were a major factor in cocoa prices soaring to a 30-year high of $3,411/tonne in October 2009. Other factors included the possibility of a global shortage of cocoa powder, the weak US dollar, and a renewed surge of fund interest in commodities in general.
The cocoa sector in Côte d’Ivoire has been plagued by an acute lack of investment during the political limbo that followed the 2002/03 civil war. The delayed elections, now likely for 2010, have the potential to end the political deadlock and pave the way for long-promised, long-term reforms.
Liberalisation and re-regulation
Under pressure from the World Bank and IMF, Côte d’Ivoire liberalised its cocoa sector in 1999. This ended the system of guaranteed prices and scrapped the state-run Caistab which controlled the sector, creating in its place a system of four specialised administrative agencies to promote and regulate production. With the end of direct government intervention and financial support of the cocoa trade, these agencies are funded by cocoa taxes but have come under criticism for a lack of transparency and overlap within their functions and failure to improve incomes for farmers.
In the current system, the government announces an official price during the season, but it is used only as a guideline and actual prices are determined by the domestic market. Combined with excessively high taxes, this means farmers receive less than 40% of the export price compared with 60% in Ghana, which has caused widespread discontent among farmers who claim they are being underpaid.
Post-liberalisation, the industry has been beset by allegations of corruption. Investigations into the disappearance of heavy taxes on cocoa that were meant to be re-invested in the sector led to the unprecedented arrest of senior cocoa administrators in June 2008 on charges of corruption and embezzlement. In September 2008 the agencies administering the cocoa sector were replaced with a temporary body ahead of the proposed implementation of widespread reforms which will allow greater transparency in the sector.
Recent reports (Reuters 23/10/09) suggest the government is poised to re-regulate the cocoa sector to try to reverse output declines that have put the country's main revenue generator at risk. A return to government control of the sector would enable the government to stabilise prices by guaranteeing a minimum price to producers, which would encourage a revival of the declining cocoa output by providing producers with a bigger and more stable share of the proceeds.
In rural communities in Côte d’Ivoire, as in countries around the world, it is common for children to help out on family farms. This activity is not considered as child labour as long as does not affect their health and personal development, or interfere with their schooling. It is also common for children in Côte d’Ivoire to be employed illegally – under age or doing hazardous work – on cocoa, coffee, and other agricultural plantations as well as in the urban informal sector working as street vendors, washing cars, working in restaurants and on construction sites. As well as Ivorians, they include child migrants from neighbouring Burkina Faso and children trafficked from Mali, Benin, and Togo.
The government is participating in a number of programmes to ensure cocoa is grown responsibly, without the worst forms of child labour and forced labour, including a farm certification project with the World Cocoa Foundation. The International Cocoa Initiative (ICI) is one of a number of cocoa industry initiatives set up in recent years with the aim of ending child and forced labour in cocoa production. Established in 2002, ICI is a partnership between NGOs, trade unions, cocoa processors, and major chocolate brands, and is working to ensure responsible labour standards in cocoa production in Côte d’Ivoire and other producing countries (www.cocoainitiative.org).
Fairtrade certified producers must meet standards which prohibit child labour and include procedures to identify and rectify non-compliance. Kavokiva had a Child Labour Charter in place for its members prior to receiving Fairtrade certification. The Charter clarifies the difference between children helping on the family farm in their spare time and exploitative, illegal practices. It includes guidelines for members on identifying child labour and what action they should take if they come across it. Twenty-one committees are in place across the regional sections to implement the Charter and educate members about it.
Poverty is a major cause of child labour - many farmers barely earn enough from their cocoa to pay for school fees and keep their children in school. This is compounded by school fees being payable in September when the school year starts, a particularly bad time for farmers who have very little cash until the harvest begins in October. To help overcome this, Kavokiva also offers every member a loan to cover the costs of schooling for their children and, as a result, almost all members' children attend school.
See these this and other Producer/Country profiles at The Fairtrade Foundation, London