This crisis is the starting point of any conversation around the historic summit of Abidjan-Côte d’Ivoire between the African Union (AU) and the European Union (EU). From this ambivalent sea, which unites and divides at the same time with its businesses and its open wounds of colonialism, with the fragile Arab springs and the danger of Islamic radicalism that has become a terrorist threat in Europe. Starting from this unique moment in European history and trying to understand if and how a sustainable balance will be found between two areas of the world that need greater cohesion and understanding of each other’s needs in order to create opportunities.

Changing Perceptions

The summit that took place in the economic capital of Ivory Coast has brought a number of innovations, a sign of good will; of great importance, the European Union and the African Union sat together at the negotiating table. This was a step forward as opposed to the past four summits where Africa was not represented in a unitary way by a continental organization. Another new feature was the main theme and tittle of the meeting that stated, “Investing in young people for a rapid and inclusive growth and for sustainable development”. It is mostly the young people that are fleeing Africa for Europe. It is therefore important to invest in them in order to start the virtuous circle that both continents would benefit from. It is a change – hopefully a shifting one, that came at the end of a 2017 during which the relations between the two shores of the Mediterranean became more intense. The idea is not only to tackle the immigration question, but also create partnerships with African countries to avoid being undercut by the Chinese investment in the continent, “we are not just looking at what we can do for Africa but also what we can do with Africa, together”, Federica Mogherini, the EU High Representative for Foreign Affairs and Security, said in May 2017; when he was presenting the proposals for a strategic partnership with the continent. The same was echoed by the European Council President Donald Tusk in the final press conference of the Abidjan summit: “The European Union is the main partner of Africa and its closest neighbour. It is also the largest investor, the main trading partner, the largest donor of humanitarian aid and development and provides the most important contribution to peace and security. This summit demonstrated our determination to further strengthen our partnership “.

Statements of intent or concrete actions?

Did the summit bring forth something concrete beyond the statements by Tusk or just statements of intent? At the end of the meeting the participants signed a joint declaration containing the priorities of the partnership between Europe and Africa in four fundamental areas namely the economic opportunities for young people, peace and security, mobility and migration and cooperation in the field of governance. In particular, the new EU External Investment Plan the first and main topic of the summit was presented. The European Commission will provide € 4.1 billion to enable € 44 billion of sustainable investments by 2020 in five main areas: Energy sustainability and connectivity: investments in renewable energy, energy efficiency and energy in transport ; Financing of medium and small companies and micro-enterprises: these companies represent the main employers; Sustainable agriculture, rural entrepreneurship and agribusiness: aims to facilitate access to finance for small landowners, cooperatives, and small, medium and micro enterprises in the agricultural sector, to address the issue of food security; Sustainable cities: activate investments in sustainable urban development, in municipal infrastructures including mobility, water, health, waste management and disposal, renewable energy; Digital for development: to promote the development of innovative digital solutions that respond to local needs, the demand for financial inclusion and job creation.

The hope is that from words you can move on to the facts, to give a signal of real change in the approach between the two shores of the Mediterranean, which in Gibraltar, drew very close but not close enough.

The funds for the Plan relating to investment will be assigned to suitable financial institutions, identified by the European Commission. These include: European Investment Bank (EIB), European Bank for Reconstruction and Development (EBRD), African Development Bank (Afdb), French Development Agency (AFD), Cassa Depositi e Prestiti (Cdp), Spanish Society for development finance (Cofides), Deutsche investitions undeEntwicklungsgesellschaft (Deg), Kreditanstalt für wiederaufbau (Kfw), Spanish Agency for International Development Cooperation (Aecid), Nederlandse Financierings-maatschappij voor ontwikkelingslanden (Fmo), Promotion and participation for coopération économique (Proparco).

Submiting a project

Companies interested in benefitting from EIP or wishing to make an investment must contact the financial institutions selected to manage the investment phases, where they will find all the information on the available mechanisms. A portal and a secretariat dedicated to the Plan will also be activated, which, among other things, will be able to direct interested companies to selected financial institutions. Moreover, if the project does not present the conditions to be financed with the EFSD guarantee, the secretariat will provide a list of financial institutions active in the regions of interest.

An example, the Climate Investor One

The Climate Investor One (IOC) is a fund managed by the FMO, one of the financial institutions already accredited by the European Commission. Its goal is to provide sustainable energy at affordable prices in emerging markets. The fund provides support to energy projects from start to finish, trying to solve market failures and inefficiencies at every stage of project development. By improving the quality of projects, the CIO aims to attract private investors and finance for countries with low and medium-low income, particularly in Africa. The EU contribution to the Climate Investor One is 30 million euros for an amount of investments activated of 900 million euros.

More information can be found here:

https://ec.europa.eu/commission/sites/beta-political/files/external-investment-plan-factsheet_en.pdf

http://europa.eu/rapid/press-release_MEMO-17-3484_en.htm

But where does this cherished product originate? West Africa collectively supplies two thirds of the world’s cocoa crop, with Ivory Coast leading production at 1.8 million tonnes as of 2017, and nearby Ghana, Nigeria, Cameroon and Togo producing additional 1.55 million tonnes.

Ivory Coast

The cocoa market is experience volatility at the moment that could pose a serious problem for the cocoa value chain. In October 2016 , the Ivory Coast government set a mandatory minimum farm gate price and with the global market offering less than the government asking price, buyers backed out and processing facilities shut down waiting for higher market prices. Exporters who secured rights to purchase cocoa in bulk also backed out. In addition, before the 2016/17 season, poor weather had reduced global cocoa supply. As expected, lower production in Ivory Coast and Ghana led to a spike in prices for the first half of 2016.

Cocoa farmers in Ivory Coast bet big on a continued slump following another weak harvest. Cocoa exporters bid on contracts before any real trends could be established in the October-March harvest season. These orders were used to set a minimum farm gate price by the Conseil Cafe Cacao (CCC), the regulatory body for cocoa and coffee in Ivory Coast. The price was set at 1,100 CFA francs per kilogram for the 2016-17 marketing year in October 2016, just as the harvest was set to begin.

Speculation on a market as opaque as cocoa includes inherent risks which may lead to big losses. The traders thought another poor harvest was just around the corner and bet prices would rise. Therefore, a combination of good weather and slumping cocoa demand could spell trouble for Ivory Coast. Increased rainfall began with the October-March harvest in West Africa, which was good news for farmers hoping for a better season.

Within the same period, there was also a lack of demand in Europe. The common measure for cocoa demand, grindings, stagnated. Possible causes for the downturn include worries over Brexit, a hot summer, and recent wellness trends. By the time farmers were ready to sell, the prices that wholesalers were willing to pay were already lower than Ivory Coast’s set farm gate price.

Exporters and producers could not purchase cocoa at the price set by the CCC if they wanted to make a profit. Trucks laden with cocoa sat at ports for months due to a lack of buyers. Of the purchases that were completed, several were rejected because of rotten beans. Ivory Coast’s miscalculation is a costly one for the country. Cocoa beans, paste, and butter account for 40.2 per cent of Ivory Coast’s exports by value. Ivory Coast had to review its 2017 budget because of the drop in sales. The West African country also asked for additional funds from the International Monetary Fund to cushion it going forward.

However, prices have inched back up in recent weeks, indicating that the worst of the crisis may be over. The fact that so much chaos could come from an ostensibly positive event suggests that there are structural problems in the Ivory Coast cocoa sector that need to be addressed. A regulatory system that better protects cocoa farmers during times of crisis would also reduce the risk of meltdown in market mechanisms.

GHANA

Ghana is the world’s second largest cocoa producer with an annual production of 750, 000 to a million tones putting its total share in the global market at 20%.  In the past decade, the chocolate industry’s demand for the product has gone up 12 per cent but production has stagnated.

While the demand, especially from developed economies like India and China is a positive sign for the Industry, the more than 6 million cocoa producers, most of whom are small-scale farmers, face a myriad of challenges ranging from poverty, poor connection to infrastructure from producers to consumers.

But the Ghana Cocoa Board (COCOBOD) established in 1947 has had a history of overseeing the sector, ensuring that it remains on track despite the challenges. The board serves as the only exclusive marketing intermediary between producers and processors of the crop.

The marketing year for cocoa begins in October, when harvest of the main crop begins, followed by the harvest of a smaller “light crop” in July. Light-crop beans are smaller than the main-crop variety, but are identical in quality and grown on the same trees. The main crop accounts for 90 per cent of total annual cocoa bean production in the country, and the light crop accounts for the remaining 10 per cent.

During the 2015/2016 harvesting season the country produced approximately 800,000 metric tones , which was 20 per cent of the total world harvest.

Until a couple of years ago, cocoa generated around a third of Ghana’s export earnings. This share decreased due to the start of oil production. In 2014, cocoa was the third largest export product with a share of 20 per cent. It is estimated that during the 2016/17 a total output of 850,000 will be produced.

Collective cocoa bean purchases by the Ghana Cocoa Board in the 2015/2016 season reached 778,000 tones, representing an increase of around 38,000 tones compared to the previous season. Although production fell short of the Government’s estimated target, it exceeded the low level of the previous season.

For the 2016/2017 season, the Government announced an increase of the guaranteed price paid to cocoa farmers to GH¢7,600 per ton (US$1,914). As at 22^nd October 2016, cocoa purchases in Ghana, as reported by News Agencies, reached approximately 200,000 tones.

Cocoa production in Ghana remains a major contributor to the tax income of the government. There are approximately 800,000 cocoa farmers in Ghana. Cocoa is grown on an estimated 1.9 million hectares. The cocoa industry employs about 60 per cent of the total labor force of the agriculture sector; most cocoa farmers are smallholders who harvest cocoa on 2 to 3 hectares with a yield of on average 400 kg/ha. Including families of farmers, employees of trading companies and input services, the cocoa sector provides income for more than 1 million Ghanaians.

The cocoa sector is one of Ghana’s economic backbones. Ghana is not only the second largest producer of cocoa in the world, but it produces the world’s highest quality cocoa. The cash crop accounts for about 9% of Ghana’s GDP and makes up about one-third of the country’s export revenues, totaling over US$ 1.5 billion.

Additionally, cocoa is an important tool to guarantee the liquidity of the Ghanaian government. Every year, the government issues a bond, which is secured by the predicted income from selling the cocoa of the next harvest. Potential investors know that due to the forward cocoa selling system the bond is a low risk investment. The Ghanaian government pays for the bond at much lower interest rates than it would have to pay for a bank loan.

Which trends offer opportunities on the European cocoa market?

The popularity of chocolate is growing. This results in a stronger demand for high-quality, fine flavor cocoa in Europe. While Ivory Coast and Ghana remain the largest suppliers of cocoa to Europe, their share is decreasing.

Latin American suppliers are increasing their market share, as sustainability is increasingly important on the European chocolate market. Consumers want to know more about the context of cocoa production, and the impact of their purchases.

In Europe, growing demand for chocolate is in traditional consuming countries such as Belgium, France, Germany, Italy, Switzerland and the United Kingdom. Consumption in this segment is associated with higher incomes but also with consumer awareness and market exposure.

This trend is especially driven by a small group of educated, loyal and casual consumers (for example, seasonal shoppers during festivities such as Easter and Christmas)

Zaouli

The first tradition to achieve this universal recognition in 2017 was the Zaouli, an ancient masked dance that has its roots in the Guro tribe, who live in the districts of the cities of Bouaflé and Zuénoula, located in the centre of Ivory Coast, west of the capital Yamoussoukro. The Zaouli is a tribute to feminine beauty that plays an important educational, recreational and aesthetic role within the communities where it is practiced, transmitting the cultural identity of its bearers and promoting social integration and cohesion. There are a total of seven masks used during the dance, all of which are inspired by many legends of the land and produced by skilled wood sculptors. Each mask goes along with a costume that is worn during the dance events, which are very rhythmic and physically demanding. Great importance is also given to musicians and other dignitaries, who guarantee respect for the traditions and who give vitality to the performances, sometimes in the form of intense competitions between villages.

Nsima

The second tradition is Nsima, a staple food not only in Malawi, but also other sub-Saharan African countries, even though it’s called by different names across Africa. It is a kind of maize meal (polenta) obtained from white corn, introduced in Africa centuries ago by the Americans. It is eaten with meat, fish and vegetables and has great importance in the local cuisine of countries such as Malawi. Everything from the cultivation of corn, to the production of flour to cooking is part of this tradition upon which many of the families  depend for their livelihood. The communities safeguard this tradition through the continuous practice, the publication of school books and recipes on the Nsima, and the organization of thematic festivals. It is also served in most restaurants across Africa.

Sega Tambour

The third tradition protected by UNESCO was discovered and thrives in the island of Rodrigues, the second most important of the Republic of Mauritius and more than 500 kilometers away from the capital Port Louis. Sega Tambour, as it is referred to is similar to Zaouli, a dance performance on a rhythmic base played with some instruments: the main one is a special type of drum that is beaten energetically with the hands, to which the Triyang, Bwat and Mayos are  associated . Unlike the Ivorian dance, however, the dancers do not wear traditional masks or costumes and the performance is in harmony with the music.

The Sega Tambour tradition originated from the slave communities of Rodrigues and has been handed down to date as a social aggregation tool within the communities of the Island. It is taught to children from an early age and there are real competitions where musicians and dancers challenge each other. A local non-governmental organization (NGO) has been founded that preserves its historical heritage and which currently falls under the auspices of UNESCO.

To these first three traditions now protected, has been added Dikopelo, practiced in Botswana, which has entered into the list of customs that are risking possible extinction and are therefore in need of urgent protectio. It is a group dance set, without a well-defined choreography, and the singing is without the accompaniment of musical instruments. Dikopelo was practiced above all in campaigns in southern Africa, however with the progressive rural depopulation, those who practice it have decreased, since it is increasingly difficult to practice it in the urban areas. It is also becoming more and more difficult to find those who are keen to pass on the tradition, even if some groups still endeavour to find young people willing to learn it.

…And the Neapolitan pizza makers

Italy, and in particular the city of Naples where pizza was discovered, also received a great boost in 2017, when UNESCO  recognized and listed  the art of Neapolitan “pizzaiuoli”(Pizza makers) as an Intangible Cultural Heritage of Humanity. This is due to the cultural and social role that it has played over the years and still continues to play, which has created a sense of identity of the Neapolitan citizens who identify with this practice and  the values ​​of cohabitation among the members of the Parthenopean community that it represents. The craft of pizzaiuolo has also created an opportunity for social redemption and success to many young people from poor backgrounds, who are guaranteed a future career as pizzaiuoli. The turnover of pizza in Italy, according to Coldiretti, is valued at approximately 12 billion euros.  The Americans being the biggest consumers with 13 kilos per capita, while the Italians lead the ranking in Europe with 7.6 kilos per capita, followed by the Spanish, French,German and British, who consume about 4 kilos per capita. It is worth noting that even the “Mediterranean diet” has been in the UNESCO list of Intangible Cultural Heritages of Humanity for some years now.

Most of the major countries in Africa gained independence in the 1950s and 1960s. Others like the Republic of South Africa got independence from the white minority rule as late as 1994 and are yet to find their bearing in order to make any significant progress. Politics (poor governance), corruption, education, health and tribalism have been known to be some of the main causes of Africa’s economic stagnation, but with more and more Africans gaining access to higher education, better health facilities, and growth of democracy, Africa is finally getting ready to take its place on the world stage.

Africa is endowed with alot of natural resources that for a long time has been exploited by the western world while its inhabitants wallowed in poverty. These include Bauxite from Guinea which is the world’s fifth largest producer after Australia, China , Brazil and india, Uranium from Namibia, Niger and South Africa with Namibia and Niger ranking fourth and fifth place respectively in the world production. Gold, with South Africa’s Witwatersrand Basin holding the world’s biggest gold reserve. Gas, which is mainly found in South africa, Mozambique, North African countries such as Egypt, Libya Algeria and in Nigeria. Infact, Africa accounted for 60% the world’s gas discovered in 2013. Other resources include Diamond where Africa accounts for about half of the world’s produce and is mainly found in South Africa, Angola, Botswana, Namibia and the Democratic Republic of Congo. Oil mainly from Nigeria , Libya, Algeria, Egypt and Angola and many others African countries including Kenya where  extraction is yet to begin.

There are many international companies such Tullow oil that are making in -roads to invest in building the necessary infrastructure in preparation for the take off.in addtion, countries like China foron are also investing huge amounts of money in building infrastructure mainly roads, railways and Airports across African, some of them big enough to cover entire regions such as East Africa where they are currently putting up the famous $4 Billion SGR Standard Gauge Rail, 90% of which is funded by China. The SGR has so far been partly completed between Mombasa and Nairobi and is expected to extend to Kampala, Uganda and eventually to Rwanda knitting together swaths of the east African Community’s emerging trade bloc.

These infrastucture once ready will sporadically propell economic development in the continent making Africa the next best frontier for potential investors after Asia. Infact the European Union is making strides in cementing the relationship with some of its existing African partners such as South Africa, Nigeria, Ethiopia and Kenya among others and even inviting them to sit at the negotiating table as was evidenced in the G7 meeting held on the 28th may 2017 in Sicily Italy. “Perhaps the choice to be in Taormina and Sicily says much about how important our relations are with Africa,” Italian Prime Minister Paolo Gentiloni said in his opening remarks.“Today our discussion on Africa will focus on the need for a partnership across all sectors with innovation and development our core objective,” he added.

If the projections by PwC are anything to go by, then South Africa Nigeria And Egypt will be shifting their positions to become some of the worlds strongest Economies with most Western Economies either falling behind or making insignificant progress. PwC Put Nigeria at position 14 from its current position at number 2. Egypt is expectect rise to position 15 from its current position at number 21 with an estimated annual population growth of 1.4% and finally South Africa which is expected to rise to position 27 from its current position 29 with it’s population expected to grow by 0.5% per year by 2050.

The report suggests that most western economies are likely to slow down mainly because of unfavourable demographics as in the case of Italy and Germany which are estimated to move drastically from thier current position 5 to position 9 for Germany and position 12 to position 21 for Italy . The USA will be replaceds by India from position 2 to position 3 even though it will still keep it’s place as one of the largest and most important world Economic powers.

When this happens, eyes will turn to African, with Africans themselves opting to look for opportunies closer to home within the contentinent thereby changing the current trend that is robbing Africa of its finest skilled labour which will be in high demand in order to facilitate the expected growth. Most skilled labour from the western countries with the relevant experties may also end up looking to Africa for well paid jobs.

Some of the Key Infrastructural Projects in Africa include:

Transport costs are 100 per cent higher in Africa compared to other continents. Only a third of the population have access to electricity—in rich countries this rises to between 70-90 per cent. Just 6% have access to the internet, compared to 40 per cent in other developing nations. Despite its rich water resources food security is a constant thorn in the flesh, but only 5 per cent of agriculture is under irrigation.

Such infrastructure gaps continue to weigh down the continent, reducing the dividend from its brisk growth of the last two decades. But some countries—and mega investors too—are making huge progress in reducing the size of the deficit.

It is for this reason that a number of big infrastructural projects have been initiated and built in Africa by International economic and trade partners. They vary from, railway lines, power projects, water dams to roads. This paper will highlight just a few, both complete and ongoing.

The Grand Ethiopian Renaissance Dam : The Ethiopian government is currently constructing the Grand Ethiopian Renaissance Dam (GERD). Once complete, GERD will be the largest hydropower facility in Africa. It will add about 6 000 Mega Watts to the national grid. This is nearly triple the country’s current electricity generation capacity – and represent a potential economic windfall for the government.

Ethiopia has not succeeded in getting international/outside financing for the project, in part due to its lack of competitive bidding for the project’s construction contract. The project therefore is 100 per cent sponsored by the Ethiopian government. It says it will sell dam bonds directly to the citizens to realise this.

Most public workers in Ethiopia earn relatively low wages and face a significantly high cost of living.  Hence, they are not likely to be able to sacrifice that much of their salaries to invest in this national project.  Nevertheless, many of them have been observed purchasing the GERD bonds, primarily because of pressure from the government and the belief that participation in this national project is a show of one’s patriotism.

The Trans-Kalahari Railway: Namibia and Botswana took the first steps in 2015 to establish a multi-billion dollar railway project to link Botswana’s rich coal fields to the Namibian coast. The project, which is still ongoing, is meant to be developed by the private sector in the two countries. Private companies will have to gather capital for the project and not the two governments.

Although several media reports from Botswana have said that the government may have changed its mind about supporting the project, it is said the project is more beneficial to Botswana’s coal exports through Namibia.

Financing: Botswana and Namibia have already signed a bilateral agreement for plans to develop the 1 500-kilometre railway for transporting coal exports to Walvis Bay that will cost US $15 billion. Once the two countries resolve outstanding issues, this will make way for funding initiatives and tenders. In addition, China and India’s demand for the more than 200 billion metric tonnes of coal in Botswana’s central Karoo basin could boost economic growth in the landlocked southern African nation.

Lake Turkana Wind Power Project : Kenya with 11 eleven projects, has the greatest number of large infrastructure projects in East Africa equivalent to 26 per cent of the total. Lake Turkana Wind power project, a renewable energy project is one of them. It aims to provide 300MW of reliable, low cost wind energy to Kenya’s national grid, equivalent to over 20 per cent of the current installed electricity generating capacity. The wind farm site is located in northern Kenya, approximately 50km from the Capital, Nairobi. The Project will comprise a wind farm, associated overhead electric grid collection system and a high voltage switchyard. The Project also includes rehabilitation of an existing road which covers a distance of approximately 200km.

Financing: The total project cost is estimated at US$680 million and includes the cost of the envisaged 400 km transmission line from Lake Turkana to a sub-station near the capital Nairobi, as well as the cost of upgrading 200 km of roads and various bridges. The project will be financed through equity debt (25 per cent), mezzanine debt (5 per cent) and senior debt (70 per cent). As the mandated lead arranger and senior co-lender, Africa Development Bank (AfDB) will provide a long-term senior loan of USD 150 million.

Coastal Railway – Nigeria: This is the largest ever contract awarded to a Chinese company in Africa. The project is worth $12 billion. The deal was signed between the Federal Republic of Nigeria and China Railway Construction Corp (CRCC) in 2014. The railway is 1,402 km in length and upon completion (final phase ongoing), it will link Lagos, the nation’s economic capital, with the eastern city of Calabar, passing through 10 states. It will also link cities with the oil rich state of Niger Delta.In the last 20 years, Chinese companies have built and upgraded around 4500km of railway in Nigeria.

Bagamoyo Port – Tanzania: The project is worth $7 billion. It is funded by China Merchants Holdings International and State Government Reserve Fund of the Oman government. The port is being built in Bagamoyo, a coastal town in Tanzania. Upon completion, it will be able to handle about 20 million containers annually and will be the largest port on the East African coastline, bigger than the Port of Mombasa in Kenya.  Its construction started in October, 2015, but was halted earlier 2017 due to financial constraint facing the Tanzanian government.

Grand Inga lll Hydropower Project Dam, DRC: This is one of the projects that redefine the meaning of a ‘mega project’ in Africa. It can potentially power 40 per cent of the continent. When completed, this dam will be the largest of its kind, with double the capacity of the Three Gorges dam of China (the current largest in the world). The ongoing project is estimated to the tune of US$100 billion from the World Bank.Once Inga III is completed, the DRC will then begin building the Grand Inga Dam which is expected to be completed by 2025.

Markets and Pricing

The cocoa market has been on a wild ride over the past year. Between July 2016 and July 2017, global cocoa prices fell by more than a third. Production of the crop was expected to shrink due to poor weather in some key growing regions, leading to increased prices. But, the opposite ended up happening. There was plenty of rain, and current estimates suggest global production will increase by 15 per cent in the 2016-17 season from the previous year.

Whereas a definite amount of unpredictability is projected, the price sink exposes serious pain points in the cocoa value chain. Much of the decline came after the Ivory Coast government set the mandatory minimum farm gate price in October 2016. With the global market offering less than the government asking price, buyers have backed out. Processing facilities have shut down, waiting for higher market prices. Exporters, having secured rights to purchase cocoa in bulk, are declining to exercise them.

Prices have inched back up in recent weeks, indicating that the worst of the crisis may be over. The fact that so much chaos could come from an ostensibly positive event suggests that there are structural problems in the country’s cocoa sector that need to be addressed. A regulatory system that better protects cocoa farmers during times of crisis would also reduce the risk of meltdown in market mechanisms.

Before the 2016/17 season, poor weather had reduced global cocoa supply. As expected, lower production in Ivory Coast and Ghana led to a spike in prices for the first half of 2016.

Ivory Coast bet big on a continued slump following another weak harvest. Cocoa exporters bid on contracts before any real trends could be established in the October-March harvest season. These orders were used to set a minimum farm gate price by the Conseil Cafe Cacao (CCC), the regulatory body for cocoa and coffee in Ivory Coast. The price was set at 1,100 CFA francs per kilogram for the 2016-17 marketing year in October 2016, just as the harvest was set to begin.

Speculation on a market as opaque as cocoa includes inherent risks which may lead to big losses. The traders thought another poor harvest was just around the corner and bet prices would rise. Therefore, a combination of good weather and slumping cocoa demand could spell trouble for Ivory Coast. Increased rainfall began with the October-March harvest in West Africa, which was good news for farmers hoping for a better season.

Within the same period, there was also a lack of demand in Europe. The common measure for cocoa demand, grindings, stagnated. Possible causes for the downturn include worries over Brexit, a hot summer, and recent wellness trends. By the time farmers were ready to sell, the prices that wholesalers were willing to pay were already lower than Ivory Coast’s set farm gate price.

Exporters and producers could not purchase cocoa at the price set by the CCC if they wanted to make a profit. Trucks laden with cocoa sat at ports for months due to a lack of buyers. Of the purchases that were completed, several were rejected because of rotten beans. Ivory Coast’s miscalculation is a costly one for the country. Cocoa beans, paste, and butter account for 40.2 per cent of Ivory Coast’s exports by value. Ivory Coast had to review its 2017 budget because of the drop in sales. The West African country also asked for additional funds from the International Monetary Fund to cushion it going forward.

Ghana

Ghana is the world’s second largest cocoa producer with an annual production of 750, 000 to I million tones. In the past decade, the chocolate industry’s demand for the product has gone up 12 per cent but production has stagnated.

While the demand, especially from developed economies like India and China is a positive sign for the Industry, the more than 6 million cocoa producers, most of whom are small-scale farmers, face a myriad of challenges ranging from poverty, poor connection to infrastructure from producers to consumers.

But the Ghana Cocoa Board (COCOBOD) established in 1947 has had a history of overseeing the sector, ensuring that it remains on track despite the challenges.

The board serves as the only exclusive marketing intermediary between producers and processors of the crop.

Markets and pricing

The global market share for this second leading cocoa producer is estimated at 20 per cent.

The marketing year for cocoa begins in October, when harvest of the main crop begins, followed by the harvest of a smaller “light crop” in July. Light-crop beans are smaller than the main-crop variety, but are identical in quality and grown on the same trees. The main crop accounts for 90 per cent of total annual cocoa bean production in the country, and the light crop accounts for the remaining 10 per cent.

During the 2015/2016 harvesting season the country produced approximately 800,000 metric tones , which was 20 per cent of the total world harvest.

Until a couple of years ago, cocoa generated around a third of Ghana’s export earnings. This share decreased due to the start of oil production. In 2014, cocoa was the third largest export product with a share of 20 per cent.

It is estimated that during the 2016/17 a total output of 850,000 will be produced.

Collective cocoa bean purchases by the Ghana Cocoa Board in the 2015/2016 season reached 778,000 tones, representing an increase of around 38,000 tones compared to the previous season. Although production fell short of the Government’s estimated target, it exceeded the low level of the previous season.

For the 2016/2017 season, the Government announced an increase of the guaranteed price paid to cocoa farmers to GH¢7,600 per tone (US$1,914) As at 22^nd October 2016, cocoa purchases in Ghana, as reported by News Agencies, reached approximately 200,000 tones.

Cocoa production in Ghana was and is a major contributor to the tax income of the government. There are approximately 800,000 cocoa farmers in Ghana. Cocoa is grown on an estimated 1.9 million hectares. The cocoa industry employs about 60 per cent of the total labor force of the agriculture sector; most cocoa farmers are smallholders who harvest cocoa on 2 to 3 hectares with a yield of on average 400 kg/ha. Including families of farmers, employees of trading companies and input services, the cocoa sector provides income for more than 1 million Ghanaians.

The cocoa sector is one of Ghana’s economic backbones. Ghana is not only the second largest producer of cocoa in the world, but it produces the world’s highest quality cocoa. The cash crop accounts for about 9% of Ghana’s GDP and makes up about one-third of the country’s export revenues, totaling over US$ 1.5 billion.

Additionally, cocoa is an important tool to guarantee the liquidity of the Ghanaian government. The government issues every year a bond, which is secured by the predicted income from selling the cocoa of the next harvest. Potential investors know that due to the forward cocoa selling system the bond is a low risk investment. The Ghanaian government pays for the bond at much lower interest rates than it would have to pay for a bank loan.

Conclusion

Cocoa traders speculating on the continued rise of cocoa prices in mid-2016 were proven wrong after a bumper crop in West Africa saw production quantity jump by double digits. Traders in both Ivory Coast and Ghana were already locked into trade agreements requiring them to purchase, if they chose to, well above the current market price. Archaic rules that were supposed to help farmers led to a disaster for them and a serious inconvenience for many others.

Cocoa, like coffee, is one of a handful of agricultural commodities grown exclusively in tropical regions and consumed overwhelmingly in Europe and North America. Cocoa, however, is more extreme than coffee in how uneven its value chain is, funneling only a small fraction of its final retail value back to farmers.

The continued presence of quasi-governmental organizations like Ivory Coast’s CCC  and Ghana’s COCOBOD likely causes much of this dysfunction by adding an extra layer between the world market and the farmers who trade with it.

Small-scale cocoa farmers are so removed from the final product that many of them have never seen chocolate, let alone tasted it. Consequently, when cocoa prices tumble, cocoa farmers’ income may fall dramatically while chocolate manufacturers and consumers may not even notice the price difference. And that leaves trade on the crop at relatively stable position.