The government of Ghana is committed to adding value to cocoa produced in the country, so it introduced a policy to ensure that 40 per cent of production is processed locally, Boahene Asamoah explains.
Adding value to raw cocoa beans has always been the plan of successive governments but it has not always been successful.
So the announcement by the government some few years back to introduce policy initiatives that would ensure that over 40 per cent of cocoa produced locally would be processed into semi-finished goods so as to increase its price value was received with mixed reaction. But generally, the initiative holds a lot of promise for the country. Ghana's cocoa is of premium quality on the international market and as a result, many analysts and commentators believe that its semi-processed form could add as much as 40 per cent more to the price currently offered on the international market.
The current cocoa processing activity in the country is not encouraging. In 2007, Ghana exported about 730,000 tonnes of cocoa beans out of which about 13 per cent was processed into semi-finished products like cocoa liquor, butter and cake.
Again, only one per cent of total annual cocoa production is processed into finished products like chocolate, and other confectionery products.
Until recently, the West African Mills (WAMCO), Cocoa Processing Company (CPC) and Barry Callebaut were the only major companies producing semi-finished cocoa products on a large scale for exports. However, over the past three years as a result of the government's policy initiative, new companies have taken advantage of the government's policy and entered the industry to process cocoa beans into finished and semi-finished products, while the major companies already in the industry have made significant investments into their operations to increase their capacity.
CPC for instance has embarked on an expansion programme that would see its production capacity increased to 64,500 metric tonnes of cocoa powder, liquor and cake.
Barry Callebaut has also undertaken an expansion programme that would double its capacity to 60,000 metric tonnes per annum all in anticipation that the government policy would spike up the industry further.
Furthermore, WAMPCO 's capacity has increased tremendously, since it was divested and currently has a capacity of 80,000 metric tonnes.
New companies such as Gergens Cargilm, ADM, Afrotropic and Commodity processing are currently putting up capacities of 60,000; 60,000; 15,000 and 15,000 metric tonnes respectively to process raw cocoa into semi-finished products.
So far Afrotropic and Commodity Processing Industries, which is a joint venture between some Ghanaians and their foreign partners, has started operations, to take advantage of the government's policy and by the end of next year, Cargil and ADM should be in full operations. The combined production of these companies is expected to reach 354,500 tonnes by the end of next year, nearly 50 per cent of total production.
According to some industry experts, this new policy initiative will not only benefit the country, but also the companies themselves. Some of the locally registered cocoa processing companies are already processing beans for their parent companies abroad, which analysts see as a cost-saving measure. Due to the high labour cost in most advanced countries, processing the beans locally saves cost on transportation and labour.
Cocoa importing firms, it seems, are looking up to Ghana to process cocoa for the European and the US market, so as to improve their own bottom-line profit.
Strong demand from China and India has stimulated interest in cocoa products especially from Ghana and West Africa.
Ghana's cocoa enjoys high patronage especially from Japan and other Asian countries.
The only glitch, industry experts have warned, is the rising cost of the price of cocoa beans on the international market. It is believed that if prices keep rising, like they are today, financially it could become more beneficial to sell the raw beans than the processed product.
On the international market, cocoa price currently stands at US$2,862 per metric tonne, the same price local processing firms have to pay for cocoa beans.
Cocoa sales in Ghana are effected through forward sales, which involve contractual arrangements for future delivery of the beans. Cocoa has a long history in Ghana and from 1911 to 1976 Ghana was the world's leading producer, contributing between 30 and 40 per cent of the world's total output.
It is a major export earner for the economy. Since the mid 19th century, cocoa has contributed significantly to the socio-economic development of the country and there are currently around 1.6 million people involved in growing cocoa and many more in associated industries.
Processing of cocoa in the country, however, started in 1947 and in the late 1970s the world market price for cocoa plummeted by two thirds. Ghanaian cocoa farmers were getting less than 40 per cent of the world market price from the state agency responsible for the industry — Cocobod — and so many stopped producing cocoa altogether.
The situation worsened after the droughts and accompanying bush fires of the early 1980s and production in Ghana fell from a third of the world's total in 1972 to just 12 per cent of total world production.
At this stage the World Bank and International Monetary Fund intervened with a Structural Adjustment Programme to "rescue" the economy, and the industry, as it was a major sector for any structural reforms.
Today the government offers over 70 per cent of the producer price to cocoa farmers.
Cocoa production has soared since the government introduced mass spraying of cocoa farms throughout the country, a policy that started in 2002; culminating in record production in 2005.
Due to smuggling, the volume of export from Ghana has reduced in this light crop season.
Cocobod purchased about three per cent less beans from farmers during this year's light-crop season. Cocobod bought 13,613 metric tons of beans from growers by the eighth week of the season, compared with about 14,000 tons in the same period a year earlier, according to sources at Cocobod.
In July, the board said it expected to receive as much as 40,000 tons of the beans, compared with 50,000 tons last season. Fewer controls and poor quality beans in neighbouring Ivory Coast, the world's biggest cocoa grower, enable Ghanaian farmers to fetch higher prices for their crop in that country. Cocobod is working with security agencies in Ghana to reduce smuggling.
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