Value addition to spur cocoa growth

Boahene Asamoah examines the government’s policy to process about 40 per cent of cocoa products locally and the response of the policy by some foreign firms.

The government over the past few years announced a policy to process over 40 per cent of cocoa production locally in a bid to add value to the raw cocoa beans being exported.
Ghana’s cocoa is of premium quality on the international market, but it is the value addition that is the high earn value of the cocoa business.
Ghana exported about 730,000 tonnes of cocoa beans out of which about 13 per cent of total production are processed into semi-finished products such as cocoa liquor, butter and cake.
Again, out of the total cocoa production, only one per cent are processed into finished products such as chocolate, and other confectionery products.
Until recently, the West African Mills (WAMCO) in Takoradi, Cocoa Processing Company (CPC) and Barry Callebaut were the only major companies producing semi-finished products on large scale for exports.
However over the past three years, these companies have made significant investments into their operations and has subsequently increased their capacity, while new entrants have taken advantage of the government’s policy.
CPC 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 is also undertaken a expansion programme that would double its capacity to 60,000 metric tonnes per annum.
WAMPCO capacity has increased tremendously ever 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 another 15,000 metric tonnes respectively to process raw cocoa into semi finished products such as cocoa butter, cake, powder and liquor.
So far Afrotropic and Commodity Processing Industries which is joint venture between some Ghanaians and their foreign partners are reported to have started operations.
Cargil and ADM which are part of a multi-national companies are expected to begin operations by the end of the year. These companies however, do process for their mother companies in Europe and America.
According to some industry experts, there is growing cost of processing raw cocoa beans in the developed countries and thereby many cocoa producing firms are looking towards Ghana to process cocoa for the european and the US market.
Again the emergence of of the Asian tigers especially China and India has stimluated the demand for cocoa products especially from Ghana and West Africa.
Ghana’s cocoa enjoy’s high patronage especially in Japan and other Asian countries. The industry presently is receiving very significant private investments and become vibrant.
The combine production of these companies is expected to reach 354,500 tonnes by the end of next year, nearly 50 per cent of total production.
However, some industry experts say the rising cost of cocoa price on the international market is source of concern for local processing companies.
Cocoa sales in Ghana are effected on contractual basis for future delivery and such products compete with other products from other major cocoa producing countries such as Cote d’Iviore, Cameroun, Brazil, Malaysia and Indonesia.
Cocoa prices on the international market currrently stands at $2,862 per metric tonne, the same price local processing firms have to pay for cocoa beans.
Cocoa has been grown in Ghana since the mid 19th Century.
Processing of cocoa in the country however, started in 1947 at the Cocoa was first exported at the end of the 19th century, and between 1911 - 1976 Ghana was the world's leading producer, contributing between 30-40 per cent of the world' s total output.
There are currently around 1.6 million people involved in growing cocoa and many more in associated industries.
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 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.
Today the government offers over 70 per cent of the producer price to cocoa farmers.
Production of cocoa have soar on account of government intervention in the form of mass spraying of cocoa farms throughout the country since 2002, hitting record highs in 2005.