Ghana’s Cocoa Sector: A Journey Through Decades of Bold Reform and Restructuring

The story of Ghana’s cocoa industry is one of dramatic peaks, devastating troughs, and a relentless pursuit of efficiency. Once the undisputed global leader, Ghana has undergone several waves of cocoa reforms designed to reclaim its market share and modernise an industry that remains the backbone of its economy.

History of Reform and Restructuring in Ghana's Cocoa Industry

The Rise, Fall, and Road to Recovery

In the mid-1960s, Ghana was the world’s cocoa powerhouse, producing 581,000 metric tons in the 1964/65 season, a massive 38 percent of global production. However, this dominance was not to last. By the 1983/84 crop season, production plummeted to a mere 160,000 metric tons, and Ghana’s market share withered to just 10 percent.

This decline was largely attributed to excessive taxation and a lack of incentives; at its lowest point, the government was taking as much as 44 percent of cocoa export revenue in taxes. Recognising the need for change, the government began implementing policy reforms in 1986 aimed at restoring macroeconomic stability and increasing the share of the export price paid to farmers.

Streamlining the Giant: COCOBOD Restructuring and Job Losses

Central to these reforms was the restructuring of the Ghana Cocoa Board (COCOBOD). To increase the efficiency of the marketing system and ensure more revenue reached the farmers, the board underwent significant downsizing:

• 1987 Staff Reductions: COCOBOD reduced its staff by nearly 12,000 people. This was achieved by limiting the board's involvement in non-core activities like road haulage and the maintenance of feeder roads.

• 1992–1994 Cuts: A further program was embarked upon to reduce the staff by approximately 5,000 additional employees.

• Merger of Services: By the late 1990s, the government began merging COCOBOD’s extension services with the Ministry of Food and Agriculture, a move that involved further retrenchment, though the costs of this reorganisation initially slowed the process.

Breaking the Monopoly: Liberalisation and Private Sector Competition

The 1990s marked a shift toward liberalisation. In March 1992, the government allowed private traders to compete with the state-owned Produce Buying Company (PBC) in the local purchasing of cocoa. This trend culminated in the privatisation of the PBC in late 1999, which ended the public sector’s dominant role in domestic purchasing.

Furthermore, the government began plans to phase out the Cocoa Marketing Company’s (CMC) monopoly on exports, aiming to allow qualified private buyers to export at least 30 percent of their purchases starting in the 2000/01 crop year.

The 1999 Medium-Term Cocoa Development Strategy

In April 1999, after an extensive participatory process involving farmers, traders, and the World Bank, the government adopted a Medium-Term Cocoa Development Strategy. This strategy set ambitious targets to:

• Increase production to 500,000 metric tons by the 2004/05 season.

• Raise the producer’s share of the export price to 70 percent.

• Reduce the cocoa tax gradually to 15 percent (or lower, depending on world prices).

Staying Competitive: Ghana vs. Côte d'Ivoire

The reforms were also driven by the need to keep pace with regional competitors. During the 1990s, Côte d'Ivoire surpassed Ghana as the world’s largest producer, achieving yields per hectare two to three times higher than Ghana’s through the use of high-yielding varieties.

Moreover, historically higher producer prices in Côte d'Ivoire created a massive smuggling incentive, with an estimated 40,000 to 60,000 metric tons of Ghanaian cocoa diverted across the border annually during the reform period. Ghana’s strategy to raise producer prices and reduce marketing costs was essential to curbing these losses and ensuring the industry's long-term prosperity.

Conclusion

While the road to reform has been marked by difficult job losses and the challenges of liberalisation, these steps were vital to modernising the sector. By shifting toward a more participatory and market-driven approach, Ghana has laid the groundwork to remain a key contributor to the global cocoa market while prioritising the welfare of its farmers.

Data: Cocoa Reforms: An Experiment in Participatory Decision Making - IMF e-library