27 June 2019

Africa: One Small Step for Fair Trade

Photo: CCILCI
Cacao
guest column

The announcement last week by the governments of Côte d’Ivoire and Ghana to suspend forward sales of cocoa beans for 2020/21 until further notice and to demand the implementation of a floor price of US$2,600 per metric tonne of cocoa beans is revolutionary and must be welcomed by all those interested in fair and greater equity in international trade.

Their decision was announced after a two day (June 11-12) Stakeholders Meeting on Farmer Income meeting between Ghana and Côte d’Ivoire in Accra. This is the first time the producers have met to determine the price of cocoa beans. A technical committee meeting will be held in Abidjan on July 3rd to work out the modalities.

Like most other raw commodities and materials grown, mined or produced in Africa, the prices are always set out of Africa. Cocoa trading takes place at the New York Mercantile Exchange (NYMEX) and the Intercontinental Exchange (ICE) in London. Until now, the three top multinationals, the largest privately held corporation in the United States in terms of revenue, Cargill, the Swiss Barry Callebaut group and the Singapore-headquartered agribusiness giant, Olam International, all but influence and determine the price of cocoa.

The producer countries say their decision to demand an increase in the prices is to enable them to provide a living wage for farmers and improve their living standards. They assert that the farmer’s income is very low especially compared to the significant amount of profit made by the cocoa traders.

Cocoa cultivation in Africa has been synonymous with extreme poverty. The crop has had minimal impact on the lives of the people who grow it and has resulted in significant deforestation. Although farmers in the Côte d’Ivoire and Ghana together produce more than 60 percent of the world’s cocoa, a Fairtrade study in April 2018 showed that 58% of Fairtrade certified cocoa farming households in Côte d’Ivoire had incomes below the extreme poverty line.

Both countries produce about three million tonnes of cocoa beans but the revenue generated from the sale of cocoa does not amount to $6 billion. According to Etelle Higonnet of the Mighty Earth, a global campaign organization that works to protect the environment, “(T)he majority of cocoa farmers make under $1 per day. With the lion’s share of the benefits, it is high time that retailers take responsibility for human rights abuses and environmental abuses in the cocoa they sell.” According to Higonnet, most cocoa farmers are wrestling with whether or not they can afford to put a meal on the table for their families.

Farmers’ poverty has only gotten worse in the last three years. Roughly 2.1 million children work in cocoa, 96% of whom are found to be in hazardous labor according to researchers at Tulane University. According to Higonnet, “I can accept that some parents with a sweet tooth might sneak a wee bit of candy from their kids’ stash, but I can’t accept that a $100 billion-a-year industry is robbing the farmers who are slaving away in unacceptable conditions to supply them with raw materials.”

According to the Financial Times, ‘(T)he industry that provides nearly 7 percent of Ghana’s GDP and about a quarter of its export earnings does not provide enough for most of its 800,000 farmers to live without government subsidies and aid from non-government organisations. Many live in poverty, lacking access to services such as healthcare and education. Often, they are forced to use their children as labourers.’

Fairtrade Foundation, a charity based in the United Kingdom that works to empower disadvantaged producers in developing countries by tackling injustice in conventional trade, welcomed the decision by Côte d’Ivoire and Ghana. 'We believe in sharing the benefits of trade more equally, and welcome this move by the governments to shore up cocoa farmers’ incomes' said Jon Walker, Fairtrade International’s Senior Advisor for Cocoa. ‘We will be actively engaging with the cocoa regulatory bodies in each country to understand how the Fairtrade structure, including our Minimum Price, will fit in with their plan.'

Fairtrade International last year announced that as of 1 October 2019, the Fairtrade Minimum Price for conventional cocoa would increase by 20 percent to $2,400 per metric tonne, with additional increases for organic cocoa. The Fairtrade Premium for cocoa farmers and their co-operatives will also increase by 20 percent to $240 per metric tonne. Fairtrade operates a certification standard that seeks to ensure that households in several sectors including cocoa, coffee and cotton earn enough ‘to afford a decent standard of living for all members of the household’ and enhance their livelihoods.

The efforts by the producer countries of the two countries in taking joint action to increase the price in order to obtain "a decent compensation" for workers' efforts in line with the Abidjan Declaration of March 2018 are laudable. However, there is a need to ensure that farmers are the ultimate beneficiaries of the increased prices, if it does come to fruition. When implementation of a floor price is mapped out, farmers must be the ultimate beneficiaries – not middlemen or the authorities. Farmers need not only a floor price, but also increased public sector investment in transportation, logistics, and trade-related infrastructure, development help for farming communities, better access to education and health, and transparency in government services. Most of all, farmers must be consulted fairly, transparently, and respectfully.

The two leading Cocoa producers face a huge challenge. The buyers may call their bluff and refuse to buy their cocoa beans at that price. They may turn to other producers in South America such as Brazil, Ecuador and Mexico to buy cocoa at a lower price.

Whether this current pricing increases materializes or not, it is clear that Ghana and Cote d’Ivoire are intent on creating an OPEC-like cartel that will give them greater powers in determining the price of cocoa. It should not only be up to the buyers to set the prices. Unfair prices have left many farmer families struggling to afford the basics: schooling for their children, medical treatment when they are ill and even access to safe water. It is sad that cocoa farmers, whose lives are at stake, were not duly involved during deliberations in Accra. It very important that the governments of Ghana and Cote d’Ivoire as well as  aid agencies ensure that the suspension of cocoa sales does not negatively impact lives of millions of cocoa farmers (pending the industry agreeing to producer country demands). No one wants farmers and their families to go hungry, or for the industry to be able to use farmers’ misery as a hostage, in negotiations on a floor price.

It will also be key to ensure that increased prices don’t incentivize further conversion of forest land for cocoa production by smallholder farmers. Côte d’Ivoire and Ghana have already lost over 90% of their forests, and these two countries won the World Cup of deforestation in 2018, with the two worst rates in increased deforestation worldwide. What little forests remain must be vigilantly protected for future generations.

Africa will never be able to attain the Sustainable Development Goals (SDGs) unless it can eliminate deeply entrenched poverty and marginalization. Fair trade is based on dialogue, transparency and respect, that seeks greater equity in international trade. It is about ‘better prices, decent working conditions, local sustainability, and fair terms of trade for farmers and workers in the developing world.’ It seeks to address the injustices in world trade tradition and eliminate discrimination against the poorest, weakest producers. It seeks to put people first. Ghana and Cote d’Ivoire have taken a small step in this direction. It is the way forward for Africa.

Abdul Tejan-Cole works for Mighty Earth, a global campaign organization that works to protect the environment.

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