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Humble cocoa bean plays major role in billion dollar economy

Interview - February 23, 2012
Chief Executive Officer Mr. Anthony Fofie discusses the various functions of the Ghana Cocoa Board, which range from attracting investment and partnerships, to improving the lives of peasant farmers
GHANA COCOA BOARD
MR. ANTHONY FOFIE | CHIEF EXECUTIVE OFFICER GHANA COCOA BOARD

Please elaborate on the importance of agriculture to Ghana and the world economy.

Agriculture has been the backbone of the Ghanaian economy for a very long time. Almost 60% to 70% of the population is engaged in what we call the primary production. We initially started with cocoa then ventured into palm oil, timber, and so on. Mining is also an important sector for the country. It has been a producer of crude oil and diamonds. More recently, we began producing refined oil, as well. The discovery of oil in Ghana will definitely change the country’s outlook (as well as its GDP).
Cocoa, gold and other commodities have traditionally been the main exports of the country. They still contribute to the country’s revenue. However, the coming of oil will supplement the development in the cocoa industry.

Ghana is known for its cocoa. It is its trademark. The economy has been historically driven by the cocoa sector. Now, that is actually changing. There are quite a lot of peasant farmers. We have almost 800,000 smallholder farm families engaged in cocoa. When the cocoa season starts, a lot of the revenue goes into the rural areas.   

Can you tell us a bit about the role that the Cocoa Board plays?

The Cocoa Board finds ways to make the lives of these smallholder farmers better. At a social level, we look into the quality of education for the children of these farmers, as well as health programs for their families. We contribute our quota towards the construction of the roads in the rural areas. We put up healthcare facilities such as clinics. 
Because we value the welfare of our local smallholder farmers, we have formulated a pension scheme for them. This is crucial. Nobody really retires from farming, but when the farmer becomes too old and weak that he has to retire from his trade, there must be something set aside for him (in the same manner that you would expect from any other job in the formal sector).
 
Urbanization is a trend we see in the younger generations. How can agriculture be re-energized to appeal to the youth?

Farmers do not get enough credit for the kind of work that they do. People see it as a menial career, instead of respecting it for the kind of trade that it cultivates and makes possible. The traditional hoe-and-cattle method holds little appeal to the youth, who have a more progressive outlook. Added to this is the fact that not all smallholder farmers can afford machinery to develop their farms further.

I feel that if we introduced some new cost-effective equipment and machinery to make the job more labor-friendly (all while increasing the revenue potential), we can entice young people to take interest. Introducing certain technologies to optimize output is a way to appeal to the younger generation.
Right now, raw produce is processed in urban areas, taken to places like Tema where there is a concentration of processing factories. This is something that we are looking at. The agriculture economy should not be based on primary production. We should also include the addition of value to those commodities.
 
The entrepreneurial spirit of Ghanaians demonstrates the country’s capability of developing and sustaining local excellence while maintaining international standards. What challenges do you face as the CEO of the Cocoa Board? In terms of your subsidiaries, how do you maintain the culture of excellence in all your operations?

Obviously, we want to attract as much foreign investment as we can to expand the skills and technologies that we have in the country. Foreign investment brings in the kind of expertise and equipment that we are looking for, to help us promote our local content.

The prospect of expanding the skills and the machineries available for our local businesses makes it all exciting. There is a lot of competition. We have Cargill, Barry Callebaut (from Switzerland), the Archer Daniels Midland Company (ADM) – they are all here. There is a factory which is a joint venture (JV) between the Ghanaian government and the Cocoa Board. There is also the 60-40 deal we have with a German investor for a West African facility (with the investor getting the majority share). These are the kind of collaborative projects that we consider in terms of foreign investment.

We have some local entrepreneurs who have established processing companies. PLOT Enterprise (Ghana) Limited, which was inaugurated by the H.E. Pres. John Evans Atta Mills. Located in Takoradi, PLOT is a fully-owned Ghanaian cocoa processing factory whose CEO is Patricia Poku-Diaby. Coming up with the infrastructure and the machinery for the plant required a US$40-million investment. The initial capacity is 32,000 metric tonnes of cocoa annually, which a targeted 25,000 tonnes for the production of cocoa cake, cocoa butter, and cocoa liquor every year.

PLOT is a true success story. In fact, I have been told that Barry is buying some of their products.
All these linkages serve the economy well. We can have foreign entrepreneurs doing business with the local business people. Together, they can push the value-addition idea forward.

In what capacity can potential German investors work with these organizations?

There have been a number of collaborations taking place; particularly, in the area of R&D. We have the UK research group. There is also the Roundtable on a Sustainable Cocoa Economy, which is a joint effort between the Ghana Cocoa Board, and the Ministry of Agriculture, Nature and Food Quality of the Netherlands. On top of which, we have some exchange programs with international universities (including those from Germany).

We recently had representatives from Kraft Foods (formerly Cadbury Ghana Ltd.). They have injected significant funding to carry out their R&D. Last year, as part of their solar energy project intervention, they donated US$600,000 worth of solar lanterns to the 10,000 households of the 160 cocoa communities. This is on top of the GH¢1.303 million worth of solar panels in 22 basic schools in rural villages. They have really done a lot.

There is the project with the Department for International Development (DFID) for the control of phytophthora megakarya (a cocoa disease) using phosphonic acid.
We have collaborative research between a number of organizations and processing companies (e.g., Kraft Foods, Hershey’s, a number of traders from the UK, and many others).
We got some funding from the Common Fund for Commodities (CFC) to research on processing of cocoa by-products (e.g., husks, pulp, cocoa butter by-products, etc.), to optimize the revenue potential of our plants.

We look at the aspect of quality. Here in the organization, we have a Seed Production Unit that is in-charge of the distribution of high quality, hybrid cocoa and coffee planting materials to farmers. It is a joint effort with the Cocoa Research Institute of Ghana. We look at what the consumers want and factor it into our research.

There is also the EU-Cocoa Sector Support Programme Grant Agreement to promote such quality and sustainability programs. It is now at its second phase, and translates to an EU contribution of about five million Euros. This is basically what we do.

What has been the consumer reaction to the developments in the sector?

Having been at the International Cocoa Organization (ICCO), the consumers are very excited about the developments taking place. There is the dark sugarless chocolate, the certified beans, and so on. These things are good for the sustainability of the industry.
You see how it is. You come to Ghana, and you have to taste the chocolate because they come from the best quality beans on the planet. We pride ourselves of our dark chocolates. Unlike other chocolates, it does not have high quantities of sugar and milk. It has been scientifically proven that high quality dark chocolate (such as what you would find here) is good for your heart.

There are so many developments taking place in the sector at the international front.

A lot of or cocoa beans go to the EU. Normally, the first stop is Amsterdam, then Hamburg. Germany processes a lot of Ghanaian cocoa. Some of the processed products go to Belgium, other parts of Germany, and the Netherlands. We now see some of these products moving towards the new EU members.

In Japan, 70% of their cocoa factories capacity has been dedicated to processing Ghanaian cocoa. In September 2010, delegates from the Chocolate and Cocoa Association of Japan (CCAJ) came to Ghana to discuss their Food Sanitation Law, the agrochemicals being used, the procedure for pre-shipment pesticide analysis, the counter-measure against condensation damage on the beans, and so on.

We have all these existing chains. There are the traditional European markets (e.g., Germany, the Netherlands, etc.), as well as the emerging markets. We are also interested in China and India. India is a traditional British market, and they consume a lot of Cadbury chocolate, which contains Ghanaian cocoa. There are also the chocolate drinkers (which now has a more or less medicinal bent). Cocoa has a lot of antioxidants, which prevent the growth of cancer-causing elements.

There is the local consumption for culinary and medicinal purposes. We are looking to promote our products here, as well.

How does the US market factor in?

The US does not buy the chocolate directly from Ghana. However, most of their companies (like Hershey’s) use Ghanaian cocoa. They get our cocoa from other countries.

How would you describe the local production of cocoa?

It is normally government policy that determines whether an investor comes in or not. This has to do with incentives such as tax rebates. Some relocate to Ghana because of the discount offered to them on a certain type of bean. It is only a question of size, but they are very good quality cocoa. Those who process cocoa internally are granted a 20% discount (on top of other tax rebates). ADM, for instance, opened a plant in Kumasi. Because there are no existing routes leading from Kumasi to the ports of Takoradi and Tema, they had to be given some tax incentives and discounts to locate their factories there. A lot of them are excited about the FTZs. We do this so that we can encourage them to produce cocoa products for domestic and international consumption.
 
What concerns do you have in terms of production?

A lot of them produce at an intermediate level, and not the confectionary level. Only our people from the Cocoa Processing Companies do that. We want that to change. We want to promote a higher level of production, so that they produce chocolates and chocolate products. I was talking to Barry Callebaut earlier and it turned out that it is something that they have been considering. However, there are trade barriers in some market. For instance, in Germany, they would like to know how much of what has gone into the chocolate comes from Germany and how much comes from elsewhere. Issues will be raised. Some would say that they want the milk from the German cattle to go into the chocolate. They prefer to mix our cocoa in Germany, with their own sugar and milk. We are looking to collaborate with some of the factories in Europe because that is where the money is for chocolate.
 
Give us an overview of the investment climate in Ghana.

A lot of people make the mistake of looking at West Africa like it is just one country. They neglect to consider the differences of each state. When they hear about conflict going on in, say, Côte d'Ivoire or Nigeria, and they think it is going on in the whole of West Africa. This is a strange thing since a number of us have not even gone to certain parts of West Africa.
The truth is Ghana is a safe country with a very stable economy. It has sound governance. In the cocoa sector, here in the Cocoa Board, we are able to source funding from several parts of the world. Last year, for example, we were able to raise almost US$2 billion against all odds. The confidence of more than 50 European and American banks demonstrates the kind of sound framework we have here. While other countries have very low credit ratings, we were able to raise US$2 billion. That says a lot.

How good is Ghanaian cocoa?

It is the best in the world. It is premium quality. It gets a margin higher than the world market. Germans know this for a fact because they process a lot of Ghanaian cocoa.

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