The Truth Behind Liberalisation
POSTED 2nd June 2013

Pauline Tiffen, one of Divine's board members, wrote this piece about liberalising cocoa trade in Ghana.

Until recently the government had exerted full monopoly control over Ghana's cocoa trading. The State, through COCOBOD (the Ghana Cocoa Board) developed a specialised set of state-owned subsidiaries and institutions, providing all the services necessary for commercialising cocoa production and buying up cocoa directly from the farmers. They defined the methods used in cocoa growing and harvesting, combined with very strict quality control systems and considerable research and development by the Cocoa Research Institute of Ghana. They have contributed to Ghana's international reputation in the world markets for high quality and premium priced cocoa.

However the farmers held many grievances against the State and its buying agents, for example they were often cheated by the State's buying agents and received less than 40% of the world market price for their cocoa.

In 1993, the World Bank introduced a Structural Adjustment Programme (SAP) to Ghana which included the liberalisation of the cocoa trade. Companies were invited to apply for licences to buy and sell cocoa, most were private initiatives financed by private capital. The internal market reforms represented an opportunity to improve on the systems in operation and change the ways of thinking and operating. However the concepts underpinning the liberalisation process ignored the institutional framework in Ghana and the severely disadvantaged position of farmers which made them vulnerable and therefore likely "losers" in the process. From the institutional perspective small-scale farmers appear to have been invisible to the designers and implementers of Structural Adjustment Programmes in Ghana.

The efforts to trigger the emergence of a new "private sector" presence in cocoa marketing did not see farmers as potential "entrepreneurial" players in the chain, capable of setting up and running their own companies. In the vacuum created by the abolition of the state marketing boards, why weren't new forms of institution, for example farmers co-operatives, considered, given the context of a rural-based activity like commodity crop production? Instead SAPs actually increased the vulnerability of small-holders by undermining even the relative stability of the "state marketing period".

If farmers were to benefit from liberalisation it could have been through a trickle down effect from the new private companies entering the market. However small-scale farmers were abandoned to a remarkably crude ideology of "free markets" - and method; "dismantle the state and allow the private sector to emerge". The farmers were left prey to predatory merchants and agents who showed only contempt for rural life and "uneducated" rural people. This instability threatened product quality, farmers' earnings and "confidence" and the thus the sustainability of rural livelihoods and cocoa production.

There was also a deliberate policy shift away from small scale farm plots because they were seen as inefficient and backwards. The new cocoa plantations in South East Asia paid lower wages and operated on a larger scale and could therefore sell their cocoa at a lower price. However although the Ghanaian mode of operation generally did offer lower over all yields, it also delivered both social and environmental benefits. In Ghana plantations were particularly inappropriate and there was no defensible market case for disrupting the small-holder cocoa production systems and quality controls in operation in Ghana, given the strong market sentiment and preferences for African small-holder cocoa.

The work undertaken on traditional Sub-Saharan African commodities and their markets in 1990-1991, published by Pluto Press in 1992 as "Short Changed. Africa and World Trade", showed all too clearly that liberalisation, per se, was in the case of Ghanaian cocoa not an appropriate response to market signals. In short, the conclusions reached were that with respect to cocoa as a commodity;

  • The market "valued" Ghana's fine cocoa.
  • The mainly small-scale farming systems had a relative and real quality advantage over other regions.

However this quality advantage might be lost, A, in a haphazard dismantling of the system and, B, in an effort to compete in an open market with the cheaper (though lower quality) larger producers in West Africa and the intensive plantation-style production in South Asia. The story of the formation and extraordinary results of the Kuapa Kokoo group, behind Divine Chocolate, is a tale of constructing a farmer-rooted response to liberalisation. What is clear is that thinking "outside the box" of the restricted and dogmatic institutional framework of the "structural adjusters" and "full liberalisers" has unleashed an apparently resonant and robust new organisational paradigm.