The International Monetary Fund (IMF) has identified 2024 as a challenging financial year for Ghana’s Cocoa Board (COCOBOD), despite some notable gains recorded in 2023. The challenges, primarily linked to low production levels and unfavorable forward sales arrangements, have significantly affected the sector’s performance.
In its latest assessment, the IMF emphasized that COCOBOD has struggled to capitalize on record-high global cocoa prices during the 2023/2024 cocoa season. While international cocoa prices reached unprecedented levels, weak domestic production hampered Ghana’s ability to fully benefit. Consequently, COCOBOD faced difficulties meeting its obligations under existing forward sales contracts, a situation that has deepened financial pressures on the sector.
Data from the Ghana Statistical Service highlights the stark reality of the cocoa industry’s decline. Cocoa output for the third quarter of 2024 fell sharply by 26%, marking the fifth consecutive quarter of contraction. This prolonged decline has raised concerns about the long-term viability of Ghana’s cocoa sector, which has historically been a critical pillar of the national economy and a major source of foreign exchange earnings.
The IMF observed that Ghana missed a critical opportunity to reap the full benefits of rising global cocoa prices due to its reliance on forward sales arrangements. These contracts, which are typically used to hedge against price volatility, prevented Ghana from taking advantage of the unexpected surge in international cocoa prices.
In response to these challenges, the government has taken several steps aimed at stabilizing the sector and restoring COCOBOD’s financial sustainability. A key measure was the significant increase in the farmgate price for cocoa for the 2024/2025 season. The government raised the price by 50%, a move designed to discourage smuggling of cocoa to neighboring countries where prices are often higher.
The decision to increase the farmgate price also seeks to address another pressing issue: the growing trend of cocoa farmers converting their farmlands into illegal mining sites. Known locally as “galamsey,” this practice has become a major threat to the cocoa industry, as farmers seek quick financial returns at the expense of long-term sustainability. By offering more competitive prices, the government hopes to make cocoa farming a more attractive and viable option for farmers.
In its latest staff report, the IMF acknowledged the government’s efforts to address the sector’s challenges. One notable initiative is the establishment of a dedicated cocoa desk at the Ministry of Finance. This unit is tasked with overseeing policies and strategies aimed at stabilizing the cocoa sector and ensuring its long-term viability. The creation of the cocoa desk is part of a broader strategy to restore COCOBOD’s financial health and improve its operational efficiency.
The report also highlighted the importance of strengthening collaboration between COCOBOD and other stakeholders in the cocoa value chain. This includes engaging with cocoa farmers, industry players, and international partners to address the structural issues affecting the sector.
Despite these efforts, the road to recovery for Ghana’s cocoa industry remains challenging. The prolonged decline in production has exposed vulnerabilities in the sector, including aging cocoa farms, inadequate investment in modern farming techniques, and limited access to financing for farmers. Addressing these issues will require a coordinated and sustained effort from all stakeholders.
Experts have called for increased investment in research and development to boost cocoa yields and enhance resilience to climate change. Ghana’s cocoa sector is heavily reliant on rainfall, making it vulnerable to the effects of climate variability. Developing and promoting climate-resilient farming practices will be essential to safeguarding the future of the industry.
Additionally, there is a need for greater emphasis on value addition within the cocoa value chain. Ghana, like many cocoa-producing countries, exports a significant portion of its cocoa in raw form, missing out on the higher returns associated with processed cocoa products. By investing in local processing and manufacturing, Ghana can increase its earnings from the sector and create more jobs for its citizens.
The government’s efforts to combat smuggling and illegal mining on cocoa farmlands have also been commended. Smuggling has long been a challenge for Ghana’s cocoa sector, driven by price differentials with neighboring countries. The recent increase in farmgate prices is expected to reduce this incentive, but sustained vigilance and enforcement will be needed to address the issue fully.
Illegal mining, on the other hand, poses a more complex challenge. The environmental damage caused by galamsey activities has had devastating effects on cocoa farmlands, rivers, and forests. Tackling this issue will require a multifaceted approach, including stricter enforcement of environmental regulations, alternative livelihood programs for affected communities, and public education on the long-term consequences of illegal mining.
As Ghana navigates these challenges, the role of COCOBOD will be crucial in driving the sector’s recovery. The organization will need to adopt innovative approaches to improve efficiency and transparency, while also ensuring that farmers receive the necessary support to enhance productivity.
The IMF’s assessment serves as a wake-up call for Ghana to address the structural weaknesses in its cocoa sector. While the government’s recent initiatives are steps in the right direction, achieving sustainable growth will require a comprehensive and long-term strategy. This includes addressing production challenges, improving value addition, and fostering collaboration among stakeholders.
For now, the increased farmgate price and the establishment of the cocoa desk at the Ministry of Finance offer hope for a more stable and resilient cocoa industry. However, the journey to restoring COCOBOD’s financial health and securing the future of Ghana’s cocoa sector will require sustained effort and commitment from all stakeholders.
