Why Africa isn’t earning more from cocoa

Posted by: stiphbami in InfoVibe Jun 30, 2021

When you tuck into a chocolate bar, do you think about the journey that those raw ingredients have come on? Chocolate is a global $137+ billion industry that relies on one key ingredient, cocoa. And although Côte d’Ivoire and Ghana are responsible for 70% of global cocoa production, with cocoa exports play a huge role in their economies, many cocoa farmers earn less than $1 a day.

Many economies that rely on exporting raw materials often have to choose between generating revenue and adding value to products locally. The choice is usually made to export these raw materials because the foreign exchange earnings are typically better.

How important is cocoa production for Africa?
With a population close to 1.37 billion in 2021, agriculture and other related activities has been the primary occupation of at least two-thirds of the population for a considerable amount of time. According to statistics, cocoa was the top exported commodity in 2017, generating an astounding $3.79 billion for the economy, showing just how important cocoa production is for the continent. Although the end product of cocoa is something that’s loved universally, it also comes with a huge hidden cost.

Why Africa isn’t making enough money
Because cocoa beans go through such a vast number of stages before being used in chocolate products, it often means that the costs are skewed. When you break down the supply chain from start to finish, it’s clear to see that farmers are among the worst hit, with many earning less than $1 a day. Yet, without these skilled farmers, both cocoa and chocolate industries would suffer from shortages, creating a domino effect down the chain.

This low income also has an effect on other issues surrounding cocoa farming. For example, because farmers are often unable to bear the costs of cocoa farming because of their low income, they resort to employing children who then miss out on education, get paid little to nothing and are also put at risk due to hazardous working conditions.

Africa also struggle to make enough money from cocoa because they don’t have established enough industries to physically make the chocolate, therefore must settle for shipping the raw product. With the price for raw cocoa beans being so low, it’s unlikely Africa will ever be able to create the income it needs to make this a sustainable industry.

The changes needed to be made
There are many changes that need to be made to the industry before it becomes to damaging. Regulations should be put into place protecting children from poor working conditions. There should also be the introduction of a minimum wage for cocoa farmers so they are able to get the equipment and support they need. Without any of these, it’s likely the industry will continue to progress as it already is.

There are also ways in which we can help too. Cocoa is a luxury commodity and an important ingredient in many products that we know and love. Because it’s so popular, it means it’s also popular on the stock market too. If you’re looking to invest in commodities, companies such as Tickmill provide valuable advice on both the positives and the negatives when it comes to investing. As with any investing, be sure to do your research and make sure you understand the associated risks.