Interview: How Oikocredit supports small-scale cocoa producers in West Africa

Interview: How Oikocredit supports small-scale cocoa producers in West Africa

Yves Komaclo

Yves Komaclo, Investments Manager West Africa

23 December | 2020

Cocoa farming is a key source of livelihoods in Côte d’Ivoire, Ghana and Nigeria. We interviewed Yves Komaclo, Oikocredit’s Investment Manager for West Africa, to catch up on Oikocredit’s support for the cocoa sector.

How important is cocoa in West Africa?

West Africa is a global leader in the production of cocoa, the main ingredient in chocolate manufacture. Three Oikocredit focus countries feature among the top producers worldwide: Côte d’Ivoire and Ghana, the world’s two largest producers, and Nigeria.[1] The region supplies about 70% of global production, mainly for export.

In Côte d’Ivoire especially, cocoa is the main source of foreign currency and the leading agricultural subsector, sustaining around 1.5 million households.[2] Most of West Africa’s cocoa farms are smallholdings of less than 3 hectares. Because of the crop’s importance, the Côte d’Ivoirian and Ghanaian governments work together in their management of the sector.

How does Oikocredit support the cocoa sector in the region?

Oikocredit provides financial support to producers via farmer cooperatives, small to medium enterprises (SMEs) and microfinance institutions (MFIs), helping farmers purchase inputs to maintain and improve production. We prefer to work with producer cooperatives, but in some cases we reduce the investment risk by providing finance via SMEs and MFIs.

We also invest at the post-harvest stage. Our financing helps pay for cocoa bean collection and transportation, warehouse construction and drying equipment. And we assist our cooperative and SME partners in building the governance and financial capacity they need to meet Fairtrade and Rainforest Alliance/UTZ certification standards.

How has Covid-19 affected the West African cocoa sector?

The Covid-19 outbreak caused alarm in West Africa in the first quarter of 2020, leading many governments to take strong preventive measures. The lockdown was gradually lifted in June and July. Fortunately, cocoa production was largely uninterrupted, because the peak harvest season in West Africa runs from October to December. However, the restrictions delayed some producers in hiring workers for plantation maintenance, which many had to undertake later in the year than usual.

Covid-19 has also resulted in greater price volatility. Western export markets have been affected by closures in the hospitality industry, with falling demand and lower prices for chocolate. This was partly compensated for by rising demand in China, India and Russia. Overall, cocoa producers can probably expect increasing price fluctuations.

What other challenges does cocoa production face?

Most cocoa farmers receive only a small share of the value that their crop generates through the value chain. The Côte d’Ivoirian and Ghanaian governments have responded by adding a premium to farmer prices, but this has reduced the margins earned by producer cooperatives and SMEs through export sales.

Social and environmental sustainability is crucial to the sector. Despite years of effort to eradicate child exploitation on cocoa farms, child labour continues. Oikocredit addresses this through careful selection of in-country partners and by insisting on certification, promoting training and awareness, partnering with socially responsible manufacturers such as Tony’s Chocolonely, due diligence and careful monitoring.

A separate challenge is that cocoa farmers represent an ageing demographic. The sector needs more young producers.

Foremost among issues of environmental sustainability is the prevention of deforestation, which often occurs when new areas are converted to cocoa cultivation.

But there are positive tends too. Awareness of the problem of child labour has grown, and international actors increasingly provide technical assistance and grants to farmer cooperatives. Public–private partnership such as the World Cocoa Foundation’s Cocoa & Forests Initiatives are being launched to help the sector.

How are Oikocredit’s cocoa partners in the region doing?

Our partners are generally doing reasonably well, although some that experienced difficulties prior to the pandemic have continued to do so. Certain SMEs have been unable to source cocoa at affordable prices.

We have recently renewed our support for Ocean, a cocoa SME since 2015, whose affiliated cooperatives ECAM and Socopacdi are key suppliers to Tony’s. These cooperatives’ several thousand farmers benefit from certification premiums, technical assistance and community support. Another partner, Ecookim, has recruited 500 new members despite the pandemic.

Shifting rainfall patterns in the region can also be problematic. Most cocoa farmers lack irrigation systems and depend on seasonal rains. Although rainfall volumes have not altered markedly, rains often come later than before and may result in lower yields.

How would Oikocredit like to work with West Africa’s cocoa sector going forward?

Oikocredit has achieved success in providing input finance and trade finance to the sector, but we can do more. Cash-strapped West African governments may reduce their financial support and/or raise taxes on production, so we see potentially a greater need for our support. And progress in combating child labour and deforestation may have slowed or reversed during the lockdown, so we need to be ready to redouble our efforts there.

Improving sustainability is essential if producers and cooperatives are to meet the traceability standards demanded by ethically conscious consumer markets, especially in Europe.

Many smallholdings are in need of renovation and rehabilitation because of the effects of ageing trees, crop pests and diseases, and soil depletion.[3] We are keen to support more technical assistance to farmers in replacing trees and applying good agricultural practices such as pruning, pest control and fertiliser application, and we look forward to partnering strategically with other impact investors.

We see additional opportunities to add value in-country by localising processing. Instead of producer organisations exporting unprocessed beans, we would like to support them in investing in grinding machinery and job creation to export higher-value cocoa butter.  

Another area where we can promote progress is digitisation. Use of ‘mobile money’ tools enables cooperatives, SMEs and MFIs to reach more farmers and should lead to more uptake of cocoa farming by younger people. Digital payment systems reduce risk, provide greater security and increase savings capacity, financial inclusion and producer resilience.

> Read the press release announcing our latest investment in the cocoa sector in Côte d’Ivoire



[1] Statista.com, 2017/18 production data.

[3] Sustainable Trade Initiative, Smallholder tree crop renovation and rehabilitation, 2015, https://www.idhsustainabletrade.com/uploaded/2017/03/Dalberg-RR-Report.pdf

« Back