ISSUES
Activities at Ivory Coast's Port of Abidjan last week, before the cocoa export ban
Cote D'Ivoire:
Derivable Benefits From ATroubled Economy By Bankole Shaklrud••n Ad ••hlna (with agency reporls)
'T1lE latest twist added to the raging political 1 imbroglio in Cote D'lvoire may-have created unimaginable economic opportunities for
some African countries. The announcement earlier in the week by the country's Internationally acclaimed winner of the November 18 Presidential run-<>ff, Alassane Ouattara, to ban cocoa.expottation, was said to be part of the stringent strategies adol'ted to wrestle power from the recafcitrant mcumbent PreSident, Laurent Gbagbo. But such decision, no matter how result-driven it may seem, has no doubt sparked serious economIc anxieties at the international market, as prices of the product have risen astronomically. For instance, consequent upon the persistent and aggravated crisis, cocoa futures has been inflated to a one-year high of $3,340 a metric ton before settling at $3,312, up 4 per cent. Specifically, cocoa's international markets are New York and London. In New York, the price hit a 30-year high of around USS3,510 (GB£2,350) a tonne in December 2009. In london, the peak came a few months later in July,jumpigto a fi~month high of £2,307a ton ($3,692/ton) and settled at (2)90 a ton, up £42. The artificial inHation appeared to have created great economic opportunities to be explored bycountries with future-driven policy plans for continuous growing and sustainable cocoa-based agriculture sector. This is justified with the increase in the demand of the commodity, as supply from the World and Africa largest producer/exporter of the product dwindles. Among countries, which could take advanta~ of this embargo, especiallyinAfrica are Nigena, Ghana and Cameroon. These are major cocoa producing countries in Africa that could experience demand boom and possibly take the advantage for increased proouctlon and supply. currently, industry analysts and the media have started campaigns, sensitizing the
Ghanaian government on the need to explore the development in raking in more revenues, should it persist. 'The question remains whether Ghana can take advantage of the world price hike to rake in more revenue. The country currently produces less than 700,000 metric tonnes per year." But the same may not be said of Nigeria, the world's fourth biggest producer, which fell 35. percent last year (in October), according to the Federal Produce Inspection Service. "Shipments fell to 12,935 metric tons from 19,830 tons a year earlier. Total cocoa-bean exports in the first 10 months of last year rose 13 percent to 140,5375 tons from 124,663 tons a year earlier," spokesman Adekunle Adebambo was reported to have said Nigeria's cocoa year is divided into two harvests. The main<rop harvest begins in October and ends In January, while the-Ug/lt<rop season, the smaller of the two, usuaIly begms in March and ends in June. The commodity, statistics show, remains Nigeria's second-biggest foreign-exchange earner after crude oil. In reaction to the development, the International Cocoa Organisation (ICCO) Executive Director Dr Jean-Marc Anga, said since the ban, the industIy has experienced a knee-jerk reaction, which saw cocoa bean prices rising sharply, from 1,900 pounds per tonne last week, to a high of 2,300 pound per tonne. Anga had previously explained that the highest price cocoa bean fetched in over three decades was around US3, 600 pertonne, stressing that the latest crisis in Cote D'lvolre could change the current situation.
"If the current standoff continues or even worse, degenerates into a full scale anned conOict, supply will be affected and prices will increase considerably because of the uncertainty over supply level," he said. Beside Cote d'lvoire, other major producing countries are Ghana with 800,000 tonnes (21 per cent), Indonesia with 500,000 tonnes (13 per cent), Nigeria with 250,000 tonnes (six per cent) and Cameroon with 200,000 tonnes (five percent). For the 2 nd world highest world cocoa producing country, Ghana, whose domestl~ economy continues to revolve around subSIstence agnculture, which accounts for 35% of GDP and employs 55% of the work force, there are chances to also explore the gap. But with the country's unstable export growth, it is very unlikely the opportunity could be explored to the fullest In from 20002003, Ghana's cocoa production enjoyed a period of on average 16 per cent. "Yet the reasons for this huge production increase are var•ied and in fact Ghana's cocoa yields per hectare . are still low by international standards," according to experts. BeSides, a report on the reason behind the Huctuation laentifies land, labour, fettllizer, insecticides, eguipment, rainfall, among others as critical factors to be looked into. '11us study suggests that Ghana's cocoa ~ ers are not mal<ing the best use of technolOgIcal innovations in their production and as such their Increased production is not sustainable," said the researcher, adding that "bringing new land under cultivation is risky, as much of the land was previously forest and after a short period and without adequate
If the current standoff continues and possibly degenerates into a fullscale armed conflict; supply will be affected and prices will Increase considerably because of the un!;ertainty over supply level. This development may have created unimaginable economic opportunities for some African countries.
attention this land may be exhausted. Intensive use of labour has led to high increases In the cost of labour and may impact profitability and high ratnfall is only periodic." For Nigeria, the 4th worid largest producer/exporter of the product, cocoa beans is produced In 16 states of the federation, namely Ondo, Cross River, Oyo, Osun, Ekiti, Ogun, Edo, Kogi, Akwa Ibom, Delta, Abia, Kwara, Ebonyi, Rivers, Taraba and Adamawa with an annual production of 400,000 metric tonnes. However, 98 per cent of this is exported. Ondo state is the fiighest cocoa producing state in Nigeria and Idanre is the hub of cocoa production in the state. Major market destinations for Nigeria's cocoa are: Netherlands, U.K, France, Gennany, Spain, Italy, USA and Japan. Other markets being explored are the emerging economic powers of Cnina and India. The country's export free on board price of cocoa beans nas fluctuated between USDJ, 000 - 3,500/MT from January to August 2010. The local maIket price of raw cocoa beans per MT ranges from NGN400,OOO.00 to NGN500,OO.00 to deliver it to Lagos during the season and also when the commOdity is off the season. However, Cameroon, the fifth world cocoa exporter, is yet another prosrective country that could take advantage 0 this embargo, should the government see enough reason to Invest maSSively in its agriculture. But there are some intem~lly motivated f,?rces, ranging from bureaucratic bottlenecks, mfrastructural challenges and international factors that are controlling the country's major source of national revenue. For example, the country's export of the commodity, as at last year, were running into 4.1 percent below the previous year's levels, according to data from the Cocoa and Coffee Interprofessional Board (CCIB). The data showed that 166,939 tonnes of cocoa was exported between the beginning of the 2009{!0 season last August and the end of June, down from the 174,002 tonnes exported for the same period last year. Monthly volumes for June were up at 4,785 tonnes, a significant jump from the 2,381 tonnes in May, and a slight increase from the 4,635 tonnes for the same month last year. Telcar Cocoa Ltd, the leading cocoa exporting company, which failed to provide its data for May, exported 1)04 tonnes in June, the head of the statistics at CCIB, Yves Abissi said. Reports from all major exporters suggest that export volumes for July and August are also set to rise comrared to last year due to a healthIer mid<Top. The Cameroon cocoa season runs from August 1 to July 31, with the main harvest between November and January and the midcrop harvest from late April/May to July. Cocoa bean exports, as revised b¥ the National Cocoa and Coffee Board (NCCB) in February, hit a record level of 205,233 tonnes in 2008/2009, up from 187.475 tonnes in 2007/2008. Furthennore, economic analysts are entettaining fears that the development, which could achieve its Intended result, could equally lead to massive hunger and possibly ruin the nation's troubled economy. Besides, investors are already considering alternative option, as the uncettainty over supplies mounts ahead of Easter, when demand for the chocolate ingredient is high. According to one of them, "the market is concerned not only over the prospect of an extended interruption to the How of cocoa from the Ivory Coast. ..but also that mounting pressure from the international community towar9.s, ,-, .' Gbagbo may produce unexpected tonse- .. ' quences as the situation moves towards the endgame." With 33percent, Ivory Coast remains the world largest producer and exporter of cocoa beans and coffee to the international market. The cash crop Is grown mainly by small-holder farmers with less than a couple of acres of land, yet exports provide almost one-third of the country's gross domestic product. Farmers are expected to produce a bumper crop of about 13 million tons this year. The statistics fell from the previous 39percent intimidating dominance in 2009/2010, owing to the persistent civil war that began in 2003 in thecoun~
The CriSIS has unfortunately swollen Cote D'lvotre's debt profile, pegging it at SU.6billion, as at December 31, 20\0 ani:! its unemployment climbing up to 42~rcent, according to world factbook. However, the embargo was dismissed by the Gbagbo administration spokesperson, Ahoua Don Mello, who said it would nave "no effect" on the ground. "It is we who are running the country, that is the reality." "In the coming days it will be evident whether the order will be followed and whether it will dig into Laurent Gbagbo's bottom line," said ChownOved.