Ghana Cocoa Industry—An Analysis from the Innovation System Perspective


This paper discusses Ghana’s cocoa industry from the innovation systems perspective. Cocoa is the major cash crop of Ghana. Its importance is not only in the contribution of about 25% annually of the total foreign exchange earnings but also on account of being the source of livelihoods for many rural farmers and the related actors in the value chain. The critical actors in the innovation system are the farmers, the researchers, the buyers, the transporters, public officers, consumers and the policy makers. By the roles and functions they perform, they impact on the dynamics of the cocoa industry. The paper describes the trends in cocoa production and processing and highlights the key characteristics and implications. It discusses the policy reforms in the cocoa industry and the major drivers of the reforms. The Ghana Cocoa Board (COCOBOD) is one of the biggest public institutions in Ghana and its subsidiaries are major actors in the production process of cocoa for export. The key reforms in the policies governing the industry were the dissolution of the monopoly of Produce Buying Company and the deregulation of cocoa purchasing to allow Licensed Buying Companies (LBCs) to enter the business in 1992/93 crop season. There was also the dismantling and re-organization of the Cocoa Services Division into two separate units—the Cocoa Swollen Shoot Virus Disease Control Unit (CSSVDCU) and the Seed Production Unit (SPU). The processing of cocoa into cocoa butter, cocoa paste and confectioneries is an important component of the value chain especially with the national goal of processing 50% of cocoa before export. The paper discusses policy implementation in the cocoa industry underscoring the successes and failures. It highlights lessons for other primary commodity producing countries especially those whose development contexts are similar to Ghana’s.

Share and Cite:

Essegbey, G. and Ofori-Gyamfi, E. (2012) Ghana Cocoa Industry—An Analysis from the Innovation System Perspective. Technology and Investment, 3, 276-286. doi: 10.4236/ti.2012.34038.

1. Introduction

Ghana was until the 1970s the leading world producer of cocoa. It was the highest foreign exchange earner for Ghana even as far as constituting about 45% in the 1960s. Even until the 1990s, cocoa’s share of the country’s total export earnings averaged about 35% annually. Currently, the annual percentage share has dropped to about 25% [1]. Yet, it remains the most important economic crop for the nation. The political economy of cocoa surpasses that of any other commodity the country is exploiting. Six of the ten regions of Ghana grow the crop, which for many households constitute the fundamental capital base for income and employment. It is generally known that about 90% of cocoa produced the world over comes from smallholder farms varying in size up to 5 hectares. The situation is no different in Ghana making the commodity an instrumental vehicle for lowering poverty incidence in the cocoa growing areas and providing employment for a fairly wide range of skilled and unskilled labour.

When Tetteh Quarshie brought the Amelonado cocoa bean into the then Gold Coast from Fernando Po (now Equitorial Guinea) in 1876 to establish his own plantation, he probably did not foresee the dominance the bean would have in the country’s economic life. It has grown rapidly to assert itself as one of the pillars of the country’s economy. How the trend has continued in the last two decades, the drivers of change and innovation accounting for cocoa maintaining its enviable position at the top of all agricultural commodities is the crux of this paper. From the innovation system perspective, the paper analyses the experiences, the reforms and the outcomes of the cocoa industry to provide policy options for developing economies sharing similar endowments.

The paper, which is the outcome of mainly desk research and some interviews with key informants, is organised into six sections. The introductory Section 1 emphasises the importance of cocoa in Ghana’s economy and Section 2 presents the conceptual framework. Section 3 applies key aspects of the conceptual framework to highlight the roles and relationships of the critical actors in the cocoa innovation system. Section 4 analyzes trends in production and value addition. Section 5 discusses pertinent issues relating to further development and growth of the cocoa industry and Section 6 presents the conclusion.

2. The Conceptual Framework (Heading 2)

Innovation system comprises a network of critical actors interacting in a given geographical or sectoral setting to apply knowledge and information producing innovations to address socio-economic problems or needs in context [2-5]. Such knowledge may not necessarily be new outside of the setting or even in the context of use. However, new ways of application and development emerge relative to the socio-economic needs and aspirations, leading to innovations. Innovation entails processes and products, tangible and intangible. The salient characteristics of any innovation system are the critical actors, the relationships between the critical actors and the context of innovation. The relationships are invariably defined by the responses to environmental or contextual factors and stimuli. It is important to assume the systemic perspective for analysis of development issues in relation to the cocoa industry since as far as Ghana is concerned, cocoa is a pillar in national development planning. Figure 1 depicts the critical actors and the influencing factors from the internal and external environments and their converging impact on the cocoa industry.

In applying the innovation system to the cocoa industry, Figure 1 describes the cocoa innovation system and presents an analytical framework for discussing the trends, and innovations in the industry. The critical actors as highlighted, including the public institution COCOBOD, the cocoa farmers, the processing companies and the scientific institutions. External and internal factors affect the dynamics in the system. It is necessary to discuss more summarily, the roles and activities of the critical actors as done in the next section.

3. The Critical Actors and Their Roles, Functions and Relationships (Heading 3)

The analysis of trends and innovations begins with the description of the critical actors, their roles and their functions. How they relate to each other and the strength or weakness of the relationships is important for achieving the overall goals and objectives stated for the sector. The specific roles and functions expressing how the critical actors and their roles impact on the industry are detailed in Table 1.

The analysis of the impact of the critical actors on the

Figure 1. Diagram of the cocoa innovation system—Critical actors and influencing factors.

Table 1. The critical actors and their roles and functions in the cocoa innovation system in Ghana.

cocoa industry is qualitative. However, the estimation entails the consideration of the key criteria of the roles and functions performed, the effectiveness of performance reflecting in achievement of institutional goals and objectives and, the relation of achievements to national development. Implicit in the analysis is the evaluation of the strength or weakness of linkages with relevant actors in the system. The reviews of annual reports, use of secondary data and discussion with key informants, enable such estimation to be made. The importance of Table 1 is much less in the robustness of the methodology as in the illustration of the relative strengths of institutional functions. From the innovation system perspective, it points to which institutions need to be strengthened to ensure greater innovation. The following sub-sections discuss each of these critical actors listed in Table 1, the roles, functions and relationships.

3.1. Ministry of Finance and Economic Planning (MOFEP)

In Ghana, MOFEP is perhaps the ministry with the most onerous responsibility. It oversees national budgeting and is responsible for resource allocation. Given the limited resources at the disposal of the state, the responsibility of MOFEP in resource allocation is not an easy one. For example, consistently Ghana’s total export revenue has been below total imports value. In 2010, the total merchandise exports value including that of cocoa for Ghana was about $7.9 billion as against imports of $10.7 billion [1]. Revenue mobilization in Ghana has its own challenges and even as government’s revenue as a percentage of GDP increased from 26.23% in 2009 to 29.27% in 2010, it is still not as would adequately support allocation of resources to public institutions as these institutions have budgeted. In fact, actual government revenue excluding grants in 2010 fell short by about 7 percent of the estimated budgeted of roughly $5.5 billion [1]1. The task of resource allocation is therefore herculean and places MOFEP in a difficult position even as it makes it a powerful ministry.

The entire cocoa industry falls within MOFEP’s remit. Fortunately for cocoa, the industry is highly prioritized and therefore the cocoa institutions are among those receiving the highest attention in resource allocation. Still its relationship with the relevant actors in the cocoa industry, especially the public institutions may not be exceptionally excellent given that allocation of resources cannot always be as demanded by the institutions.

3.2. Ghana Cocoa Board (COCOBOD)

The Ghana Cocoa Board established in 1947 has had a long history of overseeing the cocoa sector of Ghana. It has undergone various transformations since the cocoa industry became established. However, its modern constitution and mandate reflects the modern trends in the industry especially in the light of Ghana’s socio-economic and political aspirations. Reforms carried out beginning from the 1980s through 1990s to present have restructured COCOBOD significantly. There was the Cocoa Sector Rehabilitation Project funded by the World Bank which included reducing COCOBOD in size by restructuring and re-organising some of the subsidiaries to enhance the share of farmers in the earnings from cocoa exports [6]. Currently, COCOBOD is a relatively slimmer organisation with five main subsidiaries including the Quality Control Company and Cocoa Marketing Company (limited liability companies, which play lead roles in addressing the overall organizational goal of exporting premium and high-quality cocoa). It maintains functionally strong linkages with the critical actors especially its subsidiaries, the licensed buying companies, the Cocoa Research Institute of Ghana, the Cocoa Swollen Shoot Virus Disease Control Unit (CSSVDCU) and the Seed Production Unit (SPU).

3.3. Licensed Buying Companies (LBCs)

The purchasing of cocoa and its evacuation from the cocoa villages is a daunting task which has implications for the political economy of the crop. The role of the LBCs in tackling this task determines to a large extent the success of reaching the global market with Ghana’s cocoa.

The largest Licensed Buying Company, the Produce Buying Company Ltd. (PBC) used to be a subsidiary of the COCOBOD. It used to enjoy monopoly in the purchasing of all cocoa produced by the farmers. However, the reforms which began in the 1990s came with the deregulation of the cocoa sector and liberalized cocoa purchases. In June 1993, COCOBOD adopted the multiple cocoa purchasing system for internal marketing of the commodity as a means of introducing competition. The legal framework for this was spelt out in the “Regulations and Guidelines for the Privatisation of the Internal Marketing of Cocoa”. The decision to adopt the multiple buying system was really a major step in the reformation of the cocoa sector which was at that time being buffeted by certain challenges making it slide down in competetiveness [7]. The reforms were carried out with one of the goals being the restructuring of the key public institutions in the cocoa sector like COCOBOD and its subsidiaries including PBC. The reforms continued with the enlistment of the PBC on the Ghana Stock Exchange with the public coming in to purchase shares of the company. Currently, the Ghana Government only holds about 37% share of PBC. The Social Security and National Insurance Trust (SSNIT) holds 38% of the shares and others comprising institutions and individuals hold 25% [8]. Given that SSNIT is a public institution, one may say the ownership of PBC is primarily public. Yet, the 25% completely private ownership is no mean achievement given the historical organization of the company not only as a wholly public institution and a subsidiary of COCOBOD but also the only LBC in the country. Currently, PBC only controls about 33% of cocoa bean purchases in the country and competes against about 26 other LBCs. Yet, it remains a formidable enterprise and was in 2011 adjudged the topmost company in Ghana’s Club 100 which ranks the top 100 companies in the country including the banks and industrial companies whether local or international. Without doubt, the reforms constitute one of the key factors in the revitalization of the cocoa Industry in Ghana. It is one of the experiences in institutional innovation which has re-energized the cocoa industry.

3.4. Cocoa Processing Companies

As far back as the 1960s, there was an effort to process cocoa before export. The West Africa Mills Company (WAMCO) was established by private initiatives to process cocoa beans into cocoa paste, cocoa butter and other products. However, the share of the total processed cocoa in the total cocoa exported was minimal. With one of the major national goals being exporting at least 50% of cocoa as processed, the role of cocoa processing companies has become very important. Currently, there are about five large processing companies operating in the country all at various levels of processing. These are the Cocoa Processing Company (CPC), Barry Callebaut, Afrotropics, Cargill and Archer Daniels Midland (ADM). There is primary processing into the pastes, butter and nibs and there is secondary processing into confectioneries and chocolates. The Cocoa Processing Company (CPC) which used to be a subsidiary of COCOBOD but became privatized with the reformation of the industry currently operates with an expanded installed capacity producing chocolates and cocoa-based sweets and other products for exports and local consumption. Currently, the total installed capacity for processing cocoa is 343,000 metric tons, giving the indication that the country could achieve its medium term policy goal of processing 50% of its cocoa before export. The latest processing company to be established is the ADM company in Kumasi, which has an installed capacity of 30,000 metric tons. The indications are that, good business on the part of the operating processing companies will encourage others to be established. The challenge however is dealing with the threats in the external environment to ensure competitiveness. For example, CPC suffered setbacks in 2011 due to the financial crisis in the European countries where its exports are traded. The average price obtained for cocoa butter during the year was US$3050 per tonne as against an average price of US$5800 per tonne in 2010 [9]. As a result of the marketing challenges and some internal operational difficulties, CPC was only able to process a total of 16952.723 metric tonnes in 2011 as against 21554.960 metric tonnes in 2010 leading to a 21.4% decrease in the processed output of the company [9]. On the whole, marketing is a major challenge for Ghana as it increases its value addition and the overall strategy should be to widen market access to go beyond Europe and America.

The major challenge facing the processing companies suggests that there should be greater linkages among them to enable joint strategizing. Moreover, although the processing companies relate strongly with the COCOBOD and the regulatory bodies such as the Food and Drugs Board and the Ghana Standards Board as they are required to do by the state regulations, their linkage with scientific institutions are not that strong. It is a weakness which does not facilitate innovation in the sector.

3.5. Cocoa Farmers

Where it all begins for the cocoa industry is on the farms of the cocoa farmer living in the semi-deciduous forests spanning six of the ten administrative regions of Ghana and encompassing several of the main ethnic groups of Ghana. Cocoa has enabled these farming households to stay significantly above the national poverty average. Poverty among cocoa farmers has declined significantly and cocoa growth has been more pro-poor than growth in other sectors [10].

There is a Ghana Cocoa, Coffee and Shea Nut Farmers Association (GCCSFA) to which many cocoa farmers belong. However, the challenge for cocoa farmers as it is for most other farmers is that there are several farmer associations which sometimes lead to turf attitudes among them. The cocoa farmers association is still a strong lobby group and could be a means of getting important policy decisions made and adopted by the farmers, in the same way that they could cause a change in government policies once it is found not to be favourable to farmers. Farmers’ representation on the board of the COCOBOD also means that farmers have a voice in the board room discussions of the operations in the cocoa industry.

3.6. International Organisations and Global Companies

The International Cocoa Organization (ICCO) based in London, comprises cocoa producer and cocoa consuming countries. It was established in 1973 to put into effect the first International Cocoa Agreement negotiated in Geneva at the United Nations International Cocoa Conference. There have been follow-up negotiations and conclusions on subsequent agreements. In 2005, the International Cocoa Agreement came into force with the over 80% of exporting countries acceding to the Agreement. ICCO Member countries represent almost 85% of world cocoa production and more than 60% of world cocoa consumption. All Members are represented in the International Cocoa Council, which is the highest governing body of the organization.

The International Cocoa Organisation (ICCO) is a powerful organization bringing the international players together mainly to act to decide on how to structure the global cocoa market for the mutual benefit of all players. In this regard, the cocoa consuming countries of the Western World have a role to play to ensure the balance of power in the organization.

The individual global companies e.g. Cadbury International (now Kraft Food), Mars, Unilever, and several other companies whose food industry depends on raw materials such as cocoa play a role in stimulating cocoa production in the cocoa producing countries such as Ghana. Even though one may always argue that the actions of these trans-national companies are mainly in their organizational interests, what they do also creates the (dis) incentive systems for cocoa production. Currently, Ghana exports its cocoa mainly to Western Europe which accounts for about 67.6%. The main importing countries are The Netherlands (33.8%), UK (12.1%), Belgium (8.9%) and Germany (3.6%). Outside of Europe, Ghana exports to Japan (7.2%) and US (3.3%) mainly [1].

The Alliance of Cocoa Producing Countries (COPAL) which produces about 75% of the world’s cocoa is also one of the key actors in the cocoa industry. The membership includes Cote d’Ivoire, Ghana, Nigeria, Cameroun, Gabon, Dominican Republic and Malaysia and continues to operate on the Abidjan Charter since its formation in 1962. There have been challenges where members have been unable to take unified positions on the world market. However, by and large, the organization has contributed in ensuring the sustainability of cocoa supply. The Alliance’s main contribution is in the facilitation of exchange of scientific and technical information concerning the production of cocoa in the respective countries.

3.7. Civil Society Organisations

One of the developments in the cocoa industry is the emphasis on social responsibility and human rights. For example the issue of child labour and the demand for the recognition of child rights has become pivots for the increase in the activities of civil society organizations (CSOs) such as International Cocoa Initiative (ICI). Whilst some of the work of the CSOs is desirable, there are cases where issues are not presented or discussed in a manner in which they should be. For example, some of the citations of child labour are misrepresentation of the communal activities typical of the African societies. Children make contributions to the total household income and going to weed or help harvest cocoa pods on cocoa farms do not necessarily mean that children are slaving on cocoa farms. One may agree that all children, irrespective of where they grow up, should be given access to education from primary to tertiary educational institutions especially as Ghana is already implementing the Free Compulsory Universal Basic Education (FCUBE). However, the facts of the cultural features of the society need to be presented as is. The Ghana Government in collaboration with ICI has set up the National Programme for the Elimination of Child Labour (NPELC) in cocoa communities. NPELC (under Ministry of Manpower Youth and Employment) with the assistance of COCOBOD has embarked on intensive education using rural FM radio stations to address issues relating to the elimination of child labour in cocoa growing areas of the country.

3.8. Research Institutions

The scientific institution known as Cocoa Research Institute of Ghana (CRIG) has a long history going back to 1938 when the West Africa Cocoa Research Institute (WACRI) was established to investigate disease and pest militating against cocoa production in the West Africa sub-region. WACRI disintegrated with the coming of independence in West Africa and each country sought to have its own research institute to address cocoa production on scientific basis. The institute’s mandate has been expanded to research into other oil seed bearing trees (e.g. shea and cashew) as well as coffee which though minor in their contribution to the total foreign exchange earnings of the country, are important in providing livelyhoods for marginalized segments of the population.

CRIG currently plays the lead role in providing Science and Technology inputs for the cocoa industry. Other institutions like Institute for Statistical and Social Research (ISSER) offer socio-economic research to support the cocoa industry. COCOBOD has a Research Monitoring and Evaluation (RM&E) Department which handles research and development of the board’s programmes and policies to enable it achieve the set objectives.

4. The Trends—Production and Value Addition (Heading 5)

Cocoa production in Ghana has grown through phases of world domination in the 1950s and 1960s when the country produced the largest volume of cocoa, through the 1970s and 1980s when that global domination was abdicated, through a phase of rehabilitation during parts of the 1980s, 1990s and 2000s. Other countries, mainly Malaysia and neighbouring Cote d’Ivoire caught up and overtook Ghana. However, it is not so much of how the country ranks in terms of cocoa production as how the country manages the socio-economic activities surrounding the crop such that, the benefits for the people are maximized.

4.1. Ghana Cocoa Production Trends

Nevertheless, as Figure 2 illustrates, the total export earnings from cocoa has been increasing since the mid 2000s. Apart from a dip between 2006 and 2007, there has been steady increase from 2007 consistently up to 2010 when the country earned approximately $2.285 billion from total cocoa exports, which contributed 28.9% of the total foreign exchange earnings [1]. It has been the stated policy goal of achieving total cocoa production of one million tons. In 2011, Ghana was said to have achieved that target [11]. What is significant about the trends in cocoa production and exports is the rising component of the value added cocoa.

4.2. Value Addition in the Cocoa Industry

Value addition has been a long-standing national goal in enhancing earnings from the cocoa industry. The current goal is to achieve a 50% processed cocoa as a proportion of the exported. Analysing the component of the processsed cocoa in the exports of cocoa from Ghana gives an indication of the extent to which this goal is being achieved. See Figure 3.

Indeed considering the contributions to the total value of exports of Ghana in the ten-year period between 2000 and 2009, cocoa and its products have contributed 32% of the total as shown in Figure 3. Much of the non-agricultural exports amounting to 62% is coming from mineral exports of which over 90% is from gold. Timber exports contributes 3% as well as non-traditional exports which is a mix of primary agricultural commodities such as horticultural fruits (e.g. pineapples, mangoes and cit-

Figure 2. Cocoa exports—2001-2010.

Figure 3. Foreign exchange earned by agric and non-agric sectors—2000-2009 (US$ million).

rus) and some processed products. There are specific programmes designed to boost the share of the non-traditional exports in particular. However, as may be deduced from Figure 3, the share of the cocoa exports is so dominant of the agricultural component that it may take a long time to reduce its share. More importantly, it shows that there are opportunities for further enhancing foreign exchange earnings. Table 2 gives an illustration of the value addition trend in Ghana.

Figure 2 highlights graphically the increases since 2005 as Figure 3 highlights the importance of the share of cocoa earnings in the national total foreign exchange earnings in recent years. However, the specific issue is how much progress is being made in improving value addition in the cocoa industry.

As shown in Table 2, the significant increase in value addition has occurred in the last three years with the percentage processed cocoa increasing from 16.09% in 2007, to 21.38% in 2008, and to 31.19% in 2009 and then to 37.66% in 2010. Thus there has been consistent increase in the past six years. It appears that this trend will continue as the country strengthens its efforts in attaining the goal of 50% processed cocoa exports. However, an important issue to address is the mix of products in the value added cocoa and the extent to which it enables high premiums to be earned.

Table 3 shows that the top 5 value added products exported from Ghana comprises cocoa paste and cocoa butter at the very top of the ranking with $539.1 million and $127.1 million in 2010 respectively. The percentage increases of these values compared to the preceding year of 88.68 per cent and 40.80 percent illustrate the growing significance of cocoa manufacturing economic activities in Ghana and the importance of this in the overall manufacturing activities. It is a positive development and the trend is likely to remain positive in the next couple of years. However, cocoa paste and cocoa butter are not in

Conflicts of Interest

The authors declare no conflicts of interest.


[1] ISSER, “The State of the Ghanaian Economy in 2010,” Institute of Statistical, Social and Economic Research, University of Ghana, Legon, 2011.
[2] B.-A. Lundvall, “National Systems of Innovation: Towards a Theory of Innovation and Interactive Learning,” Pinter, London, 1992.
[3] L. K. Mytelka, “Local Systems of Innovation in a Globalised World Economy,” Industry and Innovation, Vol. 7, No. 1, 2000, pp. 15-32. doi:10.1080/713670244
[4] R. R. Nelson, “National Systems of Innovation: A Comparative Study,” Oxford University Press, Oxford and New York, 1993.
[5] B. Oyelaran-Oyeyinka and K. Lal, “SMEs and New Technologies Learning E-Business and Development,” Palgrave MacMillan, New York, 2006. doi:10.1057/9780230625457
[6] A. K. Fosu and E. Aryeetey, “Ghana’s Post-Independence Economic Growth: 1960-2000,” In: E. Aryeetey and R. Kanbur, Eds., The Economy of Ghana—Analytical Perspectives on Stability, Growth and Poverty, James Currey, Suffolk, 2008.
[7] G. O. Essegbey, “Chapter Two—Ghana: Cassava, Cocoa and Poultry,” In: K. Larsen, R. Kim and F. Theus, Eds., Agribusiness and Innovation Systems in Africa, World Bank, Washington, 2009.
[8] PBC, “Produce Buying Company Ltd Annual Report 2009/2010,” Produce Buying Company Ltd., Accra, 2010.
[9] CPC, “CPC Annual Report 2011,” Cocoa Processing Company Limited (CPC), Accra, 2011.
[10] C. Breisinger, X. S. Diao, S. Kolavalli and J. Thurlow, “The Role of Cocoa in Ghana Future Development,” Ghana Strategy Support Program (GSSP), Washington, 2008.
[11] RM&E, “COCOBOD Annual Report, Research,” Monitoring & Evaluation of COCOBOD, Accra, 2011.
[12] UNIDO, “Agro-Value Chain Analysis and Development: The UNIDO Approach,” Vienna, 2009
[13] B. Eifert and V. Ramachandran, “Competitiveness and Private Sector Development in Africa—Cross-Country Evidence from the World Bank’s Investment Climate Data,” Asia-Africa Trade and Investment Conference (AATIC), Tokyo, 2004.
[14] C. Juma, “The New Harvest: Agricultural Innovation in Africa,” Oxford University Press, New York, 2011.
[15] M. Buchgraber and E. Anklam, “Validation of a Method for the Quantification of Cocoa Butter Equivalents in Cocoa Butter and Plain Chocolate—Report on the Validation Study,” European Commission Joint Research Centre, Brussels, 2003.
[16] European Parliament, “Directive 2000/36/EC of the European Parliament and the Council June 2000 Relating to Cocoa and chocolate products intended for human consumption” OJ L197, 2000, pp. 19-25.

Copyright © 2024 by authors and Scientific Research Publishing Inc.

Creative Commons License

This work and the related PDF file are licensed under a Creative Commons Attribution 4.0 International License.