A major roadblock that is currently hampering the shift towards more advanced technologies and agricultural practices is the lack of expertise and finance that are necessary for climate-smart cocoa production (Kroeger et al., 2017). Despite the fact that the absolute costs of renovation and rehabilitation in Ivory Coast's cocoa plantations are difficult to estimate, Kroeger et al. (2017) have predicted the “long-term establishment costs” to amount to twenty-billion US dollars (p. 31). They therefore emphasise the need for supplementary investments in renovation and rehabilitation of cocoa plantations.
The report by Kroeger et al. (2017) identifies five different actors that should play a role in financing and supporting the development and enhancement of the cocoa industry in Ivory Coast and Ghana. These are producer country governments, development finance institutions, financial institutions and investment funds, supply chain companies and civil society organisations.
Private investments in the cocoa industry are essential for the resilience of Ivorian livelihoods to climate change. However, with its heavy dependence on various factors such as weather and politics, the cocoa market has been historically volatile (prove). Kroeger et al. (2017) suggest that a combination of technological and financial barriers causes private investors to be reluctant about financing a transition towards climate-smart cocoa production. Therefore, in order to successfully make a transition to more sustainable and effective agricultural practices, there is a need for risk reduction for foreign investors in the cocoa sector. A decision-making tool developed in joint collaboration by the Rainforest Alliance and Mars Incorporated allows stakeholders in the cocoa industry to 'better understand the investment required and discuss the opportunities for the implementation of large-scale investment loan vehicle for intervention' (Rainforest Alliance, 2013).
The question remains whether production levels are, and will be, the primary cause of poverty in Ivory Coast. Production has repeatedly surpassed optimum levels, which has forced the Ivorian government to introduce dramatic cuts in farmers' cocoa prices as recently as 2017 (Monnier, 2017). Cocoa prices fluctuate daily and are determined by futures markets in London and New York (source). The Ivorian government sets farm gate prices… (too similar to Schweisguth?). Ivory Coast has only known government-imposed farm gate prices since 2012 in order to comply with IMF terms (Schweisguth, 2015). This poses an opportunity for policymakers in Ivory Coast to address the problem of poverty amongst smallholder farmers, as an increase in farm gate price minimums would directly lead to increased income for farmers.
Indeed, a substantial factor in the nation's poverty appears to be the price that farmers receive for their cocoa. A study by The True Price and IDH suggests that, when externalities are included, the price of one kilogram of cocoa should be as much as five times higher than it currently is (Fobelets & De Groot Ruiz, 2016). These externalities include both environmental and social costs such as land use, soil pollution, income, forced labour and child labour.
Certification seems to be a viable solution to increase smallholder farmers' income. Complying with certain social and environmental production standards set by organisations such as Fairtrade International and the Rainforest Alliance enables farmers to receive a premium for their cocoa. In addition, these organisations support farmers' transition towards more productive and sustainable agricultural techniques. As a result of the increase in income, producers’ children can receive an education and workers receive a fair wage for their labour.
Fobelets & De Groot Ruiz (2016) have pointed out that, on average, profits of certified farms are 49% higher than those of non-certified farms. In addition, according to an evaluation report by the Rainforest Alliance (2012), cocoa yield of certified producers can exceed that of conventional producers by as much as 70%, whilst keeping the costs at approximately the same level. What is more, farmers' net income has shown to increase almost fourfold on farms that are supported and certified by the Rainforest Alliance. In addition, educational levels of children are positively affected by certification of their family's farm (Rainforest Alliance, 2012).
However, despite the benefits of certification, 58% of Fairtrade farmers still lived below the extreme poverty line in 2016. This is, however, significantly less than the 93% of conventional farmers in that same year.
Whereas individual actors can play an important role in improving the environmental, social and economic standards that are required in order to alleviate poverty, a joint collaboration between all stakeholders in the cocoa industry might be most effective. The Joint Framework for Action initiated by the Cocoa & Forests Initiative, which has been signed by the governments of Ivory Coast and Ghana, as well as most of the largest chocolate manufacturers, focuses on increasing cocoa production in those countries to avoid expansion towards protected forest areas. Besides encouraging R&R practices and empowering farmers' organisations, it aims to “promote financial inclusion and innovation to deepen farmers’ access to working capital and investment funds required for production and farm renovation” (IDH, 2017, p. 4). The framework includes the aim to encourage investment in sustainable cocoa production (IDH, 2017).
Bibliography
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Cocoa & Forests Initiative (2017). Joint Framework for Action Côte d’Ivoire. Consulted on 18 October 2018, from https://www.idhsustainabletrade.com/uploaded/2017/11/CDI-Framework_English.pdf
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Consulted on 13 October 2018, from https://unctad.org/en/PublicationsLibrary/suc2015d4_en.pdf
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