Highlights of new study assessing the impact of increasing domestic processing of cocoa in Ghana on employment and job creation presented during high-level meeting

The new study was conducted by the STRENGTHEN project, a joint ILO-European Union global initiative.

News | 11 December 2018
ILO News - Ghana is one of the leading producers of cocoa in the world - second after Cote d’Ivoire - with a market share of about 20 per cent. In 2017, the country received USD2.71 billion in export income from cocoa exports, approximately 80 per cent in the form of raw beans. A new study examines the impact on employment and jobs based on increases in cocoa beans processed and exported as semi-finished products such as cocoa powder and butter, and other related products. The study, entitled “Assessing the Employment Effects of Processing Cocoa in Ghana” was conducted at the request of the government by the “Strengthening the Impact on Employment of Sector and Trade Policies”, or STRENGTHEN project, a joint ILO and European Union initiative and was presented during a high-level meeting held on 31 October.

The project aims at strengthening the capabilities of country partners to analyse and design sectoral and trade policies and programmes for more and better employment and growth. Ghana is one of the nine countries that STRENGTHEN is supporting. The project aligns with the call by the President of Ghana H.E. President Akuffo Addo for a “deliberate, conscious assessment of the impact of public investments on jobs, and evidence for wise public spending to improve the lives of the people, communities and businesses”.

In Ghana the project is being implemented in collaboration with the Ministries of Trade and Industry, Employment and Labour Relations, Agriculture and other key stakeholders in the employment arena under the Guidance of the Interim National Employment Coordinating Council.

Inputs obtained from the report are of key importance to policy-makers in Ghana given current plans to expand cocoa processing capacity and create quality jobs in the country. In answering the research questions, the study assessed employment created by two cocoa processing companies in Ghana and used the data collected to estimate the jobs created per unit of raw material processed and per USD of exported cocoa products.

Initial findings from the study were presented by the ILO STRENGTHEN team to a broad audience that included representatives from the cocoa sector, among them, processing companies, the Ghana Cocoa Board, (COCOBOD) and relevant Ministries. Contributions received during the meeting are expected to be factored into the final report.

Opening the high-level meeting, Hon. Minister for Employment and Labour relations, Mr Ignatius Baffour-Awuah thanked the ILO for its research in the cocoa sector and drew attention to the importance of the agricultural sector and, in particular, cocoa to the Ghanaian economy and labour market. He mentioned that there had been various studies that supported investing in adding value locally to Ghana’s cocoa sector. However, he also pointed to concerns facing the cocoa sector/industry, saying “as we know, it is threatened as cocoa farmers are ageing and youth of working age are not interested in farming in general or cocoa in particular”. He added that many cocoa farmers were continuing to work well into their old age.

Representing the Minister for Trade and Industry at the meeting was Mr Ebo Quayson, Director of Export and Trade Services. In his remarks, he stated that the Ministry recognized the importance of the cocoa sector and its impact on in the GDP of Ghana. He commended COCOBOD for the good work being done in the sector but stressed the need to consider tertiary production and value additions to maximize gains from cocoa. The major challenge, however, has been how to increase the production of beans. He also reiterated the concerns raised by Minister Baffour-Awuah about the ageing cocoa farmers, indicating that their average age was now 57, and that it was, therefore, imperative that the production of cocoa be made more attractive to youth.

Key study findings

The findings of the study were presented by Dr Bernardin Senadza, National Consultant, University of Ghana, and Mr Maikel Lieuw-Kie-Song, the STRENGTHEN project manager for the component focusing on sector policies. Among the main findings of the study:
  • while cocoa processing created relatively high-quality formal jobs, it was a very capital intensive activity, resulting in a relatively low number of jobs created compared to the investment involved;
  • the skill levels required of employees varied with the type of plant and level of automation applied in the process, with the more automated plants requiring fewer skilled workers and more unskilled labour;
  • over the past years, partially due to the government’s policies, investment in cocoa processing had increased significantly, with 10 processing companies currently active in Ghana. The latter had increased the local demand for cocoa beans, to the extent that there was an insufficient supply of “light crop” (cocoa beans that are smaller in size, not exported and therefore sold locally at a discount);
  • the production of cocoa had not increased sufficiently to meet the demand for local processors as well as the export market. As a result, processing companies were generally not operating at full capacity;
  • with regards to employment, the study estimated that approximately 4,000 permanent jobs would be created directly in cocoa processing if 40 per cent of cocoa was processed before being exported. The majority of these jobs would be skilled jobs but the skills composition would be strongly influenced by the type of processing technology deployed;
  • with regards to the indirect employment effects, given that the main input to processing is cocoa beans, the indirect employment effects compared to other sectors was also found to be limited.
The Hon. Minister indicated that, one policy option available would be to sell the main crop (export size beans) at lower prices to local companies that would be able to work at capacity. However, this would imply a loss of revenue for the Government. He further added that, unfortunately, for employment creation purposes the cocoa processing sector did not appear to be a good sector for investing as the figures relating to employment were not found to be encouraging.

Samuel Takyi of COCOBOD explained that it would not be attractive to sell the main crop at a discount to local processors as there was ample demand internationally at premium prices. But rather with increased local processing of cocoa beans, to further boost employment creation in Ghana, the sector would have to enter into the next step of value addition of manufacturing cocoa products such chocolate and cocoa-related products. This would create further local demand for other inputs like milk, sugar and packaging materials, increasing employment in the sector.

On the issue of how to make cocoa farming attractive to youth and increase production, it is expected that the government’s seven tree crop initiative “Planting for Export and Rural Development”, which includes cocoa, will re-energize the sector as every district has been given the mandate to produce a cocoa nursery for free seedling distribution to facilitate cocoa production. In addition, the COCOBOD has employed about 8,000 hand pollinators on farms and outsourced sprayers, creating employment in the logistics sector. COCOBOD also provides financial resources to these minor agencies to prepare the cocoa for export.

The meeting concluded that cocoa processing was capital intensive with low labour intensity, but that the jobs created were of a much higher standard than average in Ghana: they are formal, pay higher wages, are of longer duration and provide social security.