Making chocolate can give Ghana a taste of prosperity
What will happen if Ghana, the world’s second largest cocoa producer, refuses to ship raw materials to Switzerland, one of the largest chocolate manufacturers? We may be about to find out.
During his state visit to Switzerland last year, President Nana Akufo-Addo of Ghana stunned His host announced that Ghana will stop exporting raw cocoa to the country from now on. He said: “If we continue to maintain an economic structure that relies on raw material production and exports, then in the short, medium or long term, the people of Ghana will not have future prosperity.”
Akufo-Addo may have exaggerated the effect. Ghana’s output is second only to Côte d’Ivoire, accounting for about one-fifth of global cocoa exports. These did not stop overnight.
But the point he made is correct.of 130 billion U.S. dollars In the global chocolate industry, less than US$2 billion flows to Ghana. Many farmers live in poverty. Some people hire children or use deforestation to make a living to expand their farms.Farmers get the most 7% Chocolate value chain. Those who make, sell, and market chocolate make up more than 80%.
Akufo-Addo set the challenge for his country to produce chocolate bars on a commercial scale. Is this realistic? The short answer is yes, although it is very difficult. From poor quality infrastructure to lack of manufacturing and market knowledge, the obstacles are huge. However, unless Ghana can solve this problem, many Ghanaians will always fall into poverty.
People have been making chocolate in Ghana for more than two decades. Several domestic companies produce bars for Ghana’s growing domestic market, although most of them are not of high quality to attract European consumers.Two Ghanaian sisters running ’57 chocolate, One of several hand-made manufacturers of high-end chocolate in small batches.
FelafricA German-Ghanaian company is trying to break the routine by mass production of export-quality chocolate. It has built a US$10 million factory north of the capital Accra, which will produce 50 million gold bars every year, increasing to 100 million gold bars. This is still modest by the standards of automated European contract manufacturers, whose output is 10 times that of global brands.
Hendrik Reimers, founder of fairafric, said that by turning beans into bars in the country, the value of Ghana has increased fivefold. He said the problem is not that cocoa beans are sold too cheaply. In Europe 200 years ago, most people were self-sufficient small farmers. “If the price of potatoes is higher, I don’t think Germany will develop faster,” he said. The remedy is not to increase the price of cocoa, but to process it.
Ghana is beginning to be at a disadvantage. It has no dairy industry, so milk powder must be imported. Its packaging cannot be compared with the West in terms of cost or complexity. Energy is more expensive and less reliable. Ghana is hot, which means you need more power to prevent the chocolate from melting. It is farther from the global market, so it is not very suitable for consumers’ tastes, and it is not too close to large retailers such as supermarkets.
Reimers said that these are not insurmountable. To be sure, Ghana is still unable to compete with automated Western factories on price. But chocolate made in Ghana performs well in the high-end market. It can also tap more and more Western consumers, especially millennials, who respond to the story of supply chain creating high-paying jobs.
The discussion goes far beyond chocolate. In Asia, almost no economy of any size can escape poverty without manufacturing. As economists including Dani Rodrik and Ha-Joon Chang have pointed out, Asian economies from Japan and South Korea to Taiwan and China climb the escalator of development by training labor in factories.
Manufacturing usually starts at the basic level and is large in scale, which is ridiculous. One of Korea’s earliest major industries was to make wigs from human hair. Since the 1960s, Hyundai Motor has produced several cars with disassembly kits every week.
As the President of Ghana said, most African economies are caught in neo-colonial trade relations. They supply raw materials from bauxite and copper to coffee and cashew nuts. Few people can get most of the value. Therefore, poor Congolese miners mine cobalt for the multi-billion-dollar battery industry, while Nigeria exports crude oil only to re-import refined fuel and heating oil from Europe.
It is very difficult to break these patterns. This is also essential for countries that aspire to lift their people out of poverty.