Sub-Saharan Africa
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Cocoa Crisis Looms as Global Prices Skyrocket & EU Regulations Threaten African Producers: Expert

© AP Photo / Sophie GarciaA farmer opens a Cocoa pod in Divo, West-Central Ivory Coast, November 19, 2023.
A farmer opens a Cocoa pod in Divo, West-Central Ivory Coast, November 19, 2023.  - Sputnik Africa, 1920, 28.03.2024
The global cocoa market is in turmoil as prices soar to unprecedented levels, exceeding $10,000 per ton, driven by a perfect storm of challenges affecting major producers in West Africa, notably Ivory Coast and Ghana. Since the beginning of 2024, prices have jumped up 2.4 times.
In the wake of the continuing rise in cocoa bean prices, Sputnik Africa engaged Dr. Tafadzwa Ruzive, a development finance expert from South Africa's Nelson Mandela University, to shed light on the factors exacerbating the cocoa shortage and the potential ramifications of the upcoming EU regulations on deforestation for African cocoa producers.
Dr. Ruzive identified climate change, the cocoa swollen shoot virus, and deforestation as the primary culprits behind the dwindling cocoa supply from West Africa, particularly Ivory Coast and Ghana, which are the world’s largest cocoa bean producers.

"The EU regulation on deforestation is going to worsen the shortage of cocoa that is coming out of Ghana and Ivory Coast," the expert said. "So, adding an export ban on 'irresponsibly sourced' cocoa (that's how they put it) is going to act as an export ban of cocoa from Ghana and Ivory Coast into the European Union."

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According to Dr. Ruzive, this restriction of cocoa exports from Ghana and Ivory Coast to the EU will trigger a global shortage and driving prices even higher.
In addition, small-scale farmers in the region will bear the brunt of compliance costs, potentially jeopardizing their livelihoods and endangering the cocoa industry in West Africa.

"The price is going to shoot through the roof, yes, we know, but also for the exporters in Ghana it is going to result that the cocoa that doesn't make the grade is going to be dumped, and its value is going to be almost zero. This is big trouble for cocoa farmers and the cocoa industry in West Africa," Dr. Ruzive assumed.

Highlighting the challenges faced by cocoa producers in meeting the stringent EU standards, Dr. Ruzive underscored the complexity and costliness of compliance.
He explained that ambiguous regulations and expensive implementation processes pose significant obstacles for farmers, threatening their profitability and sustainability in the face of mounting regulatory pressures.
"You have to clearly define what deforestation is, for starters. The ambiguity that comes out of the rules creates massive challenges," the South African development finance expert said.
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In response to the looming crisis, Dr. Ruzive called for government intervention to support cocoa farmers by subsidizing input costs. According to him, as uncertainties surround the severity of the new EU regulations, providing financial support for inputs could help mitigate adverse effects, stabilize the sector and prevent the collapse of the cocoa industry in the region.
Moreover, Dr. Ruzive suggests the establishment of a Ghanaian-based compliance authority to oversee and ensure that local farmers meet the EU's deforestation requirements before cocoa is purchased by European businesses.
"I foresee that a subsidy on inputs or a subsidy through a Ghanaian-based compliance authority that actually makes sure that the Ghanaian farmers are complying in Ghana before sourcers, marketers, businesses from the EU actually come to buy the cocoa," Ruzive concluded. "So for me, those are the two solutions that I would suggest, with the one for a Ghanaian regulator being the cheaper one and the one that can escape World Trade Organization and fair trade regulations."