Technology and Investment, 2012, 3, 276-286 doi:10.4236/ti.2012.34038 Published Online November 2012 (http://www.SciRP.org/journal/ti) Ghana Cocoa Industry—An Analysis from the Innovation System Perspective George Owusu Essegbey1, Eugene Ofori-Gyamfi2 1Science and Technology Policy Research Institute (STEPRI), Council for Scientific and Industrial Research (CSIR), Accra, Ghana 2CSSVD-CU (COCOBOD), Hohoe VR, Ghana Email: [email protected], [email protected], [email protected], [email protected] Received June 12, 2012; revised July 12, 2012; accepted July 19, 2012 ABSTRACT 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 Co- coa 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 Com- panies (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 les- sons for other primary commodity producing countries especially those whose development contexts are similar to Ghana’s. Keywords: Cocoa; Innovation System; Critical Actors; Policy Reforms; Value Addition; Ghana 1. Introduction When Tetteh Quarshie brought the Amelonado cocoa bean into the then Gold Coast from Fernando Po (now Ghana was until the 1970s the leading world producer of cocoa. It was the highest foreign exchange earner for Equitorial Guinea) in 1876 to establish his own planta- Ghana even as far as constituting about 45% in the 1960s. tion, he probably did not foresee the dominance the bean Even until the 1990s, cocoa’s share of the country’s total would have in the country’s economic life. It has grown export earnings averaged about 35% annually. Currently, rapidly to assert itself as one of the pillars of the coun- the annual percentage share has dropped to about 25% try’s economy. How the trend has continued in the last [1]. Yet, it remains the most important economic crop for two decades, the drivers of change and innovation ac- the nation. The political economy of cocoa surpasses that counting for cocoa maintaining its enviable position at of any other commodity the country is exploiting. Six of the top of all agricultural commodities is the crux of this the ten regions of Ghana grow the crop, which for many paper. From the innovation system perspective, the paper households constitute the fundamental capital base for analyses the experiences, the reforms and the outcomes income and employment. It is generally known that about of the cocoa industry to provide policy options for de- 90% of cocoa produced the world over comes from veloping economies sharing similar endowments. smallholder farms varying in size up to 5 hectares. The The paper, which is the outcome of mainly desk re- situation is no different in Ghana making the commodity search and some interviews with key informants, is or- an instrumental vehicle for lowering poverty incidence in ganised into six sections. The introductory Section 1 em- the cocoa growing areas and providing employment for a phasises the importance of cocoa in Ghana’s economy fairly wide range of skilled and unskilled labour. and Section 2 presents the conceptual framework. Sec- Copyright © 2012 SciRes. TI A. G. O. ESSEGBEY, E. OFORI-GYAMFI 277 tion 3 applies key aspects of the conceptual framework to national development planning. Figure 1 depicts the criti- highlight the roles and relationships of the critical actors cal actors and the influencing factors from the internal in the cocoa innovation system. Section 4 analyzes trends and external environments and their converging impact in production and value addition. Section 5 discusses on the cocoa industry. pertinent issues relating to further development and growth In applying the innovation system to the cocoa indus- of the cocoa industry and Section 6 presents the conclu- try, Figure 1 describes the cocoa innovation system and sion. presents an analytical framework for discussing the trends, and innovations in the industry. The critical actors 2. The Conceptual Framework (Heading 2) as highlighted, including the public institution COCO- BOD, the cocoa farmers, the processing companies and Innovation system comprises a network of critical actors the scientific institutions. External and internal factors interacting in a given geographical or sectoral setting to affect the dynamics in the system. It is necessary to dis- apply knowledge and information producing innovations cuss more summarily, the roles and activities of the to address socio-economic problems or needs in context critical actors as done in the next section. [2-5]. Such knowledge may not necessarily be new out- side of the setting or even in the context of use. However, 3. The Critical Actors and Their Roles, new ways of application and development emerge rela- Functions and Relationships (Heading 3) tive to the socio-economic needs and aspirations, leading to innovations. Innovation entails processes and products, The analysis of trends and innovations begins with the tangible and intangible. The salient characteristics of any description of the critical actors, their roles and their innovation system are the critical actors, the relationships functions. How they relate to each other and the strength between the critical actors and the context of innovation. or weakness of the relationships is important for achiev- The relationships are invariably defined by the responses ing the overall goals and objectives stated for the sector. to environmental or contextual factors and stimuli. It is The specific roles and functions expressing how the important to assume the systemic perspective for analysis critical actors and their roles impact on the industry are of development issues in relation to the cocoa industry detailed in Table 1. since as far as Ghana is concerned, cocoa is a pillar in The analysis of the impact of the critical actors on the External Factors e.g. Multi-lateral and bilateral agreements, global companies’ business interests and policies, international cocoa trade regimes, regional and sub-regional conventions Global Processing Civil Society companies Industries Organisations Government Cocoa Rural Ministries/ Cocoa Communities/ COCOBOD Industry farmers Marketing/ Scientific Financial Institutions Commercial Institutions (CRIG, Enterprises ISSER, RM&E) Internal (national) factors e.g. national development agenda, economic policy, agricultural policy, programmes and strategies, investment policy and related legislations and regulations, business climate, infrastructure, human capital, culture and political systems Figure 1. Diagram of the cocoa innovation system—Critical actors and influencing factors. Copyright © 2012 SciRes. TI 278 A. G. O. ESSEGBEY, E. OFORI-GYAMFI Table 1. The critical actors and their roles and functions in the cocoa innovation system in Ghana. The critical actors Main roles and functions Impact on cocoa* Oversees Ghana’s economic policies and programmes, national 1. Ministry of Finance and Economic Planning 1 2 345 budget and resource allocation Implements government policies and programmes on cocoa and 2. Ghana Cocoa Board (COCOBOD) and subsidiaries selected cash crops Internal marketing of cocoa purchasing cocoa directly from the 3. License Buying Companies farmers and selling to statutory body 4. Cocoa processing companies Responsible for processing of cocoa 5. Cocoa farmers On-farm production and pre-harvest/industrial processing of cocoa 6. International buyers/ global companies Creating demand for cocoa 7. Civil Society Organisations Promoting rights and corporate responsibilities Conducts research and development on the cocoa tree and farming 8. Research Institutions of Ghana (CRIG, ISSER, RM&E) systems for innovations *Authors’ own assessment. cocoa industry is qualitative. However, the estimation the estimated budgeted of roughly $5.5 billion [1]1. The entails the consideration of the key criteria of the roles task of resource allocation is therefore herculean and and functions performed, the effectiveness of perform- places MOFEP in a difficult position even as it makes it a ance reflecting in