Economics

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Primary Product Dependency: Ghana's farmers eye sweet success from chocolate

Geoff Riley

13th April 2021

This extended piece by Ijeoma Ndukwe from BBC Business is a superb read on the challenges of overcoming dependency on cocoa growing in Ghana.

The retail industry was worth $107bn (£78bn), according to one projection, but Ghana - the world's second largest cocoa producer - earned just around $2bn

The overall story will be a familiar one to students who appreciate why such a small percentage of the final retail price we pay for our chocolate products goes into the pockets and accounts of the cocoa growers themselves.

Processing and branding chocolate offers higher value added and has the potential to lift per capita incomes in Ghana which is the second biggest producer of cocoa beans in the world.

But as the article makes clear, transitioning from growing to processing is not without cost and risk. Intermittent energy supplies, the expense of buying or leasing scarce refrigerators at ports and high interest rates on loan finance to buy essential capital equipment are all major barriers to manufacturing in Ghana. In a nutshell, the article provides excellent context on many of the barriers to economic growth in such countries.

Industrialisation is a key objective for the Ghanian government and a raft of tax incentives are being put in place or considered. But there is a big distance to travel - Ghana processes only about 30% of its cocoa crop and the rest is exported. They have little pricing power in global markets and are vulnerable to volatile world demand and prices.

According to the Observatory of Economic Complexity:

"In 2019 Ghana was the number 73 economy in the world in terms of GDP (current US$), the number 72 in total exports, the number 81 in total imports, the number 141 economy in terms of GDP per capita (current US$) and the number 143 most complex economy according to the Economic Complexity Index (ECI)."

Geoff Riley

Geoff Riley FRSA has been teaching Economics for over thirty years. He has over twenty years experience as Head of Economics at leading schools. He writes extensively and is a contributor and presenter on CPD conferences in the UK and overseas.

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