Kuapa Background

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• Kuapa Kokoo Union was founded in 1993 by a group of cocoa farmers and Twin Trading, a UK alternative trading organisation, as a response to the liberalisation of the cocoa market in Ghana. Its mission is to improve the social, economic and political status of its members and protect their business interests from the vagaries of world market forces (see Liberalisation of the Cocoa Industry below.)
• Kuapa is a national (third-level) co-operative and imbrella organisation for more than 1,000 village-level farmers' societies and regional organisations.
• Kuapa purchases and markets its members' cocoa beans. It is the only co-operative among 12 private buying companies which have been granted export licenses. This allows Kuapa to buy up to 30% of the cocoa it purchases from members and export it to buyers via the Cocoa Marketing Company Ltd (CMC), a subsidiary of the Ghana Cocoa Board (Cocobod). The remainder has to be sold to CMC for export.
• From modest beginnings, Kuapa, the only farmer-owned company in Ghana, has rapidly grown into an organisation of national importance.
• Kuapha Kokoo means 'good cocoa farmer' in Twi, the local language.
  

Kuapa Members

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• Kuapa represents 48,854 farmers from 1,124 village-level farmer societies, and is continuing to grow. 28% of members are women.
• Kuapa members produced 63,000 tonnes of cocoa beans in 2004, representing 8% of Ghana's total production of 736,000 tonnes.
• The average farm size is 1.6 hectares (4 acres) of which 1.2 ha (3 acres) are under cocoa production. The farms are family-run but a few of the larger farms occasionally employ seasonal labour.
• Cocoa provides virtually 100% of members' cash income.
• Some farmers grow plantain, cocoyam, cassava and vegetables for home consumption and plaintain, oranges and palm fruits for sale at local markets but the soil quality on most farms is too poor to grow these crops.

Organisational Structure

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Kuapa Kokoo Limited: the commercial arm of Kuapa, responsible for purchasing, marketing and exporting the cocoa produced by its farmer members. It pays farmers above the government price for sales to the conventional market and provides a range of training programmes and services such as subsidised agricultural inputs.
Kuapa Kokoo Farmers Union: the collective of village-level cocoa farmer societies. Each society has an elected committee and elects a regional council member to represent them on the National Executive Committee.
Kuapa Kokoo Farmers Trust Fund: the body through which Fairtrade premium money is channelled.
Kuapa Kokoo Credit Union: provides credit and banking services. Members take out loans to pay for school fees, build or renovate houses and pay for other social obligations.

Social Context

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Members are predominantly poor small-holders living in the most remote and deprived parts of the country. Most of the cocoa growing villages do not have potable water, paved roads, healthcare, motorised transport or electricity and rely on kerosene for artificial light. Most villages lack basic schools with educational materials and teachers but this is being improved with the introduction of the government’s free compulsory basic education policy. Some farmers are able to grow plantain, coco yam, cassava and vegetables for home consumption and plantain, oranges and palm fruits for sale at local markets. But the soil in many cocoa farms is too poor to grow vegetables and other food crops so these must be bought in at extra cost. Apart from basic education, there are no free social services in Ghana so farmers must pay for all services such as healthcare and secondary education.

Kuapa and Fairtrade

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• Kuapa was certified as a Fairtrade producer organisation in 1995.
• Kuapa receives the Fairtrade minimum price of $1600/tonne for Fairtrade sales, plus the Fairtrade premium of $150/tonne for investment in commercial, social or environmental projects. When the world cocoa price is $1600/tonne or above, Kuapa receives the world price plus $150/tonne premium.
• If requested by the co-operative, Fairtrade buyers must provide pre-finance of up to 60% of the value of the contract.
• World prices, set at the New York Exchange, fell to a 27-year low of $714 per tonne in November 2000. They have since rallied, fluctuating during 2002 between $1,280/tonne and a 16-year high of $2,362/tonne. Prices were relatively high at an average of around $1,600 in 2003/04, in part because of market uncertainty caused by the political situation in Côte d’Ivoire, the world’s largest cocoa producer. Nevertheless, in 2003/04, real prices were less than half of what they were in 1970/71 according to the ICCO Annual Report 2003/04.
  
  Kuapa’s partnership with Fairtrade is helping develop a strong, democratic institutional framework at all levels of the organisation. With the additional income from Fairtrade sales and premiums, Kuapa has been changing the fortunes of thousands of farmers; projects undertaken by the organisation have helped the farmers, especially the women, empower themselves, build their confidence and independence, and ensure a sense of community participation and ownership. The extra income from Fairtrade sales has been used for:
  • Direct payments to farmers in the form of an ‘end of year bonus’
  • Dozens of social projects including the provision of wells and bore holes for drinking water and construction of public toilets
  • Mobile health programme to visit members’ villages
  • Investment in various activities including the construction of two day care centres, a block of six classrooms and purchase of two mobile cinema vans for the farmers' education programme
  • Construction of warehousing at Tema port
  • Employment of Development Officers to advise farmers on good agricultural practices, set up training programmes in management and leadership skills and organise HIV/AIDS workshops. They have also initiated alternative income generating schemes, particularly for the empowerment of women, such as tie-dye textiles, soap making, palm nut production and palm oil extraction, corn milling, and snail farming for local and export markets.
• Sales to the Fairtrade market account for around 3% of Kuapa’s total production and increased from 450 tonnes in 1999 to 1,800 tonnes in 2004.
• The participation of women is actively promoted: each society elects a Management Committee of seven including at least two women. Each society then delegates one female and one male member to elect Area/Regional Executive Committees of which two of the seven members must be women; five of the 33 members of the National Executive Committee are women. One of the two delegates sent to the AGM by each society must be a woman.
• Seminars and workshops have been introduced to help women develop other income generating activities such as making soap from the potash produced from burnt cocoa husks.
• Kuapa is a founder member of the Day Chocolate Company, a Fairtrade company based in London. Kuapa owns a 33% share in the company and has two elected representatives on the board. Kuapa contributes to manufacturing and marketing decisions and receives a share of company profits.
• In the UK, Kuapa cocoa beans are used in a growing number of Fairtrade products including Day Chocolate Company's Divine milk chocolate, dark chocolate and Dubble bars; Co-op and Starbucks own brand chocolate bars; and in some Body Shop, Oxfam and Traidcraft products.
  

Fairtrade and cacao

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"The impact of Fairtrade on farmers is that they are able to have their own institution to trade thus ensuring independence from exploitative intermediaries.
The farmer-owned institution provides higher prices to farmers as seen in higher producer price than Ghana's government guarantee price, end of year bonus and other extra incomes to increase income level of farmers. Employment of farmers is achieved through capacity building and training as well as through the establishment and practice of democracy throughout the organisation"
- Mr Tinyase Ohemeng, managing director of Kuapa Kokoo

“Before I was a member of Kuapa Kokoo I was facing many problems – I had no money to feed my family or educate my children. I have been relieved of my problems…I was formerly a member of another cocoa buying company, but I never had a voice. Now I can speak my views and people listen, I have been made treasurer of my society”.
- Mary Nyamekye, cocoa farmer

“Fairtrade is a good thing. Things you take for granted may be hard to come by in Ghana. Fairtrade is good to the farmer and makes us happy. We would like to sell more cocoa to Fairtrade so more farmers can taste a better life.

“We have taken our destiny into our own hands. Through Fairtrade and Kuapa we now have a lot of progress. We have good drinking water, toilet facilities and schools. Kuapa pay the farmers on time and there is no cheating when the cocoa is weighed. We meet every two weeks to share our problems. We are able to generate extra income through our soap making and palm oil making schemes that help us through the lean months. Kuapa Credit Union gives us loans and enables us all to benefit. We can take a loan out as an individual or as a group.

“Kuapa have assisted women, they ensure that women have a voice and that we are heard. I have learnt a lot from Kuapa. I grew up in cocoa and I see many differences between Kuapa and the other buying companies.”
- Comfort Kwaasibea, cocoa farmer

Kuapa Exports 1999 - 2004

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Year	Fairtrade sales (tonnes)	Total sales (tonnes)
1999	450	19,139
2000	850	32,506
2001	400	34,284
2002	650	37,388
2003	1,300	37,108
2004	1,800	62,900

Cocoa in Ghana

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• Cocoa was first planted in Ghana in 1879. Ghana is renowned for the quality of its cocoa beans
• Smallholder farmers produce almost all cocoa grown in the country.
• 3.2 million farmers and workers are engaged in cocoa production in Ghana (pop. 19.5m), out of a total of 14 million worldwide¹.
• With an annual production of around 400,000 tonnes, Ghana is the world's second largest cocoa producer after Côte d’Ivoire (annual production totals fluctuated between 322,000 and 497,000 tonnes during the period 1995-2003 and jumped to a record 736,000 tonnes in 2004², prompted by higher prices and government-subsidies crop spraying.
• Ghana overtook Indonesia in 2003 to be the second largest cocoa exporter after Côte d’Ivoire.
• In 2003, Ghana exported 358,000 tonnes of cocoa worth $715 million³.
• Cocoa represents around 30% of Ghana's total export earnings and it is second most important export commodity after gold⁴.

Liberalisation of the Cocoa Industry

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Until recently the government exercised full monopoly control over Ghana's cocoa trade through the Ghana Cocoa Board (Cocobod). Cocobod contributed to Ghana's international reputation for high quality by providing a Research Institute, quality control programmes, and subsidised inputs to farmers such as fertilisers. By regulating sales and exports Cocobod aspired to protect growers from price fluctuations, but farmers were often cheated by Cocobod's buying agents and received less than 40% of the world market price.

In the 1970s and 1980s the industry experienced severe difficulties as plummeting world prices, drought, and bush fires hit production.

In 1993 the government began the liberalisation and restructuring of the cocoa industry in line with structural adjustment programmes imposed by the World Bank and IMF designed to rescue Ghana’s ailing economy. The philosophy was that growth of the cocoa industry would be driven by private investment in the plantation sector, at the expense of small-scale farmers. Cocobod was restructured and the number of employees slashed from 100,000 to less than 10,000. Export responsibilities were taken over by its subsidiary the Cocoa Marketing Company (CMC) and a range of services were opened up to private companies. As a result, predatory merchants filled the institutional vacuum left by the haphazard dismantling of state support, leading to instability in the industry which threatened small-scale farmers’ livelihoods as well as the quality of cocoa beans being produced.

Ghanaian cocoa which, with its high quality and sound export reputation, continues to receive a price premium in the international market over cocoa from other sources. The government, through CMC, retains full control of exports and offers a guaranteed ‘minimum’ internal price, called the ‘producer price’, paid in local currency to farmers or their organisations. While prices paid to farmers have increased, this is offset by rampant inflation and the increased costs of previously subsidised services.

The General Agricultural Workers' Union⁵ has called for a review of the cocoa restructuring programme in light of:

• the gradual collapse of the cocoa industry
• worsening living conditions of workers in the sector and lack of investment in alternative income sources
• benefits of privatised cocoa purchasing have been achieved to the detriment of quality control
• the alarming and indiscriminate increase in the use of pesticides.
  
  

In November 1992 Twin Trading began a programme to support cocoa farmers in Ghana. The aim was to establish, on a limited but practical scale, an entirely new chain between cocoa farmers and the export market, which, while conforming to the requirements of Cocobod, would be of direct benefit to the farmers.

Their mission was to assist small-scale farmers, through trading, to achieve:

• greater awareness and ability to plan and think strategically, to be protagonists in the market
• greater bargaining power through this knowledge and the ability to gain access to resources and infrastructure through ownership or negotiation with third parties
• greater income at the village community level and thus greater capacity to invest in human capital for the future⁶

Kuapa is one of a small number of private companies now licensed to purchase cocoa (i.e. from members) and sell it to CMC which still controls all exports as part of its regulation mechanism and retains the power to decide, according to market conditions, whether or not cocoa can be sold to export markets. Plans for full liberalisation, not yet scheduled for implementation, will allow licensed companies like Kuapa to directly export up to 30% of domestic purchases.

The continuing success of Kuapa’s co-operative model in meeting the challenges of liberalisation is testament to the dynamism and determination of the organisation – and may well be contrary to the expectations of the institutional economists responsible for the introduction of the liberalisation process.

[ ¹ ] International Cocoa Organization, www.icco.org
[ ² ] UNFAO Statistical Database at www.fao.org
[ ³ ] idem
[ ⁴ ] IMF Ghana Statistical Appendix at www.imf.org
[ ⁵ ] GAWU National Executive Council, 28 February 2001
[ ⁶ ] www.divinechocolate.com