Kuapa Kokoo Union

Kuapa Kokoo

"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 weighted. 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

Summary

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Kuapa Kokoo is a cocoa-growing co-operative set up in 1993 in response to the partial liberalisation of the cocoa sector in Ghana. It is the only farmer-owned organisation among the private companies that have been granted government licences to trade cocoa. In this marketing role, Kuapa Kokoo purchases cocoa from members and other farmers on behalf of the state-run cocoa board which controls all exports. Kuapa Kokoo now represents almost 50,000 small-scale cocoa growers and in 2007 soild 12% of production to the Fairtrade market.   

Cadbury's Commitment to Fairtrade

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Kuapa Kokoo 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.
• The organisation was founded as Kuapa Kokoo Ltd in 1993 by a group of cocoa farmers supported by Twin Trading, a UK alternative trading organisation, and SNV, the Netherlands Development Organisation. This was in response to the partial liberalisation of the cocoa industry in Ghana in which the structure was changed from a single government-controlled cocoa purchasing entity to a system in which private companies could take on the role of licensed cocoa buyers. The farmers saw this as an opportunity to protect their interests and take on the internal cocoa marketing function by setting up their own company to sell cocoa to the Cocoa Marketing Company Ltd (CMC), the marketing arm of the Ghana Cocoa Board (Cocobod) which retains a monopoly on exports (see Liberalisation of the Cocoa Industry below).
• Kuapa is the only farmer-owned entity among 24 privately-owned buying companies (LBCs) which have been granted licences to buy cocoa from farmers on behalf of CMC.
• From modest beginnings, Kuapa Kokoo has rapidly grown into an organisation of national importance.
• Kuapha Kokoo means 'good cocoa farmer' in Twi, the local language.

Kuapa Kokoo Membership

• Kuapa Kokoo started with just 200 members in 22 village societies and is now a national (third-level) co-operative union with a membership of more than 1,300 village-level co-operative societies.
• Kuapa Kokoo represents 48,854 farmers – of which 28% of are women – and is continuing to grow.
• Kuapa Kokoo members produced 35,000 tonnes of cocoa beans in 2007, representing 5% of Ghana's total production of 690,000 tonnes (FAO).

Kuapa Kokoo Structure

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Kuapa Kokoo is a composite organisation under the umbrella of the Kuapa Kokoo Farmers’ Union, whose objectives are to empower small-scale cocoa producers, enhance female participation in the decision- making process, and encourage environmentally sustainable production. The four sub-units are:

Kuapa Kokoo Farmers’ Trust: a trust fund which receives Fairtrade Premiums and other funds intended for farmers and their communities and uses them to provide social infrastructure and income generation for farmers.
Kuapa Kokoo Credit Union:  a legal entity that promotes savings schemes and performs the role of a rural bank by enabling members to access credit at competitive rates. Members can take out loans to pay for school fees, build or renovate houses and pay for other social obligations.
Divine Chocolate: a UK chocolate company set up by Kuapa Kokoo, Twin, and partners, which markets chocolate products made from Kuapa Kokoo cocoa. Kuapa Kokoo owns a 45% share in the company and has two elected representatives on the board. It contributes to manufacturing and marketing decisions and receives a share of company profits.

Social Context

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Members are predominantly smallholders living in remote and deprived parts of the country. Most of the cocoa growing villages do not have access to healthcare, clean drinking water, or electricity and rely on kerosene for artificial light. Most villages lack basic schools, educational materials, and teachers. High illiteracy rates are improving with the introduction of the government’s free compulsory basic education programme. 

The average farm is 4 hectares with around 3 hectares under cocoa, which accounts for virtually 100% of farmers’ cash income. The farms are family-run but larger farms sometimes employ seasonal labour. Some farmers 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 they must be bought in at extra cost. 

Transporting cocoa and other crops is hampered by unreliable transport and the lack of access roads. Apart from free basic education, farmers must contribute to social services such as healthcare and secondary education. Farmers are very concerned about having to employ expensive casual labour to help with weeding and harvesting because of the decrease in family labour as young people in particular are increasingly migrating to towns looking for a better life.

Kuapa Kokoo and Fairtrade

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• Kuapa Kokoo was certified as a Fairtrade producer organisation in 1995.
• Sales to the Fairtrade market have grown from around 3% of total production in 1999 to 12% in 2007.
• The Fairtrade minimum price for cocoa is $1,600/tonne plus the Fairtrade premium of $150/tonne for investment in business, social or environmental projects. When the world cocoa price is $1,600/tonne or above, the Fairtrade price is the world price plus the $150/tonne premium.
• The Fairtrade minimum price is an export price paid to the producer organisation and includes the costs of delivery to port and loading on the ship (known as Free on Board or FOB). The producer organisation deducts its costs from the amount it pays farmers for their cocoa beans.
• Each year Cocobod sets a farmer price for the coming cocoa season. It is a proportion of the predicted world FOB price, based on an assessment of world cocoa futures prices at London and New York. The high quality cocoa grown in Ghana typically attracts a price differential which is shared with growers at the end of the season in the form of an annual bonus payment.
• The government price has effectively been above the Fairtrade minimum price in recent years due to high world prices. It includes an additional price differential of up to 10% for high quality Ghanaian cocoa beans, an incentive to increase productivity and boost the economy with additional dollar earnings.  
• Like most commodities, world cocoa prices are volatile and have been subject to a long-term downward trend – figures from the UN Food & Agriculture Organization (FAO) show that in real terms prices in 2000-2005 were a quarter of what they were in the 1970s.  
• Cocoa futures prices at the New York Exchange fell to a 27-year low of $714 a tonne in November 2000, before tightness of supply saw them rebound to a 28-year high of $3,275 in July 2008.
• Price volatility has increased as a result of the global financial crisis: cocoa fell to $2,000 a tonne in autumn 2008, climbed to $2,800 in January 2009, then dropped back to $2,300 in March 2009. Despite this volatility, a probable global cocoa deficit in 2009, predicted by the International Cocoa Organization (ICCO), should prevent prices falling steeply.
• Kuapa Kokoo’s partnership with Fairtrade is helping develop a strong, democratic institutional framework at all levels of the organisation. With the additional income from Fairtrade premiums, Kuapa Kokoo has been able to improve the livelihoods its members; projects undertaken by the organisation have helped the farmers, especially the women, empower themselves, build 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 visiting members’ villages
  • Funding various activities including the construction of two day-care centres, a block of six classrooms and purchase of two mobile cinema vans for a 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. 
• The participation of women is actively promoted: each society elects a Management Committee of seven which includes 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 and 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 soap making using the potash produced from burnt cocoa husks.
• In the UK, Kuapa Kokoo cocoa beans are used in more than 300 Fairtrade products including chocolate bars, cakes, biscuits, cereal bars and ice cream. As well as the range of Divine Chocolate products, they can be found in own-label products from ASDA, the Co-op, Marks & Spencer, Sainsbury’s, Tesco, Traidcraft, Waitrose, and Starbucks.

Kuapa Kokoo Exports 1999 - 2007

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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.
• Cocoa accounts for 28% of Ghana’s foreign exchange earnings and 57% of total agricultural exports^[1].
• In 2006, Ghana exported 358,000 tonnes of cocoa worth $1.06bn^[2], making it the second most important export commodity after gold.
• With an average annual production of 680,000 tonnes in 2003 - 2007 Ghana is now the world's second largest cocoa producer after Côte d’Ivoire (1.3m tonnes).
• Annual production has grown from around 400,000 tonnes during the period 1995-2003 to a record 737,000 tonnes in 2004.
• The growth was prompted by the government’s cocoa expansion drive to increase export earnings, which included higher farmer prices and subsidised crop spraying.
• Smallholder farmers produce almost all cocoa grown in the country.
• 3.2 million farmers and workers are engaged in cocoa production in Ghana (population 22.2 million), out of a total of 14 million worldwide^[3].

Liberalisation of the Cocoa Industry

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Until 1993 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 cocoa 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 which were designed to rescue Ghana’s ailing economy. Cocobod was restructured and the number of employees slashed from 100,000 to less than 10,000, while services such as marketing and technical support were opened up to private companies.

In 1993 Kuapa Kokoo was set up by a number of leading cocoa farmers who recognised the opportunity to organize farmers and set up a company to market their own cocoa. They were supported by Twin Trading, which develops supply chains for Fairtrade companies like Cafédirect, and SNV a Dutch NGO. Kuapa Kokoo’s mission is to empower farmers in their efforts to gain a dignified livelihood, to increase women's participation in all of Kuapa Kokoo's activities, and to develop the environmentally friendly cultivation of cocoa.

Currently, 24 private licensed buying companies (LBCs) have been granted licences by the government to buy cocoa from farmers on behalf of the Cocoa Marketing Company Ltd (CMC), a subsidiary of Cocobod which retains its monopoly on exports. Cocobod’s original plan to have about 30 percent of cocoa production exported through licensed private companies appears to have been shelved at least for the time being.

Kuapa Kokoo is the only farmer-owned company among the LBCs, some of which are foreign-owned. LBCs can set up operations at the cocoa buying stations in around 2,700 locations in the cocoa growing areas of southern Ghana, where they compete to buy cocoa beans from farmers. They pay farmers the official price set by Cocobod at the beginning of each season and receive a fixed 9% margin from CMC. Competition among the companies is generated through non-price strategies such as prompt cash payment and greater provision of services such as subsidised fertilizer and credit. While prices paid to farmers have increased, this has been offset by inflation and the increased costs of services that were previously subsidised by Cocobod.  

^{_[1_{] International Food Policy Research Institute, November 2007}}
 [ ² ] Production/Export stats in this section from UN FAO Statistical Database at www.fao.org
 [ ³ ] International Cocoa Organisation, www.icco.org

Updated: March 2009