Business as usual for core cocoa sector even after unrest

The latest cycle of violence in Cote d'Ivoire has sent thousands of expatriates fleeing and left hundreds of small businesses flirting with bankruptcy. But the cocoa sector - the backbone of the country's economy - has brushed aside the unrest and got back to work. Following a few days of disruption, the sweet-smelling beans which supply 40 percent of the world's chocolate are once more arriving at the country's Atlantic ports by the truckload. "I am convinced that we will continue shipping large quantities of cocoa, no matter what happens," a leading cocoa exporter told IRIN this week. Earlier this month, the government launched a new offensive on the rebel-held north, breaking an 18-month ceasefire. Nine French peacekeepers were killed in the process, prompting swift retaliation from Paris who destroyed most of the government's small air force. Irate Ivorians took to the streets and a violent campaign of looting, torching and rape ensued, targeting foreigners. But, despite a nervous spike in world cocoa prices, the cocoa traders in Cote d'Ivoire were unruffled. "It is like Liberia during the civil war, when tropical timber and rubber exports continued almost without interruption," the exporter said by telephone from the south-western port of San Pedro. "There is simply too much money involved." About US$2 billion per year in export earnings in fact. And sometimes more, according to government statistics. For decades cocoa has provided a generous inflow of foreign exchange and government revenue that has underpinned a level of prosperity in Cote d'Ivoire that is unparalleled elsewhere in West Africa. Cocoa exports did temporarily grind to a halt in the week following the latest outbreak of violence. Exporters at the country's two main ports in Abidjan and San Pedro shuttered their doors, trucks had difficulty journeying in from the western cocoa belt because of roadblocks and some local chocolate factories were closed for several days. World cocoa prices leapt about 20 percent in a week as traders fretted that supplies would be disrupted. But now things are more or less back to their pre-November state. The markets have calmed and a tonne of cocoa beans was selling for 870 pounds (US$ 1,640) on the LIFFE futures exchange in London on Tuesday. Cocoa war chest With the impact on the cocoa industry limited, some analysts see Cote d'Ivoire's cocoa in the same light as Sierra Leone's diamonds or Liberia's timber -- commodity exports that helped finance long-running conflicts, despite the imposition of UN trade sanctions. No-one has seriously suggested slapping a ban on Ivorian cocoa exports, but such a move is unlikely given the country's predominant position in world cocoa markets. When northern rebels tried and failed to topple President Laurent Gbagbo in 2002, local media reported that the president's advisors raided a cocoa price stabilisation fund to buy arms. The Abidjan press also reported that Gbagbo received a 10 billion CFA (US$ 20 million) gift from Cote d'Ivoire's cocoa barons to strengthen his war chest. Now with the country split in two, most of the lucrative cocoa belt lies in the southern half, controlled by Gbagbo.

The vast majority of the cocoa fields lies in territory that President Laurent Gbagbo controls

Official data shows that the cocoa-growing areas in rebel territory account for just 12 percent of Cote d'Ivoire's annual crop. The outbreak of civil war two years ago unleashed a struggle for the control of the country's cocoa plantations and this continues to provoke sporadic violence in many rural areas. The local tribes in the cocoa-growing areas of southern and western Cote d'Ivoire forced many of the settlers from northern Cote d'Ivoire and neighbouring countries like Burkina Faso and Mali off their land. Over the past 50 years northerners and immigrants had been officially encouraged to move south and clear bush to establish new cocoa plantations. In recent years settlers from the north have been accused of supporting the rebels and tens of thousands of them fled their farms to escape persecution. Some, however, stayed in the nearby bush to fight back and sporadic clashes continue. Gbagbo's own ethnic group, the Bete, has been at the forefront of moves to expel incomers from the rich cocoa lands around the town of Gagnoa, 290 km west of the commercial capital Abidjan. Fresh fighting broke out there this month following the government's launch of a short-lived offensive against the rebel-held north. A town council official in Gagnoa told IRIN that Bete youths armed with machetes, kitchen knives and sticks had attacked northerners in the town, killing at least six people and injuring 29 others. The yellow cocoa pods that sprout directly from the branches of Cote d'Ivoire's cocoa trees do not just provide money. They also give power to those who control the income generated. For several months, farmers' cooperatives have been locked in a bitter struggle with various regulatory boards that are supposed to promote production and stabilise producer prices and with Gbagbo's ruling party, the Ivorian Popular Front, for control of the lucrative sector. The farmers object to the low prices they are being offered for their beans, pointing out that cocoa growers in neighbouring Ghana receive nearly twice as much. Demands for fairer share Three weeks before Gbagbo launched his ill-fated air raids on the rebel-held north, angry cocoa farmers went on strike to protest at the very small share of the pie they were getting. They refused to sell their beans to traders just as buyers were gearing up to purchase the new season's crop. The cocoa farmers demanded 40 billion CFA (US$ 80 million) in compensation from the government-run regulatory bodies, to be distributed among some 1,000 co-operatives across the country. Despite buoyant world cocoa prices, the farmers are currently being offered 300 to 325 CFA francs (60 to 65 US cents) per kg for their beans. That compares unfavourable to an average of 340 CFA during the 2003/2004 October/September marketing year, when they also grumbled loudly. In 2002/2003, when the outbreak of civil war in Cote d'Ivoire sent world cocoa prices soaring to a 16-year high, Ivorian cocoa farmers were paid an average of 704 CFA per kg for their crop - more than twice as much. Cocoa traders said Ghanaian farmers get a better deal today because their beans are generally perceived as being of better quality than those from Cote d'Ivoire. But they also pointed out that the taxes levied on Ghanaian cocoa producers are much lower and traders in Ghana do not have to deal with the added expense of paying their way through roadblocks. And they noted that Ghana's cocoa marketing bodies are more efficient and take a smaller cut of the final export price. The leaders of Cote d'Ivoire's cocoa producers' union were barred from announcing their strike on state television and so found it difficult to spread the message to all the country's estimated 500,000 small farmers. But their stoppage still proved effective. No cocoa arrived at the country's ports for five days.

Drying the cocoa beans

After union leaders rejected an industry offer to subsidise several hundred co-operatives, Gbagbo finally waded into the fray. The president announced the creation of a special commission that would study reforms needed in the cocoa sector, saying the group would report back to him in six months. Now there is a risk that the commission's work will be pushed onto the back burner, given the latest crisis in the country's fragile peace process. Power and money Some union leaders say the creation of this commission was just a delaying tactic, which also allowed the president to hand out plum jobs to his faithful. "Thirteen out of 16 officials nominated for the commission are of the same ethnic group as the president," one farmers' leader told IRIN on condition of anonymity. "The cocoa sector is increasingly controlled by people who say they fight for better living conditions of the farmers. In reality, they are only interested in power and money for themselves and their mafia-like organizations," said another veteran analyst of the cocoa sector analyst, who asked not to be identified. Last year, Cote d'Ivoire earned US$ 2.4 billion from cocoa exports, according to the Economist Intelligence Unit. This year receipts are expected to dip to US$ 1.8 billion. Even though the harvest is expected to be roughly equal to last year's -- at around 1.3 million tonnes -- cocoa prices have dipped in 2004. Data from International Cocoa Organisation shows that cocoa international cocoa prices fell about nine percent between January and October. Although reforms of the cocoa sector have been promised, many are doubtful about how much change will be effected, particularly given the cosmetic nature of earlier reforms in the 1990s. In the mid-1980s, all cocoa exports were handled by the Caisse de Stabilisation, a state-run price stabilisation board, which guaranteed farmers a minimum price per kg. But the World Bank and the International Monetary Fund pushed for the industry to be opened up and since liberalisation took place at a time when world market prices were collapsing, Cote d'Ivoire's economy took a nosedive. The Caisse de Stabilisation was liquidated, giving way to the Coffee and Cocoa Exchange (BCC) and other groups, which were supposed to given the farmers stronger representation. But industry analysts consulted by IRIN said the reforms changed little. They alleged that the same people who had asserted influence under the old scheme were simply appointed to the new institutions. And the new system also ended up being less efficient. In 2003, the accountancy firm Arthur Andersen calculated that the new regulatory bodies ended up costing three times as much as the Caisse de Stabilisation.