Cocoa Industry Faces Fifth Consecutive Decline

The cocoa sub-sector in Ghana has recorded a significant 26% decline in the third quarter of 2024, marking its fifth consecutive contraction. This sharp downturn contrasts sharply with the broader economy, which achieved a robust growth rate of 7.2% during the same period.

Excluding the effects of oil, Ghana’s overall economy expanded to GH₵254 billion in current terms, up from GH₵194 billion in the corresponding quarter of 2023. However, despite this positive growth in other sectors, the cocoa industry, a crucial pillar of Ghana’s export economy, has been on a continuous downward trajectory.

The cocoa sector’s challenges began in the third quarter of 2023 and have significantly worsened over the past year. In the first quarter of 2024, the sector experienced its sharpest contraction at 20.2%. Despite expectations of a recovery, the situation deteriorated further, with another 26% contraction in both the second and third quarters of 2024.

This prolonged slump in cocoa production and exports raises serious concerns about the future of one of Ghana’s most important export commodities, which plays a vital role in supporting the rural economy and contributing to the country’s foreign exchange earnings. Cocoa has long been one of the primary sources of income for many rural farmers, and its decline has ripple effects throughout the economy.

Finance expert Professor Lord Mensah, a lecturer at the University of Ghana Business School, has voiced strong concerns over the situation, particularly regarding its impact on the country’s foreign exchange reserves. In an interview with Citi Business News, Professor Mensah explained that the government needs to prioritize efforts to stabilize the cocoa sector in order to safeguard its economic benefits. He remarked, “We have prioritized gold over cocoa, but cocoa provides greater liquidity. Historically, the cocoa sector has contributed about $1 billion to $2 billion annually in export earnings. However, the recent downturn means we have missed out on these inflows, which directly impacts our foreign exchange position.”

Professor Mensah further emphasized that strategic policies and investments are urgently needed to address the sector’s challenges. He pointed out that cocoa is a valuable liquid asset that can be used for borrowing against unexported beans, with repayment due once the cocoa is exported. “Cocoa remains an asset with immense potential. It’s essential to put in place the right policies and allocate resources effectively to ensure the sector’s performance and long-term sustainability,” he added.

The cocoa sub-sector’s ongoing decline highlights the urgent need for comprehensive interventions by the government to protect this key segment of Ghana’s economy. The government must act quickly to provide support to cocoa farmers, improve the sector’s productivity, and stimulate growth in both production and export levels. Failure to do so could have serious implications for rural livelihoods, the country’s foreign exchange reserves, and overall economic stability.

The government may need to explore various avenues, such as providing financial incentives, improving access to modern farming technologies, and investing in sustainable agricultural practices. Additionally, strengthening partnerships between the government, the private sector, and international stakeholders could help identify solutions that ensure the long-term viability of Ghana’s cocoa industry.

As Ghana’s economy continues to evolve, the importance of the cocoa sector cannot be overstated. Given its central role in the country’s export earnings and the livelihoods of many Ghanaians, the government must place greater emphasis on revitalizing the cocoa sub-sector. With the right support and investment, the sector could once again become a major contributor to the country’s economic growth and development.

In conclusion, the cocoa sub-sector’s fifth consecutive contraction is a significant cause for concern. Its continued decline poses challenges for Ghana’s economy, particularly in terms of foreign exchange and rural development. Urgent policy actions, strategic investments, and a concerted effort to revive the sector are essential for securing a sustainable future for Ghana’s cocoa industry and its broader economic wellbeing.