Why Africa “misses out” on cocoa’s wealth—even while growing most of it - Knowledge Hub
Industry Analysis||9 min read
Why Africa “misses out” on cocoa’s wealth—even while growing most of it
Côte d’Ivoire and Ghana in Africa remain the primary suppliers of the world's cocoa. Yet, the majority of profits are generated where the beans are transformed into branded products.
Edison Ade
Lead
Côte d’Ivoire and Ghana in Africa remain the primary suppliers of the world's cocoa. Yet, the majority of profits are generated where the beans are transformed into branded products.
Farmers and processors here capture a sliver of a chocolate bar’s final price; brands and retailers capture the lion’s share. According to FAO's value-chain analysis, farmers typically receive around 7–11% of a bar's retail value, whereas brands and retailers capture approximately 70%.
The bulk of economic value addition and profit capture accrues to downstream actors in the supply chain, specifically processors, brands, and retailers, rather than to primary producers within the African continent.
In 2024–2025, West African nations, locked into low, fixed farmgate prices by forward-selling systems, missed out entirely on the substantial profits from soaring global cocoa futures. Despite a booming international market, the financial benefits did not reach farmers or national treasuries. For instance, Ghana's cocoa regulator reportedly incurred losses of approximately $840 million due to forward contracts sold at significantly reduced prices, with unfulfilled contracts from the 2023/24 season being deferred to subsequent years.
Trade barriers penalize value addition.
The EU imposes zero tariffs on raw cocoa beans but charges 7–10% on processed cocoa products like butter, paste, and powder. This tariff escalation systematically discourages African countries from moving up the value chain. Meanwhile, the EU Deforestation Regulation (EUDR) requires extensive traceability documentation that many smallholder systems aren't yet equipped to provide, despite proposed enforcement delays.
During 2024–2025, multiple grinding facilities in Côte d'Ivoire and Ghana reduced capacity or temporarily shut down as bean shortages and elevated input costs compressed margins.
And that is not all. Cocoa Swollen Shoot disease, black pod fungus, aging tree stock, illegal mining operations, and unpredictable weather patterns have devastated yields. Ghana alone lost approximately 160,000 tons to cross-border smuggling in 2023/24 as farmers sought better prices elsewhere.
A small number of multinational corporations,including Barry Callebaut, Cargill, and Olam, control trading and processing, while a handful of brands like Ferrero, Mars, Mondelēz, and Nestlé dominate retail markets. This concentration gives them outsized influence over standards, financing, and market access.
Ecuador is on track to surpass Ghana as the world's second-largest cocoa producer, benefiting from higher yields and pricing systems that reportedly pass through about 90% of world prices directly to farmers.
What is really going on
Ghana and Côte d'Ivoire establish seasonal farmgate prices based on forward contracts negotiated months in advance. During the 2023/24 crisis, this mechanism locked both countries out of the subsequent price rally. Ghana's forward sales strategy is connected to an approximately $840 million revenue shortfall, with hundreds of thousands of tonnes rolled into future delivery obligations after production collapsed.
The EU's zero-percent tariff on raw beans versus 7–10% on semi-processed products creates a strong disincentive for African value addition. The EUDR adds another layer of complexity by requiring plot-level traceability; while enforcement has been delayed by a year, the compliance infrastructure and associated costs remain substantial challenges.
The 2024–2025 supply disruptions, driven by disease and weather events—pushed bean prices to record levels while reducing bean quality, particularly fat content. This combination squeezed processor margins, forcing several Ivorian and Ghanaian facilities to curtail operations or shut down temporarily.
Cocoa Swollen Shoot disease has spread extensively across growing regions, while black pod disease surged during periods of heavy rainfall. Illegal mining destroys farmland and contaminates water sources, driving farmers from their land. As Ghanaian production plummeted, smuggling to neighboring countries offering higher net prices exploded, with approximately 160,000 tons lost in 2023/24 alone.
A small group of multinational corporations dominates the trading, grinding, and branding segments of the cocoa value chain. They shape quality specifications, certification requirements, and buyer power dynamics. Europe's grinding facilities remain central to global processing even as Côte d'Ivoire has built significant capacity.
When official farmgate prices lag behind world market prices, economic arbitrage becomes inevitable: beans flow across borders to better-paying markets, licensed buyers and cooperatives face cash flow constraints, and state marketing boards shoulder expensive syndicated financing and operational costs.
EUDR requirements include geolocation data, legality documentation, and risk assessments. Ghana is developing a national traceability system and mapping farms, but last-mile implementation and data governance still require substantial funding and institutional alignment.
Ecuador's agroforestry practices, higher productivity per hectare, and more responsive pricing mechanisms threaten West Africa's market position unless significant productivity and policy improvements occur rapidly.
Why Local Processing Hasn't Solved the Problem
Although cities like Abidjan and Tema have new grinding capacity, the profitability of processing plants relies on a consistent supply of beans, dependable energy, sufficient financing, and steady export demand. African processors have recently scaled back operations during supply shortages, whereas their European and Asian counterparts utilized hedging strategies to stabilize their positions. State-owned processors, such as Ghana's Cocoa Processing Company, have consistently reported losses. In contrast, private sector leaders like Niche Cocoa have expanded into the United States, aiming for more direct access to end markets and lower-cost capital.
How Africa can keep much more of the chocolate dollar
1. Reform Pricing Mechanisms
Replace fixed forward contracts with farmgate prices pegged to a rolling futures basket (such as a three-to-six-month average). Maintain the $400-per-ton Living Income Differential as a price floor, but reduce the share of the crop pre-sold at locked-in prices. Use options contracts to protect against downside risk without capping upside potential. Publish a transparent formula showing how world prices translate to farmgate payments.
2. Transform EUDR Compliance Into Competitive Advantage
Complete national traceability systems with unique farm identifiers, digital boundary polygons, and mobile payment integration. Establish a unified "Ghana/Côte d'Ivoire Cocoa Data Room" where exporters can submit due diligence documentation once for all buyers. Provide government-backed grants to cooperatives for GPS mapping equipment, with open APIs that buyers can access directly.
3. De-Risk Processing Operations
Implement time-bound energy subsidies and priority power allocation for grinding facilities. Create foreign exchange windows for importing spare parts and machinery. Offer export credit insurance for semi-finished products. Link subsidies to throughput targets and local employment commitments.
4. Build Industrial Clusters
Develop an Abidjan–San Pedro–Tema "Cocoa Corridor" special economic zone featuring shared logistics infrastructure, food-grade warehousing, quality testing laboratories, and co-located facilities for butter, powder, paste production alongside packaging and specialty fats manufacturing.
5. Address Farm-Level Economics
Fund a ten-year replanting and agroforestry initiative featuring high-yield, disease-resistant varieties. Guarantee seedling supply and incentivize shade tree planting through carbon payment programs. Bundle rainfall-indexed micro-insurance with input credit to protect farmers from weather-related losses.
6. Stop Cross-Border Leakage
Harmonize farmgate pricing across borders during peak harvest periods. Strengthen border enforcement mechanisms. Guarantee payment within 72 hours of delivery through traceable mobile money systems to eliminate the cash-payment advantage that smugglers currently exploit.
7. Upgrade Cooperative Capacity
Transform cooperatives into professionally managed enterprises with shared services for compliance, finance, and agronomy. Provide cooperatives with warehouse receipt financing and working capital credit lines. Require audited financial statements as a condition for accessing premium markets.
8. Move Up the Product Ladder
Prioritize semi-finished exports initially—butter, paste, and powder. Then target specific finished goods opportunities: dark chocolate couvertures for commercial bakeries, single-estate origin bars, and cocoa beverages for school feeding programs and airline catering. Address tariff escalation through near-market production facilities (following Niche Cocoa's U.S. expansion model) while advocating for preferential EU treatment of value-added products.
9. Implement Radical Transparency
Publish monthly public dashboards showing forward-sales coverage, realized price differentials, farmgate pass-through percentages, smuggling interdictions, and EUDR readiness metrics. Enable citizens to track how much value the country captures from its cocoa resources.
10. Develop Regional Brands and Geographic Indications
Create Protected Geographical Indications such as "Ghana Gold" or "Ivorian Forest Cocoa" with verifiable quality specifications, similar to premium coffee origin designations.
11. Use Public Procurement as Demand Anchor
Mandate use of locally produced cocoa in government rations, school nutrition programs, and public sector hospitality. Pre-commit to annual purchases of cocoa powder and drinking chocolate to stabilize processing plant utilization rates.
12. Negotiate Strategic Partnerships
Offer long-term supply commitments to global processors and brands in exchange for on-site research and development facilities, farmer training centers, and minimum local content requirements.
Recent Developments
Price volatility with limited farmer benefit: Despite multi-fold price increases since 2023, fixed-price systems meant minimal gains reached farmers. Smuggling accelerated as illicit buyers offered better terms than official channels.
Farmgate adjustments: Ghana raised its farmgate price to GHS 48,000 per ton in September 2024. Côte d'Ivoire set 1,800 CFA per kilogram for the 2024/25 main crop and 2,200 CFA per kilogram for the 2025 mid-crop. While these increases help, they still lag market movements without fundamental pricing reform.
West African grinding capacity exists but remains volatile: Côte d'Ivoire maintains position as a major grinder, yet mid-year 2025 grinding declined due to poor bean quality.
Ghana's EUDR preparation: Government and development partners are mapping farms and constructing a national traceability system. Successfully completing this infrastructure could unlock "low-risk" designation under EU regulations.
EUDR timeline: EU enforcement has already been postponed, with a proposed additional one-year delay under consideration in 2025. This extended timeline creates crucial space to achieve audit-ready status without wasting the opportunity.
Africa's limited capture of cocoa wealth doesn't stem from an inability to farm or process. It results from policy design, pricing mechanisms, and power dynamics that misalign with value creation. By reforming price transmission, converting compliance requirements into competitive strengths, and de-risking processing operations, the continent can retain substantially more value from every chocolate bar sold worldwide.
The fundamentals—land, climate, labor, and growing capacity—remain in Africa. What's needed now is the institutional architecture and policy framework to ensure that wealth creation happens where cocoa production occurs.
Key Questions for Implementation
Pricing Reform: What would step-by-step pricing reform look like for Ghana starting next season, transitioning from forward-selling to a rolling futures peg while protecting farmers during down-market years?
Industrial Development: If a Cocoa Corridor special economic zone were established between Tema and Abidjan, which specific incentives, utilities, and anchor purchase agreements would convince a major grinder or confectioner to make a ten-year commitment?
Finance Strategy: How can a ten-year replanting and agroforestry program be financed at scale—combining carbon finance, export credit facilities, and warehouse receipt systems—without creating unsustainable public debt burdens?
Topics
CocoaAfrica
Written by
Edison Ade
Lead
I build ventures that scale | High output teams, low burnout operations, real growth
