Contract-Farming in Cocoa Value Chains in Africa: Possibilities and Challenges

Abstract

The cocoa industry is a global multi-billion dollar industry that faces numerous challenges at the farm production level. Cocoa is largely grown by smallholder farmers in equatorial Africa, who experience poverty, declining productivity, volatile prices and lack of funding for investment, as well as human rights and environmental issues. Contract-farming is a value chain model that has been proposed to address many of the challenges faced by cocoa farmers. This paper provides an overview of the cocoa industry, including past and current initiatives to address issues and inequities in the cocoa market, and an overview of current research on contract-farming of cocoa, including an examination of three chocolate companies that source cocoa from Africa using a contract-farming business model: Theo Chocolate (Democratic Republic of Congo), Divine Chocolate (Ghana), and Madecasse (Madagascar). This research finds that contract-farming does offer cocoa farmers the opportunity to receive a higher price point for cocoa, and is more beneficial than industry sustainability programmes. There are however significant gaps in the research into contract-farming. It is not clear how contract-farming impacts sustainable economic development in the longer term, even when farmers obtain a higher price point for cocoa. Contract-farming may increase risks associated with land tenure insecurity, marginalization of women, and crop monoculture; even so, contract-farming can be carried out in a way that mitigates these risks.