Côte d’Ivoire – Do new EU laws promise sweet success or a bitter aftertaste?
Impending EU legislation seeks to reduce the Côte d’Ivoire cocoa industry’s reliance on minimum wages, child labour, and environmental degradation. Yet these efforts may be hindered by the coronavirus pandemic, and cynical buyers seeking alternative sources. The EU’s efforts also come as the industry in Côte d’Ivoire sits in the midst of several complex political and legal storms.
Cocoa is the lifeblood of Côte d’Ivoire’s economy, with over two-thirds of Ivorian cocoa exports bound for Europe. Later this year, the EU is set to introduce a raft of laws, seeking to reduce abuses and mismanagement in the manufacturing processes and supply chains of the products Europe imports. This new legislation will implement stringent vetting of how Côte d’Ivoire’s cocoa crop is grown and harvested: seeking to raise cocoa farmers out of poverty, reduce child labour levels, and protect vulnerable forests. As the EU’s ambassador to Côte d’Ivoire described:
“The European consumer wants to eat chocolate without having to think about child labour, deforestation or the poverty of those who grow cocoa”.
Yet, the onus for salving European consciences will not rest solely on the Ivorian government or farmers. These regulations will also impact the corporations which process the cocoa: companies like Nestle, Hershey’s, or Danone. Should the EU laws come into effect as scheduled, then by 2024 these companies will be held far more accountable for the conditions and working practises of every stage of their supply network.
(Picture Credit: EU-Côte d’Ivoire Economic Partnership Agreement (europa.eu))
A Tumultuous Season Abroad…
All of this comes as Côte d’Ivoire, and its cocoa industry, experiences significant reform and uncertainty. In 2019 the Côte d’Ivoire Coffee and Cocoa Board (CCC) – along with its Ghanaian counterpart – announced the introduction of the Living Income Differential (LID), a premium of $400 to be paid per tonne of cocoa, agreed with major cocoa buyers. The LID was intended to maintain prices in the event of a decline and aid the alleviation of poverty amongst farmers. However, when both Hershey’s and Mars were accused of sourcing unusually high quantities of cocoa on the International Commodities Exchange (ICE), despite the slump in demand inspired by the coronavirus pandemic, the CCC saw evidence of the companies seeking to circumvent paying the premium despite their previous agreement. Hershey’s and its subsidiaries were banned from participating in sustainability schemes within Côte d’Ivoire, which would have denied the companies from marketing their ethically-certified products at an elevated price. The CCC lifted the suspension only after a restatement of Hershey’s commitment to the LID process.
Meanwhile, the Ivorian cocoa industry is also at the centre of a US Supreme Court judgement, expected before June 2021. The American subsidiary of Nestlé, alongside US-owned Cargill, seek to limit their accountability in the case of six Malians whom were abducted and forced to serve as child labour on Ivorian cocoa farms supplying those companies. Under a facet of US law from 1789 known as the “Alien Tort Statute” the six men were able to bring their case, a breach of international law, before civil courts in the USA. Yet the companies wish the Supreme Court to rule that American companies as entities cannot be prosecuted under such a statute, just as foreign companies were exempted in 2018.
…And At Home
Furthermore, the tempestuous domestic situation in Côte d’Ivoire has also embroiled the cocoa industry, representing as it does a quarter of the Ivorian economy and employing 20% of the population. Having previously ruled out standing in the October 2020 election, President Alassane Ouattara accepted the nomination for a controversial third term when his intended successor, Amadou Gon Coulibaly, died suddenly. This move was dubbed unconstitutional by the Ivorian opposition, citing a two-term limit. In response, Ouattara’s supporters argued that adopting a new constitution in 2016 effectively reset Ouattara’s terms, rendering him eligible to stand again. Given the controversy, a 21% rise in the price per kilogram of cocoa paid to farmers, announced one month before the election, was a rather unsubtle gesture to curry favour amongst a sizeable proportion of the population.
Will The Future Prove A Bountiful Harvest Or A Failed Crop?
Successful implementation of the EU’s proposed laws could be a welcome boon for farmers, an opportunity to reduce the disparity between the modest revenue garnered by Ivorian producers ($3.3bn in 2017) and vast sums reaped by processors ($22bn in the same year). EU investment in the cocoa sector, predicted to be worth one billion euros across a six-year period, coupled with increased tax revenue from wealthier farmers will stimulate the Ivorian economy, which has been growing at an average of 8% annually since 2011. It will also permit the Ivorian cocoa sector to develop beyond export of raw primary commodities. The Ivorian government and the CCC are keen to pursue such a vision, with plans to build two Chinese-funded facilities in the next two years, so as to increase Côte d’Ivoire’s capacity to both store and process cocoa.
(Picture Credit: Ghana and Côte d’Ivoire taste success in raising price of cocoa (theafricareport.com))
However, as the example of Hershey’s and Mars trading on the ICE demonstrates, whilst Côte d’Ivoire may be the largest, it is not the sole cocoa producer. Should the EU’s reforms, coupled with premiums like the LID, drive potential buyers away, then Côte d’Ivoire may find itself burdened with harvests it cannot sell. As of February 22nd 2021, the CCC was offering discounts of between £200-£250 a tonne, due to the strangling of trade during the COVID-19 pandemic. Uncertainty in the cocoa industry, given its dominant role in the economy and Côte d’Ivoire’s current political turbulence, may also give rise to greater agitation and frustrations aimed towards the government of President Ouattara, who staked his re-election and political future on improved cocoa prices.
With regards to 2024, the EU must offer assurances to offset those buyers who may prefer to source cheaper, less-ethical, cocoa from elsewhere. European consumers would no doubt be devastated to learn that their desire for sustainable chocolate had in fact contributed to prolonging the poverty of Côte d’Ivoire’s cocoa farmers, rather than alleviating it.
