Building Resilient Communities through Farmer-owned Enterprises
Cocoa production plays a significant role in Ghana’s economy. As the second largest cocoa producer after Cote d’Ivoire, Ghana holds a 20% market share in global cocoa production, generating approximately $2 billion in foreign exchange annually. Almost all of Ghana’s cocoa is grown by smallholders, approximately 865,000 farmers, with an average farm size of 5 acres.
Despite the importance of smallholders in Ghana’s economy, many continue to live in poverty, undervalued for their work. More than one million smallholder cocoa farmers in Ghana and the Ivory Coast cannot afford all their basic needs.
There have been efforts to address this, such as the Living Income Differential premium on the export price for cocoa jointly set by the Cote d’Ivoire and Ghanian governments. However, farm gate prices are still nowhere near high enough. While West African cocoa farmers are exposed to most of the risk – for example to drought, pests, and diseases which can decimate a harvest – they only receive 3-6% of the price of a retail chocolate bar.G2]
Image source: Adom Cocoa
Cocoa farmers play a significant role in the production of cocoa but often receive little reward, receiving only 3-6% of the price of a retail chocolate bar.
In our latest case study, we explore how Regeneration’s Rebuild Facility is helping to protect farmer incomes and foster resilient communities in Ghana, by providing working capital to deforestation free cocoa ventures.
In 2022, the Rebuild Facility gave a returnable grant to Adom Cocoa, a Licensed Buying Company (LCB) in Ghana. By being positioned as a trustworthy and investment-ready company through its association with Rebuild, Adom Cocoa attracted further financing from Didwa and the Ghana Cocoa Board (COCOBOD) shortly after receiving the grant.
In this case study we demonstrate how this investment has enabled Adom Cocoa to generate impact across multiple channels:
1. Putting power back into the hands of farmers
One of the barriers to higher farmer income and livelihood opportunities in the cocoa sector is a lack of representation of smallholders. In Ghana, only 4% of LCBs – the primary companies mandated to purchase cocoa from farmers and sell to the state-owned company in control of the cocoa market – are farmer-owned. This means that most cocoa purchasing decisions are made without consideration of the needs and priorities of smallholders.
Adom Cocoa was established to ensure farmers and cocoa-growing communities benefit from profits made by LBCs. Adom Cocoa is jointly owned by eight certified cooperative unions in Ghana, with a combined total membership of over 27,000 farmers from 361 farming communities across Ghana. This structure has benefits not only in terms of production and profits, but in terms of bargaining power of the farmers, making their voice heard.
2. Protecting smallholder livelihoods
Through Adom Cocoa’s innovative profit-sharing model and the premiums from the certification of beans (including Fairtrade and Rainforest Alliance), farmer incomes have increased significantly. The returnable grant given to Adom Cocoa has directly improved 1,948 farmers’ livelihoods and has led to an increased revenue of €150,444, out of which premiums have been paid to farmers, on top of receiving shareholder dividends.
Image source: Adom Cocoa
Adom Cocoa has supported and protected farmer incomes
3. Promoting deforestation-free cocoa that restores and regenerates nature
Typically, cocoa farmers have very little incentives not to encroach into protected forests in Ghana. Low cocoa production yields often lead to agricultural expansion and encroachment onto forests. Countrywide, agricultural expansion accounts for nearly 140,000 ha of high forest zone loss each year. Over a quarter of this is driven by cocoa production.
To protect Ghana’s forests, Adom Cocoa set up a Sustainable Land Management strategy and intensified efforts to adopt climate-smart practices on all member farms, helping farmers to increase productivity and incomes in a sustainable way, for example by reducing farm inputs for more resource-efficiency. Cooperatives collectively raised and distributed around 160,000 fruit and timber trees for planting on cocoa farms. Adom Cocoa also officially joined the Ghana Cocoa Forest REDD+ Programme (GCFRP) and is actively restoring formerly degraded forest within the Bia-Juaboso landscape. So far, 200 hectares of formerly degraded forest have been restored.
Image source: Adom Cocoa
Adom Cocoa has successfully restored 200 Ha of formerly degraded forest under the Ghana Cocoa-Forest REDD+ programme within the first year.
Since successfully repaying the returnable grant and achieving its impact targets, Adom Cocoa qualified for a second round of Rebuild funding in 2023, with impacts expected to deepen even further from the first round. Through the establishment of longer-term relationships with grantees like Adom Cocoa Buying Company, the Rebuild Facility can continue to safeguard the incomes of forest-dependent communities and protect at-risk cocoa and coffee value chains.
To learn more about how Adom Cocoa scaled up its deforestation-free cocoa enterprise using the Rebuild Facility returnable grant, read the full case study: EXTERNAL_Adom Cocoa Case Study (squarespace.com)