Cocoa harvest crunch leaves traders with a bitter taste
As we approach the end of July the global markets have now had time to absorb the grim news coming out of West Africa Despite some promising rainfall, this year's May- July cocoa harvest in Ghana & the Ivory Coast has underperformed by a large margin, with the usual suspects of disease, climate and deforestation sending prices skyrocketing. Now with trading firms stuck covering losses in the millions thanks to reneged coca deliveries and costs of confectionary likely to climb sharply in response, the case for more stable non-West African supplies is growing stronger.
Commodity traders, especially those that deal in derivative contracts, earn their daily bread on speculation and price volatility, hence why they have long pursued a love affair with cocoa. The bean responsible for the global chocolate supply is grown in humid tropical climes across the globe, but it is in West Africa - specifically Ghana & Cot d Ivoire where cocoa cultivation is undertaken at the greatest scale. No less than 60% of the global cocoa supply is cultivated here, mostly through painstaking manual labour by subsistence farmers who lack the financial wherewithal to protect their smallholdings against the multi-pronged threats facing the crop, from erratic weather patterns brought on by climate change to the ravishes of plant disease to habitat loss and deforestation.
The result has been persistent shortages in recent years, causing whiplash price rises of the sort that grabbed headlines earlier this year when cocoa surpassed $10k a tonne for the first time. The jittery cocoa market had since eased at the news of good rainfall in the intervening months but this has now been proven insufficient. Ghana alone has cost traders $1Bn after failing to deliver half its promised harvest. Those same sellers have now been forced to up the price on what cocoa products they do own in order to salvage their financial positions, which will likely compel their customers - the confectionary manufacturers- to pass those higher prices on to the final consumer in the form of higher chocolate prices.
While a disaster for those operators further up the value chain, these shortages and price rises have suited West African suppliers quite well. The state-owned Ghanian Cocoa Board reflected a profit of $194m in 2022/23, which went a long way towards helping the country achieve a debt restructuring deal with the IMF. However, this situation cannot continue for long if West African governments wish to maintain their market dominance. While the artisanal nature of local production ensured that these countries could fortify their positions as cost competitors, persistently high prices are now driving the adoption of cocoa cultivation in markets further afield, including Columbia, where the government hopes to pitch cocoa cultivation as an alternative to former cocaine farmers. If West Africa does not move quickly, it may well turn out to be its own farmers who end up with a bitter taste in their mouth.
High import charges reignite Kenya -Uganda fuel row.
It has been roughly five years after African governments first inaugurated the African Continental Free Trade Agreement with great fanfare and amid great expectation. The reality on the ground for those engaging in cross-border trade however is that the idealised vision of seamless intra-African trade remains just that, with onerous regulation and regional politics continuing to play havoc with the free movement of goods across local borders.
This is the reality which has been playing out in East Africa in the last week or more where the landlocked state of Uganda's long-term bid to secure a stable supply of low-cost fuel has gotten off to a rocky start. After months of negotiation and planning, the Kenyan government, through whose territory the Ugandans were hoping to import fuel has announced it would charge millions of US$ in bond fees on a shipment of Ugandan-bound petroleum goods that has recently landed in Mombasa, the reason given being that the shipment apparently overshot the original declared amount by 17,000 cubic metres.
To describe the situation as frustrating for the Ugandans would be the height of understatement. Like its other nearby neighbours the country has battled for many years with hikes in its fuel price driven by its reliance on a complex and disjointed supply chain of Kenyan retailers, who impose a markup before handing it off to their Ugandan counterparts. After years of effort, the Ugandans have recently snagged a deal whereby Vitol Bahrain would ship oil directly to the Kenyan port of Mombasa and from there pump it via pipeline to Uganda, bypassing Kenyan retailers entirely, but the latter appears to have now found a method of having the last say.
Such shenanigans are nothing new in East Africa. In 2019 Trade between Uganda & Rwanda came to a halt over a brief political dispute Until May of this year Kenya & Tanzania were locked in a trade dispute around the export of poultry products. Similarly until April this year Kenya & Uganda were tied in a separate tax dispute on imported Kenyan goods. Further afield the deep divisions between the Rwandans, Ugandans & Congolese are well documented.
What binds all these incidents is their origin in chiefly personal spats between these respective countries' leaders. When Kenya celebrated 60 years of independence in December of last year it was noted that Uganda’s President Yoweri Museveni, Tanzania’s Samia SuluhuHassan and Rwanda’s Paul Kagame all did not attend. Such fissures are par for the course in the East African Community Bloc of Nations which has experienced such clashes of personalities amongst its leaders since atleast the 1970’s when the region was split between the likes of Julius Nyerere in Tanzania, Jomo Kenyatta in Kenya, and Idi Amin in Uganda who frequently clashed over ideology and personal egos.
Meanwhile, the average Ugandan will still have to wait for cheap fuel.
Gambian parliament upholds FGM ban.
Elsewhere, far more positive developments are underfoot. This was the case in the small West African country of Gambia last week, where in what is being held a major victory by women's rights campaigners, the Gambian parliament has voted to reject a proposed overturning of a ban on FGM. Though unlikely to have an immediate impact on the ground as of yet, the further institutionalization of the 8-year-long ban is considered to be an important milestone amidst a growing global campaign by pro-FGM activists to allow the practice to continue unimpeded.
FGM, or female genital mutilation refers to a cultural practice in which girls undergo surgeries on their genitals, typically as part of initiation ceremonies. Once common across Muslim regions of North Africa and the Middle East the custom has long come under fire for the grievous physical and psychological harm it can inflict on its recipients. Its suppression and banning have been a key rights issue in the region for decades but enforcement has been difficult as the practice is deeply entrenched and for many adherents held to be part of the Islamic religion, despite it not being directly prescribed in scripture.
70 countries worldwide have banned the procedure, of which 35 are located in sub-Saharan Africa. Often however such bans are rendered void due to lax enforcement and cultural acceptance. The proposed ban reversal in Gambia for example was brought forward after the first legal penalties were dolled out, indicating that the ban has not served as a deterrent in and of itself. The fact that the ban was upheld in a country where the practice is so pervasive is precisely why activists are hailing it as such a success. According to the most recent statistics, ,73% of Gambian women aged 15 to 49 have undergone the procedure.
This achievement is also important campaigners argue owing to the current milieu in which it has taken place. While secular governments have achieved great strides in uprooting FGM over the past decades, they are now facing pushback from a successful counter-campaign which couches its critiques of FGM bans with messaging around cultural and religious autonomy in opposition to Western moral and cultural imperialism, a popular refrain in a region where the popularity of western liberal institutions is at quite a low ebb.