By: Dwight Links
A recent webinar that explored the prospects and untapped potential of the cocoa value chain in Africa singled out enabling infrastructure as the single most common hurdle faced by the sector’s progress.
The discussion was organised by the Leaf Organisation based in Nigeria, which is an NGO promoting Pan-African commercial ideas and stories.
Uzoamaka Igweike, founder of the company Loom Craft Chocolate, responded to the question of what is the single biggest reason why cocoa is still exported in raw form.
“I can think of many reasons, but in my experience, what has appeared the most was infrastructure. It affected me the most in terms of personal experience,” Igweike identified.
Igweike explained that she did not start as a farmer, but rather as a chocolatier.
“I went head-on into processing; that is why I cannot immediately single out one major roadblock. Infrastructure was rather the first hurdle – because making chocolate requires a lot of power. You need a stable electricity supply,” she explained.
In terms of this dimension, Igweike said that for a single batch of chocolate to be made, it requires anywhere between 18 hours to 60 hours of time for production.
“This means that your machines are constantly running depending on what you are trying to achieve from one batch,” she added.
Following on from the stable electricity supply, Igweike identified that the next aspects for bringing the product to markets would become the next issues to solve.
“You would then have to think about moving the product from the factory to the market. But, that comes after the first issues around the production dimensions,” Igweike noted.
Ahmed Adeagbo from Rasad Nigeria Limited, another cocoa business specialising in storage and exportation, agreed with the question on challenges around cocoa production, processing and further value addition.
However, Adeagbo did not entirely support the first point of Igweike on infrastructure.
“I do agree that there are challenges in cocoa production, but the real challenge is around demand. Even though we [Africa] are big producers of cocoa, we are not big consumers of chocolate,” Adeagbo pointed out.
According to him, the business case is very simple in terms of establishing markets.
“And if you do not have very strong local demand for something, then you would always take it to where the product would be consumed.
If you supply something and there is no demand for it, the price is going to drop. But if the demand is high for it, you will always want to move the goods there,” Adeagbo highlighted.
CONSUMPTION DYNAMICS
Adeagbo pointed out the markets that actually consume large quantities of cocoa.
In Europe, they consume about 9 to 10 kg of chocolate per person. In America, it is about 4 kg per person. In Asia, it could be between 1 and 2 kg.
However, in Africa it is way lower than 1 kg, as Adeagbo indicated.
The direct reason he gives is the affordability of the good.
“The problem is poverty. It makes it really hard for us to have that local consumption. We have the human capacity or population that could potentially consume this product. Running the plant, designing a plan to supply for the mass market, currently does not make business viability sense,” he added.
Adding to the malaise of the autopsy of the contributing factors associated with why Africa cannot match consumption of its own raw materials, specifically in cocoa, Nkechi Amangbo from Thamani Invest Limited also agreed that there is not one single major hurdle or challenge.
“In my experience in the financing space, it is also not one major issue. We typically see challenges around the supply chain. And more specifically the supply of the beans,” Amangbo said.
According to her, infrastructure issues can be fixed; however, questions arise about the guaranteed supply of the cocoa beans.
“One specific example was from a recent event, where we were busy financing an aggregator, and we noticed different qualities. My position from this was if you cannot guarantee quality, then I am sorry, I cannot put money on the table,” Amangbo described this unique commercial case.
She identified unreliable supply, inconsistent policies, and the need for factories to stay operational to supply quality products to the markets they serve.
Amangbo also flipped the dimension of exporting the raw cocoa versus the complete chocolate product.
“We can also export the chocolate and not only raw cocoa, if Nigerians, for example, do not want to eat the chocolate. But if you do not solve the sourcing of quality beans, you will continue to have problems,” Amangbo added.
Amangbo also noted that even if a country can export chocolate to neighbouring or consumer markets, it will still face issues on certification, issues on product quality and standards from those markets, as this is a high-value crop which produces a high-value product.
“No one is going to allow you to bring cocoa to their country that is not certified or assessed as having met standards,” Amangbo noted.
