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Niels Fold nf@geo.ku.dk

Ringvorlesung Globale Güterketten University of Vienna 08.06.2010 Securing supplies in smallholder dominated GVCs: Private regulation of West African cocoa production. Niels Fold nf@geo.ku.dk. Content. Starting point: the issue of regulation ‘Cocoa basics’ Cocoa frontier dynamics

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Niels Fold nf@geo.ku.dk

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  1. Ringvorlesung Globale GüterkettenUniversity of Vienna08.06.2010Securing supplies in smallholder dominated GVCs: Private regulation of West African cocoa production Niels Fold nf@geo.ku.dk

  2. Department of Geography & Geology Content • Starting point: the issue of regulation • ‘Cocoa basics’ • Cocoa frontier dynamics • Governance in the GVC for cocoa-chocolate • Marketing systems in Africa (SMBs) • The quality issue • - Ghana: a special case • Emergence of private regulation • The volume issue • Institutional innovations • Upgrading • Conclusion - key themes

  3. Department of Geography & Geology Dimensions • 1) Input/output structure • 2) Territoriality • 3) Governance structure • PDCs vs. BDCs (the role of lead firms) • Market, hierarchy, captive, modular, relational • 4) Regulatory institutions • National and international • Public or private - ? • Internal or external - ?

  4. Department of Geography & Geology Cocoa basics (I)

  5. Department of Geography & Geology Cocoa basics II

  6. Department of Geography & Geology

  7. Department of Geography & Geology Production and international trade patterns • Pronounced flow of beans from South to North • - From production to consumption • Dominance of few countries • - production and processing • Shifting importance of countries • Dominance of smallholders in production • - The importance of Africa • Increasing processing capacity • in some producer countries • Regionalisation

  8. Department of Geography & Geology

  9. Department of Geography & Geology

  10. Department of Geography & Geology

  11. Department of Geography & Geology Dynamics of global cocoa supply • The concept of ’forest rent’ • Dynamics of cocoa frontiers (Ruf’s model) • Migration waves • Pest and diseases • Labour costs • ’Hollowing out’ • Competitive advantage of smallholder production • Critique: • - Model does not include the role of lead firms

  12. Department of Geography & Geology Governance in the GVC for cocoa-chocolate • Concentration and centralisation • Brand manufacturers • - food • - chocolate • Contract manufacturers (grinders) • - food • - ’generic chocolate’ • Vertical integration • - downstream • - upstream (domestic purchasing systems)

  13. Department of Geography & Geology Structure and actors in the GVC for cocoa-chocolate

  14. Department of Geography & Geology Cocoa marketing systems in Africa • SAPs – from the late 1980s • - liberalisation and privatisation • Dismantling of state marketing boards • - variations in scope • - loss of quality control mechanisms • Problems with no quality control • - traders increase speed of capital circulation • - problem for all processors? • A special case: Ghana • - state: fixed prices, export monopoly, QCD • - private: LBCs, storage, transport

  15. Department of Geography & Geology Securing quality and volume: private regulation? • Increasing prices (since 2006) • - the end of the ‘global frontier’? Supply problems • - crumbling of public regulation (MB & ICA) • Provoking event: child labour in cocoa sector (West Africa) • New players in the organisation of global cocoa production • - lead firms, business associations, civil society (NGOs) • Institutional innovations (ICI) • - responsible labour practices • - ‘sustainable’ cocoa production (increasing productivity) • Scaling up of ‘best practice’ • - organisational division of labour (role of WCF) • - certification and verification (Governments & ICVB)

  16. Department of Geography & Geology Upgrading • Organisational learning • (improvement of position of firms in GVC) • A) Sequence: • Assembly, OEM, (ODM), OBM • B) Forms: • Process • Product • Functional • Inter-sectoral

  17. Department of Geography & Geology Upgrading in agro-industrial value chains 1) Higher margins (unprocessed commodities) • Quality, volume, reliability, contracts, hedging • Public action: new forms of marketing systems • Limitations: easy entry, mature technologies 2) Producing new forms of existing commodities • GMOs, customized raw materials 3) Localizing commodity processing • Intermediate and final processing • Public action: export restraints, investments

  18. Department of Geography & Geology Conclusion: Key issues • New forms of global regulation • - the role and nature of NGOs • - the role of public funding • Driving forces for institutional innovations • - rivalry and competition • - capability for collective action in the GVC • Spatial impacts on cocoa smallholders • - creation of ’certified spaces’ • - marginalised areas • Alternative model for state regulation? • - adaptation of the Ghana cocoa system?

  19. Department of Geography & Geology Thank you!

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