Fairtrade, and especially the demand for fairtrade chocolate is booming. But what is Fairtrade? And what does fair involve in this case for the cocoa farmers from Ghana?
Fairtrade certifications like the Fairtrade label have been criticized for quite some time. In 2018 this has also been proven by independent institutes with the publication of the cocoa barometer. This July, a Ghanaian expert has devoted himself to the subject of “Fairtrade” and published an article on the “big question: is Fairtrade fair for the cocoa farmers?“. Fairafric shares this critical point of view and we will take a closer look at what the Fairtrade label means for the Ghanaian cocoa farmers.
The starting point: challenges in cocoa trade
The trading with cocoa beans originated in Central America and only from the 19th century on, tasty chocolate as we know it today has been developed. Nowadays, Ghana is one of the strongest cocoa growing countries in Africa, along with the Ivory Coast. According to Fountain and Huetz-Adams (2018), there are about 2,000,000 farmers working in Ghana and the Ivory Coast, but the average income is $0.78 per capita per day. Often smallholder farmers live on the poverty line and child labour is not uncommon in the farming sector. Further, education for the children is often impossible and the family needs their financial support.
Neocolonial economic structures
In addition to the rural structures, there are neocolonial structures. Cocoa beans are mainly exported and the added value of the product chain takes place in industrialised countries. At the lower end of the value chain there are not many opportunities for farmers to improve their living standard and they depend on the strongly fluctuating world market price of cocoa to sell their cocoa beans to traders.
The world market price for cocoa and its effects
At the end of the 1980s and especially at the end of the 1990s, the world market price for cocoa beans decreased sharply and the idea of the Fairtrade label itself and the minimum price of (now) $2400/tonne was justified. Since the beginning of the 2000s, however, the price of cocoa has risen, making the Fairtrade Organisation’s concept of a fixed minimum price controversial.
In Ghana and the Ivory Coast the cocoa price is not only made up of the world market price. The CoCoBod (Cocoa Marketing Board) in Ghana submits its own minimum price at the beginning of the harvest season, which corresponds to a certain percentage of the world market price. If there is a differential between the Fairtrade minimum and the set price of the government the price will be added up in order to reach the 2400$/tonne.
The CoCoBod supports the Ghanaian cocoa farmers in the areas of quality control, education, use of pesticides or the distribution of seedlings. Thus, even non-certified farmers can benefit from further training and extra services without the fees that are charged for a Fairtrade certification. A more detailed explanation on this topic can be found here.
Definition of terms: Fairtrade versus fair trade
Fairtrade is not equal to fair traded. This is definitely confirmed by looking at the cocoa barometer and the article by Kwame Asamoah Kwarteng. While fair trade in the sense of the Fairtrade label usually follows classical structures and raw materials are exported for further processing, a fair traded product follows at its best the fair chain approach and the added value remains in the country of origin. We have published a differentiated overview of Fairtrade and fair traded here.
The idea of the Fairtrade label is to increase transparency and sustainability along the supply chain by means of certain social, ecological and economic criteria. The organisation is particularly involved at the beginning of the supply chain in the generation of raw materials by the farmers. The Fairtrade label is certified by the international certification body FLOCERT, which is by the way a subsidiary of the Fairtrade Organisation itself. All standards must be met before a product can carry the Fairtrade label. The number of certified product organisations reaches over 1400 and, according to Fairtrade, it includes 1.66 million smallholder farmers and workers.
Fairtrade label: Which criteria have to be fulfilled?
The Fairtrade label certifies different types of products or raw materials such as coffee, cotton, flowers, sugar or spices. As we are interested in the effects for Ghanaian farmers, we will get a short overview of the criteria for cocoa farmers here.
The focus of the Fairtrade certification is based on the social criteria for cocoa farmers. But environmental standards as for instance the correct handling of pesticides and hazardous substances have to be fulfilled, too. In addition, the farmers can organise themselves in trade unions and receive trainings via the organisation.
Guidelines for working conditions on the plantations include protection against discrimination and forced labour as well as measures against child labour. Special features are the payment of a minimum price and the payment of a premium of $240/tonne of cocoa beans, whether they are producing organic or conventional makes no difference. For Ghana and the Ivory Coast, different regulations apply due to the different price setting mentioned above. All these criteria include regular audits. The results of the audits should be visible and easy to understand for all members. FLOCERT carries out all audits, some are unannounced. They have employees worldwide to act locally. Due to the corona virus, audits were partially suspended, but are now active again and can also be carried out as “remote” audits.
Criticism of Fairtrade has been known for a long time, but often does not reach the end-consumers or gets lost in the jungle of labels. One of the biggest Fairtrade criticism, which is particularly important in Ghana, is that there is no noticeable difference in income between certified and non-certified cocoa farmers. The following debate should be seen as an introduction in the topic. It does not imply all arguments of criticism and the debate of cocoa quantity equalization is not even mentioned.
Certified farmers incur costs through fees and audits to the Fairtrade organisation. Only half of the premium of $240 is paid directly to the farmers, the other half is soaked up by the organisation. “Direct” means as a contribution to projects in the whole community. Ultimately, the farmers cannot decide on the amount of the premium individually. When the whole community benefits from their premium per tonne, it is definitely debatable whether this is fair or not.
Furthermore, the CoCoBoD gives non-certified farmers the opportunity to carry out quality controls and other services without having to pay additional costs to an international organisation.
The cocoa barometer shows that certifications have not contributed to create a safe living income. Thus, the smallholders remain in structural poverty and have hardly any chance to generate a higher income.
By the way, a living income is defined and calculated differently from a living wage. A living income refers to self-employed workers and not to wage earners who work in a factory. This applies to most farmers. The calculation is based on the income for the whole household and includes all costs for a standard of living such as food and accommodation but also the costs for pesticides, storage or membership fees. The living wage, on the other hand, is calculated on the basis of the wage for one week and only includes costs for the standard of living.
Another point of criticism is the pricing of the end-product, the chocolate bar. This cannot at all be influenced by the farmers and therefore the production factory, the chocolate bar sellers and international companies are the only ones who actually profit from a high end-price. The supply chain is mostly not transparent enough and the extra money generated stays outside the country of origin. This all is happening despite the fact that a Fairtrade label makes it possible to set a higher price for end consumers. The University of Bonn found out that the willingness to pay is 38.6% higher with a Fairtrade label. In their study brain stimulation of potential customers on Fairtrade labels was measured and evaluated. The results are impressive but will go too far on this point 😉.
So, how fair is the Fairtrade label for the Ghanaian cocoa farmers? If you take look at the criteria and success points of the Fairtrade label, it becomes clear that the farmers have to meet many standards in order to be certified. This definitely supports the social aspect of the supply chain and promotes better working conditions, for example to combat forced labour. However, in the end hardly anything of the premium remains for the farmers and even the minimum price paid by Fairtrade does not help to pay a fair living income. The last fact in particular underlines why Kwame Asamoah Kwarteng is sceptical about the Fairtrade label and why he does not see any added value for his fellow countrymen. Kwarteng, as well as fairafric, would like to see more transparency and a rethinking of trade structures, rather than marketing campaigns and “fair washing”.