Cocoa in Ghana, the “Political Crop”: State Control Matters

This chapter is part of a project that investigates domestic and global drivers and enablers of capital flight from Cameroon, Ghana, and Zambia. It presents analysis of the cocoa sector in Ghana. Since its introduction into Ghana in the nineteenth century, cocoa has been considered a strategic crop, over which the post-independence governments have maintained substantial control. Cocoa is indeed referred to as a “political crop.” The cocoa sector is closely regulated by the government through the Ghana Cocoa Board (COCOBOD). This chapter investigates the implications of the industrial organization structure and regulation for the performance of the cocoa sector, and specifically for minimizing the exposure to capital flight typically faced by resource-rich countries through export misinvoicing and leakage of foreign exchange earnings from exports. It is important to note that while foreign exchange earnings from exports of cocoa beans are fully repatriated as they are controlled by COCOBOD, derived cocoa products are exported by private companies, and only national companies are obligated to repatriate their export earnings. The analysis indicates that the gains from the cocoa sector in terms of contributions to GDP, tax revenue and poverty reduction remain sub-optimal. This suggests that there is substantial room for improvement through targeted reforms and policy interventions at the sectoral level.