The FAIRTRADE Chocolate Rip-Off
Stuck in a FAIRTRADE labyrinth Frédéric Doua (39), owner of a 4-hectare cocoa farm in Assoumoukro in the north of the worlds’ largest cocoa producing country Ivory Coast , regrets having joined the local FAIRTRADE cooperative UIREVI four years ago. Ever since, his harvest often sat in warehouses, waiting for the occasional FAIRTRADE buyer to […]
Stuck in a FAIRTRADE labyrinth
Frédéric Doua (39), owner of a 4-hectare cocoa farm in Assoumoukro in the north of the worlds’ largest cocoa producing country Ivory Coast , regrets having joined the local FAIRTRADE cooperative UIREVI four years ago. Ever since, his harvest often sat in warehouses, waiting for the occasional FAIRTRADE buyer to come along. “This is not what I was promised”, he says. “I was told that if I concentrated on cocoa, exclusively, and produced a lot of it, I would get higher prices and welfare premiums. But what happened is that I became overly dependent on cocoa prices and FAIRTRADE buyers. Whereas I used to grow food crops for my family’s consumption together with my cocoa trees, now I have to use my harvest income to buy food. Paying my childrens’ school fees is becoming difficult.”
Doua’s neighbour in Amoussoukro, Arnaud Kassi, explains that, as a member of a FAIRTRADE-certified cooperative, one ‘cannot sell beans outside the FAIRTRADE circuit’. His harvest now often forcibly waits in the warehouses. Kassi, owner of a 3.5-hectre cocoa plantation, feels he has been “trapped” in what he describes as a ‘FAIRTRADE labyrinth’, adding that it angers him that he has to wait for months before he can collect his harvest money at the cooperative that is FAIRTRADE’s formal partner.
Though Kassi feels that he benefits from the occasionally paid ‘FAIRTRADE Premium’ bonus, he says the amount is so small and takes so long to be paid, that this benefit becomes negligible. “The bonus money is paid to us in one go, during a year-end ceremony organised by the co-op”, says Kassi. “But it takes long before it reaches us. We have families to look after and kids to send to school. We borrow cash from people we know, but we have to pay them interest. By the time the bonus falls in our hands, our personal debts have risen so much that the final payment hardly lessens the pain.” Doua adds: “Two-thirds of the premium go to the cooperative’s leadership anyway.”
Kwesi Agyei, a peasant cocoa farmer in Atwima Mponua in Ghana’s Ashanti region, is a member of the local FAIRTRADE cooperative Kuapa Kokoo, but says he has never heard of a phenomenon called FAIRTRADE. He believes that the extra one dollar (US$ 1.00) which he receives from Kuapa Kokoo every now and then is a gift from the Kuapa Kokoo leadership. He is not aware that FAIRTRADE advertises worldwide with impressive-sounding benefits such as minimum prices, bonuses and community projects. Eleven other farmers, randomly picked among the Ashanti region’s sellers to the FAIRTRADE channel of the Kuapa Kokoo cooperative, professed, when interviewed, to be equally in the dark, even though they all paid a dollar in FAIRTRADE membership fees to the cooperative.
The FAIRTRADE-partnered cooperatives promise farmers the much-vaunted FAIRTRADE bonus as a reward for joining. In this way the cooperative obtains more and more cocoa, which it can sell both to FAIRTRADE and non-FAIRTRADE buyers. The higher the percentage of FAIRTRADE cocoa it can sell, the better, since the cooperative then obtains more premium. Nevertheless it is beneficial for the cooperative leadership to sell large amounts of beans to buyers in general, simply because the bigger it is, the more bargaining power it has.
In Ghana too, the advantages that the farmers are said to obtain from the cooperatives, are disputed. In a documentary broadcast by Dutch chocolate importer and journalist Teun van der Keuken in 2007, a Kuapa Kokoo cooperative administrator frankly admits that many farmers refuse to become members of Kuapa Kokoo because ‘the membership fee is higher than the premium they get”, (http://www.youtube.com/watch?v=Z202CnEvaA8).
Meanwhile, it is fast becoming more and more difficult for small farmers to stay independent. Kuapa Kokoo and the other co-ops are becoming bigger and bigger; the demand for certified cocoa from cooperatives increases daily. The eight Kuapa Kokoo farmers interviewed for this investigation had all paid membership fees (of US$ 1.00) because it made sense to them to pool their resources as a cooperative, even if this meant having to adhere to FAIRTRADE rules. (Once you are a Fair Trade producing farmer, your farming has to be up to FAIRTRADE standards: no children in your family are allowed to help in the fields, even if this diminishes the family’s harvest and income; if you employ outside help you have to pay a minimum wage; there are also rules regarding the use of pesticides, fertilizers and farming methods.3 See also: “Is it child labour or family labour?” elsewhere in this report.)
The dominance of the cooperatives is starting to become apparent in Ivory Coast, where village-based family businesses have no option but to join them, sell to them, or turn to shady peddlers to sell their crops at even lower prices. “I would like to sell to big buyers like the cooperatives do”, says Albert Yao, who owns a two –hectare cocoa plantation in Daloa, close to the KAVOKIVA cooperative in Ivory Coast. “But they only buy products that come from certified cocoa plantations. I am not certified. Where will I get money to survive and take care of my family if I don’t sell my crops?” Rather than become a subject of the cooperatives, Yao would like to keep his independence and become certified in his own right. But that is not possible, since FAIRTRADE does not certify individual farmers, only cooperatives. Yao: “The FAIRTRADE system strengthens the power of cooperatives to the detriment of the small cocoa producers”.
The chairman does not travel for pleasure
The cocoa sale price in the region differs, but this is mainly dependent on middlemen and infrastructure. At the time of publication of this dossier, the world market price for cocoa fluctuated around US$ 2.40 per kilogramme. Local costs like transport and middlemen take up around US$1.00 per kilogramme, sometimes more: it depends on how long it takes to get the beans to the harbour or the processing plant. If you farm at the end of a bad road in Cameroon or Ivory Coast, you may get as little as US$ 1.00 per kilogramme; if you are lucky enough to live close to the harbour, with a decent transport arrangement at hand, you could make US$ 1.60 per kilogramme or even a bit more. There is no difference between FAIRTRADE and ‘normal’ cocoa buyers in this respect. FAIRTRADE does guarantee a ‘minimum price’ of US$ 2.00 per kilogramme, but this price has been below the world market price for years now.
Therefore, the only advantage in selling to FAIRTRADE is the so-called premium or bonus, which is US$200 per tonne, or 20 US cents per kilogramme. This money is paid by the companies which buy FAIRTRADE certified cocoa, and does not go to individual farmers, but to the FAIRTRADE cooperative. FAIRTRADE stipulates that members of the cooperative should democratically decide how the premium is spent, but in practice, our interviews with farmers show, the leaders simply occasionally disburse a marginal amount to the individual farmers, who think the small hand-outs are gifts. In the case of Kuapa Kokoo, between 75 and 100 percent of the premium that a farmer earns on his harvest, flows back to the cooperative.
The cooperative pays for the yearly audit, which can cost up to US$ 8,000. The cooperative then pays for its own travel expenditures, meetings and other management costs. Only after that does the cooperative provide for ‘welfare projects’ for the community.
Christiana Ohene-Agyare, president of Kuapa Kokoo in Ghana, says that the cooperative is proud of the ‘many benefits to our farming communities’ that have been provided. She mentions a structure for a school building -that is not actually a school, since there are no teachers or teaching materials-, several bore-holes and warehouses for storing cocoa beans on the cooperative. Most of the money has, however, been invested in a multi-complex building in Ghana’s second largest city Kumasi. “We will rent this out and that will bring more revenue to the organisation”, Ohene-Agyare says. She also refers to apprenticeship programmes and a micro-credit scheme.
Kuapa Kokoo member farmers like Kwesi Agyei, however, have no knowledge of either a school project, training opportunities or credit facilities. “I would like access to small loans”, says Kwesi Agyei. “But there is no such opportunity at Kuapa Kokoo. On the contrary, they sometimes don’t even pay me on time. Then I get into debt.” The late payments worry him and other farmers a lot, since they don’t have the cash flow to allow for debts, let alone interest payments.
At the FAIRTRADE certified cooperative KAVOKIVA, about 250 km from Yakassé Attobrou, in Gonaté, Ivory Coast, the situation is similar. The Cooperative Agricole KAVOKIVA de Daloa unites more than 5,000 cocoa farmers, leads the cocoa sector in the area and is FAIRTRADE certified since 2004, with a potential production capacity of about 17,000 tonnes of cocoa beans.
Here, not one farmer openly challenges chairman Fulgence N’Guessans’ claims that through FAIRTRADE, his cooperative leadership has brought many benefits. N’Guessan, a speaker at FAIRTRADE conferences around the world, likes to mention them a lot: a primary school, a clinic, hand pumps for water, a literacy programme for women. However, privately and anonymously, farmers dispute what he says. The pumps are broken, they say, and no one is coming to repair them, just like no one came to maintain them when they were new. The same goes for two out of three wells. The ambulance bought with FAIRTRADE money has been out of service almost from the start, they add. Yet, with a production capacity of 17,000 tonnes, KAVOKIVA, -using a low estimate of 20 percent FAIRTRADE sales-, could have sold around 3,400 tonnes of FAIRTRADE cocoa in 2010, netting US$ 680, 000 in premiums.
The farmers privately say they would prefer that the cooperative use the money for improvements in infrastructure, like roads, so more buyers can be reached. They also have ideas about irrigation. “Handpumps don’t help. We need a watertower. The Chairman should rather invest our money in such a project”, said Kouassi Soro* (28). But Soro and others hardly get to talk to Fulgence N’Guessan. Fellow farmer Issa Kalou(36)*: “Chairman N’Guessan travels to attend international conferences on agriculture and the economy. But we don’t see results from those conferences. For all we know, he could be going shopping.” And a colleague adds: “Ever since the cooperative opened an office in Abidjan, he had been living there.”
When asked for comment, N’Guessan retorted that he did not ‘travel for pleasure’, and claimed that, in the region, many more children were going to school than ‘in the past’, adding that ‘people who criticise me should remember that’. He could, however, not say how access to education had improved in the region, or whether such improvement, if any, had taken place thanks to KAVOKIVA.
The same picture of doubtful ‘community benefits’ emerges at the UIREVI cooperative in Ivory Coast. UIREVI’s FAIRTRADE premium for 2010 amounted to US $ 108,539. According to UIREVI’s books 60 percent of this money went to ‘economic consolidation’, conferences and managers’ meetings (see graph 2). Another 17 percent of UIREVI premium income was spent on ‘health care’ and ‘school kits’ for farmers’ children. But interviews with farming families revealed that the ‘school kits’ consisted of little more than a bit of paper and a pencil. Regarding the health care budget item, farmers said they did not know what this referred to.
The UIREVI Board refused to comment on the use of the FAIRTRADE premium and stated that “all farmers approved meetings and other projects at the annual general meeting”, and that “everything was done in a democratic way”.
This is also the stock response of FAIRTRADE itself, when asked about the use of premium monies in the cooperatives it works with. “The cooperative holds an annual general meeting of all members each year, and the use of the premium money is democratically decided by the people themselves”, says Jochum Veerman of the Max Havelaar Foundation, the institution that allocates the FAIRTRADE label to companies in the Netherlands, echoing the response that Dutch filmmaker Teun van der Keuken received.
The inference of the FAIRTRADE stock response is that if ‘people themselves’ in those far-away regions don’t know how to manage their own democratic decision making, that is their problem, and not FAIRTRADE’s. However, by insisting that small farmers join cooperatives, FAIRTRADE inadvertently aggravates existing problems of exploitation and abuse by traditional big cocoa bosses, especially in Ivory Coast, where traditional big cocoa bosses are kingpins in a network commonly referred to as the ‘cocoa mafia’.5 Farmers interviewed in Ivory Coast all without exception confirmed that the ‘most powerful big farmers’ in a region, often somehow end up as the ‘democratically elected’ management in the cooperative. After all, it is they who produce the most cocoa, command the networks, have the best mobile phone connections, the properly equipped offices, speak the necessary western languages, and -very important for the yearly audits-, employ bookkeepers and accountants.
The small farmer may formally have a democratic right to question the cooperative’s chairman at the annual general meeting, but if you know what is good for you in Ivory Coast, you will definitely not make him angry. Ousmane Attai, an Abidjan-based commodities specialist and expert in the cocoa sector explains that many farmers in Ivory Coast are both illiterate and used to exploitation. “They don’t understand the FAIRTRADE agreements. They are used to a situation where the officials are rich, and that they can choose who to share their wealth with. They are grateful for whatever crumbs they get, since they don’t know the concept of bonuses or premiums, let alone that they have a right to those.” In the words of another expert, Ivorian sociologist Oumar Silue: “How do you expect people to contest a representative who is at the same time a traditional authority and an elder in their context,” especially if that traditional authority and elder is also the flagship face of the growing, increasingly important FAIRTRADE channel, the partner of all the big buyers?
“We all get a percentage, but we don’t know of what”
On paper, the case for FAIRTRADE, and a partnership between FAIRTRADE and membership-based cooperatives, seems like a good one. After all, the West African countries where the raw cocoa resource is grown, all suffer from state mismanagement and corruption, and exploitation of individual farmers by multinational buyers as well as local middlemen. FAIRTRADE was originally intended as a response to these problems. But, as seen above, a partner cooperative is not a fair, transparent, democratic institution simply because an outside partner wants it to be. Powerful relations, hierarchies and (functioning or faulty) management structures are features of the entire country, and to think one can, from the outside, encourage differently functioning ‘islands’ within a society hardly seems realistic.
Two years ago in Konye, South-West Cameroon, 305 small farmers who were sick of exploitation by corrupt government officials and middlemen jointly indebted themselves to an extent of US$ 6,000 to pay for the FAIRTRADE certificate and formed the KONAFCOOP cooperative. Since then, according to KONAFCOOP manager Asek Zachee, the cooperative has received US$ 12,000 in premiums. But Zachee falls quiet when asked how much of that money has gone to individual farmers. “They receive 25 percent”, he says, but doesn’t explain how the percentage is calculated: over what amount, what period, and whether this is per individual farmer or for the collective? “I’ll look it up in the papers and get back to you” he says.
Reverend Okie Ewang Joseph, both an elder in the community, a friend of Zachee and a member of KONAFCOOP, professes to be happy with a training of village elders that was given by the cooperative. Standing together, both men explain that the training was useful. “Knowing the techniques of maintaining and building your farm makes you spend less money on inputs and enables you to generate more. We have also started seeing other benefits through integrated cooperative management.” But Zachee adds that money in general is still very slow: “We have only sold 100 tonnes of our beans abroad since we became affiliated to FAIRTRADE two years ago.”
The amount sold by KONAFCOOP does not seem to tally with the total received premium, according to Zachee, of US$ 12,000. A sale of 100 tonnes, at a premium (over normal harvest payment) of US$ 200 per tonne, would add up to US$ 20,000. Quizzed about the exact premium income, the part of the premium income that went to individual farmers, the part that was used to pay off the debt to FAIRTRADE for the initial audit and certification and the part that was invested in the training project, Zachee repeats: “I will check my papers and get back to you”. But in the next days, weeks and months, the KONAFCOOP manager did not answer his phone.
To survive, KONAFCOOP needs to produce more and find more buyers, and that’s not easy. FAIRTRADE disclaims any responsibility for finding buyers for those who join their cooperatives, even if they pay the substantial certification fee 6.
“Cooperatives become middlemen just like the officials and the buying agents”
As explained earlier, FAIRTRADE did not come out of nowhere. It was an intervention, thought up 20 years ago by international trade and political structures, as a (partial) solution to a very real problem: low prices for natural resources, poverty in the countries that grow most of such resources, exploitation and corruption in these (mostly developing) countries. Saying that FAIRTRADE has not helped much, does not mean that the original problem has ceased to exist. It is still there.
Take Cameroon. Instead of receiving government help, the cocoa farmer in this country is faced with extortion both from officials and middlemen. Firstly, the government officials tasked with conducting agricultural programmes, which include free distribution of seedlings, implements and tractors, do not extend these for free, but demand payment. Ayuk Orock, a Barombi-based young graduate, who has been more or less forced into cocoa farming because of lack of employment even for certified academics in Cameroon, has paid 50 US cents each for ‘free’ seedlings. “Sometimes even after paying for them, you don’t get them. The officials don’t issue receipts, so you can’t prove your case,” he says.
‘Free’ farming tools, when they are given, can disappear as soon as they materialise. “It is not uncommon here to see a huge truck bring in machetes, shovels, digging tools, wheel-barrows and chemicals one day from Yaounde, and see the same truck carrying them back to the other side of the Mungo (Francophone Cameroon) the following day, where they disappear into individual farms”, Nnoko Clement, a farmer from Kwa-Kwa, reports.
At harvest time, the farmers’ bags of cocoa beans are bought up, often for a pittance, by ‘Licensed Buying Agents’ with faulty weighing machines and take-it-or-leave-it offers. The Licensed Buying Agents, or LBA’s for short, travel around buying cocoa directly from the farm, then sell to processing factories –or directly to Europe- at a big mark-up. Veteran farmer Dat Williams, who owns large family cocoa farms in Meme, the ‘cocoa centre’ of Cameroon: “They end up indebting the farmer. They sometimes pay in advance for yet to be harvested crop, not in money, but by way of chemicals and other farm inputs. These items are, however, sold very expensively, at times at more than three to five times the equivalent of local market prices”. Williams believes that ‘there is now practically no farmer who is not indebted to the LBA’s.”
“When you have nowhere else to go to get money with which to pay for the education of your children, you have no option but to accept the Shylock terms of LBA’s”, confirms Essambe Joseph, a farmer in Kumba. “The harvesting season begins in October but schools reopen in September so when school is reopening and you have no money with which to send your children to school, the LBA’s come in handy and propose cash advances, repayment of which is eventually done in kind with cocoa beans, the value of which can be several times above the amount you received from the LBA.”
Many LBA’s are companies headed by individuals who landed in these positions overnight, with no visible income or collateral, but who are friends or relatives of government officials. Consequently farmers view the interruption, a few years ago, of a government information service in Cameroon that kept farmers up to date on the current world market price of cocoa, with suspicion: farmers’ ignorance of world market prices now plays straight into the hands of the LBA’s. “If we were to have information on current prices, we would be able to bargain for better prices for our produce”, says Ayuk Orock. “How do you insist on selling a kilogramme for US$2.00 when the LBA tells you the prevailing market price is US$1.50 and you have no way of knowing the truth in order to stand your ground?”
When asked for comment, the National Prices Marketing Board (NPMB) of Cameroon reacts with indignation. “What do people want the government to do? When it regulated trade in the produce sector, it was accused of heavy-handedness and centralised control unhealthy in a market economy. Now it has removed government control and you people still complain. What is it that people really want in the end?” a senior official at the NPMB headquarters in Douala asks. The ‘people’ would probably want the state machinery to work as it should, with acceptable salaries for officials doing acceptable jobs. But in Cameroon, as in Nigeria and most other West African countries, the system doesn’t work that way.
Officials at the Department of Agriculture routinely deny any corruption. A civil servant of the seed multiplication centre (CCSP) in Kumba, on the allegations regarding the sale by officials of seedlings and implements, demanded to know if the source had ‘anything by way of proof to substantiate his allegations’. Asked how the farmers can prove this if the officials did not issue receipts, the official insisted that the accusations were ‘in bad taste.’ Another official tried to dismiss farmers complaints about theft of ‘free’ implements, saying that there were ‘public ceremonies whereby farm implements are handed over for free for everybody to see’. But such ceremonies are few and far between, and only involve a small number of tools and villagers.
It was because of these experiences that FAIRTRADE came into being. They were also the reasons that the farmers in Konye village had hinged their hopes on forming a cooperative and dealing directly with FAIRTRADE and a German buyer. But the cooperative, to date, has not given them any implements, or even information about market prices, either. Dat Williams is not hopeful. “Cooperatives generally do not have a good reputation. People’s harvests were in the past collected by cooperatives who promised to come and pay later. Some farmers are still being owed by cooperatives which have since gone into liquidation,” he explains his reasons for wanting to continue alone. In his view, cooperatives and their leaderships always become ‘just another middleman’ and don’t provide a long term solution to the problems of infrastructure and exploitation.
“The entire system is not fair, and an institution that perpetuates it can hardly call itself fair”
If FAIRTRADE does not really change the lives of small farmers in West Africa; if all that the small farmer gets is a little handout and a not-too-long-lasting water pump every once in a while, is this really enough benefit to justify the large amounts of money paid by Western consumers to the FAIRTRADE institution? Alternatively, is there no other, better way to improve the lives of small cocoa farmers in West Africa?
Ousmane Attai, the commodities specialist in Abidjan, believes there is a way to do this. “The only solution is to pay better prices for harvests. The buyers, whether FAIRTRADE certified or not, and the export companies should do better. They say they follow open market prices. But what they pay is derisory.” Attai suspects certified beans buyers of “working underground in cahoots with crooked businessmen to keep the average price low”. (An executive at the Cargill office in Abidjan, who refused to be named, rejected such suspicions, saying: “We have to support many costs”.)
Earlier in 2012, Germain Banny, Chairman of the Union Nationale des Producteurs Agricoles de Côte d’Ivoire (UNAPACI), Ivory Coasts’ farmers union, exasperated by what he described as ‘cheating on price’, called on cocoa farmers to stop selling their beans for a ‘ridiculous price’. The strike was short-lived; farmers restarted selling their beans when they ran out of cash. Would the ending have been different if the union and striking farmers had received international support?
Collective bargaining by farmers has already brought some improvements in Ghana, though not in the relatively little unionised cocoa sector. On the banana plantations, the Ghanaian Agricultural Workers’ Union (GAWU) has achieved improvements ever since it started monitoring the practices of the multinational corporations. Wherever FAIRTRADE applies, they also monitor the use of premium moneys. These have now financed mutual funds and health insurance on some plantations.
However, the Secretary-General of GAWU, Kinsley Ofei-Nkansah , expressed serious doubts about the FAIRTRADE system itself. “It perpetuates a system whereby Africa is only a primary producer and only receives a small amount for its raw materials. FAIRTRADE allows a small group of people to aggregate the produce of small-holder famers without much benefit to the producers and then only gives the poor producers something that is called a ‘premium’. The entire system is not fair, and any institution that perpetuates it can hardly be considered ‘fair’”, he said, adding that the FAIRTRADE premium “really does not compare to the value that is appropriated to the exporter and the chain of retail stores”.
For Dat Williams in Cameroon, it is crucial that farmers should be empowered to know what is going on, -what prices apply, what subsidies or programmes are available-, so that they can increase their bargaining power. “Government or the relevant stakeholders in the cocoa sector should set up local radio stations to disseminate information to farmers on market prices, appropriate chemicals to be used during farming seasons and the necessary inputs.” “If”, he says, “this information is relayed to farmers in their local languages, it will help empower them to squarely face predatory middlemen”. All cocoa veterans and experts interviewed concurred that only more ‘power’ to the farmers themselves, be it through income or information, or preferably both, would help them to grow their businesses and confidently school all their children.
This investigation was carried out by the Forum for African Investigative Reporters (FAIR)