Supply Chain Challenges in the Cocoa Industry Part 2

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This is a follow-up article. Before you continue reading, you may want to read the first part of this article. Click on this link: Supply Chain Challenges in the Cocoa Industry – PART 1.”

A lack of adequate compensation and remuneration for farmers

A significant percentage of the cocoa that is produced in Nigeria comes from smallholder farms that are located on land that is less than five hectares in size. The majority of farmers in Nigeria generate insufficient quantities of cocoa beans to make them wealthy. In fact, a significant number of cocoa farmers and families in Nigeria live below the average standard of living with their income.

According to various publications, a significant number of cocoa farming households in Nigeria, particularly those whose sole means of sustenance is agriculture, are living below the internationally defined poverty line. The cocoa sector faces a huge challenge in the form of widespread poverty among farmers, which has an impact on its supply chain.

Having a low income and uninspiring living conditions might have a detrimental impact on the farmers’ drive to produce high-quality cocoa. Additionally, because the task appears to be overly complicated while only offering tiny compensation, these conditions do not motivate young people to invest in the venture or even inherit what their parents left for them. This is because the return on investment is so low.

In addition, farmers who are dissatisfied and disheartened with the situation are more prone to participate in unethical tactics to increase their profits, even though these actions are detrimental to the long-term viability of the cocoa value chain.

A Satisfied Farmer On His Cocoa Plantation.
A farmer on his cocoa plantation.

To overcome this obstacle, Sunbeth Global Concepts and several other renowned distributors make it a point to always purchase cocoa beans at prices that are considered reasonable. Even though SGCL does not source directly from farmers, we make sure that the LBAs that we source from also treat the farmers that they source from in a socially responsible manner.

SGCL is also working with the European Union to give a premium to farmers that comply with EUDR and rainforest alliance laws. This is a collaborative effort between the two organizations.

Deforestation and Children Labour

Deforestation and child labour are prevalent problems that have been commonly attributed to cocoa production in West Africa. Several reports suggest that cocoa-farming-induced deforestation contribute to the loss of vast hectares of tropical forest yearly.  

Similarly, it’s a common practice among local cocoa farmers in west Africa to put children to work on their plantations. The harvesting of cocoa pods, the use of machetes to split cocoa pods, and the hauling of large loads are all examples of perilous chores that are allocated to young children of school-going age.

In more severe instances, farmers may choose to deny their children formal education to force them to work on farms. This kind of behavior is frowned upon by the many regulating agencies that are present in the sector, and whoever is proven to be responsible will be subject to the proper penalties.

Sunbeth Image 1

A Child Harvesting Cocoa

While deforestation and child labor do not have any clear and direct consequences on the cocoa supply chain, their environmental and human rights implications have a negative impact on the cocoa value chain.

To address this issue, SGCL organizes several awareness initiatives with the goal of discouraging farmers from engaging in child labor and also to shun deforestation. In addition, SGCL provides children living in rural communities with resources and infrastructures that facilitate learning to aid their education.

The chain’s middle level of operation

At the middle level of the supply chain are the intermediaries that take the cocoa beans from multiple farmers, aggregate them and sell to the major distributors. These are primarily the local buying agents dealing with several cocoa farmers in specific catchment areas.

The predominant challenge at this level of the supply chain involves integrity issues. While this isn’t a prevalent problem in the cocoa supply chain, it poses a threat to the operations of certain actors in the supply chain.

Dishonest, self-seeking intermediaries frequently engage in unethical tactics that serve their own purposes, without considering that such actions can undermine the profitability of the other participants in the supply chain.

For example, some intermediaries regularly attempt to severely underprice the commodity when purchasing from farmers. This issue is a contributing factor to the prevalent rate of poverty among local cocoa farmers in Nigeria. Even if the cocoa value chain as a whole is lucrative, a significant portion of the profit is retained by these self-seeking middlemen who are primarily after their own interests, while the farmers only receive a small amount of profit for their products.

Similarly, intermediaries can sometimes fail to deliver products to off-takers for several weeks after the agreed-upon period, even after they have been pre-funded for the commodities. Alternatively, they can attempt to offer off-takers products that are of low quality and have been contaminated. Several instances have been reported in which brokers and LBAs have supplied distributors with cocoa that contains a significant amount of dirt and debris. Those off-takers who find this to be undesirable would often return the products to the LBAs. This results in a back-and-forth process which causes a stall in the supply chain.

At the Top of the Chain

At the top of the Nigerian cocoa supply chain are major distributors/suppliers such as Sunbeth Global Concept. These companies obtain cocoa from a variety of local buying agents and then distribute it to manufacturers and processors within and outside of the country. Before supplying cocoa beans to various processing factories all over the world, these companies also put them through rigorous testing to guarantee that they meet the expected quality standards.

The majority of the problems that participants confront at this level boil down to three main factors: lack of policy support, infrastructure, and logistics.

Sgcl Operations

Sunbeth Global Concepts Warehousing and Logistics Facilities

When it comes to logistics, the majority of these businesses, such as SGCL, own and run their own in-house logistics facilities. These facilities include trucks for carrying the items and warehouses for holding them until the time comes when they will be transported to the purchasers. However, the difficulty of bad road infrastructure, poor condition of port terminals, and unfriendly tariffs on export make the business difficult for these companies. Consequently, the business is challenging for you.

In addition, the Nigerian government currently offers very little assistance to the general cocoa value chain. There are scarcely any policies or systems put in place to benefit individuals and business involved in the sector. Compared to the other major cocoa producers globally, this is a discouraging factor and contributes to the challenges cocoa producers and suppliers face.

While the cocoa supply chain is widely regarded as a lucrative field in Nigeria, many challenges such as the ones discussed above threaten the profitability of the players and the sustainability of the business. It is important to resolve these issues quickly and comprehensively for the Nigeria cocoa industry to hit its full potential.

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