Cocoa Sector Development Project

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Cocoa production supports the livelihoods of more than 800,000 smallholder households in Ghana and many others who depend on itfor a significant share of their income. In 2018-19, Ghana produced 811,746 tons of cocoa, generating over USD1.8 billion inforeign exchange. Cocoa export accounts for 20-25 percent of total foreign exchange earnings and contributes about 20 percent ofglobal cocoa exports. Ghana cocoa beans have high international reputation for quality and command a 3-5 percent market premium.Increased agricultural production, particularly in the cocoa sector, has contributed to Ghana’s rapid and steady decline inpoverty.Despite being a very important commodity, Ghana’s cocoa sector faces several challenges. There is a challenge of lowproductivity in the cocoa sector which threatens Ghana’s competitiveness and position in the international market. Current averageyields are estimated at 450kg/ha. This is lower compared to leading producers such as Cote d’Ivoire (580 kg/ha) and Indonesia (800kg/ha). The low yields are a result of a multiplicity of factors such as age of the trees, pest and disease infestation, and pooragricultural practices. To address the challenges in the cocoa sector, the Government of Ghana has developed the Cocoa SectorDevelopment Strategy II with the objective of deploying productivity enhancing interventions in the cocoa sector, addressinggender, child labor and deforestation. These interventions are expected to raise the current productivity to 1,000kg/ha as comparedto other producing countries like the Dominican Republic (1,250 kg/ha) and Madagascar (2,000 kg/ha). In addition, the strategyincludes objectives of adopting climate smart cocoa practices, undertaking shaded rehabilitation, responding to the child laborissue, and increasing the share of locally processed cocoa beans to 50 percent. The proposed project is being prepared under theJoint Ghana Cote d’Ivoire cocoa initiative which seeks to manage price volatility, optimize government revenue and welfare of cocoafarmers (income). The project will support implementation of the Cocoa Sector Development Strategy II particularly the ProductivityEnhancement Program (PEP). The project would be implemented over a period of six years with results-based activities that will bedefined during preparation. The project design includes three interrelated technical components: (i) Institutional Strengtheningand Value Chain Governance; (ii) Sustainable Cocoa Intensification; and (iii) Socially and Environmentally ResponsibleDiversification. The fourth component would focus on Project management and M&E, and the fifth component on a zero allocationContingency Emergency Response Component (CERC). The preliminary project description is presented as follows:Component 1 –Institutional Strengthening and Value Chain Governance. Component 1 aims to promote the overall efficiency of the cocoa value chainby strengthening its organization, management, and coordination, with a focus on addressing critical sustainability issues such aschild labor, deforestation, gender gap and poverty, as well as the need for greater transparency in the management of the sector.The component would finance the technical assistance, consultancies, and equipment, as well as incremental operating costs,required to support the activities described below.The component would support the following sets of activities: (i) Support toCOCOBOD capacity building for: (a) general organizational development and leadership for coordinating activities in the cocoasector, with the aim to ensure greater transparency in its operations and participation of all key sector actors in the stakeholderpolicy deliberative processes; this would include digitizing COCOBOD’s management systems and procedures, and attendant stafftraining to monitor operational programs; (b) operationalization of the cocoa farmer database (Cocoa Management System-CMS) forbetter planning and forecasting production and its integration with existing digital platforms for supplying inputs, as well aspaying for cocoa beans and the Living Income Differential (LID); (c) Climate Change Desk on zero deforestation and monitoring ofthe greening of the cocoa landscape through the use of remote sensing technology for detecting land-use changes, and measuringcarbon footprint, and impact of climate change ; and (d) responsible management and mainstreaming of implementation modalities forconducting child labor and gender gap closing interventions; (ii) Organizational support for Farmer-Based Organizations (FBOs),including the legal registration of such organizations, and technical and managerial training for their officials in areas such asgood governance, operational management, business development, group dynamics, service provision, marketing plans, andcreditworthiness; this support will position them to increase membership, strengthen internal governance, and reinforcedeliberative process; in this regard, the project would support the Ghana Cocoa Platform (GCP) and other public-privatepartnerships and initiatives, to enable FBOs to participate in the multi-stakeholder value chain policy dialogue; (iii) Support tobuilding national capacity to address child labor and deforestation: this activity would include monitoring and reporting of childlabor issues, mapping of child labor interventions and developing communication programs regarding child labor awareness andbehavioral change, and strengthening the Forestry Commission’s capacity to coordinate forest protection and zero deforestationactivities. The project would establish linkages with Government of Ghana(GoG)’s National Plan of Action for the Elimination of theWorst Forms of Child Labor) under the MELR, the Cocoa Forest Initiative (CFI), the Emission Reduction Program and other cocoalandscape restoration interventions; and (iv) Implementation of regional standards and traceability system: this activity wouldcover the launching and operationalization of the Regional Cocoa Sustainability Standard with Cote d’Ivoire , the design anddevelopment of a traceability system (barcoding of cocoa bag tag and its integration to the Content Management System-CMS) thatwill complement the regional standard, and support for south-south collaboration on knowledge exchange and technologies forpost-harvest management including cocoa pulp juice and cocoa pod valued added services. Component 2 – Sustainable CocoaIntensification. Component 2 aims to improve the productivity of existing cocoa farms and strengthen the resilience to climatechange of cocoa-based production systems. The component is expected not only to help improve and buffer farmers’ yields againstclimate shocks, but also to reduce the incentive for deforestation, to which most farmers often resort to expand their farms inresponse to stagnating or declining yields. The project would finance incremental operating costs, good and services, trainingactivities and technical assistance as required. The support is proposed to be organized under three subcomponents as detailedbelow.Subcomponent 2.1 - Renovation and replanting (R&R) of cocoa farms. The project would support COCOBOD’s R&R program as partof CSDS II strictly on CSSVD-infested farms. The remedy to CSSVD is treating affected farms and/or uprooting and replanting withdisease-tolerant varieties, followed by improved disease surveillance and management. GoG, with the support of other donors,including AfDB, is already implementing a treatment and replanting program targeting about 320,000 ha - a scale which mostpractitioners believe is needed to reach a threshold level of intervention for effective control and eradication of CSSVD in thecountry. The project would support GoG’s program on about 80,000 ha of CSSVD infested farms in the intensive cocoa growing areas ofthe Western North, Eastern, Bono, and Ahafo Regions, and Bono East, all within the High Forest and Transition Zone (HFZ) of Ghanaat an estimated cost of US$13