The stake of licence buying companies (LBCs) in the promotion of quality cocoa in Ghana

Ansah, Goodlet Owusu; Ofori, Fredrick; Siaw, Lawrencia Pokuah; Manu, John Article The stake of licence buying companies (LBCs) in the promotion of quality cocoa in Ghana Cogent Business & Management Provided in Cooperation with: Taylor & Francis Group Suggested Citation: Ansah, Goodlet Owusu; Ofori, Fredrick; Siaw, Lawrencia Pokuah; Manu, John (2018) : The stake of licence buying companies (LBCs) in the promotion of quality cocoa in Ghana, Cogent Business & Management, ISSN 2331-1975, Taylor & Francis, Abingdon, Vol. 5, https://doi.org/10.1080/23311975.2018.1560857 This Version is available at: https://hdl.handle.net/10419/206146 Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. 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If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence. https://creativecommons.org/licenses/by/4.0/ Page 1 of 12 OPERATIONS, INFORMATION & TECHNOLOGY | RESEARCH ARTICLE The stake of licence buying companies (LBCs) in the promotion of quality cocoa in Ghana Goodlet Owusu Ansah, Fredrick Ofori, Lawrencia Pokuah Siaw and John Manu Cogent Business & Management (2018), 5: 1560857 OPERATIONS, INFORMATION & TECHNOLOGY | RESEARCH ARTICLE The stake of licence buying companies (LBCs) in the promotion of quality cocoa in Ghana Goodlet Owusu Ansah 1 *, Fredrick Ofori 2 , Lawrencia Pokuah Siaw 3 and John Manu 4 Abstract: Ghana as a global bourgeon in cocoa production is attributed as the finest grower of cocoa the world over. Grounded on the cocoa industry’s tripartite actors and the fundamental role LBCs play in the domestic supply chain, the study assessed the quality control practices instituted by LBCs in promoting quality cocoa in Ghana. Both qualitative and quantitative methods were espoused in the analyses of responses obtained from a sample size of ninety-five (N = 95) involving 10 District Managers (DMs) and 85 Purchasing Clerks (PCs). The study espoused major quality control practices (QCPs) which is not limited to constant education and training of farmers on proper fermentation, efficient packaging, storage and haulage of goods in transit, proper drying, and removal of placenta and foreign matter. Also, LBCs constantly provide good storage facilities; pallets, tarpaulins, etc., to cocoa farmers, a practice that increases the financial burdens especially the smaller market shareholders. Again, LBCs ensure that their DMs oblige PCs to present high-quality cocoa beans for grading and sealing to the QCC. Findings hypothesise that LBCs are fixated on practices that promote physical quality of cocoa beans to the neglect of biochemical and process quality of the Goodlet Owusu Ansah ABOUT THE AUTHOR Goodlet Owusu Ansah holds a BA degree in Culture and Tourism from the Department of Geography and Rural Development at the Kwame Nkrumah University of Science and Technology, Ghana. Through publications, Mr Owusu Ansah is able to satisfy his genuine passion for research. His research interests transcend varied boundaries in academia to encapsulate anything he finds interesting; climate change and agriculture, Cocoa industry of Ghana, mining-induced displacement etc. Frederick Ofori is an employee of Cocoa Merchant Ltd, an LBC in Ghana and also holds a Commonwealth Executive Master’sin Public Administration. Lawrencia Pokuah Siaw is a Senior lecturer under the Culture and Tourism programme at the Department of Geography and Rural Development. Reverend John Manu is the Ashanti Regional Director of the Ministry of Food and Agriculture, Ghana. PUBLIC INTEREST STATEMENT Ghana as a leader in cocoa production is the finest grower of cocoa the world over. This worldwide recognition has been acclimatized due to strict adherence to laid down quality guidelines and criteria by COCOBOD in Ghana and the Federation of Cocoa Commerce (governs the quality of cocoa traded globally). The domestic supply chain of the cocoa industry is characterized by Cocoa farmers (production arm), Licence Buying Companies, LBCs (purchasing arm) and the COCOBOD (quality checks and exportation). The LBCs have the sole responsibility of buying cocoa beans from farmers which is expected to meet certain quality standards. In meeting these standards, LBCs indulge in practices that ensure quality cocoa management. These practices form the crux of our paper. We discovered that the practices LBCs engage in stretch their operational efforts and also increases their financial burdens to astronomical heights. Our study adds to literature and unravels a trend that is constantly putting LBCs out of business in Ghana. Owusu Ansah et al., Cogent Business & Management (2018), 5: 1560857 https://doi.org/10.1080/23311975.2018.1560857 © 2019 The Author(s). This open access article is distributed under a Creative Commons Attribution (CC-BY) 4.0 license. Received: 26 September 2017 Accepted: 15 December 2018 First Published: 19 December 2018 *Corresponding author: Goodlet Owusu Ansah, Geography and Rural Development, Kwame Nkrumah University of Science and Technology, Ghana E-mail: [email protected] Reviewing editor: Shaofeng Liu, University of Plymouth, UK Additional information is available at the end of the article Page 2 of 12 beans. It is therefore proffered that quality promotional efforts be at par to encapsulate the other cocoa quality types in the domestic supply chain. Subjects: Agriculture; Agriculture and Food; Nutrition Keywords: cocoa quality; licence buying companies (LBCs); cocoa districts; quality control practices 1. Introduction The cocoa industry’s unmatched recognition as the mainstay of the Ghanaian economy makes it is a worthwhile industry of inquest (Owusu Ansah, Antwi, & Siaw, 2017). Apart from the cocoa industry’s accolade of being the magic wand for dispelling the economic woes of many growing economies, it has the potency of sustaining the livelihoods of millions of people the world over (Anim-Kwapong & Frimpong, 2005). Based on existing figures on cocoa trading exports, Ghana exported 526,761 metric tons of cocoa beans in the 2009/2010 cocoa season, more than the 485,785 exported in 2008/2009 season (Bank of Ghana, 2012). Again, the exportation of cocoa beans amounted 40% of Ghana’s foreign exchange earnings, placing second as the largest contributor to export dollars (USDA, Foreign Agricultural Service, Global Agricultural Information Network, 2012). Free competition is a key element of an open market economy where industry players compete for major shares of the domestic market. It also stimulates economic performance and offers consumers a broader choice of better-quality products and services and at more competitive prices. Bounteous evidence tender that competition becomes a major impediment to small firms in an industry dominated and controlled by a few companies with larger market share percentages (Commodity Risk Task Force, 2002; Owusu Ansah et al., 2017; Tiffen, MacDonald, Maamah, & Osei- Opare, 2004). It was the Government of Ghana’s policy objective that liberalisation and privatisation would improve the operational and financial performance of Ghana’s cocoa marketing system so as to ensure higher and competitive producer prices (Laven, 2007). Abdul-Wahid (2012), puts forward that the liberalisation and privatisation of cocoa purchasing seem to have led to declining quality and yield of cocoa, thereby undesirably affecting farmers’and Ghana’searningsin terms of premium payment on the international market. This assertion is buttressed by Lundstedt and Pärssinen (2009), who unravelled that though the quality level of Ghana’s cocoa has still been high, there has been a decline in quality since the liberalisation of cocoa purchase. According to Kolavalli, Vigneri, Maamah, and Poku (2012), The major factors that contribute to cocoa quality are high-yielding and disease-tolerant planting material, disease and pest control (both pre- and postharvest), timely harvest of ripe pods, fermentation for a period of six days, adequate sun drying to reduce moisture content to 7.5%, removal of bad beans during the drying process, and appropriate storage of cocoa beans. The dimensions of cocoa bean quality, particularly flavour and colour, depend largely on the planting material used. According to Cocoa Marketing Board (1947), the Federation of Cocoa Commerce, which governs the quality of cocoa traded globally, grades cocoa as I, II, or substandard. All cocoa traded must be thoroughly dry and free from foreign matter. The three grades are based on percentage of moldy (3, 4 and >4 for Grade I, II and Substandard, respectively), slaty (3, 8 and >8 for Grade I, II and Substandard, respectively), and otherwise defective beans (3, 6 and >6 for Grade I, II and Substandard, respectively). Alternatively, the other dimension of observed cocoa quality is the category based on bean size and weight. The beans are primarily categorized into main and light crop (Ghana Cocoa Board (COCOBOD), 2010). Owusu Ansah et al., Cogent Business & Management (2018), 5: 1560857 https://doi.org/10.1080/23311975.2018.1560857 Page 3 of 12 According to COCOBOD (2010), the standard against which all cocoa is measured throughout the world is that of Ghana’s cocoa due to its theobromine and flavonoids high content. This makes it the best cocoa for high-quality chocolates according to COCOBOD in 2011. The premium that Ghanaian cocoa gets because of its quality is estimated to be between 4% and 6% (Gilbert & Tollens, 2003). The International Cocoa Standards (ICS) obliges cocoa of merchantable quality to be fermented, meticulously dried, free from smoky beans, abnormal or foreign odour and any indication of adulteration. Also, it must be reasonably free from living insects, broken beans and fragments, and the beans must be reasonably uniform in size (devoid of admixture). There is great demand for Ghana’s cocoa in the world commodities market and Ghana also receives quality premium that enhances export earnings from cocoa, all due to the quality of cocoa the country produces. However, there have been a lot of concerns raised about the fallen quality standards of Ghana’s cocoa in recent times. This revelation spurred the researchers to examine the contributions LBCs make towards ensuring high-quality cocoa in the domestic market. Whereas Abdul-Wahid (2012) wrote on maintaining quality standards in the face of internal market competition in Ghana’s cocoa industry, Anim-Kwapong and Frimpong (2005) researched into vulnerability of agriculture to climate change on cocoa production, and Owusu Ansah et al. (2017) wrote on “All because of competition: A bane or blessing for smaller licence buying companies (LBCs) of the Ghanaian cocoa industry”. Owusu Ansah et al. (2017) found that competition exists in the cocoa industry but is greatly controlled by LBCs with larger market shares in Ghana. However, these studies failed to consider the role LBCs play in promoting quality of cocoa in Ghana. The focus of the research is to examine the role of LBCs in promoting the worldwide acclaimed standard of the Ghanaian cocoa. This will encompass an assessment of the Quality Control Practices (QCPs) instituted by LBCs in maintaining quality standards of cocoa. 2. Materials and methods 2.1. Research design and setting The paper was advanced from a thesis conducted between September 2014 and June 2015 to examine the contribution of Licence Buying Companies (LBCs) to the management of quality control practices in the Ghanaian cocoa industry. The study design utilized the mixed method approach to descriptively analyse responses from researchers’administered open and close-ended designed questionnaires. To provide an adequate and robust account of the role LBCs play in promoting quality cocoa in Ghana, the mixed method approach helped to get a detailed account of the respondents on the role of LBCs in promoting quality cocoa in Ghana. The basic qualification for respondents was hinged on their direct employment in a recognized LBC; Regional/District manager and/or Purchasing clerk, involved in the domestic purchasing of cocoa. Figure 1is a map showing all the notable cocoa districts in Ghana. Table 1shows the summary of the study' population guide. 2.2. Recruitment and sampling Table 2illustrates the quota sampling employed for selecting respondents. The study used stratified random sampling to group the fifteen (15) cocoa districts in the Ashanti region. The simple random sampling technique was adopted in the selection of five (5) cocoa districts; Antoakrom, Nsokote, Konongo, Nyinahin and Asante Bekwai. In selecting PCs, quota sampling technique was employed in the selection of the total 85 respondents from the selected cocoa Table 1. Population Guide for the study CML Employees Population Sample size District Managers 10 10 Purchasing Clerks 100 85 TOTAL 105 95 Owusu Ansah et al., Cogent Business & Management (2018), 5: 1560857 https://doi.org/10.1080/23311975.2018.1560857 Page 4 of 12 districts. Purposive sampling technique was used to select ten (10) District Managers due to their position and achieved knowledge base on LBC operations and the cocoa industry in general. 2.3. Data collection methods We employed a one-on-one researcher administered open and close-ended questionnaire design to solicit responses from key informants; Purchasing Clerks (PCs) and District Managers (DMs). This constituted the primary data source. In sum, a total of 10 District managers and 85 Purchasing clerks availed themselves for participation. All questions were designed in the English language, the official language of communication in Ghana. In the case where respondents could not read or understand the English language, we translated to a local language (predominantly, Twi; the language mostly used in Ghana). The secondary data for the study were sourced from the published information about LBCs and their operations, annual reports and quality management practices. The information covered a period of three years from 2010 to 2016. This category of data was mainly in quantitative form. Access to the data demanded no herculean efforts due to periodic publication of annual reports in the print and electronic media for public consumption. 2.4. Data analyses Quantitative data were descriptively analysed using the Predictive Analytic Software (PSW, 16) and presented via tables and graphs. Qualitative data was cleaned, coded and analysed using the Attride- Stirling’s thematic network analysis framework. The confidentiality of the information collected from the study participants were considered by ensuring that their names and other information that could bring out their personal identities were not disclosed in the data collected. They were also made to understand their role in the data collection activity and also they were given the choice to opt out if the exercise would affect them in any way. 3. Results and discussion of findings Based on respondents’socio-occupational physiognomies, majority (60%) were between 20 and 49 years old. According to Ghana Statistical Service (2010), the active working population range is between 15 and 59 years. More males (70%) were involved in the purchasing of cocoa in the selected cocoa districts. Encouraging results were unravelled in terms of respondents’educational attainment as 96% had achieved varied levels of formal education. Abagale et al., (2003) stated that there is a positive relationship between formal education and productivity of labour. The findings, therefore, imply that with majority of respondents’having obtained basic formal education, productivity levels of PCs and DMs is likely to increase since they are able to acquire and possibly apply scientific knowledge in their activities. Majority of DMs and PCs had achieved between 5 and 10years’experience in the cocoa business and therefore could easily decipher between high-quality standard cocoa beans. Table 3sum- marizes the socio-demographic statistics of the study participants. Table 2. Using quota sampling for selecting Purchasing Clerks (CML, 2014) Cocoa districts Population Sample size Antoakrom 18 17 Ashanti Bekwai 25 24 Konongo 24 23 Nsokote 16 15 Nyinahin 17 16 TOTAL 100 95 Source; LBC, 2014 Owusu Ansah et al., Cogent Business & Management (2018), 5: 1560857 https://doi.org/10.1080/23311975.2018.1560857 Page 5 of 12 3.1. Perceptions on the quality of Ghanaian cocoa Copious evidence proffer that 64% of respondents agreed to the assertion that the quality of cocoa had fallen while 25% believed otherwise and the remaining 10% rendered sceptics. Further assessments revealed that the fallen quality of cocoa could be attributed to the competition among LBCs in the purchase of cocoa. Respondents believed competition was a threat to quality cocoa due to the assertion that, PCs with the aim of buying more cocoa beans to attract higher commissions frequently overlook quality for quantity. Figure 2illustrates the perceptual views of respondents on the quality of Ghanaian cocoa. 3.2. Quality control practices undertaken by LBCs in Ghana Figure 3shows the quality control practices undertaken by LBCs in Ghana to ensure cocoa quality. Quality control in Ghana commences at the farm level and it is discovered that 80% of cocoa quality is dependent on farmers’ability to adopt the correct pre-harvest growing practices, and post-harvest drying and fermentation (MOFEP, 1999, p. 57; BOG, 2003, p. 10). Also, according to Kolavalli et al. (2012), the major factors that contribute to cocoa quality are high-yielding and disease-tolerant planting material, disease and pest control (both pre- and postharvest), timely harvest of ripe pods, fermentation for a period of six days, adequate sun drying to reduce moisture content to 7.5%, removal of bad beans during the drying process, and appropriate storage of cocoa beans. Thus, absolute disregard for any of the factors render the quality of the beans less. Therefore, the study expounded the various practices adopted by LBCs to ensure cocoa quality management in areas of physical, biochemical, process and origin quality according to the International Cocoa Market’s (ICM) definition. Figure 1. A map of Ghana showing cocoa growing regions Dankyi, 2016. Owusu Ansah et al., Cogent Business & Management (2018), 5: 1560857 https://doi.org/10.1080/23311975.2018.1560857 Page 6 of 12 Table 3. Socio-demographic characteristics of respondents Variable Frequency Percentage (%) AGE 20–29 14 14.7 30–39 20 21.1 40–49 27 28.4 50–59 20 21.1 60-above 14 14.7 TOTAL 95 100 SEX Male 66 69.5 Female 29 30.5 TOTAL 95 100 MARITAL STATUS Single 16 16.9 Married/Cohabitation 65 68.4 Separated 10 10.5 Widow/Widower 4 4.2 TOTAL 95 100 EDUC. STATUS None 4 4.2 Primary 10 10.5 JHS/Middle School 14 14.5 SHS/Vocational/Tech. 30 31.7 Tertiary & + 37 38.9 TOTAL 95 100 EXPERIENCE Below 5 Years 32 33.7 5–10 Years 29 30.5 11–20 Years 21 22.1 Over 20 Years 13 13.7 Total 95 100 Source, Field Survey, 2014 Figure 2. Respondents view on the quality of Ghanaian cocoa. Source, Field Survey, 2014. Owusu Ansah et al., Cogent Business & Management (2018), 5: 1560857 https://doi.org/10.1080/23311975.2018.1560857 Page 7 of 12 Responses put forward that most of the QCPs were concentrated on ensuring the physical quality of cocoa (75.8%) followed by biochemical quality (17.8%), 6.4% concentrated on process quality. This finding explains the specific type of quality LBCs greatly has the ability to influence. The onus thus lies on cocoa farmers to significantly promote biochemical and process quality since these types commence at the farm level. As earlier explained, LBCs have a higher propensity to apply indigenous knowledge on promoting the physical quality of cocoa beans than ensuring biochemical quality or process quality. 3.3. Practices undertaken to encourage physical quality of cocoa bean by CML This section unearths the major QCPs instituted by LBCs to encourage the physical quality of cocoa. Based on the views and suggestions by both PCs and DMs, the following interventions were uncovered. The reasons for these interventions were premised on the acknowledged importance of quality cocoa bean (71%) in both the domestic and international world market. This acknowledgement by respondents is in line with COCOBOD’svisionto“Encourage and facilitate the production and processing of premium quality cocoa.”Also, according to Wallace, Ghana grows the finest cocoa in the world, thus unsurprising for LBCs to be also obsessed with quality maintenance practices. Based on the established Grade 1 cocoa bean quality standards, LBCs encourage its PCs and DMs to constantly value cocoa beans with lesser moisture content (7.5% for Grade 1), minimum disease infestations, low defectiveness of beans (less than 3% for Grade 1), uniform bean sizes per bag, low/no moldiness and lesser foreign matter. The researchers further illuminated the characteristics that define cocoa beans as being of higher quality or otherwise. A question was posed to allude some of the defects which indicate low quality in cocoa. The following cocoa defects were divulged: 0 10 20 30 40 50 60 70 80 Physical Qualit y Bio-chemical Qualit y Process Qualit y Origin Quality Figure 3. Area concentrations of QCPs. Source, Field Survey, 2014. Table 4. Major defects of cocoa beans identified by PCs. Defect of Cocoa beans Explanation (1) Not Thoroughly Dry (NTD) (2) Admixture also known as Average Tolerance Level (ATL) (3) Mould (4) Weevil (1) Purple (2) Foreign material (1) Flat beans (2) Smoky beans Cocoa beans with great moisture content a mixture of cocoa beans of different sizes or a mixture of uneven/unusual beans cocoa beans that become moldy, tastes bitter and lacks flavor cocoa beans infested with weevils and cocoons, damaging the food cocoa beans in purple color and tasting bitter and flavorless Cocoa beans mixed with debris, stones, or cow dung etc. beans that are very light in weight due to smaller food in them cocoa beans contaminated with smoke Source, Field data, 2015 (Abdul-Wahid, 2012) Owusu Ansah et al., Cogent Business & Management (2018), 5: 1560857 https://doi.org/10.1080/23311975.2018.1560857 Page 8 of 12