First Year of the Living Income Differential in Ghana’s Cocoa Sector: Critical Sustainability and Livelihood Issues

Abstract

Poverty continues to persist among the smallholder farmers in the cocoa sector, especially among the West African cocoa-producing countries. Despite the sector’s contribution to economic development, the smallholder farmers are yet to record any tangible improvement in their welfare and livelihoods. Government policies have not addressed the challenges fully and there are increasing concerns at the international level regarding sustainability which need to be considered. The over US$130 billion industry may be overlooking some critical sustainability and livelihood issues that need to be considered in the current ecosystem where consumers are becoming more conscious about sustainability in the supply chain of products they consume. Ghana and Côte d'Ivoire introduced the Living Income Differential (LID) as a premium on their cocoa and as a tool to complement their prices of cocoa in the international market. The purpose of this is to increase the share of benefits received by cocoa farmers in these countries. This has been implemented for a year and it is critical to consider some policy-relevant issues for the future. This brief provides a discussion of the first year of the implementation of the LID in Ghana by raising the sustainability and livelihood issues to consider.

Keywords: Cocoa, Living Income Differential, Sustainability, Livelihood, Ghana, Côte d'Ivoire

JEL Classification: N57, O13, Q1, Q15, Q17, Q18, Q56