Côte d’Ivoire begins Cocoa Sector Cleanup

Readers of this blog will remember my earlier post on the corruption in the Ivorian cocoa sector. Well documented in Carol Off’s book, the key institutions put in place after the 2000 liberalization of the cocoa sector (the BCC – Bourse du Café et du Cacao, the FDPCC – Fonds de Développement et de Promotion des Activités des Producteurs de Café et de Cacao – and the FRC – Fonds the Régulation et Control) were quickly turned into corrupt institutions that served to enrich a small elite surrounding president Laurent Gbagbo.

When the key people in these institutions were arrested in June of this year, grand reforms were promised. During the last week and a half, these reforms finally took some shape.

In early September, the World Bank vice president for Africa visited the Côte d’Ivoire and urged the government to speed up its reform efforts. More importantly, Obiageli Ezekwesili stressed that no debt relief from the World Bank and IMF would be forthcoming unless reforms were implemented. And that is no small threat. The current negotiations between the Côte d’Ivoire and the two institutions involve writing off $3 billion of external debt by the middle of 2009 and an aid package amounting to $800 million.

No wonder the government listened and acted quickly.

On Sept. 23, the government scrapped all three institutions implicated in the corruption probe (BCC, FDPCC and FRC) and replaced them with a temporary management committee that will take over all functions. The management committee has a renewable seven month mandate to clean up the sector and normalize the operations.

It is a bit hypocritical that the World Bank, which pushed for the the 2000 reforms in the first place, now threatens to withhold debt relief. It was not accident that these new institution, once removed from oversight, would develop into a mechanism to drain funds (estimates are as high as $240 million) for private enrichment and the conduct of a civil war. It was the logical outcome of that policy. The World Bank keeps holding on to the idea that markets, left alone, are free of corruption and that only government intervention causes the market distortions.

But as we are all learning during the current credit/mortgage crisis, markets without regulatory oversight will naturally develop into failing or corrupt institutions. This is not a problem of greed, it is a structural problem. Greed has been around as long as human beings have, so it is a constant. However, market failures occur at precisely those moments when markets are not regulated. So the decline of the cocoa sector in the Côte d’Ivoire should not have come as a surprise.

We will have to see if these reforms will make any difference. Ivorian farmers are not at all sanguine about their success. One farmer, quoted by Reuters, stated that they “have put new heads in charge, but they will probably just keep on ‘eating’ the money like the others.” Another farmer complained that “we work hard but get nothing back. They (the cocoa sector administrators) just climb to the top and then empty the coffers.”

As a result, the promised inputs like fertilizer and pesticides rarely make it to the bush and thus lead to declining quality. And, worst of all, there are still no price guarantees. Despite record prices, farmgate prices for cocoa are still too low to afford farmers a decent living.

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