Takoradi, the port city halfway between Ghana’s capital Accra and the Ivorian capital of Abidjan is buzzing with lots of new activity. And no, it’s not the planned boom in cocoa exports–Ghana is planning to reach cocoa exports of 1 million tons by 2010/11–it’s the expectation of an oil boom that is pushing up real estate prices in the city and causing a boom in construction and renovation.
Last year, Kosmos Energy of Dallas Texas discovered oil off the coast of this port city and ever since, life has sped up. The oil isn’t flowing yet, that won’t happen until 2010, but everyone seems busy getting ready for it. The port and its city may not be ready for it–Reuters reports huge traffic jams and quotes the port director is worried about space for larger ships and lots of pipelines–but the boom has already started.
Some commentators are realistic enough to worry about the impact of such newly found riches. Rarely, if ever, will the majority benefit from the new royalty income. Yes, Ghana has an impressive record of democratic rule to look back on and tomorrow’s election will demonstrate again the strength of that tradition. But oil discoveries disrupt social and political processes. The troubles of the Niger Delta and the corruption in Angola are but two examples of how oil can throw countries into a spiral of inequality and violence.
But the oil discovery can also create problems for Ghana’s cocoa economy. Nigeria’s experience speaks loudly on this context. Ezekiel Walker has documented the impact of oil in the cocoa economy in two articles published in 2000 (Journal of Modern African Studies and Africa Today). The oil boom started in Nigeria after the country joined OPEC in 1971. The government acquired the majority share in all oil companies and oil quickly rose to constitute the vast majority of its exports. By 1975, oil constituted 97.5 percent of its export earnings.
The government used the large influx of royalties into the state coffers to fund extensive agricultural improvement schemes, including support for the cocoa sector. Initiatives included extension services, subsidies for fertilizers and pesticides and new seedling distribution to farmers. Despite all these efforts, cocoa exports dropped from 241,000 tons in 1975 to 100,000 tons in 1983. In addition, the quality deteriorated to much that Nigerian beans were difficult to sell.
Why did this happen despite the government efforts to support the cocoa sector? The oil boom let to a massive reallocation of resources. Construction expanded dramatically, infrastructure project mushroomed and the newly found wealth led to massive increase in imports. All this create large growth in non-farm employment and people, especially young people, moved to cities to take advantage of these opportunities.
I’ve pointed out before that cocoa farming is very hard work for little money and in the face of more profitable alternatives, rational workers will choose those alternatives. Historian Sara Berry cites the example of the city of Ife where the number of car mechanics increased from 212 in 1972 to 1,256 seven years later. The impact on cocoa farmers was dramatic. Walker cites one village where of 150 children of school age only nine returned to the village after finishing their education. At the same time the boom had led to wage increases that made it impossible for cocoa farmers to pay workers to help on the farms. The result? Lower quantities and poorer quality of beans.
The early report from Takoradi show many of these dynamics at work–influx of new people, increased construction, new jobs. All this at a time that cocoa prices remain volatile. Whichever party wins tomorrow’s election, managing the oil boom will be a serious task for the next government and the fate of cocoa in the world’s second largest producer will depend in large part on the quality of that mangement.