case study: cocoa in ivory coast

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Case study reportCocoa in Côte d’Ivoire

2015

Commissioned by

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About this project

This research forms part of a project funded by the IFC, the Dutch Ministry of Affairs, SECO and IDH the sustainable trade initiative in which Aidenvironment, NewForesight and IIED sought to develop a holistic transformation model to scale sustainability in smallholder dominated agricultural commodity sectors.

For more information about the project and to access other research reports in the series please visit: www.sectortransformation.com

About the organisations

Aidenvironment is an independent value-driven consultancy. It advises clients in realizing their ambitions in sustainable market transformation in the most prominent commodity sectors. Aidenvironment is known for its in-depth knowledge, reliable quality and good advisory skills, and is continuously asked to work for frontrunners in the private, public and non-profit sector. For more information visit: www.aidenvironment.org

NewForesight facilitates sustainable market transformations. As a strategic consultancy NewForesight addresses the global challenges of our time. NewForesight develops innovative strategies, unites stakeholders around a transformative vision for their sector and drives implementation. For more information visit: www.newforesight.com

IIED is one of the world’s most influential international development and environment policy research organisations. We build bridges between policy and practice, rich and poor communities, the government and private sector, and across diverse interest groups. For more information visit: www.iied.org

Published by Aidenvironment, NewForesight and IIED (2015).

http://www.sectortransformation.com/

http://www.aidenvironment.org/

http://www.newforesight.com/

http://www.iied.org/

Please see www.sectortransformation.com to read our other case studies and reports

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Case study: Cocoa in Ivory CoastCase study: Cocoa in Ghana Case study: Coffee in Vietnam

Case study: Cotton in Mali Case study: Palm Oil in Indonesia

The Sustainable Sector

Transformation ModelSector Governance Models Service Delivery Models

Role of Voluntary Sustainability

Standards

The Sustainable Sector

Transformation Model

Phase I: Building a Roadmap to

Sustainability in Agro-commodity

Production

Table of contents

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Introduction

The Sustainable Sector Transformation Model

Cocoa in Cote d’Ivoire

Appendix – the Sustainable Sector Scorecard

This research aims to develop a transformation model for sustain-ability in smallholder dominated agricultural commodity sectors

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The three phases of the research

Phase I - Research Phase II - Shaping Phase III - Implementation

2013 2014 2015

• Identify dynamics of market transformation towards sustainability for agricultural commodities

• Identify the scope, size and impact of voluntary sustainability standards (VSS) in this process and their possible future role

• Implement the roadmap in five country- sector contexts:

• Cocoa – Ghana

• Cocoa – Ivory Coast

• Coffee – Vietnam

• Cotton – Mali

• Palm Oil – Indonesia

• Develop a transformation model towards sustainable agro-commodity production

• Apply the model to specific country-sector contexts to ensure it has local impact

• Support the IFC in integrating the strategy in its corporate priority framework

• Explore cooperation with other stakeholders

GoalDevelop a transformation model & roadmap towards sustainable agro-commodity production in sectors dominated by smallholder farmers

The success in scaling sustainability strongly depends on the degree of sector organization and economic performance

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The sector shapes model Pentagon is the desired sector shape for realizing

sustainable agriculture

Ab

sorp

tio

n c

apac

ity

for

bet

ter

pra

ctic

es

Economic Performance

Pentagon Inversed pyramidHybridsFlat pyramid

Type of competition Race to the bottom Competing on quality Competing on efficiency

Level of organization Very low Low High Medium

Average farm size Very small Small Medium Very large

Economic performance

Very low Low – medium High Very high

Absorption capacity for sustainability

Very low Low – medium High Low – medium

Example of sector Cocoa in Ivory Coast Palm Oil in Thailand Tea in Kenya Soy in Brazil

© NewForesight

Organizing the production base should be key priority and this requires an understanding of the forces that shape a sector

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The forces model Enabling environment

• Access to capacity building, inputs & finance

• Policy/regulatory framework & enforcement

• Access to land, tenure & property rights

• General education and health care

• Infrastructure

• Organized effective civil society

Market characteristics

• Product Quality & safety requirements

• Visibility in end product

• Northern vs. Southern markets

• Power concentration in value chain

• Demand for sustainability impact

• Price volatility

Production characteristics

• GAPs (minimum requirements)

• Crop perishability

• Ability to mechanize production

• Barriers to enter /investments

• Possibility to add value upstream

Alternative livelihoods

• Alternative crops (within agricultural sector)

• Alternative occupations (also nonagricultural)

• Vocational diversification

• Migration (urbanization opportunities)

Sector Shape

© NewForesight

Simplified sketch of the current situation

Flat pyramid shaped sectors have persistently high levels of poverty and poor social and environmental performance

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Characteristics

• Production base is unorganized

• Inexistent or ineffective service market (input, extension and finance)

• Inexistent or ineffective products market (dependency on trader)

• Uncoordinated support programs

• Farmers depend on external financing

What happens?

Extension

Traders

Unorganized Farmers Brands

Standards, Premiums, Company programs

Finance

© NewForesight

Inputs

Extension

Cocoa in Ghana & Ivory Coast

Coffee in Vietnam

Palm oil in Indonesia

Cotton in Mali

Economic • Poverty

• Low yields

• High Yields

• Low quality

• Low yields • Poverty

Social • Child labor,

• Health & safety

• Lack of alternativelivelihoods

• Poor labor conditions • Child labor,

• Health & safety

Environmental • Chemical pollution • Water depletion

• Overuse of chemicals

• Deforestation

• Erosion

• Chemical pollution

• Soil depletion

How does this apply to four agricultural commodities?

Consequences

• Competing on poverty

• Low productivity

• Low product quality

• Low business skills

• Farming as “survival mode”

• Not sustainable

Yet, current processes aiming for full sector transformation fail to reach a critical mass

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Sector transformation explained: the S-Curve

© NewForesight

Driving commitment to sustainability

• Civil society • Front runner companies & donors

• Follower companies & donors

• All, including government

Producers adopting sustainable practices

• Those involved in specific, niche projects.

• Early adopters, with existing sustainable capacity

• Better organized and capitalized farmers

• Late adopters, with sector-based support

• All

Intervention • Projects • Standards and certification

• Non-competitive investments

• Regulation and non-competitive investment

Market demand • Niche • Growing, but not yet mainstream

• Mainstream • License to operate

Coordination • None • Competition • Emerging alignment and collaboration

• Full alignment

Competition: Rise of VSS

Non competitive collaboration

Level Playing field & institutionalization

Projects, Pilots & Innovations

Voluntary sustainability standards (VSS) are an example of supply chain driven instruments that promote sustainability

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In response to public sector failure to address sustainability, VSS added value by :

• Creating consumer and industry awareness on sustainability

• Providing a platform for dialogue and governance

• Operationalizing the concept of sustainability into concrete practices and norms

• Mobilizing market driven incentives for sustainability

• Mobilizing investments in producer organization and training

• Promoting transparency in supply chains combined with assurance and traceability to substantiate sustainability claims

Key services of VSS

Market shares of certified production (2013)

29% 20%

71% 80% 82% 87% 96% 98%

13%18%

Coffee Cocoa Tea Palm oil Cotton Soy

The value added by VSS

Sustainability Standard

Platform for dialogue

Assurance System

Traceability

Implementation Support

Communication & Marketing

Key services of VSS

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Constraints in the VSS value cycle Key barriers to reach the tipping point in smallholder dominated sectors

ImpactAssurance

Credibilityof claims

Addedvalue

Demand

Supply

Implemen-tation of

best practices

Certified volumes remain low in a

number of sectors and certification is

not having the desired impacts

Lack of demand in many sectors Reaching unorganized farmers is costly & a minimum level capabilities

and resources is required to adopt comprehensive standards

Unsustainable funding

model based on profits

from Western industry and

donor money

Limited impact assessments and

mixed impact results

Issues with the quality of audits

Credibility impaired due to impact and assurance issues

Declining competitive advantage of label use & sustainability not main criterion for consumer purchases

• Lack of demand for certified production

• Need to proof of impacts

• High costs and weak business case for smallholders

• A different perspective on sector transformation

• New partnerships

• Complementary approaches, innovative solutions and new business models

Today’s challenges demand for

The challenges faced by VSS

VSS face serious challenges to reach critical mass in sectors dominated by unorganized smallholders

Achieving a critical mass in sector transformation requires investments that support farm quality and sector quality

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Outcomes and requirements for achieving farm- & sector quality

Farm quality Sector quality

Farm quality - outcomes

• Farmers (and their workers) earn a decent livelihood

• … are adaptive, resilient and innovating

• … produce at optimum productivity and product quality levels

• … have positive social & environmental impact

Sector quality - outcomes

• Good product reputation on world market

• The sector is resilient in the face of market volatility and climate change

• The sector has a net positive impact on natural capital and quality of life in rural communities

Sector quality – system requirements• Is able to ensure access to quality technical assistance,

inputs and finance• Is able to reward good performance (e.g. sustainability &

quality) and remove worst practices)• Production base captures sufficient % of consumer value

and re-invests in the sector• The sector manage or organize collective action on public

goods and natural capital• Ensures a balanced voice and control between different

stakeholders

Farm quality – system requirements• Apply required knowledge (business & GAP)• Optimize input use• Viable farm size • Sufficient negotiating power• Respect social & environmental norms / laws• Farmers are entrepreneurial and have the financial capacity

to manage risks and to invest in their farms

Whereas current models focus on either supply chain approaches or sector approaches, reaching farm and sector quality requires both

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Focus of sector transformation Level of success per chosen focus

Supply chain approachBuyer driven

approaches such as certification,

farmer support, outgrower models

Hard times Farmers perform

poorly in a dysfunctional

sector

Farm & sector quality

Farming creates and retains sufficient value to invest

Sector approach

e.g. investments in extension services,

input subsidies, marketing boards

Low

High

Low HighImprovement of sector performance

Imp

rove

me

nt

of

farm

pe

rfo

rman

ce

• Public services have often not been client-centred and subject to political interference

• High cost of extension services and input subsidies – create entrenched vested interests

• Marketing boards block traceability and do not meet buyers’ needs for quality & integrity

• Scale and scope of impact restricted by demand

• Only reach low-hanging fruit

• Creates islands of sustainability• Does not knit together farms, communities

and landscapes

Focus on the sector approaches

Focus on the supply chain approaches

Sector transformation models

Desired focus • Holistic approach towards sector

transformation• Focus on farm- & sector performance

• Focus on incremental improvement and removal of worst practices

• Focus on sector capacity to re-invest in sustainability

Table of contents

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Introduction



Appendix – the Sustainable Sector Scorecard

Two key principles guide the sector transformation model

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Guiding principles of the proposed transformation model

I. Continuous improvement on farm quality II. Sufficient value capture at production base

• An intrinsic business case is in place for continuous improvement on farm quality

• Mechanisms should be put in place that reward Farm Quality (step wise) and remove worst practices

• A level playing field should exist for all farmers to get a fair chance to upgrade their farm

Manufacturing

Trade

Processing

Production

National public sector

The sector transformation model provides a comprehensive framework along which strategies could be designed

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The sustainable sector transformation model and its building blocks

• Regulation and governance of market

• Support mechanisms by the government

• Effective producer organization for the service market

• Effective producer organization for the product market

• Market alignment and discipline

• Good buying practices

• Product traceability

III. Public sector governance

• Technical assistance

• Input provision

• Financing

V. Organization of the service sector

I. Sector alignment & accountability

• Platform for sector dialogue, alignment and coordination

• Shared vision and interest: FQ and SQ

• Joint strategy towards vision

• Alignment of investments, technology packages and farmer support measures

• Monitoring, assurance and learning

II. Strengthening of demandIV. Organization ofthe production base

The required steps should follow a logical order to be most effective

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Organizing the building blocks

• The extent to which the five building blocks need to be strengthened is context specific, but a focus on only one or two dimensions is bound to lead to a failure to completely transform sectors .

• This transformation is likely to be a process that takes a number of years

• It follows some consecutive steps in order to be most effective

• Whereas the first steps can be described in generic terms, follow up steps will be dependent on the specifics of the sector

A group of stakeholders with a critical weight in the sector takes the initiative to transform the sector. The initiating group should engage the other major actors and develop a shared vision on farm- and sector quality and the implications for the organization of the production base and the organization of the service sector.

The major actors align behind this vision, develop a strategy to realize the vision and agree on a monitoring and assurance mechanism. Accountability is key and requires a strategy that is measurable. Many of the failed transformation initiatives lack joint accountability.

The production base is reorganized effectively for the service- and product market. Vice versa the service sector should cater effectively to the production base. This is not a matter of organizing one before the other. It is about a stable symbiosis between service-and production sector, where producers can pay for services that will further their continuous improvement cycle.

Implementing the vision/strategy will require a combination of public and market-oriented measures, based on capacity and desire to implement change in the sector. If the dominant actor is the government, then the initial focus of the transformation should be on improving public sector governance. If the private sector is relatively concentrated and buying companies, traders or service providers have leverage over producers, then the role of the private sector in realizing the transformation will likely be stronger. Both always have to be involved in order to ensure consistent messages and incentives towards farmers, whether via demand, service delivery or policy. In line with this thinking, the public or private sector have an important role to build up a professional service sector.

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Table of contents

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Introduction



Sector profile

Gap analysis

Next steps & business case

Appendix - Sustainable Sector Scorecard

We researched five case studies, in this presentation we focus on cocoa in Ivory Coast

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Overview of the five case studies

Sectors

Countries

Team

Cocoa

Ivory Coast

Cocoa

Ghana

Coffee

Vietnam

Cotton

Mali

Palm Oil

Indonesia

Jan Willem Molenaar

(Aidenvironment)

Laure Heilbron (NewForesight)

Emma Blackmore (IIED)


Joost Gorter(NewForesight)


Jan Willem Molenaar

(Aidenvironment)

Jan Willem Molenaar

(Aidenvironment)

Jonas Dalinger(Aidenvironment)

We have used a three-step approach for the case studies: sector profile, analysis per building block and roadmap development

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• Collection of sector background information (structure, S-curve, forces, sector shape and farm quality)

• Identification of current status per sub-building block

• Description of desired status

• Appreciation of current status according to Sustainable Sector Scorecard scored */ **/ *** ( *** = best) (16 sub-building blocks see appendix A for scoring framework)

• Consolidation of priority steps to achieve sustainable market transformation

• Identification of business case

Sector Profile

Sector analysis and Recommendationsper building block

Roadmap

Steps

1

2

3

Cocoa represents 20% of GDP, and 1/3 of Ivory Coast’s population depends on cocoa for their livelihoods

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Cocoa in Côte d’Ivoire

General profile Economic profile Sector profile

Size (square kilometers) 322,463¹

Population size (millions) 22.8¹

Median age 20.3¹

Rural population 48.7%¹

Labor force in agriculture 68%¹

GDP (in $ billion) 28.3¹

GDP per capita (in $) 1,800¹

GDP per sector

- Agriculture 26%¹

- Industry 21%¹

- Services 52%¹

Number of farmers 800,000²

Total land size (million ha) 2³

Average crop plot size (ha) 3.3-3.7²

Average yield (kg/ha) 450²

Total production volume (million MT)

1.61⁴

Total value (billion USD) 2.0755

% of GDP 10%6

% of national export value 40%6

Sources: ¹CIA Factbook, ²Interviews with sector experts, ³The Observatory of Economic Complexity, ⁴UN Food and Agriculture Organisation (FAO) , 5 UN office for humanitarian affairs, 6 Certification of cocoa farming of Côte d’Ivoire; www.cacao.goiv.ci;

http://www.cacao.goiv.ci/

Collectors and traitants play an important role in the cocoa value chain in Ivory Coast

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Value chain

RetailConfectionary

and food industry

National exporters

TraitantsCollectors

GrindersInternational

traders

Exportingcooperatives

CooperativeFarmer

• There are about 100 traitants who on average work with around 5 local collectors

• The largest three traitaints represent +/- 30% of the market.

• Local grinders process 30% of cocoa and can be linked to an international or national exporter

Cocoa action and the CCC are the major stakeholders that could transform the cocoa sector

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Major stakeholders

Sector alignment & accountability

• PPPP – Public-Private Partnership Platform managed by CCC• CocoaAction – largest companies united under WCF• WCF – global body for industry representation• ICCO - global body for country representation

• Voluntary certification systems: UTZ Certified, Rainforest Alliance, Fairtrade, Organic

• Data gathering / traceability initiatives

Public sector governance

• CCC –Conseil du Café-Cacao is the cocoa board of Ivory Coast

• CNRA –National Agricultural Research Centre

Strengthening of demandOrganization of production base

• Cooperatives - 30% -50% of the farmers are organized in cooperatives (around 1400 active cooperatives),

• Traitants – cocoa traders • Pisteurs - local cocoa buyers who sell

to the larger traitants

• Retailers• Consumer product manufacturing

companies• International traders and grinders

Organization of service sector

• Government / ANADER • NGOs• Exporters/grinders• Manufacturing

© NewForesight

Ivory Coast is taking its first steps into the critical mass phase now that the private sector has aligned itself through CocoaAction

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The S Curve of market transformation

Characteristics first movers phase Characteristics Critical mass phase

Triggers for change

• Consumer awareness • Increasing awareness of private sector actors that sustainability

can be used to gain a competitive advantage

• Political: cocoa is an important livelihood source for many voters

• Problems persist and companies realize that the problem is bigger than competition can solve by itself

• Awareness is increasing that sustainability issues are starting to threaten the future vitality of the sector

Main change agents

• Certification bodies such as UTZ, Rainforest Alliance and Fairtrade (25% of production is certified)

• Private sector (manufacturers and processors)• NGOs

• Neutral convening platforms• Leading industry groups in which competitors work together• Government invests in the sector

Driving forces for the market

• Concerns over continuity of supply• First mover advantages: marketing and corporate social

responsibility promotion

• Longer term vitality of the sector • Securing sustainable sourcing • Efficiency of sustainability effort

Limitations & barriers

• Concerns exist on further scaling and impact, driving a call for a more holistic vision.

• Farmer change is mainly driven by premiums, expensive certification programs, and NGO capacity-building support for farmers

• Inefficient use of resources due to proliferation, fragmentation, and competition of standards

• Lack of trust between the parties to collaborate and share knowledge

• Lack of clarity about where the industry works together and where it competes

The sector is shaped as a pyramid: it consists of many ineffectively unorganized small-scale farmers

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• The majority of the farmers are unorganized smallholders or member of a poorly functioning cooperative

• 30% to 50% of the farmers are organized in cooperatives (around 1,400 active cooperatives), which sold 54% of total production in 2012/13.

Sector shape

Production characteristics and a lack of alternative livelihoods to support a transition to sustainable production are lacking

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The forces



The enabling environment


The enabling environment




• Limited options for mechanization• At current prices, certain investments such

as increasing fertilizers are not profitable because the return on investment is too low

• Labor intensive / capital extensive• Long durability of product after harvesting

• Hardly: some in the agricultural sector, such as food crops, palm oil and rubber

• Very limited in urban areas

• Overall environment undeveloped: poor infrastructure etc.

• Ineffective support through CNRA (government extension)

• Most support through traitants, cooperatives and private sector institutions

• 30% is processed within the country, of which most output is exported.

• High concentration of international traders and chocolate manufacturers.

• High demand for sustainability (slowly moving from compliance to a standard to impact)

© NewForesight

Cocoa farming does not offer a decent livelihood; old and diseased cocoa trees and incorrect use of inputs risk the future viability of the sector, while social issues persist

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Farm quality – goals

• Farm quality

Current situation Desired situation

Farmers earn a decent

livelihood

• Many cocoa farmers live below poverty line

• Cocoa is not profitable for most farmers

• Cocoa farmers are well above the poverty line

• Cocoa is profitable and farmers can invest in their farms

Farmers are entrepreneurial

• Limited incentives for entrepreneurialism in current system

• Entrepreneurialism is promoted via professional service delivery

• Farms are managed as a commercial business

Farmers are resilient

• Vulnerability to disease and climate change

• Ageing trees

• Financial struggles as cocoa incomes spent too quickly

• Cocoa trees are disease free

• Climate smart agroforestry systems are in place

• Ageing trees have been replaced to maximize productivity

• Farmers have additional food and cash crops or off-farm income

• Farmers have access to finance where necessary

Farmers respect social &

environmental norms

• Deforestation to expand farms rather than intensification – and move away from shade grown cocoa

• Issues around child labor

• Respect of (inter)national norms and conventions on labor, chemicals and environment

• Deforestation limited – forestry policies incentives afforestation

• Shade-grown cocoa production maximized

• Children go to school

Farmer produce at optimum

yield and quality

• Average yield kg per hectare

• High quality already achieved but limited incentives to exceed this

• Potential yield of over 1000-1500 kg per hectare is achieved

• High quality is maintained consistently

Farmers currently lack the resources to capitalize and upgrade their production, thus they are living at or below the poverty level

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Farm quality – requirements

• Farm quality

Current situation Desired situation

Knowledge & application of

GAPS

• Key challenges around disease control and prevention

• Inappropriate use of agro-chemicals, and generally poor soil management with acid, depleted soil as the result

• Insufficient coverage of extension services to improve knowledge of GAPs

• Farmers have knowledge to apply disease control and prevention techniques

• GAPS are adapted to farm context – farmers know their plot size and yield

• Farmer can make own farm management decisions

• Effective soil fertility management

Use of inputs

• Government spraying services are limited in coverage and of poor quality – ineffective and inequitable

• Famers overestimate farm size and yields –leading to overuse of inputs

• Farmers can pay for their own inputs from private input providers which matches their specific farm needs and to farms that have potential for farm quality proper targeting of services. Government could play role in distribution of planting material.

Viable farm size • 1.6 – 1.8 ha is current farm size • 4ha is probably the minimum farm size needed for cocoa to be

profitable

Negotiation power

• Negotiation power and producer voice is limited, • Farmers negotiate on an equal and regular basis with the

industry and government

Willingness and financial

capacity to invest in their

farms

• Limited capacity .

• Will prioritize other income sources over cocoa

• Cocoa farming not attractive to younger generations

• Farmers have the profits, business skills and financial planning tools to faciliate on-farm investments

• Younger farmers see cocoa as a viable livelihood

Table of contents

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Introduction



Sector profile

Gap analysis

Priority steps & business case

Appendix - Sustainable Sector Scorecard

Industry investments and government involvement have the potential to create sector-wide change, if they manage to align

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Conclusions


• (Inter)national platforms agree upon issues, have slightly different visions and rather different strategies

• Increased industry alignment and investments promise good results, although public and private sector investments could be better aligned.

• Monitoring farm and sector quality and learning from investments is limited while current assurance systems require improvement


• The government has increased its regulation and investments in the sector

• Market governance seems to have positive effects at farm and sector level but requires further strengthening


• Cooperatives are weak unless heavily supported by industry, but the government intends to make them the dominant model to market cocoa

• Market alignment is limited, but buying practices have improved since the introduction of guarantee price and due to fierce competition


• Service delivery is of limited scale and of poor quality• Input distributions lacks far behind• There is a sector-wide lack of access to long-term finance for

smallholders to rehabilitate or replant plantations

(Inter)national platforms agree upon issues, have slightly different visions and rather different strategies

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I. Sector alignment & accountability – current and desired situation (1/3)

Score Current situation Desired situation

Platform for sector

dialogue, alignment and coordination

**

• The PPPP is a government led platform regrouping most industry and civil society to align and co-invest. National industry seems to be less involved. Whereas the platform started with a lot of energy, it slowed down, became less decisive. The private sector views the PPPP as a political governmental initiative not driven by economic incentives.

• CocoaAction regroups the international industry to align investments in the sector. Their communication with CCC is frequent but could improve.

• There are various international platforms that involve many of the Ivorian cocoa stakeholders (WCF, ICCO, CEN).

• Institutional donors are generally not part of these platforms but may finance them.

• The PPPP is the national multi-stakeholder platform to discuss and plan the future of the sector. National industry, civil society and international donors also participate in exchange and learning sessions. The platformhas a strong and dynamic (facilitated by an external party) and its governance will move slightly away from the government to adopt a more multi-stakeholder model. The platform facilitates alignment between CCC and CocoaAction (this process should take place outside the ‘plenary’ PPPP sessions)

Shared vision on Farm

Quality and Sector Quality

**

• VSS offered a vision on FQ which has been endorsed by most industry players, NGOs and donors. In addition to these voluntary standards, the Ivorian government also wants to create a national norm, like the EU (CEN).

• The proposed extensive definition of farm quality has neither been agreed upon between industry and government nor within CocoaAction

• CCC and CocoaAction both have a vision on FQ and SQ which goes beyond certification. They agree on most issues and the importance of quality of life in rural communities. They differ in terms of the importance of increasing productivity (government is afraid of falling prices) and the speed of some reforms. In addition the CCC stresses the importance of a national transformation of the industry to capture more value and create more employment.

• There is no common vision within the industry and government on what the future farmer should look like (1ha, 2 ha, 15 ha or 1t/ha, 1,5t/ha).

• Institutional donors have their own vision on FQ and SQ with limited alignment between them.

• The PPPP results in the formulation of a long-term vision (this is where we want the sector to go to). It includes also milestones on how to get there, including minimum requirements and steps of incremental change.

• CocoaAction provides the strategy and government together with industry coordinates this through PPPP

Increased industry alignment and investments promise good results, although public and private sector investments could be better aligned

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Joint strategy towards vision,

including clear KPIs

**

• The CCC has developed a strategy for the cocoa sector (2QC) , including timepath and targets. Despite the consultation process, the relevance of some components in the strategy is disputed by some actors as well as its speed of implementation (too slow).

• Members of CocoaAction have dedicated themselves around a joint set of goals and KPIs. The strategies and approaches that are used to reach these KPIs are competitive and vary per company (which may in practice limit alignment).

• Between CCC and CocoaAction there seems to be more alignment in vision than in implementation

• CCC, CocoaAction and its members and the international donor community align their strategy as much as possible behind the shared vision developed within the PPPP. The individual strategies, including objectives and KPIs are shared within the PPPP, as well as progress and lessons learned.

Alignment of investments, technology

packages and farmer support methods

**

• The investments of the private sector are increasingly aligned through CocoaAction following the above mentioned goals and KPIs.

• There is limited alignment between CocoaAction and CCC investments (although the PPPP platform allowed for some joined public-private investments).

• PPPP developed a national farmer training module on agronomic practices that should become the basis of TA programs nation-wide (though many have contributed, some consider it too academic/ complex).

• Within the sector, there is no agreement on certain aspects of technology packages such as importance of fertilizers and grafting.

• Certification systems have aligned their farmer message through CCE

• Private and public sector align investment and co-invest when required(e.g. via the PPPP or non-competitive investments).

• The public and private sectors agree upon basic and advanced technology packages to farmers and cooperatives. Training modules are modular, relevant, and as simple as possible.

Monitoring farm and sector quality and learning from investments is limited while current assurance systems require improvement

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Monitoring & assurance *

• The level of monitoring in the sector is limited. Some companies, NGOs, and VSS do some monitoring, but there is no consistent approach to learn what works and what does not. This is further hampered as most industry support programsremain a black box in terms of process and approaches.

• CocoaAction provides a framework to monitor, but lacks a consistent and reliable approach to collect data.

• Assurance is provided if voluntary certification is implemented (currently approx. 25% of all production) .There is criticism on the quality (and costs) of their assurance systems.

• There is no mechanism to ensure accountability

• There is a sector wide (independent) monitoring effort with joint accountability and transparency on sustainability performance among companies, the government and service providers. Results and lessons are shared within the PPPP.

• Additional assurance is provided if there is a demand for it (could be based upon a more regional approach).

• Clear mechanism for company and government accountability in relation to KPIs

Create alignment between CCC and CocoaAction and make PPPP the national platform to align, strategize, monitor and learn

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I. Sector alignment & accountability – Next steps

Sub building blocks Next steps

Platform for sector dialogue, alignment and coordination

• Give more stature to PPPP, ensure effective facilitation and modify its governance structure to allow for greater multi-stakeholder participation

• Ensure participation of national industry and international donors in PPPP

Shared vision on Farm Quality and Sector Quality

• Align the visions of the CCC, CocoaAction and local stakeholders

Joint strategy towards vision, including clear KPIs

• Define a national strategy for sector-wide investment (2QC meets CocoaAction)

• Clarify role between public and private sector and define targets and KPIs per actor

• Include continuous improvement in the KPI structure

• Share lessons learned of industry driven support programs and determine scale-up potential

Alignment of investments, technology packages and farmer support methods

• Align investments behind national strategy. Co-invest where necessary

Monitoring & assurance

• Develop a monitoring system (potentially executed by partners, feeding into one system) and share lessons and link this to the monitoring system of CocoaAction

• Tie this to an accountability mechanism, where companies and the public sector implement and are held accountable for specific parts of strategy

Market alignment is limited, but buying practices have improved since the introduction of guarantee price and due to fierce competition

35

II. Strengthening of market demand – current and desired situation


Market alignment

and discipline

**

• There is limited alignment in the international market. Some want certified cocoa, others only want to have assurance on particular issues, while others do not demand anything.

• There is an imbalance between the supply and demand for certified cocoa, which does not favor its scaling.

• There is a lack of alignment within national sector (e.g. whereas some buyers refuse to buy from farmers that break the major rules such as deforestation, other still buy from these farmers).

• It is unclear to which extent the CEN norm will align demand on certain FQ aspects.

• Buyers (international and national) demand basic requirements for FQ for 100% of their sourcing and have ambitious targets for improvement. Worst practices are excluded.

• Buyers communicate consistently towards farmers on FQ requirements.

• Buyers involve traitants actively in their sourcing policies and reward them for good performance in promoting FQ.

Buying practices *

• There is a fixed cocoa price for all cocoa farmers and minimum quality norms are commonly respected. Additional premiums can be paid by buyers (which is done for certified cocoa, if there is a market)

• Farmers are generally directly paid. Because foreign importers generally pay once the products have been received, this creates a financing problem to those without good access to finance (notably exporting cooperatives).

• Additional service delivery to promote FQ varies widely per buyer.

• Buyers reward best performance in FQ (pay above guarantee price and/or provide incentives in services) and exclude worst practices.

• Short and long-term buying relationships are based upon fair contracting principles recognizing mutual benefits and risks.

Product traceability *

• Certification has resulted in increased traceability, but does not include the non-certified products

• Most exporters have traceability to the cooperative level (where these are the seller/trader). It becomes less transparent if traitants are involved.

• CCC wants sector-wide traceability

• Different opinions about role of traceability: some claim that there can be no market discipline without traceability, while others consider it too expensive for the benefits.

• Traceability is in place, where sustainability performance lacks behind or is not yet measured via monitoring system.

Reward good performance and exclude worst practices and position oneself as buyer of choice

36

II. Strengthening of market demand - next steps


Market alignment and discipline

• Align behind sector-wide agreement upon different levels of FQ (see vision) and worst practices

• Made in Ivory Coast should become a quality marker

• Procurement rewards good performance and excludes worst performance

Buying practices• Position oneself as buyer of first choice

• Increase targeted co-investment in smallholder capacity & finance

Traceability • Move from physical traceability to transparency (monitoring on KPIs)

The has increased its regulation and investments in the sector

37

III. Public sector governance – current and desired situation (1/2)


Regulation where the

market fails *

• After several years of relative laissez-faire policies(during the political crisis), the government is actively increasing their influence in the sector. This has resulted in more dialogue, more support (see below) and especially market governance (see next slide).

• The enforcement of labor laws and land tenure policy is generally weak.

• Land tenure is very complex due to political situation and previous conflict

• The government wants to put in place a national mandatory sustainability norm.

• The government steps in where the market fails. It actively attacks worst practices and creates safeguards for farmers in a market economy.

• Land tenure becomes clearer and more secure

Support mechanisms

by government

*

• ANADER provides TA to farmers and cooperatives but is not consistent in terms of capacity/quality.

• CNRA conducts research (e.g. on swollen shoot) and produces of planting material (but not enough)

• Government distributes pesticides for free, which has a negative impact on the distribution system and can create wrong incentives among farmers.

• Investments in basic services and rural infrastructure lack behind.

• The government invests more in basic services and infrastructure in rural communities (as much as possible complementary to other investments by private sector).

• The government reduces subsidies in the agri-input sector in favor of market based solutions. However, they increase quality control on those inputs.

• The government further strengthens ANADER extension officers to enable them to support farmers not only on cocoa, but also other crops to promotediversification

Market governance seems to have positive effects at farm and sector level but requires further strengthening

38

III. Public sector governance – current and desired situation


Market Governance **

• The Côte d’Ivoire government introduced a fixed price policy that aims to ensure farmers receive at least 60% of FOB price (minimum farmgate price) . This system works pretty well for farmers, although cases may exist where this is not respected. Ivory Coast has raised the cocoa farm gate price to 850 CFA francs per kilo in October.

• A pretty rigorous government led quality control system is in place where quality is controlled at factory gate. Since it has been introduced overall quality has increased drastically. Although cases exist where the rules are circumvented, the regulation turns out to be much more effective than all the voluntary action that has been taken in the past.

• There is a daily forward auction for exports of cocoa beans. Criticism refers to a bias to international buyers with good access to markets and finance compared to national exporting companies (PMEX) and cooperatives (COOPEX), who struggle to meet the financial requirements There are also complaints about the transparency of the selection of the bids.

• In the case the international market will collapse, it may also induce high financial damage to CCC. To mitigate this risk, CCC has set up a reserve fund.

• The fixed prices, quality control and auction system are fully implemented (less fraud). The auction system is made more accessible to PMEX and exporting cooperatives. The CCC ensures the safeguards in place avoid a collapse of the system in case the prices decline.

• The above measures facilitate the reward of FQ (not only product quality).

Strengthen public sector governance by improving and enforcing quality and financing support measures and infrastructure

39

III. Public sector governance – Next steps


Regulation where the market fails

• Improve land tenure regulation

Support mechanisms by government

• Invest in basic services and infrastructure

• Invest in farmer support where complementary to private sector (e.g. in diversification crops)

• Plan divestment financing for the farmers who will move to alternative livelihoods

Market Governance

• Intensify enforcement in quality and pricing politics

• Facilitate participation of PMEX and exporting cooperatives in current auction system

• Manage long-term financial risks of system

Cooperatives are weak unless heavily supported by the industry, but the government intends to make them the dominant model to market cocoa

40

IV. Organization of the production base – current and desired situation


Effective producer

organization for the service

market

**

• Several international buyers actively organize farmers to provide services and buy their cocoa.

• Cooperatives are generally weak. New initiatives and concepts arise to increase professionalism, e.g. Coop Academy (mini-MBA to coop manager) and ICS out-of-the box. There are some differences in how buyers deal with cooperatives; some focus on empowering them others are more active in managing them.

• The development of local service centers enables to organize farmers in a service delivery network without having to build a heavier cooperatives. In many programs, FFS have been developed as mean to transfer knowledge.

• Most traitants also delivery some service to their suppliers such as credits for inputs or schooling fees. Some initiatives try to improve traitant service delivery in sustainability.

• Cooperatives become stronger and bigger and can act as a business unit. They are able to deliver access to services and create value to members. Their access to markets, finance and knowledge is competitive to those of other players (e.g. traitants or exporters).

• Alternative organizations are allowed, such as traitantsnetworks and service provider networks, but quality of service delivery is monitored.

• Farmer organizations and networks put more emphasis and rigor in promoting FQ and removing worst practices (e.g. by performance based service delivery).

• More space for market based service initiatives such as Mars V4C in relation to individual and organized farmers

Effective producer

organization for the

product market

**

• Currently farmers sell their cocoa via traitants or cooperatives. Taking into account the services they provide, the minimum price guarantee to farmers and bad experiences farmers had with cooperatives, there are limited incentives to join a cooperative.

• Meanwhile, the government plans to oblige farmers to become member of cooperatives to market their cocoa

• Some cooperatives have close relationships with theirbuyers

• Idem as above. Flexibility in organizing the market is allowed, but basic rules are enforced on what basis relationships take form (based upon fair contracting principles). Cooperatives have competitive access to markets, finance, information to propose the best deals to their members.

Allow and strengthen a range of farmer organization models based upon fair contracting principles

41

IV. Organization of the production base – next steps


Effective producer organization for the service market

• Strengthen existing cooperatives in service delivery (and promote consolidation of cooperatives)

• Set up local service centers with a business model based upon professional service delivery to good performing farmers.

• Ensure that traitants become more active in high quality service delivery in their network, based upon fair contracting principles.

Effective producer organization for the product market

• Determine fair contracting principles to be applied in the whole sector (with regards to pricing and payments of cocoa and services)

Service delivery is of limited scale and of poor quality Input distributions lacks far behind

42

V. Service providers – current and desired situation (1/2)


Technical assistance *

• No consistency in capacity and quality of ANADER as TA provider

• The private sector is investing increasingly in TA. They either train cooperatives to train farmers, or hire NGOs or ANADER to do this. Their reach is limited but growing. Not all strategies seem to be scalable due to the heavy costs involved.

• Buyer driven TA programs to farmers are competitive (which may impede to share and scale lessons learned, but promote innovation).

• A coordinated approach among the industry is still lacking. Within CocoaAction a new working group will be set up to organize technical assistance. This will be linked to the individual commitments of the private actors. Requirements and goals are coordinated, the approach differs per actor in order to stimulate innovation and protect ownership

• Most buyer programs bundle TA, inputs and finance. Mars CVC model is an example of bundled service provision which gradually excludes the works performers in their model and increasingly is based upon a farmer pay model.

• First tiered curriculae are underway (e.g. Ecom and IFC project).

• Clarity on business case of different practices.

• Consistent TA packages between different providers.

• Service delivery to organized farmers is organized by cooperative, buyers or professional service providers.

• Service delivery to unorganized farmers is ensured via professional service providers (potentially linked to buying centers), traitants or public extension.

• Increase in number and quality of service centers that deliver bundled services to farmers, increasingly paid by farmers themselves.

• Public and private subsidies for training reduce and farmers pay increasingly themselves (based upon a solid business case). The finance for training comes increasingly from the financial sector or buyers.

Recent initiatives are likely to improve the provision of quality inputs

43

V. Organization of the service sector – current and desired situation (2/2)


Input provision **

• The government distributes free low value pesticides. The consequence of this is that farmers expect to be given pesticides which undermines their willingness to invest in this themselves. Different companies, such as syngenta and Cargil also put in place large crop protection projects.

• Fertilizers use is low as overall accessibility is bad and many farmers lack the awareness/willingness or skills to apply them correctly. Currently there is a lot of attention to promote fertilizer use, but not yet a shared vision on in which cases fertilizers makes sense. Undiscriminated fertilizer use may increase yields but could result in a negative ROI.

• Option is to remove subsidies and instead remove input barriers.

• Planting material: the challenge is that the current system works with hybrid seed gardens, and old fashioned nursery systems. The production capacity cannot fulfill the need. Next step would be to improve the infrastructure in order to be able to scale in a next phase.

• Private sector organized grafting and cloning is limited by government

• Currently the traitants play a key role in the provision of credit, inputs and fertilizer as well as some international buyers work directly with cooperatives on fertilizer use.

• The main objective of CocoaAction is to provide the right inputs and the focus is on fertilizer and planting material

• Farmers are aware in which cases it is profitable to use farm inputs. They are trained in their use, have access to them and pay for inputs themselves with a choice of providers (possibly via a farmer organization).

• Inputs are available via a healthy distribution market. Quality of inputs is controlled.

• Planting material is propagated by service providers / industry and controlled/licensed by government. Government focuses on research, breeding and quality control.

• Where subsidies are required to kick-start improvement, they are based upon farmer performance and gradually decreased.

• Soil quality / fertility mapping takes place.

• Space for cloning and grafting of planting material through private sector

There is a sector-wide lack of access to long-term finance for smallholders to rehabilitate or replant plantations

44

V. Organization of the service sector – current and desired situation (3/3)


Financing *

• Most traitants prefinance cocoa (they receive finance from own network of international buyers). In some cases they could also offer loans. This does however a increase dependency towards traitants.

• Farmers have limited access to the financial sector.

• International buyers have access to cheaper finance than cooperatives or national companies. Banks tend not to provide loans to coops because they are not considered to be bankable (some consider certification as a first step to make them bankable).

• For some other crops, such as rubber, farmers can get credit for planting and future income.

• Farmers have access to short, mid and long-term finance (based upon more flexible rules on collateral but more strict rules on FQ).

• Finance is delivered via cooperatives, trader networks and service delivery networks) or individually to smallholders.

• Short and mid-term finance is increasingly offered by banks and micro-finance institutions that become more active in the agri-sector.

• The government and donors facilitate availability of mid- and long-term financing. An option is to set-up a industry guarantee fund linked to a loan wholesale market.

Segment farmers and financing and align on a structured approach to realize sector wide technical assistance and input provision

45

V. Organization of the service sector – next steps


Technical assistance

• Segment farmers in order to be able to select and support the best in class / most potential entrepreneurial farmers

• Clarify and communicate the business case for improved practices and input use

• Support development of local service provision centers (with earning models)

Input provision• Joint industry/government strategy on fertilizer distribution (and financing)

• Promote planting material propagation by third parties, controlled/licensed by government

Finance

• Pilot financing models, including the use of new credit rating tools and methodologies as well as insurance

• Segment which stakeholder is responsible for financing: public, private or blended

Table of contents

46

Introduction



Sector profile

Gap analysis

Priority steps & business case

Appendix – Sustainable Sector Scorecard


47

Conclusions of sector analysis


• (Inter)national platforms agree upon issues, have slightly different visions and rather different strategies

• Increased industry alignment and investments promise good results, although public and private sector investments could be better aligned

• Monitoring farm and sector quality and learning from investments is limited while current assurance systems require improvement


• The government has increased its regulation and investments in the sector

• Market governance seems to have positive effects at farm and sector level but requires further strengthening


• Cooperatives are weak unless heavily supported by industry, but the government intends to make them the dominant model to market cocoa

• Market alignment is limited, but buying practices have improved since the introduction of guarantee price and due to fierce competition


• Service delivery is of limited scale and of poor quality• Input distributions lacks far behind• There is a sector-wide lack of access to long-term finance for

smallholders to rehabilitate or replant plantations


48

Timelines Who involved

Ali

gnm

en

t &

acc

ou

nta

bili

ty

• Strengthen PPPP, ensure effective facilitation and ensure participation of national industry and international donors

Month 1-6

CCC, Ministry, CocoaAction,

• Align the vision on FQ and SQ of the CCC and CocoaAction (develop a step-wise performance path). This alignment could be done in a one-to one process, with the PPPP as main platform for stakeholder engagement.

• Clarify business case for FQ levels of performance

Month 7-12

• Define a national strategy for sector-wide investment (2QC meets CocoaAction) and clarify responsibilities between public and private sector and define targets and KPIs per actor

• Develop a monitoring system including needs of both CocoaAction and public sector which can replace accountability/traceability in the future

• Share lessons learned of industry driven support programs and determine scale-up potential > Year 1 CCC

Mar

ket

de

man

d • Align behind sector-wide agreement upon different levels of FQ (see vision) and worst practices and reward good performance and exclude worst practices

Year 1Cocoa Action

• Invest in supply base mapping/ traceability, but replace its accountability function increasingly by monitoring on KPIs > Year 1

Sect

or

gove

rnan

ce

• Invest in basic services and infrastructure

Year 1CCC

• Continue quality, pricing and auction system, but facilitate participation of national SMEs

• Manage long-term financial risks of system

• Improve land tenure regulation as basic condition for entrepreneurship > Year 1

Org

. of

pro

d.

bas

e

• Promote consolidation of cooperatives and strengthen their capacity to deliver services Year 1-2 Coops, CCC,

CocoaAction,ANADER

• Allow for alternative models of farm organization such as traitant and service delivery networks and promote high quality service delivery and fair contracting principles.

Year 1-2

Serv

ice

pro

visi

on • Segment farmers in order to be able to select and support the best in class / most potential entrepreneurial farmers

Year 1-3CCC,,

CocoaAction, ANADER

• Communicate the business case for improved practices, input use and replanting

• Promote input delivery and planting material propagation by third parties with government controlling quality

• Provide access and financing of fertilizer to the farmers with the most potential for reaching Farm Quality

• Pilot financing models (for fertilizer & replanting), including the use of new credit rating tools as well as insurance

Priority steps

Potential ways for VSS to deliver value in the sustainable market transformation model

49

Potential added value of VSS

I. Sector alignment& accountability

Defining Farm Quality• Provide input in definition of Farm Quality• Develop guidance on how to step up from Farm Quality levels to their standards• Developing standards on quality of service delivery

Monitoring, learning & assurance• Collect, analyze and report data to measure progress on KPIs (audit data could be

part of this)• Provide additional assurance on demand (e.g. could be on a geographical basis or

per supply chain)

III. Strengthening market demand

Traceability• Implement a sector wide traceability system (which links to the monitoring system)• Trace sector wide investments

Claims• Regulate B2B and consumer claims & communication, if any

We have identified 3 interventions and a number of assumptions underlie our model

50

Interventions and key assumptions

Baseline

GAP

Fertilizer

Planting Material

Description Key Assumptions

Farmers continue to farm current crop, productivity declines as trees age

Baseline + additional use of pesticides

GAP + additional use of (subsidized) fertilizer

Farmers replant 100% of their farm

• Yield: 500 kg/ha

• Labor: 45 days/ha

• Max yield: 650 kg/ha


• Pesticide cost: USD 58/ha

• Max yield: 1,250 kg/ha


• Fertilizer cost: USD 300/ha (unsubsidized)

• Max yield: 1,600 kg/ha


• Replanting cost: USD 380/ha

• Farm size: 3.7 ha

• Cost of labor: USD 4.2/day

• Cocoa prices: stable at Sept 2014 prices and 2% annual increase each year (2 scenarios)

• Farm gate price: 47% of world price

• Fertilizer, pesticide, labors cost remain stable

• Initial trees age: 10 years

• Training costs excluded from analysis

• Discount rate: 15%

Sources: ICCO, IITA, IndexMundi, GIZ

Timeframes and key assumptions have a critical impact on the projected outcomes and value of each of the interventions

51

GAP FertilizerPlanting Material

Baseline

Key business case findings Key findings:

• Clear business case for GAP and Fertilizer interventions

• Business case for Planting Materials only with longer-term NPV (15+ years)

• High sensitivity of all interventions to initial age of trees. Planting material becomes vital if starting age is increased to 15 or 20 years. Below adjusted figures for (20-year) NPV, based on initial age of 15 and 20 years:

• High sensitivity of all interventions to future cocoa prices. Below adjusted figures for 20-year NPV based on 2% annual prices decreases and 2% annual prices increases:

1,6001,250

650450

1.72.22.0

5.8

-3.8

1.12.2

1.1Net incomeYr 1/10 (k$)

NPV 10/20 Yrs (k$)

11.1 12.010.4 11.4

14.9

8.6

1.6

14.3

Max yield(kg/ha)

0.12.9 2.2

8.66.77.07.0

8.6

18.812.7 14.1 15.011.510.19.6

3.3

GAP Fertilizer Planting Mat.Baseline

GAP Fertilizer Planting Mat.Baseline

Sources: ICCO, IITA, IndexMundi, GIZ

We have a number of outstanding questions that may influence the outcomes of our projections

52

Outstanding questions

• Should training costs be included in analysis?

• Should family labor be excluded from labor costs?

• Should grafting be considered alongside replanting?

• Should staggered replanting/grafting be considered?

• Are the estimates for labor requirements accurate?

Table of contents

53

Introduction



Appendix – Sustainable Sector Scorecard

1. Sector alignment & accountability (1/2)

54

Sustainable Sector ScorecardDescription * ** ***

Platform for sector dialogue, alignment and coordination

• Representation of all major stakeholders in the sector

• National buy-in and balanced voice different stakeholders

• Management at arm’s length from government – though with government as key stakeholder

• Systems of checks & balances• Clear roles & responsibilities • Commitment of resources• Strong leadership and facilitation

No platform exists.

• A platform exists, but not all crucial stakeholders participate / several platforms exist in parallel.

• Platform exists which includes all major relevant stakeholders.

Shared vision and interest: on Farm Quality and Sector Quality

• With minimum & aspiration levels.

• No actors in the sector promote sustainability or only very isolated activities.

• Strong vision exists, but not shared / sharing of weak vision.

• Different actors promote different concepts of FQ, lower company commitments undermine strong vision.

• Yes, the sector is fully aligned on a strong vision for FQ and SQ.

Joint strategy towards vision, including clear KPIs

• Including clearly defined objectives and KPIs.

• Includes a long-term vision with sequenced milestones. KPIs need to be meaningful, measurable.

• No strategy in place.

• Some strategy exist, but is either weak or not joint (different actors follow different strategies to reach their sustainability objectives of different dimension.

• Clear, joint strategy of the steps to be taken to reach FQ and SQ and clear roles and responsibilities as well as commitments of different stakeholders.

1. Sector alignment & accountability (2/2)

55

Sustainable Sector Scorecard

Description * ** ***

Alignment of investments, technology packages and farmer support methods

• Investments made in the sector are aligned across stakeholder groups (around farm and sector quality and how to achieve that), to reduce duplication in effort and improve efficiency in allocation of funds and effectiveness of joint efforts.

• No alignment of investments in farmer support.

• Some actors align investments and support strategies .

• All /most investments and support strategies are aligned.

Monitoring, assurance and learning

• Monitor to measure progress on FQ and SQ KPIs, to measure impacts and to facilitate sector wide learning.

• Additional assurance could be integrated if there is a demand for it.

• No system in place to monitor the implementation and success of a sector wider strategy.

• Scattered systems exist, but not wide-spread or not efficient enough.

• Primary focus on assurance not on improvement of sector strategy or farmer performance.

• There is an efficient and widespread monitoring system in place (with additional assurance options if required).

• Monitoring results are used to promote learning at sector and farm level

2. Strengthening of demand

56



Market alignment& discipline

• Consistent enforcement of vision on farm and sector quality by all market players in rewarding best performers and excluding worst practices.

• There is no agreement between companies on quality purchasing and discrimination of worst practices.

• Some companies implement quality purchasing and discrimination of worst practices.

• There exist agreements between the major companies in certain landscapes/supply sheds of companies on quality purchasing and discrimination of worst practices. Implementation is monitored.

Buying practices

• Companies compete to become buyer of choice through procurement practices (reliability, payment terms, transparency) that reflect demand for sustainability.

• Buying practices that do not favor FQ.

• Some companies implement buying practices favor FQ through reliability, transparency, capacity building etc.

• Buying practices adopted sector-wide, and favor FQ on a large scale.

Product traceability

• Ensuring products can be traced back to the farm on which they were grown.

• Requires tracking and documentation of some kind (and often for segregation to be built into the system).

• Traceability systems not in place or blocked by market regulation.

• Traceability only in place for a limited number of niche chains.

• Traceability widely implemented in the sector or replaced by monitoringbased systems

3. Public sector governance

57

Sustainable Sector ScorecardDescription * ** ***

Regulation• Where the market fails to

remove poorest quality and worst practices.

• No, many cases where sector regulation falls short or is even counterproductive to realize market transformation.

• Some good policies in place, but poor enforcement .

• In general the right regulation exists and is effectively enforced, removes commodities produced worst quality/illegal practice from the market.

Support mechanisms by government

• Support/subsidies to obtain inputs, research into agricultural practices, crop types, disease etc, infrastructure, basic services (water provision etc), credit and finance.

• Lack of services and infrastructure (R&D, capacity building, energy, water, roads, grades and standards, contract oversight) put whole sector at a competitive disadvantage.

• Services and infrastructure available only to elite farmers or well served areas.

• Basic services and infrastructure in place and accessible to majority of producers.

Market governance

• Overall sector and farm quality can be raised through regulation of supply, demand, transaction systems, price and quality e.g.

• Via minimum prices

• Buffer stock management

• Marketing boards

• Auction systems

• Commodity exchanges

• Counterproductive measures to regulate the market and maintain sufficient value at the producer base.

• Some good and some bad measures / lack of some measures.

• Market governance is either not needed or effective in creating the right economic environment, capture value at the production base.

4. Organization of the production base

58



Effective Producer organization for service market

• The organizational model that enables efficient delivery of high quality extension, inputs and finance

• Producers are not organized in any way to ensure effective access to a high quality and competitive service market.

• The service market is not organized in a way to effectively serve a large number of unorganized farmers.

• While some effective organization models that allow producers to access competitive service markets exist, still many are facing monopolistic service markets or are trapped in trading relationships.

• Farmers are well organized and have access to competitive, high quality service markets.

• Alternatively the service market is organized in such a way to reach out to unorganized farmers and provide them with high quality services at a competitive price.

Effective producer organisation for product market

• The organizational model that allows for efficiency in supply chains, rewarding of quality and capturing sufficient value at the production base to re-invest

• Farmers have no choice where to sell their produce and their lack of market power leaves little room to invest in their farms.

• Larger scale and/or better capitalized farmers are effectively organized to ensure access to a remunerative product market which rewards quality and leads to efficiency in the supply chain.

• Most farmers are organized in such a way that they can access to a remunerativeproduct market which rewards quality and leads to efficiency in the supply chain as well as sufficient value captured at the production base to invest in farm quality.

5. Organization of the service sector

59



Technical assistance

• Good quality extension services are provided to producers to enable the achievement of farm quality, rewards good performance and excludes worst practices.

• The deliverable model is sustainable, accessible, demand driven, participatory, consistent,continuous , available, and bundled.

• Sector is not capable of delivering basic TA.

• Sector delivers some TA, but not as driver for FQ or TA only reaches a very limited number of farmers.

• Sector is able to deliver different levels of TA driving FQ and reaches out to a large proportion of the farmers in need for TA.

Input provision

• Input provision supports farmers in producing farm quality. The deliverable model is sustainable, accessible, demand driven, consistent, continuous available, bundled.

• Sector is not capable of delivering basic inputs or inputs face quality and authenticity issues.

• Sector delivers some quality input provision, but not as driver for farm quality or the services only are available to a limited amount of farmers.

• Sector is able to efficiently/competitivelydeliver quality inputs in ways that are adapted to smallholder farms, driving FQ.

Financing

• Availability, accessibility and relevance of short, mid and long term credit to smallholders necessary to support investments in FQ.

• No formal provision of affordable finance from value chain, banks, warehouse receipts, producer organizations or microfinance base.

• Formal finance only available to large farms with sufficient collateral.

• The financial /private sector provides finance in a competitive and inclusive way, with products adapted to the smallholder majority.

case study: cocoa in ivory coast

Documents