1. Ringvorlesung Globale Güterketten University of Vienna 08.06.2010 Securing supplies in smallholder dominated GVCs: Private regulation of West African cocoa production Niels Fold nf@geo.ku.dk

2. Department of Geography & Geology Content Starting point: the issue of regulation ‘Cocoa basics’ Cocoa frontier dynamics Governance in the GVC for cocoa-chocolate Marketing systems in Africa (SMBs) -The quality issue - Ghana: a special case Emergence of private regulation -The volume issue -Institutional innovations Upgrading Conclusion - key themes

3. Department of Geography & Geology Dimensions 1) Input/output structure 2) Territoriality 3) Governance structure PDCs vs. BDCs (the role of lead firms) Market, hierarchy, captive, modular, relational 4) Regulatory institutions National and international Public or private - ? Internal or external - ?

4. Department of Geography & Geology Cocoa basics (I)

5. Department of Geography & Geology Cocoa basics II

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7. Production and international trade patterns Pronounced flow of beans from South to North - From production to consumption Dominance of few countries - production and processing -Shifting importance of countries Dominance of smallholders in production -The importance of Africa Increasing processing capacity -in some producer countries Regionalisation

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11. Dynamics of global cocoa supply The concept of ’forest rent’ Dynamics of cocoa frontiers (Ruf’s model) -Migration waves -Pest and diseases -Labour costs ’Hollowing out’ Competitive advantage of smallholder production Critique: - Model does not include the role of lead firms

12. Department of Geography & Geology Governance in the GVC for cocoa-chocolate Concentration and centralisation Brand manufacturers - food - chocolate Contract manufacturers (grinders) - food - ’generic chocolate’ Vertical integration - downstream - upstream (domestic purchasing systems)

13. Department of Geography & Geology Structure and actors in the GVC for cocoa-chocolate

14. Department of Geography & Geology Cocoa marketing systems in Africa SAPs – from the late 1980s - liberalisation and privatisation Dismantling of state marketing boards - variations in scope - loss of quality control mechanisms Problems with no quality control - traders increase speed of capital circulation - problem for all processors? A special case: Ghana - state: fixed prices, export monopoly, QCD - private: LBCs, storage, transport

15. Department of Geography & Geology Securing quality and volume: private regulation? Increasing prices (since 2006) - the end of the ‘global frontier’? Supply problems - crumbling of public regulation (MB & ICA) Provoking event: child labour in cocoa sector (West Africa) New players in the organisation of global cocoa production - lead firms, business associations, civil society (NGOs) Institutional innovations (ICI) - responsible labour practices - ‘sustainable’ cocoa production (increasing productivity) Scaling up of ‘best practice’ - organisational division of labour (role of WCF) - certification and verification (Governments & ICVB)

16. Department of Geography & Geology Upgrading Organisational learning (improvement of position of firms in GVC) A) Sequence: Assembly, OEM, (ODM), OBM B) Forms: Process Product Functional Inter-sectoral

17. Department of Geography & Geology Upgrading in agro-industrial value chains 1) Higher margins (unprocessed commodities) Quality, volume, reliability, contracts, hedging Public action: new forms of marketing systems Limitations: easy entry, mature technologies 2) Producing new forms of existing commodities GMOs, customized raw materials 3) Localizing commodity processing Intermediate and final processing Public action: export restraints, investments

18. Department of Geography & Geology Conclusion: Key issues New forms of global regulation - the role and nature of NGOs - the role of public funding Driving forces for institutional innovations - rivalry and competition - capability for collective action in the GVC Spatial impacts on cocoa smallholders - creation of ’certified spaces’ - marginalised areas Alternative model for state regulation? - adaptation of the Ghana cocoa system?

19. Department of Geography & Geology Thank you!