Côte d'Ivoire

Hot chocolate: how cocoa fuelled the conflict in Côte d'Ivoire

Format
Analysis
Source
Posted
Originally published

Attachments

1. Summary

Côte d'Ivoire is the world's biggest producer of cocoa, the main ingredient for chocolate. Yet few of the billions of consumers of chocolate around the world are aware of the role that the cocoa trade has played in the armed conflict and political crisis in Côte d'Ivoire in recent years.

"Cocoa in Côte d'Ivoire is the same as timberordiamonds were in Liberia".(i)
Diplomatic source in Abidjan, June 2006.

Côte d'Ivoire accounted for around 40% of world cocoa production in 2006. Cocoa is the main economic resource of the country, representing on average 35% of the total value of Ivorian exports, worth around 750 bn CFA(ii) per year($1.4bn)(1). Out of a total population of16 million inhabitants, 3 to 4million people work in the cocoa sector(2). About 10 % of the country's cocoa is grown in the rebel-controlled zone in the north; the rest is grown in the government-controlled south.

This report - Global Witness's first report dedicated to the cocoa sector in Côte d'Ivoire(iii) - documents how revenues from the cocoa trade have contributed to funding armed conflict and how opportunities for enrichment from cocoa through corruption and misuse of revenues, both by the government and the rebel group Forces Nouvelles (FN), continue to undermine the resolution of the crisis.

The information in this report is based on in-depth field investigations conducted in Côte d'Ivoire, Burkina Faso and Togo in June and July 2006. Global Witness staff interviewed a wide range of sources in Abidjan in the government-controlled zone; in Bouaké and Korhogo in the FN-controlled zone; in Bobo-Dioulasso in neighbouring Burkina Faso, and in Lomé, the capital of Togo. Those interviewed included cocoa sector officials, cocoa exporters, government officials, diplomats, academics, members of non-governmental organisations and journalists. Further research was carried out in France and from the United Kingdom in 2006.

The profits each side derives from this trade are fundamental to understanding why the main protagonists have not shown greater commitment to solving the political crisis over the past four and a half years. On the government side, the national cocoa institutions, the majority of which were set up after President Gbagbo came to power in 2001, have directly contributed at least 10.6bn CFA (US$20.3m) to the war effort. The big cocoa and coffee exporters' union, the Groupement Professionnel des Exportateurs de Café-Cacao (GEPEX), whose members include multinational companies such as Cargill and European companies such as ED & FMan Holdings Ltd, was represented on the board of the Bourse du Café et Cacao (BCC), one of the national cocoa institutions that decided to make this contribution to the war effort (Section 5.1.1). The country's president, Laurent Gbagbo, and his entourage, who retain control of the national cocoa and financial institutions, have tapped into the profits from the industry, using at least 20bn CFA (US$38.5m) of cocoa revenues to finance their war effort (in addition to the 10.6bn CFA mentioned above). As one insider said: "Of course the government used the cocoa money to buy weapons. Their only mistake is trying to hide it. They should have been open about it."( 4) (Section 5.1.2).

Corruption and political interference in the cocoa sector are not new phenomena in Côte d'Ivoire, but the conflict has provided them with a new dynamic. The deliberately complex structure of the cocoa sector, the appointment of presidential allies to strategic positions in the leadership of national cocoa and financial institutions, and the consequent lack of transparency have presented the government with numerous opportunities to misuse the profits from the trade (Section 6). Regardless of whether the government's attempts to defend its territory against rebel groups can be considered legitimate, its embezzlement of revenues from the cocoa sector to finance armed conflict cannot be justified.

The government's determination to hold on to this cocoa-derived wealth has been demonstrated by a pattern of intimidation against those who have attempted to expose its abuses: journalists, auditors and independent investigators have been threatened and attacked. Cases include the abduction of a French lawyer who was auditing the cocoa sector and the disappearance of journalist Guy-André Kieffer. Audits of the sector have not led to an increase in transparency (Section 7).

On the other side of the zone de confiance, Global Witness estimates the annual average of cocoa revenues accrued by the FN since 2004at 15.1bn CFA (US$30m)(5), because companies exporting cocoa from the FN-controlled zone have to pay an export tax and a registration tax (Section 5.2.1and Appendix II). The FN, despite being part of the government of national reconciliation set up by the peace agreement(iv), have progressively instituted their own parallel tax system, notably on cocoa, which has enabled them to survive as a movement and has allowed individual FN officials to enrich themselves. The FN have imposed a cocoa blockade, preventing northern cocoa from transiting south through the zone de confiance, so that they can secure the taxes for themselves (Section 5.3.1). FN political and military officials have raised a significant amount of money through a multitude of official and unofficial taxes on cocoa and other goods. Global Witness estimates that at least 77,500 tons of cocoa are exported every year from the FN zone, first to Burkina Faso, then to Togo (Section 5.3.2and 5.3.3).

The chocolate industry has a responsibility to ensure that the products it sells are conflict-free; it cannot remain a passive actor. Instead, it should play a positive and pro-active role. Companies should use their influence to ensure that money from cocoa levies is not misused or diverted. This would involve performing extended due diligence on all their cocoa purchases from the region to demonstrate publicly that they are not inadvertently providing money which is being diverted to the warring factions. Companies should also press for all cocoa institutions' accounts to be audited and published, as a way of ensuring that levies paid by exporters are not contributing to financing the conflict.

Cocoa-exporting companies need to operate in a transparent way and publish the payments they make to the Ivorian government and cocoa institutions. In the government-controlled zone, companies, including American multinationals such as Archer Daniels Midland (ADM) and Cargill, continue to trade without appearing to question the use or misuse of the significant taxes and levies they pay to the government and cocoa bodies. Publishing their payments would contribute to improving the management of cocoa revenues by the government and the cocoa institutions, as well as increasing accountability of the government to the people of Côte d'Ivoire, who have the right to know how their natural resources are being used.

Finally, companies should audit their supply chain to find out the exact origin of the products they are buying. For example, companies buying cocoa from neighbouring Togo, through which much of the Ivorian cocoa from the FN-controlled area is exported, may in fact be buying Ivorian cocoa. Companies trading in cocoa from the FN-controlled zone may be in breach of the OECD Guidelines for Multinational Enterprises which require companies to "abstain from any improper involvement in local political activities"(6) In the FN-controlled zone, the willingness of companies to make payments to the FN in order to trade in products from the zone is an additional incentive for the FN to keep a stranglehold on northern cocoa and to resist reunification of the country.

Although diplomatic and other sources may privately acknowledge the links between the cocoa trade and the political crisis, peace talks and agreements in Côte d'Ivoire have so far ignored the issue of natural resources, as well as the corruption and mismanagement in the sector which have enabled it to fuel the conflict. Global Witness believes that governments and inter-governmental organisations, such as the UN, involved in mediation and conflict resolution in Côte d'Ivoire should address both sides' economic agendas directly, as these underpin the crisis; a more open discussion of these economic motivations would be an important first step towards a sustainable solution.

In the meantime, encouraged by a culture of impunity, both sides are reaping the financial benefits yielded by the crisis. Many of the main actors have actively profited from the effective partition of the country: political division has meant economic division, and the cake has been split in two. These divisions have severely threatened the future of Côte d'Ivoire, its economy, and the well-being of its population.

This report provides yet another example of a natural resource contributing to and fuelling conflict. The international community needs to address the issue of conflict resources more systematically, not simply on a resource-by-resource or country-by-country basis A UN Security Council definition of conflict resources would act as a trigger for a coherent and proportional response to that trade, including targeted sanctions and asset freezes where appropriate (see text box: "The need for a trigger for international action to prevent natural resources funding conflict"). The international community should also require oversight of natural resource exploitation by peacekeeping missions and by the new UN Peace building Commission in cases where natural resources have been a contributing factor in a conflict.

Notes:

(i) Timberand diamonds played a central role in funding the conflict in Liberia, as documented in Global Witness reports Taylor Made, September2001, and The Usual Suspects, March 2003.

(ii) The franc CFA is the currency used throughout francophone West Africa.

(iii) The Global Witness report, Making it work: Why the Kimberley Process must do more to stop conflict diamonds, published in November2005, included information on conflict diamonds from Côte d'Ivoire.

(iv) The national reconciliation government brings together the main Ivorian political parties, as well as the rebels

(1) Ivorian Treasury website http://www.tresor.gov.ci/indicateur/cours_cafe_cacao.htm

(2) Ivorian Treasury website http://www.tresor.gov.ci/indicateur/cours_cafe_cacao.htm

(3) Global Witness interview with former cocoa official, Abidjan, June 2006

(4) Global Witness was unable to obtain the official FN revenue figures.

(5) The OECD Guidelines for Multinational Enterprises, General Policies, II.11.