Analysis Of Impact On Farmers In Ghana Sociology Essay Example

UK, supplemented by information from various Fairtrade websites and fieldwork conducted by other researchers. Financial assets play a crucial role in driving transformation and progress as they empower individuals to generate income and allocate resources efficiently. As stated by Sen, financial assets improve people's capability to function effectively and attain overall well-being.

The implementation of Fair trade in Ghana has had a significant impact on chocolate farmers and the dynamics of the chocolate market. Fair trade ensures stability by establishing a reliable pricing system, which protects farmers and their families from the unpredictable global market. A study conducted on 30 August 2008 found that more than 80% of Ghanaian chocolate farmers' income comes from chocolate production, making it crucial for their families' well-being. Higher income improves their quality of life, while lower income has the opposite effect. An analysis of sales data from Kuapa Kokoo, a Fairtrade-certified cooperative, over the past decade reveals that each farmer earns an annual income ranging between $150 and $200. The most recent year (2008/09) is likely to have been particularly profitable.

Over the past ten years, the total premium received for community development within Kuapa Kokoo amounts to $3,637,500. Each of the 1,300 small towns that are members of the organization will have $2,798.02 available for community development over a decade. The specific types of installations that can be funded with this amount are open to interpretation. It is important to consider that the calculations mentioned above do not include the cost of certification and annual renewal fees paid by farmers to remain members. These figures correspond with the findings published in Cadbury's report (Barrientos and Asenso-Okyere, 2008).

The table below shows

that a large majority of families still live on less than one dollar per day. The increase in income received from selling to Fairtrade has not significantly improved family well-being and income (Ruben, et al 2009; Thomson, 2005; Booth and Whetstone 2007; Davidson and Wilson, 2008). The current incomes generated solely from chocolate are inadequate to support many farmers and their families. On average, farmers surveyed in this study earned approximately US $0.42 per day from chocolate, and an average per capita daily income of US $0.63 from chocolate and all other sources, which is below the US $1 per day poverty line (Barrientos and Asenso-Okyere, 2008). It has been observed that farmers do not receive the full payment based on the Fairtrade minimum price for their product but rather a diluted amount based on the overall value received from all sources.

The farmers' organization is compelled to sell their products at various prices due to the fact that Fairtrade sales have reached their highest level in 15 years, accounting for only 27% of total sales. This exacerbates the situation and puts illiterate farmers at risk of exploitation as they may accept any payment without question, given the lack of internal control.

Divine cocoa, a company partially owned (45%) by these farmers, Fairtrade, and other stakeholders according to their website (www.divinechocolateshop.com), distributed a dividend of ?47,379 to farmers (approximately 470,000) in 2007 for their fiscal year ending in 2006. Remarkably, this was the first time such a dividend had been paid out despite the company's sales reaching ?8.9 million during that same year.

The company has experienced remarkable growth from ?5 million in 2004 to ?12.7 million by

the end of 2009. However, this considerable growth rate and turnover may negatively impact the livelihoods of the farmers.

According to reports, apart from the two slots held by the husbandman's administration on the board, there are no Ghanaian individuals or representatives from the husbandman who hold positions in senior management at the company. This information can be found in Doherty and Tranchell's 2005 publication as well as the Annual Report for 2008/09. Given Fairtrade's increasing prominence and the substantial retail sales (?195.4 million) generated by these manufacturers over the past decade, it is expected that there will be a more noticeable impact.

Fairtrade Premium

The Fairtrade premium is an additional income provided to Kuapa Kokoo, which is responsible for managing the husbandman's administration. The purpose of this additional income is to invest in community development projects that have been agreed upon during general assembly meetings. However, a study conducted in 2007 by FT revealed that up to fifty percent of this premium is used for administrative expenses (as reported by Fairtrade in 2007 and Davidson and Wilson in 2008). The use of this money is strictly monitored by the administration and its effects are primarily seen at a community level, although some bonuses are given to husbandmen at year-end.

The lack of funds is hindering community-level development. In Ghana, Philip Thompson's documentary film "The Bitter Aftertaste" sheds light on farmers' complaints about the subpar Fairtrade project (Thompson, 2006).

Challenges in Fairtrade income distribution

Upon analyzing Fairtrade's annual report on her website, it becomes evident why producers struggle to escape poverty for themselves and their families. More than 70% of their income is designated for marketing, promotion, licensing, product development, and

management.

The analysis in appendix 4.2 indicates that the extra money paid by ethical consumers in European stores does not benefit poor manufacturers or their country's economy, which heavily relies on primary goods. This supports public rhetoric.

Added Expenses for Farmers

There is also a contention that farming through Fairtrade methods is more costly compared to conventional approaches due to the requirement of increased labor. Farmer organizations certified by FairTrade must adhere to specific standards concerning labor conditions and various criteria related to environmental, economic, and social development. The cultivation of cocoa necessitates extensive labor; however, there is a scarcity of hired workers in this sector. Furthermore, rising labor expenses and high input costs have caused many farmers to forego implementing improved practices and maintaining their farms. Consequently, this depletes the meager Fairtrade price received by farmers.

Access to credit

Lack of or limited access to capital is undoubtedly a hindrance to investment and entrepreneurship. Creating opportunities for subsistence farmers with limited financial capital to access credit in the form of small loans is an initiative that will bring positive change to their livelihoods and provide them with an opportunity to earn future income. Kuapa Kokoo credit union, a branch of Fairtrade co-ops, serves as a rural banking institution that offers small loans to farmers using available premium received. According to Fairtrade regulations, purchasers using a Fairtrade license are expected to make up to a fifty percent down-payment for products in order to assist the farmer with the necessary credit for their farm work and expenses during off-seasons. However, a study by Barrientos and Asenso-Okyere found that access to credit did not significantly affect the

livelihood of farmers. This could be due to the limited funds available considering that only 6.3% of the total products under the Fairtrade label were sold in 2005/06. It is clear that while Fairtrade has minimal direct impact on the financial assets of farmers, there are significant externalities at play.

The battle between FT and the husbandmen has ensured a government that maintains a stable chocolate monetary value and protects the farmers and their families from the impact of constant fluctuations in value. Additionally, the partnership between the husbandmen and Fairtrade, which led to the formation of the Divine Chocolate Company, has had a positive impact on the husbandmen and their families by providing great opportunities for their future. Furthermore, being exposed to the market provides all the necessary information for negotiating contracts with purchasers.

Fairtrade and cooperatives - impact on Ghanaians' cocoa farmers' household social capital

Social capital refers to the community network and wider group connections that families and individuals belonging to various societal groups can draw upon. Social capital obtained from cooperatives can result in access to relevant market information and buyers, employment and business opportunities, formal and informal loans, cash advances, credit inputs, skills development, safety measures, shared resources for production and marketing, and migration opportunities. The SLF model highlights the contribution of cooperatives as mediating agencies in reducing poverty.

Fairtrade cooperatives

The first requirement before engaging with Fairtrade is the establishment of a community-based and self-governed administration by the farmers.

Fairtrade does not have specific standards that focus on enhancing social capital directly. However, its approach, aimed at supporting local cooperatives or producer associations, can indirectly

produce this outcome. The cooperative organization provides its members with a stronger position in the market, decreases competition, ensures sustainability, and achieves more bargaining power. Through this, Fairtrade utilizes cooperatives (the manufacturer's administration) as an agent of change in facilitating access to valuable livelihood assets for farmers and their families in the most efficient and effective manner.

Co-operatives, although not perfect, are believed to have valuable effects on the development of societal capital and community engagement. Research indicates that Fair Trade (FT) enterprises in disadvantaged countries like Ghana have primarily strengthened producer groups' capabilities (such as Kuapa Kokoo in Ghana) and improved their bargaining power. The comprehensive support provided through successful organizational development and marketing assistance within the FT package can generate benefits beyond the commercial value of products traded via FT channels.

Further information about social capital

Social capital refers to individuals' ability to benefit from their involvement in social networks or structures. According to Putnam, social capital encompasses trust, norms, and networks that enhance societal efficiency by facilitating coordinated actions.

Fukuyama defines social capital as an informal norm that is built on trust and honest behavior between individuals or groups. It involves reciprocation within communities and families, which is based on trust arising from social connections. This trustworthiness of social capital can decrease uncertainty in transactions and reduce costs. In summary, it can be said that trust-based social capital leads to higher economic growth. The level of interaction within social networks allows economic agents to reduce transaction costs and partially address barriers to access caused by imperfect markets. Social and cultural institutions can greatly influence the ability of underprivileged families to access resources.

In the survey country, within

the farming community, societal agreements in the form of agric co-ops are used to bridge resource spreads.

Kuapa Kokoo

Kuapa Kokoo is the concerted administration of approximately 47,000 small holder husbandmen in Ghana. It was established in 1993 with 20,000 members from 22 small towns with the aid of Twin Trading, (a UK ATO in Ghana) to protect the husbandmen and their families from development and to benefit from the market liberalization of chocolate in the 1990s and position them favorably to engage with other participants in the chocolate market. It was certified and licensed by Fairtrade in 1994 as a chocolate husbandman co-op. The growth of the co-ops since the time of certification has been overwhelming.

The Fairtrade cooperative in Ghana, known as Kuapa Kokoo, currently has 48,854 members who are husbandmen. Of these members, 28 percent are women. These husbandmen come from over 1,000 small towns. The cooperative's growth and expansion, particularly in terms of gender equality (as they currently have a female president), has been attributed to Fairtrade education. In addition to membership growth, there has also been structural growth with the establishment of four sub-units: Kuapa Kokoo Limited, Kuapa Kokoo Farmers' Trust, Kuapa Kokoo Credit Union, and Divine Chocolate (see appendix 4.5 for more details).

Kuapa Kokoo - Fairtrade co-op in Ghana

Kuapa Kokoo is a cooperative organization consisting of approximately 47,000 small holder husbandmen in Ghana. It was founded in 1993 with the assistance of Twin Trading (a UK ATO in Ghana) and initially had 20,000 members from 22 small towns. The cooperative was established to protect the husbandmen and their families from exploitation and to take advantage of the liberalization of the chocolate market

in the 1990s, positioning them favorably to compete with other players in the industry.

In 1994, Fairtrade certified and licensed a chocolate husbandman co-op called Kuapa Kokoo Limited. This co-op consists of four sub-units that cater to various needs of the husbandmen, their families, and the community. The first sub-unit, known as Kuapa Kokoo Limited, is a commercial and trading unit. It is an accredited Licensed Buying Company (LBC) authorized to purchase chocolate on behalf of the co-op throughout the state. Additionally, it offers training programs and services such as subsidized agricultural inputs. The second sub-unit, called Kuapa Kokoo Farmers' Trust, is a trust fund dedicated to providing social infrastructure for the communities and generating extra income for the husbandmen. This trust is funded through fairtrade premiums and other funds from charity organizations. Finally, the third sub-unit is the Kuapa Kokoo Credit Union. It functions as a rural bank, offering low-interest credit to the husbandmen while promoting a culture of saving.

Divine Chocolate is a UK cocoa company that was established by Kuapa Kokoo (owning 45%), Twin, and spouses. This company utilizes chocolate sourced from Ghana to produce cocoa and various chocolate products. It is challenging to quantify the significant impact, such as membership growth and overall social capital. Nonetheless, based on the co-op's description above, it is evident that trust, bonding, and networking crucial for the members, their families, and the community's growth were successfully attained, reaching an extensive network of 1,300 small towns.

Other impacts of Fairtrade include strengthening of the organization, improved access and utilization of credit, acquisition of assets, as well as changes in expenditure and investment. Fairtrade provides access to networks between cooperative

members and foreigners at various levels within Ghana and the global community through market access in Europe and the USA. This increased sense of confidence is evident from the local and international recognition that this once isolated cooperative now receives. For example, some members have had the opportunity to travel to Europe as a result of their participation in the Fairtrade campaign.

In addition, the level of interaction among members has significantly reduced their cost of living and marketing their products, increased their self-esteem, improved market and export knowledge, and built confidence to negotiate with buyers. Externally, this includes mentoring, where members learn new techniques from others higher up the ladder; allowing members to develop trust and reputation with each other by participating in a credit strategy; and creating opportunities for joint action.

History and importance of agricultural cooperatives

The agricultural cooperatives

The International Co-operative Alliance defines a cooperative as: 'an independent association of individuals united voluntarily to meet their common economic, social and cultural needs and aspirations through a collectively-owned and democratically controlled enterprise.' (ICA, 1995) This definition is supported by seven principles that serve as criteria to determine whether a group of individuals is cooperative: voluntary and open membership; self-governance and autonomy; democratic member control; cooperation among cooperatives; concern for the community.

Instruction, preparation, and information; member financial engagement; Historically in Europe, agricultural cooperatives have been a form of social capital used by peasant farmers to protect themselves against exploitation by middlemen in their struggle for survival (Svendsen and Svendsen, 2005). Before cooperatives were developed, the agriculture industry was controlled by middlemen who impoverished, frustrated, exploited, and

cheated small farmers, as well as manipulated consumers. Cooperatives were also created in response to the growth of capitalism and the rise of large companies that both bought products from farmers and sold goods to them. Cooperative action became necessary to safeguard seemingly powerless farmers from further development (Chirwa et al., 2005; Hussi; Murphy, 1993). Throughout the years, cooperatives have resisted the negative impacts of a rapidly changing environment and have shown resilience during times of crisis. They have provided a privileged platform for discussing and finding solutions to common problems. Various new initiatives, such as Fairtrade, offer hope for a fresh, community-committed, independent, and member-owned agricultural cooperative movement.

Agricultural co-ops establish strategic alliances between large businesses organized as co-ops and smallholder farmer families, emphasizing the need to strengthen the assets of farmers and co-ops. This includes strengthening physical assets such as land and non-material assets such as skills and knowledge. It is essential to also promote comprehensive economic, political, and social reforms that result in genuine participation, social justice, and equity. Birchall argues that cooperatives have the potential to reduce poverty more effectively than other forms of economic organization, as long as their values and principles are respected. However, if members overlook the needs of other potential members or view co-ops merely as instruments for poverty eradication instead of independent entities, this potential may not fully materialize. Similarly, Munkner suggests that co-ops do not directly assist the poor. However, by collaborating, pooling resources, practicing discipline as a group, and combining self-interest with collective solidarity, the poor can collectively address some of their problems through organized self-help and mutual support more effectively than individually.

The sustainability of

co-ops as self-governed concerns is derived from a diverse group of members and clients who provide them with various assets. These assets, such as financial capital, different capabilities, and social capital, are crucial to their success. However, some drawbacks are associated with agricultural co-ops, particularly when they consist of peasant farmers who have limited literacy skills, as is the case in Ghana. Despite this, there is a common understanding among co-op members regarding issues such as member participation, cooperative decision-making, dues, shares, savings, and profit distribution.