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March 08, 2011

Gbagbo attempts government control of Ivorian cocoa trade; industry sceptical

by Ange Aboa

A move by Ivory Coast's Laurent Gbagbo to take the cocoa sector into state hands left the industry sceptical on March 9, with officials doubting he had either the cash flow or expertise to make it pay.

The world top grower's cocoa sector has been paralysed by a violent power struggle over a disputed November election that has killed hundreds, brought the country to the brink of civil war and pushed cocoa futures to 32-year highs.

Gbagbo has defied calls to step down after U.N.-certified results showed him the loser of the poll. His decree issued late on March 7 appeared to be a bid to maintain a grip on his government's main source of revenues.

But industry players said the near-collapse of the local banking system and the logistical demands involved in bringing beans to world buyers could thwart Gbagbo's aim of installing the state as sole purchaser and exporter of the crop.

"The problem is, how are they going to pay the farmers for the cocoa given that the country has barely any banks or money left?" asked an Ivorian sector source, who like others contacted declined to be named on commercial and security grounds.

A second industry source questioned how the state would handle the transport, conditioning and storage of beans even before they were made ready for export.

"From afar it all looks easy. But there is a huge machine behind each kilo of cocoa that comes to port. Does the government have the time, the means and the manpower to do all that in the time required?"

Under the decree read out on state TV late on March 7, the state would purchase beans from farmers at a set price and would then seek to get it to world markets, replacing the role of exporters who have widely followed a call by rival presidential claimant Alassane Ouattara to suspend supplies.

"The export of products in the coffee and cocoa sector are to be carried out by the state, by those mandated by the state, or holders of an exporter's licence under terms determined by the decree," state television said.

However, the logistical challenges are made all the more daunting by the fact that the Ouattara call for an export ban, together with an EU interdiction on its ships using Ivorian ports, has left 475,000 tonnes of unexported cocoa beans sitting at Ivorian ports -- over one third of the total crop.

"The problem for cocoa right now is storage. The stores are not sufficiently aired to keep the beans there for weeks on end -- it's okay for 10 days at most and we have been storing since January 15-20. Quality is becoming an issue and that is our main concern," said the second source.

A third industry source said if the decree applied to existing stocks of cocoa -- potentially meaning a mass requisition of cocoa beans worth hundreds of millions of dollars -- the impact on the sector would be "catastrophic."

"The decree itself doesn't say anything about that. We are looking to get clarifications on that point."

But even if the Gbagbo administration seized the hundreds of thousands of tonnes of cocoa beans in storage, many doubted he would find buyers, given Western government pressure on large exporters not to cooperate with Gbagbo.

"It's not like the old days when the Russian government bought all the cocoa and then allocated it to various factories," said another sector source. "Gbagbo won't be able to sell it as none of the multinationals can touch it."


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