An analysis of the competitive performance of the Cameroonian cocoa industry

Abei, Lauretta (2017-12)

Thesis (MCom)--Stellenbosch University, 2017.


ENGLISH SUMMARY : This study is aimed at investigating the competitive performance of the cocoa industry of Cameroon, 1961 to 2013, together with developing strategic proposals to sustain such performance. A five-step analytical framework adapted from Van Rooyen and Esterhuizen (2012), Jafta (2015), Boonzaaier (2015) and Angala (2015), which accommodate aspects of agri-value chain analysis were applied. Recommendations for improved competitiveness were developed with inputs from the industry. Competitiveness in this study was defined as the ability of the Cameroonian cocao industry to sustain trade in international markets and to attract scarce resources such as land, labour, technology, management talents and capital from other competing economic activities while earning at least the opportunity costs of returns on such resources employed [adapted from the work of Freebairn (1986); Esterhuizen (2006) and Boonzaaier and Van Rooyen (2017). From 1961 onwards, the Cameroonian cocoa industry experienced increased but unstable competitive performance levels. Four different stages of competitiveness were identified over this period, namely: - Phase I: Post-colonial period; centrally regulated competitiveness (1961-1986) - Phase II: The economic crisis and liberalisation period (1987 - 1993) - Phase III: Recovering competitiveness (1994-2007) - Phase IV: Increasing but fluctuating competitiveness with global challenges (2008 onwards) Two data bases were used for measurement, through the Relative Trade Advantage (RTA) calculations, namely FAOSTATS, including only agricultural industry time series data from 1961 onwards and multi-sector/all industry ITC Data from 2001. Multisector-based competitiveness (ITC data) for the industry was generally higher than the agriculture-based competitiveness (FAOSTATS), indicating a lower ranking (RTA values) if only agricultural based information is used to determine competitive performance. Similar performance trends were however recorded for both data sets. RTA values range from 10-50 for the agriculture-based competitiveness, i.e. FAOSTATS and from 46 to as high as 204 for the multi-sector based competitiveness, i.e. ITC data. International comparisons between Cameroon and other major cocoa producing countries showed that, although the competitive performance of the country has recently dropped, since 2001, its performance within the international environment is still highly competitive with average ITC RTA of 79.3; just below Cote d’Ivoire (251.6) and Ghana (156.9). When compared to two other major agricultural exports from Cameroon, namely banana and coffee, cocoa proved to be more competitive. The enquiry included value-chain comparisons between the various value-adding processes in the Cameroonian cocoa industry viz. cocoa beans (primary production) and value-added production, i.e. cocoa butter, paste, powder, chocolate, etc. This analysis revealed that cocoa beans were the most competitive while value-adding processing and manufacturing of chocolate and related products were the least competitive in the chain. An improvement of competitive performances of such local value-adding processes will lead to an overall improvement in the performance of the general industry. Through the cocoa executive survey (CES), where leaders and executives of the Cameroon industry were interviewed, 72 factors were identified to directly influence the competitive performance of the industry. Respondents’ ratings of these factors revealed that 54.6% of the factors were constraining to competitiveness while the rest of the factors (44.4%) were seen to enhance the industry’s performance. This indicates that stakeholders view the general environment as not optimal in terms of enhancing competitive performance with room for improvement, despite the relatively high competitive performance measurement (RTA values) at which the cocoa industry of Cameroon operates. This shows an aggressive attitude striving towards improved competitiveness. The 72 factors were grouped under the six Porter competitive determinants to facilitate strategic analysis and industry level planning, namely production factor conditions, demand and market conditions, related and supporting industries, firm’s structure and strategy, government support and policy and chance factors. Results showed that three of the determinants yielded a positive impact on the competitiveness of the industry, i.e. firm strategy and structure (3.02 out of 5), related and supporting industries (2.89 out of 5) and government support and policy (2.62 out of 5). The other determinants being production factor conditions (2.28 out of 5), demand and market conditions (2.42 out of 5 ) and chance factors (2.22 out of 5) were perceived as constraining with chance factors being the most constraining of them. This indicates that the Cameroon cocoa industry, while performing positively, can strive to increase competitiveness considerably by applying selected industry-based strategies. Possible strategies that enhance competitive performance were considered - extending the recent analytical frameworks used by Boonzaaier (2015) and Angala (2015) - by testing the interrelationships within the Porter Diamond. Statistical comparisons were done between the various determinants and their respective factors to determine such interrelationships. This analysis serves as a guide for the industry as to what determinants/factors need to be dealt with in a coordinated manner or unilateral (single determinant focus) to achieve improvement. Results revealed that the Porter diamond determinants exhibit significant interrelationship except for between production factors and chance and opportunity factors; and firm strategy and industry structure and related and supporting industries. These showed little or no interrelationships. In other words, their influence on the industry’s performance is independent of each other re the improvement of the industry’s competitive performance. This study conducted a value-chain analysis approach where respondents were grouped into functional clusters. Cluster 1 represents stakeholders operating in the primary production of cocoa made up of cocoa producers, input and service providers and cocoa bean exporters (the agribusiness cluster) and cluster 2 actors representing the manufacturers and exporters, i.e. those businesses involved in the transformation of cocoa beans into semi-finished and finished products such as chocolate and chocolate related products (cocoa processors). Although the ratings of these two clusters showed similar patterns, indicating agreement/consensus on relevant factors and determinants, cluster 1 participants generally gave lower ratings than their cluster 2 counterpart did, i.e. stakeholders in cluster 2 were more positive about the industry’s performance. This can be related to their position of more direct exposure to final markets, while agribusiness were more exposed to production risks. From the findings, several industry and government level actions were proposed to improve the competitive performance of the industry. Strategies include production cost considerations such as: investment in input production plants, creation of product technology awareness through advertising campaigns and demonstrations at various points in the chain, the need to expand local research and development facilities inter alia through the development of private research activities, and the identification and accessing of new markets through diversification. Strategies to increase competitiveness also related to human capital training and development, the review of the financial and credit policies by financial institutions to promote innovation and expansion and the review the land tenure system to create a more investment friendly environment. Improved collaboration in value-chain management and analysis through the increased sharing of relevant information (seminars, work sessions and research activities), were also viewed as relevant as such actions will enable more informed decisions and strategies to improve the industry’s performance, in particular between farm-level producers and the rest of the value-chain i.e. increased competitiveness will require improved value chain coordination strategies.

AFRIKAANSE OPSOMMING : Die belangrike rol wat landbou en die kakaobedryf in die ekonomie van Kameroen speel, kan nie genoeg beklemtoon word nie, aangesien dit bydra tot die land se uitvoere terwyl 'n belangrike bron van indiensneming in die land is. Dit is in hierdie lig dat die studie daarop gemik is om die mededingende prestasie van die kakaobedryf te ondersoek, tesame met die ontwikkeling van voorstelle om die prestasies te verbeter. 'n Vyf-stap-analitiese raamwerk, aangepas van Van Rooyen en Esterhuizen (2012), Jafta (2015), Boonzaaier (2015) en Angala (2015) en wat aspekte van agri-waarde ketting analise akkommodeer, word toegepas om 'n omvattende analise van die langtermyn mededingende prestasie van die kakaobedryf van Kameroen tussen 1961-2013 uit te voer. Aanbevelings vir verbeterde mededingendheid is ontwikkel met insette van die bedryf. Mededingendheid is gedefinieer as die vermoë van die Kameroense kakao bedryf om handel in internasionale markte te handhaaf en om skaars hulpbronne soos grond, arbeid, tegnologie, bestuurstalente en kapitaal uit ander mededingende ekonomiese aktiwiteite te lok terwyl hulle ten minste die geleentheidskoste op sulke hulpbronne verdien. [aangepas uit die werk van Freebairn (1986); Esterhuizen (2006) en Boonzaaier en Van Rooyen (2017)}. Vanaf 1961 het die Kameroense kakao-industrie verhoogde, maar fluktuerende mededingende prestasievlakke beleef. Vier verskillende stadiums van mededingendheid is oor hierdie tydperk geïdentifiseer, naamlik: - Fase I: Na-koloniaalse tydperk; sentraal gereguleerde mededingendheid (1961-1986) - Fase II: Die ekonomiese krisis en ekonomiese liberaliseringstydperk (1987 – 1993) - Fase III: Mededingendheid herstel (1994-2007) - Fase IV: Toenemende maar fluktuerende mededingendheid met globale uitdagings (2008 en verder) Twee databasisse is gebruik vir meting, deur middel van die Relatiewe Handelsvoordeel (RTA) berekeninge, naamlik FAOSTATS, wat slegs tydreeksdata vir die landboubedryf en die sektors ITC Data bevat. Multisektorgebaseerde mededingendheid (ITC-data) vir die bedryf was oor die algemeen hoër as die landbou-gebaseerde mededingendheid (FAOSTATS), wat 'n laer posisie (RTA-waardes) aandui as slegs landbougebaseerde inligting gebruik word om mededingende prestasie te bepaal. Soortgelyke tendense vir beide data reekse is egter aangeteken. RTA waardes wissel van 10-50 vir die landbou-gebaseerde mededingendheid, d.w.s FAOSTATS en van 46 tot so hoog as 204 vir die multisektor gebaseerde mededingendheid, d.w.s ITC data. Internasionale vergelykings tussen Kameroen en ander groot kakaoproduserende lande het getoon dat hoewel die mededingende prestasie van die land onlangs gedaal het, is die prestasie binne die internasionale omgewing steeds hoogs mededingend met die gemiddelde ITC-RTA van 79,3; net onder die Cote d'Ivoire (251.6) en Ghana (156.9). In vergelyking met twee ander groot uitvoerbedrywe in Kameroen, naamlik piesang en koffie, neig kakao om meer mededingend te wees. Die ondersoek sluit in waardeketting vergelykings by wyse van tussen die verskillende waardetoevoegingsprosesse in die Kameroense kakao-industrie, naamlik kakaobone (primêre produksie) en toegevoegde waardeproduksie - kakao botter, smeer, poeier, sjokolade, ens. Hierdie analise het aan die lig gebring dat kakao bone mees mededingend is terwyl die waarde toevoeging van sjokolade en verwante produkte die minste mededingend in die ketting was. 'n Verbetering van mededingende prestasies van die verskillende plaaslike waardetoevoegingsprosesse sal lei tot 'n verbetering in die mededingendheidsprestasie van die algemene kakao bedryf. Deur die kakaobestuursopname (CES), waar leiers en uitvoerende beamptes van die Kameroenbedryf onderhoude ondergaan het, is 72 faktore geïdentifiseer om die mededingende prestasie van die bedryf direk te beïnvloed. Respondente se graderings van hierdie faktore het getoon dat 54,6% van die faktore beperkend was tot mededingendheid terwyl die res van die faktore (44,4%) gesien is om die bedryf se prestasie te verbeter. Dit dui daarop dat belanghebbendes die kakao bedryf as minder mededingend sien as die hoë mededingende prestasiemeting (RTA waardes). Dit toon 'n aggressiewe houding deur die bedryf wat steeds streef na verbeterde mededingendheid. Die 72 faktore is gegroepeer onder die ses Porter-determinante om strategiese analise en bedryfsvlakbeplanning te fasiliteer, naamlik produksiefaktor omstandighede, vraag- en marktoestande, verwante en ondersteunende nywerhede, firma strategie en bedryfstruktuur, owerheidsondersteuning en beleid en toevallingsfaktore. Resultate het verder getoon dat drie van die Porter determinante 'n positiewe impak op die mededingendheid van die bedryf gehad het, naamlik firma strategie en bedryfstruktuur (3.02 uit 5), verwante en ondersteunende bedrywe (2,89 uit 5) en owerheidsondersteuning en -beleid (2,62 uit 5). Die ander determinante insluitend produksiefaktor toestande (2.28 uit 5), vraag- en marktoestande (2.42 uit 5) en toevalfaktore (2.22 uit 5) is beskou as beperkinge met toevallingsfaktore wat mees beprekend. Dit dui daarop dat die kakaobedryf in Kameroen, terwyl dit positief mededingend presteer, streef om die mededingendheid steeds te verhoog deur geselekteerde industrie-gebaseerde strategieë toe te pas. Moontlike strategieë wat mededingende prestasie bevorder, is verder ontleed deur die onderlinge verband tussen die Porter Diamond determinante te toets. Statistiese vergelykings is tussen die verskillende determinante en hul onderskeie faktore gedoen om sulke onderlinge verwantskappe te bepaal. Hierdie analise dien as 'n riglyn vir die bedryf oor watter determinante / faktore op 'n gekoördineerde wyse gehanteer moet word. Uit die resultate blyk dit dat al ses Porter diamant determinante 'n sekere mate van onderlinge verhouding toon, behalwe produksiefaktore en kans- en geleentheidsfaktore onderling; vaste strategie en bedryfstruktuur struktuur en verwante en ondersteunende nywerhede onderling, wat min of geen onderlinge verband tussen hul aktiwiteite getoon het. Met ander woorde, hul invloed op die bedryf se prestasie is onafhanklik van mekaar, tov die verbetering van die mededingendheids-prestasie van die bedryf. Die studie het ook die waardekettingbenadering geakkommodeer waar respondente in funksionele groepe gegroepeer is. Groep 1 verteenwoordig belanghebbendes wat betrokke is by die primêre produksie van kakao wat bestaan uit kakaoprodusente, invoer- en diensverskaffers en uitvoerders (die agribesigheidskluster) en groep 2-akteurs wat die vervaardigers en uitvoerders verteenwoordig, d.w.s daardie besighede wat betrokke is by die omskakeling van kakaobone in semi -afgewerkte en klaarprodukte soos sjokolade- en sjokoladeverwante produkte (kakaoverwerkers). Alhoewel die faktorgraderings van hierdie twee groepe soortgelyke patrone toon, wat op konsensus dui oor relevante faktore en determinante, het groep 1-deelnemers oor die algemeen laer graderings gegee as wat hul groep 2-eweknie gedoen het, d.w.s belanghebbendes in groep 2 was meer positief oor die bedryf se mededingende prestasie. Dit kan verband hou met hul posisie van meer direkte blootstelling aan finale markte, terwyl agribesighede meer aan die risiko van primere produksie bloot gestel. Om die waardekettinganalise uit te brei, is 'n hoofkomponentanalise (PCA) uitgevoer om die hoogs gekorreleerde of konsensus faktore te identifiseer en die faktore waarvoor belanghebbendes variasie in menings gehad het. Die identifisering van die konsensus- en nie-konsensusfaktore het die keuse van faktore moontlik gemaak wat gesamentlike/konsensus strategieë vereis het en dié wat unieke / groeperingspesifieke strategieë vereis het om die bedryf se prestasie te verbeter. Vanuit die bevindinge is verskeie strategiese bedryfs- en regeringsaksies voorgestel om die mededingende prestasie van die bedryf te verbeter. Sommige van die strategieë sluit in produksie oorwegings soos belegging in insetproduksie-aanlegte, skepping van produktegnologie-bewustheid deur advertensieveldtogte en demonstrasies op verskeie punte in die ketting, die behoefte om plaaslike navorsings- en ontwikkelingsfasiliteite uit te brei, onder meer deur die ontwikkeling van privaatnavorsingsaktiwiteite; ook die identifisering en toegang van nuwe markte deur diversifikasie. Strategieësluit ook opleiding en ontwikkeling van mensekapitaal, die hersiening van finansiële en kredietbeleid deur finansiële instellings om innovasie en uitbreiding te bevorder en die hersiening van die grondbesitstelsel om 'n meer beleggingsvriendelike omgewing te skep. Verbeterde samewerking in waardekettingbestuur en -analise deur die toenemende deel van relevante inligting (seminare, werksessies en navorsingsaktiwiteite) is ook voorgestel aangesien sulke aksies meer ingeligte besluite en strategieë sal moontlik maak om die bedryf se prestasie te verbeter, veral tussen produsente en die res van die waardeketting, d.w.s verhoogde mededingendheid verbeterde waardekettingkoördinasie.

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