Department of Agricultural Economics

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Browsing Department of Agricultural Economics by Author "Abei, Lauretta"

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    An analysis of the competitive performance of the Cameroonian cocoa industry
    (Stellenbosch : Stellenbosch University, 2017-12) Abei, Lauretta; Van Rooyen, C. Johan; Stellenbosch University. Faculty of Economic and Management Sciences. Agricultural Economics.
    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.