62 Rebuilding West Africa’s food potential
Liberalization and privatization of the sector had become inevitable. In 1996, domestic prices previously
fixed by CAISTAB were partially removed,^3 while CAISTAB’s marketing of cocoa was limited to 15 percent
of annual production, thus leaving room for private operators. Finally, its expenditure and budget were
scaled down. Three years later, in 1999, faced with the limitations of these partial reforms, the govern-
ment invited private operators to be part of CAISTAB’s organigram, while fixing and price regulation were
abandoned. Although this liberalization allowed for greater participation of private actors, the effect on
producers was generally negative because they became exposed to more pronounced price volatility.
Indeed, although producer prices rose immediately after liberalization, they fell in the years immediately
following (as shown in Figure 12 below).Figure 12. Evolution of producer prices (FCFA per tonne) in the cocoa sector in Côte d’Ivoire (1991-2009)Source: FAOSTAT (2012)For small farmers who depend on these crops for their income, negative effects of falling prices (such as
in 2004) can have much longer-term harmful consequences than the benefits gained by temporal price
increases (such as those of 2002 and 2003). One of the criteria for long-term viability of these export
sectors is based on an effective system of price stabilization.In summary, this is a clear example of a value chain controlled by a single parastatal whose singular
objective was to extract maximum rents and revenues, without investing back into the value chain to
ensure sustainability and long-run viability, especially given that the commodity is produced and sold as
raw fruit to a global market that is increasingly competitive and therefore subject to high price variabil-
ity. The value chain was also run with little consideration for including small-scale producers who absorb
a higher share of risk compared with parastatals and private actors downstream. Moreover, there were
no attempts to break the monopolies of multinationals and initiate local processing opportunities or to
introduce market-based risk management instruments. All this condemned the system to become less
viable over the long run. This is also a clear example of how not to have a value chain that is linked to
multinationals and subject to their market controls but run entirely by a parastatal (in this case CAIST-
AB), controlling everything from price regulation to pre-setting each actor’s margin and profits. Such a
system proved to be unstable and incapable of withstanding and surviving such huge swings in world
prices as have happened in the past.(^3) In 1996 they were only removed from group purchasing centres for cocoa beans and from transport costs.