Validating the Living Income Benchmark for Cocoa Growing Regions of Ghana

Author Stephanie Daniels

Food Lab Value Chain Partnership Manager
Sustainable Food Lab
Stephanie Daniels (left) speaks with attendees during the 2018 Learning Meeting

On July 10, 2018, leaders in Ghana’s cocoa sector came together in Accra with the global chocolate industry to provide feedback on the draft living income benchmark study for cocoa growing regions of Ghana. The Living Income Community of Practice, in collaboration with the World Cocoa Foundation (WCF), hosted the workshop on the methodology and results of the costs of a decent diet, housing, and other essentials for a decent standard of living during the 2018 WCF Learning Meeting.

Stephanie Daniels from the Sustainable Food Lab facilitated the meeting, introducing the concept of living income and the background of the initiative among chocolate companies, NGOs and donors. A few of the members of the Steering Committee – Cargill, Fairtrade International, GIZ, Kuapa Kokoo Ltd, Lindt Cocoa Foundation, Mars, Incorporated, and Rainforest Alliance– shared their organizations’ interest in having a third party, credible assessment of the costs of living as a benchmark for use in their internal programs.

For Cargill, one of the funders of the study, it is important that a third party sets the living income benchmark. “If we were to do it alone as a company, it may not be seen as credible to external partners,” says Ywe Franken, Cargill cocoa sustainability expert. “It will help us track progress for the farmers we work with.”

Samuel Adimado, Kuapa Kokoo Managing Director, described the income diversification the farmer organization does with their members on yam and cocoa by products. “This living income benchmark will help us measure the progress and whether or not our investments are doing what we expect them to do. We want to know how we invest to best impact our farmers.

STUDY OBJECTIVES

The Ghana Living Income Benchmark study, and the parallel study being conducted in Côte d’Ivoire, intend to: 1) create credible, robust costs of a decent living assessments for the critical cocoa growing regions of both countries and 2) contribute to the learning about how to calculate and use a living income benchmark for smallholder farmers.

The research team was led by Sally Smith, with analysis and field work from Dr. Daniel Sarpong and enumerators from the University of Ghana. The study followed the Anker methodology[1], and fieldwork was done in March-April 2018 in cocoa districts in Ashanti, Central, Eastern & Western Regions.

FINDINGS

The estimate of a living income in rural cocoa growing areas of Ghana (Ashanti, Central, Eastern, and Western Regions) is GHS 1,464 ($329[2]) per month for a family of five people.[3]

Table 1: Breakdown of living income benchmark for a family of 2 adults and 3 children in rural cocoa growing regions of Ghana (Ashanti, Central, Eastern and Western Regions).

Item GHS per month USD per month
Food costs per month 757 170
Housing costs per month 198 44
Non-food non-housing costs per month 439 99
Additional 5% for sustainability and emergencies 70 16
Total costs per month for basic but decent living standard for family of 2 adults and 3 children  1,464 329

Source: S. Smith and D. Sarpong, 2018 (forthcoming)

HOW DO WE COMPARE ACTUAL INCOMES WITH THE BENCHMARK?

The Royal Tropical Institute (KIT) is exploring approaches to using their broad 2017 baseline data from Demystifying the Cocoa Sector’ (full report forthcoming) to compare actual incomes to the living income benchmark. Roger Bymolt from KIT presented an initial analysis in Accra.  This analysis will be further developed and included as a companion report to the cost of living reports in both Ghana and Côte d’Ivoire.  There is no established methodology yet on how to compare actual incomes to a living income benchmark.  In living wage benchmarks, the wage is calculated for the adult workers in a family and compared with minimum and prevailing wages.

The living wage gap is much easier to measure than living income gap. They are conceptually similar but are practically very different,” said Bymolt. “Understanding household income requires us to know how each member contributes to total household income, how many sources of income and what these are, the net income for each crop produced and sold, contribution of each income source to total HH income (share), and an estimation of the market value of the family’s own production consumed.”

KIT’s ‘Demystifying’ study collected data on net revenues for cocoa and non-cocoa crops and they are analysing this data for three clusters of farm types: female headed households, typical male headed households, and large male headed households.  The 5 person family LI benchmark was adjusted for the family sizes found in the study for these farm types.  Preliminary analysis show a range of results for these farm types, however the analysis will only be finalized and published in September 2018.

A critical issue in income studies is how to put a value on the crops grown on the farm and consumed in the home.  Given that on average, food costs are 51% of expenses in poor Ghanaian household expenditures, accurately valuing these self consumed crops is important to an accurate income estimate.  Other critical issues are how we consider both asset based results and income results; and the necessary adjustments for inflation to enable accurate comparisons of data gathered at different time periods and with different exchange rates.

DISCUSSION

The draft Living Income Benchmark report was shared both in this workshop, with two departments of the Ghana Cocoa Board and the Steering Committee. Among the feedback received, some of the critical issues for the research team to consider in the last phase of finalizing the report include:

  • There remains confusion about the differences between the benchmark, which calculates the cost of basic needs, and actual incomes which includes the costs of farming, taxes and other household and farm expenses, which are not included in the benchmark study. (Note: there are explanatory resources on the website here: https://www.living-income.com/the-concept )
  • The most significant questions are regarding how actual incomes should be measured, and the difficulty of comparing those to a benchmark in a consistent way.
  • What do actors do with the benchmark? There should be a good discussion section in the report of possible uses, without prescribing any one particular action of policy change.

CLOSING THE GAP

Following presentation on the benchmark and the actual income comparison, the balance of the day was dedicated to different perspectives on increasing farmer incomes and livelihoods. Abubaker Afful of Fairtrade Africa presented Fairtrade’s living income model, their actual income study from Core d’Ivoire and their approach to calculating a living income reference price. Nira Desai of WCF introduced the goals of the their learning sessions focused on understanding and sharing evidence on effective ways to improve farmer livelihoods.

Yaw Amekudzi of Mondelēz facilitated a View from Origin panel with Mamadou Gbongue, of the Conseil du Café et Cacao and Emmanuel Opoku of Cocobod on the governments’ vision for improving farmer income and livelihoods. The day concluded with an interactive session on farm economic modelling and income improvement. Two WCF member companies – Cargill and Ecom – presented their farm economic models and strategies to both optimize cocoa and incorporate non-cocoa crops.

Please contact Stephanie Daniels sdaniels@sustainablefood.org if you would like to provide feedback on the study (deadline July 20 for formal comments to be considered) and/or be put on the list to receive the final study in September.  For more information about the Living Income Community of Practice, visit the website at www.living-income.com.

[1] The ‘Anker methodology’ was developed by Richard and Martha Anker, experts formerly at the ILO and WHO, and is grounded in international standards of decency. It is used to calculate the benchmarks produced by the Global Living Wage Coalition. It is designed to be globally applicable and locally adapted, transparent, and practical. It uses both national statistics and primary data from field work to calculate the cost of a basic but decent standard of living for a typical size family.

[2] Exchange rate for 1 March 2018 (midway through primary data collection) was 1 USD to GHS 4.45.

[3] Updated after validation workshop, August 2018.