US$1.3 bn cocoa syndicated loan approved by Parliament

Parliament has approved a US$1.3billion finance facility between Ghana Cocoa Board (COCOBOD) and a consortium of banks and financial institutions, with government as a guarantor, for the purchase of cocoa in Ghana for the 2018/2019 Crop season.

The House, also accordingly, approved US$6.5m tax waiver of stamp duty on the loan facility.

This was contained in a report of the Finance Committee on the terms of a receivables-backed trade finance facility between Ghana Cocoa Board(COCOBOD) and a consortium of banks and financial institutions, with the government of Ghana as guarantor, for an amount of up to US$1billion for the purchase of cocoa in Ghana for the 2018/2019 Crop season.

The Trade facility is to enable COCOBOD raise adequate funds to purchase cocoa beans from farmers through licensed buying companies for the 2018/2019 cocoa season.

The Chief Executive Officer of COCOBOD, Joseph Boahen Aidoo, informed the Committee that for 2018/2019 season, the facility amounting to US$1.3m would be used for cocoa purchases and payment of other liabilities.

He also told the Committee that in the 2017/2018 crop season, COCOBOD needed to borrow GH?2.7million to support its finances.

According to him, the borrowing became necessary as a result of the decline in the world prices of cocoa as well as existing legacy debts.

He also stated that for 2017/2018 crop season, COCOBOD needed to borrow GH?2.7m to support its finances, explaining that borrowing became necessary as a result of the decline in the world prices of cocoa as well as existing legacy debts.

Maintaining producer price of cocoa

According to Mr. Boahen Aidoo, COCOBOD will not reduce the farmer price, adding that it was important to maintain interest in cocoa farming.

He said in recent times, many farmers are divesting their lands into the cultivation of cashew and rubber as well as giving them out for mining. This has adversely affected total cocoa land size.

“A reduction in the current farmer prices would further worsen the already existing situation. Even though many countries have reduced their producer prices in the face of declining world market prices, COCOBOD continued to maintain the current prices in order to keep the farmer in business,” he said.

COCOBOD have also taken measures to improve yield including artificial pollination by using the hand, pruning of cocoa trees and application of fertilizers.

Minority concerns

The Member of Parliament (MP) for Bia East, Richard Acheampong, indicated on the floor of the House that, Parliament should probe COCOBOD on an amount of GH?382m earmarked as operational expenses since at Committee level, officials of COCOBOD failed to explain the details of the amount.

He also bemoaned the suspension of construction works of cocoa roads particularly in the northern part of the Western Region.

On his part, Inusah Fuseini, the MP for Tamale Central, was worried about the approval of the tax waiver amounting to US$6.5m for COCOBOD without having the desired impact on society.

However, the Manager of the Office of the CEO, COCOBOD, Fiifi Boafo, said management is of the opinion that a syndication should not be the source of funding for projects which span beyond a year.

“For that reason the suggestion going forward is that if we intend executing any projects that go beyond a year, what we need to do rather is to secure a medium to long-term funding to take care of projects like this, however what we need to address our minds to is that certain things must be done appropriately and there is the need to put proper structures in place and get it right,” he said.

He also added that they are considering executing some road projects but they are faced with rising debts that they need to deal with.

Background

The cocoa industry has contributed significantly to the economic development of Ghana over the years. Over the years, cocoa contributes about a quarter of Ghana’s Gross Domestic Product (GDP). The industry has over the years created employment for millions of Ghanaians and serves as a major source of foreign exchange for the country.

One of the main functions of COCOBOD is to purchase, market and export cocoa and cocoa products produced in Ghana. To this end the Offshore syndicated Trade Finance Arrangement was put in place in 1994 to enable COCOBOD secure a loan facility to finance the purchase of cocoa and for other payments each year.

This year, the Board of Directors of COCOBOD gave approval for COCOBOD to borrow up to US$1.3billion for the purchase of cocoa for the 2018/2019 cocoa season.