GHANA – Cocobod is exploring a loan from cocoa traders to fund cocoa industry operations as the government faces difficulties in securing an annual loan from international banks due to ongoing debt restructuring. 

Cocobod, the regulatory body overseeing the cocoa industry in Ghana, is said to be in discussions with traders such as Olam Group Ltd. and Barry Callebaut AG to secure pre-financing for activities in the 2023-24 season. 

These activities encompass funding for seedlings, chemicals, fertilizers, and the procurement of cocoa beans from farmers, as per sources familiar with the negotiations. 

According to Fiifi Boafo, head of public affairs for Cocobod, the board has taken out loans ranging from US$150 to US$200 million from cocoa traders in order to partially finance the purchase of beans during the current 2023/2024 campaign. 

“But as the syndication process dragged on, it turned to traders to plug the funding gap. The funds will be repaid with the season’s harvest. We engaged with some of the buyers to give us capital for some of the purchase so that the capital is taken care of when we supply them the beans,” said Boafo. 

Traditionally, the regulator secures loans from investors at more favourable rates compared to the government.  

Typically, they do this by meeting with investors between June and July, and they finalize the loan agreement in September before the new cocoa harvest starts in October. 

However, this year, the talks have been complicated by the West African nation’s debt restructuring that was needed to unlock a US$3 billion government bailout from the International Monetary Fund. 

Boafo noted that the parliament would begin the approval process for an $800 million syndicated loan this week. Once approved, Cocobod will proceed to work with partner banks to finalize and sign the loan agreements. 

Challenges in Ghana’s cocoa market 

Meanwhile, cocoa farmers in the West African region are suffering from falling incomes and worsening poverty as the world’s biggest chocolate producers are enjoying large profits while failing to pass on the benefits to cocoa farmers. 

In a response to the scathing allegation, world’s largest food company Nestlé denied these allegations stating that while it ‘cannot influence the farm-gate prices due to the cocoa-trade structure in Ghana’ the company does ‘everything we can to help cocoa-farming families close the living income gap.’ 

Meanwhile, Ghana the second-largest producer of cocoa in the world, may not be able to fulfill some of its crop contracts for a second season due to weak harvest, raising the possibility of a global shortage. 

The actual harvest is now expected to be around 650,000 tons, down from the initial estimate of 850,000 tons by the Ghana Cocoa Board. 

Production is said to have been hampered by a lack of fertilizers, spraying chemicals, and sales to the neighboring Ivory Coast, where a stronger currency is alleged to offer better returns for farmers.