Ghana’s cocoa sector, long hailed as the backbone of the nation’s economy, faces a looming crisis as indigenous Licensed Buying Companies (LBCs) struggle to stay afloat.
Dr. Randy Anerley Abbey, Acting CEO of the Ghana Cocoa Board (COCOBOD), has raised the alarm over what he describes as a potential collapse of local cocoa buyers due to the absence of syndicated loan financing.
In an interview, Dr. Abbey revealed that COCOBOD will not be pursuing a syndicated loan for the 2025/2026 cocoa season, a sharp departure from the financing model that has traditionally supported domestic LBCs through seed capital disbursements.
“Something is happening with the LBCs, especially the indigenous ones, which has to do with the fact that we are not doing the syndicated loan,” Dr. Abbey said.
“But 2024/25, low syndicated loans, so no seed fund. Now the indigenous LBCs are unable to operate because there’s no seed money.” He added.
In past years, COCOBOD has relied on syndicated loans sourced from international banks and commodity traders to raise up to US$1.5 billion annually. These funds were used to establish a seed fund, which LBCs leveraged to purchase cocoa beans from farmers during the season. However, amid tightening global credit conditions and high interest rates, COCOBOD has chosen to forgo that financing route.
“Mind you, because of where the prices are today, if we were to go for a syndicated loan, Cocobod will be looking at maybe GH¢3 billion or GH¢3.5 billion and because of the nature of our finances, you even have banks asking for 8% to 10% on $1.” Dr. Abbey noted.
While the decision may save the board significant interest costs, it has created a liquidity vacuum for local LBCs, many of which lack the capacity to raise funds in a high-interest environment independently.
“We’re still doing the 60-40 with the buyers. So it’s the reason why I went to Europe and North America to meet the buyers and all that.” Dr. Abbey explained, referring to COCOBOD’s financing split with international cocoa buyers.
To avert the looming collapse of these indigenous firms, Dr. Abbey has proposed a novel solution to the Bank of Ghana (BoG), a temporary release of a small portion of the Cash Reserve Ratio (CRR), the mandatory funds commercial banks hold with the central bank for cocoa sector support.
“What I then told the central bank when we engaged them was that, look, you have the Cash Reserve Ratio, where all the banks put 25% of their deposits at the central bank. This is idle, not doing anything,” he said.
“Now we have a critical industry, the indigenous LBC dying off. Can we look at apportioning 2% or 3% of this Cash Reserve Ratio just to support indigenous LBCs?”
He emphasized that any such support should be strictly ring-fenced for cocoa purchases to prevent misuse.
“We can restrict it to cocoa purchases, just to ensure that they also don’t go using it for oil, tin tomatoes and all those things.”
The proposal is currently under review by the central bank following a formal letter from COCOBOD. However, Dr. Abbey was clear about the urgency of the situation.
“If we continue with this financing model, I fear that most of them might go extinct,” he cautioned.
