Ghana’s cocoa sector is facing significant changes as the Ghana Cocoa Board (Cocobod) increasingly depends on top foreign exporters to finance the purchase of cocoa beans, marginalizing local buyers. Due to challenges in securing a $1.5 billion loan from international banks for the current season, major exporters like Cargill Inc., Olam Group Ltd., and Barry Callebaut AG have stepped in to provide loans to local licensed buying companies (LBCs), which purchase beans directly from farmers.
For decades, Ghana relied on annual loans from global banks to pre-finance cocoa purchases and provide essential inputs like fertilizers and pesticides to farmers. While Cocobod aims to reduce its reliance on external loans, this new financing model is raising concerns about the erosion of government control in the sector. This shift comes at a time of tight global cocoa supplies and high prices, driven in part by poor harvests in both Ghana and Ivory Coast, which have caused trader losses and pushed cocoa futures to record highs.
The new system has sidelined many local LBCs, leaving only a few, mostly those backed by foreign exporters, actively purchasing beans. This has raised concerns that the regulator may not have sufficient funds to support farmers with subsidies until its commitments to these foreign buyers are met. While this system may function temporarily due to high cocoa prices, there are fears that farmers could be left with unsold beans when supply improves and demand eases.
Ghana’s cocoa harvest is expected to fall 20% below earlier forecasts, with approximately 650,000 tons anticipated for this season. Cocobod’s role as a stabilizer for the market and protector of farmers is being questioned, with some industry experts warning that the increasing control of foreign buyers could weaken the board’s ability to shield farmers in the long term. Additionally, local LBCs are struggling due to slow repayment rates from Cocobod, further limiting their ability to compete with the foreign-backed firms that now dominate the sector.
The cocoa sector has been struggling in the past four years, posting significant negative growth in the last quarter according to recent data released by the Ghana Statistical Service. The challenges have equally manifested on the streets of the major cities of Ghana, as popular confectioneries produced in Ghana such as chocolate have become expensive and out of reach of many retailers and hawkers who depended on them for their sustenance.
