The failure of Ghana Cocoa Board (COCOBOD) to secure the annual cocoa syndicated loan could push several weak Licensed Buying Companies (LBCs) out of business if alternative funding is not found in time. Many indigenous LBCs, including the struggling state-owned Produce Buying Company, rely heavily on COCOBOD for loans to purchase cocoa beans from farmers.
For the first time in 32 years, COCOBOD has abandoned the annual cocoa syndicated loan after talks with international lenders stalled. The lenders were reluctant to lend $1.5 billion, citing concerns about COCOBOD’s ability to repay due to low cocoa production volumes and previous defaults on cocoa bills—a short to medium-term funding instrument used by COCOBOD.
COCOBOD CEO Joseph Boahene explained that the decision to forgo the syndicated loan was part of an effort to wean the company off international lenders. However, the regulator has increasingly struggled to secure adequate funds at favourable rates. Last year, COCOBOD raised only $600 million, far short of its $1.3 billion target, and secured the funds late in December instead of the usual September timeline. This shortfall forced COCOBOD to seek additional funding from the domestic market.
The concern now is whether COCOBOD can secure sufficient funds domestically to on-lend to LBCs. Without these loans, many LBCs may fold, leading to layoffs and potentially increasing cocoa smuggling as smugglers exploit the situation. COCOBOD is currently negotiating a $500 million loan from companies like Barry Callebaut and Olam Group but may face challenges due to existing debts owed at least one of the two companies to the tune of about $1million since the December 2023 when the deal was struck.
The absence of the syndicated loan also raises concerns about the strength of the cedi. The annual loan traditionally provides a significant foreign currency inflow, supporting the cedi and preventing rapid depreciation. Without it, the government may struggle to stabilize the cedi, which has already lost over 21% of its value this year. On the interbank market, the dollar started selling at GH¢15.72 on Wednesday, up from GH¢15.70 on Tuesday.
Despite the challenges, COCOBOD is hopeful that the upcoming 2024/2025 crop season will see cocoa production volumes increase from 460,000 metric tonnes to 800,000 metric tonnes, following a nearly GH¢943 million investment in revitalizing old and diseased cocoa farms over the past year.
