The first tranche of the $1.3 billion syndicated cocoa loan is expected to hit Bank of Ghana’s (BoG) account from October 4 this year.
With pressure on the local currency due to the strengthening of the dollar, the Bank of Ghana (BoG) is likely to sell part of the $1.3 billion cocoa loan to commercial banks.
This would ensure enough supply of dollars to stabilise the cedi.
Ghana Cocoa Board (COCOBO) signed the loan agreement with international banks to fund cocoa purchases and other liabilities for the 2018/19 season, due to open in early October.
The loan agreement was signed in Amsterdam with 21 banks, including Amro Bank, Bank of China, Standard Chartered Bank, Industrial and Commercial Bank of China, and Ghana International Bank.
Some of the local banks involved in the syndicated loan were Ecobank, Barclays Bank, SG Bank and Standard Chartered Bank.
The 2018/2019 syndicated loan would be drawn down in three tranches.
$650m first tranche
The first tranche, representing 50% of the $1.3 billion, which translates to about $650 million, will hit BoG’s account from October 4, 2018.
Second and third tranches
An additional $450 million would be transferred to BoG in November while the remainder is expected to come probably in December this year.
Money will buy 900,000 metric tonnes of cocoa
Chief Executive of COCOBO Joseph Boahen Aidoo said at the signing ceremony that the facility would be used to purchase at least 900,000 metric tonnes of cocoa from farmers.
Loan to be repaid over 12 months
He said COCOBOD would repay the loan over 12 months with an interest rate of Libor plus 0.625%.
Prompt payment to cocoa farmers
“By this event, Ghanaian cocoa farmers are going to be assured of fair and prompt payment for the fruit of their labour – that is cocoa,” he added.
Mr Aidoo said the facility was oversubscribed when COCOBOD outlined its roadmap in London.
According to him, with the facility, COCOBOD would be able to meet its obligation in the crop season.
He said the facility would not be able to address all the challenges confronting the cocoa sector, hence government was in talks with some of the banks to provide medium to long-term financing facility to address those issues.
COCOBOD seeks additional $300m loan
“We had some favourable conversations with some of the lenders to support with $300 million to address the fundamental challenges in the sector,” he added.
Fundamental challenges facing cocoa sector
Aidoo listed perennial pests and diseases, the ubiquitous Cocoa Swollen Shoot Virus Disease, volatility and fall of cocoa prices, climate change and poor road infrastructure linking producing communities to markets and service centres and to the warehouses and the ports as fundamental challenges that contrive against the industry.
968,000 Metric tonnes produced
He noted that within the past 18 months, COCOBOD has been able to reverse the declining trend of cocoa production in Ghana from 778,000 metric tonnes to 968,000 metric tonnes.
Productivity enhancement programmes
According to him, COCOBOD sustained the upturn because of the productivity enhancement programmes such as hand pollination and mass pruning, which COCOBOD introduced along with conventional CODAPEC and HI-TECH measures.
“Even though the annual facility comes in handy to facilitate these PEPs and payment to cocoa farmers, hardly can it be relied upon for addressing the fundamental challenges.
“COCOBOD, for instance, has programmed to undertake irrigation on cocoa farms, rehabilitation of diseased and moribund farms, expansion of warehouse capacity, improvement of the conditions of roads that link cocoa communities and promotion of domestic consumption of cocoa.
“These are largely capital-based projects which require medium to long-term financing and not annual facility.
“The imperative is that so long as these fundamental challenges remain, the full and real measure of the annual facility cannot also be realised,” he added.
Medium to long-term financing
Aidoo noted that it was against the foregoing backdrop that COCOBOD made a call for medium to long-term financing.
“I am happy to note that some of our friends in the international financial sector have responded positively.
“We urge all others who may not have been aware of this call to join this laudable endeavour.
“In essence, the annual facility must be complemented with medium to long-term facility if the former were to bring real and meaningful impact onto the cocoa industry in Ghana,” he said.
He paid tribute to gallant cocoa farmers who have, through their toils, enabled Ghana to achieve this enviable record in the past 25 years.
The COCOBOD Chief Executive noted that the resilience of cocoa farmers in the face of all the challenges has ensured that Ghana continue to produce enough cocoa of premium quality to fulfil contractual obligations to trading partners.
“If you and I are here today, then it is because of our cherished cocoa farmers. Let us together, therefore, assist them to make the industry a sustainable one,” he added.
Aidoo explained that this facility would ensure that adequate funds are made available to the Licensed Buying Companies (LBCs) to pay cocoa farmers promptly for their produce during the 2018/19 crop year.
This, he said, would motivate the farmers to work hard to ensure that production targets are met.
He assure all the banks participating in this syndication that Ghana Cocoa Board is alive to its obligations under this loan agreement and would fully discharge them as COCOBOD has always done.
He also pledged the commitment of COCOBOD to ensure that the cocoa industry remains vibrant and attractive to the international financial market in the years ahead.
How the 2017/2018 funds were utilised
According to documents submitted to parliament, this is how the GH¢5.49 billion was utilised.
Seed fund to LBCs for cocoa purchases – GH¢1,935,325,697.95
CTORs/Cocoa deliverables paid to LBCs – GH¢2,813,860,155.30
Inputs/CODAPEC and Hi Tech Expenses – GH¢395,822,471.63
Operational Expenses – GH¢382,796,675.12
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