By Edzorna Francis Mensah
Parliament has approved a total of US$800,000,000 syndicated loan to purchase cocoa beans for the 2023–2024 cocoa season.
The motion was moved by Kwaku Kwateng, the chairman of Finance Committee in Parliament, inviting the House to consider and approve the terms of the Agreement (negotiated Rates in the attachment to this Memorandum) for US$800,000,000.
Receivables-Backed Trade Finance Facility to finance the purchase of cocoa for the 2023/24 crop season by the Ghana Cocoa Board; and the waiver of Stamp Duty of 0.5% of the Facility, amounting to US$4,000,000.
The Chairman argued that cocoa purchasing operations by COCOBOD require over US$ 2.0 billion each year, and the offshore syndicated facility is usually sourced by COCOBOD to enable prompt payment of cocoa and payment of margins to other stakeholders.
He said, “the facility also allows COCOBOD to optimise sales and shipments to generate the optimal revenues for financing the cocoa supply.”
For the 2023–2024 cocoa season, the Minister for Food and Agriculture gave approval for COCOBOD to borrow up to US$1,500,000,000.
However, based on a thorough assessment of the world market situation, COCOBOD projected that prices were likely to rise to US$2,600 per tonne and above. Hence, a prudent decision was taken to limit the amount of the facility to US$800,000,000.
The Finance report on the loan said, “in order not to lock in many volumes at lower prices, but to take advantage of better prices in subsequent months.”
The loan will be used to purchase about 47% of the projected 850,000 tonnes of cocoa beans.
The facility will be drawn in two installments between October 2023 and February 2024.
In justifying the loan, the sector Minister at the committee level submitted that ‘the Trade Facility is to enable COCOBOD to raise adequate funds to purchase cocoa beans from farmers through licenced buying companies for the 2023/24 cocoa season”.
The purchasing operations also involve the payment of margins to stakeholders.
Thus, the syndicated facility is integral to the successful management of operations related to the purchasing, quality assurance, storage, and export of cocoa by COCOBOD.
Background
The cocoa industry continues to play a crucial role in the economic development of the country.
The industry contributes significantly to the Gross Domestic Product (GDP), employs over 2 million people along the supply chain, and remains a major source of Ghana’s foreign exchange earnings.
The cocoa sector supports infrastructural development in education, roads, and highways, among others.
Most of the foreign exchange earnings from cocoa are retained in the country, thereby boosting its foreign exchange reserves.