Ghana is looking to borrow $400 million from cocoa traders to keep its cocoa industry running smoothly.
This move comes as the country’s government faces difficulties in obtaining its usual yearly loan from international banks, all while dealing with a debt restructuring.
According to Bloomberg, the Ghana Cocoa Board, also known as Cocobod, which serves as the regulatory body for the cocoa industry in Ghana, is seeking financial support from various traders such as Olam Group Ltd. and Barry Callebaut AG.
It is noted that the loan is intended for acquiring seedlings, chemicals, and fertilizers, as well as facilitating the procurement of cocoa beans directly from the farmers, basically, activities related to the upcoming cocoa production season in 2023-24.
According to undisclosed sources that spoke with Bloomberg, the Cocobod has managed to secure approximately half of the intended amount from the involved companies.
The loan is set at an interest rate of approximately 5%.
The Cocobod usually gets loans from investors at better rates than the government. Typically, they do this by meeting with investors between June and July, and they finalize the loan agreement in September before the new cocoa harvest starts in October.
However, this year, things have been more difficult because Ghana had to reorganize its debts, a necessary condition for accessing the $3 billion loan from the IMF this year.
The Cocobod also had to restructure its own 7.7 billion GHC debts, making it less attractive to investors.
There has been a disruption in the cocoa value chain in Ghana due to insufficient funding. In the past, the Cocobod would finance the local buying companies (LBCs) to buy cocoa beans from farmers on its behalf.
However, due to the inability to access funding, the Cocobod has tapped foreign buyers to directly purchase cocoa from the farmers with their own funds which the board will pay back.
This new arrangement has forced many LBCs to shut down.
Irrespective of the challenges, Ghana is projected to produce 830,000 tons of cocoa in this new cocoa season, up from the decades-low 683,000 of the last season.
However, tight supply worries still plague the global cocoa industry.