Vice President of IMANI Africa, Bright Simons, has alleged that Ghana to sell a portion of its future cocoa production in exchange for securing loans.
Taking to the X platform, he highlighted that the surge in cocoa prices, rising fourfold, has prompted some individuals within Ghana’s cocoa regulator, COCOBOD, to either cancel or renegotiate the existing forward contracts.
According to Mr. Simons, these individuals seek to exploit the lucrative spot market prices, where cocoa can be sold immediately.
He expressed concerns about the potential repercussions of such actions on Ghana’s future relationships with banks.
Renegotiating contracts, he warned, could undermine trust and credibility with financial institutions, potentially affecting Ghana’s ability to obtain favorable loan terms in the future.
“Ghana sells fwd some of its cocoa to collateralise loans. The price of cocoa has quadrupled, so some shrewd operators at Cocobod are looking to back out of various forward deals & squeeze the most out of the spot market. Shrewd, but what about future relationships with the banks?,” he added.
Ghana sells fwd some of its cocoa to collateralise loans. The price of cocoa has quadrupled, so some shrewd operators at Cocobod are looking to back out of various forward deals & squeeze the most out of the spot market. Shrewd, but what about future relationships with the banks? pic.twitter.com/TnIUA0AALo
— Bright Simons (@BBSimons) March 26, 2024
Ghana, the world’s second-largest cocoa producer, sealed an $800 million loan deal towards the end of last year with a consortium of eight banks, led by Cooperatieve Rabobank UA.
According to Bloomberg, sources familiar with the matter, who requested anonymity due to the sensitive nature of the issue, revealed that Cocobod lacks sufficient cocoa beans to support the final $200 million drawdown from the commodity-backed facility.
A spokesperson for Cocobod, Fiifi Boafo, stated that it would not be “prudent” to pursue the additional drawdown. “Management has decided to avoid an overstretch in the repayment,” he added.
Ghana’s funding woes coincide with an anticipated shortfall in the cocoa harvest for the 2023/24 season, projected to reach only about 422,500 to 425,000 tons—half of the initial forecast.
Without timely payments from Cocobod, farmers risk being unable to afford essential resources like seedlings, chemicals, and fertilizers necessary for cultivating healthy crops.
Traditionally, Cocobod conducts an investor roadshow between June and July each year, culminating in the signing of a syndicated facility agreement in September, just before the commencement of the new harvest season in October.
However, complications arose last year due to Ghana’s debt restructuring, delaying negotiations until December.
Consequently, Cocobod secured the loan at an unprecedented interest rate of 8%, much higher than previous rates. Originally slated for disbursement in January, the final tranche remains inaccessible.
Among the participating banks in the syndicated loan were Standard Chartered Plc and Societe Generale SA, further complicating Cocobod’s financial predicament.