The Ghana Cocoa Board’s (COCOBOD) report on financial self-sufficiency has come under scrutiny as experts argue that the state-owned cocoa giant will still require international banking support to fulfil its commitments.
According to policy analyst and Honorary Vice President of IMANI Africa, Bright Simons, COCOBOD’s much-publicized decision to move away from 32 years of reliance on syndicated loans from international banks is proving impractical, with the board admitting it will still need to engage in some form of external syndication to meet delivery obligations.
In a post on X, Mr Simons pointed out that COCOBOD’s attempt to position itself as self-sufficient by opting for domestic funding alone is not sustainable.
“Ghana’s state-owned cocoa behemoth (and sole approver of cocoa trading and exporting licenses), Cocobod, finally backs down & acknowledges that it will still need to do a syndication deal of some sort with some international banks to fulfill delivery commitments that it has so far struggled to do,” Mr Simons stated.
COCOBOD’s Chief Executive Officer, Joseph Boahen Aidoo, has noted that the board would no longer seek offshore loans to finance the upcoming cocoa season, describing the decision to self-finance as a bold step towards financial independence, aiming to save $150 million in interest payments and other costs associated with syndicated loans.
“For the first time in COCOBOD’s history, we want to wean ourselves from the offshore syndication,” Aidoo said. He emphasized the need for the board to take control of its finances after 32 years of borrowing from a consortium of international banks.
The move to rely on local banks for cocoa production funding has been presented as a cost-saving measure, but Simons suggests this is a reactive step after COCOBOD failed to close a deal with international banks before the cocoa harvest season, expected to open soon.
This situation is compounded by concerns about the stability of Ghana’s currency, the cedi. Leeuwner Esterhuysen, an economist at Oxford Economics Africa, highlighted the pressure on foreign exchange reserves due to the need for COCOBOD to convert local currency raised from domestic financiers into foreign exchange to import fertilizers and other inputs for cocoa production.
“This means that there will be an initial outflow of forex to purchase inputs and an eventual inflow of forex when the cocoa is sold,” he explained. However, this approach leaves the cedi vulnerable to further weakening, which could disrupt efforts to stabilize the currency.
While the pivot to local banks has been touted as a strategic move, experts like Bright Simons maintain that international transactions remain crucial for the board to meet its operational demands. This suggests that COCOBOD’s reliance on foreign financing may not be entirely over, despite the board’s ambitions.