COCOBOD to raise $2bn for cocoa purchases
The Ghana Cocoa Board (COCOBOD) is to raise $2 billion from a consortium of international banks to finance the purchase of cocoa beans in the 2016/17 crop season.
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As a result, the Ministry of Finance has presented a paper to Parliament, asking for approval for the deal which is a receivables-backed trade finance facility.
In the deal, the Government of Ghana would serve as the guarantor.
A Deputy Minister of Finance, Mr Cassiel Ato Forson, who laid the paper on behalf of the Minister of Finance, Mr Seth Terkper, said the facility was to enable COCOBOD to raise adequate funds to purchase cocoa beans from farmers through licensed buying companies (LBCs).
The paper showed that COCOBOD would be required by the Stamp Duty Act, 2005 (Act 689) to pay one per cent as tax on the facility.
The Deputy Minister of Finance thus requested that Parliament waive the stamp duty.
Cocoa production
The $2 billion is higher than the $1.8 billion which was approved and raised by the COCOBOD in the 2015/16 season for the purchase of some 850,000 metric tonnes of the beans.
This year, the board is hoping the country will produce 900,000 metric tonnes of the crop of which the $2 billion would be used to purchase.
Repayment of last season’s loan
As of February this year, COCOBOD had started the repayment of last season’s loan, which attracted an interest rate of 1.19 per cent.
In that month, the first tranche of the repayment, valued at US$285 million, was made.
The rest of the amount is expected to be repaid in seven instalments over a seven-month period.
Indications are that the board would finish the repayment by August this year.
Background on syndication
The cocoa industry has been the backbone of Ghana's economic development over the years.
The industry has created employment for millions of Ghanaians and served as a major source of foreign exchange earner for the government.
Over the years, cocoa production has increased significantly to an all-time high of more than one million metric tonnes in the 2010/ 2011 crop season.
The increase in production levels required substantial financial resources to enable COCOBOD to finance the purchase of the beans.
To that end, the offshore syndicated trade finance arrangement was put in place first in the 1993/4 crop season to enable COCOBOD to secure a loan to finance cocoa purchases.
It had since become an annual transaction that many international financial institutions the world over looked up to.
The amount raised has also risen from $140million in the maiden attempt to US$2billion.