Ghana Cocoa Board (COCOBOD) is poised to significantly bolster its financial standing by floating commercial papers and bonds on the local market, marking a pivotal shift from the syndicated loan regime. The Chief Executive Officer (CEO) of COCOBOD, Dr. Randy Abbey, revealed this initiative during a media sensitization program, outlining a plan to raise GH¢16 billion annually to finance cocoa production for the next five years.
Dr. Abbey explained that the company intends to float 270-day commercial bonds, representing a substantial amount of funds, with the goal of securing long-term funding for the crop’s future.
The projected proceeds from these bonds will primarily be allocated to servicing outstanding debts, totaling billions of cedis, a significant portion of which is expected to be used to pay off existing obligations, including some debts requiring COCOBOD to incur annual payments of approximately GH¢26 billion over the next three years.
This strategic move follows a period of financial challenges experienced by COCOBOD, stemming from the company’s recent operational difficulties. Dr. Abbey emphasized that the board’s decision was prompted by the need for increased liquidity and a more sustainable funding model for the cocoa sector.
The government views the issuance of these local commercial bonds as a crucial component of Ghana’s economic strategy, believing there is sufficient liquidity to achieve an annual GH¢16 billion revenue goal. Specifically, the government anticipates that the annual issuance of GH¢16 billion will provide a crucial buffer against future financial pressures.
Furthermore, the government has established a special purpose vehicle (SPV) to facilitate the efficient execution of this financing plan. The SPV will aggregate human resources and technical expertise from various sectors to manage the bond issuance process.
The COCOBOD CEO stated that the five-year bond issuance is a key element of the cocoa sector’s funding strategy, alongside the existing refinancing of existing debts.
To illustrate the scale of the endeavor, the company plans to float the five-year bonds annually from this year onward, initially with the first issuance in 2026, followed by a second in 2027, and a third in 2028.
The COCOBOD has also revealed that the new arrangement is a key part of the two-year cocoa season alignment initiative, with the two neighboring countries opening their cocoa seasons in September.
As a result of the new arrangement, COCOBOD has flagged the possibility of smuggling cocoa from Côte d’Ivoire to Ghana, which is causing significant challenges to the country’s economy.
In April, security operatives arrested four individuals for allegedly smuggling over 100 bags of cocoa from Côte d’Ivoire to Ghana, resulting in a significant price drop for the cocoa crop.
The government has also pegged the cocoa price to farmers at $2,600 per tonne, a figure that has fallen far below the global market price offered for the crop.
In addition, the COCOBOD has reported that cocoa prices have plummeted to their lowest level in decades. Notably, the crop that sold for over $4,000 per tonne at the start of 2024, but collapsed at the close of that year, is now selling at $2,500 per tonne on the world market.
The government has also highlighted that cocoa prices have fallen to their lowest level in decades, prompting a strategic shift in the sector, including an alignment of the two countries’ cocoa seasons.
Ghana and Cote d’Ivoire are currently the world’s top two cocoa-producing countries. COCOBOD is the world’s leading producer, with an annual production volume of approximately 2.3 million tonnes, while Côte d’Ivoire is the second largest producer, with an annual production volume of just below one million tonnes.
Dr. Abbey emphasized that the decision to float local commercial bonds is a step towards greater financial stability and long-term growth for the cocoa sector. The new arrangement will provide the necessary capital to ensure the continued success of cocoa production, and will allow the government to achieve the annual GH¢16 billion target. It is expected that the COCOBOD’s financial strategy will have a significant impact on the economy of Ghana.
The COCOBOD also revealed that the decision to align the two-year cocoa seasons is a result of discussions between the leaders of the two countries, as the crop suffered a major hit in global markets this year.
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Source: Graphic Online
