The Ghana Cocoa Board (COCOBOD) has issued a directive to Licensed Buying Companies (LBCs) to prohibit the purchase of cocoa beans from farmers on credit, signaling a significant shift in the industry’s financial landscape. This move comes after a lengthy period of warnings and a commitment to strengthen the cocoa marketing sector’s liquidity.
COCOBOD Chief Executive Officer, Dr Randy Abbey, addressed this issue during a launch of the Chamber of Cocoa Marketers, outlining measures aimed at enhancing payment discipline and operational efficiency across Ghana’s cocoa industry. He emphasized that the directive is a direct response to concerns about payment turnaround times and the potential for LBCs to face financial difficulties.
As detailed in the original article, COCOBOD has formally communicated the directive to all LBCs and explicitly stated that repeat violations will result in the withdrawal of their operating licenses. This action is part of a broader strategy to shorten payment cycles, allowing LBCs to purchase cocoa more quickly and reduce their reliance on bank financing. COCOBOD estimates that the new funding model will provide sufficient liquidity for procurement and related operations throughout the year.
The directive is part of a larger initiative to promote faster payments and bolster the profitability of cocoa marketing. COCOBOD is projecting that the new financing model will eliminate delays in payments to LBCs after they take over cocoa from farmers, a challenge that has been significantly impacting LBCs since 2020. Dr. Abbey highlighted that the previous financing structure, which relied heavily on collateral to secure funding, had restricted access to raw cocoa beans for local processors, hindering Ghana’s capacity to process more cocoa locally and retain a larger share of the value generated.
The new legislation, outlined in the 2026/27 cocoa crop year financing framework, guarantees cocoa farmers 70% of the gross Free on Board (FOB) value of cocoa while allowing producer prices to be reviewed during the season based on market indicators. The reforms are designed to improve the financial sustainability of the cocoa sector, strengthen the cocoa value chain, and ensure greater returns for farmers and industry stakeholders. COCOBOD anticipates that this will significantly enhance domestic cocoa processing and industrialisation.
Specifically, the new financing model includes the elimination of delays in payments to LBCs after they take over cocoa from farmers, a situation that has been a major concern for LBCs since 2020. COCOBOD is also aiming to increase domestic cocoa processing and value addition, reflecting a broader commitment to strengthening Ghana’s cocoa industry.
Furthermore, the new legislation is expected to provide greater liquidity for cocoa procurement, reduce indebtedness, and improve the efficiency of the cocoa marketing system. Dr. Abbey stated that the new financing reforms are intended to create a stronger foundation for growth, increased domestic processing, and greater industrialisation within Ghana’s cocoa sector. The initiative represents a significant reset of the industry’s governance since 1984, with the new legislation replacing the previous framework that had governed COCOBOD since 1984. The government has also secured 30% of Ghana’s gold output by targeting 15 months of import cover by 2028.
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