- COCOBOD Says Domestic Borrowing Could Free Half of Cocoa Crop for Local Processing
Ghana Cocoa Board is defending plans to move away from the country’s long-standing syndicated loan model, arguing that greater reliance on domestic financing could reduce foreign-currency exposure and give Ghana more flexibility to retain cocoa beans for local processing.
Jerome Kweku Sam, Head of Public Affairs at COCOBOD, said the proposed financing shift forms part of a broader attempt to restructure the economics of the cocoa industry and allow the country to capture more value before beans are exported.
“When we raise money domestically, the important aspect of it is that, one, the monies are not denominated in hard currency, i.e. the American dollar,” Mr Sam said during a discussion on JoyNews’ PM Express.
For decades, Ghana has relied heavily on annual syndicated loans from international banks to finance cocoa purchases at the beginning of the crop season. The arrangement provided sizeable upfront foreign-exchange inflows but also required future cocoa receivables and exportable beans to support repayment.
COCOBOD’s argument is that this structure has increasingly constrained the country’s ability to deepen domestic processing. If beans are already committed to servicing syndicated facilities, there is less flexibility to redirect larger volumes towards local factories.
Mr Sam said moving towards domestic financing could allow Ghana to retain as much as 50% of production for local processing. “It is going to afford you the opportunity for you to retain 50% of your production where you turn that into local processing, that is the value addition, resulting in the creation of jobs, realizing additional revenue through taxes,” he said.
The proposal addresses a long-standing weakness in Ghana’s cocoa economy. The country remains a major producer of raw beans, but much of the higher-value activity associated with chocolate, confectionery and branded consumer products continues to take place outside Ghana.
Increasing domestic processing could allow more value to remain within the economy through manufacturing, packaging, transport, logistics and related services. It could also broaden the tax base if processing companies expand employment and profits locally.
But the financing change alone will not deliver a 50.00% processing rate.
Domestic processors would need sufficient working capital, reliable power, predictable access to beans and internationally competitive operating costs. Ghana would also need strong demand for cocoa liquor, butter, powder, cake and finished products if additional processing capacity is to operate sustainably.
There is also an important financial trade-off. Borrowing in cedis reduces direct exposure to dollar-denominated debt, but domestic funding is not automatically cheaper. The eventual cost will depend on interest rates, maturities and the depth of Ghana’s local capital market.
A large domestic borrowing programme by COCOBOD could also compete with government and private-sector borrowers for available funds if the financing is not carefully structured. The strength of the strategy will therefore depend on whether the reduction in foreign-exchange risk outweighs the cost of raising capital locally.
Mr Sam nevertheless argued that COCOBOD’s financial position had improved sufficiently to support the transition. “We have because when we came, we’ve been able to pay about 2.5 billion of Cocoa bonds which was raised in 2017,” he said.
He added that another GH¢164 million had been released to investors, presenting the payments as part of efforts to rebuild confidence in the institution’s capacity to meet its obligations.
The financing debate is unfolding alongside a broader political dispute over the new cocoa legislation passed by Parliament and awaiting presidential assent. Critics have questioned whether farmers and other industry stakeholders were adequately consulted before the reforms were finalised.
Mr Sam rejected that criticism, arguing that engagement should be assessed by whether representative groups were consulted rather than whether each of the more than 800,000 cocoa farmers in the country was personally involved.
“There is no way that over 800,000 cocoa farmers that we have, we could have consulted each and every cocoa farmer. That is never possible,” he said.
He maintained that farmer groups, licensed buying companies and local processors were engaged, and said COCOBOD participated in meetings with the Ministries of Trade and Finance ahead of the drafting process.
“The local processors, they have come out to say that they were consulted because I was part of that meeting prior to the drafting of this particular bill,” Mr Sam said.
He also rejected claims that meetings between COCOBOD Chief Executive Dr Randy Abbey and farmers around the country amounted to engagement with politically selected groups. “How can anybody in all fairness say this? It is quite unfortunate,” he said.
Mr Sam further argued that consultation does not mean every proposal submitted by every stakeholder must be adopted. “Cocoa Board is the regulator. So, if you propose something that does not fit well with the board or that does not inure to the benefit of the larger stakeholders, are you to say that because you are a fraction of the stakeholders, yours should be taken?” he asked.
The immediate public debate may focus on consultation, but the deeper test will be whether the new model improves the financial sustainability and competitiveness of Ghana’s cocoa industry.
The sector is already confronting ageing farms, disease, climate pressures, illegal mining, smuggling and the financial challenges facing COCOBOD itself. At the same time, gold has become increasingly dominant in Ghana’s export structure, increasing the pressure on cocoa to deliver more value from each tonne produced.
Moving away from syndicated borrowing could give COCOBOD greater control over the crop and reduce part of its foreign-currency exposure. Retaining more beans for local processing could also help Ghana shift gradually from exporting predominantly raw cocoa towards capturing more value from processing and manufacturing.
But the reform will ultimately be judged by whether the economics work for farmers and the wider industry.
If domestic borrowing proves expensive, processors cannot absorb the additional beans or COCOBOD’s balance sheet remains under pressure, the country could simply exchange foreign-currency risk for higher domestic financing costs.
If the model works, however, it could represent one of the most significant changes to Ghana’s cocoa financing architecture in decades changing not only how the crop is funded, but how much of its economic value remains inside the country.
