The Ghana Cocoa Board (COCOBOD) is seeking to raise GH¢16.3 billion ($1.4 billion) from domestic investors to fund cocoa purchases for the upcoming season. According to a government presentation to investors, the national regulator is turning to domestic debt markets to fund its operations after struggling to finance the sector since its decade-old syndicated loan arrangement with international banks collapsed during the 2023/24 season.
A separate arrangement under which international trading houses pre-financed purchases fell through last season, contributing to delays in payments to farmers. Farmers and buyers have blamed funding challenges for uncertainty over the timing of the new season. The Chamber of Cocoa Marketers, which represents the country's licensed cocoa buyers, warned that financing may not yet be in place to fund purchases once the season opens.
Cocoa Capital PLC, a new special purpose vehicle, is expected to issue a first tranche of debt to raise funds this week, comprising a 2.3 billion cedi bond and 4 billion cedi in commercial paper. Commercial paper with tenors of up to 270 days will be used to finance seasonal cocoa purchases, while bonds with a maturity of up to five years will be used to refinance existing short-term debts held by COCOBOD.
Ghana's cocoa buyers are owed about 4 billion cedis by COCOBOD for last season's crop and want it paid before the new crop year begins. The Chamber of Cocoa Marketers also expressed concerns that the debt could disrupt cocoa purchases in the new season. Ghana and Ivory Coast, the world's two biggest cocoa producers, agreed in June to harmonize their farmgate prices and season start dates.
While Ivory Coast's season opened on September 1, Ghana is yet to announce a start date. Debt repayments will be backed by assigned cocoa export receivables generated from selected forward sales contracts, the presentation showed. Eligible participants in the domestic financing plan include commercial banks, pension funds, insurance companies, stockbrokers, high-net-worth individuals, other institutional investors, and international cocoa buyers.
COCOBOD did not respond to a request for comment on the new issuance. However, it said on X last week that the government had engaged investors, describing the planned issuance as a shift towards mobilizing Ghana's domestic capital market to finance the cocoa sector. The move aims to address the funding challenges faced by the sector and ensure a smooth start to the new season.
The Chamber of Cocoa Marketers and other stakeholders are closely monitoring the situation, as the cocoa sector is a significant contributor to Ghana's economy. The successful implementation of the domestic financing plan will be crucial in ensuring that cocoa purchases are made on time and that farmers receive their payments promptly.
Key points
- Cocobod seeks GH¢16.3 billion ($1.4 billion) from domestic investors to fund cocoa purchases.
- The domestic financing plan aims to address funding challenges faced by the cocoa sector.
- Debt repayments will be backed by assigned cocoa export receivables.
