Business & Markets

Ghana to struggle to repay $1.3bn cocoa loan

Ghana Cocoa Board (Cocobod) may struggle to fully pay back loans totalling $1.3 billion as this season’s harvest will likely be smaller than first anticipated, according to the head of the industry regulator.

The world’s second-biggest grower signed for the loans with lenders such as Credit Agricole SA and Natixis SA prior to the start of the annual harvest in October to pay farmers for their beans.

The Chief Executive Officer of the regulator, Mr Joseph Boahen Aidoo, said Ghana would probably not meet its target of 850,000 metric tons due to dry weather and plant disease.

The CEO said while recent rains may improve yields in the smaller harvest that runs from June to September, they may not be sufficient to make up for losses suffered in the main harvest.

He declined to give a new forecast for the crop.

“We are only praying that we’ll be able to meet our collateralised facility because the crop wasn’t as good as anticipated,” Aidoo said. “We just started paying the first instalment in February.”

He said the board purchased 625,111 tons of cocoa for the season up to Feb. 22, compared with 640,075 tons for the same period in the previous crop season, according to a source familiar with the matter.

Mr Aidoo said while Ghana may not achieve its forecast for the season, it is already selling cocoa at a loss after it chose not to lower prices for farmers even as global prices slumped by a third from July 2016 through the end of last year.

It would be recalled that the cocoa regulator was said in February (last month) to be losing the equivalent of about $600 for every ton sold this season.

According to data compiled by Bloomberg, the board is in talks with the government on ways to pay for operational expenses and liabilities as the cost of debt on local markets is too expensive.

The data say over the past year, Cocobod sold bills and notes at rates of as much as 22%.

“We are still discussing with government and we’ll find some solutions,” Mr Aidoo said.

For the next harvest, the cocoa board will target a harvest of 900,000 tons and again seek to raise $1.3 billion in syndicated loans, Mr Aidoo said.

Last month, the International Cocoa Organization forecast a 900,000 tons harvest for the season. Neighboring Ivory Coast is the top global producer.

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