Parliament okays $1.8 billion cocoa loan

Parliament yesterday approved a loan agreement between the Ghana Cocoa Board (COCOBOD) and a consortium of international and local banks for an amount of $1.8 billion for the purchase of cocoa beans for the 2015/ 2016 crop season.

The banks are Barclays Bank Plc, Commerzbank, Aktiengesellschaft, Deutsche Bank AG, Natixis, Standard Bank Group of South Africa and Sumitomo-Mitsui Banking Corporation.

Standard Chartered Bank is the arranger of the facility while the government of Ghana is the guarantor of the loan.
The loan will enable the company to purchase 900,000 metric tonnes of cocoa for the season.

Justification for the loan

The facility is to enable COCOBOD to raise adequate funds to purchase cocoa beans from farmers through Licensed Buying Companies (LBCs) for the 2015 / 2016 cocoa season.

The sourcing of the facility also provides the nation with the opportunity to demonstrate its good track record of borrowing from the international finance market.

Background

The cocoa industry has been the backbone of Ghana's economic development over the years.

The industry has created employment for millions of Ghanaians and serves as a major foreign exchange earner for the country.

Cocoa production in Ghana has also increased significantly since the 1999/2000 crop season, reaching an all-time high of more than one million metric tonnes in the 2010/2011 crop season.

The increase in the levels of production requires substantial financial resources to enable COCOBOD to finance the purchase of cocoa beans.

To that end, the offshore syndicated trade finance arrangement was put in place in 1993 to enable COCOBOD to secure a loan facility to finance cocoa purchases and for other payments each year.

COCOBOD is, however, required by the Stamp Duty Act, 2005 (Act 689) to pay one per cent as tax on the facility.
The parliamentary approval was also sought for the waiver of the payment of the stamp duty on the facility.

Finance Committee's views

Presenting the report of the Finance Committee of Parliament on the facility, the Chairman of the committee, Mr James Klutse Avedzi, urged the House to approve the loan.

He said it would enable the company to raise the needed funds to purchase cocoa for the season.
"Further, the approval of the waiver will also allow COCOBOD to use the entire syndicated facility for cocoa purchases and other related uses," he said.

Deputy Minister reacts

Reacting to the approval of the facility, a Deputy Minister of Finance, Mr Cassiel Ato Forson, told the Daily Graphic that the $1.8 billion facility was not only timely but would also support the ongoing efforts to restore stability on the foreign exchange market and hence impact positively on the macro-economic front.

He stressed that the disbursement of the facility and the anticipated inflows from the euro bond issue and the World Bank facility of $150 million would provide an inflow amounting to $4 billion into the economy in the second half of the year.

That amount, he added, would provide a strong buffer for international reserves and further support the declining pace of depreciation.
“This means that the government will be in a position to sustain the appreciation of the cedi going forward,” he stated.

Mr Forson assured the public that the appreciation of the cedi would continue because of those interventions that the government was determined to sustain.