Ghana Seeks R9.35 Billion Loan from Cocoa Traders Amid Industry Challenges

Ghana, the world’s second-largest cocoa producer, is in urgent talks with major cocoa traders to secure a loan of R9.35 billion. This move is part of a broader effort to stabilize the country’s cocoa industry as it faces significant financial and operational challenges.

The Context Behind Ghana’s Loan Request

The Ghana Cocoa Board (Cocobod), the regulatory body overseeing the country’s cocoa industry, is aiming to raise R28.05 billion to support its operations. This includes costs for seedlings, chemicals, fertilizers, and purchasing beans from farmers. A significant portion of this funding—at least one-third—is expected to come from major cocoa traders such as Olam Group Ltd. and Barry Callebaut AG. However, ongoing debt restructuring has complicated these efforts, leading to delays in finalizing the annual syndicated loan that Cocobod typically secures from banks.

Why the Loan Matters

This loan is crucial for Ghana as it enters a new cocoa season in October. The funds will serve as a temporary lifeline, enabling Cocobod to maintain essential operations while negotiations with banks continue. In recent years, Ghana has increasingly turned to cocoa traders for financial support, as delays in securing the syndicated loan have become more frequent. Last season, similar delays forced the country to borrow R7.48 billion in November and another R3.74 billion in March.

The Impact of Declining Cocoa Production

Ghana’s cocoa industry has been hit hard by a combination of unfavourable weather conditions, disease, and a shortage of fertilizers. This has led to a significant drop in cocoa production, from 683,000 tons in the 2021-22 season to 654,000 tons in 2022-23. The International Cocoa Organization projects further declines, with production expected to fall to 501,000 tons by the end of September. This decline in output has contributed to a global cocoa shortage for the third consecutive year, raising concerns among lenders about Ghana’s ability to repay its debts.

Unfulfilled Contracts and Forward Sales Pressure

Adding to Ghana’s challenges are unfulfilled forward sales contracts, amounting to approximately 250,000 tons. Some of these contracts have been deferred over the past three years, adding further financial strain on the industry.

The outcome of these loan negotiations will be critical for Ghana’s cocoa industry as it seeks to navigate these complex challenges and stabilize its operations for the coming season.