Ghana’s Cocoa Board (COCOBOD) announced that it has secured a consortium loan of $1.2 billion to purchase cocoa in time for the 2009-10 cocoa year which starts October 1. That’s $200 million more than the amount borrowed for the current cocoa year (see my post last year). Ghana is one of the few countries that has maintained some government control over the cocoa sector despite the calls for privatization that dominated the 1980s and 1990s. The COCOBOD remains Ghana’s sole cocoa exporter.
The cocoa chain in Ghana, as elsewhere, starts with the farmer. The next link are licensed buying companies which buy beans from the farmers. The LBCs then sell the cocoa to the COCOBOD. The COCOBOD determines the price to be paid to the farmer and the margin the LBCs can charge. The board then turns around and exports the beans, thus recovering the funds borrowed. The loan is a receivables-backed trade finance facility, that is, a loan that is backed by the actual beans which will be exported.
Unlike in previous years, the African Development Bank played an important role in getting the loan consortium established. When the world financial crisis hit earlier in the year, Ghana had trouble lining up the usual banks that had financed the cocoa year in the past. This time, the ADB provided a $100 million trade financing package to signal its confidence in the COCOBOD’s ability to pay back the loan. This was the first venture of the ADB into trade financing.
Other banks in the consortium include Société Général and Ghana International Bank. The signing ceremony took place today in Paris.
