Top cocoa-growing nations, Ghana and Cote d’Ivoire, have applied to the African Development Bank (AfDB) for financial support worth US$1.2 billion to help mitigate the impact of falling cocoa prices on their respective economies and their cocoa sectors in particular.
The loan is expected to help cushion the losses that the two countries have so far suffered after prices of the crop declined from around US$3,000 per tonne in July last year to hover around US$2,800 per tonne in the first week of September.
In the case of Ghana, the AfDB support is expected to help better the financial constraints of the Ghana Cocoa Board (COCOBOD), which is now borrowing at 25 per cent to pay for cocoa beans.
The Minister of Food and Agriculture, Dr Afriyie Akoto, told the Daily Graphic on September 5 that the quest for financial support from the AfDB was one of other initiatives being explored by the two countries in the wake of the falling prices.
Ghana and Cote d’Ivoire account for about 65 per cent of global cocoa supplies, with beans from Ghana being touted as premier and, therefore, sold at a premium of about 15 to 20 per cent above prevailing global prices.
Since the weak prices started in January this year, Dr Afriyie-Akoto said, the two countries have lost a total of US$2.5 billion, with Ghana’s loss estimated at around US$1 billion.
Beyond reducing productivity in cocoa business, the decline in prices threatens revenue estimates from cocoa, which were pegged at GH¢3.92 billion in this year’s budget.
The AfDB support is, therefore, expected to help bail the two countries out of the situation, the minister said.
Beyond being a challenge to the economies of the two countries, the minister said the consistent decline in cocoa prices was “a mystery to everybody”, given that it was not supported by any of the factors known to be influencing price falls.
“The decline does not reflect the fundamentals. There has been a steady growth in world consumption of cocoa and production has not gone through the roof for us to have this slash in prices,” he said, explaining that the situation had put the two top growers of the crop in a tight corner.
He said the ministry and the board had so far suspended the project to allow for an audit to be completed.
He, however, explained that the leadership of the two countries had resolved to find an amicable solution to the problem, through series of interventions that included the issuance of a joint communiqué by the two Presidents earlier this year.
Also, COCOBOD and its Ivorian counterpart, the Council of Coffee and Cocoa, have signed an accord that mandates the two institutions to work together to help enhance the interest of their stakeholders.
Given that cocoa prices are not within the domain of the two countries, Dr Afriyie-Akoto said both states “will have to harmonise our trading regimes so that we can influence the market in a positive way.”
“This is why we set up a joint commission between the two countries and they are working steadily towards this goal,” he said.
Suspension of roads project
To help ensure smooth carting of cocoa beans from farms, COCOBOD has made road construction a major part of its activities in recent times.
However, excessive expenditures have meant that the board has overstretched its purse, leading to debts.
Dr Afriyie-Akoto disclosed that although the board had budgeted to spend some GH¢1.6 billion on the cocoa roads over the last four years, a recent review revealed that commitments exceeded GH¢5 billion as of December last year.
This is one of several other acts of financial indisciplines in the past that is now threatening the smooth operation of the board, he said.
He disclosed that the ministry and the board had so far suspended the project to allow for an audit to be completed.
He, however, gave the assurance that his outfit had resolved to help reverse the trend through prudence and professionalism.
Over the past five years, Ghana’s cocoa production averaged 800,000 tonnes and is now expected to rise to one million tonnes following the distribution and planting of some 120 million seedlings of hybrid cocoa that is disease-resistant and high yielding.
The distribution started in the 2014/15 cocoa season and was meant to replace the ageing and diseased plants, which are estimated to be about 33 per cent of the national cocoa tree stock.