Cocoa loan will not add to debt stock…as Parliament approves US$1.3bn syndicated loan
Deputy Finance Minister, Kweku Kwarteng, has disclosed that Cocobod’s US$1.3bn syndicated loan would not add to government’s debt stock and that only a portion would be used for collateralization.
Mr Kwarteng stated that: “We do not even need the entire US$1.3bn for collateralization, only a bigger portion of that would go for the purpose. The rest would go into the provision of related services, scholarships, and the construction of cocoa roads. The fear that we need some US$1.7billion for the collateralization in unfounded.
I would like to assure my colleagues that we have borrowed, that has not added to our debt stock as central government borrowing, why should we have a fear, it is because we considered that Cocobod can borrow on their own books and it would be counted as their own borrowing,” he said.
Minority Leader, Haruna Iddrisu had sought assurances from the Finance Ministry on the issue of default risk and other interest payments on Cocobod’s investment, whether is used in offsetting other activities of Cocobod.
His comments follow Parliament’s approval (US$1,300,000,000) One billion, three hundred million dollars for the purchase of cocoa for the 2017/2018 crop season.
The object of the facility is to raise adequate funds to enable Cocobod to purchase cocoa beans from farmers through licensed buying companies for 2017/2018 cocoa season.
The US$1.3billion trade finance is being provided by a syndicate of banks with Natixis, Standard Bank of South Africa Ltd, Credit Agricole Corporate and Investment Bank, Sumitomo Mitsui Banking Corporation(SMBC) and Ghana International Bank as the Initial Mandated Lead Arranger (IMLAs).
Section 32(6) of the Stamp Duty Act, 2005(Act 689) requires loan documents to be stamped at 0.5% of the loan amount.
In order to ensure that the trade finance facility is used solely for the purchase cocoa beans and related expenses, the facility was also exempted from the payment of Stamp Duty Act 2005 (Act 689) amounting to US$6.5m (US$6,500,000).
The CEO of Cocobod, Joseph Boahen Aidoo, noted that the funds would be used for the payment for produce from farmers, buyer margins, internal marketing operations, and farmers services, among others.
The projected cocoa purchases for 2017/2018 crop season is 850,000 metric tonnes, with the first expected drawdown by October, 2017 with the expected amount of US$700m (GH?3,150million).
Cocobod is targeting a production of 850,000 metric tonnes, as a result, a number of measures have been put in place to assist it achieve the target.
Hand Pollination of Cocoa
One of the major interventions is artificial pollination by the use of the hand. Cocobod said the natural pollination was not very effective and, therefore, has rolled out hand induced pollination programme to augment the existing pollination of the cocoa trees.
To do this, 10,000 personnel have been recruited to assist in the exercise. An additional 20,000 more personnel are expected to be engaged to assist in training farmers in hand pollination by November.
It is expected that the pollination programme would assist in increasing production significantly.
Though the trade finance loan for the 2017/2018 crop year of US$1.3billion is lower than the US$1.8billion that was sourced the previous crop year despite the increase in crop production, Aidoo explains that given the fall in world market price of the cash crop from an average of US$3,000 to US$2,000/ton: “There is therefore the need to go for a smaller amount to guarantee repayment”.