Ghana Loses GH₵61.5 Million Of Cocoa Money

Ghana Cocoa Board (COCOBOD) has come under fire for taking poor investment decisions that have denied the country the much needed foreign exchange in high demand.

COCOBOD has been accused of selling the country’s entire cocoa exports in forward contracts in the futures market, departing from its normal practice of apportioning sales in the spot and futures market.

The GRAPHIC BUSINESS has gathered that COCOBOD has traditionally sold 60 per cent of the country’s cocoa exports in the futures market in forward contracts and 40 per cent on the spot price.However, last year, COCOBOD sold Ghana’s entire cocoa exports in forward contract pegged at US$2,500 per tonne, an assertion COCOBOD has denied.

Meanwhile, the Intercontinental Exchange (ICE) futures quoted the price at US$2,803 per tonne on February 25. The price reached more than a two-year high of $2,844 per tonne hit earlier this month.

“By this risky decision it means the country is losing about US$300 per tonne. This is part of the reason why the economy is starving of foreign currency leading to the depreciation of the cedi’s value,” an economic analyst said on condition of anonymity.

This means that the country could have earned an extra US$25 million from the 830,000 tonnes of cocoa beans that were exported by COCOBOD in the 2012/2013 cocoa season.

This also translates to some GHC61.5 million that was lost within the period, using an exchange rate of one US Dollar to Ghc2.48.

COCOBOD reacts

Meanwhile, COCOBOD has said the board did not sell all of the country’s cocoa output through forward contracts.

Without being exact, Mr Amenyah, however, admitted that the greater part of the beans has been sold through forward contracts; a practice he said, had been going on since the 1992/1993 crop season.

The Head of Public Affairs at the board, Mr Noah Amenyah, said in an interview on March 1 that the decision to sell majority of the cocoa on forward contracts was not started by Mr Fofie, adding that the assertion that it was costing the country some revenues was not true.

“We have been doing forward contracts since 1992/3 and it has remained so till now. I don’t know how they did their calculations to say that we are losing but I can tell you that other cocoa producing countries envy the way we do our forward sales,” Mr Amenyah said.

He explained that the forward sales is often done to meet demands of the board’s syndicated loan, which was first secured in the 1992/3 crop season and has since become an annual initiative for COCOBOD and the contributing banks across the globe.

Given that the loan, which was US$1.2 billion in the ongoing season, is always a cocoa-backed facility, the conditions make it mandatory for the board to agree with the contributing institutions the price at which the cocoa would be given to them as repayment for the funds contributed, the head of public affairs at the board said.

“We sell sufficient amount which will make it possible for us to secure the loan and then sell what remains on the spots market. So, depending on the amount of the loan and the output, we sell enough on the forward to be able to back the loan,” Mr Amenyah explained.

He added that although the loan, which was touted as the highest financial transaction in sub-Saharan Africa, was often syndicated from a consortium of financial institutions, the contributors “do not take their money at the same time and that makes it possible for us to sell on the spots as when we think the price is good.”

“What you must also even understand is that the spot prices can be bad because the market can dip anytime,” he added.

Mr Amenyah disclosed that the Ministry of Finance and Economic Planning, which supervises COCOBOD, was even enthused about the board’s ability to raise such high amounts using the cocoa as guarantee and subsequently requested it (COCOBOD) to share some of its experiences with the ministry.

“They (MoFEP) want to tow the same line and that is because they have seen over the years that the way COCOBOD does the syndication and the repayment through the forward sales is good,” he added.GB

Cocoa output

While Ecobank research predicts that cocoa output would fall to 780,000 tonnes for the 2013/2014 production year, COCOBOD insists that production in the world’s second largest grower can cross 850,000 tonnes due to good weather. COCOBOD had initially set a target of 830,000 tonnes.

“The weather has so far been good and other new farms have come on board, we have some good cocoa coming from the Volta Region,” Bloomberg quoted the Public Affairs Manager of COCOBOD, Mr Noah Amenyah, as saying at a news conference on January 20.

Cocoa production for the 2012/13 cocoa output fell to around 835,000 tonnes, from 879,000 the previous year.

The International Cocoa Organisation (ICCO) is predicting a global cocoa deficit of more than 100,000 tonnes in 2013/14, due to lower production and higher demand.

Reuters reports that traders had bought heavily to head off the expected shortfall and that was driving up prices.

Should the trend continue, another decision to sell off their country’s entire output in forwards could seriously hurt foreign exchange inflows, going forward.