The Chief Executive Officer (CEO) of the Ghana Cocoa Board (COCOBOD), Joseph Boahen Aidoo, has reaffirmed plans to introduce a self-financing model for the 2024/2025 cocoa crop season. Speaking at a meeting with cocoa farmers from various districts in Kumasi on Friday, Aidoo explained that the self-financing model will not replace the traditional syndicated loan system but rather operate alongside it, creating a blended approach to funding the cocoa sector.
COCOBOD recently announced its intention to shift towards a self-financing model, sparking a mix of reactions across the cocoa industry. The self-financing initiative aims to reduce COCOBOD’s dependence on external loans by utilizing internally generated funds and revenue from cocoa sales to finance the purchase and export of cocoa beans. However, Finance Minister Dr. Mohammed Amin Adam had earlier contradicted this announcement, stating that the government would still seek external funding to support the cocoa sector.
Addressing these concerns, Aidoo clarified that the self-financing model is a complementary strategy, designed to work hand-in-hand with the existing syndicated loan arrangement. “It is just a blend. We are blending what we’ve been doing for years. I don’t think there is anything wrong with introducing a new thing,” he stated. He emphasized the flexibility of this approach, allowing COCOBOD to adapt to changing financial landscapes and reduce the risk associated with relying solely on external loans.
Aidoo further highlighted that the self-financing model had already been tested during the last crop season, from June to the end of August, and had proven effective. “We have already tried it during the last crop season, and it has worked, but we want to scale it,” he noted. This model involved using internally generated funds to purchase cocoa beans and manage shipping logistics, rather than depending entirely on loans.
Aidoo reassured farmers and stakeholders that this blended approach would not compromise the effectiveness of Ghana’s cocoa marketing system. “Even as we may be going for a loan, because when you talk about syndication, it is like going to borrow, and what we are doing will not require borrowing. So if we are blending not borrowing with borrowing, I don’t think it should become an issue,” he explained. The CEO stressed that the intention is to gradually phase in self-financing methods, reducing the need for external loans over time.
The CEO’s remarks came against a backdrop of ongoing discussions about how best to fund Ghana’s cocoa sector amidst volatile global market conditions. Cocoa is a critical component of Ghana’s economy, contributing significantly to export revenue and employing millions of Ghanaians. The country traditionally relies on syndicated loans from international banks to pre-finance cocoa purchases for the upcoming crop season. This approach, while providing immediate liquidity, also exposes COCOBOD to fluctuations in international interest rates and currency exchange risks.
By blending self-financing with the traditional loan system, COCOBOD aims to enhance the sector’s financial stability and reduce costs associated with loan interest rates. The self-financing model is expected to give COCOBOD more flexibility in managing its resources, potentially allowing for better pricing and more timely payments to farmers. “We want to implement the not borrowing, thus the self-financing. That is what we are starting the season with, and once it works, there will be no need for us to go for borrowing,” Aidoo stated.
However, the Finance Minister’s recent comments suggest that the government is still considering external funding options to ensure adequate support for the sector. This divergence in views has raised questions among stakeholders about the future direction of cocoa financing in Ghana. Some industry experts argue that while self-financing is a commendable move towards sustainability, it may not yet be feasible to completely eliminate reliance on external funding, given the current economic challenges and global market dynamics.
To address these concerns, Aidoo has been actively engaging with cocoa farmers and stakeholders to explain the benefits and practicality of the new financing model. During the Kumasi meeting, he assured farmers that the blended financing approach would be in their best interest, providing stability and reducing the uncertainties associated with fluctuating global financial markets.
Moreover, COCOBOD’s decision to scale up the self-financing model comes at a time when the global cocoa market faces numerous challenges, including fluctuating prices, climate change impacts, and shifting consumer preferences. A blended funding model, which combines self-financing with strategic borrowing, could position Ghana’s cocoa industry to better navigate these complexities.
While some stakeholders have expressed concerns about the feasibility of a complete shift to self-financing, many have welcomed the initiative as a step towards greater financial independence for the sector. As COCOBOD moves forward with its plans, the coming season will serve as a critical test for the viability of this new approach.
Ultimately, the goal is to create a more resilient and sustainable cocoa industry in Ghana. By reducing dependence on foreign loans and increasing the use of internally generated funds, COCOBOD aims to secure better terms for cocoa financing and protect the livelihoods of the millions of farmers who rely on this crop. As Aidoo concluded, “If it works, then Ghana will work with that model going forward.” This sentiment captures the hopeful outlook that many within the sector share about the potential benefits of a more self-reliant approach to funding cocoa production in the years to come.
