Bright Simons raises concerns over Ghana's cocoa forward contracts as collateral for loans

Ghanaian

Bright Simons, Vice President of IMANI Africa, has raised concerns about Ghana's forward contracts for cocoa reserves, alleging that they are being used as collateral for loans, potentially affecting the country's future financial relationships.

Simons highlighted that with cocoa prices soaring fourfold, individuals within Cocobod are considering canceling or renegotiating these contracts to take advantage of the lucrative spot market

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The renegotiation of contracts could have significant repercussions on Ghana's credibility with financial institutions, potentially impacting its ability to secure favorable loan terms in the future.

Ghana recently secured an $800 million loan deal with a consortium of banks, led by Cooperatieve Rabobank UA, but faces challenges in accessing the final $200 million drawdown due to insufficient cocoa reserves.

Ghana sells fwd some of its cocoa to collateralise loans. The price of cocoa has quadrupled, so some shrewd operators at Cocobod are looking to back out of various forward deals & squeeze the most out of the spot market. Shrewd, but what about future relationships with the banks? pic.twitter.com/TnIUA0AALo

— Bright Simons (@BBSimons) March 26, 2024

A Cocobod spokesperson stated that pursuing the additional drawdown would not be prudent, as it could lead to repayment overstretch. This decision comes amid an anticipated shortfall in the cocoa harvest for the 2023/24 season.

Without timely payments from Cocobod, farmers risk facing difficulties in affording essential resources for cocoa cultivation, such as seedlings, chemicals, and fertilizers.

The funding challenges coincide with delays in negotiations for the syndicated loan due to Ghana's debt restructuring, resulting in an unprecedented interest rate of 8% and delays in disbursement.

Participating banks in the syndicated loan include Standard Chartered Plc and Societe Generale SA, further complicating Cocobod's financial situation.