4 August 2017

Ghana: Parliament Approves U.S.$1.3 Billion for Cocobod

Parliament has approved an amount of US$1,300,000,000 syndicated loan for the Ghana Cocoa Board (COCOBOD) for the purchase of cocoa for the 2017/2018 crop season.

The object of the facility was to raise adequate funds to enable COCOBOD to purchase cocoa beans from farmers, through licensed buying companies, for the year under review.

A report presented to the Plenary by the Finance Committee of Parliament, which was subsequently been okayed by the House, indicated that the terms and conditions of the loan included one-month libor + a margin 0.65% per annum, as interest rate.

The facility comes with a commitment fee of 0.2275% per annum, upfront fees of 0.70% flat, with security margin being assignment of cocoa contracts for 110% of the facility amount.

Presenting its report, the Chairman of the Finance Committee, Mark Assibey-Yeboah, said the Committee met with a Deputy Minister of Finance, Kwaku Kwarteng, and his technical team from the Ministry and officials from COCOBOD to consider the report.

According to the Chairman, having met the official, the Committee observed, as the Chief Executive informed the Committee, that the funds would be used for the payment for produce from farmers, buyers' margins, internal marketing operations, and farmers' services, among others.

He said COCOBOD envisaged that US$1.300billion with,the expected equivalent of GH¢5,850million, would be required to finance the purchase of cocoa for the 2017/2018 crop year.

"The projected cocoa purchases for 2017/2018 is 850,000 metric tonnes. If approval is given, the first expected drawdown would be in October 2017, with the expected amount of US$700 million (GH¢3,150 million)," the reported captured.

In the report, COCOBOD requested the waiver of stamp duty. Thus, the Committee inquired of the Board as to why they should be exempted from the payment of stamp duty.

The Board explained, as stated in the report, that currently, COCOBOD is distressed financially due to payments of outstanding contracts and services.

Further, COCOBOD is also servicing the payment of some facilities, including the payment of the Bui Dam loan, adding that paying the stamp duty would add further financial challenges to the Board, which could adversely impact on the purpose for sourcing the facility.

However, the Deputy Minister for Finance, Kwaku Kwarteng, agreed with the Committee that going forward, COCOBOD should pay Stamp Duty.

Commenting on the report, the Minority Leader, Haruna Iddrisu, indicated that was a normal activity for COCOBOD to find money for the purposes of buying cocoa.

But, added that it was prudent that the country looked at the impact of the facility on the economy.

"Mr. Speaker, this is a normal thing. I say this, because, borrowing short term, backing it with cocoa contract for the purposes of buying cocoa, Mr. Speaker,is seen as an activity that Ghana COCOBOD would definitely would have to do for the purposes of buying cocoa.

"Mr. Speaker, ideally, we would have to be looking at the impact on the economy, the proposed use of proceeds, and how the receipts payments were made, using the previous loan that Parliament has made."

Meanwhile, Kwaku Kwarteng assured the House that the Ministry would consider all the suggestions and recommendations from the Legislature.

To this end, a question was put for the approval or otherwise of the facility, to which the House agreed positively.

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