The Licensed Cocoa Buyers Association of Ghana (LICOBAG) has called on the government to urgently secure a financing facility to pay for an estimated 300,000 metric tonnes of cocoa in a phased manner between now and September.
It warned that failure to do so could lead to the collapse of the sector.
The association said any funds secured for cocoa purchases must be ring-fenced strictly for that purpose, stressing that the core mandate of the Ghana Cocoa Board (COCOBOD) was the purchase of cocoa beans produced by farmers.
Speaking at a press conference in Accra yesterday, the Executive Secretary of LICOBAG, Mr Victus Dzah, emphasised that the government must also urgently determine the current farmgate price of cocoa to allay the apprehension among actors across the cocoa value chain.
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"The government must urgently make a determination on the current farmgate price of cocoa to allay the apprehension of all value chain actors," he said.
Mr Dzah explained that since the 2023/2024 cocoa season, the industry had faced serious funding challenges due to COCOBOD's inability to arrange its traditional syndicated facility.
"Instead of the usual annual syndication of $1.3 billion or more, COCOBOD was able to raise only $500 million, which was secured six months after the opening of the season on September 8, 2023. As a result, Licensed Buying Companies (LBCs) were compelled to pre-finance cocoa purchases through facilities raised from various banks at very high interest rates, with the Ghana Reference Rate standing at 29.8 per cent at the time," he explained.
Mr Dzah attributed the current crisis partly to the COCOBOD/CMC off-taker shipment arrangement, which he said was driven by an overall sales strategy that failed to respond effectively to market conditions.
"Why should we move from a period of rollovers in the previous season because COCOBOD could not deliver on their contracts, and this season we cannot buy cocoa produced by farmers because our pricing mechanism is not competitive enough?" he asked.
He said the situation could be explained by the failure of traders to enter the market early and sell when global prices were high.
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According to him, COCOBOD made the first payment for cocoa deliveries to the port on January 26, 2024, six clear months after deliveries had been made, even though LBCs had already paid farmers in full.
"This unfortunate development pushed all LBCs into huge debts, leading to the total collapse of many companies," he remarked.
He said the debt overhang persisted while COCOBOD had failed to compensate LBCs, as promised, for the high financing costs incurred in pre-financing cocoa purchases.
Mr Dzah called for greater proactiveness in sales strategies by CMC, COCOBOD, and traders, while urging COCOBOD to strengthen oversight of the trading room.
"There is the need to develop the professional capacity of CMC cocoa traders and restore a credible succession plan which will give security of tenure and improve professionalism and staff morale for better outcomes," he elaborated.
He further urged the government and COCOBOD to go beyond "rhetorics and theatrics" in efforts to revive the cocoa industry, calling on COCOBOD to divest from non-core businesses and outsource them to the private sector.
