COCOBOD assures lenders it will repay US$1.3bn loan despite setbacks

Chief Executive Officer of Ghana Cocoa Board (Cocobod), Joseph Boahen Aidoo, has assured lenders that the company is on course to meet its financial obligations in respect of the US$1.3billion syndicated loan, in spite of a dwindling crop harvest caused by dry weather and plant disease.

“We have shown over the past 25 years that Cocobod is credible and has never defaulted, and will not default this year,” he told the media.

“I wish to assure lenders that we are on course and will fully meet our financial obligations toward the US$1.3bn we signed for the 2017-18 season. We have sufficient beans to meet all our financial obligations for the crop year,” he said.

“We are confident we will meet our collateralised facility as we have always done; we just started paying the first instalment in February and will continue for the next seven months,’’ he said.

While recent rains may improve yields in the smaller harvest that runs from June to September, they may not be sufficient to make up for losses suffered in the main harvest that continues until then, he said.

Last year, Cocobod signed an agreement with some 25 banks to raise a US$1.3billion syndicated loan at an interest rate of 0.65% plus Libor rate for the 2017/2018 purchase of cocoa beans.

The Board had purchased 625,111 tonnes of cocoa for the season through Feb. 22, compared with 640,075 tonnes for the same period of the previous crop year.

Mr. Aidoo explained that the Board is in talks with government on ways to pay for operational expenses and liabilities, as the cost of debt on local markets is too expensive.

“We are still discussing with government, and we’ll find some solutions.”
The country is likely to produce around 700,000 tonnes of cocoa this season – well short of its initial forecast of 850,000 tonnes, due to poor rains during the main crop harvest.

The International Cocoa Organisation (ICCO) forecasts a global cocoa surplus of 105,000 tonnes of beans for the 2017/18 season. But concerns about the harvest in neighbouring Ivory Coast, the world’s top producer, has sent global prices soaring in recent weeks.

The country had registered purchases of around 650,000 tonnes by March 2.
Mr. Aidoo said: “We have bought the bulk of our cocoa for the season. We’re hoping to get something from the light crop – about 50,000 tonnes or a little above. That takes us to around 700,000 or a little above 700,000 tonnes”.

The country operates a two-cycle cocoa year consisting of the 33-week main crop (October-June) that is mainly exported to Europe and Asia, and a minor light crop (11-week) which is discounted to local processing firms including the state-owned Cocoa Processing Company (CPC).

Ghana produced an unprecedented one million tonnes of cocoa during the 2010-11 crop-year, thanks to good weather and improved farming techniques – but production declined to about 850,000 tonnes last season.

Time is ripe to bring new life to cocoa production – Osafo Maafo

Senior Minister, Yaw Osafo-Maafo, has said the time is ripe for Ghana and Cote d’Ivoire to develop strategies that will bring new life to the cocoa value chain and improve wellbeing of farmers.

“At the economic management level, we are looking at a possible insurance system for our farmers. We must begin to think outside the box; we should consider the cocoa farmers and their wellbeing.

The crop continues to be our economic backbone,” he said at the Joint Commission Meeting/Cocoa Investor Forum in Accra.

The Investor forum, organised by Ghana and Cote d’Ivoire, was in collaboration with the African Development Bank and it brought together actors in the cocoa value chain, private sector financial institutions, as well as the World Bank.

It was also aimed at discussing possible solutions required to transform the cocoa sectors in Ghana and in Cote d’Ivoire, framework for the Ghana Cocoa Board (Cocobod) investment programme and also joint commission statement in preparation for the World Bank Annual meeting.

The forum also discussed how to enhance farm level productivity, marketing and issues of interest in international affairs.

The meeting comes on the back of low cocoa prices on the international market and it is expected to devise strategies for mitigating the harsh effects of declining prices on cocoa farmers.

Ghana and neighbour Cote d’Ivoire, last year, established joint cooperation on cocoa with the aim of seeking to influence the direction of decisions of global stakeholders on the commodity, especially those which affect its pricing, as the two countries account for more than 60 percent of total global output annually.

Mr. Osafo-Maafo explained that it is prudent to improve the crop yields per acre and called for urgent, effective and sustainable measures to first protect the farmers and the economies from the harsh effects of the price falls and chart a future path of greater self-reliance.

He proposed value addition to the crop and the need to increase local consumption of the end product.
“We should move away from producing only the crop beans and add value,” he stressed.

Ghana and Cote d’Ivoire produce about 2.35 million tonnes of cocoa, which is about 60 per cent of world production but the two countries only consume less than one percent of the produce, which the Senior Minister said is “abysmally low.”

He, therefore, called for deliberate major policy interventions from the two countries to ensure increased cocoa consumption locally.

He urged the Minister for Food and Agriculture, Dr. Owusu Afriyie Akoto, to quicken the implementation of the cocoa consumption of the school feeding programme this year.

Increased domestic consumption, he said, would spur increased cocoa processing locally and provide the opportunity to industrialise and diversify the economies, create jobs and generate revenues for social and economic development.

Dr. Akoto said improving the living conditions of cocoa farmers will require massive investment.
“The enhancement of the welfare of cocoa farmers would require an improvement in farm productivity, sustainable domestic and international prices and a stronger producer organisation to ensure that the interest of farmers and producer countries are catered for while fostering a competitive domestic downstream sector,” he stated.

Dr. Akoto said increasing domestic value addition is long overdue, adding that expanding the downstream sector and increasing consumption of cocoa domestically were among the urgent steps needed to be taken.

“Our aim should be to gradually move to the end of the value chain, in order to realise the maximum gains and other related benefits that this process will catalyse,” he said.

Exports under AGOA hit US$300m…more value-added products needed

Ghana can build on its good performance under the African Growth and Opportunity Act (AGOA) programme by focusing more on value addition to its export commodities like cocoa and Shea Butter and exporting to the US market.

Available data from the US Economic Policy in Africa show that between 2016 and 2017 Ghana saw its exports to the United States more than doubled, with exports under AGOA quadrupling to more than US$300million.

Mr. Harry Sullivan, Acting Director for Economic and Regional Affairs at the Bureau of African Affairs, told selected African journalists during a telephone-briefing organised by the Africa Regional Media Hub, that African non-oil exports to the US under AGOA had grown from US$1.3billion in 2001, the year that the legislation was passed, to US$4.2billion in 2016, with the trend continuing to be positive since then.

Currently, there are thousands of products available under the AGOA list to enter the United States duty-free.

For more than a dozen years, AGOA has been the U.S. government’s signature trade initiative with sub-Saharan Africa – helping diversify exports, create jobs, reduce barriers to trade, and expand economic opportunities for the region’s population.

With more than 6,000 products receiving duty-free treatment when exported to the United States, AGOA has helped generate jobs through trade and investment opportunities during its short lifespan.

AGOA provides a framework for improved access to U.S. credit and technical expertise, and establishes a high-level dialogue on trade and investment in the form of an annual US/sub-Saharan Africa Trade and Economic Forum.

It is an integral component of the United States’ overall trade with sub-Saharan Africa, increasing two-way trade between the two regions to over US$95billion in 2011.

AGOA also generated a US$13billion increase in two-way trade between 2010 and 2011, and a total of US$716.1 billion since 2001.

Mr. Sullivan said agricultural exports, especially, like cocoa and shea butter, can help Ghana up its earnings through AGOA.

“Everybody knows you provide a huge portion of cocoa to the world; so, if you could do some first-class processing in Ghana, that would add value to your economy. Shea butter, I believe, is also present in northern Ghana,” he said, and urged Ghana to look at those kinds of agricultural products as well as light industry.

He explained that Ghana is a success story in Africa and can build on those attributes by moving from a market entrepreneurship to larger-scale industries. “And that can happen, perhaps, through cooperatives,” he stated.

He indicated that although the American market has huge benefits, there is a need to produce at the necessary quality and quantity; and cooperatives could sometimes provide a mechanism for pooling resources in order to reach the required quantities.

Statistics on US-Africa Trade through 2017 showed that total U.S. trade with sub-Saharan Africa rose by 16.8%: from US$33billion in 2016 to US$38.5billion in 2017.

U.S. exports to Africa also increased, by four per cent to 13.1 billion, while African exports to the United States rose by more than 24 per cent to more than 24 billion.

“Increased oil exports did account for a large share of this increase, but we also saw some encouraging signs of diversification. African exports of agricultural products to the United States rose by 10% to US$2.7billion in 2017.

“We often say that the cornerstone of our trade policy with Africa is the African Growth and Opportunity Act. And that’s been true since 2000, when the first AGOA legislation passed; and AGOA’s special benefit is offering duty-free market access for thousands of products that are eligible to African countries.

“AGOA provides a powerful incentive to increase trade and investment, which has spurred inclusive economic growth and regional stability by providing that market access,” he stated.

Ghana Free Zones companies playing tricks on regulator

       .They submit no quarterly financials

• They lie about status of expat employees
• And they flout the law, sellING above 30% of products locally

Most of the over 200 enterprises operating within the free zones enclave have failed to submit quarterly financial statements to the Ghana Free Zones Authority (GFZA), and have been working with expatriate staff who have “visitor” status in the country, a situation that works against tax collection, the authority’s CEO, Michael Okyere Baafi, has said.
 

“So far, less than 20 companies have submitted their financial statements; and these are the same companies that continue to comply with the rules,” he told CEOs of licenced free zones enterprises from the Eastern, Greater Accra and Volta Regions at a one-day forum in Accra.

“Most of the companies are not submitting their books because they have expatriate working staff with visitor’s permits in the country,” he said.

“Some of them also come with falsity and misrepresentation of information that affects the GFZA’s reporting to government,” he said.

More grievously, he said, some of the quarterly reports are presented with false information, as most companies do not comply with the basic requirement on free zones companies to sell only 30 percent of products locally and export the remaining 70 percent.

“We have had complaints of free zone enterprises selling more than the stipulated 30% on the local market,” he said.

He disclosed that most of the companies owe ground rent, and some have not renewed their licences – which has greatly affected finances of the GFZA.

The Ghana Free Zones Programme is designed to promote processing and manufacturing of goods through the establishment of Export Processing Zones (EPZs), and encourage the development of commercial and service activities at sea and airport areas.

It works to create a conducive atmosphere for foreign investments and currently has capital investment worth over US$3.4 billion, with over 200 companies.

The free zones enclave has been exporting an annual average of US$1.5 billion worth of products since its establishment in 1995, or some US$30.9 billion over the past two decades.

Its focus, currently, is to do some US$5.4 billion of exports in 2018, by licensing more free zones companies.

Establishment of New Units

The authority intends to set up and Oil and Gas Unit, to assist investors in that sector, whilst a Research and Business Development Unit has also been created to undertake market intelligence and source new markets for companies that wish to venture into new markets and not rely on one traditional market.

Security at the Tema Export Processing Zone (EPZ), he said, will be increased. The GFZA, in this regard, is having discussions with the Ghana Armed Forces to provide a military detachment at the Tema EPZ.

Michael Okyere Baafi told CEOs of the free zones companies that the IT unit at the authority has been made more robust and expanded into a Management Information Systems (MIS) Department.

He said his outfit is working on creating the needed platforms to implement a paperless system and ensure that most documents, including quarterly returns, can be submitted online.

“With the introduction of speed as a business strategy, you – our clients – will be a better judge of that. I hope you have experienced an improvement in the time for processing your documents.”

He indicated that a business centre is coming up at the Tema enclave as a Free Zones enterprise. This is to take care of the business needs of FZEs and other multi-national companies around.

This, he said, will serve as a community centre for the enclave – with amenities like meeting and conference halls, event centres, a health-care centre and shopping mall.

50 megawatts solar power to be added to national grid in 18mths

Minister for Energy, Boakye Agyarko, is hopeful that within the next 18months, 50 megawatts of solar power will be added to the national grid to augment country’s energy delivery.
 

Speaking to B&FT after the signing of Memorandum of Understanding on renewable energy between the government and ENI Ghana, Mr. Agyarko said: “We are looking at an 18months development and delivery time lines but it will all depend on a number of factors within their control; but, our expectation is that if all go on well within 18months we should be able to start loading power from the solar systems through the same switchyard as Bui Power Authority’s Hydro onto the national grid.”

The Bui Power Authority, he said, has completed its switch yard to evacuate the full additional 250 megawatt to come online.

“What has not happened yet is ENI and Bui Power Authority sitting down and looking at the engineering of the solar portion and the development of the farm; that is something we have to leave to both sides to work out diligently. But within 18 months these engineering solutions and delivery are possible.”

Mr. Agyarko explained that government is playing a facilitating role with the construction of the solar system, since the project is entirely an ENI project.

“It is an ENI project; government is only facilitating the construction of the solar system where it will deliver power, it is just like any other independent power producer; it is not a cost to government,” he stressed.

Government has a target to have renewable energy constituting 10 percent of the country’s generation mix by 2020. There is also a plan to have government institutions supplementing their energy source with solar power.

Presently, less than 1% of electricity consumed locally is from renewable energy sources, a situation some players in the industry find worrying.

Parliament has already ratified a framework Agreement on the Establishment of the International Solar Alliance (ISA).

This means Ghana has already joined some 121 countries to access US$2 billion from the Indian government towards making renewable energy a reliable alternative to the more expensive sources of energy on the continent.

With this ratification, government hopes to expedite the integration of renewable energy in the sources for electricity among its institutions and agencies, including Junior and Senior High Schools.

Over the next five years, there would be significant increase of PV energy in the power mix for the country.

Signing the agreement, Luca Consentino, Executive Vice President ENI, Milan-Italy, assured government of the firm’s commitment to deliver world class solar power to help augment the country’s energy.

ENI, an Italian international petroleum company, has been in Ghana since 2009. The government is in a US$7bn contract with the company to produce oil and gas at Cape Three Points.

Even though the company is involved in the exploration of oil and gas, Mr Consentino indicated that his outfit is interested in renewable energy because “we believe that renewable energy is the future.”

For that reason, he said, it was collaborating with the government to realise its long-term strategy of integrating traditional businesses with renewable energy sources.