Deputy Cocobod CEO for Finance outlines implementation of new financing framework

The Ghana Cocoa Board (Cocobod) is at an advanced stage of implementing a new locally financed funding regime that will enable the institution to raise working capital from domestic investors through a commercial paper programme, with pension funds, commercial banks and key industry stakeholders identified as the primary sources of financing.

Deputy Chief Executive Officer in charge of Finance and Administration at Cocobod, Ato Boateng, says the institution has already engaged the necessary transaction advisors and is close to finalising the structure of the programme ahead of its launch.

Speaking in an interview on the sidelines of the Ghana-UK Investment Summit in London on June 2, he disclosed that significant progress has been made in designing the financing framework and addressing regulatory concerns raised by stakeholders.

“We’ve gone very far and hired all the advisors that we need to launch the issuance, so the advisors are really working hard on the structure of the finance, which is almost finalised to address all the regulatory concerns raised by all parties,” he said.

The proposed financing model forms part of broader efforts by government to reform Cocobod’s funding structure and reduce its dependence on traditional syndicated borrowing arrangements.

Under the new regime, Cocobod intends to raise funds entirely within Ghana through the issuance of a commercial paper programme designed to support cocoa purchases during the crop season.

According to the Deputy Chief Executive, pension funds represent one of the most significant opportunities for the programme.

“The whole idea is for Cocobod to be able to do this and raise the money internally and we’re looking at three different sources. The first source is the pension funds,” he explained.

He noted that pension funds currently manage assets worth approximately GH¢100 billion and have the capacity under existing investment regulations to allocate a substantial portion of their portfolios to eligible investment instruments.

“The pension funds can place investment up to about 35% of their assets. We could potentially look at 35% of the 100 billion cedis,” he added.

Commercial banks will constitute the second pillar of the financing structure. While regulatory requirements remain a concern, Cocobod says it is working on innovative arrangements to encourage stronger participation from the banking sector.

The institution plans to bring Development Finance Institutions (DFIs) into the structure to help expand the lending capacity of banks and improve the attractiveness of the programme.

“We’ve got to be very innovative with this because we also need the banks to really participate. So, with that, we will be looking at bringing in the Development Financial Institutions and try to expand the lending capacity of the banks,” he said.

The third source of financing will come from key players within the cocoa value chain. Cocobod is considering private placements targeted at major industry stakeholders, including international buyers and other participants in the sector.

“We also want to bring in our industry stakeholders. As part of the issuance, we would potentially look at doing some private placements with some of our key major stakeholders, especially the buyers and all the players in the industry so that they also have a stake in what we are doing,” he stated.

The official stressed that the programme is being developed in close consultation with advisors and regulatory authorities to ensure a successful launch.

“It is going to be all locally financed. We are working very closely with all the advisors, all the regulatory authorities so that Ghana is able to raise this funding locally by the issuing of the commercial paper,” he said.

Cocobod is proposing a 270-day commercial paper instrument, equivalent to roughly a nine-month maturity period, specifically tailored to the cocoa purchasing cycle.

The facility is expected to function as a working capital instrument that allows the institution to draw funds when required during the peak purchasing season and repay investors as cash flows are generated.

“What we are looking at is a 270-day commercial paper, meaning that it is going to be a nine-month maturity; it is essentially a working capital facility because our season opens in September through to January, which is mainly when we buy about 70% of our produce,” he explained.

He added that the programme would adopt a tranche-based drawdown system to improve efficiency and minimise unnecessary borrowing costs.

“The idea is that we look at trenching the amounts so that we draw the money that we need to do the purchases, and when there is no need for the money, we pay back to the investors to ensure that we use the money for what its intended purpose is.”

The comments come after Finance Minister Dr. Cassiel Ato Forson revealed at the Ghana-UK Investment Summit that government is preparing legislation to reform Cocobod and establish a more sustainable financing structure for the cocoa regulator.

The Bank of Ghana Governor, Dr. Johnson Asiama, has also advocated for a model that enables Cocobod to access long-term domestic capital, including pension funds, while reducing its dependence on conventional bank borrowing.

The financing reforms have taken on added significance amid ongoing public debate over developments in the cocoa sector, including concerns raised by farmers over producer prices and broader discussions about the future sustainability of Ghana’s cocoa industry.

Source: 3news.com by Christian Yalley