The Licensed Cocoa Buyers Association of Ghana (LICOBAG) has called on the government to urgently secure funding to pay for an estimated 300,000 tonnes of cocoa in phases between now and September, warning that failure to do so could deepen the crisis currently confronting the cocoa sector.
Addressing the media in Accra last Thursday, the Executive Secretary of LICOBAG, Mr Victus Dzah, said any funds raised for cocoa purchases must be ring-fenced and used strictly for that purpose.
“We suggest a review of the current funding model to a hybrid of the old system, where a syndicated facility—local or international—is secured to enable real-time payment for cocoa purchased and delivered to the ports by Licensed Buying Companies (LBCs),” he said.
COCOBOD responds
In a swift response last Friday, the Ghana Cocoa Board (COCOBOD) acknowledged the severe liquidity constraints affecting the sector, which have led to delayed payments to farmers. At the same time, it announced plans to permanently abandon the decades-old syndicated loan system.
“We are fully aware of the issues and take very seriously the concerns raised by farmers and other stakeholders,” the Chief Executive of COCOBOD, Dr Randy Abbey, said at a press conference. He assured that COCOBOD was working closely with the Ministry of Finance to find an urgent solution.
Pricing, transparency and reforms
At LICOBAG’s press briefing, Mr Dzah, flanked by other executives, stressed that since COCOBOD’s core mandate is to purchase cocoa from farmers, government must urgently determine the current farmgate price to ease uncertainty across the value chain.
While calling for improved transparency and stronger communication between LICOBAG and COCOBOD, he urged Cocoa Marketing Companies (CMCs), traders and COCOBOD to adopt more proactive sales strategies to optimise returns.
Mr Dzah also called for increased oversight of COCOBOD’s trading operations, the professional development of CMC staff and traders, and the restoration of a credible succession plan to boost morale and professionalism.
“Serious efforts must be made to revamp the cocoa industry beyond rhetoric and theatrics,” he said, adding that COCOBOD should divest from non-core activities and outsource them to the private sector.
Risk of industry collapse
Mr Dzah warned that unless urgent corrective measures are taken, the cocoa industry risks collapse.
“We had expected COCOBOD to engage us on these issues, but that has not happened, hence the need to set the records straight following recent public statements,” he said.
He identified key challenges as funding constraints, weak sales strategies by COCOBOD, CMCs and traders, lack of commitment to sector reforms, and excessive political interference.
Funding challenges since 2023
According to LICOBAG, funding challenges became acute in the 2023/2024 season when COCOBOD failed to secure its traditional syndicated facility. Instead of the usual US$1.3 billion or more, only US$500 million was raised—six months after the season opened on September 8, 2023.
As a result, LBCs were forced to pre-finance cocoa purchases through bank loans at high interest rates, with the Ghana Reference Rate at 29.8 per cent. COCOBOD made its first payment for cocoa delivered to the ports only on January 26, 2024, six months after delivery, even though LBCs had already paid farmers in full.
Mr Dzah said the situation plunged many LBCs into heavy debt, leading to the collapse of several companies.
During the 2024/2025 season, COCOBOD was unable to secure any syndicated loan due to its deteriorating financial position, leading to the introduction of the 60/40 financing model. Under this system, clients pre-financed 60 per cent of cocoa purchases upfront, with the remaining 40 per cent paid to COCOBOD upon final delivery.
However, many LBCs failed to access funding, while others struggled to find off-takers for their stocks. Delayed payments and high interest costs, Mr Dzah said, contributed to increased cocoa smuggling.
For the 2025/2026 season, the model was revised to 80/20, with 80 per cent of upfront payments directed to LBCs for farmer payments and handling costs, and 20 per cent paid to COCOBOD upon delivery. Even then, Mr Dzah said many buyers exited the market early, citing unpaid deliveries and the high cost of Ghana’s cocoa.
COCOBOD’s explanation and new model
At its own press briefing, Dr Abbey attributed the crisis to a combination of collapsed international financing, volatile global cocoa prices, and legacy debt. He said these factors had left thousands of farmers unpaid and others unable to sell their produce.
Tracing the roots of the crisis to 2022, Dr Abbey said COCOBOD’s difficulty in servicing syndicated loans led to growing reluctance from lenders and ultimately the collapse of the system for the 2024/2025 season—ending a 32-year financing arrangement based on forward sales of raw cocoa beans.
He disclosed that COCOBOD had relied on a US$70 million bridge facility from the Ministry of Finance during the 2023/2024 season. However, the temporary buyer-financing arrangement faltered when global cocoa prices fell sharply from over US$6,400 per tonne to around US$4,000.
Although COCOBOD had sold more than 530,000 tonnes of the current crop, about 50,000 tonnes remain unsold, while some delivered cocoa has yet to be paid for.
Dr Abbey said COCOBOD was therefore accelerating plans to introduce a new, sustainable funding model, originally scheduled for the 2026/2027 season.
“We are exploring a model that does not mortgage Ghana’s cocoa through raw bean forward sales and undermine our value-addition ambitions,” he said, noting that the old system constrained local processing by committing most of the crop to export contracts.
