Narrative
Full Description
Project narrative
On November 12, 2019, the Ghana Cocoa Board (COCOBOD) — a state-owned enterprise and the world's second largest cocoa producer — signed a USD 600 million pre-export receivables-backed term loan facility agreement with the African Development Bank, Credit Suisse AG, and the Industrial and Commercial Bank of China (ICBC). ICBC’s contribution is recorded in Record ID#111097. Then, on March 6, 2020, several other development finance institutions (DFIs) joined the loan syndicate (through the signing of an amended and restated pre-export receivables-backed term loan facility agreement), including the Japan International Cooperation Agency, the Development Bank of South Africa, and Cassa Depositi e Prestiti Spa, an Italian development bank. The DFIs — including the Africa Growing Together Fund which was jointly jointly established by the People's Bank of China and African Development Bank — reportedly contributed to a USD 250 million, 7-year loan tranche (see Record ID#105838), while the commercial banks, ICBC and Credit Suisse, contributed to a USD 350 million, 5-year loan tranche (captured in Record ID#86575). The interest rates that apply to these loan tranches are unknown. However, it is known that the overall loan facility was secured by (ie collateralized against) receivables from future cocoa sales contracts. The borrower was expected to use the proceeds of the loan to finance key components of its Productivity Enhancement Programmes (“PEPs”). The objective of the PEPs is to roll out a set of measures that will improve productivity per hectare and increase cocoa production levels well above 1 million tonnes per year (versus an average of 800,000 tonnes per year over the last ten years). The PEPs were expected to mainly entail measures to sustainably increase plant fertility; develop irrigation systems; rehabilitate aged and disease-infected farms; increase warehouse capacity; and create an integrated farmer database. The programs were also expected to provide short-term working capital support to local cocoa-processing companies, thus facilitating domestic value addition) and consumption of cocoa products in Ghana. One source indicates that the loan proceeds were earmarked for the following purposes: $140 million for fighting Cocoa Swollen Shoot Virus Disease (CSSVD), $50 million for investing in COCOBOD's warehousing facilities, $200 million for processing cocoa locally and meeting the Government of Ghana's goal of processing 50% of the nations cocoa locally by 2022, $7.5 million for building a domestic consumer base, and $10.6 million for establishing a database of all cocoa farmers in the country. As of September 5, 2024, Cocobod and the Government of Ghana’s Official Creditor Committee (co-chaired by France and China) were negotiating whether a sovereign debt treatment (rescheduling) should include the repayment of advances owed to ICBC and other commercial creditors under the under the $600 million syndicated receivables-backed trade finance facility. The Government of. Ghana and Cocobod expect these obligations to be excluded from the debt treatment (with the impact to be compensated to ensure comparability of treatment principle is achieved). However, according to a Government of Ghana disclosure on September 5, 2024, '[I]f the debt to [ICBC and other commercial creditors) is restructured, it could further impact Cocobod’s credibility and its ability to secure future intra-year trade facilities, which are crucial for providing liquidity at the start of the cocoa season. This liquidity is essential for purchasing cocoa beans from farmers, supplying inputs necessary for crop success, and managing operational costs. A default could further exacerbate Cocobod’s financial challenges and undermine the [Government of Ghana's] broader efforts to stabilise the economy through fiscal consolidation and debt sustainability measures.'
Staff comments
1. According to a news release from the African Development Bank, the African Development Bank acts as the original development financial institution (DFI) lender and initial mandated lead arranger to the loan, Credit Suisse acts as the original commercial lender, the global commercial coordinator and the co-mandated lead arranger, while the Industrial and Commercial Bank of China Limited London Branch joined the agreement as an original commercial lender, co-mandated lead arranger and joint commercial underwriter and bookrunner. Credit Suisse will also structure and fund the dual-tranche facility to the loan comprising of a $250 million, 7-year DFI tranche, and a $350 million, 5-year commercial tranche. 2. The individual contributions of the banks that participated in the lending syndicate are unknown. For the time being, AidData assumes equal contributions ($175 million) across the 2 members of the syndicate that contributed to the $350 million loan tranche (ICBC and Credit Suisse). 3. Ghana’s cocoa production is regulated by the Ghana Cocoa Board (COCOBOD), an organization separate from the Ministry of Food and Agriculture that is wholly owned by the Government of Ghana. COCOBOD does not purchase any of the cocoa which is exported, but is responsible for assuring the quality of the product. To ensure the high quality of Ghana’s cocoa exports, the COCOBOD oversees horticulture practices and regulates the use of pesticides and fertilizer. In addition, COCOBOD sets the producer prices for cocoa farmers and, through a subsidiary, oversees the marketing of cocoa. The operations of the COCOBOD are funded through the receipt of a percentage of the revenue received from cocoa exports, but all profits after covering expenses are passed onto the Government of Ghana in the form of export taxes. 4. According to the African Development Bank, 'commercial risks of this transaction are considerably mitigated by the proposed collateral package which will at all times amount to 110% collateral cover comprising firm and fixed-price USD contract receivables from pre-approved creditworthy buyers and a charge over the offshore escrow collection account on which proceeds payable under the assigned cocoa contracts will be collected’. 5. In August 2017, COCOBOD told the country’s parliament it was in financial distress due to obligations that included servicing China Eximbank loans for the Bui Dam Construction Project (captured via Record ID#183, ID#30801, ID#30709, and ID#30086). 6. The invitation memorandum can be accessed in its entirety via https://www.dropbox.com/scl/fi/yutbinfygrud0aij3a3zd/215715-1.pdf?rlkey=crxo0uxgd7zkx8zaqe3g1d9fa&st=ejlism13&dl=0