The Ghana Cocoa Board (COCOBOD) has outlined plans to sell bills and notes to fund a nationwide cocoa-replanting programme, in an effort to boost yields following an outbreak of disease.
In late December international media reported that COCOBOD, the industry regulator, was considering a plan to sell 182-day bills and one-year notes to finance the replanting of approximately 45% of the country’s cocoa tree stock.
Around 400,000 ha of cocoa crops are non-productive due to age or disease. Cocoa swollen shoot virus, an incurable disease that in its most severe form can kill plants within three to four years, has affected around one-fifth of trees, while another quarter are nearing the end of their 30-year production cycle.
COCOBOD estimates it will need $200m-250m for the rehabilitation programme, which will consist of cutting down affected crops and replanting a hybrid variety that is not only pest resistant, but also better designed to deal with climate change.
On top of the proposal to sell bills and notes, the board has held talks with local and international banks for a $750m loan, and is engaged in discussions with the African Development Bank over a potential $600m facility.
“On our current budget, we have started cutting down affected trees and replanting on a minimal scale,” Joseph Boahen Aidoo, the CEO of COCOBOD, told international media. “We will go for cocoa bills to keep our operations going, at least the normal operations, while we wait for the loans talks to bear fruit.”
Boosting crop yields is a priority for the industry, which in 2016 accounted for 23.1% of Ghana’s foreign exchange earnings, according to official statistics. Following a record yield of 1m tonnes in the 2010/11 agricultural season, cocoa production declined to as low as 740,000 tonnes in 2014/15, before rebounding to 778,000 in 2016/17. Officials hope to reach a target of 850,000 tonnes in the current season.
Labour challenges and illegal mining pose hurdles to expansion
While the government is moving forward with plans to rehabilitate large sections of the crop, issues surrounding labour and illegal mining remain obstacles for the sector.
Although the replacement of cocoa plants would boost long-term production, there is reluctance among some farmers to replant old or disease-affected trees due to the manual labour required.
The first five years of cocoa growing is particularly labour intensive – a disincentive for many in an industry where the average age of growers is 50 years old. In addition, fruit yields only emerge after two or three years, meaning growers must work without profit for the first few seasons.
Illegal mining also poses a challenge. With the same type of land required for both mining and farming, many see gold mining as more lucrative than growing cocoa. Furthermore, there have been frustrations over the uneven distribution of free fertiliser, with local media reporting that some stock had been given to non-farmers and sold to neighbouring countries. The lack of access to fertiliser has hindered production in some cases, and has reportedly led to the sale of cocoa farmland to illegal mining operators.
To combat the threat, last year the government formed a 400-strong military and police taskforce to close down illegal mining operations, while also announcing a $3m plan to purchase drones to survey at-risk land. Industry players have said that unless affirmative action is taken to stop illegal mining, Ghana’s long-term cocoa productivity could be significantly damaged.
A related article: Ghana looks to technology and transport to reinvigorate cocoa output
Producer price and pension reform to support growers
In light of these challenges, the government has sought to support cocoa growers by maintaining the producer price for cocoa purchased during the current agricultural season, despite a 30% drop in global market prices.
Addressing industry officials in October, President Nana Akufo-Addo said the government would continue to pay local farmers GHS7600 ($1700) per tonne in a bid to stabilise the local industry.
Global market prices dropped from $3100 in August 2016 to around $2200 at the beginning of March, leading to concerns about the subsequent impact on growers around the world.
Another measure aimed at strengthening the sector is the rollout of a state-backed pension scheme for cocoa growers, the first of its kind in the country, designed to provide greater financial security for farmers and attract more people to the industry.
Under the scheme, expected to be implemented later this year, growers will contribute a portion of their earnings to a pension fund, which will be topped up with a pre-agreed amount by COCOBOD, providing farmers with finances that can be accessed upon retirement.
Another Must Read: The woes of Ghana Cocoa- Dr. Owusu Afriyie Akoto writes
Source: www.oxfordbusinessgroup.com
