First step towards commercialization of cocoa sector support commences

The Ghana Cocoa Board, armed with the first tranche of a US$600 million medium-term loan secured from a consortium of international lenders led by the African Development Bank, has begun the first step towards a fundamental restructuring of how cocoa farmers in the country are supported in their activities through the provision of production inputs and agricultural extension services.

This first step comes in the form of the creation of what it calls the Cocoa Management System, a comprehensive database which captures the details of cocoa farms and their owners nationwide.

It will also capture information about product and service providers, their capacities, reach and product/service pricing, with the ultimate goal of matching them with the cocoa farms that need those products and services.

This is a crucial first step towards replacing heavily subsidized state support for cocoa farmers with private sector support on commercial terms, which would expectedly be far more efficiently delivered, in part because it will be guided by information provided through the CMS.

The pilot phase of the data gathering exercise required to establish the CMS has been completed, covering about 1,000 cocoa farmers.

The next step is to extend the data gathering to cover the entire cocoa farming industry, comprising 673,377 identified farms, spread across 1,404,388.27 hectares of land, cultivated by some 800,000 households.

It will also gather information on purchasing clerks and their locations as well as the various privately owned technical support service providers and production input (such as fertilizers and pesticides) providers. Altogether COCOBOD hopes to register data on 1.2 million individual farmers onto the system.

The exercise is expected to cost US$10.69 million and will be financed out of the US$200 million second tranche of the AfDB led syndicated medium-term loan, which COCOBOD is scheduled to draw down during the last week in December this year.

Registered farmers are to be issued with Cocoa Identification Cards that will be linked to the National Identification System with cards becoming primary identification documents with which the farmers can access production inputs and extension services, initially from the state at subsidized rates but ultimately from private enterprises on commercial terms.

Importantly, registration onto the CMS will provide private suppliers with comfort in providing the farmers with inputs and services on credit terms and will provide commercial financiers with comfort in providing short term credit financing towards production.

The key to this happening though is COCOBOD’s ambitious programme towards doubling – and in some cases tripling – productivity per hectare as well as expanding farmland under cultivation in order to provide farmers with the financial wherewithal to afford the products and services they need for production, on commercial terms.

Hitherto, COCOBOD’s heavy subsidization of cocoa production inputs and services has left it with accumulated losses running into several millions of cedis, which are still being continuously refinanced at high domestic interest rates, a situation recognized by the Board’s current management as unsustainable and therefore in need of being rectified.

The CMS will be able to match farms and the providers of their production input, extension service and financing needs, with registration on the database serving as an assurance that financial, input and service credit can and will be repaid from revenues earned from eventual cocoa bean sales.