Following a debate on a motion on the Finance Committee’s report, Parliament has finally approved a US$1,300,000,000,000 trade finance facility for the purchase of cocoa in the 2018/2019 cocoa season.
Chairman of the Finance Committee and Member of Parliament for New Juaben South, Dr. Mark Assibey Yeboah, stated on the floor of Parliament that the trade facility is to enable COCOBOD raise adequate funds to purchase cocoa beans from farmers through the licensed buying companies for the cocoa season.
Dr. Assibey-Yeboah informed the house that the cocoa industry has contributed significantly to about a quarter of Ghana’s Gross Domestic Product (GDP) for economic development.
He again indicated that the industry has created employment for millions of Ghanaians and serves as a major source of foreign exchange for the country.
Dr. Assibey-Yeboah further explained that the Offshore syndicated Trade Finance Arrangement was put in place in 1994 to enable COCOBOD secure a loan facility to finance the purchase of cocoa and other payments each year.
Minority’s argument
Debating the motion, Member of Parliament for Bia East, Mr. Richard Acheampong, stated that most cocoa roads in the Western Region have been abandoned by the current government.
He explained that road contracts awarded under the previous government have been abandoned due to lack of capital flow for the completion of the roads.
Mr. Acheampong further added that the uncompleted roads are in a deplorable state, making it difficult for cocoa farmers to transport their beans.
In his submission, he showed different pictures on the floor to illustrate the deplorable state of the cocoa roads in some part of the Western region.
He held the view that the cocoa roads should be constructed first before the government thinks of borrowing to purchase cocoa beans.
The Finance Committee’s report on the loan facility agreements
Section 32 (6) of the Stamp Duty Act, 2005 (Act 689) makes it imperative to stamp a loan document. In order to ensure that the full value of the loan is used for cocoa purchases in the 2018/2019 crop season, there is the need to waive the Stamp Duty on the loan facility. The amount to be waived is US$6,500,000.
Under the Terms of the agreement, the arrangers of the facility are ABN AMRO Bank, Bank of China, Industrial and Commercial Bank of China (ICBC) and Standard Chartered Bank.
A flat fee of participation and arrangement is set at 0.625 percent. Legal cost and other expenses sum up to $66,000 while commitment fee covers 35 percent on interest margin.
The report disclosed that the syndicated loan was drawn down in three tranches. The first 50 percent drawdown was made on October 6, 2017. Additional $450 million drawdown was made on November 13, 2017. The final drawdown was made on December 13, 2017, bringing the cumulative drawdown to the full amount of $1,250,000,000.
The report again indicated that the borrowing became necessary as a result of the decline in the World prices of cocoa as well as existing legacy debts.
In the report, the COCOBOD technical team informed the committee that the Stabilisation Fund is part of the positive margin between international prices and producer prices.
It was stated in the report that the current producer prices are higher than the international prices hence the margin is adverse and if the situation improves, repayments would be made into the Stabilisation Fund.
The report finally revealed that in order to ensure that the objective for the Trade Finance facility is realised, there is the need to exempt the facility from the repayment of Stamp Duty.
Source: GhanaJustice/S.Ayisi
