Banking Consultant, Nana Otuo Acheampong, has cast doubt on the ability of local banks to take over the annual syndicated loan arrangement for the purchasing of cocoa beans from farmers by COCOBOD.
His comment follows recent calls by the Board Chairman of COCOBOD, Hackman Owusu-Agyemang, for local banks to build their capacity play a critical role in the syndicated loan arrangement in the near future.
Speaking to Citi Business News, Nana Otuo Acheampong said it is not possible for local banks to take over the process in the short-term.
“If all the recapitalized banks are to take part and pull a quarter of their capital to handle the syndication process, it would not be possible in the short-term. But in the medium to long-term, once they are able to build up their capital and move their single obligor limitations up then they can do it.”
Nana Otuo Acheampong also spoke about the interest rate disparity that exists between local and international financial institutions, and how that serves as a drawback to plans to involve more local banks in the syndication process.
“Possibility of doing it from a capital perspective is not a problem, but from a pricing perspective it is almost impossible. The current interest rate that COCOBOD borrowed from the international banks is not something the local banks can match, seeing that our Monetary Policy Rate alone is at 14.5 %. This means no local bank can lend below that rate and by extension even match the 2 % or 3 % that COCOBOD can get from the foreign banks.”
Local banks must fully fund cocoa syndicated loan in future – Hackman Owusu-Agyemang
Board Chairman of COCOBOD, Hackman Owusu-Agyemang, has urged local banks to strategically position themselves, so they are able to fully provide the loan COCOBOD needs to purchase cocoa beans in the not too distant future.
Since the 1992/1993 cocoa crop season Ghana’s cocoa sector regulator, has been signing syndicated loan facilities with the participation of a mix of international and local financial institutions.
The latest syndicated loan facility for the 2020/2021 cocoa crop season worth $1.3 billion dollars was facilitated by a total of 28 banks made up of only 4 local and 24 international financial institutions.
Speaking to Citi Business News, Hackman Owusu- Agyemang bemoaned the current structure which sees a lot of the profit from the loan agreement going to the foreign banks.
“Certainly we should know that this is an expensive exercise and when you do this oversees, the profit goes to them. And I believe the time has come to be able to put together $1.3 or $1.5 billion for an industry that has shown that it can always deliver.”
“So I sincerely believe that we should avoid the cost of doing these syndications, it’s not cheap because you have all manner of fees coming up to add to the interest rate that is given to you. Farmers in North America and other parts of the world like Malaysia don’t go through this,” he added.
COCOBOD secures $1.3 billion syndicated loan; first tranche expected by October 10
Chief Executive Officer of Ghana Cocoa Board, Joseph Boahen Aidoo says the first tranche of the newly signed $1.3 billion syndicated loan facility which will cater for the purchase of cocoa beans for the 2020/2021 crop season should hit their accounts by October 10, 2020.
The agreement for the loan was signed in Accra on September 29, 2020, with the participation of 28 banks made up of 4 local and 24 international financial institutions.
The amount is to help COCOBOD facilitate the procurement of some 900,000 metric tons of cocoa beans.
Lead Financial Institutions involved in the deal
Initial Mandated Lead Arrangers of the new loan include;
ABN AMRO BANK NIV
BANK OF CHINA LIMITED LONDON BRANCH
COOPERATIVE RABOBANK UA
DZ BANK AG DEUTSCHE ZENTRAL-ZENOSSENSCHA FTS BANK, FRANKFURT AM MAIN.
GHANA INTERNATIONAL BANK PLC
INDUSTRIAL AND COMMERCIAL BANK OF CHINA LIMITED, LONDON BRANCH
MUFG BANK LIMITED
STANDARD CHARTED BANK
The four local banks that are participating in the deal include: Ecobank Ghana Limited, Société Générale Ghana Limited, ABSA Ghana Limited and Stanbic Bank Ghana Limited.