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President Mahama’s government is coming under pressure to help the country’s cocoa farmers hit by market forces and encroachment by gold miners
Ghana’s licensed cocoa buyers are in hock to the country’s banks by up to US$750 million, according to the Licensed Cocoa Buyers Association of Ghana, as low prices and the country’s weakened banking system have left many cocoa businesses facing mounting debts.
Last year, the chocolate industry warned that the EU’s new anti-deforestation regulation, which requires buyers to ensure that the cocoa – and a range of other commodities – that they buy is not linked to deforestation, would likely push up prices by creating a premium product of ethically sourced cocoa (AC Vol 66 No 17, Cocoa and coffee farmers facing trade chaos as Brussels pushes deforestation crackdown).
But instead, cocoa prices have collapsed due to weak demand. Around 70,000 metric tonnes of cocoa beans are still in the fields across Ghana, says the industry regulator Cocobod. Ghana’s debt crisis, which saw up $44 billion in external and local debts restructured, also involved a Domestic Debt Exchange worth $910m that hit domestic bank balance sheets (AC Vol 65 No 22, Accra jumps through more debt hoops). That, in turn, has reduced banks’ capacity to lend to local businesses, including the cocoa sector.
Yet the debts owed by cocoa buyers are rapidly accruing interest, deepening the sector’s liquidity problems. President John Mahama’s government has responded by reducing the fixed price it pays for bean purchases and promising a cocoa financing scheme to boost the sector.
Under pressure from African and Asian farmers, the EU deforestation law has now been delayed by two years. And European businesses worry that the law – and other EU green laws – could hurt the bloc’s competitiveness (AC Vol 66 No 22, Brussels backs down on forest laws again).
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