Ghana Cocoa Board: No Credit Purchases for LBCs as COCOBOD Threatens Licence Revocation

• COCOBOD has threatened to revoke LBC licenses if they continue to purchase cocoa on credit.
• The new financing arrangement for cocoa purchases aims to provide adequate funding throughout the year, reducing delays in payments to LBCs.
• LBCs that disregard COCOBOD's directive may face sanctions, including license revocation.
• The Ghana Cocoa Board Bill 2026, which has been passed by Parliament and is awaiting presidential assent, will guarantee farmers 70% of the gross Free On Board value and supports local value addition.
• Lawyers advising LBCs should be aware of these developments and advise their clients accordingly.

The new funding model is to ensure sufficient liquidity for cocoa purchases and related operations all year round.

The Ghana Cocoa Board (COCOBOD) has issued a stern warning to Licensed Buying Companies (LBCs), threatening to revoke their operating licenses if they continue to purchase cocoa beans from farmers on credit. This move is part of COCOBOD's efforts to improve liquidity in the cocoa purchasing system and ensure that farmers receive prompt payment for their produce. The regulator has formally communicated this new position to LBCs, advising them to refrain from buying cocoa on credit and instead adopt a cash-based system.

COCOBOD's Chief Executive Officer, Dr Randy Abbey, emphasized that the restriction is necessary to address the delays in financing that have hindered LBCs' ability to purchase cocoa efficiently. He noted that this has led to some companies becoming heavily indebted to financial institutions, which in turn affects their profitability and efficiency.

The new directive comes ahead of the implementation of a new financing arrangement for cocoa purchases from the 2026/27 crop year. This model is expected to provide adequate funding for cocoa procurement and related activities throughout the year, reducing delays in payments to LBCs after they take over cocoa receipts from farmers.

LBCs that disregard COCOBOD's directive may face sanctions, including the revocation of their licenses. This is not a new development, as the Ghana Cocoa Board Bill 2026, which has been passed by Parliament and is awaiting presidential assent, will guarantee farmers 70% of the gross Free On Board value while allowing producer prices to be reviewed during the season based on market developments.

The reforms introduced under this bill constitute the most significant changes to the industry since 1984. They aim to reset the cocoa sector for growth and industrialization, with a focus on improving domestic processors' access to cocoa beans and supporting local value addition.

Lawyers advising LBCs should be aware of these developments and advise their clients accordingly. The potential loss of operating licenses is a significant risk that companies must consider when making decisions about purchasing cocoa on credit.

The new financing arrangement for cocoa purchases is expected to provide adequate funding for cocoa procurement and related activities throughout the year. This will reduce delays in payments to LBCs after they take over cocoa receipts from farmers, enabling them to purchase cocoa more quickly and improve their profitability.

Improving payment speed will also support efforts to expand local cocoa processing and value addition by improving domestic processors' access to cocoa beans. This is a critical step towards industrializing the cocoa sector and ensuring that Ghana benefits fully from its rich cocoa resources.

The success of these reforms depends on the cooperation of all stakeholders, including LBCs, farmers, and domestic processors. By working together, they can create a more efficient and profitable cocoa purchasing system that benefits everyone involved.

Lawyers advising Licensed Buying Companies (LBCs) should be aware of the potential loss of operating licences if they continue to purchase cocoa beans from farmers on credit, and advise clients accordingly.

Source: Original reporting via myjoyonline.com