Cocobod sinks into ¢12.3bn debt leading to financial cost rise of ¢325m – A-G warns of ‘industry crippling’ risk

The Ghana Cocoa Board (Cocobod) is sinking into deep debt, the 2021 Auditor-General’s report has revealed, noting that the burden was as high as GH¢12.3 billion as of the 2019/2020 financial year.

Section 90 of the Public Financial Management Act, 2016 (Act 921) stipulates that the governing body of a public corporation or state-owned enterprise shall establish and maintain policies, procedures, risk management and internal control systems, and governance and management practices, to ensure that that public corporation or state-owned enterprise manages its resources prudently and operates efficiently in accordance with the objectives for which the public corporation or state-owned enterprise was established.

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However, the Auditor-General said: “Our examination of the records of Cocobod noted that the Board has been burdened with relatively high loan portfolios over the years”, adding it has “debts totalling GH¢12,301,211,685.40 in its records as of the end of the 2019/2020 financial year”.

“We also noted from our review that the Board did not provide us any effective plans to reduce its debt burden into the future”.

Also, the report said the absence of sustainable debt plans coupled with the absence of effective long-term cost control measures, resulted in this state of affairs.

The debt burden resulted in increased financial costs over the years amounting to GH¢325,766,160.20.

“This, if not managed effectively, could lead to crippling of the cocoa industry”, the report warned.

The A-G said his office urged the “management to deploy and implement effective plans and strategies that would lead to the reduction of the Board’s debt burden within the medium to long term”.

It noted that the Cocobod “management has a detailed plan in place to reduce debt on the books of Cocobod. Cococbod is implementing tighter budgetary controls to ensure that debt is not accumulated but rather we make savings to repay all debts on our books”.

The report said Cocobod recorded a loss of GH¢426 million in the 2020 financial year, as compared with a loss of GH¢320 million registered in 2019.

This represents a 33% decrease in the Board’s financial performance over the period.

Revenue increased by 5.2% from GH¢9.76 billion in 2019 to GH¢10.27 billion in 2020.

Even though Cocobod recorded a 4.41% fall in cocoa production over the previous year, the rise in revenue was largely attributed to a higher export price per tonne of US$2,477 in 2020 compared with an average export price of US$2,236 for 2019.

Direct Cost increased marginally by 0.1% owing to an increase in the cost of Pest and Disease Control by GH¢480 million indicating a 4.421% increase.

Also, the report said distribution expenses and administrative expenses increased by 116.3% and 33.5%, respectively resulting in an operating profit of GH¢651 million, representing a 7.5% increase over the previous year.

Non-current assets increased marginally from GH¢8.21 billion in 2019 to GH¢8.24 billion in 2020, representing an increase of 0.4%.

The current assets went up by 44.3% from GH¢6.85 billion in 2019 to GH¢9.89 billion in 2020.

This was as a result of the Board holding much cash and cash equivalents at the end of the financial year and an increase in trade receivable.

The Board’s liquidity ratio (current ratio) improved from 0.75:1 2019 to 0.82:1 in 2020.

The increase notwithstanding, the Board would not be able to meet its short-term obligations as and when they fall due.