The previous administration under John Dramani Mahama spent US$400m out of the $1.8 billon cocoa syndicated loan for the 2016/2017 crop season, after losing the 7 December 2016 elections, Chief Executive Officer of Ghana Cocoa Board (COCOBOD) Joseph Boahen Aidoo has said.
At a press conference on Wednesday, 1 November, Mr Aidoo said: “The NDC government secured an amount of US$1.8 billion for the 2016/2017 cocoa purchases which were projected at 850,000 metric tonnes.
“As of January 2017, the US$1.8 billion had been fully drawn and utilised when only 587,125 metric tonnes of cocoa had been purchased. The mystery surrounding the exhaustion of the US$1.8 billion is being investigated and the full facts will be made known to Ghanaians in due course. Peculiar to the loan utilisation is the last drawdown of US$400.0 million which was effected on 20th December 2016 at the time the NDC had woefully lost the December 2016 elections.
“It is still surprising how the full drawdown of US$400.00 million (GH¢1.69 billion) was fully expended between 20th December 2016 and 6th January 2017 when the NPP government took over after 7th January 2017. Audit findings into the utilisation of the amount will be made known to Ghanaians at the appropriate time when the full facts are unravelled.
“Despite this inability to account properly for the loan, the NPP Government was saddled with a whopping debt of GHC19.6 billion after taking over in January 2017,” he said.
Read the full statement below:
RESPONSE TO THE MINORITY PRESS STATEMENT ON COCOA
Good morning Ladies and gentlemen of the media (both electronic and print)
I am grateful to you all for honouring our invitation this morning. I have had the opportunity to interact with some of you since assuming office as Chief Executive at different fora and at my office but I have resisted the temptation of discussing the details of what myself and my team inherited as Managers of Ghana Cocoa Board.
The reason for shying away was just because, we felt it was a responsibility the President Akufo-Addo who appointed me had the trust that I could handle and there was no need trumpeting the problems.
However, I have decided on this day to make you aware of some of the challenges and rot we inherited, since the minority who are supposed to know the true situation of the Board has resorted to peddling of misinformation, half-truth, concocted stories and blatant lies in some instance just to throw dust into the eyes of the public in general and farmers in particular.
We cannot allow such attitude to continue unchecked because it enormously and negatively impacts on the sustainability of the cocoa industry. Cocoa is the backbone of Ghana and we must and we shall protect it.
Our attention has been drawn to a press conference by the NDC minority group, seeking to demand answers to the utilisation of proceeds relating to cocoa production above the 850,000 metric tonnes cocoa production projected for the 2016/2017 crop year.
The answers lie in the responses enumerated below:
Falling Price of Cocoa between 2016/2017 and 2017/2018
The world market price of cocoa has fallen by an average of 30% from US$2,950.00 per tonne in 2016/2017 to an average of US$2,080.00 per tonne in 2017/2018. The farm gate price, on the other hand, has remained the same at GH¢7,600.00 per tonne despite the fall in the world cocoa price. The producer price of GHC7,600 per tonne paid in 2016/2017 formed 65% of the gross FOB of US$2,950 per tonne. In the 2017/2018 season, the producer price of GHC7,600 forms 83% of the gross FOB of US$2,080.00 per tonne.
The bulk of the excess cocoa above 850,000 metric tonnes was light crop cocoa sold at an average discounted price of US$1,600 (GHC6,720.00) per tonne while the producer price paid to the farmer remained at GHC7,600.00 (US$1,810) per tonne. COCOBOD incurred a loss of US$210.00 (GHC882.00) per tonne. Thus, the cocoa production achieved above the target tonnage of 850,000 metric tonnes in 2016/2017 was subsidised by COCOBOD.
Ladies and Gentlemen, it is instructive to note that farm gate prices in all cocoa producing countries have reduced the producer price to reflect world market trend. In keeping faith with the Ghanaian cocoa farmer to sustain their livelihoods, the NPP Government has maintained the producer price which is 83% of the gross FOB leaving 17% for operations.
The Stabilisation Fund policy was introduced by the NPP administration led by President Kuffour in the 2004/2005 cocoa season to support farmers from the effects of international price volatility. The Fund had accumulated an amount of GHS206.50 million when the NPP Government took over in January 2017. The budgeted figure of GHS93.5 million for the 2016/2017 season was not set aside by the NDC Government as a result of misplaced priorities. After the NPP administration took over in January 2017, an amount of GHS103.5 million has been added to the fund bringing the cumulative balance to GHS310 million. The actual amount required to maintain the producer price in the 2017/2018 season is GHS1.294 billion. The price subsidy to farmers is, therefore, GHS984 million after setting off the stabilisation fund of GHS 310 million available.
Suffice it to say that the amount of the international price fall meant that the Stabilization Fund was far less the amount required to fully absorb the shocks from the fall in price. The government has therefore subsidised the producer price. This goes to buttress the priority Government and the new management of COCOBOD place on the welfare and motivation of the farmer to sustain cocoa production.
Cocoa Roads Debts
The new Management of Ghana Cocoa Board (COCOBOD), upon assumption of office in February 2017, inherited cocoa roads debt to the tune of GH¢3.52 billion. Total budgetary allocation of GH¢1.64 billion was earmarked for the cocoa roads project between 2014/2015 and 2016/2017 whilst the NDC Government awarded contracts to the tune of GHC5.16 billion. This was the budgeted figure by GHC3.52 billion.
It is worth noting that this reckless commitment above the budgeted amount was questioned by the Public Procurement Authority (PPA) in December 2016 when COCOBOD needed to seek approval to award additional contracts and the Authority inquired about the availability of budgetary provision to enable it to approve the requested contract awards.
The NDC Government at the time justified the road contracts in a response to the PPA. This was the time when the NDC had woefully lost the elections and was trying to acquire retrospective approvals for the contracts already awarded without initial approval. Ladies and gentlemen, I am sure we are all aware of the legal implications of this action taken by the NDC administration. It later turned out that the justification of all the awarded road contracts as having budgetary provision was a palpable lie communicated to the PPA in order to have the contracts receive approval.
The NDC administration, in an attempt to conceal the over-bloated cocoa roads contracts, decided to create a Trust as a separate vehicle to manage the cocoa roads project. The Trust Deed was not registered even though the Trust was said to have been inaugurated at the Ministry of Finance. The inauguration of the Trust was used as a charade to deceive Ghanaians.
It is also instructive to note that many of the cocoa roads for which contracts were awarded have been found to be non-existent or excessively over bloated as revealed by an interim audit conducted by technical consultants. For the first time in the history of Ghana, the NDC had introduced ghost cocoa roads in Ghana.
Under the cocoa roads contracts, four-wheel drive vehicles were purchased by COCOBOD for the contractors as part of the contract price. Currently, over 160 vehicles are the contractors. To indicate the abuse, an eighteen-kilometre road, for example, was allocated six four-wheel vehicles for inspection by the old administration. I have initiated steps to retrieve the vehicles from the contractors.
Losses arising from Trading in Options
The numerous actions which led to losses in the era of Dr Opuni and the NDC included trading in options. This led to the loss of US$750,000 in 2015/2016. This trading in options, which was executed by the then Marketing Manager of CMC and directly supervised by Dr Opuni, is a subject of investigations currently being undertaken by COCOBOD.
In addition, price discounts which were given on cocoa sales for COCOBOD’s failure to honour contracts on due dates resulted in losses to COCOBOD. The price discounts, which were executed at the blind side of appropriate approval channels, resulted in the loss of US$12.4 million to COCOBOD. COCOBOD has had to deal with all these losses from the 2016/2017 production tonnage, further explaining the so-called excess production.
Advance Receipt of Proceeds against Future Production of Cocoa
The previous administration of COCOBOD in the NDC era sourced and received a total of US$320.70 million in addition to the US$1.7 billion syndicated loan funding received in 2014/2015. Part deliveries were made on the advances and US$128.70 million in outstanding commitments were carried forward into the following year 2015/2016.
Additional advances of US$178.70 million were received in 2015/2016 by the previous administration for which no deliveries were made.
On the assumption of office of the new COCOBOD administration, total commitments of US$35.97 million equivalent to 13,539 metric tonnes of cocoa were outstanding as a result of the advances received, having run from 2014/2015 and 2015/2016. These inherited cocoa delivery commitments were satisfied with production from the 2016/2017 crop, further explaining the so-called excess production.
Roll-Over of Sales Contracts Resulting from Unrealistic Production Forecasts
COCOBOD budgeted to achieve a production tonnage of 900,000 metric tonnes of cocoa in 2014/2015. Crop forecast and COCOBOD Research analysis had indicated a realistic production of 750,000 metric tonnes. The COCOBOD Research forecast was rejected by the then Chief Executive, Dr Stephen Kwabena Opuni, who was an appointee of NDC.
Apparently, the Chief Executive and his management team then had used the conjured production of 900,000 tonnes to arrange a loan facility of US$1.7 billion in the 2014/2015 season. A production figure of 740,000 metric tonnes was however achieved instead of the 900,000 tonnes. COCOBOD deliberately oversold cocoa based on the 900,000 metric tonnes. Consequently, this created default on the part of COCOBOD generating losses for non-delivery of contracted volumes on due dates.
The same situation occurred in the 2015/2016 season with an actual production of 778,000 tonnes achieved when a loan facility of US$1.8 billion had been secured with a production forecast of 850,000 metric tonnes. COCOBOD had difficulty repaying the two facilities in 2014/2015 and 2015/2016 due to inaccurate forecast and insufficient crop to service sales contracts.
The new Management of COCOBOD, upon the assumption of office in February 2017, had a liability of US$280 million (equivalent to 61,894 metric tonnes) to serve as a result of rolling over contracts from 2014/2015 and 2015/2016 seasons. Part of the 2016/2017 production had to be applied to fulfil such sales contracts, explaining the utilisation of the so-called excess production.
Non-Payment of Borrowings, and Repayment with Advance Receipts against Future Production
It is instructive to note that the previous COCOBOD administration under the NDC failed to pay for the annual syndicated funding in 2014/2015 and 2015/2016 with cocoa deliveries as normally the case. Cocoa production declined as a result of the abandonment of the cocoa rehabilitation programme. Cocoa farms were neglected and budgeted production could not be achieved to meet repayment of contracted loans and advances with cocoa sales proceeds. These are indicative of the gross mismanagement with which the NDC handled the affairs of COCOBOD.
Free Fertiliser Programme
The free fertilizer programme was used by the NDC to introduce sub-standard and inefficacious fertilizers into the cocoa Hi-Tech programme. Cocoa farmers expressed misgivings and disquiet in accepting the sub-standard fertilizers through the free fertilizer programme introduced by Dr Opuni and the NDC regime. He resolved to willfully cause financial waste such that farmers would be compelled to accept the fertilizers for free if acceptance through the subsidized sale was not successful.
Similarly, the cocoa mass spraying exercise was changed from the normal model of spraying by gangs to the distribution of sub-standard insecticides and fungicides to farmers to spray their own farms. The amount saved from the non-payment of gangs was misapplied through inflated contracts.
The rehabilitation programme was abandoned by the NDC regime, and therefore the party cannot claim credit for the cutting of mistletoes. Rather, the NDC decided to pursue the so-called free distribution of inputs and seedlings, which were rather conduits for inflated contracts and the syphoning of funds.
The NPP Government has now re-introduced the fertilizer subsidy programme with quality and high yielding fertilizers. There is an average subsidy of 53% on the fertilizers. The mass spraying gangs are paid promptly and therefore there is no evidence to suggest that spraying gang allowances have been in arrears for four (4) months as alleged by the NDC press conference. The gangs spray evenly across all farms without discrimination.
It is very interesting to hear the minority talk about challenges with the Cocoa Mass Spraying programme when the government has, in fact, re-launched the programme to make it more viable. All the so-called challenges mentioned are non-existent. Cocoa diseases and pests do not know the political affiliation of cocoa farmers. It will, therefore, be unfortunate for COCOBOD to politicise this important intervention which has played a very important role in increased cocoa production since its introduction in 2001.
The NDC administration spearheaded procurement of agrochemical and fertilizer inputs above allocated budgets. The budgets for the years were exceeded through padded contracts. Worse to mention is the fact that these agro inputs were rushed through the scientific testing regime by the Cocoa Research Institute of Ghana (CRIG). Officials of CRIG who resisted to rush the products through the fast-tracked testing regime were transferred. These inputs were confirmed by farmers across the country to be ineffective and it is not surprising that Ghana’s cocoa production plummeted to the 740,000 and 778,000 tonnes in the 2014/2015 and the 2015/2016 seasons respectively when Dr Opuni was in charge of COCOBOD.
In addition to this, the NDC Government had awarded contracts for fertilizer and chemical supplies worth more than GHC500.00 million before leaving office in January 2017. The new management had to renegotiate these contracts, saving the Ghanaian farmer over GHS80.00 million.
Ill-Conceived, Financially Over-burdening Construction Contracts
The penchant to siphon funds through inflated contracts was rampant in the NDC administration through ill-conceived construction contracts in the cocoa sector. These contracts were awarded without proper value for money analysis, bringing into question the motive for the contracts.
For example, the contract for COCOBOD to construct a guest house at Bole in the Northern Region was needless at the time it was awarded. President Mahama was said to have influenced the award to enable him to enjoy comfortable holidays during visits to his constituency. Also, the contract to construct a 50,000 metric tonne warehouse at Tema was not considered to be financially and operationally prudent at the time since COCOBOD already had enough warehousing capacity at Tema to sustain its operations into the foreseeable future. The warehouse rehabilitation contract at Abuakwa in Kumasi was not required at the time since the facilities were in excellent working condition. Last but not the least, a whopping US$24 million contract was awarded to demolish excellent staff housing quarters in Tema, only to construct new housing facilities raising several questions about the motive for the award of the contract.
Annual Syndicated Loan Facility – Accounting for the US$1.8 Billion 2016/2017 Syndicated Loan
The NDC government secured an amount of US$1.8 billion for the 2016/2017 cocoa purchases which were projected at 850,000 metric tonnes.
As at January 2017, the US$1.8 billion had been fully drawn and utilized when only 587,125 metric tonnes of cocoa had been purchased. The mystery surrounding the exhaustion of the US$1.8 billion is being investigated and the full facts will be made known to Ghanaians in due course. Peculiar to the loan utilization is the last drawdown of US$400.0 million which was effected on 20th December 2016 at the time the NDC had woefully lost the December 2016 elections.
It is still surprising how the full drawdown of US$400.00 million (GH¢1.69 billion) was fully expended between 20th December 2016 and 6th January 2017 when the NPP government took over after 7th January 2017. Audit findings into the utilization of the amount will be made known to Ghanaians at the appropriate time when the full facts are unravelled.
Despite this inability to account properly for the loan, the NPP Government was saddled with a whopping debt of GHC19.6 billion after taking over in January 2017.
The governance structure at COCOBOD has not posed any problem for smooth and effective administrative procedures. The NDC has failed to support their claim of the CMC budget increment by 38% and they have also failed to support their claim of the current governance structure causing the increase. The governance at COCOBOD is working smoothly, and all corporate governance procedures are being followed.
There is evidence to show that the NDC over bloated revenue and allocated budgets for spending the available resources.
Abuse of Power and Wasteful Expenditure
It is worth noting that the extent of mismanagement left by the President Mahama administration with Dr Opuni in charge of COCOBOD needs experienced and prudent management to redeem the institution from its current debts and mess. Thus, on assumption of office, the NPP administration has initiated various value for money audits, and Ghanaians will soon know the extent of rot left by the President Mahama administration at COCOBOD. Staff are either on leave, at the post or interdicted and payment to them are not considered wasteful.
Export Duty Abuse
The President Mahama/Opuni tenure used export duty payments from COCOBOD as a conduit to syphon funds for activities not related to cocoa. A case in point is the payment of US$25million from COCOBOD to Construction Pioneers (CP) in January 2016 to settle judgement debt awarded against the Government of Ghana in the UK. Without this payment, Government was to lose a property worth about US$1.2 million in the UK as a result of reckless handling of debts owed CP. This amount was taken from COCOBOD in the name of “exercise” duty (in the word of the then Deputy Minister of Finance – a Board member of COCOBOD Casiel Ato Forson). The payment under export duty was to make it appear legitimate.
Ladies and Gentlemen of the Press, this is the depleted state the NDC Government left COCOBOD.
Let me assure you that we are up to the task of solving the myriad of problems we inherited but we do not need the needless noise by the Minority in Parliament.
Time will not allow me to go over the numerous interventions we’ve rolled out as we seek to make cocoa sustainable in Ghana and make our farmers better-off.
We believe in Cocoa farming and cocoa business and we pledge to help build and enticing cocoa industry for Ghana.
Thank you for your attention.