GHANA is in the process of finalising a US$600 million loan from the African Development Bank (AfDB) for the country’s cocoa regulator, Cocobod, which will support the cocoa sector, including processing operations.
According to BMI, research outfit of ratings agency, Fitch, fiscal incentives will continue to spur investment over the long term, while favourable cocoa processing margins will ensure profitability in the short term.
“Local governments have maintained a business-friendly environment for cocoa processors. For example, in Ghana firms operating in free zones get generous tax exemptions and reductions. These include, among other benefits, complete exemption from direct or indirect duties and levies on all input imports and cocoa exports, no income tax on profits for the firm’s first 10 years, and immunity from double taxation agreements for foreign investors”, it stated in its report on “Investment Frenzy to Support West African Cocoa Grindings.”
Between 2019 and 2023, cocoa consumption in Ghana is expected to grow by 2.0 per cent year-on-year. However, Ivory Coast, Cameroon and Nigeria’s consumption are expected to be higher than Ghana.
BMI said cocoa grindings in West Africa have grown at a steady pace in the past decade, and it believe the region is well-positioned to further expand processing capacity over the next five years.
The main cocoa growers in Africa – Côte d’Ivoire, Ghana, Nigeria and Cameroon – together accounted for approximately 20.9 percent of world grindings in 2017/18, up from 15.9 percent in 2008/09. In 2018/19, BMI is forecasting cocoa grindings to rise in Côte d’Ivoire, Ghana and Cameroon, while Nigerian grindings will grow at a modest pace.
The report emphasized that firm growth in cocoa processing in origin countries can be attributed to two catalysts.
First, on the supply side, domestic policy has successfully incentivized greater private sector investment at a time when global processing margins remain elevated, partly owing to the current abundant supply and low price of cocoa beans (although cocoa powder and butter ratios in Europe have eased in recent months).
Second, on the demand side, consumption of dark chocolate continues to rise undeterred in a number of developed and emerging markets amid a growing consumer appetite for healthier treats.
“In this article, we focus on the former, looking at how grindings have benefitted from the influx of investment as well as the fiscal incentives that have allowed cocoa processing capacity to expand”, it said.
Ghana recorded more than 950,000 metric tons of cocoa production during the 2017/2018 crop year and expects to repeat that level of production during the ongoing (2018/2019) crop year as well.