Produce Buying Co. (PBC), Ghana’s largest purchaser of cocoa from farmers, delayed plans to borrow $30 million from France’s development agency as Africa’s worst-performing currency threatened to raise repayment costs.
PBC, which planned to use the Agence Francaise de Developpement funds to buy coca beans and build sheds and depots for the current season, expects to conclude a deal in the next harvest, Joseph Osei Manu, Deputy Managing Director responsible for finance and administration, said in an interview in the capital, Accra, yesterday. The cedi has fallen 33 percent this year against the dollar, the biggest drop among 24 African currencies tracked by Bloomberg.
“We needed to guard against the higher cost of repayment that comes with the depreciation of the exchange rate,” Manu said. “We are still discussing. We will see how the exchange rate moves in the coming year.”
Companies in the world’s second-biggest cocoa producing nation are battling the weaker currency that pushed the inflation rate to 15 percent in June, a 10th straight month of increases. Accra-based PBC is looking to cut repayment costs on the loans it needs to buy the chocolate ingredient as profit after tax in the six months through March dropped 45 percent to 3.9 million cedis ($1.1 million), it said April 29.
PBC increased its borrowing from industry regulator Ghana Cocoa Board to 450 million cedis from 400 million cedis because of the delayed French loan, Manu said. This season’s harvest ends in September and the next one begins the following month.
Cheaper Rates
Borrowing from the board known as Cocobod is still cheaper than rates at local commercial lenders, he said. The company was charged 18 percent by Cocobod, while a supplementary loan of 250 million cedis that it took from banks attracted an average annual interest rate of 25 percent, he said. The French development agency loan would have had a lower rate than Cocobod, Manu said.
PBC has fallen 18 percent this year on the Ghana Stock Exchange and traded unchanged at 14 pesewas by the close yesterday in Accra.
The company, which is 74.8 percent owned by the state pension fund Social Security and National Insurance Trust and the government, is still discussing plans with its largest shareholders to raise at least 150 million cedis through a rights offer to ease debt costs, Manu said.
“We’re hoping to be given the go-ahead in the coming year.”
Credit: Bloomberg