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 GHANA COCOA BOARD
Interview with
Mr. John H. M. Newman,
Chief Executive
October 1st 1999
Contact:
Cocoa House - P.O.Box 933, Accra - GHANA
Tel: (233) 21 22 12 12
Fax: (233) 21 66 71 04
E-mail: cocobod@africaonline.com.gh
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At what measures is the GCB looking to deal with this situation?
In terms of pricing it is very difficult to talk about measures because it is an external factor. Unfortunately it is not even an issue of supply and demand because this year, last year and possibly next year there will still be deficits in production. It is an international macro situation and the problems of South East Asia, Russia, Eastern Europe and Brazil have not helped. Fortunately for us because of the opportunity Cocoa Marketing Company has in terms of selling forward, it has been able to achieve better prices for the country than what some of the origin operators have been able to. It is a very difficult situation for us.
Mr. Kwame Pianim, a former Chief Executive of the Cocoa Board, mentioned in an article in the Daily Graphic today that the whole sector should emphasize on marketing efforts, specifically for Asia. What countries are you planning to focus on in the future in terms of marketing and what specific marketing efforts are you looking at?
That is his opinion and let me say that Cocoa Board is forever looking for new markets. We deal obviously with the old markets of Europe and America but we are beginning to make inroads in to the South East Asia market. We export cocoa to Singapore, Malaysia, Brazil wants to take some and we are still exporting to Eastern Europe except that the Yugoslav problem had undermined the process. Russia was a very big market for us, we were trying to further develop this market but the crush of the ruble last year hit us. We would nevertheless not relent. Last year I sent a team to Malaysia, Singapore and China but if those you want to talk to are not ready because of their own macro problems then you are stuck. The big issue is basically to come together and help increase consumption worldwide. It cannot be done only by a country like Ghana but it can be done in collaborate with the big multinationals who would also like to export their chocolates into those markets because as they expand their markets the request for cocoa will increase and we can sell more cocoa. It has to be a concerted action of producing countries as well as the importing countries including the private sector in the importing countries.
Last year you received a 320 million pre-trade finance loan for the 1998/9 season. What have been the priority areas that you invested the money in?
The money is used to buy cocoa and to facilitate ancillary cost.
Is the government also trying to attract foreign investors into Ghana?
Certainly. We recently signed an agreement with one of the biggest processors worldwide. They intend to invest in the cocoa sector here to build a factory and process cocoa. In fact Mitsubishi wants to join them to build a warehouse so there is a positive reaction to our invitation to the private sector, both internally and externally. I know that the Chinese are interested in coming in to process cocoa as well.
0 Have you had any positive talks with American investors?
0 Yes. I know that one or two organisations have been in touch with American investors but it is still on the drawing board.
1 Given this what would you say are the benefits of the sector here in Ghana for foreign investors?
1 This is a country where the political climate is good and if there is peace and quiet from the political perspective it helps the private sector. We talk about a cocoa sector where the farmer is producing some of the best cocoa in the world, a sector where the infrastructure is developing fast. There is access to the cocoa growing areas, a sector where there is a huge commitment by both the private sector internally and the government to encourage investors to come in. A sector where the private sector can come in with inputs; insecticides, spraying machines, and where they can come in with vehicles to support cocoa evacuation, into warehousing and to provide service in marketing. The private sector can go into cocoa planting, build its own warehouse and establish its own processing plant; the involvement can be total and beneficial.
2 Given all these benefits and despite of the fall in prices, how do you see the future of the cocoa sector and specifically the GCB?
2 The future of the cocoa sector is still quite bright because we believe that what we are seeing in terms of low prices is part of a cycle. It will turn round, I think it is a short term thing. In fact gold prices are beginning to turn round. We expect cocoa to ride on the back of gold. It may take a bit of time but this is an area where you can create a lot of wealth especially with the kind of product which we deliver to the market. For Cocobod it would change because we are delinking from core operational activity to become a smaller organization with a regulatory function. We cannot afford not to increase the buoyancy in the cocoa sector. This is an economic activity which takes care of about 8 million of our people so we can only encourage it and also encourage the farmer to produce more by applying the good agronomic practices which are made available to them for a higher yield per hectare. At the moment our yield per hectare is about 400kilos per hectare and we want to move to about 650 like Cote d’Ivoire or even 800 like Malaysia. The sector has a bright future.
3 What would you say has been your biggest achievement since you have been the Chief Executive of the Cocoa Board?
3 I think that in the last 3 years that I have been here I have been able to help government to redesign the future of the cocoa industry. I am presiding over a major transitional phase in the cocoa sector, moving from a huge conglomerate to a small one, getting the private sector involved in the cocoa activity, we are on course. Again, we have been able to market our products at the highest possible price levels. Every time our averages are better than what the ICCO averages prices suggest. I also think that in terms of the human psyche I am beginning to give more confidence to my people that they should be confident to manage this process without serious inhibitions.
4 As you know Forbes Magazine reaches more than 4 million readers, mostly businessmen. What is your final message to them?
4 There are opportunities in the cocoa sector in this country. I would invite businessmen who want to get involved in supplying inputs to the cocoa board or the licensed buying companies, to come in and process cocoa at the Export Free Zone, come into cocoa farming, into haulage, into warehousing because we need to build a lot more ware houses. There is a vast opportunity for businessmen to come into the cocoa sector. This country is a peaceful country so their investments will be safe.
| Could you give us a brief historical background of Ghana Cocoa Board?
Ghana Cocoa Board was established as the Gold Coast produce marketing board in 1947 ,so we are 52 years old. When we had independence it became the Ghana Cocoa Marketing Board. At that time the board was just responsible for regulating the market. Subsequently it has developed into a huge conglomerate having assumed a responsibility for services provided to the farmer at the pre-harvest level as well as responsible for scientific research into cocoa, coffee, shea nut and cola. And for a long time it assumed the direct responsibility for internal purchasing of cocoa from the farmers as with a monopoly in respect of external marketing of cocoa. In the late 60s early 70s it took over the processing factories. The processing factory in Tema and what used to be the Takoradi factories which have now been privatized all belonged to the Ghana Cocoa Board. It was also responsible for quality management of the produce. It has a multiple portfolio, beginning with pre-harvest activity to marketing not only of the beans but of products as well. In a nutshell this has been the history of the Ghana Cocoa Board.
What are the objectives of the G.C.B. today?
The objectives of the Cocoa Board are changing quite fast, having regard to government’s macro-economic policy to deregulate marketing, and privatize. The internal marketing of cocoa has been freed. Now we have 20 licensed buying companies in addition to the board’s own wholly owned licensed buying company, the Produce Buying Company. The distribution of insecticides and other inputs to farmers has shifted and been assumed by farmers organizations. Cocobod is still responsible for quality as well as external marketing. In the medium term the Cocobod’s overall responsibility for all aspects of the cocoa economy will change. Extension services to the farmer at pre-harvest level will shift from Cocobod to the Ministry of Agriculture. The external marketing of cocoa policy is also beginning to change. In accordance with government policy, from the year 2000/1, licensed buying companies which have qualified in terms of a determined criteria will be permitted to export about 30% of the produce they purchase. Again we intend to invite private participation into the processing factory in Tema. The government has decided that the Produce Buying Company should be privatized so we are in the process of listing it on the Ghana Stock Exchange. Some of the shares will be sold to farmers, workers, the general public and government will take a minority share. We expect this process to be finalized before the end of the year. In terms of scientific research, the Division will become a lot more independent. At the end of the day, GCB’s role will become regulatory and would only intervene where necessary. We are eliminating from Cocobod’s objectives the components of the industry which are structured to make profit. We believe that the private sector is a better platform to handle those enterprises.
How much influence do you have over the 20 companies that you mentioned in the area of their management and decisions?
If you look at the fact that Cocoa Board gives license to the private companies, our role is only to regulate the market. The management of these companies will have to recognize the supervisory role of Cocoa Board and will have to dove-tail their programs into the general macro- framework under which Cocoa Board operates. In terms of financing however because of the strength of the Board it is able to obtain loans from the international financial market every year and these moneys are on lend to the private licensed buying companies to enable them buy cocoa from the farmer. We are not in charge of them but from a purely business perspective they should be able to recognize the importance of Cocoa Board in their activity. We are not involved in management of the Licensed Buying Companies.
How do you respond to critics of the whole privatization process who are looking at Cameroon’s experience?
The basic philosophy of getting the private sector involved in key economic activity is understandable. We believe that the private sector will be able to operate more efficiently than the public sector. This depends however on whether the private sector personnel have the right orientation in respect of creating wealth and looking at the bottom line. We have recognized the problems of Cameroon and a few other places and we think that to go round this problem we will need to build the capacity of the private sector which should assume the role that Cocoa Board plays now. With the appropriate know-how and finance the private sector should be able to do it but without these basic capacities of efficiency and resource availability they will not do it well. My response to that kind of concern is that we would not go the Cameroon way if the private sector participants prepare themselves adequately. That is why before we give you the opportunity to export we like to find out if for instance you will be able to trade and hold your own against the big players in the commodity market.
Cocoa is the second largest foreign exchange earner in Ghana and more than half the population depends directly or indirectly on this sector. To what extent has the fall in cocoa price affected the sector and the whole Ghanaian economy?
Very badly. If you look at the fact that in a year, from June last year to June this year, the price has fallen by almost 50%; immediately you are talking about losing one half of the wealth which would have been created from the cocoa activity. That has very serious macro ramifications for the country. Consequently this year we could not afford to increase the farmer price. In fact we should have decreased the farmer price but government in its wisdom decided not to. We did not increase Cocobod’s cost, we did not increase license buying company cost, transportation cost or other marketing cost. In terms of inflation it means that all these operators in the cocoa sector are worse off than last year. Added to that is the fact that government revenue in terms of tax from cocoa will be reduced by about 100 billion cedis for this year. For next year, because we are not seeing any fundamental change in the price we expect a shortfall of 250 billion cedis in cocoa tax revenue. Cocoa is a fulcrum around which other economic activities turn so the fall in cocoa price has a serious downstream impact.
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© World INvestment NEws, 1999.
This is the electronic edition of the special country report on Ghana published in Forbes
December 13th 1999 Issue.
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GHANA
