Ghana's cocoa export revenue has taken a devastating hit, plummeting by nearly $700 million in the first half of 2024. The ongoing impact of illegal mining (galamsey), smuggling, and crop diseases has severely crippled cocoa production, putting immense pressure on the sector that has long been the backbone of the nation’s economy.

According to the latest Bank of Ghana, July 2024 Summary of Macroeconomic and Financial Data, cocoa export returns dropped sharply from $1.45 billion in the first half of 2023 to just $760 million in the same period this year, marking a staggering 47.7% decline.

Cocoa export revenues have slumped in the post-pandemic period, with half-year inflows revealing a dramatic 134% decline. This downturn has resulted in losses exceeding $1 billion since 2021, underscoring the severe challenges facing Ghana's cocoa industry.

Ghana’s cocoa harvest in the 2023-2024 season, which ended this month, was expected to be 650,000 tons to 700,000 tons versus an initial forecast of 850,000 tons, according to the Ghana Cocoa Board. However, people familiar with the industry say adverse weather, disease, shortage of fertilizer, and galamsey in cocoa-growing areas could lead to projected yields falling below 500,000 tons.

On top of this, rising cases of bean smuggling to neighboring countries for relatively higher prices could lead to the world’s second-largest producer of cocoa losing about 200,000 tons, affecting its ability to obtain needed bean assurances to attract bigger loans from the cocoa syndication programme.

COCOBOD, Ghana's primary cocoa regulator, is acutely aware of its deteriorating creditworthiness in the international syndicated loan market stemming from the inability to supply sufficient beans and the painful debt restructuring exercise.

As a result, it has turned to domestic self-financing as a survival strategy. The near collapse of Ghana’s forward cocoa sales last season sent a clear message: a significant risk premium will now be placed on Ghana’s cocoa beans, not only for this season but for subsequent ones as well.

This is partly because the country failed to meet its contractual obligations to cocoa buyers, leaving trading houses with losses exceeding $1.4 billion on cocoa derivatives, as they were forced to liquidate short positions amidst a rallying market, where prices surged to $10,000 per ton.

The driving factors behind this uncertainty are multifaceted. Bad weather, crop diseases, smuggling, and illegal mining continue to disrupt Ghana's cocoa production. These same challenges, compounded by last season’s default, have led to a surge in risk perception among investors and international buyers.

While COCOBOD initially projected $1.5 billion in external funding for this season, these recent developments mean Ghana may be priced out of the market due to the steep interest rates associated with the perceived risk.

Historically, cocoa has been the backbone of Ghana’s economy, providing critical foreign exchange earnings that stabilize the cedi, particularly against the US dollar. However, this year’s performance has been grim. In the second quarter of 2024, total government revenue and grants saw a significant decline, primarily due to the poor performance of key tax handles and a marked reduction in cocoa inflows.

Export earnings from cocoa plunged by nearly 48% in the first half of the year, compared to the same period in 2023. In dollar terms, this represented a shortfall of more than $690 million, severely weakening the cedi, which has lost over 20% of its value against the US dollar since the start of the year.

Ghana's dependence on cocoa exports is thus facing a critical juncture, as both domestic production challenges and international market confidence falter. COCOBOD’s pivot to domestic financing may serve as a stopgap, but without addressing the underlying production and export issues, the future of the country’s cocoa sector—and its broader economic stability—remains in jeopardy.

About the writer:

Isaac Kofi Agyei is a Data & Research Journalist/Analyst at JoyNews based in Accra, where he covers mostly finance, economics, banking, and politics across Ghana and West Africa, from detailed analytical reports on all key issues to debt crises to IMF programmes. He also serves as an Economic & Financial Analyst at SBM Intelligence, an Africa-focused market/security leader in strategic research, providing actionable analyses of West Africa’s socio-political and economic landscape. With his academic background in economics and statistics and additional training from credible institutions such as the UNDP, Afrobarometr, Ghana Statistical Service, and a host of others, Isaac has honed his skills in effective data storytelling, reporting, and analysis.