Cocoa Revenue Disaster Exposes NDC Government’s Economic Mismanagement – Dr. Amin Adam

A severe crisis in Ghana’s cocoa sector has sparked a major political and economic controversy. Dr. Mohammed Amin Adam, Member of Parliament for Karaga and a former Minister of Finance under the New Patriotic Party (NPP) administration, has launched a detailed critique against the current National Democratic Congress (NDC) government. He argues that the so-called “cocoa revenue disaster” is a direct result of the government’s failure to implement a comprehensive, pre-existing restructuring plan for the Ghana Cocoa Board (COCOBOD), a plan developed with International Monetary Fund (IMF) consultation. This analysis breaks down the key claims, the historical context, the economic arguments, and the implications for Ghana’s most crucial agricultural export.

Key Points: The Core Accusations

Dr. Amin Adam’s press briefing centered on several interconnected criticisms of the government’s handling of the cocoa sector:

Failure to Implement Existing Strategy: The current government did not need to announce a new COCOBOD restructuring plan because a detailed, IMF-backed “turnaround strategy” was already available from the previous administration.
Short-Changing Farmers: Recent measures, particularly the reduction of the cocoa producer price, unfairly burden farmers instead of addressing systemic inefficiencies or providing a necessary bailout to COCOBOD.
Unimplemented Reforms: Specific proposals from the old strategy—like transferring cocoa road costs to the Ministry of Roads, enacting a transparent pricing policy, and canceling unnecessary cost items—have been ignored for over a year.
Currency Mismanagement: The government’s policies have led to an “overvalued” Ghanaian cedi, making Ghana’s cocoa more expensive on the global market and reducing competitiveness and demand.
IMF Silence: Dr. Adam expressed surprise at the IMF’s perceived lack of pressure on the government to implement the agreed-upon strategy, a key component of their economic program.

Background: COCOBOD and Ghana’s Cocoa Economy

Understanding COCOBOD’s Mandate

The Ghana Cocoa Board (COCOBOD) is a state-owned marketing and regulatory body with a pivotal role in the national economy. Its core functions include purchasing, grading, sealing, and exporting all cocoa produced in Ghana. It also supports the industry through initiatives like research, disease control, and infrastructure, notably the construction of cocoa roads. As Ghana is the world’s second-largest producer of cocoa beans, COCOBOD’s financial health and operational efficiency directly impact government revenue, foreign exchange earnings, and the livelihoods of millions of smallholder farmers.

The NPP’s Turnaround Strategy and IMF Engagement

According to Dr. Amin Adam, as the NPP government was exiting power, it had already developed a comprehensive “turnaround business plan” for COCOBOD. This plan was reportedly crafted in consultation with the International Monetary Fund (IMF) as part of the conditions attached to an IMF economic support program. The stated goals were to restructure COCOBOD’s finances, improve operational efficiency, reduce costs (especially in procurement), divest from non-core activities, and create a more transparent and sustainable pricing mechanism for farmers. The strategy, he claims, was formally handed over to the incoming NDC administration.

Analysis: Deconstructing the “Disaster” Narrative

The Unimplemented Turnaround Strategy

Dr. Adam’s central thesis is that the current crisis is not a mystery but a predicted outcome of policy negligence. He points to specific, actionable items from the 2023/2024 turnover documents that remain unimplemented:

Cocoa Road Funding: The proposal to shift the substantial cost of constructing and maintaining cocoa roads from COCOBOD’s operational budget to the central government’s Ministry of Roads was intended to free up COCOBOD’s funds. The current government’s recent announcement of this transfer is framed not as a new idea, but as a belated and incomplete adoption of the old plan.
Transparent Pricing Policy: A legislative framework to determine the cocoa producer price (the price paid to farmers) through a clear, formula-based method was a cornerstone of the proposed reforms. Its absence, Dr. Adam argues, allows for arbitrary and politically motivated price setting.
Cost Item Elimination: The previous strategy identified certain deductions and cost items within the COCOBOD value chain as “unnecessary and, in some cases, duplicative.” Removing these would have increased the net revenue available to set a higher producer price. The failure to do this, he suggests, directly contributes to the need to lower farmer payments.

His argument implies that had these measures been enacted in 2023, COCOBOD’s financial position would be stronger, potentially avoiding the liquidity crisis that necessitated the recent producer price reduction.

The Producer Price Cut: Bailout vs. Farmer Burden

The most emotive point in the debate is the reduction of the cocoa producer price. Dr. Adam contrasts the current government’s action with the NPP’s response during a previous crisis (referencing the “MPP time,” likely meaning the period of the IMF program under the NPP). He asserts that the appropriate response to a sector-wide revenue shortfall is a government “bailout” or subsidy to COCOBOD to maintain farmer prices, not passing the financial pain down the supply chain. This frames the price cut as a policy choice reflecting misplaced priorities rather than an unavoidable economic necessity.

The Critical Role of Currency Valuation

Dr. Adam introduces a crucial macroeconomic variable: the exchange rate. He accuses the government of allowing a “reckless overvaluation” of the Ghana cedi. His economic reasoning is standard in export-oriented agriculture:

Inflation-Adjusted Depreciation: With domestic inflation at 3.8%, he argues the cedi should depreciate by at least that rate to maintain export price competitiveness. Appreciation, he claims, is “poor economics” for an export nation.
Impact on Global Competitiveness: An overvalued currency makes Ghana’s cocoa beans more expensive in US dollars for international buyers. He cites the COCOBOD CEO’s own admission that Ghana’s cocoa is now considered more expensive, leading to lost sales as customers “turn away.” This directly links government monetary/fiscal policy to the revenue shortfall at COCOBOD.

This argument shifts some blame from COCOBOD’s internal management to the broader macroeconomic framework managed by the Ministry of Finance and the Bank of Ghana.

The IMF’s Alleged Silence

The claim that the IMF has “gone to sleep” is significant. If true, it suggests a breakdown in the conditionality monitoring that is central to an IMF program. The turnaround strategy was, in Dr. Adam’s words, “one of the requirements for implementing the IMF programme.” His surprise at the IMF’s inaction implies either a failure of the IMF’s oversight mechanisms or a political decision not to enforce this particular condition with the same rigor.

Practical Advice: Paths Forward for Stakeholders

Based on the analysis, several actionable steps emerge for different actors:

For the Ghanaian Government and Ministry of Finance:

Immediate Implementation: Fast-track the implementation of the unimplemented elements of the handed-over turnaround strategy, starting with the transparent pricing policy legislation and cost item review.
Currency Policy Review: Adopt a more flexible exchange rate policy that allows for market-driven depreciation to restore export competitiveness for cocoa and other commodities.
Strategic Bailout: Consider a targeted fiscal transfer or guarantee to COCOBOD to stabilize its finances and protect the 2025/2026 producer price, treating it as a strategic national asset.
Engage the IMF Proactively: Seek a clear, technical dialogue with the IMF on the status of the COCOBOD strategy to clarify conditionality and potentially secure technical support for implementation.

For COCOBOD Management:

Operational Efficiency Drive: Intensify efforts to reduce procurement costs and administrative overheads as originally planned, publicly reporting on savings.
Advocate for Core Mandate Focus: Resist pressure to engage in non-core ventures and lobby forcefully for the government to take over legacy social obligations like cocoa roads.
Transparency Initiative: Launch a public dashboard showing the cost structure of a ton of cocoa, from farmgate to FOB (Free on Board) export, to build trust and demonstrate efficiency gains.

For Cocoa Farmers and Associations:

Collective Bargaining: Strengthen farmer cooperatives to better engage with COCOBOD and the government on pricing formulas and representation.
Document Impacts: Systematically collect data on how price reductions affect household incomes, school enrollment, and community investment to build a evidence-based case for policy change.

For the International Community & IMF:

Technical Assessment: Conduct an independent, public technical audit of COCOBOD’s financials and the status of the 2023 turnaround strategy implementation.
Policy Dialogue: Use existing program reviews to explicitly link exchange rate flexibility and structural reforms in the cocoa sector to overall macroeconomic stability and debt sustainability.

Frequently Asked Questions (FAQ)

What is COCOBOD and why is it so important?

COCOBOD is Ghana’s state-owned cocoa regulator and exporter. It controls the entire value chain from purchasing beans from farmers to selling them on the international market. Cocoa is Ghana’s second-largest export commodity, generating over $2 billion annually and supporting the livelihoods of an estimated 800,000 to 1 million farmers and their families. Its financial health is a major factor in the country’s foreign exchange reserves and rural development.

What is a “producer price” and why does changing it matter?

The producer price is the fixed price at which COCOBOD buys cocoa beans from Ghanaian farmers. It is set by the government (via COCOBOD) and is a primary source of income for cocoa farming households. A reduction in this price directly decreases farmers’ earnings, affecting poverty levels, rural consumption, and investment in farms. It is a highly sensitive political and social issue.

How does an “overvalued” currency hurt cocoa exports?

An overvalued currency means the local currency (the cedi) is too strong compared to what market fundamentals (like inflation and trade balances) would dictate. For a Ghanaian cocoa exporter, this is a problem: when they sell beans for US dollars and convert them back to cedis, they receive *fewer* cedis per dollar than they would if the cedi was weaker. To stay profitable, they must charge international buyers a higher US dollar price. This makes Ghana’s cocoa less competitive compared to beans from Ivory Coast, Nigeria, or South America, leading buyers to seek cheaper alternatives and reducing overall demand and revenue for Ghana.

What is a “turnaround strategy” for a state-owned company like COCOBOD?

It is a detailed business and operational plan designed to rescue a struggling organization. For COCOBOD, this typically involves: improving operational efficiency (reducing waste and cost), restructuring debt, focusing strictly on core activities (buying and exporting cocoa), divesting from unprofitable sidelines, implementing modern procurement and financial management systems, and creating a sustainable, transparent pricing model that balances farmer income with export competitiveness and COCOBOD’s financial needs.

Is Dr. Amin Adam’s critique purely political?

His position is inherently political as he is a leading opposition figure from the rival NPP. However, his critique is based on specific, verifiable policy claims: the existence of a prior strategy, the status of its unimplemented components, and basic economic principles of exchange rate management. The validity of his claims rests on independent verification of the turnover documents, the actual cost structure of COCOBOD, and the data on cedi valuation versus inflation and trade performance. The political dimension lies in assigning blame and interpreting the government’s motives.