CPC golden tree


A loss making chocolate company owned by a group of Ghanaian government entities loses millions of U.S. dollars each year. The government keeps it afloat without an adequate explanation for why. They should explain their reasons, or sell, or close the business and use the capital to better affect the industry.

COCOBOD, the government, and Social Security and National Insurance Trust, each own 57.73%, 26.13% and 10.14% of the company respectively. Collectively the government entities own 94% of the business.

There are reports of losses this year of $13.2m, although we couldn’t find an official statement to confirm. This does appear in line however with losses reported in their 2018/2019 annual report, of $12.01m.

It’s not unusual for governments to use taxpayer money to buy into a company, but this is usually on the basis of those being strategic national assets, such as defence. In the UK during the financial crisis in 2008, the UK government bailed out the banks, sometimes making the taxpayer the majority shareholder. The shares were then sold later, in some cases at a profit.

You might understand the case for the government keeping the retail banking system alive, but can the same be said for a national chocolate company?

By most measures, the income statement is grim reading, and we noted in particular that the company gets beans from COCOBOD – their biggest shareholder – who conveniently waives repayment of their loan without noting any concessions, which you’d expect in normal commercial circumstances. The conflict of interest is rather stark, and it makes me wonder what price CPC is paying for the Cocoa, and whether the LID premium is being applied.

If CPC is not paying a fair market price for the beans, then are farmers being short-changed?

A substantial part of the Company’s liabilities are due to the majority shareholder, Ghana Cocoa Board (COCOBOD) and a syndicate of banks. The Company has defaulted in the payment of principal and interest on the COCOBOD loan. In addition, the Company has been unable to make adequate payments towards the syndicated bank loan

Goldentree Ghana (CPC) 2018/2019 Annual Report

In reviewing the Board structure, which may have changed since the last published report, we noted the absence of any Non-Executive Directors, nor any true representation of the farmer’s interests. There also appeared to be instances where a conflict of interest might arise. For example, Mr Vincent Okyere Akomeah is a Board member but also sits on the Board of Cocoa Marketing Company Ltd (CMC), which is a company that CPC seems to be doing a lot of business with. The latest annual report from their website is below:

Securing a collateral management agreement: The Company plans to enter into a collateral management agreement with Cocoa Marketing Company (CMC) for the purchase of cocoa beans. Under the arrangement, CMC would issue the Company with a letter of guarantee to supply the Company with 23,000MT of cocoa beans (main and light crop for every cocoa season with the light crop proportion larger than the main crop) on an annual basis. This will increase the currently supply from CMC by over 200%.

Goldentree Ghana (CPC) 2018/2019 Annual Report

Goldentree Ghana (CPC) 2018/2019 Annual Report

The real loss of income to the industry has to take into account not only the losses attributed to the failing company, but we must add in the value that would have been realised if the beans had been sold on the market.

To make an approximation of this lost value, we can use the ‘costs of goods sold’ (COGS) line item in the income statement, since cocoa should be the biggest cost of materials. In 2018, that number is $27.4m. Even if Cocoa represented only 50% of the COGS, that’s another $14m which when added with the company loss of $12m, makes $26m each year that could have gone into industry initiatives, farmer support, topping up the pensions, research, or any number of beneficial activities.

A statement from their Auditor KPMG on the ongoing viability of the business, should be followed by a justification, or otherwise from the Ghanaian government as to why taxpayers and the Cocoa industry in Ghana should continue to put more money into this enterprise.

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