Ivory Coast is Liquidating “Chocolate” From Exporters

By CultureBanx Team

  • SAF-Cacao group owes Ivory Coast banks an estimated $280M
  • Ivory Coast dominated by 5 banks, representing around 60% of banking system assets

The largest cocoa exporter from Ivory Coast, SAF-Cacao group has been  ordered to liquidate its group of companies over unpaid debts to the country. Cocoa exporters are major borrowers from the Coffee and Cocoa Council, which serves as the country’s marketing board. Just how hard will the country’s banking sector be hit if they can’t recoup the outstanding debt?

Why This Matters: The banking sector in Ivory Coast is predominantly run by five banks, which represent around 60% of banking system assets, according to Reuters. As of now SAF-Cacao group owes Ivorian banks an estimated $280 million. The company buys around 150,000 to 200,000 tonnes of cocoa annually and Reuters reports its thought to have around 50,000 tonnes of cocoa beans in its warehouses.

Earlier this year the International Monetary Fund (IMF) released a study where it found lending to the five largest borrowers made up almost 99% of the country’s banking system’s total capital. The report paints a vivid picture of just how hard banks could be hit by only a few defaults.

Bank officials told Reuters that outstanding loans coupled with the impact of SAF-Cacao’s liquidation could discourage international banks from continuing to lend to Ivory Coast. Furthermore, this statement highlights the importance of the court taking actions now against companies with large outstanding debts, to avoid destabilizing their financial sector.

Situational Awareness: In late 2016, cocoa futures plunged 27% in a six-week period. The last season saw a wave of contract defaults by exporters from the country, its left them unable to pay back their bank loans. Poor growing conditions in West Africa is perhaps another reason why prices are up about 25% this year, making it harder for exporters to dig themselves out of their debt holes.

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