The National Food Buffer Stock Company (NAFCO) is appealing to the government for assistance in trading some agricultural bills and bonds on the Ghana Stock Exchange (GSE) to hold reserves in food in order to raise enough returns to finance the company’s operations.
NAFCO explained that though the government has assisted the company on several occasions to raise money from the financial market through loans, it is rather an expensive option of financing – considering banking regulations and interest rates. As the financial requirements to hold national food reserves are getting huge, NAFCO says it will be a challenge to ensure national food security without government intervention.
A board member of NAFCO, Dr. Emmanuel Adu-Sarkodee, who was speaking to the B&FT during a working tour of the company by officials of the Ministry of Public Enterprises said: “Instead of holding our reserves in dollars, we can hold some of our reserves in food. So, the government underwrites these bonds for us which would be tradable on the GSE. Once these bonds are floated, money is then released for NAFCO to give its licenced buying entities to purchase food items and store them in warehouses”.
Mr. Adu-Sarkodee said NAFCO would then collaborate with the Ghana Commodity Exchange (GCX) to ensure that various warehouses being used by the company’s licenced buyers have the expected warehouse receipt system for effective tracking.
He explained that the warehouse receipt system with the GCX will link up with the banking system to ensure a complete ecosystem wherein agriculture is fully modernised to benefit farmers and the nation in general.
NAFCO believes that raising bonds and bills from the stock exchange offers opportunities for such bonds to become tradable instruments which could be cheaper, as the tenure could also be rolled over even when the company does not have money to pay. This, according to Mr. Adu-Sarkodee, will be a better way to fund the company’s operations to mitigate the persistent borrowing from the financial market at commercial rates.
Meanwhile, the Minister for Public Enterprises, Joseph Cudjoe, lauded the management of NAFCO for the innovation and approach to making the company profitable amid the challenges. He said the government is currently financing 175 state-owned enterprises and joint ventures, with the spending draining the national coffers. He recommended that government entities must devise innovative ways of raising money to assist in their operation.
Mr. Cudjoe said his ministry will engage the Food and Agriculture Ministry on how to assist NAFCO to trade on the GSE through agricultural bonds and bills to generate revenue and complement operations.
Despite the challenges facing the company, NAFCO since 2017 has been on an upward trajectory of growth, with revenues reaching GH¢500million from less than GH¢100million in 2017. The company’s food storage capacity has also increased from 7,000 metric tonnes to over 100,000 metric tonnes, with an increase in Licenced Buying Companies from 100 in 2017 to 1,300 currently.
Source: Business and Financial Times