The Agyapa deal: Government of Ghana must bow-out
Adnan Adams Mohammed
The Agyapa Royalties Company Limited and the Ministry of Finance have entangled themselves in a heavy tight cobweb with the fate of the Agyapa royalties deal as the deadline for the admittance of the Initial Public Offer (IPO) on the London Stock Exchange (LSE) is left with 31 days.
Four weeks before the deadline, the fate of the
controversial Agyapa gold royalty deal is unclear, as it has been returned to
the Parliament. The general elections scheduled to take place on December 7 add
to this uncertainty.
As the international anti-graft institution has cautioned the UK government, if the parliamentary of Ghana is to approve the deal for the second time, the deal is not going to be out of the woods just yet, as the UK Financial Conduct Authority will need to approve the London Stock Exchange listing of Agyapa Royalties shares.
“In the absence of a thorough investigation into the
allegations of corruption, the UK authorities should reject the project,
upholding their mission to ‘regulate in a way that adds the most benefit to
those who use financial services’”, Transparency International has alarmed in a
recent paper it released.
It added that, “The compliance departments of the corporate
parties to the deal should also take notice. They should suspend their
engagement on the project until the allegations are fully investigated. The
investment banks JP Morgan and Bank of America – both of whom are involved in
the initial public offering – and the law firm White and Case – who have
advised the Ministry of Finance – should not partake in a deal fraught with
corruption risks.
“When an opportunity for a lucrative new project comes up,
it is easy to forget about the normal people who rely on their country’s most
valuable resource.
“Allegations in a far-away continent may make it difficult
for authorities, lawyers and bankers in London to visualise the impact on
Ghanaian men, women and children. It is their future that is being mortgaged,
however. The loss belongs to every Ghanaian who may never see roads, schools
and hospitals being built because those outside the country fail to see through
an “innovative financing solution” as a potential façade for embezzlement.”
This is enough for the Government of Ghana to act wisely and
drop the deal completely for now and weigh other options through broad
consultation as it is determined to use alternative innovative way to utilize
the gold revenue to benefit the country.
In the midst of a major global economic crisis, one asset
has consistently beaten the impact of COVID-19: gold. As investors look for
safety from volatile markets and increasing national deficits, gold prices hit
an all-time high in August 2020.
This year would seem like an opportune time for the world’s
largest gold producers to consolidate their control over this vital natural
resource.
Alternatively, they could follow the example of Ghana and
try to sell off almost all of their rights to future gold royalties in
perpetuity. This is the story of Agyapa Royalties.
Ghana is Africa’s leading producer of gold, accounting for 4
percent of government revenue in 2017. Well-spent, that means money for public
goods and services for the country’s citizens. Who wouldn’t want
better-resourced health services or improved education facilities?
Given the sector’s strategic importance, it is beyond
curious that Ghana is proposing to sell almost 76 percent of its future
receipts from gold royalties to a special corporate vehicle in the British
overseas territory of Jersey – a known tax haven and secrecy jurisdiction.
A mysterious company based in the UK tax haven of Jersey,
Agyapa Royalties, has inserted itself into the middle of what looks like a highly
unwise financing arrangement, writes Nick Shaxson.
Under the deal, Ghana would own 51 percent of the
Jersey-based company Agyapa Royalties and the remaining shares would be listed
on the London Stock Exchange.
In return for handing over such a large share of their
future revenues, the government has argued that it could raise US$500 million
in capital to ease their growing debt crisis by listing the remaining 49 per
cent of shares. This values the rights at around US$1 billion – far less than
they are potentially worth, as Ghanian think tank IMANI Africa has argued.
In September 2018, at the end of a one-week emergency
sitting, the Parliament of Ghana approved the Minerals Income Investment Fund
(MIIF) bill. The bill allowed the government to set up the fund to receive
royalties from mineral resources and invest them. It also allowed for the
creation of a special purpose vehicle (SPV) in any jurisdiction to undertake
such investments.
President Nana Akufo-Addo signed the bill into law later
that month. Since then, the Government of Ghana worked to put in place a
supposedly “innovative financing solution” to the perpetual problem of
sovereign debt in Sub-Saharan African economies.
But in July 2020, the Parliament was asked to amend the Act
to allow more independence for a sovereign-owned special purpose vehicle and
less government oversight.
With less than 4 hours to review the documents and serious
concerns surrounding the probity of the project, the minority in the Parliament
staged a walkout and the measures were passed by the majority in their absence.
Civil society organisations in Ghana decried the
government’s failure to hold broad consultations given the importance of these
revenues to the country.
The project also attracted the attention of the Special
Prosecutor in Ghana, Martin Amidu. His office was created in 2017 as an
election promise from the incoming Akufo-Addo administration to tackle
corruption and criminal wrongdoing.
After resistance from the Ministry of Finance in the
submission of documents, Amidu sent his report to the President on October 16.
As the administration delayed acknowledging his findings, Special Prosecutor
went public on November 2.
In the report, the Special Prosecutor had laid out the
connections between the transaction advisor appointed on the project, Imara
Corporate Finance of South Africa, and Databank Financial Services, a Ghanaian
company co-founded by the Finance Minister.
Millions of dollars have already been paid to both with
little input from the Ministry of Finance. The way Imara were contracted – and
the involvement of Databank in the deal – led Amidu to suspect “bid-rigging,
and corruption activity including the potential for illicit financial flows and
money laundering”.
A hasty directive from the President to the Minister of
Finance followed, instructing him to re-submit the project to Parliament in
light of the report.
Publicly, the President welcomed the investigation. Behind
the scenes, there are alarming reports that threats made against his life led
the Special Prosecutor into resigning, which followed just two weeks later.
Ghana’s lawmakers should reject a controversial deal that
would sell most of Ghana’s future gold royalties to a Jersey-based company,
local civil society groups said on November 11. An alliance of 25 organisations
– including Ghana Integrity Initiative, Transparency International’s national
chapter – called on Parliament to roll back the transactions.
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