Tuesday, 20 April 2021

True Debt of GoG: Clean-up balance sheets of SOEs

 


Adnan Adams Mohammed


A financial and energy expert has called on the government to declare the true debt it owes both domestic and foreign including its indebtedness to State Owned Enterprises (SOEs).


The expert is of the view that, the value normally quoted by finance ministry and Bank of Ghana does not truly represent the total debt of government because it mostly excludes government's debt owes to SOEs and most of those debts are of substantial value. 


In a recent interaction with the former Executive Director at Standard Chartered Bank, the expert posited that, government's true debt should take into account amount of debt government is hiding in  various areas in the balance sheets of SoEs mainly with the likes of  ECG, VRA, GRIDCo, TOR , BOST, Ghana Gas, GNPC, VALCO plus some other smaller SOEs. 


"These debts cannot and will not be paid by these SOEs and other government controlled institutions to the SOEs so government will have to step in to make these payments sooner or later, as it will soon be confronted with the need to clean up the  balance sheets of these SoEs", Alex Mould, former CEO of Ghana National Petroleum Corporation (GNPC) intimated in a recent article shared with this paper. 


He claimed that, government is the largest debtor to most of these companies directly or Indirectly (through controlled companies) and that these debts can not and will not be paid by these other SOEs.  He also stated that, many hidden and latent contingent liabilities such as legal disputes on agreements - which are potential judgement debts - and staff end-of-service benefits, which still exist in the books of some SOEs despite the introduction of provident funds in the 90s and the more recent Tier 2&3 from the Pensions Act.



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Govt’s true debt should take into account amount of debt Govt is hiding in in various areas in the balance sheets of state owned enterprises (SoEs) mainly with the likes of  ECG, VRA, GRIDCo, TOR , BOST, Ghana Gas, GNPC, VALCO plus some other smaller SOEs;


Govt is the largest debtor to most of these companies directly or Indirectly (through controlled companies)


These debts can not and will not be paid by these other SOEs and other Govt controlled institutions to the SOEs owed and Govt will have to step in to make these payments sooner or later;


So, there needs to be a clean up of these SOEs balance sheets;


First, Debtors Receivables  are over stated - there are many bad debts in there ie unrecoverable (and in o no pay cases owed by Govt)


Parliament needs to sit up and ask for a clean up of SOEs - balance sheets and profitability (or even ensuring they are a going concern) - as many of them are on unsustainable life support.


These could mount up to over GHS10billion


Secondly, Payables and liabilities are understated 

Many of these have not been validated by their auditors;


These could mount up to over GHS5 to10billion.


Thirdly Equity, this is wiped away because of losses made by these SOEs - mainly from bad policies, like subsidies or appointing CEOs and Board of Directors that did not exercise their fiduciary duties to the Company but rather to the President that put them there and not to the company and shareholder (the people of Ghana) which really is a conflict of interest;


These could mount up to over GHS5billion.


Lastly, there are so many contingent liabilities, including but not limited to 

1.  End of service benefits (and unpaid pension contributions)

2  Potential judgement debts; 


These need to be estimated and quantified and booked ; 


These could mount up to over GHS10billion.


We await the 2020 financials to quantify the real extent of Govts exposure in terms of funds needed to clean the balance sheets of these SOEs 


By AKM

02/04/21

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