Showing posts with label Dr Steve Manteaw. Show all posts

Thursday, 12 November 2020

Botched Agyapa Deal: CSOs, Minority and others deserve national commendation

Dr Steve Manteaw, addressing journalist
on behalf of Alliance of CSOs. Credit Joynews 

By Adnan Adams Mohammed

Once again, collective action by Civil Society Organizations (CSOs) and advocacy efforts by other national and international voices have saved the nation from a well-planned 'state capture'. 

But for the timely intervention of civil society, the Agyapa gold royalties’ deal would have occasioned a situation where millions of dollars accruing from Ghana’s gold royalties would have ended in the hands of a few powerful political elites and private individuals to the disadvantage of the ordinary Ghanaian citizens. This has been the pre-occupation of the Alliance of CSOs working on Extractives, Anticorruption and Good governance and its partners.

The Alliance of CSOs made up of a 25-member coalition of CSOs and policy think-tanks united against the Agyapa deal in its current structure. On Wednesday, November 11, 2020, the Alliance released a press statement in response to the Office of the Special prosecutor’s corruption risk assessment report on the controversial Agyapa gold royalties’ deal.

At the press conference held at the Mensvic Hotel in response to the OSP's report and subsequent comments by the President and the Finance Minister, the Alliance called for "the entire set of Agyapa transactions to be rolled back and the transaction agreements abrogated."

The Alliance believe "Parliament cannot repair the defects." This position of the Alliance appears to be informed by several expert analysis of the subject matter by member institutions of the Alliance, as well as international non-governmental organizations like the Natural Resource Governance Institute (NRGI).

In a recent blog on Agyapa, NRGI analyzed the risks and rewards in the Agyapa deal, proffering eight useful points for consideration by government and civil society actors in shaping the Agyapa deal to the best interest of the people of Ghana.    

The Alliance has in the past released two press statements, generally calling for the deal to be halted to allow for broader national consensus. The Alliance’s two earlier press releases and follow-up advocacy work attracted international attention – including the international media, foreign missions and the investor community.

The strong national advocacy of the Alliance of CSOs moved the Ministry of Finance to temporarily halt the implementation of the deal in September to give room to meet the CSOs after their first series of press conferences and engagement which had even scheduled a second press conference the very day, the Ministry of Finance invited the CSOs for a meeting, which was against the ministry's initial posturing of 'not ready to listen to anyone syndrome'.

It was also the Alliance’s work that occasioned the Office of Special Prosecutor (OSP) to invoke its statutory powers to halt the deal to allow space for 'corruption risk assessment, the report of which assessment is what the Alliance now seeks to respond to. The underlying philosophy of the Alliance’s campaign has been to ensure a good Agyapa and other extractives sector deals that would ultimately benefit the people of Ghana.

Martin Amidu, Special Prosecutor

The OSP's report on Agyapa released a fortnight ago highlighted serious irregularities with the deal, transactions that pose a high risk of corruption, and transactions that plainly breach the Public Procurement and Financial Management Acts. In this report, Martin Amidu, the Special Prosecutor reveals a “stinky, rotten and a well-calculated attempt of state capture, breach of procurements regulations, conflict of interest, abuse of public office by the Finance Minister to benefit his private company, cronyism advantage among others”.

Finance Minister, Ken Ofori-Atta and Gabby Otchere Darko

The release of the 'damning and indicting' report against the Finance Minister, Majority in Parliament, Office of the President, private companies and individuals like Gabby Otchere Darko's law firm pushed the President of Ghana Nana Akufo Addo to direct the deal to be halted temporarily and the transaction documents constituting the deal relayed in Parliament for broader deliberation and consensus-building. The president additionally requested Parliament to reconsider the deal only after the December 2020 elections.

But, Many feel the President’s statement is inappropriate and inundated with bad motive such that, in the event that, the President and his party NPP wins the elections for his second and last term, then they might revisit the implementation of the deal in its exact same structure. The largest minority party in Parliament, the NDC, has indicated they would completely abandon the deal if they win the December elections. 

 

 

The opposition NDC, yesterday, held a press conference in Accra addressed by their General Secretary, Johnson Asiedu Nketia, who called on the government to retrieve all monies 'already wrongly' paid some entities and individuals within a two-weeks ultimatum, failure of which of the party together with other stakeholders organized a big demonstration in the first week of December, 2020.

 

Hon Asiedu Nketia retorted that, "the OSP has found, that the Mandate Agreement under which billions of cedis have been paid to companies like Databank, which is owned by the President’s cousin and Finance Minister, Ken Ofori Atta; African Legal Associates, which is owned by another cousin of President Akufo Addo, Gabby Otchere Darko and their foreign partners, are illegal and therefore null and void." He then posited that, "What Ghanaians must be interested in at this stage, are the steps the Akufo Addo government is taking to retrieve the illegal payments that they have made to these companies. This is because, you cannot put something on nothing and expect it to stand. If the agreements under which these companies were made are null and void, then so are the payments made thereto, hence must be refunded to the State."

 

"The Corruption Risk Assessment conducted on the “Agyapa” scandal by the Special Prosecutor confirms our long-held position that the whole Agyapa deal is daylight robbery. As found by the OSP, the transaction processes and Mandate Agreement violated the Public Procurement Act, the Financial Management Act, and the 1992 Constitution of Ghana, hence null and void. As a matter of fact, the processes leading to the transaction agreements and Mandate Agreement were shady, opaque and fraught with procurement rigging, stonewalling, fraud, statutory and constitutional breaches. The valuation of our gold royalties and transaction agreements that President Akufo Addo and his corrupt New Patriotic Party approved was a ripoff and an affront to the sovereignty of our dear nation", the NDC General Secretary read.

 

Mr Benjamin Boakye, Executive Director of ACEP, a key member in the coordination of the Alliance of CSOs, in his remark on the efforts of the CSOs so far intimated that, he is glad the OSP's report has vindicated their main objective for the collective actions of the CSOs, which was calling on the government to allow further consultations to ensure transparency and amend some parts of the fiscal terms in the deal.

 

 

 

Sunday, 13 September 2020

PRMA Amendment: stakeholders want restrictions on Heritage Fund peg at 25years

 


 

Adnan Adams Mohammed

 

Stakeholders involved in the consultative process on the proposed amendments to Ghana’s Petroleum Revenue Management Act, 2015 (Act 893) have unanimously agreed to a proposal that, restrictions on transfers from Heritage Fund (HF) should be extended to 25 years from the current 15 years.

 

The proposal which was made by the Investment Advisory Committee justified that, a longer period of lockup of funds in the Ghana Petroleum Fund (GPF) is advisable and also in line with potential tenors of long term projects and global best practices. The stakeholders also want the definition of Section 10.4 of ACT 893 extended to cover all earnings, including equity dividends, capital gains and ownership interests.

 


There is indication that, government will push to have the amendments passed by the end of 2020. Some of the stakeholders involved in the consultative process were: Ministry of Finance, Bank of Ghana, Investment Advisory Committee, Public Interest and Accountability Committee, Ghana Revenue Authority, Petroleum Commission of Ghana, Audit Service Ghana and some CSOs.

 

“GPF is envisaged to also allow investments beyond fixed income” Dr Steve Manteaw, former Chairman of PIAC said during a virtual media and CSOs training session organized by NRGI in collaboration with PIAC on the proposed amendments.

 

The training session was to achieve overriding objective of enhancing CSOs and the media skill on the reform process, particularly proposals made by CSOs, to be able to keep track of every stage of the amendment/review process and influence the outcome.

 

The Petroleum Revenue Management Act, 2011 (Act 815) as amended by the Petroleum Revenue Management (Amendment) Act, 2015 (Act 893) (“PRMA”) was enacted to provide a strong governance framework for the collection, allocation, and optimum management of petroleum revenues in Ghana. The underlying philosophy is to ensure a responsible, transparent, accountable, and sustainable management of petroleum revenues to the benefit of the citizens of Ghana, in accordance with Article 36 of the Constitution. Specifically, the PRMA provides for the establishment of the Petroleum Holding Fund (PHF) and Ghana Petroleum Funds (GPFs).

 

Additionally, it provides a framework for the allocation of funds to the GPFs, Annual Budget Funding Amount (ABFA), a National Oil Company (NOC), and the Ghana Infrastructure Investment Fund (GIIF). Other provisions include a mechanism to manage oil price volatilities, and the establishment, composition, and funding of the Public Interest and Accountability Committee (PIAC) and Investment Advisory Committee (IAC).

 

Since 2015, petroleum revenue management processes in Ghana have largely been effective and well streamlined under the PRMA. This has culminated into increased transparency, accountability, and use of revenues for development.

 

However, there exist broad implementation bottlenecks and compliance challenges with the PRMA. Among others, specific challenges relate to revenue collection relative to non-payment, deferred payment, and wrongful lodgment of revenues.

 

The rest are political interference in the management and utilisation of the GPFs; recurring non-compliance in the reported expenditure of the Ministry of Finance (MoF) to the PRMA requirement to spend at least 70 percent of the ABFA on Public Investment Expenditure (PIE); and the inconsistent allocation of petroleum revenue to GIIF, contrary to the Law. These militate against good revenue management efforts, and therefore require remedial action.

 

To this end, the MoF, in 2019, started a consultative process with sector stakeholders to trigger reform of the petroleum revenue management framework to address the identified challenges and respond to the current context. Two consultative fora which drew representation from CSOs and key government institutions were held in October 2019 and February 2020. These were to ensure holistic review of the PRMA and to solicit stakeholders’ inputs on specific provisions in the PRMA that may require amendment, and to discuss same for consideration.

 

At the end of the consultation process, a compendium of proposed amendments to the PRMA was developed from the various stakeholder inputs by a Technical Committee constituted by relevant sector stakeholders, and presented to the MoF for Government’s study and consideration.

Thursday, 10 September 2020

How did Government value all Ghana’s gold royalties at US$1.0bn? – CSOs and experts demand answers

 


 

 

Adnan Adams Mohammed

 

The Alliance of Civil Society Organisations (CSOs) working on Extractives, Anti-Corruption, and Good Governance have questioned the government through the ministry of finance, Minerals Infrastructure Investment Fund (MIIF) and the Agyapa Royalties Company on how it arrived at the  US1.0 billion value of all the royalties that could accrue the country for the next 15 years.  

 

According to the group of CSOs which is calling for the suspension for the deal, the justification from government that the US$1.0 billion is the book value for Agyapa is not the actual valuation for the IPO, doesn’t answer the question.

 

Already, some financial and resource governance experts have contested the figure given as the estimated value for all the gold royalties of all the over 40 mining concessions (with 12 active companies now).  A net present value (NPV) calculations by Kofi Ansah of Ghana’s gold mining royalties pegged the valuation of total royalties at US$2.4 billion at a market price of US$1,600/oz and at US$2.7 billion at a market price of US$1,800/oz.

But, the Member of Parliament for Adentan Constituency and also the Communication Director of the New Patriotic Party (NPP), Yaw Buaben Asamoa has justified that, the US$1 billion valuation put on the Agyapa Royalties deal was only to ‘spice’ up the deal to attract investors on the stock market. Noting that, the money to be recouped from the deal should be between US$1.5 – US$2 billion. However, that doesn’t mean Ghana has to put out the actual figure of valuation out there on the market.

 

“This doesn’t answer the question. The US$1.0 billion valuation reflects the Ghana government’s assessment of its assets assigned to Agyapa which has been approved by Parliament”, the CSOs asserted in their statement released to the media on Tuesday.

 

The CSOs expatiated that, in recent communication, the Minister of Finance has stated that Agyapa’s asset value of US$1 billion approved by Parliament will not be the fair value that will be determined by the market. This is where appreciating the difference between net asset value and fair value becomes extremely important. Granted that the market will determine the fair value of the asset, it is important for government to determine the appropriate net asset value for the market to consider what it deems fair. This essentially is what the contract states as US$1 billion.

 

“Therefore, if the asset is under-valued by government itself, then Ghana cannot expect the market to give a favourable valuation of the IPO which the Minister himself states will be about 0.6 to 3.2 times the asset value. This indicates that Ghana is just gambling on the market for the determination of the value of an important revenue stream.

 

“The interesting thing for citizens to appreciate is that, through government’s communication it is evident that it is either not paying attention to the revenue flows in the sector, or deliberately undervaluing the assets for unknown reasons. When a direct question was posed to the Deputy Minister of Finance on the amount of royalties received from gold in 2019, he said Ghana received about GHS650 million ($123 million). The truth is that Ghana received GHS 1.06 billion ($200 million) from the big companies under the Chamber of Mines alone.”

 

The CSOs surprisingly alleged that, “Government has data on the other receipts, yet it decided to under-report the numbers.

 

“Again, in our meeting with the Ministry of Finance, we were given half year receipts for 2019 of $72 million (GHS 366 million). The underreporting of the 2019 revenue which is the most significant period for revenue projection and emphasis on old royalty numbers is intriguing.”

 

The Parliament of Ghana passed the Minerals Income Investment Fund Act in 2018 for the management of Ghana’s equity interest mining companies and also receive royalties on behalf of the Government of Ghana. The Minerals Income Investment Fund, which is mandated to invest royalties and revenues it receives on behalf of the government, is also allowed by law to establish Special Purpose Vehicles (SPVs) to help realise its objectives.

 

As a result, the Minerals Investment Fund established a company called Agyapa Royalties Limited, which will trade 49% of its shares on Ghana Stock Exchange and the London Stock Exchange, with the Government of Ghana, through the Mineral Income Investment Fund, remaining as a majority shareholder.

 

Below is the full Calculation of the NPV by Mr Kofi Ansah:

ESTIMATION OF THE PRESENT VALUE OF THE AMOUNT TO BE ASSIGNED TO AGYAPA

 

The factors that go into the determination of the valuation are:

1. Total Projected Gold Production over a chosen period by all the mining companies included in the agreements.

2. Gold Price projections over the chosen period

3. Effective Royalty Rate

4. Discount Rate (for discounting future amounts)

5. Number of years over which valuation is considered.

6. Percentage assigned to Agyapa

Projections of Gold Production

The 2020 forecast of total gold production from 12 gold mining companies currently in production is 3.2 million ounces.

 

The 2021 production forecast for these same companies is 3.5 million ounces. A number of companies in the group have embarked on expansion projects. In addition four more companies with mining leases that haven’t yet started production but are likely to do so within the next 4 years are included in the agreements. Therefore it is reasonable to assume that production over the 15-year valuation period would on the average be 4 million ounces per annum for the 12 mines.

 

Additionally, a number of companies at various stages of prospecting are included in the agreements and when they start producing their royalty payments will be included in the Agyapa assignment. Even if it is assumed that only a couple of them would succeed in making commercial finds it will be reasonable to add 0.5 million ounces per annum to the 4 million ounces per annum projected to be produced by the current mining lease holders.

Therefore we use 4.5 million ounces in our valuation computations.

 

Gold Price Projection

 

The current gold price is around $1,950 per ounce and has been around that level for the past few months. Current predictions suggest that prices would trend at this level for quite some time to come.

 

However, predictions from experts on future gold prices over the years have not been known to be very reliable. We therefore do the valuation estimate for two average gold prices: first, a conservative $1,600 per oz, and then a more optimistic $1,800 per oz, over the 15-year period.

 

Valuation Computations

 

The assumptions for computing the valuation are:

1) Annual average production – 4.5 million oz

2) Average gold price – $1,600 per oz/$1,800 per oz

3) Effective Royalty Rate – 4.5%

4) Discount Rate – 6%

5) Valuation Period – 15 Years

6) Percentage Assigned to Agyapa – 75.6%

Therefore;

Annual Royalty Amount = Annual average production x Average gold price x Effective Royalty Rate

= 4.5 Million oz x $1,600/oz x 0.045 = $324 million

(AP) Annual Amount Assigned to Agyapa = Percentage Assigned to Agyapa x Annual Royalty Amount

= 0.756 x $324 million = $245 million

Therefore;

Present Value over the 15 years using the annuity formula

Amount = AP × [   ]

Where;

r = 6%

AP = $245 million (for $1,600 per oz gold price)

n = 15

Therefore;

Valuation Amount for $1,600 per oz gold price = $245 million x 9.7 = $2.4 billion

Valuation Amount for $1,800 per oz gold price = $2.4 billion x 18/16 = $2.7 billion

 

These makes government’s position and justification with the US$1.0 billion valuation is really a case of concern to every independent minded Ghanaian.

Gov’t underreporting mining revenue received in 2019 - CSOs

 


 

 

Adnan Adams Mohammed

 

Government has been accused of deliberately under-reporting the revenues it received from mining companies in last year just to support the valuation of the Agyapa Royalties deal at US$1.0 billion.  

 

The group of about 22 Civil Society Organisations (CSOs), calling itself ‘Alliance of CSOs working on Extractives, Anti-Corruption, and Good Governance’ at a press briefing in Accra yesterday claimed that, government reported Ghana’s gold royalties last year to be US$123 million during a meeting with them , but from their independent checks the figure was rather US$200 million.

 

Apart from the accusation of under-reporting the country’s earnings from gold royalties, they said, government is also hampering access to the information on the deal. Interestingly, through government’s communication it is evident that it is either not paying attention to the revenue flows in the sector, or deliberately undervaluing the assets for unknown reasons.

 

“When a direct question was posed to the Deputy Minister of Finance on the amount of royalties received from gold in 2019, he said Ghana received about GH¢650 million ($123 million), the spokesperson for the CSOs Alliance, Dr Steve Manteaw lamented.

 

The Co-Chair of Ghana Extractive Industry Transparency Initiative (GHEITI) disclosed further that, “The truth is that Ghana received GH¢1.06 billion ($200 million) from the big companies under the Chamber of Mines alone. Government has data on the other receipts, yet it decided to under-report the numbers.

 

“Again, in our meeting with the Finance Ministry, we were given half-year receipts for 2019 of $72 million (¢366 million). The underreporting of the 2019 revenue which is the most significant period for revenue projection and emphasis on old royalty numbers is intriguing,” Dr Manteaw added.

Ghanaians to petition FCA/LSE on Agyapa gold royalties IPO… for nondisclosure of vital information to owners of the gold

 

 

 

Adnan Adams Mohammed

 

Some Ghanaians including reputable Civil Society Organisations (CSOs) have hinted their intent to petition the Financial Conduct Authority (FCA), the regulator of London Stock Exchange (LSE), to draw its attention to how the government and Agyapa Royalties Company is hiding vital information from key stakeholders including owners of the gold (i.e Ghanaian citizens, especially those in the gold mining communities).

 

The 22 CSOs working on Extractives, Anti-Corruption, and Good Governance at a press conference held yesterday accused government of deliberately denying them hiding vital information from them even when they met with the finance minister on the deal last week. The CSOs have therefore pledged to use every means to get the needed information on the deal so they can offer better critique of the royalties which is has perpetual effect on the country’s revenue from all the gold resources endowed the country.      

 

Experts have alarmed that, if the petition is served to the LSE, through the FCA, then it can affect the price and credibility of the shares in the gold royalties Agyapa Royalties Company will be issuing on the LSE on behalf of Ghanaians through the Minerals Infrastructure and Investment Fund (MIIF). Already, the minority in Parliament of Ghana who walked out of parliament during the passage of the bill that permitted the government to execute the widely contest deal in opposition to the some terms of the deal and lack clarity and adequate disclosure of information, have declared their preparation of petition the LSE. This comes as majority of Ghanaians sees the deal as a ‘State or Elite Capture’ (a situation where few powerful individuals in government or outside government team up to use state resources for their benefit against state interest).

 

“At our last meeting with the Ministry, some slides containing some data were presented. However, when we requested for copies, those particular slides of interest to us, were omitted either deliberately or inadvertently”, Dr Steve Manteaw, Co-Chair of GHEITI who spoke on behalf of the CSOs disclosed at the press conference, adding that they have been constrained in conducting critical analysis of the gold royalties deal as is expected of them as they play their watchdog role on governance.

 

“We have so far been constrained in our analysis of this transaction by our inability to access the full complement of data and assumptions used in Government’s valuation of the royalties being traded.”

 

Below is the full statement:

 

Government’s Responses to Concerns on Agyapa Deal Unconvincing

8th September 2020

Distinguished Ladies and Gentlemen of the Media, since our last press conference on the controversial Agyapa Mineral Royalty deal, government has made efforts to respond to the questions we raised.

However, the more we get to know about the deal the more concerns it raises. We are therefore not surprised that many Ghanaians are encouraged to join our course to ask the necessary questions that help to bring our country to the path of consensus on how to protect our mineral royalties, and to optimise their use for the benefit of current and future generations.

We find it rather unfortunate, that, while the Minister for Finance has favourably responded to the call for further consultations, he has publicly stated that he will go ahead with the transaction regardless of the serious concerns being raised by a large section of the Ghanaian population. Such posturing raises doubts about the genuineness of the pledge to undertake further consultations.

We have so far been constrained in our analysis of this transaction by our inability to access the full complement of data and assumptions used in Government’s valuation of the royalties being traded. At our last meeting with the Ministry, some slides containing some data were presented. However, when we requested for copies, those particular slides of interest to us, were omitted either deliberately or inadvertently.

According to government, its objective for the Mineral Income Investment Fund is to maximise the value of the royalties due the Republic from the mineral wealth of the country, for the benefit of its citizens, in a responsible, transparent, accountable and sustainable manner. The challenge, however, is how the outright sale of up to 49 percent of the royalties from 48 leases that constitute the bulk of Ghana’s proven gold deposits and currently contributes about 95 percent of royalty receipts, translates into the stated objective.

Ladies and gentlemen, it is important for us to separate the key strands of the issue and deal with them in simple language.

1. Government of Ghana is selling almost half of the royalties available for annual budgetary support for a lump sum of about $500 million for unknown quantities of mineral resource embedded in the 48 leases under the Agyapa transaction. This is a sale of right as of heritage. Put simply, the Government assumes half of the unknown share of the royalties in the most prolific 48 geographic areas are worth about $500 million.

2. An assumption is created that, the remaining share of 51 percent will generate returns to continue to support the budget by investing in a company incorporated in a Tax Haven and operated by politically exposed persons. However, the government has not told the good people of Ghana, what guarantees exist to ensure that risk free royalties can be invested without subjecting the resource to significant risk exposures. In the event where Agyapa’s investments do not yield the expected returns, Ghana would have risked its royalties that would have flowed from the mines to support the budget.

The sad part is that, Ghana has no way out, if the government wakes up in future to the reality that mining sector investments have their own risks as happened in the seventies when assets were nationalised.

3. Another assumption deduced from government’s communication is that, listing on the London Stock Exchange (LSE) will ensure transparency and accountability in the management of the resources. If the government is unable to ensure transparency and accountability when it controlled 100 percent of royalties, listing on the LSE through a company incorporated in a Tax Haven will not guarantee transparency.

Today we will try to, once again, break down the key questions to see if government will provide the answers rather than pushing a utopian agenda of revenue maximisation when in actual sense, it is selling half of the royalties accruing from the resource;

1. How did Government value the royalties at $1 billion?

The answer we have heard so far, is that, the $1 billion is the book value for Agyapa, it is not the actual valuation for the IPO. This doesn’t answer the question. The $1billion valuation reflects the Ghana government’s assessment of its assets assigned to Agyapa which has been approved by Parliament. In recent communication, the Minister of Finance has stated that Agyapa’s asset value of $1 billion approved by Parliament will not be the fair value that will be determined by the market. This is where appreciating the difference between net asset value and fair value becomes extremely important. Granted that the market will determine the fair value of the asset, it is important for government to determine the appropriate net asset value for the market to consider what it deems fair. This essentially is what the contract states as $1 billion. Therefore, if the asset is under-valued by government itself, then Ghana cannot expect the market to give a favourable valuation of the IPO which the Minister himself states will be about 0.6 to 3.2 times the asset value. This indicates that Ghana is just gambling on the market for the determination of the value of an important revenue stream.

The interesting thing for citizens to appreciate is that, through government’s communication it is evident that it is either not paying attention to the revenue flows in the sector, or deliberately undervaluing the assets for unknown reasons. When a direct question was posed to the Deputy Minister of Finance on the amount of royalties received from gold in 2019, he said Ghana received about GHS650 million ($123 million). The truth is that Ghana received GHS 1.06 billion ($200 million) from the big companies under the Chamber of Mines alone.

Government has data on the other receipts, yet it decided to under-report the numbers.

Again, in our meeting with the Ministry of Finance, we were given half year receipts for 2019 of $72 million (GHS 366 million). The underreporting of the 2019 revenue which is the most significant period for revenue projection and emphasis on old royalty numbers is intriguing.

2. What other investment options were considered before settling on the sale of up to 49 percent of Agyapa?

The assertion that government seeks to optimise the royalties presupposes that forward sale of part of the royalties is the best option available to government. We are interested in knowing what other options were considered by government and the specific trade-offs made to suggest that it is better to sell than wait for the revenues. In considering the stock market, what other deal structures besides the IPO route did Government consider, and can the comparative and benchmarking analysis be shared for review?

3. Why is Ghana patronizing a Tax Haven when internationally, countries are pushing against companies hiding in Tax Havens?

When we asked this of the government, it used examples of private companies to justify its decision. The consensus position of governments around the world is that Tax Havens inhibit the revenue mobilisation efforts of countries; the reason many regulators around the world are cracking down on Tax Havens. For Ghana’s government to do business and hide from tax anywhere in the world is a bad message to the rest of the world, particularly when the country is struggling to defend itself before the European Union, having been blacklisted on account of high money laundering risk.

4. Why is Government exempting Agyapa from taxes when it will be partly owned by investors?

Although the royalties are taxes, when a portion is sold to investors, dividend payout is income that must be subjected to tax. At that point the government is not taxing itself, rather, it is taxing income from a company in which it is only a shareholder. The provision in Section 28(5) of the MIIF Act seeks to declassify royalties as taxes and make it a revenue stream for MIIF, and by extension Agyapa. Exempting Agyapa from taxes does not exempt government alone but also the investors. This is the more reason why government should not exempt Agyapa from taxes, and failure to do so only benefits the investors.

5. In considering Agyapa, what becomes of government’s manifesto promise to increase royalty share to mining affected communities?

In government’s 2016 manifesto, it stated that;

“With regard to mineral royalties, the NPP’s policy is to ensure that mining communities receive a higher share. Currently, 80% of the royalty goes to Government, 10% to the Minerals Commission, and 10% to the community. The NPP will reduce Government share to 70%, while doubling the community share to 20%. The additional 10% to the community will be given to the District Assemblies to be used specifically for developing infrastructure in the mining communities.” How government is responding to this promise is missing from its new efforts through the MIIF.

Ladies and gentlemen, these are important questions that require a national conversation to be addressed. It is not enough for the Minister of Finance or the government to ask citizens to trust their sincerity and their expertise. It would not be right for them to try to bulldoze through a controversial transaction such as this, and about which genuine questions have been raised by experts as well as by ordinary people. We are therefore reiterating our call on the government to suspend implementation of this transaction pending a national dialogue on options available to optimise Ghana’s mineral royalties.

Thank you.

Participating Organisations:

1. Africa Centre for Energy Policy (ACEP)

2. Centre for Democratic Development (CDD)

3. Centre for Extractives and Development Africa (CEDA)

4. Centre for Public Interest Law (CEPIL)

5. Chamber of Petroleum Consumers Ghana (COPEC)

6. Citizens Movement Against Corruption (CMAC)

7. Civil Society Platform on Oil and Gas (CSPOG)

8. CSOs Open Licensing Monitoring Group

9. Ghana Anti-Corruption Coalition (GACC)

10. IMANI Centre for Policy and Education

11. Institute for Democratic Governance (IDEG)

12. Integrated Social Development Centre (ISODEC)

13. WACAM

14. Oil Watch Ghana

15. Penplusbytes

16. Public Interest and Accountability Committee (PIAC)

17. Publish What You Pay Ghana (PWYP)

18. SEND Ghana

19. The People’s Project (TPP)

20. Women Aspire

21. Centre for Social Impact Studies, Obuasi

22. Friends of the Nation, Takoradi

Tuesday, 25 August 2020

Full Statement of CSOs Press Conference on Agyapa Deal

 15 Civil Society Organisations demand suspension of Agyapa ...



CSOs Response to the Implementation of the Minerals Income Investment Fund and Matters Arising

 

25th August, 2020

 

Ladies and Gentlemen of the Press,

 

We, members of the Alliance of CSOs Working on Extractives, Anti-corruption, and Good Governance, have been following keenly, the raging disquiet among sections of the Ghanaian population about the government’s decision to leverage Ghana’s present and future mineral royalties for international credit to finance the country’s development programmes.

 

While the intention of government may be genuine, and aimed at optimising the benefits of gold royalties to the state, we are of a firm conviction that, the lack of, or inadequate consultations on the bill that eventually passed into the Minerals Income Investment Fund (MIIF) Act, (2018), Act 978, with its 2020 amendments is responsible for the lack of public support for its implementation. A consultative process that respects the views of Ghanaians on such an important decision would have been useful in shaping government’s policy and potentially exploring other investment options that could achieve greater impact for citizens.

 

The opaque manner in which the Act is being implemented: the relatively weak transparency and public oversight arrangements, and the haste with which the government is running to the market, in spite of concerns being raised by a broad spectrum of the Ghanaian populace, do not engender public trust and consensus building around matters of public policy. This approach rather raises moral and governance questions. The assumption that, once everything goes through parliament, it is above board and represents the interest of all Ghanaians is deceptive, and turns democracy on its head. It makes the elected, the only relevant stakeholders in policy making, and as former U.S. president, Barack Obama once indicated, it wrongly assumes that democracy is a transaction executed between leaders and the people only at elections.

 

We note that, within the context of good governance, such an important decision requires consultation even with the poor woman in Tarkwa, Daamang, Obuasi, Kenyasi, and other communities, who have lost their livelihoods to mining, and continues to bear the negative consequences, in a language she will understand. The Chiefs and Queen mothers who have given their lands and continue to engage government with the hope that one day, at least, the requirement of the Mineral Development Fund Act to cede 10 percent mineral royalties to develop their communities, will be respected in full. Any assumption that the people will not understand such policies is very disrespectful in a democracy. In fact, the people do not only understand “vote for me”.

 

We are deeply worried that if government proceeded to the market amidst the public outcry, and threats of future policy reversal from the major opposition party, Ghana may suffer the undesirable consequence of a rather high premium, as investors may be sensitive to the political risks associated with such investment. It is also worth noting that the current financial difficulties of the country, imposed by Covid-19, and the pending elections, present lethal disadvantage for Ghana on the London Stock Exchange; as a desperate country looking for resources to invest.

 

Ladies and gentlemen, the recent amendment to the Minerals Income Investment Fund Act creates more suspicion. The rushed amendments inserted worrying clauses, including clauses that lifts the Special Purpose Vehicle (SPV); Agyapa Royalties, above Ghanaian tax laws, waves Ghana’s sovereign immunity, and by that exposes the country to the risk of damaging lawsuits should any future government seek to reverse this transaction.

 

What we find even more repulsive about this whole transaction is the provision that permits Agyapa Royalties, a supposed company of the sovereign state, registered in a tax haven, to borrow money or raise equity in foreign currency from any source on the back of the gold royalties of Ghanaians without the requirement for any further approval, consent, or administrative act of the Government of Ghana - Sect.33(2)(a).

 

We acknowledge, ladies and gentlemen, that postmortem attempts are being made to engage the public by the MIIF to provide answers to some questions Ghanaian have on the Agyapa transaction. This, in fact, underscores the point that prior engagements would have better served the national course and deepened consensus on the policy. Regardless of the attempt to clarify some concerns, significant questions remain unanswered:

 

1. Are the managers and directors of Agyapa not politically exposed persons, and were they not selected through a non-competitive process? Just last week, we sighted a call for expression of interest, placed in the Daily Graphic, inviting prospective consultants for the development of a strategic plan for the Mineral Income Investment Fund. While we welcome the open and transparent process for the firm selection relative to this assignment, we have not found evidence of the same openness in the creation of the SPV and the appointment of its directors. Again, it beats our imagination as to why an entity, without a corporate strategy, and approved spending plans, will proceed to raise $1 billion and cede US$500 million to government in such indecent haste, especially when there is no known national emergency to warrant such rush.

 

2. Were the transaction advisers and legal intermediaries not handpicked by the government, and are they not politically exposed persons?

 

3. What is the dividend policy on the investment being sought on the London Stock Exchange (LSE)? This is a crucial part of the entire transaction which will tell Ghanaians how the investors will benefit from the royalties of the state. This also allows the public to see whether indeed the deal is beneficial or not. Shockingly, parliament showed no interest in this and rather waved its oversight.

 

4. To convince Ghanaians that this is a good deal, don’t we need to know how the Agyapa investments compare with other investment options?

 

5. Agyapa Royalties is going to invest risk-free royalties on investments unknown to the state. Don’t we need to know the level of risk the royalties will be exposed to, and how those risks will be mitigated by the managers of Agyapa Royalties. What will Agyapa be investing the $500 million dollars in? This interestingly was not before parliament. Neither did the house demand for the investment options before approving the transaction. In essence Parliament has agreed to cede Ghana royalties to a company to undertake investments at its pleasure.

 

We take this opportunity to also draw the attention of the Government to its own 2016 manifesto commitment in respect of the mineral sector, Ref. Page 27, Natural Resources – Land, Forestry and Mining, paragraph (f), where the NPP pledged to:

 

“Ensure that mineral revenues are efficiently managed for the benefit of Ghanaians, and to enact a consolidated Mineral Revenue Management Law, similar to the Petroleum Revenue Management Act 2011 (Act 815), to guide the use of mineral revenues in strategic sectors of our economy”.

 

We however, regret to note, that what we are being served, and against which we are holding this press conference, is a far cry from what was promised.

 

Indeed, the transparency and accountability provisions in Ghana’s Petroleum Revenue Management Act (PRMA) have been hailed world-wide as a best practice. The 2017 global Resource Governance Index placed Ghana’s petroleum sector governance at 13th position, among 89 countries; and the best in Africa. Its value is reflected in the fact that Ghanaians today have adequate information on how their petroleum revenues are being managed on their behalf. Issues of poor spending decisions, or monies that cannot be accounted for under current and previous governments, are all matters of public knowledge, thanks to the PRMA, as well as the annual reports of the Public Interest and Accountability Committee (PIAC).

 

Ladies and gentlemen, Ghanaians will probably not have lost sleep over this Agyapa – Mineral Income Investment transaction, if it had been orchestrated under an open and transparent regime such as the PRMA provides. Indeed, what the government is intending to do with our mineral royalties would not have been permissible under the PRMA. For instance, Sect.5 prohibits the use of the Petroleum Holding Fund, which includes royalties, as collateral for borrowing. It also prohibits borrowing against the country’s petroleum reserves, which sadly, is what the Minerals Income Investment Fund seeks to do.

 

Ladies and Gentlemen, we are happy to engage as always, to learn, debate and challenge government on ways to optimise the mineral royalties if government is willing to activate those democratic channels. Those who have divergent views are equal stakeholders in the mineral revenue. Therefore attempts to disregard dissenting views, is most unfortunate, as they defy the principle of participatory decision making, which forms the bedrock of democratic practice.

 

We take this opportunity to call on his excellency, Nana Addo Dankwa Akufo-Addo to:

 

1. Acknowledge that, though, the MIIF and its SPV may be legal without public input, it fundamentally goes against his pact with the Ghanaian people, particularly the mining communities to cede 20 percent of mineral royalties to develop the communities.

 

2. Suspend the implementation of the MIIF until all documents relating to the establishment of the SPV, and its beneficial owners have been disclosed. As concerned Ghanaians, we sought to access the transaction documents on the MIIF’s website, only to discover that it has none.

 

3. Establish a multi stakeholder process to review all options to optimise the mineral royalties in order to secure risk-free revenue to the state. Gold royalty is the most certain revenues to the state. Even though commodity prices tend to be cyclical, Gold has only oscillated within 20 percent, which makes it a more stable commodity than oil. And with oil losing demand growth to alternative fuels, Gold is expected to continue to be a stable source of revenue.

 

4. Recognise that, by its current approach to the implementation of the MIIF, government may appear to be encouraging citizens to transact business in tax havens.

 

Ours is a struggle against the elite capture of resources that commonly belong to all Ghanaians, and we call on every one of us, regardless of our political persuasion, to join hands in safeguarding the national interest.

 

Thank you.

 

Participating Organisations:

1. CSOs Open Licensing Monitoring Group

2. ACEP

3. Centre for Extractives and Development Africa (CEDA)

4. ISODEC

5. Citizens Movement Against Corruption (CMAC)

6. Civil Society Platform on Oil and Gas (CSPOG)

7. Penplusbyte

8. Oil Watch Ghana

9. IDEG

10. CDD

11. NRGI

12. PWYP

13. CEPIL

14. Imani Ghana

15. Women Aspire

16. SEND Ghana

17. PIAC

Gov’t disregarded GHEITI, CSOs, and Chiefs of mining communities in Agyapa deal…. 17 CSOs call for its suspension

Inadequate Consultation Responsible for Lack of Public support on ... 

 

 

Adnan Adams Mohammed

 

Government of Ghana have been accused of deliberately disregarding and sidelining the Ghana Extractive Industry Transparency Initiative (GHEITI), watchdogs in extractive governance (Civil Society Organizations, Media), Traditional authorities and the citizens of mining communities (whose resources the President is holding in trust for them) in the recent controversial deal it has signed with Agyapa Royalties Ghana.

    

The deal which involves the monetization of the country’s mineral income accruing to the country which gives Agyapa Royalties Limited, the right to secure about US$1 billion to enable government finance unknown infrastructural projects. The Alliance of CSOs working on Extractive, Anti-Corruption and Good Governance is thereby calling for the immediate suspension of the controversial Agyapa Royalties Limited agreement with the government of Ghana.

 Suspend Agyapa Royalties deal – CSOs

The CSOs wants the beneficial ownership of the Special Purpose Vehicle and Agyapa Minerals Royalties be made public or the implementation of the deal should be deferred. Parliament last week, in line with the Minerals Income Investment Fund (MIIF) Act, 2018 (Act 978) approved the agreements under ‘certificate of emergency’ to allow the country to derive maximum value from its mineral resources and monetise its mineral income accruing to the country in a sustainable and responsible manner.

 

“The deal is not transparent and places Agyapa Royalties above the country’s tax laws”, Dr Steve Manteaw, Chairman of the Alliance of CSOs working on Extractive, Anti-Corruption and Good Governance expressed worry at a press conference on Tuesday, 25 August 2020.

 

He added, “The recent amendment of the Minerals Income Investment Fund creates more suspicion. The rushed amendment and inserting worrying clauses including clauses that leaves a special purpose vehicle; Agyapa Royalties above Ghanaian tax laws, outweighs Ghana’s immunity and by that, expose Ghana to the risk of damaging lawsuits should any future government seek to reverse this transaction.”

 

“What we find even more repulsive about this whole transaction is the provision that permits Agyapa Royalties, a supposed company of the sovereign state, to register in tax payments to borrow money or raise equity in foreign currency from any source on the back of the gold royalties of Ghanaians without the requirement of any further approval, consent and administrative Act of the Government of Ghana. This provision takes Agyapa Royalties away from parliamentary oversight and control”, he added.

 

Already, the deal has been criticised by many who described it as a way of mortgaging Ghana’s mineral resources. The Minority in Parliament staged a walkout on the passage of the agreement while the National Democratic Congress (NDC) flagbearer, John Mahama has said the architects of the Agyapa Royalties deal are cronies of President Nana Akufo-Addo and hinted at cancelling the agreement should he win the 7 December 2020 polls.

 

“If I become president, I will not accept that deal”, he threatened. According to him, “the people of Ghana do not accept that deal” since, in his view, “it is against the money laundering rules”.

Sunday, 29 December 2019

VAT disadvantages the poor as it widens inequality gap

 Image result for ghana vat

Adnan Adams Mohammed

The Valued Added Tax, (VAT), introduced as an easy approach to help government mobilize resources for national development has been characterized as a retrogressive tax system, which is an inequitable to the poor who pays the same as the rich in the country.

A tax and development expert is proposing a review of most of the tax systems especially the VAT on consumable goods and basic services. The expert further describes most of Ghana's tax system as unfair to the poor as it places a huge burden on them in terms of revenue mobilisation compared to the rich.

The Tax Justice Coalition as part of its advocacy to ensure that; every Ghanaian understands the tax systems, encourage compliance, discourage tax evasion, tax justice and equitable and transparent distribution of the tax revenues to benefit the poor and the rich in an equitable manner has called on all stakeholders (especially the media) to join hands to help it achieve its objectives. A key member of the Coalition has called for efforts by government to block loopholes that allowed, especially big and multinational companies, to evade taxes using several dubious accounting and financial management systems.

“The VAT is not a good instrument for addressing development inequalities because it made the poor and the rich to pay the same prices for goods, a situation, which further widened the inequality gap in the country”, Dr Steve Manteaw, the Co-Chairperson of the Ghana Extractive Industry Transparency Initiative has said during a presentation at a two-day capacity building workshop on tax and public financial management reporting for the media organized by the Tax Justice Coalition Ghana with support from the Open Society Initiative for West Africa.

He added that the poor were rather contributing more in terms of taxes for national development, citing subsidies in the energy sector which is meant to cushion the poor, rather tended to benefit the rich compared to the poor as it is in its current state.

He called for a tax system that guaranteed that people paid taxes based on their economic and income level to help address inequality in the country.

Meanwhile, the Head of the Ho Small Tax Office (STO) of the Ghana Revenue Authority (GRA), Mr. Anthony Dekagbe, has said the refusal by entities to honour their tax obligations is a threat to national security and must be considered a criminal act.

Key national services, including security, would not function effectively in the absence of tax revenue, which was also the lifeline to developmental projects, he said at a tax forum on Voluntary Compliance in Ho, which brought together sections of the taxpaying public and officers of the GRA.

“You are a threat to national security if you don’t pay your taxes. There will be no protection because our security services would not be paid. Key developmental projects would also suffer,” he said.

Despite tremendous efforts by the GRA in tracking down tax evaders, he said the goods sector still managed to dodge the tax net. He assured that, the Authority would continue to collaborate with security agencies in sealing the loopholes and enforcing tax compliance and would need more public support in widening the tax net.

Mr Leonard Shang-Quartey, Coordinator of Tax Justice Coalition Ghana assured of more collaboration with the media to strengthen their capacity on issues of tax justice to improve media coverage of the sector.

Some of the participants said while tax avoidance was not a crime, the processes leading to it such us over-invoicing and under-invoicing amongst others were crimes and must be singled out for prosecution to help curb the practice for the country to increase revenue mobilisation.

Also, Mr. Lord Lucas Vodzi, Deputy Coordinator of Tax Justice Coalition, called for proper communication of tax policies to make the public and business entities not to view tax officers as enemies.

“The GRA must have a more friendly approach. They must seek to build relationships with clients and businesses, and must engage them constantly for better understanding of the tax regime,” he said.

Saturday, 21 December 2019

PIAC dysfunctional as minister refuses to swear-in new members

Image result for Public Interest and Accountability Committee




Adnan Adams Mohammed

The Public Interest and Accountability Committee (PIAC), an independent statutory body mandated to promote transparency and accountability in the management of petroleum revenues in the country has been inactive for some period now as the Energy Minister refuses to swear-in new nominees including the Chairman whose tenure has elapsed.

According to reliable information picked, the current committee has its mandate elapsed for some months now which has got new members nominated by representing institutions and associations and ready to be sworn-in so they could assume their oversight work as mandated.

From the source of information close to the Committee, the minister was supposed to swear-in the new members before November, but gave an excuse that they were busy with the budget preparation.

“Ironically, the budget had been prepared and presented over a month ago, yet the ministry is not showing any interest in the swearing-in. An event that takes less than 30 minutes to undertake”, the source lamented on anonymity.

The mission of PIAC is to be committed to ensuring efficient, transparent and accountable management of petroleum revenues and investments to secure the greatest social and economic benefit for the people of Ghana through active engagement with the government and citizens. This is to be accomplished by maintaining a balanced stance, exhibiting high integrity and remaining independent of sectional influences.

The statutory Accountability Committee has three main objects as outlined in the Petroleum Revenue Management Act. These are; to monitor and evaluate compliance with the Act by government and relevant institutions in the management and use of petroleum revenues and investments; to provide space and platform for the public to debate on whether spending prospects and management and use of revenues conform to development priorities as provided under section 21 (3); and to provide independent assessment on the management and use of petroleum revenues to assist parliament and the executive in the oversight and the performance of related functions.

Also, the Committee’s functions include; to consult widely on best practice related to the management and use of petroleum revenues; and determine the rules of procedure under which it will operate.


The current Committee Members are:

Dr Steve Manteaw, Chairman, representing Ghana Extractive Industries Transparency Initiative (GHEITI) with Dr Thomas Kojo Stephens as Vice Chairman, representing Ghana Bar Association (GBA).

Other members are:
Mr Joseph Winful, Member, representing Association of Chartered Accountants, Ghana; Dr. Affail Monney, Member, representing Ghana Journalists Association (GJA); Prof. Albert Fiadjoe, Member, representing Ghana Academy of Arts and Sciences (GAAS); Alhaji Alhassan Abdulai, Member, representing Muslim Groups; and Mr. Noble Wadzah, Member, representing Civil Society & Community-Based Organisations.

The rest are: Ogyeahoho Yaw Gyebi II, Member, representing National House of Chiefs; Rev. Dr. Kwabena Opuni-Frimpong, Member, representing Christian Groups; Nana Agyenim Boateng, Member, representing Association of Ghana Industries and Ghana Chamber of Commerce; Kansawurche Hajia Bukari, Member, representing Queenmothers\' Association; Mrs. Mary Karimu, Member, representing Trades Union Congress (TUC); Prof. Akosua Keseboa Darkwah, Member, representing Independent Policy Think Tanks.

Tuesday, 5 November 2019

GNPC urged to lead efforts to improve active local participation


Image result for alex mould


Adnan Adams Mohammed

As Ghanaians yearn for more stake and benefits in revenue from its oil and gas, an energy expert is calling for a broad stakeholder consensus to give authority to the national oil company, Ghana National Petroleum Corporation (GNPC), to be a catalyst for deepening  local content in the upstream and midstream oil and gas production.

Catalyzing local content development is one of the key pillars of GNPC’s strategy. But as it is now, GNPC is only a non-operating partner in all the oil gas and fields in Ghana, Mr Alexander Mensah Mould, former CEO of GNPC has said.

According to industry experts, participation in oil and gas requires large and long-term capital and technical knowledge. None of these is easily available to Ghanaian entrepreneurs. Besides its rich technical expertise, GNPC has the balance sheet to raise the needed capital for long term exploration and development.

“As the NOC, Government and the public should support GNPC to take increasing stake in oil blocks. This must be done strategically. GNPC must not take higher stake just for the sake of it.” MrMould stressed when speaking at the Oil and Gas Conference held at the University of East London in the United Kingdom, last week.

He added that “The Corporation has a unique reservoir of knowledge on all the basins; more than any other entity in Ghana. What the Corporation needs is clear support to enable it grow and develop in the manner some of the most successful ones did it, like Petronas of Malaysia.”

Currently, GNPC is the anchor, but non-operating partner in all the oil gas and fields in Ghana. Not being the field operator limits GNPC’s ability to drive the local participation agenda.

However, many experts like Dr Steve Manteaw, Chairman of Public Interest and Accountability Committee (PIAC) wants GNPC to use its leverage in the governing structure under the various Petroleum Agreements to ensure that contracts that local companies can execute are given to local companies.

More important is how GNPC uses its local dominance in the industry.  GNPC’s strategy must be to pave the way for increased local private participation. This could be achieved through listing of subsidiaries on the Ghana stock exchange, so that ordinary Ghanaians can buy the shares.

In the Voltaian basin where GNPC is the sole operator, the Corporation must build an eco-system of local companies to support its activities from these early stages, and grow with them. This will require a number of things: developing a pool of potential local partners, being fair and transparent in the selection of local contractors for any specific contracts, and nurturing them for the long haul.
MrMould while speaking on the theme: “Ghana’s Oil and Gas Resources For Socio-Economic Development” noted that, GNPC has been playing an enabling role in the energy sector as well as the wider economy.

“Like any state enterprise, it has a dual mandate: to pursue commercial as well as developmental objectives. During my time as CEO of GNPC, we provided the financial guarantees that enabled the deployment of the Karpowership barge from Turkey to provide electricity. The rationale for GNPC’s support in this transaction was two-fold: the power barge was necessary to mitigate an urgent power generation deficit in the country. But more importantly, the barge was meant to convert from using Heavy Fuel Oil (HFO) to natural gas. This was meant to avert incurring take or pay liabilities on the Sankofa gas.

“In this transaction also, we did something quite smart: we took up the role to supply the HFO to the barge, at a margin. We also negotiated to use mainly existing placements with banks as the guarantee. GNPC was therefore earning interest income on the guarantee.
“GNPC similarly intervened in other areas, including pre-financing the construction of access roads to enable the evacuation of Liquefied Petroleum Gas (LPG). Not doing this would have created a bottleneck in gas processing and gas offtake.”

Also, GNPC can play a significant role in attracting and adapting the right technology to further indigenize the development of the oil and gas sector in Ghana. The sector is technology-driven. Through its partnerships, GNPC must be conscious to partner with companies that are willing to share their technology, including proprietary ones. Then GNPC must invest in its people and processes in order to be able to adapt those technologies to suit the Ghanaian environment.

In addition to that, GNPC must invest in research and technology to solve the peculiar problems of the oil and gas sector, within the Ghanaian context. A good example is Petrobras of Brazil, which invested heavily in understanding its oil-rich offshore reserves trapped below a 2,000m-thick layer of salt, which itself is located below 2,000m-thick post-salt sediments. Now, Petrobras has become a world leader in pre-salt and deepwater exploration and development.

Sunday, 30 June 2019

Gov’t disregarding PRMA and other financial laws



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Adnan Adams Mohammed

The Finance Ministry has been accused of showing gross disregard to the petroleum laws and acts governing the oil revenue management for compelling Ghana National Petroleum Corporation (GNPC) to cancel US$50 million debt owed by the ministry to the Corporation.

The 2018 Public Interest and Accountability Committee (PIAC) report, reports that the Finance Ministry in 2014 withheld the said amount and had since not released the money to GNPC, but surprisingly, the Finance Ministry is compelling GNPC to expunge the debt from its books as a loan.

Again, the transaction was not supported by any form of agreement detailing the terms of the loan and a repayment plan.PIAC is therefore calling on Parliament to consider reviewing the situation where a law, and in this case the Earmarked Funds Capping and Realignment Act, 2017 (Act 947), is used to override provisions in existing laws without repealing relevant sections of those laws, when in the hierarchy of laws, all Acts of Parliament are supposed to have equal standing.

“The use of one law (the Earmarked Funds Capping and Realignment Act) to over-ride the provisions of another Act (the Petroleum Revenue Management Act), without repealing the applicable sections of the latter, raises questions bordering on the legality of the Ministry’s actions”, Chairman of PIAC, Dr Steve Manteaw has said.

Details of the supposed inappropriate conduct of government through the Ministry of Finance was narrated by PIAC as that; “GNPC, on September 7th, 2018, reported that the Ministry wrote to inform the Independent Administrator preparing the Ghana 2016 EITI Report (with the Corporation in copy) that, provision had been made in the 2019 Budget for the settlement of the advance.

“The Corporation further reports that, on December 15th 2018, another letter was received from the Ministry asserting that per the Earmarked Funds Capping and Realignment Act, 2017 (Act 947), the Minister for Finance is empowered to cap all earmarked funds at 25% per annum. The government indicated in a communication that, it has not retained the Corporation’s flows thus far with the view to offsetting the US$50 million advance with part of the capped amount of GHC1.001 billion, and that, the Corporation should expunge the US$50 million advance from its books.”

The Committee also observes that, with the situation where GNPC’s funds are currently capped at 30% of net petroleum revenues, a further 25% cap of the 30% using Act 947, reduces GNPC’s funds to a mere 7.5% and with GNPC expected to wean itself off the Petroleum Holding Funds (PHF) by 2026, GNPC lurks in financial suffocation to execute its legal mandates.

Apart from the unpaid US$50 million loan, an amount of US$4.14 million, representing 1% of total receipts, used to support the construction of the Western Corridor Roads is not yet paid. The money was requested from GNPC by the government to assist the construction of key roads within the Western Corridor financially, in order to facilitate the evacuation of gas from the Ghana Gas Company at Atuabo.

GNPC spent US$3.8 million on the secretariat activities of Ghana – La Cote d’Ivoire Maritime Boundary Dispute which is still not been refunded to GNPC. PIACis thereby calling on government to refund the US$3.8 million to GNPC on the grounds that, the Ghana Boundary Commission established by the State to deal with such matters must have a fully functioning Secretariat and made to handle its own budget

Also, in 2018, GNGC received raw gas worth $85,214,825.34 from GNPC during the year, for which payment is outstanding. Total GNGC indebtedness to GNPC currently stands at $315,530,008.87 as at the end of 2018.

GNGC’s income from the sale of lean gas, LPG, and condensates for the period was $224,704,210.61, of which only $85,211,856.99 was paid.GNGC made no attempt to defray part of its debt to GNPC, even though the Company received revenue for the period under review.
GNPC and the ABFA received US$305.27 million (31%) and US$235.10 million (24%) respectively of PHF allocations for the year 2018.

Ghana National Gas Company (GNGC) was established as a commercial entity to enter into a business arrangement with GNPC to take the raw gas, add value, sell it, make a profit and pay back GNPC.

The report said, the vicious political interference in GNPC’s affairs and the tendency to use it to finance quasi-fiscal expenditure, if not checked by Parliament, will undermine the Corporation’s operational efficiency and threaten its sustainability.

While the Committee is satisfied with the quality of spending by the Foundation, it recommends to Parliament, to consider placing some restrictions on the proportion of GNPC’s budget that can be channeled into Corporate Social Investment to forestall any future excessive expenditure in this category.

Natural Resource Economist, Gideon Ofosu-Peasah, has said that in the face of the current spending by GNPC for the quasi-fiscal expenditure of the government should be a cap on the spending on corporate social investments.

“The focus of the business should not only be focused on its core mandate. It should also be concerned about its environment and society as well. If that will derail you from your core mandate then there should be a cap”.

Ghana National Petroleum Corporation (GNPC) was established in 1983 and started operations in 1985 to support the Government's objective of providing an adequate and reliable supply of petroleum products and reducing the country's dependence on crude oil imports through the development of the country's own petroleum resources.

In addition to the functions of petroleum exploration, development, production and disposal activities, the Corporation assumed responsibility for the importation of crude oil and petroleum products to meet national demand.

GNPC is Ghana's national oil company mandated to explore on its own or partner all contractors in the exploration and production of petroleum in Ghana.