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FRONTPAGE VIEWPOINT MAGAZINE BY SECTION Special Report Business Nigeria COVER POLITICS BUSINESS & ECONOMICS BACK OF THE BOOK REGULARS NEIL FORD LETTERS PUBLISHERS NOTE AROUND AFRICA POLITALK WILMOT ADVERTISING Email us for advertising information COMPANY PROFILE MISSION TEAM EDITORIAL BOARD DIRECTORS |
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Click here for the NewsAfrica Special Focus Article Can of worms THE PROTRACTED saga of the purchase of Ghana Telecom (GT) by UK’s Vodafone seems to be drawing to a close with the announcement by the Mills administration of its intention to re-engage with the management of Vodafone International over their purchase of the telecom provider. The sale of a majority stake (70 per cent) of Ghana Telecom (GT) by the former Kufuor government to Vodafone for $900m in July 2008 sparked a huge public outcry that has intensified since early this year when the present administration assumed office. Critics opposed to the deal accused Kufuor of short-changing the nation by cheaply offloading the national asset to Vodafone. The main opposition parties including the National Democratic Congress (NDC), which is now the ruling party, the trade unions and several pressure groups, attacked Kufuor over the deal, saying the offer was too low and there should have been a greater public debate before parts of GT was sold to any private investor. The TUC, in a statement in July last year, said it was inappropriate for a government which had barely five months to leave office to hurriedly sell such an important and strategic state asset. Citing previous privatisations by outgoing governments elsewhere in the region, the TUC called for a public consensus to be found before the deal was completed. The Kufuor government retorted that the deal was necessary to save GT, which was operating at a loss and had accrued about $400m of debts. According to former administration officials, Vodafone’s investment would improve the company’s competitiveness and free up the government to spend money on other sectors. But the then opposition NDC spokesman for communications (now communications minister), Haruna Iddrisu, said the telecoms company was worth more than it was being sold for. ‘It is our belief that the value of Ghana Telecom and all its assets should not be less than $1.5bn,’ he said last year. ‘We are aware of the government’s desperate need for cash to finance a gaping budget deficit. However, it is important to advise the government to take into consideration the supreme national interest,’ he added. An Accra pressure group, The Committee for Joint Action (CJA), also accused the government of selling GT without any regard to the national economic, political and strategic interest. It said the speed with which the transaction was carried out denied Ghanaians the opportunity to fully debate its full implications. The current deputy information minister, Samuel Okudzeto-Ablakwa, who was at that time a leading CJA member, also accused the government of misleading the public about the transaction saying that the assets of GT comprised fixed lines and carrier services, a mobile network, SAT-3 fibre-optic gateway and exZeed call services. In addition, the government was handing over a fibre-optic network belonging to the country’s main power generator, the Volta River Authority (VRA), and an uncompleted National Fibre-Optic Backbone, which was financed by a Chinese grant. This, according to Ablakwa, would make Vodafone a private monopoly in the country’s fixed line business and the biggest telecom operator in Ghana. The groundswell of opposition to the privatisation was such that a group of individuals took legal action in a bid to block the sale. The group is suing the government for recklessly causing financial losses to the state, unlawful disposal of public property, entering into a contract of sale detrimental to the public interest, undervaluing property for sale to a foreign company and entering into a public agreement without due process. According to Bright Akwetey, the solicitor for the group calling itself ‘Concerned Ghanaians’, relief being sought by the action includes revocation of the agreement for the sale of GT to Vodafone International, order for dissolving the enlarged Ghana Telecom Company created for the purpose of the sale of GT, restoration of the fibre-optic network to VRA and an order for a true and faithful revaluation of assets of GT. The case is still pending in court. It is against this background that the current administration set up an Inter-Ministerial Review Committee in May to provide the government with investigative analysis as well as findings, conclusions and recommendations on the numerous controversial issues surrounding the privatisation of GT. In its findings, the committee said parliament acted unconstitutionally in ratifying a Sales and Purchase Agreement (SPA) that was not authorised by the president. ‘This is because the Constitution only allows parliament to ratify agreements that have been entered into by and on behalf of the president. This is a fundamental error that cannot be cured by any internal procedures within parliament,’ the committee said, adding that ‘parliament is subject to the Constitution of Ghana and not above it.’ This, said the committee, makes the purported ratification of the SPA by parliament ‘null and void and of no effect.’ The committee also found that GT was valued more by the transaction advisor and could have fetched a higher price than the SPA price of $900m (at an enterprise value – EV – of about $1.3bn) for 70 per cent of the Enlarged GT Group. It emerged during the committee’s investigations that Telecom South Africa offered $947m (EV of $1.6bn) for 66.67 per cent. It also transpired that the quoted price, ‘through a series of complicated financial arrangements led [the state] to eventually realise only $266.57m from the SPA.’ According the findings, the transaction was basically a sale of assets. ‘All that the “cash free debt free” meant was that the debts of GT were retired from the proceeds of the transaction and the available cash. [The government] did not get value for money from the sale,’ the findings revealed. On the National Fibre-Optic Backbone, the committee found that the National Communications Backbone Company (NCBC) that was included to create the enlarged GT Group, ‘was grossly undervalued.’ This value, according to the findings, was determined solely on the costs of the stated value from the VRA for the VoltaCom fibre assets and the $30m Chinese Exim Bank concessionary loan. ‘The value of the National Fibre Backbone Company should have been determined based on the synergies of creating a high performance service delivery platform with nationwide reach, with revenue and annual profit far in excess of the total assessed asset value,’ said the committee. It referred to a press briefing by the then communications minister in July 2008 at which the minister explained that following the unavailability of concessional funding for the implementation of the second phase of the National Communications Backbone Project, it would be easier for the project to be completed by the Enlarged GT Group which was to emerge after the SPA. The committee’s findings establish that the minister was being economical with the truth. ‘This was not reason enough for transferring the fibre infrastructure to Vodafone. The [state-owned] Social Security and National Insurance Trust (SSNIT) in partnership with the private sector had funds and have been pursuing their interest in developing a fibre optic infrastructure (since 2004) that was more extensive. SSNIT’s programme for fibre would have covered Phase 1 and 2 of the [Government of Ghana] NCBC programme. The said press briefing occurred after the [Government of Ghana] had already committed to the transfer of the fibre assets and NCBC to Vodafone,’ the committee revealed. It added, ‘In any case, the committee finds that the fibre optic network is a strategic national asset and should have remained an independently operated infrastructure as originally intended and must not be sold to a private investor with a solely commercial agenda.’ More worrying is the fact that Kufuor held at least one meeting alone with Vodafone executives in London and a second meeting with the Vodafone executives, also in London, and this time with his secretary present. The findings also reveal that the former president had on several occasions held meetings with Vodafone to negotiate and agree the transaction consideration and the underlying assumptions of the Vodafone offer in Ghana and with some of his ministers (communications, finance and chief of staff) present. ‘This was done without expert advice,’ the committee said. Castigating the former president for his actions, the committee said, ‘the whole process leading up to the transaction proceeded on the wrong footing. The former president himself led the way. All the negotiations with Vodafone regarding the acquisition and purchase of 70 per cent shares in Ghana Telecom was done by the former head of state John Agyekum Kufuor himself and a few of his ministers, namely the ministers of finance, communications and the chief of staff.’ The committee also heard testimony that the former president subsequently agreed on the transaction price, technical considerations and the underlying legal assumptions of the Vodafone offer letter dated May 15 2008. ‘The offer letter was then signed by Akoto Osei, then minister of state of the ministry of finance, instead of the substantive minister. This was within 24 hours of presentation of the Vodafone bid and granted exclusivity to Vodafone,’ the committee said. The committee accused Kufuor of maverick behaviour saying, ‘the process undertaken by the former president was highly irregular and unconventional and did not rely on expert advice.’ The committee could not disguise its contempt for the whole SPA, which is made up of 13 articles, 16 schedules and 27 offer assumptions. ‘The negative thing about this agreement is that the SPA is unwieldy and cumbersome reading,’ it says. ‘But that is not all. The reading of it wears you down so much that one becomes tired. The impression is that the whole agreement was drafted by the Vodafone group and foisted on the Ghana negotiating team to which the government of Ghana gave its approval,’ said the committee. ‘The Ghana negotiating team could not voice its objections. It seems further that the previous government was so anxious for the money that they could accept just anything and Vodafone, having realised this, took advantage of the situation and drafted an agreement so favourable to themselves.’ According to the committee, most of the terms of the SPA are inimical to Ghana’s interest. It cites article 6.1.6 that says, ‘There shall not be any injunction or other order that prohibits/restrains the sale of the Sale Shares by the [Government of Ghana] to the Purchaser in particular or generally.’ The committee argues that there cannot be any law that ousts the courts jurisdiction let alone an agreement. ‘Any agreement that purports to oust the jurisdiction of the Ghanaian courts is null and void and of no effect,’ it counters. Another article – 10.7 – compels the government to waive all rights to any claim or prosecution against any member of the Enlarged GT Group or any post-Closing directors in respect of any act of any such member or director relating to the Anti-Corruption Warranties which arises from or otherwise relates to the period prior to closing. Expressing its disagreement with this particular article, the committee riposted: ‘It is clear that the Government of Ghana cannot waive or make any such undertaking not to prosecute anyone who might have committed any offence. Absolutely nobody can contract out of criminal law. Vodafone knows this very well so why have they come here to ask us through this agreement to agree to this term?’ It continued, ‘No Euro-American can accept this and even it would be illegal by their law as it is illegal by our law. We find it amazing that the previous government agreed to a term like this one. Clearly the law does not allow this and it cannot take effect. Those personnel the SPA sought to shield by this article are by our discovery involved in fraudulent activities bordering on crime and we intend to ask for a probe leading to prosecution.’ The government in its reaction to the committee’s report says it will re-engage with Vodafone and ensure that there is compliance with the country’s laws. A statement issued earlier this month and signed by the chief of staff, JH Martey Newman, said ‘This process of re-engagement is without prejudice to any legal suits pending before the courts of Ghana.’ This is in clear reference to the pending suit filed by the “Concerned Ghanaians” led by Bright Akwetey. The statement however stressed that the government has no intention of abrogating the SPA. The re-engagement would also include issues relating to the operation of the National Fibre Optic Backbone which the majority of Ghanaians consider a strategic national asset. The statement said the The National Communication Backbone, which was managing the Fibre Optic Backbone, would enable the government promote its key ICT policies and must be an open-access network that served the whole country with competitively-priced services that would enable the rapid development of e-government, BPO, and other ICT Industries and Services. The statement added that by this action, the government was looking forward to the realisation of the true value of the fibre optic backbone and a consideration of its policy objectives in order to arrive at an outcome that would benefit the people of Ghana. The government has also accepted the committee’s recommendation that in future, negotiations involving government must be handled by a team of technical experts and negotiators. In addition, copies of all government agreements should be deposited with government archivists as required by law with a second repository lodged with the attorney-general. In its reaction to the statement, Vodafone said it looked forward to ‘constructive re-engagement with the government to find ways that Vodafone can support Ghana’s goals even more in future.’ Some analysts believe the furore caused by the deal could scare off foreign investors, while others say though the country needs foreign investment, the national interest must be paramount in all such transactions. |
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