CJA Statement on sale of GT

COMMITTEE FOR JOINT ACTION (CJA) PRESS CONFERENCE STATEMENT ON THE SALE OF GHANA TELECOM

Ladies and Gentlemen of the Media,

We thank you very much for meeting with us once again at such short notice. The purpose of this meeting is to focus on how the NPP government, in its enthusiasm to take us back into slavery, completely ignored the national interest in the sale of 70% of Ghana Telecom’s shares to Vodafone.

As the days go by it is increasingly becoming clear that they deliberately concealed crucial aspects of the Sales Purchase Agreement from parliament and the people of this country in the effort to deceive and manipulate.

Ladies and Gentlemen of the Media, We are in possession of documents which confirm that Vodafone, aware of the extraordinary zeal of the NPP government to sell Ghana Telecom at any price, made outrageous demands for concessions and reliefs much to the disadvantage of the people of Ghana; and these appear to have been granted.

In a letter to the Chief Executive of the Ghana Investment Promotion Centre (GIPC), dated 9th July 2008, Vodafone applied for the following reliefs from the government:

1. Exemption from import duties on capital items for three years; 2. Exemption from Withholding Tax on Interest Payments; 3. Exemption from Corporate Tax in the first three years; 4. Approval to carry forward any losses and offset them against any profits due to the government of Ghana; 5. Higher Immigrant (Foreign Staff) Quota 6. Non-Payment of Stamp Duty/Capital Duty on sale of GT landed Properties by Vodafone

Strangely, the NPP government failed to provide Parliament with details of these unreasonable reliefs. The reliefs were only mentioned in passing in Article 6.1.13 of the Sales Purchase Agreement, hurriedly approved by Parliament without knowing exactly what those “reliefs” and their implications were.

We intend to take these issues in turn to show you how the NPP government has sold the country down the drain by agreeing to these unreasonable demands by Vodafone. 1. Exemption from import duties on capital items for three years; Vodafone is seeking exemption from import duties payable on plant, machinery, equipment or parts thereof for 3 years. Provisions of Section 24 of Act 478 that set up the Ghana Investments Promotion Centre (GIPC) entitle enterprises registered with the GIPC to submit an application to avail themselves of incentives provided under Section 23 of the Act. Specifically, such enterprises could apply for exemption from import duties, sales tax or excise duties on plant, machinery, equipment or parts thereof where the items imported fall under Chapters 82, 84, 85 and 98 of the Customs Harmonised Commodity and Tariff Code. This incentive was available to and enjoyed by all telephone network operators until the Kufuor administration assumed power. For some time now, the Government has refused to approve applications for the incentive to telephone network operators. Currently all telephone network operators are paying customs duties and V AT on imports of equipment. The question is why should that incentive, which has been withdrawn for other telephone companies, be suddenly granted only to GT at a time when it is being taken over by Vodafone? What informed the earlier decision of the government to refuse to approve applications for the incentive but is now reversing its decision for the sake of the takeover of GT by a foreign company? Vodafone makes a claim in its request that if they do not have that special relaxation of the rules for them alone, the development of Vodafone’s Ghana Telecom is likely to limit their ability to deploy “cutting edge, state of the art technology”. It is our view that since the other phone operators in Ghana also deploy state of the art technology without the incentive, it is unacceptable to have granted the facility to Vodafone alone? Ladies and Gentlemen, why should the people of Ghana be deprived of much needed taxes for the sake of only one company? 2. Exemption from Withholding Tax on Interest Payments for a Period of 5 Years; A large part of the additional funding to be contributed to GT by Vodafone or a Vodafone Group company is likely to be contributed by way of debt. An exemption has been granted to Vodafone from the requirement to pay withholding tax on GT’s interest payments for any shareholders loans by Vodafone for a period of five years.

Vodafone is seeking the setting aside of the provisions on thin capitalisation under the provisions of Act 592 to allow interest payment by the new GT to non-resident associated companies, possibly from the Vodafone International Holdings BV. This means tax that must be deducted in excess of the ratio of 2 to 1 for debt to equity as Prescribed under Act 592 will not be deducted.

Agreeing to the above request will result in huge revenue loss to the Ghana government in the following ways:

a) Government will lose withholding tax of 8% on interest paid by Ghana Telecom;

b) Government will also lose 25% tax on the excess interest over and above the limitation placed under the provisions of Act 592 on thin capitalisation;

Total revenue loss to Government is about 33% of interest to be paid by GT under Vodafone, possibly to associated companies of Vodafone. This tax is an asset to Government that should be efficiently utilised for the benefit of the whole country.

Such an arrangement does not make business sense. We say this because the government could have used the tax revenue to shore up its shareholding in Ghana Telecom to ensure that its shares in GT are not diluted.

3. Exemption from Corporate Tax Rate in the first three years Vodafone has been granted an exemption from the payment of corporate tax in the first three financial years of investment. This again represents a loss in revenue to the Ghana Government at the rate of 25% of GT's net profit. The reality in Ghana today is that in recent years, there have been other changes in the ownership of other telephone network operators who were not granted this tax holiday. Since Vodafone has been allowed to carry forward any future losses against the profits of GT, why does the NPP government agree to this extra incentive which exempts them from Corporate Tax even from the meager profits that GT might make? The effect of this decision is that Ghana is not likely to benefit even from our 30% shares. This is a greedy demand by Vodafone which has sadly been acceded to by the NPP Government. 4. Use of Carried Forward Losses to Offset Profits for 5 years Under this arrangement, any costs that Vodafone would incur, and which may result in losses would, for the first five years, will be offset against any possible profits that Ghana Telecom may make in future. We wish to state that such an arrangement was introduced in Act 592 under the government of the National Democratic Congress (NDC) for all companies. However, in 2002, the NPP government restricted the provisions on “carry forward of losses” to three areas: farming, manufacturing for export and mining. In 2006 the Government expanded the provision to cover ICT, Tourism and Agro-processing. ICT is defined under Act 592 to be software development.

It is strange that the government now finds it necessary to reverse the provisions of Act 592 to favour Vodafone. This amounts to tilting the scales of competition in favour of only one company.

We dare ask: what has Vodafone got that its competitors in Ghana don’t have because of which it alone has to be singled out for such a special favourable dispensation?

What deals were hatched between government officials and Vodafone in the course of this transaction that Vodafone has to be treated in a way that makes them more equal than others in the industry? 5. Higher Immigrant (Foreign Staff) Quota Under the Act that set up the GIPC, a foreign company is entitled to a maximum of four persons to work as their expatriate employees in Ghana. Vodafone alone has been granted the following excessive quotas:

a) For the first six months, Vodafone can have a quota of 32 foreign staff b) For up to three years Vodafone can have 23 foreign staff c) After three years, Vodafone can have seventeen foreign staff.

The implication of this is that the new GT will have an over-bloated number of foreign staff who will receive salaries and other benefits that will eventually eat into the potential profits of GT.

In view of the fact that the Sales Purchase Agreement does not contain any provision for the training of Ghanaian staff to give them the capacity and equal opportunity to be employed in very top management positions within the Company, Ghanaians cannot hope for any significant development of human resource to provide them with the capacity to manage the company within its top echelons.

Ladies and Gentlemen, this is yet another example of the NPP government taking us along the road to re-colonisation.

6. Non-Payment of Stamp Duty/Capital Duty Vodafone has been granted exemption on the payment of stamp duty on all bonds guarantees, liens or instruments of security for the period of five years. This represents yet further loss to the Government of Ghana in tax revenue.

7. Lastly, we are appalled that the Sales Purchase Agreement accepts that bribes (deceptively described as charitable donations”) paid to government officials, their close relatives or associates were allowed and there would be no prosecutions as long as the bribes did not amount to more than US$10,000. (Article 10.7 of the agreement and Schedule 13 [3.8])

We wish to assure the NPP government and Vodafone that we of the CJA shall continue to fight against this blatant betrayal of the interests of the people of Ghana until the agreement is reversed. This is because we believe that Ghana gains nothing from this dubious transaction.