How P/NDC sold off GHACEM into a monopoly

Two months ago, the outgoing Minister of Trade & Industry, Alan Kyerematen threatened to bring back the free-market-unfriendly policy of price control specifically to stabilise the retail prices of cement, which shot up by some 35%.

According to The Statesman, GHACEM holds what is virtually a monopoly of the cement market, and the liberty that they have to hike up prices without having to look behind even drew the anger of President Kufuor a couple of years ago.

An earlier threat in 2004 by Finance Minister Yaw Osafo-Maafo to flood the market with imports came to naught. But, recent revelations that in the 1990s the then Norwegian owners of GHACEM, SCANCEM, allegedly bribed government officials over $4 million to protect their virtual monopoly status has thrown back the searchlight on how the Rawlings governments of PNDC and NDC went about selling all of Government shares in GHACEM for SCANCEM to own it outright.

According to The Statesman, its checks revealed that Government controlled as much as 75 percent of GHACEM shares, with the Norwegians having 25%. On August 5, 1992, Government sold 2.8 million of its shares to SCANCEM, representing 35% of GHACEM Ltd. The amount paid was $4.074 million, equivalent to ¢1.540 billion then.

Meanwhile checks made by The Statesman has drawn a blank as to where the money was lodged and into which government coffers.

A similar check on the $4m purchase price of the earlier 1992 transaction indicated that the money was paid into an Ecobank account. But, by Monday, the office of the Auditor-General was still unable to tell the paper what happened to the $17m.

The paper said there are even question marks on the 1992 deal. On October 18, 1991; the Norwegians offered to buy 45% of Government shares at ¢586 per share. Four days later, another letter was sent reducing the offer price to ¢410. Eventually, the Divestiture Implementation Committee and SCANCEM agreed on ¢550 per share. This offer price was even further reduced by an arrangement which gave a peculiar exemption to the Norwegians from paying any duties, taxes or fees on the deal.

‘GHACEM's local operations have raised certain auditorial eyebrows. Between 2000 and 2004 alone, charges of ¢284.2 billion stated on the company's financial statements were described by the Auditor-General in 2006 as "charges made without transparency.”’

In the words of the Auditor-General, Edward Dua Agyemang, at the time, "Lack of transparency has contributed significantly to the cost of the company’s cement to the detriment of the construction industry in the country."

As far back as May 2005, the Auditor-General raised concerns about the operations of GHACEM. GHACEM is the leading producer of cement in Ghana, with a total installed capacity of 2.4 million tonnes annually by 2006. With cement being of such importance to national development, Government, whose interest in the company is now down to receiving duties and taxes, has sought to get some answers. But, all attempts to get the company to open up have been met with some legal rebuffs.

For example, GHACEM, in a letter filed by its solicitors Tettey & Co on July 14, 2005, stated: “Since the Government ceased to be a shareholder in 1999, it cannot continue to exercise the rights of a shareholder. We trust that this letter would put the matter to rest but we are prepared to advise our clients to submit the matter to a court decision if that is your wish.”

The paper quotes its auditing sources as saying that a comprehensive review of the price structure of GHACEM cement per bag confirms that certain cost items such as donations, interest charges by suppliers, consultancy, legal and other professional fees, protocol allocations, travelling, repairs and maintenance and so-called temporary services all add up to the high cost of cement in the country.

In 2004 alone, ¢10.2bn was the charge for professional fees. Transport expenses totalled ¢29.3bn in 2003, with passages and travelling adding an extra ¢5.lbn to company expenditure. Also, in 2003, the company registered a charge of ¢16.2bn as going on 'technology transfer fees.' ¢13.3bn was charged under the same heading in 2004.

The Internal Revenue Service is also suspicious of certain charges on the company's financial statements. They suspect certain items to have been overcharged or should not be charged at all to the company's income before arriving at the taxable income.

SCANCEM International, which is now owned by a German firm, currently controls 94.5% of GHACEM.