$3 Billion Loan: Is China defrauding Ghana?

In 2011, the Attah Mills/Mahama government secured a $3 billion loan from the China Development Bank (CDB) which is state owned, for major infrastructure development projects in Ghana. The loan agreement was approved by Parliament in August 2011 amid controversy over the terms and conditions of the loan agreement, particularly, the collateralization of oil against the loan. As a result, the minority in parliament (NPP) abstained from the vote but the majority had their way.

I subsequently posted an article on Ghanaweb regarding the subject (see NPP Abstention on $3 Billion, A Political Opportunism or a Miscalculation ). President Mahama, who was the then Vice-President is reported to have made a direct appeal to CDB through the Chinese Foreign Minister to expedite the release of the loan to Ghana (see, Expedite action on release of Chinese loan – Prez).

According to the President, “although Ghana received only about $600 million from the $3 billion loan, the country continued to pay commitment fees on the whole loan. The President further said, “the fact that Ghana continued to pay commitment fees on the whole CDB $3 billion was a disincentive to it”.

It’s sad, isn’t it? The question is, “na who cause am?” Is it not the same government that President Mahama was the then Vice-President? Did they carry out the due diligence when the agreement was signed? The answer is, no, and it was government incompetence in the negotiations that has resulted in Ghana paying more money in the form of commitment fees to China only for the Chinese to give some back to Ghana as a loan. This is madness and wanton dissipation of scarce state resources. It’s criminal and those who negotiated the loan agreement must be charged and prosecuted for causing financial loss to the state.

I quote from my aforementioned article of August 29, 2011 on what I said about the terms and conditions of the loan agreement and the negotiation skills of the Ghanaian government officials.

“From some of the terms and conditions of the loan, it appears to me as if China wrote the whole agreement and presented it to Ghana for approval. If they were drawn up and negotiated by parties from both sides, then, the Ghanaian representatives either fell asleep, have had too much to drink during the negotiations or the language of negotiations was Chinese, so the Ghanaians did not understand what was at stake.

If they had translators and interpreters, they did not have a good grasp of both languages (Chinese and English). I say so because most of the details of the clauses were so one-sided in favour of China to the detriment of Ghana that one begins to wonder if the Ghanaian side had the skills to conduct robust negotiations to reach an agreement that is fair to both parties”.

According President Mahama, so far, Ghana has received only $600 million of the $3 billion. Assuming the annual commitment fees is 1% of the $1 billion, Ghana could be paying $30,000 million a year to CDB depending on the repayment period. How can Ghana pay $30,000 million annually and receive mere $600 million in two years? In other words, Ghana may be paying 50 times what she is receiving in fees alone. If this is not fraud, what is it?

This has happened because the Ghanaian ministers and civil servants who negotiated the loan agreement failed to ensure that the payment schedule was watertight and it contained a clause that sanctioned each party for not fulfilling their part of the agreement terms and conditions to the letter.

For example, they should have ensured that there was a clause stating that, “if CDB failed to release the loan to Ghana as per the payment schedule, Ghana shall not pay the commitment fees and CDB shall compensate to Ghana for any delays caused to infrastructure development projects in Ghana and any cost appreciation due to the delay”. If this was secured in the terms and conditions of the loan agreement, CDB would have not delayed in releasing the loan to Ghana. If it did as is happening, Ghana could have stopped paying the commitment fees and also sued for compensation and probably benefit from judgement debt.

Unfortunately, the Ghanaian negotiating team probably received mobile phones as presents from their Chinese counterpart and did not care to secure Ghana’s national interest. The Chinese bank realised that their Ghanaian counterparts could be easily bought so they took advantage to get whatever they could from the agreement. They have taken Ghana for fools because Ghana is giving away huge sums of her hard earned dollars to China and the Chinese bank is kind enough to return part of the giveaway as loan to Ghana. This is more than robbing Peter to pay Paul. It’s daylight armed robbery. This is the typical plunder of Africa by China.

Ghana must be careful with doing business with China because China is only after one thing (huge profits and free resources at the expense of Ghana). The terms and conditions of this loan agreement has clearly demonstrated that Ghana did not require the loan because Ghana is paying more in terms of commitment fees to China than she is receiving from China in loans.

It also means Ghana could have relied on internally generated revenue to prosecute the infrastructure development projects as I have said in earlier articles. That is, with prudent management of the economy, coupled with efficient and timely collection of all taxes, Ghana could easily be self sufficient and not require a big loan with such detrimental terms and conditions.

Perhaps, the minority NPP will be laughing and saying, we told you so. I hope President Mahama and his ministers have learnt a big but painful lesson from this fraud, and to improve their negotiating skills. This stinks and it’s theft by the Chinese bank. A Kwaku Ananse folklore that can happen only in Ghana.

Happy New Year.