In the last two weeks, the amendment of the Mineral Income Invest Fund (MIIF) Act 2018 (Act 978) by parliament and the creation of a Special Purpose Vehicle (SPV) leading to the approval of the Agyapa Royalties Limited (ARL) have generated several concerns, discussions and rumours in Ghana because, in the view of many, the approval processes appear to have been shrouded in secrecy. This article is a contribution to the ongoing debate on some of the concerns.
The Mineral Income Investment Fund Act, 2018 (Act 978) was passed by parliament in 2018 with three key objectives as follows:
· to establish a fund that will manage the equity interests of Ghana in mining companies;
· to receive mineral royalties and other related income due to Ghana from mining operations; and
· to provide for the management and investment of the assets of the fund and related matters.
Following the passage of Act 978, the president inaugurated a nine-member Minerals Income Investment Fund Board in October 2019. Parliament amended and approved five agreements on August 14, 2020, to allow the country to derive maximum value from its mineral resources and monetise its mineral income accruing to the country.
The purpose of the agreement is to enable Ghana to use a special purpose vehicle, the Agyapa Royalties Limited (ARL) to secure about $1 billion to finance large infrastructural projects. ARL, operating as an independent private sector entity, will raise funds from the capital markets, both locally and internationally, as an alternative to the conventional debt capital market transactions.
Among the agreements is one between MIIF and ARL, which states that MIIF will fund ARL in shares to be issued by ARL on behalf of MIIF to the tune of an agreed price of $1 billion. There was also approval for indemnity agreement between the government of Ghana on one side and the foreign partner investors (Merrill Lynch International, JP Morgan Securities plc., BMO Capital Markets Limited, Peel Hunt LLP and Tamesis Partners LLP), on the other. This is to enable the admission of the shares to the standard listing segment of the Official List of the Financial Conduct Authority in the UK and to trade on the London Stock Exchange. The shares will also be traded on the Ghana Stock Exchange. Finally, Ghana will own 51% in ARL and 49% to a group not yet clear, (see, “Parliament approves five minerals royalty agreements” Graphic Online, August 17, 2020).
The brouhaha has arisen because according to the minority, who walked out of parliament during the approval in parliament, at the committee level the agreements’ transaction documents or the prospectus that spelt out the terms and conditions of the shares subscription were never made available to members of the committee because the Executive or the majority in parliament claimed the prospectus was confidential.
How could parliament approve such an important and critical agreement without seeing the contents of the prospectus, when the agreement is between the government of Ghana through MIIF and ARL on one hand and the foreign investors on the other? If so, on what basis did the majority approve the agreement?
The question is, who and who have seen the contents of the prospectus and are they members of parliament or only the Executive? Did the MIIF Board see and approve the prospectus and what about those representing ARL? Who represents ARL? No one knows.
I do not understand why a prospectus is confidential to the extent that even the parliamentary committee could not see it because a prospectus contains information about investment offering, the company’s management team, financial performance and other related matters that are of interest to potential investors. It is also registered with appropriate regulators in countries that the company raises shares through the stock exchange. Company prospectus is not a trade secret so I cannot understand why it is confidential.
Another interesting question is if the shares are 51% to Ghana, who owes the 41% since the prospectus is still confidential? There is a mystery because the prospectus, which contains the shareowners said to be confidential. Is the prospectus also confidential to the foreign investor partners in the deal (mentioned above)? If not, then why can’t Ghana’s parliament who are the elected representatives of the people be given copies? What will the 41% shareholders bring to the table for their 41% shares (money, management skills, investment experience or intellectual property?) These are not clear.
It is also interesting to note that ARG will be registered in Jersey, a tax haven. This is to avoid paying taxes on investment returns. Though there is nothing wrong with a company registering in a tax haven as it is common for private companies to do so, ARL is not private but state majority-owned. Again, on moral grounds, is it right for a government seeking to broaden its domestic tax collection attempt to evade tax in Ghana and the UK, where shares will be floated? It must be remembered that the EU has already listed Ghana as a money-laundering country and therefore registering a state majority owned company in a tax haven is not a good idea.
It has been reported that the purpose of using ARL to raise funds for infrastructure development projects at a cheaper cost without increasing the national debt. Is this creative accounting because ARL is state majority owned so its debts will still be state debt? Therefore, it does not matter whether it’s added to the national debt or not, though not adding directly to the national debt could mean that Ghana could borrow from other financial markets at cheaper rates since GDP to debt ratio could be smaller. Moreover, it is also possible that the objective of raising cheaper funds may not materialise if Ghana holds 59% shares and as much as 41% go to others.
There is also the problem of giving ARL management a licence to do whatever they want by the government not being able to dismiss or change them for 15 years irrespective of how ARL performs. Equity investment is a tricky business, though if prudently managed, return on investment could be rewarding. On the other hand, the investment could also disappear into thin air within a short time from poor management and bad investment decisions. So, giving the fund managers such a long term of office does not make business or investment sense.
Those who have raised concerns about the lack of transparency have been accused of intellectual dishonesty. It was reported on Ghanaweb that the Information Minister claimed the full details of the agreement were made available to parliament (see, “Agyapa deal: Osafo-Maafo’s son not appointed transaction advisor – Oppong Nkrumah”, Ghanaweb, August 26, 2020). Is the minority not telling the truth or is the minister being economical with the truth? He also suggested that those who want details of the agreement should request for it. Really, why can’t the government in the spirit of accountability and good governance publish it on its website?
The intentions of both the MIIF and ARL are good but the secrecy surrounding the approval of ARL agreement and others as well as who exactly are the owners of the 41% shares and the failure to provide details of the prospectus to parliament are legitimate questions that citizens must be interested in asking and demanding answers to them. After all, were we not asked to be citizens?