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Opinions Tue, 29 Jan 2002

In The matter of the Golden Share

The ongoing media blitz by the Ashanti Goldfields Corporation (AGC) aimed at convincing the government and people of Ghana to part with the government's ‘golden share' in the AGC, lacks integrity.
The AGC argument is that the golden share is now the cause of all its travails, not AGC's own internal ‘reckless' management. Remove the golden share, and the share value of AGC stock will skyrocket! Remove the golden share, and AGC will be better able to compete in the ‘cut-throat' world of the gold business. The arguments that have been assembled by AGC so far, are arrogantly self-serving and rather spurious. That has not stopped AGC and its surrogates from continuing the media campaign in Ghana and abroad.
The campaign was launched last December (2001), when Mr. Sam Jonah, the head of AGC assembled ‘senior journalists' in Ghana to address them on "The State of The Mining Industry". It included a reported 29-page slide show to afford the ‘senior journalists' a pictorial image of the mining industry. The question that begs for answer is this: Would the ‘senior journalists' be required to sell this idea to ‘junior journalists', who would then mount a frontal propaganda favourable to AGC? That seems to have been Mr. Jonah's aim. From the write-ups that the subject received in the Ghana media, there is no question that the session with the ‘senior journalists' proved rather profitable to Mr. Sam Jonah and AGC. What we read in the Ghanaian papers by our journalists, were mere parroting of what Mr. Jonah said, without any analysis.
In the current discourse, the term ‘golden share' has taken on a most unpleasant nomenclature orchestrated by AGC. Contrary to AGC claims, Ghana is not the only country that has decided to hold on to a golden share in a company that a government had privatized. Indeed, the term came to common usage in the 1980's; it refers to a government's continuing interest in companies that have been privatized and, allows a government a veto power to override decisions of a company's board of directors that are deemed inimical to national interest.
From its inception, golden share was taken by governments to assuage public concerns over the privatization of businesses that were considered to be of critical interest to the state. In 1994, the government of Ghana privatized the Ashanti Goldfields, but held on to a ‘golden share'. For a country like Ghana that has a rather weaker regulatory regime, the golden share provides a tough oversight on the predatory behaviour of international business.
Margaret Thatcher's Tory government in Britain, did take a golden share when companies such as British Petroleum (BP) were privatized. Italy, Malaysia, China, Singapore, and nearly every nation that divested hitherto government-owned companies take golden share. They all do so, for the same reasons that Ghana decided to take a golden share in AGC: To act as a check on the unruly practices of management.
The real beauty of the golden share idea, as one writer has put it, is that while it affords special rights, the government can choose not to exercise them. In Britain for example, the government did not use its golden share when Ford Motors of USA acquired Jaguar. Neither did the government oppose the BP takeover of Britoil. Other countries have acted in similar fashion by not using the golden share. When a company acts in the best interest of the state, the idea of a golden share becomes moot. That is not the case with regards to a huge natural resource of sentimental and huge dollar value as the gold mine at Obuasi
Mr. Sam Jonah would counter this type of argument (that governments hardly use the golden share), by saying that Ghana's position is unique because Ghana is located in Africa, an area that receives the most negative press. Indeed, in his address to the members of the Ghana Institute of Public Relations, late last year, Mr. Jonah addressed themes relating to why Africa's dire circumstances make it an unattractive address to investors.
That argument, may be true. But when a government such as the one we have in place in Ghana, whose commitment to supporting the private sector cannot be doubted; then all Ghanaians must promote this government's unquestionable commitment to private sector investment. If the AGC were acting in the government's interest, the golden share would be given up. The arguments being presented by Mr. Sam Jonah reflects nothing in the interest of Ghana; except those of his company and employer Lonmin of London.
The government recently signaled its intention to hold on to the golden share, through an announcement by the Minister of Presidential Affairs, Jake Obtsebi Lamptey. In spite of the government's decision to hold on to (or perhaps because it was not made forthrightly), the propaganda machine of the AGC and its surrogates continue to trumpet the rather bizarre notion that the government's decision constitutes an anti-investment stance. In other words, AGC thinks that potential investors to Ghana as well as AGC, will be put off because of the golden share. AGC is marketing the golden share as being a "depressant" to its growth; and a potential hindrance to investment in Ghana.
All this propaganda is, sadly, being led and orchestrated by the head of AGC, Mr. Sam Jonah. Perhaps, buoyed by the government's pro-business stance, and a reported tight connections between the AGC boss and people in the very top echelons of the government and Ghanaian society, Mr. Jonah sees a golden opportunity to undo the golden share. Internet Web sites that deal with mining news are filled with reports of interviews that Mr. Jonah has given to international media outlets such as CNN; Catos; CNBC, Financial Times; and Minesite.com; and he continually links the government's holding a golden share to a crippling of AGC! There are ‘analysts' who testify to the crippling effect of the golden share. It is all scripted. And rather dangerous, to the investment climate in Ghana. One would think AGC realizes the negative impact of its one-hand-clapping on the golden share propaganda on Ghana.
It would seem that when Mr. Sam Jonah talks, the international gold business community listens. These are the very same people with links to other international businesses. If Mr. Sam Jonah's business feels crippled by government policy, why would another foreign investor be interested in that same Ghana? Already, Mr. Jonah serves on at least two high-powered economic teams; one set up by the president of South Africa, and another by the Secretary-General of the United Nations. If he does not de-link the golden share from AGC troubles, he risks doing Ghana a great harm.
In the AGC campaign to undo the golden share, the truth is the victim. The fact of the matter is that Mr. Sam Jonah and Lonmin (his London employer that owns the majority share - 32% of AGC) wants the government out of the AGC so that the Lonmin will have a free hand in taking whatever decisions it deems necessary for their profits. It must be pointed out that Mr. Sam Jonah is on record as saying that he favours Ghana selling her stock shares in AGC. Why would Mr. Jonah be so interested in Ghana divesting itself completely of AGC interests?
The truth is, AGC is a company that is broke, in spite of recent quarterly profits. The long-term profitability of the company is not in question because of huge gold deposits at Obuasi. The pressing problem is that AGC has short term liquidity crisis that makes it vulnerable to a takeover. The problems of AGC started when Mr. Sam Jonah decided to play God, by dealing in hedge funds. When the price of gold was in continual decline in the early 1990's, Mr. Sam Jonah made a bet that the prices would continue in that fashion. That proved not the case. When gold prices rose, the AGC hedge fund turned into a liability of more than half-a- billion-dollars, $570 million to be precise. Ghana's 20% share, shrank to 17% representing a loss of millions of dollars!
As a result of this ‘reckless' management as Mr. Jonah sought to explain the huge loss away; investors ran away from buying AGC shares. Hence, the share price plummeted from a high of about $25 to about $3 dollars. Note that the government held the golden share when the price went to as high as $27 dollars. Further, this surge in value occurred under the NDC administration that was quite schizophrenic to private business. So where does Mr. Sam Jonah get this notion that the golden share inhibits AGC growth?
In his address to the members of the Institute of Public Relations, Mr. Jonah advised that "capital is nomadic", and would seek to invest in peaceful lands. Well, it turns out that ‘investors are nomadic' too! The drop in gold prices, coupled with the ‘reckless' management of the AGC head, has sent investors packing. The truth, therefore is that, the golden share has nothing to do with the circumstances of the AGC. AGC is telling a convenient ‘white lie', which the government must dismiss with contempt.
If Mr. Jonah and his employer Lonmin believe that they seek the best interest of Ghana, why should they be concerned about government role, when in fact the government is the second largest share holder. Why would the government want to bite the hand that feeds it! The truth is that Lonmin has rather sinister motives: Lonmin wants to sell AGC, and sees the Ghana government as potentially opposed to such zany idea. If the golden share is removed, it removes the only barrier that stands in Lonmin's way. Lonmin has sent Mr. Sam Jonah to do its bidding by trying to force the NPP government to acquiesce to a policy that Ghana will surely live to regret.
The Obuasi mines will always remain attractive business investment venture no matter what investment regime obtains in Ghana. According to written estimates, there is more gold underground than has been excavated. The fall of Enron, the giant energy firm in the USA has taught us to be wary of company heads. This is not to impugn the motives of AGC executives; but we must seek to bring integrity into this debate for the sake of Ghana. We know enough, to understand that Mr. Sam Jonah is an honest man doing his best for his employer, with eyes on a tidy profit if the company is sold. That is a fact. And there are suitors like Gold Fields (according to London's Africa Confidential newsletter) waiting in the ante-room!
Protecting national treasures like Ashanti Goldfields must be a priority of the government. Such a policy does not, and should not, contradict the government's pro-business policy. It will rather confirm an astute policy of not allowing greed to run roughshod over national interest. In fact, during the 1980's we witnessed United States Senators and Congressmen smashing Japanese manufactured products on Capitol Hill with sledge hammers. The American lawmakers were sending a clear message that they were more than willing to protect American manufactured products in the ‘trade wars' between US and Japan! A country can be protective of its natural assets; and yet remain supportive of free private enterprise.
If the government gives up the golden share today, it will not increase the share value of AGC. It will however, free Mr. Sam Jonah and Lonmin to sell Ashanti Goldfields Corporation quicker than one can spell OBUASI!!

Columnist: Ellison, Kofi