Who is Ken Ofori-Atta Deceiving?
By Kofi Ata, Cambridge, UK
It was disappointing to read the statement issued by Ken Ofori-Atta to clarify and refute allegation that the Obotan Project was not a credible venture (see, “Ken Ofori-Atta Clarifies Obotan Sale”, Graphic/Ghanaweb November 26, 2014). Disappointing for me because the statement raised more questions than it answered. Moreover, considering his background and experience he could have done better and finally, he came across to me as very well versed in banking and finance in a documentary on opportunities in Ghana that I watched on one of the African Channels on Sky Television. The purpose of this article is to analyse the statement in particular and the subject of using or misusing state funds and resources for private gain in Ghana in general.
According to the statement, “a group of investors and promoters, including himself, initiated and designed the concept, which it packaged in search of financial backing from other investors, including Social Security and National Insurance Trust (SSNIT). The project was in the planning and development stage between 1998 and 2000.” It states further that SSNIT acquired 55% shares in 1999 despite being offered 44%.
The above facts mean that Obotan Project became state or quasi state owned since SSNIT is a public institution. As the majority share holder, did SSNIT control Obotan Project from 1999 till when its shares were acquired by Databank Financial Services in 2005 or 2007? Since the project was in the planning and development stage between 1998 and 2000, what happened between 2001 and 2005 or as at today? For example, were foundations for the community complex laid, architectural plans ready, construction engineers appointed, community ready for occupation, etc?
“It is a matter of fact that SSNIT’s investment was purchased by Databank through a negotiated purchase of their equity interest evidenced by an agreement dated 31st August 2005. Payment under the agreement was made between June 2004 and February 2007, stating the precise amount paid to SSNIT as $2.22 million, which was the dollar equivalent of the Cedi value paid by SSNIT in 1999 for its shares. Databank paid an additional $78,680 as interest, thus SSNIT got back every pesewa it invested in the Obotan Project with the equivalent interest. In return, the national pension fund manager transferred all its shares in Obotan to Databank Financial Services by a Deed of Transfer in 2007”
Does Ken Ofori-Atta see a number of financial anomalies in the above quote? First, the agreement was reached on August 31, 2005 but payments began from June 2004, over one year earlier than the purchase or sale agreement. The $2.22 million that Databank paid for SNNIT’s shares between June 2004 and February 2007 is mentioned but why did he fail to state how much SSNIT originally paid for its 55% shares in 1999? Does that also mean no dividend was declared and paid between 1999 and 2005 when SSNIT sold its shares? Why were the SSNIT shares bought for at their 1999 value and not at the time of sale in 2005? Was it because SSNIT was in a hurry to offload its shares or the result of the excellent negotiation skills of Databank and the incompetence of SSNIT Fund Managers?
The $78,680 interest paid to SSNIT represented a 3.54% (about 0.6% per annum) of the $2.22 million equity shares over the six years period. Was that a fair return on the major shareholder’s investment? What were the interest rates on the Ghanaian financial market between 1999 and 2005? I appreciate that shares are not similar to direct savings or a loan so interests are normally not paid but rather dividend. However, a critical analysis of this financial arrangement smacks of a financial re-engineering purposely for using public funds to raise cheap capital for a bank in dire need of funds. In other words, it was a scam that the Board and Management of SSNIT at the time either willingly or innocently participated.
Perhaps, I was wrong in saying that I was disappointed in Ken Ofori-Atta’s statement. In fact, I was right that he could have done better and indeed, he is a shrewd financial operator. He saw an incompetent SSNIT with lots of money to invest, took advantage to try his luck and succeeded. We cannot blame him for being clever and outwitting the state. The SSNIT Board and Management who were either accomplices or incompetent in investing tax payers’ money should be the ones to be held accountable first and foremost before Ken Ofori-Atta and Databank.
Why do I say the scheme was a scam? The proper question to ask Ken Ofori-Atta and Databank is, after acquiring the SSNIT shares and Databank becoming the sole or major shareholder, what happened to the Obotan Project that in Ken Ofori-Atta’s own words, “was considered attractive, primarily due to the location of the land to be used for the development, which the promoters had already purchased”, to the extent that SSNIT immediately bought 55% when the promoters offered 44%? Is the project under construction or completed in 2014 (16 years after its conception)? No, because the main objective was not to build any community but solely to raise funds for Databank.
Ken Ofori-Atta is not alone when it comes to financial scams, especially using the public resources or tax payers’ money to raise funds for private gain. There are a number of them in Ghana. The STX Housing Project which resulted in a sovereign guarantee by the state for a foreign or joint private company was a typical example. Another good example was the failed Rice Project that Tsatsu Tsikata went to jail for causing financial loss to the state. I believe Dan Agbodakpi’s incarceration was also due to similar misuse of public funds for private gain. There were rumours that the recent sale of Merchant Bank was also done through the use of public funds by a private equity firm in a creative accounting methodology.
There is another type of investment scam commonly known in Ghana as “single purpose vehicle”, when senior politicians and civil servants tip off their cronies about upcoming government contracts for them to form companies just to bid for such public contracts. Often, sections of the governing documents of such single purpose vehicle companies are copied (verbatim) from the contract specifications being put out for tender by the government. The developing oil and gas sector is full of such arrangements. For example, the brother of the Energy Minister bought the land for part of the gas project from its original owners just before the project began and sold it to the state at a very good profit.
In the private sector, similar financial and investment scams are also common in Ghana and globally. For example, the recent arrest of a man in a tilapia investment scheme or scam with hundreds if not thousands Ghanaians duped into investing their life savings in a non-existing fishing project. In other words, this is not new in Ghana or anywhere. However, what is wrong is that in Ghana no one is held accountable for the daylight robbery and plunder of public resources and individuals. Regulatory institutions are weak and under the control of politicians and public servants who often facilitate and encourage such scams. Even, media houses are also guilty of openly advertising and promoting such schemes without questioning them.
I accept that such schemes or scams may not be illegal and therefore Ken Ofori-Atta and his cohorts who use or misuse tax payers’ money for private gain may not be held liable for any offence. However, it is annoying for them to insult the intelligence of the public by issuing such deceptive statement and threatening those who ask legitimate questions with court action. The public has the right to know, especially if you use or misuse tax payers’ money for private gain.
Mr Ken Ofori-Atta’s statement was far from the truth on its face value. You may be able to deceive some of the people but not all the people. The threat to sue is hollow and scaremongering. I am convinced that the Obotan Project was conceived as a vehicle to raise funds for Databank at very cheap cost using SSNIT funds and was a scam. I do not dispute that Ken Ofori-Atta and Databank have made meaningful contributions to the economy but we must call a spade a spade. I also believe that it’s time that those in positions of trust in Ghana put the national interest above personal interest.
Kofi Ata, Cambridge, UK