The Mysterious AAL Statutory Interest Rate

Sat, 28 Sep 2013 Source: Asare, Kwaku S.

S. Kwaku Asare

According to Mr. Awua-Peasah, a Director at the Ministry of Finance and Economic Planning (MoFEP), the Africa Automobile Limited (AAL) obtained a GH¢16 million judgment against the government n 2010. However, after three years of non-payment, the debt has now ballooned to GH¢618 million!

The legitimacy of the GH¢16 million debt is itself in question as the MoFEP has no records of the agreements between AAL and the ministries that benefitted from AAL’s services. But as reckless as that is, it pales in comparison to the Director’s admission that a GH¢16 million debt had ballooned to GH¢618 million in three years!

As a matter of arithmetic, this admission can be plausible under very extreme and absurd sets of assumptions. For instance, one must assume that the interest rate on the debt is compounded daily at 122% per annum (GH¢16000000.00 × (1+0.00334247)1095= GH¢617998222.12). Of course, the actual statutory interest rate is significantly less than 122% and interest does not compound daily on most debts, let alone government debts. Therefore, Awua-Peasah’s admission is plainly problematic and fraudulent.

It was only in late 2010 that the late President Mills revealed to a shocked nation that his government had paid over GH¢600 million as judgment debts to various shady creditors since his administration (Mills/Mahama) was elected in 2008.

Notwithstanding public outcry, EOCO investigations, Amidu’s writ, and the Supreme Court reversal of some of the fraudulent payments, the Mahama/Arthur administration has woefully failed to prosecute the fraudsters or shown any serious interest in retrieving the loot. Why? From my perspective, the only reason this can be happening is that the administration does not care, is inept or is itself complicit in these fraudulent activities.

And if the nation was shocked by the payment of over GH¢600 million to various sham beneficiaries, we are now being told that the 3-year interest on a shaky GH¢16 million debt is GH¢602 million!

Unfortunately, the incidence and frequency of such fraudulent raid of the treasury, disguised as judgment debt payments or interest, have become so commonplace that their revelations no longer seem to surprise or anger the general public. It was not to long ago that it was revealed that in the 4-year period, spanning 2009 to 2012, GYEEDA received GH¢949,661,017 from five unauthorized sources to fund several unspecified and ill-defined projects/activities. GYEEDA also owed an additional GH¢259,000,000 by June 2013, bringing its total spending in this 4-year period to approximately GH¢1,000,000,000. Notwithstanding this massive financial allocation, GYEEDA never produced financial statements (audited or unaudited).

While all these fraudulent transfers persist and get worst over time, the nation expectedly suffers on her unstoppable march to JPHIPC (Judgment-debt Paying Heavily Indebted Poor Country). Just last week, we learnt that Kamel Bashiru, an 8-year old class three pupil, fell into his school’s pit latrine and died. How can we be paying over GH¢600 million interest on a shaky GH¢16 million debt when our students are using pit latrines in 2013?

It is time to get serious about our finances.

1. Since the President and the executive arm have shown no interest in prudent financial management and are often conspirators in the raid of the treasury, it is time for parliament to step in and pass “qui tam” legislation. The essence of such legislation will be to empower private citizens to prosecute suspected fraudsters for a reward. For instance, the existence of such legislation would not only have covered Martin Amidu’s court costs but also given him a percentage (e.g., 10%) of the savings from the Woyome fraudulent transfer. The advantage of a qui tam regime is to encourage whistle blowing and incentivize all citizens to play the role of Auditor General of the national purse. Qui tam was a common law device employed by the King to protect his assets and is in use in USA (also known as the Lincoln Law).

2. Parliament must pass a Special Prosecutor ACT. Judge Apau’s report must be submitted to the special prosecutor’s office for prosecution. Like the GYEEDA report, nothing good will come out of the Apau report if it is handed to the Flagstaff house for laundering.

3. Parliament must pass a law fixing the interest rate on judgment debt at no more than 2% simple interest. And our MPs need not wait for the executive to act. A Private Member Bill can be introduced for this purpose. There is nothing in the Constitution that bars a Private Member Bill, contrary to the widespread myth that there is such a ban.

4. All government officials involved in the AAL judgment debt and interest computation must be immediately interdicted. They must be permanently barred from holding any public office because of their gross misunderstanding of financial arithmetic. Further, they must be prosecuted for a conspiracy to willfully cause financial loss of GH¢600 million to the State.

Columnist: Asare, Kwaku S.