Minority outlines ‘specific concerns’ about controversial Agyapa Royalties deal

Minority Leader, Haruna Iddrisu, on Tuesday, September 1, 2020, addressed a press conference to outline key concerns of Minority MPs to the Agyapa Royalties deal.

Among the concerns of the Minority is the issue of the incorporation of Agyapa as an offshore company in Jersey, UK, a tax haven.

“Tax havens are susceptible to money-laundering and thus elevate the risk of Ghana being listed as a money-laundering jurisdiction by international bodies such as the European Union and the United Nations,” Haruna Iddrisu said.

Despite strong calls by Civil Society Organisations (CSOs), the government insists on going ahead with the deal that is expected to leverage Ghana’s mineral royalties for primary capital on the international market.

Under the agreement, government intends to monetise parts of its annual gold royalties from some mining concessions to raise $500 million of equity upfront from private investors through the placement of shares in a newly created Special Purpose Vehicle (SPV) which the State will transfer its royalties into.

Critics of the deal, including at least 15 CSOs, have said the deal lacks transparency.

Below is a list of all the concerns raised by the Minority MPs about the deal.

- The incorporation of Agyapa as an offshore company in Jersey, in the Channel Islands, a known tax haven, is worrying. Tax havens are generally known for their lack of transparency in matters of corporate governance such as disclosure of the beneficial ownership of the shares of companies.

- Tax havens are susceptible to money-laundering and thus elevate the risk of Ghana being listed as a money-laundering jurisdiction by international bodies such as the European Union and the United Nations.

- Ghanaians will recall that in May 2020, the European Union placed Ghana on its Anti-Money Laundering List (AML) but deferred the implementation date to October 1, 2020 due to the Covid-19 pandemic. By setting up a sovereign wealth fund in a tax haven, the Government of the NPP significantly elevates the risk of Ghana being considered as a money-laundering jurisdiction. This is because individuals and businesses use tax havens such as Jersey to hide their income and wealth so as to avoid payment of taxes and general regulatory scrutiny of their business deals.

- The European Union, the OECD and the United Nations use evidence of these offshore deals to rate countries on the effectiveness of their anti-money laundering regimes, including laws, regulations, policies, and other governmental actions.

- Minority’s concerns on off-budget transaction. The deal is intended to monetize gold royalties to fund the Budget and ought to have been reflected in the Budget Statements tabled for approval and subsequently enacted in the various Appropriation Acts for the 2020 Fiscal Year. The deal did not reflect in the Budget Statement for the 2020 Fiscal Year.

- In reviewing the 2020 Substantive and Supplementary Budgets, the Government did not disclose any of the following fiscal measures to Parliament.

i. That the MIIF will substantively replace the Mineral Development Fund (MDF) from 2020, as the Government noted;

ii. There was no policy on how current MDF beneficiaries, including traditional authorities, will continue to get their share of mineral royalties; and

iii. There were no explicit provisions in Financing (or borrowing) and Public Debt in the Budgets from 2020 onwards, besides the International Monetary Fund (IMF) COVID Loan.

iv. The Government showed the mineral (gold) monetization “explicitly” in December 2019 as a potential source of financing the Budget in the IMF Article IV Report—but did not do so in the 2019 Budget approved by Parliament in the same December 2020.

v. In March 2020, in applying for the IMF COVID-19 Loan (approved in May 2020), GOG took the opposite step in excluding the minerals (gold) royalty monetization from the financing sources.

vi. The Government also excluded mineral royalty monetization from its COVID-19 Statements to Parliament in March and May as well as Supplementary Budget in July 2020.

- Minority’s Concerns on Family and Friends transaction. This transaction is yet another classical case of family and friends transaction. The good people of this country need to know the following. Ghanaians are demanding answers.

i. We need to know the procurement processes used in selecting Africa Legal Associates (ALA) as legal advisors. ALA is owned by Gabby Otchere Darko, the cousin of both President Akufo-Addo and Ken Ofori Atta, the Finance Minister.

ii. We also need to know the cost of the transaction and how much has been paid to the lawyers, and brokers including Gabby's company.

iii. We need to know whether the amount of money paid to Gabby's company was at arm’s length.

iv. Considering Gabby's relationship with the finance minister and the president we also need to satisfy ourselves that he did not use his influence with decision makers to secure this lucrative deal.

v. Why the choice of Kofi Osafo Marfo, son of Senior Minister, Yaw Osafo Marfo? Was he subjected to a credible international competitive selection process?

vi. What considerations went into determining the remuneration for Mr. Osafo Mafo's son? Did his father (the senior minister) influence the selection process? Ghanaians deserve to know.

vii. Why is he, together with other board members guaranteed employment for the foreseeable future irrespective of their output?

- Minority’s concerns on conflict of Interest.

Gabby Otchere-Darko's law firm advising on this shady Agyapa deal is similar to the objectionable practice of Databank serving as a book runner on government bonds or co-manager of Eurobonds. All these transactions are motivated by fees which are certain and paid upfront. These fees partly explain the rapid growth in public debt. A key driver of the ballooning public debt under the Akufo-Addo government is the fees earned by the Finance Minister’s company, Databank.

The selection of Databank Brokerage Limited as a book runner means that Databank profits every time the Government issues bonds on the domestic market. The actual commission is not based on the debt stock but on gross issuance (including refinancing) on the domestic market which in 2019 alone amounted to whopping GHc64.0 billion. Since 2017, Databank has also been a Co-Manager of Ghana’s Eurobond transactions. During this period, Ghana has issued $5 billion in Eurobonds, with commissions and fees paid to Lead Managers and Co-Managers.

It is difficult to see how the Minister can be restrained from borrowing for Ghana if his firm benefits on a commission each time the government issues domestic bonds or Eurobonds. Indeed in 2018 when CHRAJ investigated conflict of interest allegations against the Minister of Finance in the matter of the issuance of $2.25 billion of bonds, the Commission observed that the respondent is either a director, the former director, the shareholder, or beneficial owner, of several companies whose objects relate to the securities market sector. The companies were Databank and EGL. As such, Respondent’s interests in the growth and wellbeing of those companies, have the potential to conflict with the interests of the state in relation to the securities market such as the issuance of bonds.

- Minority’s concerns on the secrecy of information on the company (Agyapa).

i. The Government has failed to give us information on the value of the company.

ii. We were not given information on how they arrived at the value of the company.

iii. We were also not given cashflow forecast for the duration of the project and its assumptions.

iv. Neither do we have the prospectus for us to know the cost of the transaction. We are reliable informed that they have spent $5 million even though the minister of finance claimed to have spent about $2 million as fees.

i) Minority’s concerns on Fiscal issues. This current NPP administration has mortgaged all our major revenue streams, and this has serious fiscal implications.

i. They have mortgaged Getfund receivables.

ii. They have mortgaged Energy sector levies

iii. They have mortgaged Bauxite with synohydro.

iv. They have mortgaged the Road Fund, and as if this is not enough, they now want to mortgage mineral royalties.