The Government of Ghana has decided to terminate a contract worth US$13 million it entered into with Bullion Group Consortium over the sale of 70% shares in the Volta Star Textiles Limited (VSTL).

Minister for Trade and Industry, Alan Kwadwo Kyerematen who briefed Parliament over the issue on Wednesday, July 19, 2017, said the decision was arrived at after consultations with its Transaction Advisor, Price WaterhouseCoopers.

Re-opening the tender process to potential investors, according to the Trade and Industry Minister, is scheduled to commence at the beginning of August, 2017.

Bullion Investment Group, according to Mr. Kyerematen, won the bid out of the three companies that showed interest in acquiring the 70% stake in the VSTL.

The two other companies that also bid for the shares are China Yuemei Group and Kingdom Business Venture Capital Limited.

The US$13 million, he noted, was even revised downward to US$9.5million after an Escrow Agreement was executed with the Bullion Group Consortium led by ANFD International.

However, since 2016, Bullion Group Consortium has not been able to pay the money after numerous promises they made, hence, the abrogation of the contract to pave the way for new investors to bid for the shares.

The comments of Mr. Kyerematen follows a question that was posed to him by the MP for North Tongu on the progress of work on the private participation in the future of Volta Star Textiles Limited at Juapong in the Volta Region.

Background

VSTL is solely owned by the Government of Ghana. The Company produces world class yarn and grey baft as its products. Its main local customer is Tex Styles Ghana Limited (GTP) but has recently started exporting to Cameroon.

The company has the largest spinning and weaving capacity in Ghana with an estimated grey baft production capacity of 20 million yards per annum.

It is currently producing 6 million yards of grey baft per annum representing 30% capacity utilization.

VSTL runs two shifts currently employing 750 workers and has the capacity to employ 1,200 workers running three shifts at full plant capacity utilization.

Challenges

But the company, according to the Trade and Industry Minister, is heavily indebted to state agencies as government being the sole shareholder has not been able to adequately provide the company with the required working capital in order to make its operations viable.

The company, Mr. Kyerematen added, as at May 2017, owes the Electricity Company of Ghana GH?3.8million, Ghana Revenue Authority GH?1million, SSNIT GH?1million, and EDAIF (now Ghana Exim Bank) GH?6,144,771.

It also owes GH?1.47million to service providers and staff salary arrears.

“The total debt of the company is GH?13.4million,” noted the Trade and Industry Minister.

According to him, it was borne of this indebtedness that the Government of Ghana under the previous administration decided to offload some of its shares to a strategic investor with the requisite expertise and resources to restructure the company.

“VSTL was in dire straits and proceeding with the status quo would have been detrimental to the nation and in particular the Juapong community,” he stressed.