…Was Nsawam Cannery Really “Rotten” & “A Place Nobody Wanted” Prior To Its Divestiture As Claimed By Rawlings? – Here Is The Answer As Given By The March 31, 2004 Report Of The Auditor-General On Investigation Into Financial And Procedural Improprieties In The Divestiture Of Nsawam Cannery Limited To Caridem Development Company Limited.

SOURCE: NEW CRUSADING GUIDE

*VALIDATION OF THE ASSETS OF NSAWAM CANNERY:

The assets of Nsawam Cannery were valued by a team of consultants.
*SUMMARY OF VALUES USED IN THE VALUATION OF THE PROPERTIES IN 1991.
¢
* Industrial Estates – Buildings 306,032,600
* Residential Estates – Buildings 76,600,000
* Agricultural Land 416,870,000
* Factory Site/Residential Site 3,570,200
Total (1991 valuation) 803,072,800

The exchange rate of the cedi to US dollar in 1991 was US$1 to ¢390. It was therefore decided to update the values of the properties by using the dollar rates in 1995 when the assets were acquired by Caridem. The 1995 total value of the properties was updated to ¢2,470,003,200 instead of the valuation figure of ¢803,072,800 in 1991. The management of Caridem objected to the use of the value of the dollar in updating the value of the properties. I conceded to their objection and accepted the original value of the properties as contained in the Asset Sale and Purchase Agreement, since any shortfall in the value through the passage of time will be compensated for in the interest charged on the cost of the company.

*VALUATION OF PLANT AND MACHINERY:
Valuation of the Plant and Machinery of Nsawam Cannery which was used in the Sale Agreement was prepared by Messrs Mecon Consulting Engineers in December 1990 and certified by the Land Valuation Board in 1991.
The report observed that ALTHOUGH MOST OF THE MACHINES AVERAGED 18 YEARS IN AGE, THEY HAD BEEN KEPT CLEAN AND WELL MAINTAINED. A COMPLETE TOMATO/JUICE PROCESSING LINE IMPORTED IN 1987 REMAINED PACKED IN CONTAINERS NOT YET ASSEMBLED. THE REPORT SEEMED TO BE SATISFACTORY.

*THE FOLLOWING IS THE SUMMARY OF THE VALUES USED IN THE VALUATION OF THE PLANT AND MACHINERY:
¢
* Drink Production Line 1,260,250
* Can Production Line 2,102,752
* Food Processing Line 9,929,695
* Services And Utility Equipment 35,865,650
* Quality Control Equipment 4,749,656
* Farm Equipment 1,430,250
* Technical Shop 499,780
* Machine Shop 1,608,700
* Motor Vehicles 8,950,000
* New (Unpacked) Machine 317,826,302
* Total Value of Plant and Machinery: 384,223,035

*VALUATION AS CALCULATED FROM THE TAKEOVER REPORT FOR THE SAME PLANT AND MACHINERY:
¢
* Drink Line 4,166,500
* Can Production Line 5,167,000
* Food Processing Line 38,485,500
* Service and Utility Equipment
? Boiler House 53,040,000
? Generator House 701,000
? Laundry 297,000
? Miscellaneous 1,200,000

55,238,000
* Quality Control Equipment 4,433,325
* Farm Equipment -
* Technical Shop -
* Machine Shop 5,723,000
* Motor Vehicles -
* New (Unpacked Machinery) 950,884,000
* Total Takeover Value of Plant and Machinery: 1,064,097,325

For the same reasoning I could not use the dollarised value which exceeded the takeover value by ¢280,123,205, I therefore, included in our computations the takeover values.

*STOCK VALUATION REPORT:
DIC contracted Messrs. L.K. Blay & Co., Management and Accounting Consultants, to inspect and value the stocks. Inspection of the stocks took place from 15 May to 30 May 1995, and a Stock Valuation Report issued on 5 September 1995.

A combined team made up of representatives of DIC, Caridem and Nsawam Cannery was commissioned by DIC to do another stock valuation. It is interesting to note that the inspection was stated to have taken place from 15 May 1995, about the same period that Messrs L.K. Blay & Co. prepared the Stock Valuation Report. Although physical count of stock items were identical in the two reports, unit prices in the Takeover Report were generally much lower than the Stock Valuation Report. On the average the takeover values were about 10% of the stock valuation values. There was no clear explanation of the discrepancies in the unit prices.

*BELOW IS A COMPARISON OF THE TWO VALUATIONS:
Valuation Report Takeover Report
? Technical Stocks
¢ ¢
* Electricals 947,100 520,899
* Building Materials 456,800 not listed
* Machine Parts 7,474,060 901,676
* Vehicle Parts 1,614,810 184,135
* General Goods 1,229,100 344,406
* Consumables 2,705,250 160,304
* Sub-total 14,427,120 2,111,420

? Laboratory Stocks
Chemicals and Glassware 8,797,610 Values were ignored

? Trading Stocks
* Packaging Materials 39,809 Not listed
* Raw Materials 922,218 Not listed
* Labels 3,024,282,416 Not listed
Sub-total 3,025,244,443

? Stationery Stocks
Sundry Stationery 2,788,743 1,878,180
Total value of stocks 3,051,257,916 3,989,600

COMMENTS:
In addition to the discrepancies found in the unit prices, building materials and packaging materials worth a total of ¢3,026,158,043 were not listed. Significant is the value of the labels for the products amounting to over ¢3 billion which was completely ignored. The unit prices of some machine parts were not extended to the total column to be included in the totals. Also no values were placed on the chemicals and glassware valued at ¢8,797,610.

Assuming that the labels were found to be obsolete and of no value, still the total value of stocks would be ¢26,975,500. Therefore the value of stocks for the takeover purposes was understated by ¢22,985,900. This amount has now been considered in the takeover valuation to arrive at the new valuation placed on the Cannery.

*SUMMARY OF RECOMPUTED VALUATION OF NSAWAM CANNERY LIMITED:
¢
* Value of Properties 803,072,800
* Value of Plant and Machinery 1,064,097,325
* Value of Stocks 3,051,257,916
Total Value 4,918,428,041

The purchase price indicated in the Asset Sale and Purchase Agreement is ¢2,789,846,000. This value compared with the recomputed value of ¢4,918,428,041 shows an understatement of ¢2,128,528,041. However, in view of the doubtful condition of the labels I have allowed the original Asset Sale and Purchase Agreement value of ¢2,789,846,000 to stand.

*PAYMENT OF THE PURCHASE PRICE WITHOUT OUTSTANDING INTEREST ACCRUED:
Caridem could not keep to the terms stated in the contract. As at 30 November 1999, the principal and interest had accumulated to ¢7,455,345,536.11. Since then only ¢559,085,000 had been paid as at 31 December 2000. Caridem Development Company Limited was therefore indebted to DIC in the sum of ¢8,378,558,797, being principal and interest accrued as at 31 December 2000.
On 12 February 2001, however, the management of Caridem paid off the outstanding principal in the amount of ¢1,319,930,400 without any mention of or reference to the interest of ¢7,058,628,397 accrued on the principal as at 31 December 2000.