Osafo-Maafo Calls For Debate On GCB Divestiture

The government has appointed a transactions advisor to value the assets of the Ghana Commercial Bank (GCB) to determine the proportion of its interest in the bank to divest.

The valuation report is expected to be ready by October this year to enable the government to go ahead divest either part or all of its interest.

The Minister of Finance and Economic Planning, Mr Yaw Osafo-Maafo, disclosed this in an interview in Agona Swedru in the Central Region at the weekend, shortly after opening a three-day seminar on the draft Banking and Payment Systems Bills.

The bills, which have been put together by the Bank of Ghana, will strengthen the legal and regulatory framework of the financial sector to make it consistent with international best practices and enhance the supervisory capacity of the BoG.

The Minister said although the government is determined to divest its interest in the bank it is not in a position to rightly decide on the exact quantum of the intended divestiture until the report is ready.

He, however, reiterated that in view of the importance the government attaches to micro-financing, it stands by the condition that no prospective buyer of government interest in the bank will be allowed to close down any of the bank’s branches.

Mr Osafo-Maafo pointed out that it is likely the bank will operate two separate systems of rural and urban banking.

“GCB would be divided into two banking institutions: The urban based banking unit and the micro-financing unit, and all the banks rural branches will be amalgamated. That is likely to be the final shape of the bank so that we provide that extensive network to support rural industries and micro-financing,” the minister stated.

He added that any attempt of any prospective buyer to close down any branch of the bank would be a violation of a condition that has been posed upfront. He said since rural banks are tax-exempt, the non-performing branches may be converted into rural banks in order to enjoy this facility to enhance their growth. This way all the branches will be maintained.

Mr Osafo-Maafo made it clear that the government’s intention to divest itself from GCB is not solely due to the $15 million required to automate the bank. Rather, he said, “in the government’s estimation the return on investment in GCB is extremely low compared with other banks operating in the same environment”.

Mr Osafo-Maafo, said for instance, that last year, the bank had as much as ?130 billion of its profit as bad debt and said this raises doubt as to whether the bank is making the right returns on investment.

“Would you say a company that has that chunk of its profit as bad debt is being managed properly,” the minister questioned and urged the public to consider all sides of the issue in order to make objective assessment of the situation.

“Let people look at things such as what could the ?130 billion do for the education or health sectors of this economy and whether we are getting the best returns out of the investments in GCB, or the management of GCB is making it look like everything is excellent,” the minister advised.

Mr Osafo-Maafo contended that since GCB works in the same environment with 18 other banks, it will be prudent to measure the bank’s performance against those of its competitors.

He called for an objective and comprehensive debate based on the facts on the ground in order to technically draw valid conclusions, rather than drawing hasty conclusions.

In his estimation, “people are just throwing dust into the eyes of the public”, and this he described as unfair.

On the issue of looking within the country for solutions to the bank’s predicaments, the minister stated that this option would be considered, if that will enhance the banking operations in Ghana and provide the necessary remuneration to the government.

He stated, however, that it does not make economic sense to sell to indigenous people at a lower price than the stated value and that the public may even be disillusioned about it, adding that “ the government is being careful to prevent partisan interests from holding a sway over commercial, logical and development interests.”