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Opinions of Saturday, 28 January 2012

Columnist: Ata, Kofi

Are some Ghanaians capable of managing State Affairs?

Judgement Debts and Contracts: Are some Ghanaians capable of managing State Affairs?

By Kofi Ata, Cambridge, UK

At independence, many Ghanaians and Africans as a whole, if not black people across the globe were very hopeful that, a new African capable of managing their own affairs was on the horizon to transform the lives of millions from colonial oppression and want into freedom and prosperity. This self confidence was immaculately evident in the independence declaration speech of Kwame Nkrumah on 6 March 1957 and I quote from the relevant section of the speech. “From now on, we must change our attitudes and our minds. We must realise that from now on we are no longer a colonial but free and independent people. ….that new African is ready to fight his own battles and show that after all, the black man is capable of managing his own affairs. We are going to demonstrate to the world, to the other nations that we are prepared to lay our own foundation. Our own African identity, create our own African personality and identity. It's the only way that we can show the world that we are ready for own battles”.
Sadly, not long after the euphoria had dissipated, the new sense of the self confident Ghanaian capable of managing the affairs of the state imploded into thin air and up to today, Ghanaian and other African leaders have shown that they are not only incapable of managing their own affairs but also miserably mismanaged the affairs of nations and states since independence. This article was necessitated by recent development in Ghana, especially but not exclusively, a statement attributed to the Deputy Minister for Water Resources, Works and Housing regarding Ghana Real Estate Developers Association (GREDA) and the failed STX housing project made me pose this question. Are some Ghanaian leaders incapable of managing Ghana’s affairs prudently, particularly when it comes to negotiations and management of agreement and contracts? I do not intend to answer the question but provide a review of some relevant matters that would enable readers to make their own judgement and provide answers to the question.
The Deputy Minister for Water Resources, Works and Housing is reported to have said that GREDA cannot take over the failed STX deal, as is being speculated in the media because the embattled STX housing company whose boardroom wrangling has stalled the government’s flagship affordable housing project, still has a contract with the government of Ghana. Therefore any company that has interest in that bid must first broker a deal with STX (see Ghanaweb.com January 26, “GREDA cannot take over STX Project – Deputy Minister). Really, I thought that was ended on 6 March 1957?
I felt a sharp pain in my stomach spin after reading such a ridiculous statement from a deputy minister. The minister had the audacity to ask a Ghanaian Association to negotiate with a foreign company before they build houses in their own country. Where on earth would this happen and who caused that? My second reaction was, Wrong, Wrong, Wrong and No, No and No. NEVER. First, this mess was created by government officials who through negligence or incompetence or both failed to carry out due diligence to ensure that STX was capable of delivering their part of the contract. Second, he was wrong because in every contract or agreement, there are clauses for sanctions and terms and conditions for the abrogation of contract if any of the parties defaulted or breached the contract. The agreement contract can contain Key Performance Indicators and Milestones to be delivered through measurable outputs and outcomes such as, after twelve months of the agreement coming into force, output X must be delivered resulting in outcome Y. If after the twelve months X and Y have not been delivered, the defaulting party (in this case STX) must explain why. The other party to the agreement (Ghana) can resort to applying sanctions against STX if the explanation is not reasonable and acceptable. This can include penalty charges, renegotiation of the contract or total termination for failure to meet the terms and conditions of the agreement without good reason/s.
From all we know about the STX housing project, Ghana government has done its best to assist STX resolve their board room wrangling amicably but to no avail. Under such circumstances, Ghana has every right to initiate a process to terminate the contract with STX by exercising its rights under the terms and conditions of the agreement in order to avoid any breaches which could result in a claim against Ghana by STX in the future. Thereafter GREDA and Ghana government can negotiate to enter into a new agreement for GREDA to undertake the same housing project that STX has failed to deliver. So what is the minister talking about and in whose interest is the minister acting, Ghana or STX?
The Deputy Minister’s statement also drew my attention back to the huge Judgement Debts Ghana has been paying to companies and individuals, including the infamous “Woyome”. These payments are a heavy burden on Ghana’s scarce resources. They are also a drain and waste on the economy and could be crimes against the people of Ghana. Every government has the right for whatever reason/s to abrogate agreements and contracts that they are unhappy with. Some are even done purely for ideological reasons but most are on financial grounds. Whatever the reasons may be, most if not all termination of contracts may involve payment of compensation by one party to the other either through negotiation, arbitration or by court judgements and Ghana is no exception.
The contemporary challenges Ghana faces with the management of national contracts is that, it some appears Ghanaian leaders, past and present are unable, incapable or unwilling to negotiate meticulous and prudent agreements as well as fail to manage the contracts efficiently and in so doing cause the state to lose catastrophic huge sums of money in judgement debt payments. According to media reports, the NDC government alone has paid over $600 million in judgement debts in the last three years. Who knows how much was paid by the first NDC government and the NPP administration under the Fourth Republic? Despite the glaring waste by the state, unfavourable and bad agreements continue to be negotiated and signed by the present government. An example of such bad agreement is the recent $3 billion Chinese loan agreement. The terms and conditions of the agreement as reported by the Minority in Parliament, if accurate, are diabolical and even inimical to the state or another “gargantuan crime”.
If the principal amount and the interests amounted to $4.6 billion, why should Ghana commit about $7 billion in crude oil supplies to China as repayment? What is the difference of $2.4 billion meant for? The other contention in the agreement is the $85 per barrel price at which Ghana agreed to peg the crude oil to China when the world market price of crude oil has never fallen below $100 since 2009. What is the potential for oil falling below $85per barrel? What stopped the Ghanaian negotiators to peg the price at prevailing world market prices or a small percentage below the going world market price? What stopped them from inserting a clause with the option for Ghana to review the price every five years in accordance with world market prices? Instead of the negotiators spreading the risk to Ghana, they offered concessions.
Another plausible question the negotiators should have asked and answered was, Ghana’s hedging of crude oil imports. At what price was this done and if it was higher than $85 per barrel offered to China, why? I understand that twenty years is a long time and new forms and sources of energy could be discovered within that period that may lead to drastic fall in crude oil prices but that reality is less likely and in my opinion, Ghanaian negotiators let Ghana down.
It is also reported that Ghana’s crude oil is being collateralised to defray the loan and interests for a period of twenty years. This clause is senseless, possibly illegal and only to the advantage of China. The Petroleum Revenue Management Act states that petroleum revenues cannot be collateralised for more than 10 years yet the loan agreement provides that China can lift oil from Ghana for up to twenty years. Is the Executive aware of this law and not bound by the law?
Why this time period when the value of the oil should not be determined in years but calculated in monetary terms according the quantity and price of oil exports to China? If in ten years time Ghana had exported enough crude oil to China to cover the total cost of the loan and interests, will Ghana continue to export crude oil to China for the another ten years at $85 per barrel not withstanding world market prices at that time and irrespective of the fact that the loan would have been paid off? In reality that is what the agreement means. Is Ghana China’s Father Christmas? After all, Ghana has oil that China desperately needs and Ghana also urgently requires China’s dollars for very important infrastructure development, so the negotiators were not empty handed beggars asking for scraps from the Chinese dinner table. Ghana is strong to negotiate with China as a sovereign state and not as a junior province.
When I read such reports, I ask myself whether those who negotiated the agreement were either simply incompetent or just did not care about Ghana. Are they unpatriotic or just selfish as far as they personally or their party benefited from the agreement? Such clauses do not make sense to me and wondered who in their rational mind would subject their country to such unfavourable terms with very damaging financial consequences for the nation and potential disputes that could also lead to judgement debt payments? For example, if Ghana is able to repay the loan in fifteen years and wants to stop exporting oil to China at $85 per barrel, China could have the right to sue Ghana for breach of contract under the terms of this loan agreement, unless it is made watertight that such exports should be no more than the value of the loan plus interest or whichever comes first. All states negotiate agreements with the sole objective of securing and protecting their interests but it appears Ghanaian leaders negotiate to give away and betray the country’s interests
Sometimes, I question the justification for me to hold myself in high esteem and be proud to be from Ghana when Ghanaian leaders are incapable of negotiating good agreements and manage contracts effectively. I also wonder if the nation has the calibre of people to do such negotiations and mange contracts successfully. Despite my apprehension, there is no doubt in my mind that, Ghana boats of qualified men and women at home and abroad who are more than able and capable of doing excellent job when it comes to negotiations and management of resources at any level. All over the world, Ghanaians have and are excelling at every human endeavour and even within the narrow confines of the two main political parties (NDC and NPP), there is abundance of talents, skills, expertise, knowledge and experience to execute contracts efficiently and expeditiously. Greed and selfishness (call it corruption) is what is killing mother Ghana.
To reduce the huge sums lost to the state through judgement debts and the negative impact on socio-economic development (since they can never be eliminated completely), there is the urgent need for Ghanaians to work together to harness the best brains and experience for each job. That will require NDC and NPP to put aside their political and ideological differences and collaborate in the interest of Ghana. I am not suggestion a coalition government as I dislike any government of marriage of convenience such as the current UK government. What I am suggesting is for the two main parties who are most likely to rule Ghana in turns for the foreseeable future to tap into the expertise, skills, knowledge and experience of their members no matter which one is in government. President Obama appointed a Republican as Defence Minister (a very sensitive position to be held by someone from the other aisle of the political divide). Here in the UK, the Prime Minister appointed a former Labour Cabinet member to lead a review of state pensions. If Obama could appoint a Defence Minister from a party with some Christian fundamentalists who hate him and his policies more than they love Jesus, why can’t NDC and NPP collaborate when they only disagree with each other but not hate one another, let alone more than Jesus?
That is the sort of collaboration that should exist between the government of the day and the opposition parties. For example, involvement of other parties in agreement negotiations should not be considered as the government not having quality ministers or personnel to conduct and lead government business. On the contrary, it will minimise the risk of future governments unilaterally abrogating agreements and contracts entered into by the immediate past governments and therefore avoid claims against the state and judgement debts. In fact, collaboration should not be restricted to only politicians but the larger Ghanaian society as a whole. Government should be able call on professionals and experts from the private sector as well as academics in times of need for national assignments, if conflict of interests can be avoided. In very complicated court cases such as the Ya-Na murder trial, the state could have secured the services of experienced prosecuting attorney from private law firms in Ghana to prosecute the case.
Unless Ghanaian leaders begin to take advantage of the all the human resource capacity within and outside the country for the benefit of the people, the state would continue to be plagued by and suffer from damaging and debilitating consequences of inefficiency, incompetent and mediocre when it comes to agreement and contract negotiations and management. Ghana has the people, knowledge, expertise, skills and experience in abundance and they should not be wasted through round pegs in square holes. For example, someone commented on Ghanaweb.com on the resignation of the first Attorney General and Minister for Justice that she was appointed with the main objective of prosecuting former NPP officials for alleged malpractices. If that was true, I beg to say that, it was the wrong move because her background was in International Law suitable for her previous role at the Commonwealth Secretariat and not Criminal Law, especially, when the AG is required occasionally to prosecute cases in person at courts. No doubt the outcome spoke millions. No disrespect to her knowledge, expertise and abilities but it is undeniable that she failed Ghana as AG and Minster for Justice. Ghana deserves better in the management of her abundant human and natural resources. Your Honour, I rest my case.

By Kofi Ata, Cambridge, UK