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Opinions of Friday, 3 June 2005

Columnist: Asare, Kwaku S.

Matters Arising out of Hotel Giza Yaro

The public has raised three issues on Hotel Giza Yaro:

  • (1) whether JAK purchased and owns the hotel;
  • (2) whether Chief purchased the hotel as an agent of an undisclosed principal, now rumored to be JAK;
  • (3) whether Chief used the Presidency to purchase the hotel on his own behalf.
The President, through his spokespersons, has denied the first two allegations. However, neither the President nor Chief has properly addressed the third allegation. The President, through his spokespersons, claims he cannot comment on what is a private matter, although he has not categorically denied or affirmed that Chief used the Presidency.

Au contraire, it is now well accepted that Ms. Giza Yaro, then on Government Payroll as a financial/legal consultant, was not only engaged in the hotel negotiations but also did the negotiation in the presence of Chief. That alone is enough to warrant detailed explanations from the President, at least on the role of Ms. Giza Yaro. In particular, who was Ms. Giza Yaro working for when she initially spoke to the agents of Saoud (the hotel owner)? What was Chief's capacity in this incipent negotiation? Did Chief subsequently "trade on insider information?"

Chief's response to the third allegation has not been illuminating. In a fax to Ghanaweb dated 5/12/2005, he avers that (1) he is a shareholder in Hotel Giza Yaro; (2) Hotel Giza Yaro is being financed by a consortium of Banks; (3) he is a 41 year old PWC accountant who has the expertise to put together a consortium of Banks; (4) Prudential Bank is the lead Bank in financing the project; (5) the property is currently mortgaged with a number of Banks.

Averment (1) claims that he is a "shareholder" of Hotel Giza Yaro. This suggests that the Hotel is a duly registered company doing business in Ghana. It seems to me that there should be more public information about this hotel. The Chief could help his case considerably by providing information about the registration and tax status of Hotel Giza Yaro.

Averment (2) needs clarification. Are the banks financing the hotel as equity participants or mere credit providers? If they are mere credit providers, what was the extent of investment by the equity participants? Clearly, a situation where the Banks have provided a significant level of debt financing while the equity participants have invested de minimis funds cannot be countenanced and will support the theory that the Presidency is being used to acquire "easy wealth."

Averment (3) is intriguing. Clearly, the firm of PWC has the expertise to put together a consortium of Banks to finance a project. Less clear to me is whether individual accountants, working for PWC have the expertise, resources and time to put together such a consortium. From what I have read, I cannot tell whether Chief did this work in his individual capacity or in his capacity as a PWC accountant. If he did it in his capacity as a PWC accountant, then PWC should be doing the explanations. If he did it in his individual capacity then he should avoid dragging PWC into this matter.

Averment (4) and (5) merely repeats averment (2). Thus, the issues raised hereinabove apply.

The reference to mortgage should also be clarified. Mortgages in Ghana typically are short term loans carrying high interest rates. I saw one advertised on the web, which required a down payment of 40%, followed by 2 payments of 30% and 30% (all within 2 years). A mortgage on a $3M loan at 20% for a 5 year period will require a monthly payment of $80,000. This has significant cash flow implications, especially while the Hotel was being completed and no revenues were forthcoming.

It would help the Chief's case if he can demonstrate that the terms of his mortgage are typical, his payments are up to date, he has complied with all tax and other statutory obligations.

Let me end with some free advice. We are all skeptics in Ghana. It is tempting for JAK and Chief to insist that this is a private matter and resist the calls to provide information on the transaction. Indeed, many "friends" will urge them not to provide the information and will confound the issues by blaming politics. JAK and Chief, be wary of such friends and such short sighted advice.

The issues may be successfully suppressed today but they will never go away. They will be raised again in the future and will continue to haunt them. It is far better to divulge all the information now and clear the air. This is the only and surest way to save themselves from future encumbrances.



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