Ashanti, AngloGold and Golden Age of Business

I wonder if Ghanaians have weighed the implications of the recent bidding war between AngloGold and Rangold to merge their respective companies with the Ashanti Goldfield Company (AGC) limited, one of the oldest and most enduring mining companies in the world.

The bidding war has inadvertently focused attention on Ghana as a potentially serious destination for investment, especially in the mineral/gold sector. How the Kufour administration responds to these entreaties should signal to the world whether or not the country is ready to be a significant player in the global capitalist economy or to be content sitting at its fringes.

The government, in collaboration with private sector interests, organised Ghana Expo 2003 from 16-19 October to shore up investment and trade deals for local and foreign businesses. The benefits from such road shows take a while to mature and the impact on the economy may not be evident for many years.

However the fall out from the proposed merger of Ashanti with AngloGold could have a huge psychological benefit and could provide the spark that the country has been waiting for to rekindle her economy. That is, if the government makes the right decision.

After weighing the offers from Rangold and AngloGold, the board of AGC endorsed the revised merger proposal from AngloGold, which is now awaiting the approval of the Government of Ghana. It is widely believed that the merger of the two companies would create the world's largest gold mining company in terms of reserves.

And with Newmont Mining Corporation of the United States already prospecting for gold in Ghana, the country would become a major gold mining hub in sub Saharan Africa.

As a regulator as well as shareholder, the Government of Ghana is required to support or not to support the deal. What will the government do with its almost 17% of shares? What will the Government do with its so-called golden share, which allows it to veto the deal?

To answer these questions and others, the Government has appointed Soci?t? G?n?rale (SG) of Switzerland to help it make the right decision.

It has taken SG an unusually long time to make its findings public. As it said in business parlance, time is money. It is, therefore, hoped that SG will release its recommendations to the Government as expeditiously as possible as any undue delays could undermine the position of the Government.

It could make the Government look indecisive and in the business world such perception could be deadly.

It could undermine the efforts being made such as Ghana Expo 2003 to attract sustainable investments into the economy.

Without pre-empting the recommendations of SG to the Government, we intuitively feel that the Government should endorse the decision by the board of AGC, remove its golden share but retain its currents shares, which will be reduced to 2.2% of the shares of the merged companies.

In lieu of the golden share, the Government should set up a Gold Stabilisation Fund. Dividends and tax benefits accruing to the Government from AngloGold Ashanti and from other mining companies could be invested in this Fund.

The accumulated profit from the Fund could be used to mitigate the possible impact of depleted gold reserves in the future.

A positive response from the Government will be popular with investors, both local and foreign, which should give a welcome fillip to the policy on Golden Age of Business.

Views expressed by the author(s) do not necessarily reflect those of GhanaHomePage.