Judgment Debt Albatross

Debt is a powerful word in all regards and given the fact that it has two-faces makes it even more powerful. Well, some may better describe it as a double-faced king; a king that breeds good tidings and one that can at the same time frighten and send shivers down the spines of many. Could it be the case that the word 'debt' is given too much weight? One cannot be sure of that, because the word really stands tall in terms of what it can do to the fortunes of an individual, entity or nation. It can either serve as a catapult to glory or a route to doom. Glory or doom, the substance is on how debt is incurred and why. Has it been used to generate additional cash flows or has been flashed down the toilet?

For many in the field of finance, debt, which is also called leverage, is a wonderful tool for corporate funding and growth. Debt is used to finance capital projects and operations. Debt becomes a good option when equity is not readily available to finance projects and when capital projects show a rate of return which is more than interest rate payable on debt. A good debt to equity combination takes companies far. It is worthy of note that debt is most often used by nation states to finance development projects of capital nature. Individuals also use debt to finance business activities and other needs. The point has to be made that, debt which is incurred for purposes of recurrent expenditure is counter-productive. Some may disagree, but the debate goes on.

It doesn't take a genius in finance to know that debt which is not used for projects or outflows capable of generating additional cash flows are not worthwhile. When debt is misused and interest payments cannot be serviced, debt becomes a monster, scarecrow and nightmare. A journey of difficult return starts at this point. This is where the word 'debt' becomes unpalatable, undesirable and unfriendly. Debt cannot be incurred just for the purpose of incurring debt, but should only be incurred for purposes capable of producing returns more than the cost of the debt, expressed as rate of interest. Individual, organization or nation, the underlying principle is constant: debt should only be incurred for a more rewarding purpose.

These days, Ghanaians wake up in the morning and the only dominant news on the airwaves, television, internet, print media, etc. is 'judgment debt'. What at all is judgment debt? Simply put, judgment debt is a debt arising out of a settlement by two contracting parties, of which one party has failed to keep to the terms of an original agreement. When party X and party Y enter into an agreement and party Y fails to abide by the terms of the agreement, party X will sue for damages. What party Y pays in damages becomes a 'judgment debt'. Also, party Y, if uncomfortable with the asking amount of party X in court, will opt for an out-of-court settlement. The amount negotiated and subsequently paid becomes 'judgment debt'. I believe the concept of judgment debt has been demystified.

From November 2011 to date, judgment debt has become a household and street name in Ghana. From infants to oldies, the word has become predominant and pervasive. It all started with the Woyome Case involving corporates like Mpowapak, Waterville, Austria BVI, etc. Today, we have others like Construction Pioneers (CP), African Automobile Limited (AAL), Isofoton, Bulkan Energy and others, and we have even been promised more judgment debt revelations. What is going wrong? Have we lost it?

It has become clear that most of the debts have been incurred courtesy the unjust abrogation or vitiation of contracts by government as well as questionable conducts by public officials, who may have sharing interests in judgment debts paid to entities. The acts of omission and commission by public officials are causing the nation a lot of money. Those amounts paid out by government could have tackled to a certain extent issues related to poverty, ignorance and disease. Is Ghana in a state of disorder?

What is surprising is that, in the midst of these judgment debt issues, there are blames and counter-blames by NDC and NPP about who caused the debts? Are we serious? At this moment, we should be looking at the systemic problems. What are the conditions that have allowed this phenomenon to fester? Is it incompetent officials? Is it systemic loopholes? Is it crass corruption? These are the germane issues that should occupy our minds. We have to roll back this canker of judgment debt payment by removing the seeds which have been sown. This presupposes that in entering into contracts, public officials have to be circumspect to ensure that the state is not saddled with debts. A holistic approach will be to get competent people into public service, remunerate and motivate them well, keep them in serious check, and unpluck all corrupt tendencies.

Are we putting up enough fights in the courts of law as a state to crash out debt overhang cases by these contractors? Our state attorneys have to be up and doing and make sure that our tax moneys don't go to corporates who will like to exploit legal and administrative loopholes for their gain.

A cloud of misfortune is in the skies of Ghana, rolling steadily to give birth to a destructive downpour. It is in our own interests as a country to clear the skies and allow the bright radiance of sunlight to shine once again upon our homeland. Everybody has a role to play, and for someone like me, I have begun with this piece. Act in your own way and manner to reclaim Ghana's destiny. Martin Amidu known as Citizen Vigilante is doing a great job and I call on all citizens to support him. God bless our homeland Ghana.

Paul Edem Kuenyefu is an Entrepreneur, Writer and Motivational Speaker and is the author of 'TO THE ZENITH', a motivational piece.
Email: pedem99 [at]gmail [dot] com