Ghana-Economy: Privatisation -- Saving the Best for Last

Ghana-Economy: Privatisation—Saving the Best for Last
By Asare Kofi. InterPress Service. 15 January, 1996
ACCRA, Jan 15 (IPS) - Ghana's government feels it should have little difficulty finding buyers for 113 state-owned firms given the performance of formerly loss-making companies divested earlier on in a privatisation programme now in its eighth year.

But independent analysts fear that the new wave of privatisations may have come too late.
“The sweet pickings are over,” said an accountant with a consulting firms selected by the state's Divestiture Implementation Committee (DIC) to guide the privatisation programme. The expert, who asked not to be named, said investor interest was now on the wane.
Most of the enteprises up for sale are moribund, he charged. “The average investor is not going to buy them simply because they have buildings,” he told IPS.
But the DIC, the government agency responsible for carrying out the programme, counters that the firms set to go on the auction block should sell fairly easily since they are much more attractive than most of those divested since 1988.

“We started with the loss-making enteprises,” explained a
DIC official, who also requested anonymity. “It is now that
we are starting with the profit-making ones.”
“We always have foreign investors showing interest,” he added.
Moreover, many of the loss-making firms sold off at the beginning of the programme are now doing well, according to the DIC. It cites Tropical Glass, a producer of beer bottles, and Tema Steel Company, which makes steel rods and billets, as examples.
Tema Steel “was a factory that had been closed down completely,” DIC notes in a report issued late last year.

Ghana's government sold all or some of its shares in 128 firms between 1988 and 1994. It announced last year that it had decided to quicken the pace of the programme and later approved a list of 113 companies to be divested.

The decision to start with loss-making enteprises had helped to avert opposition from nationalists. The programme passed a major test in 1994, when the state reduced its share in one of Ghana's most profitable firms, Ashanti Goldfields Company (AGC).

At the time, the state owned 55 percent of AGC, which produces more than 80 percent of Ghana's main foreign exchange earner, gold. It slashed its share to 28.6 percent. Lonhro PLC reduced its shareholding from 45 to 42.9 percent.

The initial public offering, listed simultaneously on the Ghana and London stock exchanges, was opposed by various interest groups, including the National Union of Ghanaian Students and the opposition New Patriotic Party (NPP).

NPP's Kwame Pianim, an economist, failed to stop the
divestment of AGC when he sued the government for the sale
of “Ghanaians' birthright.”

The AGC now accounts for more than 80 percent of the Ghana Stock Exchange (GSE)'s market capitalisation. “People never knew we could touch the profit-making companies too,” said the DIC official.

Now the state is preparing to let go of other money-spinners, like the Cocoa Processing Company, the State Insurance Corporation and the national telecommunication company.
However, before that happens, the DIC will select experts from its pool of registered consultants—accountants, management specialists, commercial firms, merchant banks, investment banks and asset valuers—to submit proposals on each enteprise.

The nature of the assets involved makes a thorough evaluation necessary, according to Clemens Anyomi of the Financial Sector Adjustment Programme (FINSAP). He explained that divestitures took place in the late 1960s and early 1970s, but that there were no records of who bought what assets, “so we are trying to take care to ensure that we go according to properly documented procedures”.

As a result, the sale of least two concerns has been postponed.
The Ghana Commercial Bank (GCB) and the National Investment Bank (NIB) were to have been floated on the GSE last year, but, according to Anyomi, the sale had to be delayed after audits revealed that both had “certain weaknesses”.

“We had to undertake some corporate house cleaning,” said Anyomi. The GCB and NIB are now billed to be floated on the stock exchange within the first half of this year.
After that, FINSAP will focus on three other banks: the Agricultural Development Bank, Bank for Housing and Construction and Cooperative Bank, according to Anyomi. “The options are to look at mergers before divestiture, or look at each of them independently,” he said. (END/IPS/AK/KB/96)