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27.10.2004 Feature Article

Opinion On Ghana Airways

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35 cents or 6300 cedis from 20 million Ghanaians saves Ghana Airways? This new company, without a name except for partnership between the Ghana government and Ghana International Airline (GIA) is still born. Its dead from the start for many reasons. For that matter GIA a US-based consortium with their expertise and experience are the major beneficiaries. It will be interesting to know the name of this consortium in the US. Is it GIA and is it officially registered in the US as such? Unfortunately, the government is trying to convince Ghanaians that it has 70% equity in the new Airline to be set-up.

In the corporate world, and whoever is representing Ghana (the people of Ghana) in this deal as a corporate lawyer (certain members of the NPP pitifully boasts of lawyers and doctors as if it was what matter most), this person should have been able to recognise that the GIA is no legal entity anywhere except subsequently in Ghana. If especially not in the United States then we are heading for a real trouble, for that matter we should not be told that for the mere fact that this body or individual (not a company) as it were is from the US hence, everything is fine.

The caution is that the company(GIA) does not and could not exist there (in the US) in any form or manner as a corporate entity, we can as well see from what the so-called name GIA tells it all. I wonder who exactly the government is dealing with here except to say a US-based consortium. We need to be told what consortium so that independent information could be sought where necessary.

The reasons why Ghanaians say it is a strategic investment are abound, just consider the links to various important cities that Ghana Airways has around the world, it is a gateway to the ECOWAS trade zone and especially the West African countries, Ghanaian Nationals are proud to patronize it if it is revitalised to the required standards and the tourist dollars accruing from the numerous passengers from abroad will wish to experience a taste of Ghanaian hospitality before touching down and so on. Now to say the least from 2000-11-29; "One billion blown at Ghana Airways" to 2004-10-18; "Ghanair Workers Want To Operate Airline" one hundred and seventy (170) articles have been published on Ghanaweb about the Ghana Airways and it tells us the amount of interest generated.

The legal issue here is that since this person(s) will be represented only as US citizens doing business in Ghana and not as just as a company in case of any misunderstanding or loss it will be the US against Ghana and as it were, we cannot detain a US citizen in this country under current agreements with the US. So we should ask oursleves whether we are deceiving ourselves or somebody else.

If so, then that person of course also knowing will do well to reap as much as he/she can as profit within the shortest possible time the highest return on investment (ROI) within the tax break (holiday) period and will bolt away soon after the grace period is over. A typical case of the Canadian mining company that left a huge debt on government agencies. If the company begins to record losses it will be a recipe for disaster so any debt accruing will have to be borne by Ghanaians, including those yet unborn as it has always been the case. It may as well be that the 30% equity is owned by an individual in that case the responsibility is in effect in the ratio 1 is to 20 million Ghanaians.

In an earlier newspaper report posted on Ghanaweb on September 21(exactly a month ago), indicated that "Mr. Heaton also stated that the Company was looking to raise $50 million to $75 million, maybe $100 million, to start the operations of the airline. In the words of Mr. Heaton, "eventually, after we raise the money and the equity investors come in with the cash."

On the otherhand as the minister for transport "rightly" calculated that "$7 million was required to kick-start the operations of the new airline, adding that the amount was to be shared between the two partners; the amount, among other contingencies was to be used for the automation of the ticketing and accounting systems and in the interim, leasing of aircraft." If every Ghanaian is to contribute to kick-start this new company every living individual of the about 20 million Ghanaians will only have to provide 35 cents and to be generous it translates into only 7 (seven) thousand cedis per capita (head) to create this new airline. Even if it is because the NPP does not want the name Ghana Airways because it is Nkrumah Tradition so, will like to kill it and boast of creating a new thing when it came into office, I will think this is unnecessary.

Then again the Minister`s speech read on his behalf indicated that US$7 million was needed and we must make sure it is to be shared according to a similar ratio 30:70 (%) it as well means that we will be contributing something very negligible and less than a minimum wage of a Ghanaian worker just to save the airline because the GIA is in actual fact contributing just US$2.1 million and the government US$4.9 million equity and since the Ghana Airways has properties home and abroad which will be inherited, so government need for cash will even be far less.

I wish to admit that I have assumed all Ghanaians wish to save the airline and that should be the role of government acting on the people`s behalf. The country`s debts are being or going to be paid by all, more so even and pathetically those unborn. This includes how much we pay our president, the parliamentarians and the allowances they receive.

In effect the government can guarantee for us to obtain funds, grants or loans in this all important issue from international donor agencies if we can make a proper case in form of a proposal. In effect we do not need anyone to come and help us do it. The only thing to make us desperate is, if we are stressed by time, which we are not because the government has not told us when it hopes to fly. But with little seriousness the deputy minister of transport hinted the new airline will fly in two weeks from today (Thursday October 21, 2004). Later the same minister on the same JoyFM the next day says the new airline will be operational between January and March 2005.

The implications for the new airline faced with a host of hurdles to overcome like no name, not yet put up announcements on recruitment, no aeroplane to fly, no routes to fly, no registration at airports in world destinations, no new ticketing machines installed, no marketing of the new airline, poor public relations, nonexistent customers (passengers), oil prices not favourable to allow for bargain tickets for the start and yet to float part of the 70% of government shares will obviously not fly by November 11, 2004, the time when the two weeks announced will mature.

My estimate looking at the job at hand if a good work is to be done for the new airline under this kind of speed and pressure from winning the election clearly make me feel it will be well until after the elections into 2007. Mr. Heaton said in a September report that, "The new airline is expected to have routes to the United States, the United Kingdom and Germany during the 2005 first quarter."

In terms of the equity 30:70 (%), and seriously thinking it out its two-thirds share for Ghana meaning mortgaging in reality the equivalent of "60 million Ghanaians" to one partner (from the US) that is to say three times the current population (1:60 million Ghanaians) so in money (equity) terms. It also means if Ghana should do this alone and the government is really prepared and had the political will and the right expertise it could have had the same guarantees from the same way this partner went to see the Stanchart and Barclays Banks to open an account we were told.

Everyone will wish that considering the equity involved the partner should have shown some form of bank guarantees cheques to the tune of US$2.1 million because for an individual to open an account in the two banks does not require even $100 although I would not be sure for companies, probably $1,000 which will not be anywhere near the equity of US$2.1 is presumably short.

Does it mean that the Ghanaian business of 5 to 10 per cent paid by beneficiaries of procurement to government top agency officials, if calculated on the US$2.1 equity of teh partner gives government a tune of between US$105,000 (945 million cedis) to US$210,000 pocket money that could be used easily for the election campaigns. Especially when the government has promised time and again that it will not increase the liquidity in the system but it only means it will have to find money from somewhere.

The are funds that could have been accessed from the international donors if a good case was made. For instance based on part general MDG and GPRS the gateway to the sub-region and so on. This was not thought of but for now the government is going to fully assist the 30% equity person to get established in Ghana whereas it has no legal entity anywhere but Ghana. This in effect means this entity is very silent on it assets and will pretend to have assets just in Ghana.

The risk here is that in the worst case of failure especially where oil prices are pushing airfares high at this time well into 2005 and even well established airlines are facing problems with low patronage and are resulting to partnerships and alliances it is clear that since the government has no timelines as to when the new airline will make its maiden flight we may not be having an airline even in 2007.

It is going to drag on because government does not have the equity(money), and this has been the major reason that government is saying it is going to float its share of 70% equity. I believe we will all assume that it will be a preserve for Ghanaians but considering our income levels it may as well be that the stakes will turn round that in reality Ghana`s equity will be 70% to 30% for the partner (GIA).

When this happens the government will have to be held accountable because it will bring huge financial loss to the state. Hence, we will find out that vital investment capital will be locked up in personal accounts in overseas banks held in trust for selfish Ghanaians.

There are a lot of transparency issues here, the issue of government procurement which has become the major source of corruption and even deciding the name of the new airline should have been thrown to Ghanaians by now so as to involve the people, if in reality they are to be stakeholders in the new airline.

The timing is such that its only going to be a new parliament of 2005 who will carry on with the forming of the new airline. Here again what is the guarantee in case that the government (NPP) is changed and a new government decides that it is a bad decision (it looks like it by the way)?

Unless we are truthful to ourselves now, we will be saying in effect that if we have a company that is not performing or running at a loss we will use the government instrument as a cover to pretend to close the company and begin to forming a new one. Could or should this be a trend that any government should dream of? This case is therefore is an unworthy precedence.

After all the investment of the NDC into remoulding the Kotoka International Airport (KIA) but there is no credible Ghana Airline to fly into it. What will be next on the NPP agenda because I have also read some two groups making pronouncements like we as Ghanaians should go into the business to even change the name of the airport and you wonder what is the motive except that it portrays the trends and wishes of this government.

The problems of this country have some much been trivialised to the extent like changing names of airports and you ask youself is this going to get us out of poverty. By the way who cares what name is on an airport when in the world airports do not even bear the names of persons but cities.

Flying today is mostly computer based and mostly there is e-booking, e-checking in and e-ticketing so that for our airport you will only need the airport code which is KIA and you are done so what`s the point. It is only if you travel a few times that this change of name will seem important to you. I will ask the the statue be returned to the airport since it has been missen for a very long time now.

On the issue of floating of the 70% equity, to who? The government must be specific otherwise we cannot believe it is a Ghana government equity, if Ghanaians for any reason cannot purchase the equity then probably it can only become an NPP equity, since it will be easier for members of the NPP government to be proxy to foreign interest.

Even all things being equal and the way the government has handled this issue is so bad that it is going to be very difficult to win any would-be investors when the equity is floated for this simple reason that the new company has no track record except the fact the the new CEO has, and he is a foreigner.

Indirectly the government is prepertuating the notion that what is Ghanaian is bad and what is foreign is good. Imagine the number of flights of Prez. Kufuor on British Airways during his term of office and the amount of tax cedis (dollars) lost to the state because the president and his cabinet could not surpervise the sustenance of a strategic national airline. I can assure you that Ghanaian pilots are among the best in the world; they have been hired by British Airways, Swiss among others in the past and their prowess is witnessed if we consider the take offs and landings on these planes captained by Ghanaian pilots to world destinations and for those of us who have actually globe-trotted a lot we know this fact.

To the poor workers who are out of job and would have no salaries what will be more important to them than to wake up in the morning and knowing that you have a job but we are told and I do not see how "floating the shares would offer the opportunity to workers of Ghana Airways to buy shares in the new airline thereby giving them a stake in it." Is it going to be the new staff or those who have lost their jobs?

The other sad bit is that the many workers do not know their fate and the new company`s partner is going to have the lee way in selecting its workers and government has not even stated clearly that since we need to create job for Ghanaians in Ghana the government has a major stake to insist at least on the same equity of 30% to 70% of personnel as well.

The government has been silent on this type of assurance, and the government went on further to state that the new company will do its own selections as it deems fit. Equity on staffing cannot be overemphasised though, it is even difficult to judge the equity solely on numbers since professional; engineering staff, captain and crew as workers are valued differently from ancilliary workers similarly professional and nonprofessional, managerial and non-managerial staffs of an airline and so on will differ.

It was also reported that "although the government recognised the status of workers of Ghana Airways, it wonders the capacity in which they could have entered to bid as a strategic partner." The long and short of it is that it is unheard of to say the workers are the strategic partners far from it. What is being emphasised is the strategic investment bit, which means it is a life blood and dear to the success of Ghanaian economy in term of employment and revenue emanating from the investment it even become a security issue.

All these and others should not be twisted to mean something else for heaven sake. We are talking of Ghana`s strategic investment so the keyword here is Ghana, that is the government acting on behalf of the people of the country and not the workers, the workers of course will be acting on their own behalf but guided by the companies code and the laws of the country after which they should be remunerated through salaries and benefit or sacked from malfesance or misappropriation.

One reason mentioned in the report by the Daily Graphic newspaper as the course of failure was " Reconciliation of tickets to appreciate uplifts has been one of the major areas of contention between Ghana Airways and the Ministry of Roads and Transport. Ghana Airways had not been doing this since 1999, he said due to the absence of automated accounting and ticketing systems, tracking of revenue over the years had been extremely difficult."

I pressume by this we knew the problem and could this have been the part of the course of mismanagement per se or the airline probably not been well funded especially the because this thiing should have been part of the infrastructure at the airport hence a problem of the Ministry of Roads and Transport/Civil Aviation and not Ghana Airways. The other problems are the so called "mafia group" and this is a corruption issue which can be dealt with by state legal agencies; CHIRAJ, SFO etc., and the constitution, then "bad (mis)management" which is a corporate governance issue is an much easier problem that could have been solved and rightly so by the KLM/Kenya Airlines group would have been of great assistance.

On the equity they should not be compelled to since there are different forms of equity and the valuation of equity not necessarily the cash component of of US$7 million that will be injected so that some of it could be used in political campaigning or what? Then after election we will come to square one. We all know when it come to procurement and contract bidding in Ghana there is the 5% to 10% quota on winning agents to pay to the top government officials. As such it looks like it is the hard cash that is being targetted.

I think the KLM did the right thing to reject the proposal of the Ghana government mind you the Netherlands is in the 7th (8.9) position of the Global Corruption Index of Transparency International for 2004 whereas Ghana came 64 out 146 countries with 3.3 points. I may only mean that the KLM group did not hope to be party to any corrupt practices by the way, so this is the difference. Kenya by the way is committed to fighting corruption that is why they could partner with KLM and again Kenya hosted the Berlin-based nongovernment organisation working in the area of corruption perception research and awareness creation institution, Transparency International (TI) in Nairobi for this year`s, 2004 conference.

Please lets use the brains that God has endowed us, to build our nation and stop thinking too big and forgetting about the little things but very practical solutions to our problems. Every person should be an entrepreneur in every discipline hence be able to market whatever goods he or she has and furthermore we should be innovative, also try to do and teach evaluation of whatever action(s) we take that is the way forward for Ghana.

The experts are there in Ghana to be utilised unless it is not partisan and let us be fair and frank with each other. The Germans did it, so did the Japanese, the "Asian Tiggers," most recently India and China are on the heat. What about countries in Africa? Probably Ghana can show the way after South Africa but we have to bring all hands on deck. James W. Doe Independent SARD Researcher Views expressed by the author(s) do not necessarily reflect those of GhanaHomePage.

James W. Doe
James W. Doe, © 2004

The author has 15 publications published on Modern Ghana. Column Page: JamesWDoe

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