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13.04.2004 Business & Finance

DIC’s Kalabule Divestiture

By Crusading GUIDE
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Numerous investigative reports carried by The Crusading GUIDE over the last two year or so about the financial and procedural improprieties occasioned by the divestiture of state-owned Nsawam Cannery Limited to Caridem Development Company Limited, a company owned by the 31st December Women's Movement led Mrs. Nana Konadu Agyeman-Rawlings, Ghana's immediate past First Lady, which were strongly denied by Miss Sherry Ayittey, a Director of Caridem, have at last been vindicated by the findings in the Final Report of an investigation conducted by the Auditor-General in pursuance of Article 187(2) of the 1992 Constitution and Section 11 of the Audit Services Act 2000 (Act 584).

The Final report dated March 31, 2004, indicated that the total indebtedness of Caridem Development Company Limited as at December 31, 2003, with regards to the divestiture of the Nsawam Cannery which took place in February 1995, was ¢7,058,628,397, being outstanding interest accrued on the principal in the Sale and Purchase Agreement (SPA).

The report also revealed that Caridem was indebted to the Government of Ghana (GoG) in the sum of ¢2,406,772,015.97 through accessing a loan facility of ¢750 million from the Trade And Investment Programme(TIP) in November 1997.

Records from Ecobank Ghana Limited, the Managers of the TIP facility on behalf of the Ministry of Finace and Economic Planning, showed that the ¢750 million loan facility was approved for Caridem upon an application dated October 29, 1997 submitted and signed by Miss Sherry Ayittey, a Director of Caridem, ''requesting for funding under the Trade and Investment Programme (TIP) for providing credit support to the non-traditional sector''

The amount (¢750m) was disbursed on November 28, 1997. However the Auditor-General's investigations disclosed that the Company (Caridem) had as at March 31, 2004 NOT serviced the loan. Neither had it made any repayment.

''The total amount outstanding as at 15 February 2004, as confirmed by Ecobank, on 17 February 2004, was ¢2,406,772,105.97. This is made up of principal amount of ¢750,000,000 plus accrued interest of ¢1,656,772,015.97. Caridem is therefore indebted to the government of Ghana in the sum of ¢2,406,772,015.97 through the TIP Fund'', stated the Final report on page 11.with regards to the divestiture of Nsawam Cannery, the Final Report stated that thee purchase price indicated in the Asset Sale and purchase Agreement was ¢2,789,846,000. It further noted that this value (¢2,789,846,000) when compared with the recomputed value of ¢2,128,528,041 '' However, in view of the doubtful condition of the labels, I have allowed the original Asset sale and Purchase Agreement value of ¢2,789,846,000 to stand''

The Auditor-General's final findings revealed that as per agreed terms of payment, 10% OF THE Purchase Consideration (PC) (¢2,789,846,000) should have been paid by January 31, 1995: a further 50% of the PC should have been paid by March 31, 1995 upon the execution of the SPA; 20% of the PC should have been paid 6 months after the date of execution of the SPA and the final payment of 20% of the PC should have been paid 12months after the date of execution of the SPA in that order.

It was also stipulated in the SPA, according to the Report, that the deferred payments would attract interest at Treasury bill rate.

''Caridem could not keep to the terms stated in the contract. As at 30 November 1999, the principal and interest had accumulated to ¢7,455,345,536.11. Since then only ¢559,085,000 had been paid as at 31 December 2000. Caridem Development Company Limited was therefore indebted to DIC in the sum of ¢8,378,558,797, being principal and interest accrued as at 31 December 200'', disclosed the report.

Significantly, the investigations revealed that, on February 12, 2001, one month, 5 days after the ushering in of a new government (NPP administration) and six years after taking possession of Nsawam Cannery (February 1995), '' the Management of Caridem paid off the outstanding principal in the amount of ¢1,319,930,400 without any mention of or reference to the interest of ¢7,058,628,397 accrued on the principal as at 31 December 2000''

In all, the Auditor-General's investigations revealed that between the divestiture of Nsawam Cannery to Caridem and the latter's accessing of the loan facility from TIP at Ecobank, the total indebtedness of Caridem Development Company Limited as at December 31, 2003 was ¢9,465,400,413. This amount, according to the Auditor-General, ''will increase with time since the interest on the loan the purchase price is still running''.