28.06.2004 General News

Parliament Okays Another "Dubiuos" Agreement -Palaver

28.06.2004 LISTEN
By Palaver

Fresh on the heels of the NPP Government's infamous and scandalous US$300 million CNT/CNTCI scam loan comes the West African Gas Pipeline Project Agreement that Parliament approved last Thursday and which appears not at all to be in the national interest.

"Osagyefo Dr. Kwame Nkrumah would have described the Agreement as "bogus and fraudulent", given the extent to which it could compromise Ghana's sovereignty, put our strategic national interest at risk, and subjugate the interest of the country to the interest of our other sub-regional collaborating partners", an energy expert that 'Ghana Palaver' consulted on the subject stated.

The energy expert, who shall remain unnamed for now, listed the following as only three of the areas of concern that Parliament ought to have taken into account before deciding whether to approve the Agreement or not:

(i) The discretionary pledging of all assets of the VRA, including the Akosombo and Kpong Dams, the Aboadze Thermal Plant, the Akosombo Township, the VRA's high tension cables and sub-stations throughout the country to guarantee the payment of the pipeline and associated costs;

(ii) The discretionary charge of payments due under the Agreement on the Consolidated Fund;

(iii) The ouster of the Energy Commission Act, the Ghana Maritime Authority Act, the Environmental Protection Agency Act, the Ghana Investments Promotion Act and the Exchange Control Act from the operation of the Agreement.

The energy expert also drew attention to the draft of a request proposed letter dated June 5, 2004, which is to be jointly issued by the Minister of Finance and Economic Planning and the Minister of Energy to the World Bank for a US$50 million facility in connection with the West African Gas Pipeline Project and which in his view contains conditions which are invidious to the interests of the country.

VRA's Assets as Security

The energy expert referred to Article 10.2 (on "Security from VRA") of Part V (on "Financial Matters") of Schedule 23 (on "Legislative Matters-Ghana") of the Agreement ("West African Gas Pipeline Project Agreement - International Project Agreement") which states as follows"

"In addition to the provision of section 22(3) of the Volta River Development Act 1961, the VRA may charge its assets, undertakings and revenues as security for the performance of its payment obligations under any agreement relating to the Project to which it is a party and may do all other things necessary for or incidental to the creation of such security. Any such charge shall be capable of registration with the Companies Registrar".

According to the energy expert, this is a most preposterous provision. In his view, the pledging of VRA assets as security under the Agreement is discretionary, but he is alarmed that the Government could even dream of pledging assets of the VRA, the country's most prized, most important and most critical infrastructure investment, for the payments of an investment in a gas pipeline, a most fragile and risky investment, represents one of the worst investment decisions any government could make.

The energy expert explained that the assets of the VRA include the Akosombo and Kpong Dams, the Aboadze Thermal Plant, the Osagyefo Barge, the Akosombo Township, all the high tension electricity cables stringing the entire country, the numerous transformer stations throughout the country, and the offices, residential accommodation and other properties and assets of the VRA, including even the external assets of the VRA.

"Osagyefo Dr. Kwame Nkrumah must be turning in his grave to think that any government after him would even dream of using any of these VRA assets as security for any other investment, let alone go ahead and sign an agreement to that effect", the expert stated, adding, "the whole idea is mind-boggling".

The energy expert explained that under the Agreement, it is only Ghana that commits itself to such a ridiculous clause, and he compares the clause to the equivalent clauses for the other participating countries as follows:

(i) Article 8 of Schedule 22 on Benin restricts Benin's security pledge to "assets of the Company (that is the West African Gas Pipeline Company) located in Benin", and also in favour of "third party creditors only";

(ii) Article 10.2 of Schedule 24 on Nigeria restricts Nigeria's security pledge to "assets, revenues and accounts of the Nigeria National Petroleum Corporation (NNPC) as are set aside for the Project as security for the performance of their obligations";

(iii) Article 8(1) of Schedule 25 on Togo restricts Togo's security pledge to "the assets of the West African Gas Pipeline Company located in Togo", and also in favour of "third party creditors only".

In other words, according to the energy expert, it is only Ghana that may pledge, without restriction, any of VRA's total assets movable or immovable and whether situated in or outside Ghana, to the payment of its obligations, including obligations to the participating countries, under the Agreement.

"Why any government should submit itself to such self-destructive discriminatory provisions against itself beats my imagination: the energy expert lamented.

Consolidated Fund as Guarantee

The energy expert quotes Article 10.3 of Schedule 23 on Ghana as allowing the Minister of Finance "in writing to guarantee the performance by the VRA of its undertakings under any agreement relating to the Project to which it is a party", and that "moneys payable under such guarantee shall be charged to the Consolidated Fund".

The expert explains that because of Article 13(2) on "Derogation/Disapplication of Existing Law", what it means is that any time the Minister of Finance guarantees VRA's performance, the payment in case of a VRA default takes precedence over all other payments that are charged to the Consolidated Fund. In other words, payments to the Gas Pipeline Company must be made before even the salaries of civil and public servants, including those of parliamentarians themselves, can be made.

There are no equivalent provisions in the Agreement for Benin and Togo, but the equivalent provision for Nigeria, which is in Article 10.3 of Schedule 24 on Nigeria, simply states that "the President (not the Minister of Finance as in the case of Ghana) may, in writing, guarantee the performance by the NNPC of its undertakings under any agreement relating to the Project to which they are a party".

There is no reference to the Consolidated Fund in the Nigerian Schedule.

Ouster of Ghanaian Legislation

The energy expert also pointed out that under Article 13.1 of Schedule 23, the following laws of Ghana shall not apply to the Company or to any other company of the Company, Buyers, Sellers, Shippers and Project Contractors in respect of the Project:

(i) The Energy Commission Act 1997 (Act 541) and any regulations adopted thereunder;

(ii) Ghana Maritime Authority Act 2002 (Act 630);

(iii) Ghana Investments Promotion Act 1994 (Act 428);

(iv) Exchange Control Act, 1961 (Act 71) and any regulations adopted thereunder.

According to the energy expert, the ouster of these laws has very serious implications for Ghana.

He explained that under the Energy Commission Act and its regulations, for example, power operators are required to utilise the lowest cost power first and the highest cost last. With its ouster, it means that ECG must purchase power from the WAGP, which is much more expensive, before purchasing power from the VRA's hydro-operated systems at Akosombo and Kpong.

The Maritime Authority Act is the law that empowers the Ghana Maritime Authority as the authority to implement the provisions of the Merchant Shipping Act, 1963, Act 183, to fulfil flag state and port state responsibilities in an effective and efficient manner, deal with matters pertaining to maritime search and rescue, and ensure the prevention of marine source pollution, protection of the marine environment, and response to marine environment incidents.

With the "disapplication" of that law, it means that the Pipeline Company may do anything in our coastal waters without being subjected to any authority or regulation in Ghana. "If you consider that the oil pipelines are to be laid under the sea on our continental shelf and in our Exclusive Economic Zone (EEZ) and we are saying that no Ghanaian authority can regulate or control their activities, then we are really making a fool of ourselves as a country", the energy expert stated.

The Ghana Investment Promotion Council whose enabling legislation is also "disapplied" under the Agreement coordinates and monitors all investment activities in Ghana. Among other things, the Council registers and keeps records of all investing enterprises and of all technology transfer agreements relating to investments.

There are also special provisions relating to foreign participation and minimum capital requirements, incentives for special investments and investment guarantees, transfer of capital, profits and dividends, and the remittance of proceeds in the event of sale or liquidation of the enterprise.

According to the energy expert, all these elaborate provisions are excluded with respect to the Gas Pipeline Project and Company, which do not make sense. "There may be a case for excluding specific provisions of those laws, and this could have been done with respect to each law, but to legislate for the wholesale exclusion of those enactments is to say the least lazy and sloppy drafting at best and gross irresponsibility, to say the least", the energy expert moaned.

The energy expert explained that there are so many odious and obnoxious clauses in the Agreement that he wonders why Parliament as a whole approved it in its present form.

But he reserved his greatest criticism for the NDC Minority in Parliament He was of the view that the NDC MPs should never have approved the Agreement in its present form, especially given that their own Chief Whip, Hon. Doe Adjaho, and their own Ranking Member on Energy, Hon. S. P. Adamu, had raised the red flag on the Agreement and expressed serious reservations about it.

He added, "I happen to know that people like Hon. Dr. Ampofo on the NDC side had worked on this Agreement in the NDC era. If they had only read what the NPP Government brought for approval, they would have realised that it was a completely different thing from what they had worked on. That the NPP Government changed the implementation agency from the GNPC to VRA alone should have put the NDC members in the know on their guard".

According to the energy expert, the NDC MPs have another chance to make amends. He explains that Parliament is yet to pass the Resolution that will give legal validity to the Agreement. He advises strongly that the NDC MPs should not vote for the Resolution. His reason is simply that the Agreement in its present form is not in the national interest.

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