26.04.2005 Business & Finance

Five companies refuse to refund ¢153bn Gov’t loan

By Chronicle
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Accra, April 26, 2005, Chronicle -- J. STANLEY OWUSU & Company Limited (JSO), and four other companies have defaulted in the payment of grants, totaling 9,012,981.65 pounds (¢153,220,677,000) they benefited under the National Democratic Congress (NDC) regime, some nine years ago.

Documents available to The Chronicle reveal that in 1996, five Ghanaian Construction Companies were granted an Export Credit Guarantee Development Facility (ECGD), in line with World Bank assistance programme to enhance the capacity of Ghanaian companies.

The Facility, The Chronicle gathered, was granted in the form of plant and equipment, guaranteed by the Ministry of Works and Housing (MWH), repayable through 30% deduction from work done, by the Ministry of Finance, as and when payments were to be made.

The Chronicle investigations further revealed that the government, which granted this facility, never made any attempts to compel the beneficiary companies to pay back the loan.

The investigations also revealed that, these companies could have fully paid back their total loan amounts under the NDC government had the then Finance Ministry, complied with the agreed 30% deduction from contract payments to the companies.

A source at the MWH told the paper that Hon. Kwamena Bartels, who was the first NPP government Minister to head that portfolio, vowed not to give any contract to those companies if they did not pay fully the loan granted them.

The source continued that Hon. Bartels' approach could not yield any result, as none of the companies made any attempt to pay back their share before his exit from that ministry.

When Alhaji Mustapha Iddris took over the Ministry, The Chronicle gathered, he formed a committee to find ways of compelling these companies to pay back the loan.

After the committee's work, they came out with eight recommendations. One of it was that the beneficiary companies were required to submit proposal for the repayment of the loan facility.

Another was that, the companies were to submit to the MWH, records of all projects being undertaken by them, for both government and non-governmental agencies.

A revised agreement was signed between the beneficiary companies and MWH with a provision, which mandated them to supply information for effective monitoring.

The committee recommended also that until the full recovery of the loan facility, the beneficiary companies should register their respective plant, equipment and machinery in the name of the MWH Despite the opportunities and flexible repayment terms that these companies were offered the facilities, they have refused to pay even half of their debt after nine years.

Documents available to the paper indicate that in all, the five companies, as at February 2005, have paid only 3,063,772.06 pounds.

The leading beneficiary company of the facility, JSO, who had the highest amount of 3,510,996.02, equivalent to about ¢60 billion, has executed a number of projects for the previous and the current governments, but strangely, have defaulted in repayment.

Notwithstanding JSO's indebtedness to the state, the Accra Metropolitan Assembly AMA, a cash-strapped state institution, went ahead and overpaid this company by about ¢1 billion for its solid waste operations.

A credible document at the disposal of The Chronicle indicates that, as of February 2005, JSO had paid only 215,681.65 pounds out of the 3,510,996.02 pounds, leaving a balance of 3,295, 314.37 pounds, nine years after benefiting from the facility.

In JSO's response to The Chronicle's questionnaire last month, signed by Mr. E.Adu Smith, General Manager, Finance, the company admitted benefiting from the facility in 1996.

However, Mr. Smith stated in his response that, the company had so far paid about ¢6.1 billion, leaving a balance of ¢8.2 billion, implying that the total debt was only ¢14 billion, using an exchange rate of ¢4,085.

The other four companies are Marine Construction Company Limited, 2,301,985.65 pounds, Yiadom Builders' Limited, 1,200,000pds, Pentrexx Ghana Limited 1,000,000 pounds and Bascon Works Limited 1,000,000pds.

The Chronicle investigation disclosed further that, out of the five companies, it is only Marine Construction Co.Ltd which had paid a greater part of its share, having paid 1,847,985.07pds out of 2,301,985.65 pounds, leaving a balance of 454,000,56 pounds.

Bascon Works Limited, for example, had paid less than 100,000 pounds out of a one million-pound loan it benefited after nine years.

The company has since collapsed.

The Chronicle can state categorically that all the plant and equipment, which were given to the companies, had broken down beyond repairs.

Some of the contractors are currently facing serious financial crisis. Those that have a sound financial capacity and are doing brisk business, however, seem unprepared to pay off their indebtedness.

The Minister of Roads and Transport, Dr. Richard Anane, recently announced that his ministry had secured a similar facility to help build capacities of local Road Contractors, to enable them compete with their foreign counterparts.

The question to ask is: what measures would the ministry put in place this time round, to ensure the facility, when disbursed would not go the way of the previous one?

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