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06.10.2005 General News

Ghana bleeding from crony Capitalism

By Statesman
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FOR months, The Statesman set its sleuthhounds on a charge that tormented and characterised the eight-year rule of the National Democratic Congress and well into the first term of the Kufuor administration in 2001.

The perception was that the NDC was nakedly corrupt. That, ostensibly, in the name of supporting the private sector, government contracts, grants, loans and other items of state-sponsored munifence were indiscreetly and discriminately given to government and party officials, supporters, their families and friends, with little recourse to the ability to deliver and make repayment into national coffers. It is called Crony Capitalism or, at best, reckless management.

According to documents available to The Statesman, at least ¢8 trillion ($882 million) of government-guaranteed loans lent to institutions and companies, many of whom with close ties to the PNDC and NDC, are yet to be recovered by the State. With some dating as far back as 1987, several of the arrears are considered today as doubtful debts.

Moreover, at least another ¢328 billion of loan facilities to the private sector guaranteed by the Rawlings administration has been totally written off by the Kufuor administration as “non-recoverable loans” – bad debts. Our investigations, ongoing, suggest that there are more of such financial advances yet to be accounted for than the amounts quoted above. “Nobody can actually tell how much of government-guaranteed loans and grants were recklessly thrown to their business friends,” a senior source at the Finance Ministry told one of our reporters.

“The facilities were handled in such a haphazard manner that finding a proper and articulated paper trail is no picnic,” another source added. There is, for instance, an alleged $100 million loan facility that was contracted and was never sent to Parliament for approval. More on this in subsequent editions.

Frandesco & Partners, a construction company owned by one of the biggest bankrollers of the NDC at the time, Francis Doe, is among the biggest defaulters. Between 1992 and 1996, a total loan package of £27.2 million (¢430.6 billion) and DM17.1 million (equivalent to ¢184 billion), under the ECGD facility, were guaranteed by Government to five companies allegedly headed by or allied to Francis Doe. The companies were Frandesco & Partners (£4 million), Frandesco (West Africa) (£12.5 million), Fruit & Flavours (£2.8 million), Goi-Kposem Mining (£8.2 million). The DM17.1 million went to another allied company, Franmar JV.

Similar facilities were given to other companies with close links to the then ruling party, led by the Great Apostle of Probity & Accountability, Flt Lt JJ Rawlings. For example, £25.6 million (¢102.7 billion) of the ECGD facility advanced to 15 companies under the NDC, is still outstanding.

Kamara Ltd, owned by a man tipped as Prof Mills' running mate in 2004, Baba Kamara, still owes Government about ¢19 billion from the ECGD facility. Pentrexx Ltd, a company that the NDC Chairman, Obed Asamoah, allegedly refused to prosecute over the construction of the Keta Sea Defence system, has an outstanding debt of about ¢18.4 billion owed to the State.

J Stanley Owusu & Company, a firm owned by a staunch NDC sympathiser at the time, still has to make loan repayment of £3.3 million (¢57 billion) to the State.

Apart from the £25.6 million, there is an additional 'disputed' balance of £80.6 million (approximately ¢1.8 trillion) of the ECGD facility owed by 7 other companies, including Danielli Mabey, owned by Danny Ofori Atta of EGLE Party and a leading member of the Wahala demonstrations.

An additional ¢5.7 billion of a Japanese non-project type grant is still owed by beneficiary companies of the PNDC and NDC regimes of Jerry John Rawlings. Much of the Japanese grants given between 1987 and 1994 went to companies with very close links to Mr Rawlings or his administration. Typical of these are Mark Cofie Engineering, which received ¢8.4 million in 1989 value. Mr Rawlings had a well-known friendship with a daughter of the late Mark Cofie and indeed stayed in their house for a while in the past. The Tema-based Brenya Distribution, which still owes ¢59.6 million dating as far back as 1991 from the same Japanese grant facility, was owned by a leading female member of the NDC.

In the case of Frandesco, a situation not unusual with several of the others, the company did not even make payments to cover the contractual 15% down payment of the total value of the funds borrowed. The 15% down payments, arrangement fees and other charges were also paid by the central bank and recovered from Government. Moreover, matured repayments relevant to the 85% were not made as scheduled by the five allied companies and had to be recovered from the Controller and Accountant-General's account at the Bank of Ghana. This is because funds were not made ready in advance, as agreed, by the beneficiary companies to meet the maturing instalments.

Ironically, Frandesco is suing Government for breach of contract involving some construction works.

A letter filed in July 2005 to the Attorney General and Minister of Justice (and copied to eight others) carried the frustrated sentiment of the Finance Minister.

It begins, “The Ministry of Finance is concerned about the high rate of inflow of requests to settle judgment debts against Government.” The letter continues, “The Ministry is, however, also aware that various judgments, including Quality Grain, Court Computerisation, in which former Government officials and investors respectively have been convicted, also made recommendations that Government institutes actions to recover its losses from these individuals.”

The frustration heightens, “We are also concerned about the slow pace in dealing with CP Construction's illegal transfer of DM117 million into its Liechtenstein account. I notice that we continue to pay fees to overseas attorneys assisting Government in fighting CP's claims in numerous arbitration cases in various international fora while the alleged perpetrators continue to walk freely in Ghana.”

Kwadwo Baah-Wiredu tells Joseph Ayikoi-Otoo, “In a similar vein, Frandesco & Partners is being allowed to pursue Government in international courts while our own case initiated by your office in April 2002 continues to be in abeyance.”

The letter also makes mention of various cases investigated against former DCEs in 2001 “that are also not being dealt with.”

It ends on a strong note, which is also a serious indictment on the A-G's Department, “Finally the lack of actions in our Courts both civil and criminal is making the Government look bad in the eyes of our Donor partners with respect to our commitment to fighting corruption, including ensuring that alleged corrupt officials are made to answer for their alleged crimes.” Read more in next Wednesday's edition.