|
The Vodafone commission's report
Valerie SAWYERR (Dr.)
DEPUTY CHIEF OF STAFF
CASTLE- OSU
Thursday October 15, 2009
In 2008, the Government of Ghana divested seventy
percent (70%) of its shares in the Ghana Telecommunications
Company Limited (GT) to Vodafone International Holdings BV for
nine hundred million US dollars ($900m) under a Sale and
Purchase Agreement (SPA).
The then Minority group in Parliament urged on by a large
section of Ghanaians strongly opposed the sale, on grounds among
others, that the sale was shrouded in secrecy, fraught with
irregularity, ignored time-honoured procedures, contravened the
laws of Ghana, did not guarantee value for money and therefore
was not in the strategic interest of Ghana.
In furtherance of a campaign promise to review the sale and the
SPA in order to ensure that the strategic national interest of
Ghana is guaranteed, an Inter-Ministerial Review Committee
chaired by Justice Emmanuel Akwei Addo was inaugurated on 18th
May 2009 to review the Vodafone transaction.
The Committee’s Terms of Reference was to examine all issues
relating to the management and finances of GT from the tenure of
the Telenor Management Partners which later metamorphosed into
Telecom Management Partners to the period of the sale of 70%
shares of GT to Vodafone; and an examination of the terms and
conditions of the SPA, the contract with the transaction
advisers and issues after the sale.
The Committee has since presented its report to government
through the Ministry of Communications.
Government takes this opportunity to thank the members of the
Committee for diligently applying themselves to the task and for
their sacrifice and good work.
The Committee in its report to Government noted that former
Minister of State for Finance Dr. Akoto Osei and the immediate
past Chief Executive of GT Dickson Oduro Nyaning refused to
assist the Committee with information. While Dr. Osei flatly
refused to honour invitations from the Committee, Mr. Oduro
Nyaning said he could not provide the information and
explanations the Committee required for personal reasons.
The Committee received testimony from a sitting Member of
Parliament that the majority side in Parliament at the time was
bribed or improperly incentivized to endorse the Vodafone
agreement. The Committee was of the view that if found to be
true, the entire validity of the process would be called into
question and would be contrary to the criminal laws of Ghana
particularly Sections 240 and 244 of the Criminal Offences Act,
1960 (Act 29) which prohibits corruption of public officers. The
Committee did not have the powers and resources to investigate
these claims and therefore refrained from making findings on
this specific allegation.
The Committee found among others that:
1. Most of the terms of the SPA are inimical to Ghana’s
interest. For example, Article 6.1.6 provides that
“There shall not be any injunction or other order that
prohibits/restrains the sale of the sale shares by GoG to the
Purchaser in particular or generally.”
The Committee noted that there cannot be any law that ousts the
courts’ jurisdiction and any agreement that purports to do that
is null and void and of no effect.
Article 10.7 provides that
“GoG hereby waives, and undertakes that it will not at any time
bring, any claim or prosecution against any member of the
Enlarged GT Group or any post-Closing directors in respect of
any act of any such member or director relating to the
Anti-Corruption Warranties which arises from or otherwise
relates to the period prior to Closing.”
It is the Committee’s view that the Government of Ghana cannot
waive or make any such undertaking not to prosecute anyone who
might have committed an offence. Absolutely nobody can contract
out of the criminal law and Vodafone knows this very well. The
Committee found it amazing that the previous Government agreed
to a term like this one.
2. The SPA in its negotiation and ratification breached many
laws of Ghana including the 1992 Constitution, the National
Communications Authority (NCA) Act and Regulations, and the
Internal Revenue Act 2000 (Act 592) of Ghana.
3. The allocation of a 3G license under the SPA was not in
compliance with the NCA Regulations 2003 (L.I. 1719) which
stipulates that such a license may only be granted by public
tender where the unassigned frequencies are limited, as is the
case with 3G licenses.
4. The indemnity clause in the SPA is not balanced as it seeks
to protect the interests of the buyer and not the mutual
interests of both parties.
5. While the SPA was made with Vodafone International BV in the
Netherlands, Vodafone PLC of the UK has come into the fray and
assumed the centre place doing business as if the agreement was
signed between Ghana and Vodafone PLC. The argument that
Vodafone PLC
owns Vodafone International BV cannot be accepted because the
two companies are two separate entities and one cannot take over
the other when it is not a party to the SPA.
6. The ratification of the SPA entered into between the
Government of Ghana and Vodafone International BV on July 03,
2008 is unconstitutional. Parliament’s ratification of the SPA
cannot cure it of any illegality because a ratified
international commercial agreement is not of the same status as
an Act of Parliament.
7. The enlarged GT Group’s 70% stake could have been sold for
more than the SPA price of US $900million because the value put
on GT by the Transaction Advisors was higher and Telekom SA
offered US $947 million for a much lower stake of 66.67%.
8. The Government of Ghana did not get value for money from the
sale and, through a series of complicated financial
arrangements, the Government of Ghana realized only US $266.57
million from the SPA.
9. The National Communications Backbone Company (NCBC) which was
added to create the Enlarged GT Group was grossly undervalued.
The fibre optic network is a strategic national asset and should
have remained an independently operated infrastructure as
originally intended.
10. The appalling financial state of GT before the sale was
because the Telenor/Telecom Management Partners (TMP) and later
the three-member Interim Management Committee (IMC) grossly
mismanaged the company by indulging in all manner of financial
malpractices and irregularities. This plunged the company into
crippling debt and to the point of insolvency.
11. There was executive interference in the sale of GT with
former President, John Kufuor, being the one who agreed on the
transaction price, technical considerations and the underlying
legal assumptions of the Vodafone offer of May 15, 2008. These
negotiations by the former president were highly irregular,
unconventional and did not rely on expert advice.
12. Claims amounting to about US $45 million made against a US
$63 million escrow account by Vodafone are not valid. Charges
against the Escrow include increases in provision for bad debts
and exchange differences arising from delayed update of Vodafone
records with government assumed debts.
13. The IMC did not advise against payments such as US $1.9
million made to the TMP in 2008 even though they knew that TMP
had illegally paid monies to itself long before the GT sale.
14. There was not enough information on how Vodafone utilized a
US $228 million shareholder loan which was intended in the SPA
for non-waivable debts including the Irroko Bonds.
15. The contract of the Transaction Advisers was not renewed and
they were not used in the Vodafone negotiations. Fixed fee
payments due them remain unpaid while a success fee claim for US
$1.5 million had been negotiated with the former Chief of Staff
as of December 2008.
16. Despite several requests, Vodafone could not provide
information to enable the Committee confirm the expected US $200
million capital injected into GT after the SPA. Vodafone had
claimed that they have made as much as US $187 million
withdrawals from the US $200 million bridge facility.
17. While Vodafone claimed that, between August 2008 and May
2009, it paid Huawei GH¢61 million from the bridge facility,
documents submitted by Huawei indicated that they had invoiced
and received only GH¢37.29million and not GH¢61million. This was
a misrepresentation to the Committee, and the Committee
considered it a breach of the warranty provisions in the SPA.
The Committee was of the view that Government may want to
confront Vodafone and ask them to account for the difference of
GH¢23.71 million.
18. There is evidence that Vodafone International BV seems to
have ceded its role to Vodafone PLC and can be a ruse way of
wanting to practice the phenomenon of transfer pricing and the
Internal Revenue Service must be alerted.
Accordingly, the Committee made the following recommendations to
Government:
1. Government should consider the option of renegotiating the
SPA with Vodafone and in particular, a reconsideration of the
following:
a. Parties to the SPA
b. Compliance or otherwise of the SPA with the laws of Ghana,
particularly the NCA Regulations and the Internal Revenue Act
592
c. Value for money/ Transaction consideration
d. Retention of the National Fibre Optic by the Government of
Ghana as a strategic national asset
e. Decoupling of the Ghana Telecom University from the
transaction (already done)
f. Return of GT investments to the Government of Ghana such as
the Telecom Emporium
2. The NCBC must be decoupled from the Enlarged GT Group and a
public entity established with a nationalistic mandate and given
the resources to complete and expand the backbone to all
socially and economically necessary locations to enable it act
as the foundation for Government’s ICT Policy.
3. A forensic audit must be conducted into the affairs of GT to
cover the TMP and the IMC, and management at the time made to
answer for their stewardship.
4. GT-Vodafone must be requested to provide detailed reporting
requirements based on forensic accounting and reporting
principles. This should follow the establishment of actual
sourcing and use of funds purportedly introduced by the current
management as working capital.
5. The SPA was negotiated in an inelegant manner by Government,
which gave everything and took nothing in the context of the
inequalities in bargaining power that were allowed to prevail.
This should never be allowed to happen again.
6. Government must conduct a serious audit into the way and
manner it negotiates such business deals. A working party of
experts consisting of a corps of technical experts and
negotiators should be in charge of such negotiations.
7. Copies of all government agreements should be lodged with
government archivists as required by law. Copies of such
agreements should be lodged with the Attorney-General as the
second repository and copies retained by the respective MDAs who
should superintend the execution and implementation of the
respective public agreements to ensure that the best interests
of Ghana are protected.
Government has taken note of the Committee’s findings and
recommendations, and will soon make public its position on the
recommendations.
We however wish to assure all Ghanaians that we remain committed
to our promises and pledge to ensure that any transaction that
purports to transfer any part of any asset belonging to Ghana,
as in this case GT, to another entity must take full cognisance
of and be consistent with the spirit and letter of the laws of
Ghana, set guidelines and procedures. Ultimately, any such
transaction must deliver to Ghanaians value for money.
|
