Re: Gov't demands retraction, apology from Gabby over 'chop chop' allegation

My attention has been drawn to a statement issued by the Government of the Republic of Ghana “demanding an immediate substantiation or a retraction and apology from the NPP’s Gabby Okyere Darko [sic] who said in an interview on Joy Fm on the evening of Thursday 25th August, 2011 that ‘some people who arranged it [the loan] will have access to $30 million when the $3billion loan is approved by Parliament.”

The statement from Government added that in the said interview, “Mr Gabby Okyere Darko impugned corruption when he made the following remarks: ‘Why is this so called Master Facility Agreement before Parliament because it doesn’t automatically lead to the project being funded? It doesn’t. All it does, actually, is that immediately after it is approved by Parliament, some people who arranged it will have access to $30 million and a commitment fee of $3.5 million will be paid within 20 days and another 3.5 before the first subsidiary agreement will be approved and the funding released.’ Mr. Okudzeto Ablakwa said for such a very important facility which is the single biggest loan the Republic of Ghana has ever entered, it is natural to expect enormous interest from the international community and for such unsubstantiated statements to be unchallenged will be very inimical to the image and fortunes of Ghana.”

To help achieve a fuller appreciation of the issues, I wish to begin by drawing Government’s attention back to August 3, 2010, when Parliament gave approval to the $1.5 billion STX Suppliers’ Credit Facility. That $1.5 billion facility stipulated expressly in Clause 14.2 FEES, the following: (a) The Government shall pay to the Supplier a Facility Fee of 0.75% of the Facility; (b) the Government shall pay to the Supplier a Management Fee of 0.50% of the Facility; (c) the Facility Fee and the Management Fee shall form part of the first disbursement of the Facility.”

The subsequent sub-paragraph of 14.3 INSURANCE PREMIUM, stated: “(a) the Government shall pay to the Supplier of the Facility for the purpose of arranging political risk insurance cover for the Facility (The Insurance Premium); (b) the Insurance Premium shall form part of the first disbursement of the Facility.”

These put the total amount of stipulated fees for that $1.5 billion transaction at $20 million and the insurance premium at about $265 million. But, there was an important provision that the two fees shall only be paid to the supplier (STX E&C (Ghana) Ltd) at the point of first disbursement. On the face of the STX agreement, the ‘arranger’ was STX, the supplier. A similar provision is provided in this $3 billion credit line from China and it is surprising that my reference to it has caused such consternation within Government circles.

The Government’s statement demanding an apology and retraction was generous enough to include the details of Clause 11 of Section 4 of the Master Facility Agreement (MFA) of $3 billion between the Republic of Ghana (as borrower) and the China Development Bank Corporation (as lender). What that paragraph states unequivocally, however, is that the fees to be paid for the arrangement, management or, whatever, for the facility add up to 1.25% of the total facility of $3 billion. It is this that translates into $37.5 million and it is this also that the agreement demands must be paid upfront even before any agreement for disbursement is concluded.

On top of that, every cost and expense incurred by the China Development Bank in this transaction shall be coughed up by the Republic of Ghana. Clause 15 COSTS AND EXPENSES, demands of the Ghana Government, the Borrower, to “promptly on demand pay to the Lender the amount of all costs and expenses (including legal fees) reasonably incurred by the Lender in connection with any Eligible Project, and the negotiation, preparation, printing and execution of: (15.1.1) this Agreement and any other documents referred to in this Agreement, up to a maximum amount agreed by the parties and approved by the Borrower’s Parliament; and (15.1.2) any other Finance Document executed after the Execution Date, including each Subsidiary Agreement.”

Rather than Government demanding that “Mr. Gabby Okyere Darko should be willing to name those people and give all Ghanaians the evidence of his claims,” Government should be, instead, explaining to Ghanaians the purpose of those two specific fees stated in the MFA. It is instructively odd that the two fees, the ‘Up-front Fee’ of 0.25% and the ‘Commitment Fee’ of 1%, are the only material words that have not been defined in the Definitions and Interpretation Section of the MFA.

The import of my point on Joy FM on the said Thursday was that I could not see the relevance in Government getting the legislature to give approval to the $3 billion MFA because its approval, unlike most loans, would not lead to an automatic approval of any of the 12 specific loans (covered under Subsidiary Agreements) provided in the MFA and that the only guaranteed trigger from the parliamentary approval was the ‘Execution Date’ (date of agreement) which would lead to upfront payments from Government totalling $37.5 million. Essentially, these up-front payments shall be made before the First Subsidiary Agreement of any of the loans shall be approved for disbursement (or utilisation).

Government has been quick to explain away the absence of details for any of the 12 broad projects listed for the utilisation of the loan facility. The explanation is that after the approval of the MFA, each of the projects will be presented to Parliament for individual parliamentary approval. This has led to legitimate questions over the relevance of seeking parliamentary approval of the MFA, which the Minority in Parliament has described as effectively a Memorandum of Understanding.

However, the point must be made (and was made by me on Joy FM) that the approval of the MFA requires of Government to make upfront payments totalling $37.5 million or 1.25% of the total facility of $3 billion, even though, at the point, there will be no guarantee of which percentage of the total facility will be approved by the CDB for utilisation.

This fact is clear under Section 2, Paragraph 4 of the MFA, which deals with Subsidiary Agreement. It states that before the Lender will approve of any of the 12 Subsidiary Agreements, the conditions that must be fulfilled include evidence that “the fees then due from the Borrower under Clause 11 (Fees) and Clause 15 (Costs and Expenses) have been paid; the amount standing to the credit of the Debt Service Reserve Account is no less than (in the case of the first Subsidiary Agreement) the Required Amount and (in the case of each other Subsidiary Agreement), the Debt service Reserve Amount for the Interest Period in  which that Subsidiary Agreement is entered into”, etc. Debt Service Reserve Account is defined as “an amount equal to 1.5 times the aggregate amount of principal and interest due to be paid under this Agreement in respect of the Interest Period.”

Indeed, under Schedule 1, which deals with Conditions Precedent to First Subsidiary Agreement (i.e. the first of the 12 broad projects to be financed),  there must be “Evidence that the annual principal and interest payments due under the Master Facility Agreement and each Subsidiary Agreement have been included in the current fiscal budget for the Republic of Ghana.” This immediately takes us to 2012, since no such provision is explicit in the 2011 budget, including the subsidiary one.

Another important condition precedent involves Offtaker Agreements for the GNPC to sell crude oil to China that can cover the repayment of the loans. An Oftaker Agreement is defined as “the agreement between the Borrower and the Lender for the lifting of crude oil as approved by the Borrower’s Parliament.”

And, instructively, there must be “Evidence that the amounts to be received by the Exporter [GNPC] under the Offtaker Agreement are sufficient to support the payments to be made under this Agreement and the Subsidiary Agreements.”

Indeed, such is the strictest nature of this Chinese facility that before a Subsidiary Agreement can be utilised, the CDB is demanding “Evidence that the term of oil supply under the Offtaker Agreement extends at least 6 months beyond the latest Final Repayment Date under the Subsidiary Agreements,” which can be 10 or 15 years.

The author is the Executive Director of the Danquah Institute, a policy think tank in Accra, Ghana. This e-mail address is being protected from spambots. You need JavaScript enabled to view it

EDITORS’ NOTES

I have reproduced below the provisions  of Clause 11, as done by the Deputy Minister of Information.

11. FEES

11.1 Up-front fee

The Borrower shall pay to the Lender an up-front fee equal to zero point two five per cent (0.25%) of the Total Commitment of which:

11.1.1 half shall be paid on or before the day falling twenty (20) days after the Execution Date; and

11.1.2 half shall be paid as a condition precedent to the first Utilization under the first Subsidiary Agreement.

11.2 Commitment fee

11.2.1 The Borrower shall pay to the Lender a commitment fee of an amount equal to one percent (1%) per annum on the undrawn and uncancelled portion of the Total Commitment during the period beginning on the earlier of:

(A) the date of satisfaction of the conditions precedent referred to in

Clause 4.1 (Conditions precedent to the first Subsidiary Agreement); and

(B) the date falling sixty (60) days after the Execution Date, and ending

on the date of the final Utilisation under all the Subsidiary Agreements.

11.2.2 The Borrower shall pay the accrued commitment fee:

(A) on the last day of each successive period of six months which ends during the Availability Period;

(B) on the last day of the Availability Period;

(C ) and, if cancelled in full, on the cancelled amount of the Total Commitment at the time the cancellation is effective.

Note that under Section 1 (INTERPRETAION) which deals with definitions and interpretation, 'Commitment Fee' is not defined neither is 'Upfront Fee'.

Execution Date is defined as "the date of this Agreement"

Total Commitment means "the aggregate of Tranche A Commitment and Tranche B Commitment, being US$3,000,000,000 on the Execution Date."

Utilisation means "a disbursement of a Loan under a Facility."

---

Add this page to your favorite Social Bookmarking websites

 

Comments

Add New Search

watches-happy (175.42.35.xxx) 2011-08-27 08:05:27 link:http://www.watches-happy.com/iwc-watches-iwc-ingenieur-watches-c- 116_120.html comes with great quality, creativity and innovation, which is superior value for revenue for the advantageous cost and discount price of it.Each Luxury link:http://www.watches-happy.com/iwc-watches-iwc-ingenieur-watches-c- 116_120.html produced is examined carefully by our quality test section and each watch is inspected again before being sent to our client. link:http://www.watches-happy.com/iwc-watches-iwc-ingenieur-watches-c- 116_120.html come in varied designs and style patterns and all the designs of the replica IWC Ingenieur link:http://www.watches-happy.com/iwc-watches-iwc-ingenieur-watches-c- 116_120.htmllook absolutely gorgeous. These watches will certainly make your dream come true. Reply 0 0

perfect-watches-replica (175.42.35.xxx) 2011-08-27 08:05:39 link:http://www.perfect-watches-replica.com/bell-ross-watches-c-7.html have appeared as the most highly revered and best appoints.The reason that link:http://www.perfect-watches-replica.com/bell-ross-watches-c-7.html are so popular is that they are high fashionable and very reliable.Famous link:http://www.perfect-watches-replica.com/bell-ross-watches-c-7.html are known for their premium engineering and the brand link:http://www.perfect-watches-replica.com/bell-ross-watches-c-7.html has turn a symbol of high-end watch-making.The huge admiration that the elegant design and high quality of link:http://www.perfect-watches-replica.com/bell-ross-watches-c-7.html is what triggered the demand to create this timekeeper style at affordable prices. Reply 0 0

replica-watch-brand (175.42.35.xxx) 2011-08-27 08:05:49 All Luxury link:http://www.replica-watch-brand.com/Wholesale-tissot-motogp-watche s_c816 sold at link:http://www.replica-watch-brand.com are brand-new and superiority.Our link:http://www.replica-watch-brand.com/Wholesale-tissot-motogp-watche s_c816 is crafted to meet the exact specifications of the original designs, Each link:http://www.replica-watch-brand.com/Wholesale-tissot-motogp-watche s_c816 is paid tight attention in manufacturing, and inspected carefully before it was taken out of the warehouse so that each client can receive an assured product from us.It is our desire that you do experience the joy of shopping when buying one of our Luxury link:http://www.replica-watch-brand.com/Wholesale-tissot-motogp-watche s_c816 at our site. Reply 0 0

http://www.zapatillas4futbol.com botines futbol Nike (124.72.6.xxx) 2011-11-17 06:40:40  Rafael Marques abrió el marcador para el Gremio, Fred empató y Marquinhos puso en ventaja link:http://www.zapatillas4futbol.com/nike-mercurial-vapor-superfly-ii i-fg-c-604.htmlde nuevo link:http://www.zapatillas4futbol.com/nike-t90-c-605.html al equipo de Porto Alegre, que terminó el primer tiempo con la victoria parcial. En el segundo tiempo, con la solidez en marca del colombiano link:http://www.zapatillas4futbol.com/adidas-predator-c-601.html Edwin Valencia y la link:http://www.zapatillas4futbol.com/adidas-f50-adizero-c-600.html creación del portugués de origen brasile?o Deco, el Fluminense se adue?ó del mediocampo, emparejó con Fred y viró con Rafael Sobis, sin link:http://www.zapatillas4futbol.com/ embargo, link:http://www.zapatillas4futbol.com/el link:http://www.zapatillas4futbol.com/ Gremio, que llegó a 47 puntos, remontó con tantos de Brandao y Adilson. Con otra vez el marcador adverso, el héroe de la jornada, Fred, volvió a igualar, link:http://www.zapatillas4... Reply 0 0

Write comment
Name:
Email:	do not notifynotify
Website:
Title:
Please input the anti-spam code that you can read in the image.

Powered by !JoomlaComment 4.0 beta1

!joomlacomment 4.0 Copyright (C) 2009 Compojoom.com . All rights reserved."