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The Agyapa / Asaase deal, which sells Ghana’s gold royalties to investors through an SPV, has created an uproar and rightly so. It managed to muddy the waters and raises a number of legal and valuation questions.
First, it raises the important question of whether the Government of Ghana should bet by investing in a Fund, which will be managed by a Fund Manager with no reported fund management history. A Fund with unknown objectives, and backed by a rather questionable amendment to the MIIF Act that only the majority in Parliament passed (after a minority strike), which restricts any government from changing directors or fund managers regardless of the breach.
Also in question is the timing of this amendment, which subsequently allowed the SPV, originally established as Asaase Royalties, to be renamed in August when questions arose linking it to the owners of Asaase Radio: Gabby Okyere Darko and Akuffo-Addo. family – to be built as is.
Then there are the legal issues, on which the Attorney General, on July 22, 2020, raised seven (7) major conflicts between what the transaction advisor wanted done and the laws of Ghana. These issues, highlighted by the Attorney General, confirmed our worst fears and suspicions; that this agreement is excessive and illegal.
Surprisingly, just a few days ago a new document appeared dated August 12, 2020, in which the very serious legal concerns initially raised by the Attorney General have been miraculously resolved with no changes to any laws.
The real question is why the Minister of Finance chose a route of selling shares to raise money instead of the more conventional, tried and tested traditional and safe approach that investment bankers have used over the years to monetize the flow asset future, in this case being our royalties – through a securitization route.
The conventional method consists of setting up an SPV to which the Royalties flows (not sold) will be assigned; the SPV then issues notes to raise money for the owner of the SPV i.e GoG. Therefore, in this case it is only the future flows of these royalties that are securitized. There is no sale of royalties from Ghana, and all flows in excess of what is used to make debt service payments to note holders (interest and principal) go back to the government’s consolidated funds.
On the contrary, this controversial and unconventional route taken by the government in the Agyapa case is highly unusual. Here, GoG is selling the Royalties from 16 mining deals, ad infinitum, to an SPV company, of which Ghana owns only 51%, and which in turn uses our Royalties to trade without supervision or supervision.
What is the reason for taking this unconventional route, whereby Ghana will not receive royalties in our consolidated fund until the end date of these mining lease agreements, which is also unclear and clouded by ambiguity?
There is absolutely no rationale for choosing to raise money through floating shares in a new company with no track record. If the government needs to raise funds using our royalties, a cheaper and more transparent way would be to issue notes in the capital markets backed by future royalty receivables.
Fund management is another area where there is clearly a lack of good governance and clear and adequate oversight. Investors are attracted to solid and proven fund managers based on their qualifications and experience. This should therefore be seriously considered, as no one will invest in a startup company unless it is being managed by a reputable and well-established fund manager with excellent credentials; well, nobody except maybe friends and family who know what they are going to receive.
Another issue of concern is the price: the value obtained by the Government (GoG) for selling 49% of its participation in future royalties. How did you arrive at the share price of a Fund that will receive 75.6% of GoG’s royalties from an identified gold mining lease, whose specific objectives are to trade or invest in assets?
One would have expected that our investment banking minister would have provided a comprehensive analysis of the net present value (NPV), which would convincingly show that the rate of return on the initial payment received from the sale of 49% of the GOG fund, as well as The projected future earnings accumulated for GoG from this Asaase / Agyapa company will exceed the return we currently obtain from receiving 100% of all our royalties. This would certainly have helped clear up many unanswered questions.
The current argument that is being raised to justify this transaction farce is that citizens do not have clarity or visibility about what our royalties have been used for. However, the darkness of Agyapa is precisely the reason why there is absolutely no transparency or accountability.
Clearly another case of bad governance and, worse, weak policies and laws!
I think this fuss could have been avoided if GoG, for example, had modeled the management of mining sector revenue in a similar way to that of the oil sector PRMA, in a transparent and conventional way, even though the PRMA has its own challenges, which is another. topic of discussion on another good day.
Finally, I am appalled at the lack of independence of our Legislative arm of the Executive, as evidenced by the repeated and blatant State Capture schemes of the Office of the President approved by Parliament.
My fellow citizens, this agreement raises more questions than answers, as there are many crucial issues that require immediate answers that clear up the gray areas.
Ghanaians deserve answers now.
Signed
Alex Kofi-Mensah Mold
08/30/2020
