Divestiture of State Assets Its Impact On and Implications For Ghanaians From the perspective of an Nkrumahist.

A] INTRODUCTION The idea of the State owning its own economic entities has been with us since the colonial times, more specifically during the post-world war II era when the colonial masters of the then Gold Coast, the British, established a number of public utilities, such as water, electricity, postal and telegraph services, rail and road networks and bus services to serve the populace. Furthermore, in order to encourage and foster the export of coffee, palm kernels and cocoa, the Agricultural Produce Marketing Board was founded in 1949. Again, the colonial government established the Industrial Development Corporation and the Agricultural Development Corporation, all State enterprises, to promote industries and agriculture in the Gold Coast. In recent times, in the mid1970s, the Government of the National Redemption Council, (NRC), under the direction of General I. K. Acheampong, also emphasised the importance of state enterprises in the economic development of Ghana. Thus, the NRC Government established a number of new State enterprises, and partly or wholly-nationalised a number of foreign-owned companies which included the Ashanti Goldfields Corporation and Consolidated African Selection Trust. Intermittent efforts to improve performance and efficiency of the State enterprises often led to the transferal of duties and functions to alternative State bodies, but never was there any wholesale privatisation of ownership rights and assets.

B] THE GENESIS OF DIVESTITURE Actual divesting of State assets began after the overthrow of the CPP Government in 1966, under the Government of the National Liberation Council, (NLC), when certain State enterprises were sold off to certain individuals. However, the much-publicised divestiture of State assets began much later. Thus, by the 1980s, the operations of State enterprises had begun to deteriorate, along with a number of many other businesses in Ghana. This gave the excuse for certain persons to blame the State enterprises for the countrys general economic malaise. References were made to the heavy subsidies that these sick State enterprises were alleged to be receiving from the central purse and their drain on the finances of the country. As a result of pressure from the World Bank, and in accordance with the principles of the Economic Recovery Program, (ERP), divestiture of State assets was made to become a part of Governments macro-economic policy under the Provisional National Defence Council, (PNDC). The Government thus initiated and launched the State-Owned Enterprise (SOE) Reform Program in 1988 which consisted of measures both to improve the performance of enterprises, where they remained State-owned, and the rationalisation of the State sector by means of the divestiture program.

C] JUSTIFICATION FOR DIVESTITURE A number of reasons have been excogitated to support the sale of State assets by various Governments, the major one being that many State-Owned Enterprises (SOEs) have performed inadequately over the years. Factors which are said to have contributed to this include:

Over-staffing; Decision-making at times being paralysed by excessive bureaucracy and a laissez-faire attitude towards state business; The lack of technical expertise; The absence of the commitment and entrepreneurial direction that private investors bring to business; Low incentives for management and inadequate working capital; Lack of, or low, investment in new plant and machinery, leading to low capacity utilisation.

In response to the alleged deterioration in efficiency, productivity and profitability of the SOEs, the divestiture program was launched as an ambitious attempt to unlock the economic potential of Ghana by permitting resources of people, money and technology to be put to their best use, and by increasing efficiency to achieve better living standards for all. More specially, the program was intended to reduce the size of the public sector and improve the performance of SOEs by mobilising private sector management and capital. This, it was believed, would reduce the financial and managerial burden on Government. A leaner and more focused State machinery, it was argued, would then be able to manage the business of Government more efficiently by utilising the proceeds from the sale of SOEs to improve infrastructure, health service and education.

D] PROCEDURE FOR DIVESTING STATE ASSETS The Government of Ghana established the Divestiture Implementation Committee, (DIC), to implement and execute all Government policies in respect of divestiture programs. Details about DIC are set in the Divestiture of State Interests (Implementation) Law, 1993, (PNDC Law 326). DIC's functions, under the law, are:

To plan, monitor, coordinate and evaluate all divestitures. To arrange for the effective communication of Government policies and objectives for any divestiture. To develop criteria for the selection of enterprises to be divested and assume responsibility for preparing such enterprises for divestiture. To make appropriate consultations for successful processing of all divestiture programs.

To ensure consistency in procedures for divestiture, in particular with regard to valuation, invitation for bids, negotiation of sales and settlement of account.

The members of DIC comprise Ministers of State, Trade Unions, Institutional and Private-sector Representatives. The day-to-day management of the divestiture program is undertaken by a Secretariat, led by an Executive Secretary. The members of DIC meet regularly to consider, among other things, specific transactions negotiated by the Secretariat, submitting, as applicable, recommendations to the President's Office for approval. DIC is assisted by specialised subcommittees on mining, cocoa and coffee plantations and railway. In order to divest, information and documentation are collected on each SOE listed for divestiture. Once completed, decisions are then been made as to whether it would be divested as a whole or fragmented, and the preferred mode of divestiture. However, other options have included the sale of shares, (particularly where the SOE already has some private sector shareholders), the entry by the State into a joint venture with private sector investors, (usually by transferring all or some of the SOE's business and assets to a newly formed vehicle, and the State and investors taking equity stakes in that vehicle), and the leasing to private sector investors of an SOE's assets. Where an SOE has been found to be moribund and no interest has been shown by investors, liquidation has been put in train. It has been Governments policy, except in exceptional circumstances, to terminate the contracts of employment between an SOE and its employees with effect from completion of the divestiture. In this circumstance, the Government has had to indemnify investors against all costs associated with termination, (including, for example, severance payments and end-of-service benefits), or otherwise arising out of the employment of the employees during the period ending on the termination. Termination has, it is said, permitted investors to start with a clean slate and, most importantly, to select own levels of staffing. In addition, except where the mode of divestiture is the sale of shares, Government has usually assumed responsibility for the discharge of the SOE's liabilities. The procedure followed in any particular case has depended on a number of factors, including the mode of divestiture selected. However, where the mode of divestiture has been the sale of the assets of an SOE, by competitive tender, (which is the most common mode), the procedure followed has usually been as set out below. While the procedure may appear long and cumbersome, it is touted to ensure transparency and integrity in connection with the divestiture of SOEs:

Advertisement: As soon as bid documents have been prepared, the SOE concerned is advertised for sale. Obtaining bid documents: Those interested are provided with the relevant bid documents. These generally comprise a detailed set of bid procedure, draft sale and

purchase agreement, an information memorandum containing a profile of the SOE and an independent valuation report of SOE land and buildings, plant and equipment and other fixed assets. Form of bids: It comprises qualification statements and price bids. Qualification statements usually include, among other things, details about the investor and the investor's business plan for the SOE. Price bids include, among other things, the price offered for the SOE's assets, the timing of any deferred payments, details of the security proposed to be given, (in the case of deferred payments), and a detailed explanation of how the investor intends to finance the acquisition. Information on price: DIC prefers the price offered to be paid in full on completion of the sale and purchase. Deferred considerations are secured by a guarantee from a bank or other person of sufficient financial standing. DIC may consider, where appropriate, taking security over assets until full payment is received. Interest is payable on deferred payments. Due diligence: Investors are permitted to carry out a site visit to the SOE's assets, operations and records prior to the submission of their bids. Delivery of bids: Completed bids must be sealed in two separate envelopes: one envelope will contain the qualification statement the other the price bid. Bids must be delivered, by hand or post on or before the closing date stated in the relevant advertisement and bid procedures. Late bids are not accepted. Evaluation of bids: A two-stage procedure is usually adopted for the evaluation of bids received with evaluation of qualification statements being completed prior to any price bids being opened and compared. Price bids from investors who submit unsatisfactorily qualification statements are not opened. In the event of equal price bids, preference is given to the bids submitted by Ghanaians. Negotiations: The investor who submits the highest conforming price bid opened is invited for negotiations of the draft sale and purchase agreement and discussion of the business plan. In the event of negotiations with an investor failing, the investor who submitted the next highest conforming price bid opened may be approached, and so on. Approval and Signature: Formal approvals to any divestiture must be sought from, first, the members of the DIC and, secondly, the President's Office. Upon receipt of the approvals and the payment of the appropriate purchase consideration, the sale and purchase agreement is signed and the assets concerned handed over.

E] DIVESTED SOEs The divestiture program, as we know it now, began in 1988 with over three hundred, (300), SOEs. Whilst a large number of them were in manufacturing and agriculture, (including cocoa and coffee plantations, poultry and fishing), others were in the mining, hotel and timber sectors. To date, about four hundred (400) transactions have been completed and these include SOEs or parts of them. Some of the prominent divestitures include the following: The Ashanti Goldfields The Tema Drydock Ghana Telecom Bonsa Tyres Golden Tulip Hotel West African Mills The Coca Cola Company The Nsawam Cannery Ghana Agro-Foods Company Ghana Rubber Estates La Palm Royal Beach Hotel

E] CRITIQUE OF THE DIVESTITURE PROGRAM The divestiture program has been criticised on a number of fronts, including the following. That the program, inter alia, Created wide-spread unemployment through the termination of the employment of a number of persons who were formally employed by the divested enterprises. Lacked the professed transparency. The example of the Nsawam Cannery is cited. It is argued that, given the conditions of the time, and the political clout of the purchasers, there is no way that anybody could have been able to secure all the required information to out-bid the eventual winners. Created avenues for corruption. It is alleged that, but for the alleged greasing of palms, it is incomprehensible that a company with a higher bid lost out to one with a lower bid for Ghana Telecom. Further, the same allegation is made in respect of the Ashanti Goldfields sale. Enabled people in authority to secure some of the divested enterprises for their cronies. Created the means by which some State assets were disposed of in a way that benefited individuals, and not the State. The lack of rigid adherence to the procedure for divesting, in some cases, has been cited as the facilitating factor.

Created an apparent legitimate means to line ones own pocket, at the expense of the State. Thus, many persons have questioned the wisdom of the Government of the day abrogating the sale of Ghana Telecom to the Malaysians, only to end up selling it to Vodafone for, it is alleged, a song. And the reason, it is further alleged, lies in what was secured for self rather than for Ghana. Became the vehicle by which the forward march of Ghana was halted by the neocolonialists who have never felt comfortable with the strides that the country has made under the CPP-led Government of Osagyefo Dr. Kwame Nkrumah and the CPPinspired Government of General Kutu Acheampong. In his much-acclaimed book, entitled Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism, Chang, an economist, argues that, by compelling poor countries to adopt certain economic policies they themselves never practised, todays rich nations are effectively kicking away the ladder in order to deprive others of the means of climbing up after them. On the specific issue of non-performing State-owned enterprises, the economist cites, as an example, the case of the Toyoda, (todays Toyota), car company in the 1930s, when the Japanese Government had to bail it out repeatedly with public funds, even though the company failed badly in the initial stages. Thanks to the Governments determined support for the troubled Toyota Company, (and that countrys motor industry as a whole), Japan is one of the worlds leading car manufacturers and exporters today. However, it is without doubt that if the Government had donned on the Golden Straight Jacket at the time, Toyota car company would have probably been liquidated and Japan would have remained a third-rate industrial country with a lower than average income. Chang points out that even the developed nations nurture and protect their own industries when they find it expedient. Without exception, they have all, at one time or the other in the past, employed strategies such as import bans, tariffs and subsidies for the protection and nurturing of selected local industries. According to him, Oxfam estimated in 2002 that European citizens were supporting the dairy industry to the tune of 16 billion per year through subsidies and tariffs an equivalence of more than $2 per cow per day. A vast majority of the population in the developing world continues to live on less than $1 a day. One crucial piece of advice Chang offers to developing countries is that they have to learn to defy the market if they want to nurture their fledging industries and say goodbye to poverty. However, taking a bold measure, such as defying the market, requires focused leadership and, above all, a nationalistic vision which Ghana has lacked since the end of the First Republic. With such a vision, every State-owned enterprise or industry is given a specific role to play in the realisation of the national dream. This, perhaps, was what distinguished Osagyefo Dr. Kwame Nkrumah from other leaders. He had a clear vision for Ghana and worked out calculated policies towards the attainment of that vision. All the economic policies and textbooks aside, it is commonly obvious that any individual, organization or nation that insists on continuing to do business, as usual,

when the geo-political landscape and market dynamics have undergone fundamental changes, does so at its own peril. That is why no Ghana Government can continue to trumpet the virtues of the poisonous economic prescriptions of the World Bank and its operatives and continue to hope that it can pull the large number of suffering Ghanaian masses out of poverty.

F] CONCLUSION Whereas a dispassionate consideration of the reasons and procedures for divesting State assets could be plausible, the real intended beneficiaries of the process appear to have been short-changed so far. The argument that the process would create jobs and infuse efficiency, productivity and profitability into the economic operations of the divested enterprises has only remained a mirage. Whatever happened to the various GIHOC companies, the State Transport Corporation, the State Construction Corporation, and a host of others? Individuals and certain groups are alleged to have benefitted personally from the process. Many of the divested enterprises, especially those sold to foreigners, fronted by some well-placed Ghanaians, have been used to transfer funds from Ghana to overseas, to the detriment of the Ghanaian economy. Ghana has, as a result of the State-Owned Enterprises divestiture program, lost control over some of the vital assets which are needed everywhere, in the world, to propagate quick economic development. Who does not know the usefulness of information technology in industrial development? Why did the Government of the day have to sell off the fibre-optic backbone of the erstwhile Ghana Telecom for a song? Why did the Government sell off virtually all of the States share in Ashanti Goldfields? One does not have to be a rocket scientist to appreciate the impropriety of that unfortunate antinationalistic action of the Government which sanctioned those transactions. A major justification for divesting State enterprises, that is, the injection of foreign capital into the Ghanaian economy, has not been supported by the realities on the ground. Rather than help the Ghanaian economy grow, the foreign buyers of the States assets have rather used their ownership to drain Ghana of its well-deserved resources and contributed to its relative degeneration. Thus, the agreement with the mining companies to keep as much as eighty percent, (80%), of their export earnings outside Ghana cannot be said to benefit Ghana in any way. As a matter of fact, the retention of these foreign earnings overseas, and the continued use of the very scarce foreign exchange resources of the country, by the same mining companies, for the settlement of their import bills, has been pointed out as an important contributor to the depreciation of the Ghanaian currency.

And, we are all witnesses to the devastating effect of the loss in value of the Ghana Cedi, vis--vis the major world currencies, on all areas of the Ghanaian economy!!!! Until a very bold and dizzying step is taken, as that of General Kutu Acheampong, in retrieving the Nations divested enterprise in the mining and telecommunications sectors, to mention but a few, Ghana risks losing the very essence of its independent-being in the not-too-distant future. And, that is a very ominous eventuality which cannot be taken lightly.

(ABEBRESE, J T)

This is copyrighted material, but may be cited for academic work. Appropriate credit must, however, be given. Tema. November 3, 2012