He argued that the move is also likely to affect subscription of the country’s bonds expected to be issued in the first quarter of this year – 2018.

The Minority in Parliament has impressed on President Akufo-Addo to sack the Finance Minister for what they describe as a breach of aspects of the law in the issuance of the 2.25 billion dollar bond in 2017.

Mahama Iddrisu tells Citi Business News the country will become a risky investment destination if the issue is not properly addressed.

“After making your Second Deputy Governor of the Bank of Ghana, Dr. Johnson Asiama go, now you want your Finance Minister to go. It shows that things are in disarray. Of course, investors will be worried. What investors normally do is to look for a place that is stable, a place that can give them better returns. If they think that it’s too risky to invest in Ghana because there is constant change of key financial officials, they’ll send their money somewhere.”

Mahama Iddrisu argued that regardless of a country’s positioning as a hub for business, it will see investors walk away if investors get scared of bringing their money into your country.

“Changing officials in key aspects of the economy destabilizes the economy, and what that does is that it worries foreign investors. A lot of signals go out there and the current signals we’re sending out are not positive.”

The Minority in Parliament at a news conference this week addressed by its leader, Haruna Iddrisu, threatened to initiate processes to have the Finance Minister removed from his position through a motion of censure per Article 82 of the constitution.

According to Haruna Iddrisu, the multiple infringements of the law by the Minister in the issuance of the bond as indicated in a report by the Commission on Human Rights and Administrative Justice (CHRAJ), indicated that he acted in bad faith and must not be allowed to remain in office.

CHRAJ concludes probe into bond petition

CHRAJ, in December 2017, cleared Mr. Ken Ofori-Atta of the allegations of conflict of interest in the issuance of the bond, but found him guilty of some infractions in the process.

Among the 21-point findings in its decision, CHRAJ observed that Primary Dealers also doubled up as Bookrunners/Transaction advisors and that dual role gave them an undue advantage.

It also observed that the “Respondent is either a director, former director or shareholder, or beneficial owner, of several companies whose objects relate to the securities market sector. The companies include Databank and EGL. As such, Respondent’s interests in the growth and well-being of those companies, have the potential to conflict with the interests of the state in relation to the securities market such as the issuance of bonds.

It stated that “The Respondent has business partners and associates related to the securities industry where, according to the Respondent, he has been working for over thirty years. These business partners and associates include partners in Databank, Enterprise Group Limited, Ventures and Acquisitions Limited, as well as Keli Gadzekpo, Trevor Trefgarne and Angela Ofori Atta, also Respondent’s spouse.”

‘Blacklist Databank’

Haruna Iddrisu further urged state institutions to cut ties and discontinue engagements with Databank and Enterprise Group which he says the Finance Minister, Ken Ofori-Atta has interests in.

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By: Bobbie Osei/citibusinessnews.com/Ghana

The post Investors to ditch Ghana over calls to remove Minister appeared first on Citi 97.3 FM - Relevant Radio. Always.

Banking analysts also tell Citi Business News the move is likely to yield in some mergers by the end of the scheduled date.

They however admit that while it has been easy for some banks, it appears others will have to double their efforts to hit the mark by December 2018.

The Bank of Ghana first announced the new 400 million cedis minimum capital requirement in September 2017.

The commercial banks were among others expected to present a recapitalisation plan by November the same year.

As at December 2017, the Governor of the Bank of Ghana, Dr. Ernest Addison disclosed that all thirty-four (34) banks had fulfilled this requirement.

“As part of the processes of meeting the minimum capital within the given time limit, banks were asked to submit feasible recapitalisation plans by the end of November 2017; my understanding is that all banks including the Beige bank have submitted their recapitalization plans,” he stated.

A Credit Consultant, Emmanuel Akrong explains that the majority of banks have demonstrated their ability to meet the minimum capital.

This he says should translate into some potential mergers which may reduce the number of banks by at least five.

“I am not expecting more than five banks consolidating because considering the prevailing conditions there are some ten banks whose preparation are somehow out of the public domain. With this, you’re looking at such banks consolidating and I do not foresee more than ten banks in this category,” Mr. Akrong asserted.

An assessment of the Ghana Stock Exchange has shown that in 2017, about 90 percent of banks listed on the Ghana Stock Exchange performed well on the bourse.

Some analysts say they expect such performances to continue following the banks’ ability to raise additional capital from investors and also meet the new capital set by the central bank.

But reacting to how well placed such banks that are listed on the Ghana Stock Exchange are in meeting the new capital requirement, an Investment Banker, Mahama Iddrisu rather alluded to a sustained positive growth at least well into the second quarter of 2018.

“We should hope that this year we spur the company’s on to make better profits in the first and second quarters and then when they make their rights issues, existing shareholders and even outside investors could see there’s some value on investments in such banks and they can invest,” Mr. Iddrisu explained.

Meanwhile Credit Consultant, Emmanuel Akrong attributed the strong performances of the listed banks  more to the prevailing economic conditions which in his view, supported the banking sector’s growth.

“With the issuance of the energy bond, there is some expectation in the market that those who are exposed are going to be paid. Also looking at the GDP performance of the economy, debt to GDP ratio and all other performance on the stock market, they show that the banks’ performances should be crystallised. As to whether it is because of the new capital requirement people are getting capital, I do not have that news yet,”

For now, commercial banks will have to take their positions in order not to lose their licenses following inability to meet the new directive.

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By: Pius Amihere Eduku/citibusinessnews.com/Ghana

The post Banks pursue investments for GH¢400m minimum capital appeared first on Citi 97.3 FM - Relevant Radio. Always.

According to him, if the claim by the two major shareholders, SNNIT and SIC Life, that they were not involved in the processes is true, then the acquisition of more shares was illegal.

Fortiz acquired 90 percent of then Merchant Bank for 90 million cedis in 2013 and was expected to inject an additional 50 million into the bank subsequently as part of the agreement.

Fortiz however, after acquiring the 90 percent shares paid GHC 10 million as equity capital and entered into an unsecured subordinated debt instrument facility referred to as a convertible loan to take care of the extra GHC40 million.

The Social Security and National Insurance Trust (SSNIT) and SIC Life went to arbitration claiming that the conversion from debt to equity of the tier two debt was done on their  ‘blindside.’

According to the claimants, the entire 50 million cedis was initially expected to be provided in the form of equity and it was because Fortiz was unable to provide the entire amount that the Bank of Ghana directed it to inject a mix of equity and tier two debt capital into the company.

They therefore argued that it was not right for Fortiz to have used the means it did to acquire more shares than contemplated in injecting the GHC 50 million into the bank.

Speaking on Eyewitness News, Mr. Iddrisu explained that if the claim by the two shareholders that this happened on their blindside was correct, then that renders Fortiz’s act illegal.

“They had a contract that converted that loan into equity. That money that was borrowed actually was a guarantee for the three shareholders banks to take that money meanwhile it was converted to benefit only Fortiz,” Iddrisu added.

[contextly_sidebar id=”Ds9tDJLgbK1adkKykPgxltzwIg8SibhW”]The arbitration panel however dismissed the claims of SSNIT and SIC Life saying “although the consideration paid by Fortiz in acquiring UMB could have been made payable to SSNIT and SIC Life, they agreed to use the money to increase the capital adequacy ratio of the bank, which agreement the panel did not find illegal.”

In the formerly wholly state owned Merchant Bank, the Social Security and National Insurance Trust (SSNIT) controlled an 89.6 percent stake with the remaining 10.4% belonging to SIC Life.

SSNIT and SIC Life sold 90 percent of the bank to Fortiz, with the expectation that they could claw back more shares when a plan by the special purpose vehicle, the Merban Assets Recovery Trust (MART) succeeded in recovering more than 30 percent of the bank’s bad or impaired loans.

But Fortiz opted for a cause of action which resulted in the increasing their stake in UMB, whilst reducing the state owned entities’ shares from 10 percent to 5 percent jointly.

Problems with contract

Mr. Iddrisu said all these problems for the state entities stemmed from a contract that “was not properly construed.”

“…the GHc 40 million [borrowed from the bank] actually belongs to the two shareholders and not Foritz for borrowing the money, because that same money was sitting in the bank and the bank assets were sitting as collateral.”

He noted further that the money belonged, by extension, to workers but was converted to equity, constituting an illegality.

“They borrowed it from the asset management company, that actually belonged to the total bank, and which’s money belonged to workers and that same money was used to convert to equity up front, making them reduce the shareholding down to 4.3 percent. That alone is an illegality.”

Background

Fortiz paid GH¢90 million for a majority stake in the bank with the understanding that an additional injection of GHS 50 million would be injected within a six month period.

The amount gave them a controlling stake of 90 percent in the bank, leaving the minority 10 per cent to the country’s pensions fund manager, SSNIT and SIC Life Limited.

But after an initial payment of GHS 10 million to UMB as equity capital by Fortiz, it entered into an unsecured, subordinated debt instrument facility, referred to as a convertible loan with the bank, through which an additional GHS 40 was invested into UMB.

Soon after it was concluded, the loan was converted into equity, in accordance with the Term sheet as approved by the AGM.

This led to SSNIT’s shares reducing from 8.96 to 4.43% of the company and valued at GHS 2,565, 537, while that of SIC life reduced from 1.04% to 0.51% and valued at GHS 297, 780.

Subsequently, SSNIT and SIC Life took Fortiz and UMB to arbitration in January 2017 claiming among other things that Fortiz erred in the means it did to acquire more shares in the bank.

The arbitration panel however roundly rejected the claims by the two.

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By: Delali Adogla-Bessa/citifmonline.com/Ghana

The post Fortitz’s acquisition of extra UMB shares illegal if … – Mahama Iddrisu appeared first on Citi 97.3 FM - Relevant Radio. Always.