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Vol 57 No 5

Published 4th March 2016


It’s the contract election

Both the main parties have form when it comes to spending sprees and big contracts ahead of elections

Come commodity crash or boom, if it's election year, it's contract time. That's when incumbents hand out largesse and stock up the political war-chest. In Ghana, election year contracts trigger strong reactions going back decades. In 1995, reforming Finance Minister Kwesi Botchwey stormed out of President Jerry John Rawlings' National Democratic Congress (NDC) government after he was overruled on a plan for an spending splurge to win the 1996 elections. Rawlings won the vote and Botchwey left for the United States to resume his academic career.

President John Kufuor's New Patriotic Party government, which made much of its success in doubling the size of Ghana's economy between 2000 and 2008, also had its critics on pre-election contracts. Its deal with the USA's Kosmos Energy, which provided a massive tax concession for the company and two minority shareholdings for NPP loyalists, was investigated in Ghana and the USA amid a political outcry (AC Vol 50 No 21, Corruption claims and rows tarnish Accra's record). After five years, the investigations were dropped, with Kosmos and the party loyalists trumpeting their innocence.

Similarly, a deal under which President Kufuor negotiated the sale of Ghana Telecom to Britain's Vodafone in 2008 at a price lower than several others on offer prompted long-running investigations and much political vituperation. Like Kosmos, Vodafone pronounced itself cleared of all allegations and continues to operate a profitable business in the country. With a population of just over 27 million people, there are about 35 mn. live mobile telephone connections.

Now it is President John Mahama's NDC government that is in the frame for contracts great and small. On 23 December, Minister of Transport Dzifa Attivor resigned after it emerged that she had spent 3.6 million cedis (US$947,000) to repaint 116 buses in Accra, emblazoned with portraits of Ghana's presidents, including the incumbent (AC Vol 57 No 1, Power cuts may sway polls). A week later, Energy Minister Kwabena Donkor resigned, taking the fall for the persistent power cuts in the country, known as dumsor-dumsor ('on-off' in Twi). He had unwisely pledged to end the power crisis before the new year.

Now, the energy industry is immersed in rows over the value for money of three huge contracts. The most contentious is a $510 mn. deal between the government and a company based in Dubai, United Arab Emirates, called Ameri Group to supply ten turbines and to contract a Greek company, Metka, to install them. Ameri is an investment vehicle controlled by Sheikh Ahmed bin Dalmook Juma al Maktoum, of Dubai's ruling family.

Mohammed Amin Adam of the Africa Centre for Energy Policy in Accra, and other analysts say the market price for the ten General Electric TM2500+ turbines used in the project was $220 mn. and that there is little information on what the other $290 mn. is to be spent on.

There is also some puzzlement about why negotiations between Ghana and a company owned by Hungarian financier-philanthropist George Soros and former US Secretary of State Madeleine Albright to supply the turbines at a much cheaper price were suddenly abandoned in favour of the Ameri deal.

Further alarm bells rang after VG, a Norwegian newspaper, visited Ameri's very modest offices in Dubai. When the journalists asked why the company had hired one Umar Farooq Zahoor, a Pakistani Norwegian who is the subject of an Interpol arrest warrant and was a witness to the contract with Ghana, they were informed that Zahoor had since left the company in search of new opportunities.

As the furore over the Ameri deal mounted, Mahama referred the case to consultants PricewaterhouseCoopers for 'evaluation' and to see what lessons could be learned. The NPP's Energy Spokesman, Kobina Tahir Hammond, who failed to lead serious scrutiny of the contract when it went through Parliament last year, now says the opposition was tricked over the contract. Ameri has become part of the NPP's election campaign.

Similarly, a lack of information on the terms of the supply contract for two 225 MW power ships from Turkey's Karpower has prompted outrage, particularly because the deal was not subject to parliamentary scrutiny. Few details have emerged about the financing arrangements, least of all what will be the price of the power generated by the ships over the ten-year period that they will be in Ghana. On 29 February, Turkish President Recep Tayyip Erdogan landed in Accra on a tour of West Africa and lauded the growing economic cooperation between the two countries.

Last month, it was Italian Prime Minister Matteo Renzi that breezed through Accra to set the seal on yet another contentious energy deal. He was greeted by a protest letter from the NPP asking him to personally revisit the terms of a $7 billion contract between Italy's state-owned ENI (Ente Nazionale Idrocarburi) and Ghana to develop the Sankofa oil and gas fields. Questions are being asked about why Sankofa's costs are so much higher than the nearby TEN (Tweneboa-Enyenra-Ntomme) oil and gas project. Also under scrutiny are the requirements that the government makes a $125 mn. payment up front on the project or else ENI can take the equivalent in tax-free revenue from its gas sales as part of extremely generous fiscal terms.

Most contentious of all, Ghana will pay ENI $9.8 per million British thermal units for its own gas. That compares with a current world market price of $8 per mn. BTU. As an outraged energy expert who is close is to the government pointed out: 'Under this ruinous deal, Ghana could buy LNG [liquefied natural gas] from Qatar more cheaply than it can buy its own gas.'

Faced with these figures, government officials argue that the World Bank's International Finance Corporation did the due diligence on the ENI deal before it agreed to a partial financial guarantee. This time, both the World Bank and NDC government will be in the firing line as more details emerge about the onerous terms of the Sankofa project.

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