With reference from MOF/OLA/ PLCDA dated on 22nd June, 2020 requesting the Attorney-General’s review on the following agreements:
- The mineral investment royalties agreement:
- The relationship agreement:
- Indemnity Deed:
- Non-recourse disclosure letter:
- Mineral revenue management agreement:
- Operations Management Agreement:
- Assignment Agreement; and
- Explanation note (Memorandum).
Parliament, on last Friday, in line with the Minerals Income Investment Fund (MIIF) Act, 2018 (Act 978), approved agreements to allow the country to derive maximum value from its mineral resources and monetize the mineral income accruing to Ghana sustainably and responsibly.
A lot of Ghanaians are still confused and lost about what the Agyapa deal entails.
The Agyapa Royalties deal is part of the current government’s strategy to beat the long-standing problem of lack of capital for developmental projects.
Due to the Global pandemic loans on the capital market are no longer attractive. Interest rates on the bond markets are generally high and because the tenure is short, Ghana risks falling into high debt distress.
The Agyapa Royalties agreement, therefore, is among the strategies governments across the world that have been adopted to raise money on the global financial market. It involves securitizing future flows of revenue with proceeds from the extractive sector.
The deal started in June 2018 to manage the equity interests in mining companies and also receive royalties on behalf of the Government of Ghana.
The government, therefore, introduced an amendment in July 2020, to the Act to ensure that the SPVs that the Fund would establish to manage investments get unrestricted independence.
However, it is noted that payments in respect of the agreement, will be made in US dollars. This is a clear indication of a violation of the Bank of Ghana Act, 2002 (Act 612) as amended by the Bank of Ghana Amendment Act, 2016 (Act 918), which mandates that all transactions be made in a currency unit of Ghana which is the cedi or its equivalent. And it is, therefore, recommended that the mode of payment under the agreement be reviewed with specific reference to clauses 8.1 (a) and 8.2(a).
According to the Attorney General “We note that the subject matter, that is monetizing royalties and investing such income, has been ring-fenced for ListCo and RoyaltyCo such that the Republic is precluded from exercising any right over the 75.6 percentage shares as referred to in the agreement.
“However, we also not that the value of gold is not stable on the international market and likely to drop against the projection of high value, which may have negative consequences on the royalties received.
“It is suggested that this agreement should be for a fixed term for the avoidance of doubt and sanctity of contract”, the AG advised.
However legal opinion also pointed out to the fact that: “Act 978 allows the minister to execute a tripartite stability agreement with the fund and a special purpose vehicle (SPV). The stability clauses in the present agreement, related to both legal and fiscal stability and covers any law or action that may affect the performance of the agreement.
“It freezes anything legal, including judicial orders and decision. In effect, no court can pronounce on any part of the agreement as being illegal, unconscionable, null, and void or on any matter before the court, which may or is likely to affect any part of the agreement it said.
The government however should have engaged wider and communicate its essence better despite its future assertions as stated on Thursday by Ofori-Atta, Finance Minister Ken Ofori-Atta defending the deal as a clean and transparent one.
Addressing a press conference in Accra on Thursday, 27 August 2020, however, Mr. Ofori-Atta said: “… Agyapa is 100 percent owned by MIIF, which is 100 percent owned by the government and there are no hidden beneficiaries in that regard”.
“It is a clean transaction as far as I know and we’re just looking for ways to maximize value and to play in the game that our multinationals play and now we have the skillset to be able to do that”, he asserted.
The main controversy over the deal is linked with the initial name for the SPV, Asaase Royalties.
The question is why the change of name?
Especially with the identities of the top management of Agyapa Royalties as father and son.