After days of back and forth arguments over the US$3 billion Chinese credit facility to finance infrastructure projects under the Ghana Shared Growth Development Agenda (GSGDA), the deal has finally been sealed, with Parliament approving the controversial Master Facility Agreement (MFA).

Despite declaring their support for the intent of the projects contained in the MFA, the Minority Members of Parliament (MPs) abstained from the voice voting, giving the Majority members of the House a field day to approve the loan deal by popular acclamation.

A thunderous “aye” from the Majority side of the House sealed the deal when the First Deputy Speaker, Edward Doe Adjaho, who presided over the sitting, put the question “as many as are in favour of the motion for the adoption of the resolution say “aye”; to which Majority members of the House responded “aye,” and the Speaker continued, “those against say “naye”; at this juncture, there was no response from the Minority side. Mr. Adjaho went ahead to declare the winner of the voice vote, saying, “The “ayes” have it, the resolution is accordingly adopted.”

The approval of the two-tranche loan facility, each US$1.5 billion, but with different terms, enters the history books as the biggest-ever credit facility sourced outside the shores of the country to undertake various infrastructural projects. The Majority members referred to the loan agreement as “STX PART II”.

Terms of the loan agreement

The first tranche has a five year grace period, 15 years re-payment period, a commitment fee of one per cent flat, an interest rate of 2.95 per cent, six months LIBOR (London Inter-Bank Offer Rate), and an upfront fee of 0.25 per cent flat.

The second tranche of $1.5 billion has a grace period of five years, ten years tenure interest rate of 2.285 per cent, six months LIBOR, 0.25 per cent upfront fees per annum, and a commitment fee of one percent per annum.

The debate of the motion for the approvable of the MFA loan of US$3 billion was postponed on Thursday, August 25, 2011, when the Chairman of the Joint Committee on Finance and Poverty Reduction Strategy, James Klutse Avedzi, withdrew the committee’s earlier report, following concerns raised by the Minority members.

The goal of the credit facility, according to movers of the motion, is to enhance the efficiency and effectiveness of the oil and gas sector operations, as well as industrial minerals processing and agro industrial ventures.

The MFA, the report noted, would be disbursed under individual subsidiary project agreements (Subsidiary Agreement) to be signed between implementing agencies, and the contractors, for the construction and establishment of projects to be financed from the facility.

Actual disbursement of the funds would be for projects, for which the Subsidiary Agreement had been approved by the Government of Ghana, through Parliament, and the China Development Bank (CDB).

Outlined projects in the loan agreement

Projects under Tranche A1 of the loan agreement include the Western Corridor Renewal Project with railway components, Western Corridor Infrastructure Renewal Project, Takoradi Port Phase 1 Retrofit Rehabilitation, and the Sekondi Free Zone Project, which include the development of onsite infrastructure and utility services for the proposed industrial minerals processing estate and alumina refinery.
Projects under Tranche A2 of the loan agreement include the Accra Plains Irrigation Project Phase 1, covering 5,000 hectares, Coastal Fishing Harbours and Landing Sites Project in Axim, Dixcove, Elmina, Winneba, Mumford, Senya Bereku, Jamestown, Teshie, Gomoa Fetteh, Ada, Keta and Moree, Eastern Corridor Multi-Modal Transportation Project – Volta Lake facilities components – upgrade of ferries/ pontoons as well, and landing sites for Kpandu/Amankwakrom, Kete Krachi-Kwadwokrom, Yeji-Makango, Tapa Abotoase, Dzemini, as well as the upgrade of the Akosombo and Buipe ports.

The following projects have been proposed under Tranche B (B1 & B2) – Western Corridor Gas Infrastructure Project – Offshore Gathering Pipeline, Early Phase Gas Processing Plant, Onshore Trunk Pipeline including gas dispatch facility; retrofit of Tema Oil Refinery (TOR) to enable processing of natural gas liquids (NGLs); and deployment of helicopter fleet for enhanced surveillance of facilities, Takoradi Petroleum Terminal Project – to be sited at Pumpuni, Western Corridor “Oil Enclave” Toll Road Redevelopment Project, Deployment of ICT–based integrated platform to enhance security and surveillance of all infrastructure and facilities in the Western Corridor Oil Enclave, Accra Metropolitan ICT-enhanced Traffic Management project to include an accelerated completion of stranded road construction works on key congested road arteries, and Small and Medium Enterprise (SMEs).

Benefits from projects

Benefits to be derived from the projects, according to the Joint Committee on Finance and Poverty Reduction Strategy, include added value within a relatively short time to the nation’s gas resources, by developing it to its fullest, to the benefit of the country.

Repayment of the loan facility, according to the report, would be effected from petroleum revenue and other government owned resources. Due to the aforementioned terms of repayment, the reported stated that a commercial contract for the off-take of oil would be entered into by the Ghana Petroleum Corporation and the Chinese authorities.

According to the report, the government would reduce the impact of commercial projects on the public debt, through an on-lending and escrow arrangement for most of the projects under the facility.

Fifteen percent (15%) of the Government of Ghana’s (GoG) counterpart funding would be paid from the “Owner Contribution Account,” to be established as a sub-account under a main “Collection Account” to be established at the Bank of Ghana, into which the GoG would deposit funds towards the repayment of the loan facility.

The committee’s report further stated that the government intended to repay the loan facility through the Annual Budget Funding Amount (ABFA) with the Petroleum Revenue Managing Act, 2011.

Under clause three of the Master Facility Agreement, a minimum of 60 per cent of each tranche was required to be paid to the People’s Republic of China (PRC) contractors, a clause which allows about 40 percent of the facility to be applied towards local content sourcing, or sources other than the PRC.

Minority’s headache

Prior to the approval of the loan facility, the Minority had argued that though the intent of the facility was good, inconsistencies, coupled with contradictions in the whole agreement, ought to be corrected before going ahead to source the US$3 billion Chinese loan.

Whilst the Majority members were of the opinion that the projects earmarked for funding under the facility were critical to the nation’s development, especially, the gas infrastructure development, and that approval must be given to enable the various Subsidiary Agreements to be negotiated and presented to the House for approval, those on the Minority side argued that since the definition of “Facility Agreement” includes Subsidiary Agreements, approval of the Facility Agreement would necessarily imply the approval of the Subsidiary Agreements, which are not yet known.

They were also of the opinion that the approval of the MFA was inextricably linked with the approval of the other requests, and therefore, it would be improper to approve the MFA without seeing the relevant Subsidiary Agreements, and therefore, suggested that the CDB should be a “Letter of Comfort”, otherwise, the agreement should be rather be treated as a Memorandum of Understanding (MOU), and be approved to give the government the green light to negotiate the Subsidiary Agreements and bring them back for approval in that context, so that it does not constitute a binding contract.

The debate

Below is an excerpt of the debate put forth by some MPs from both sides of the House:

The New Patriotic Party (NPP) MP for Sunyani West, 

Majority voice seals $3bn Chinese deal

“Thank you Mr. Speaker for giving me this opportunity. I would like to continue from where my ranking signed off. He made a point about a fundamental difference between the Cabinet memo position and that upfront payment, and that of the loan document itself.

“Whereas the Cabinet memo says it is per annum, that of the loan document says it is a one-time payment. Mr. Speaker, the implication of the two is quite huge on the nation’s finances. So, I would want you to establish whether we should go ahead to debate these two documents, where there is a fundamental difference between the two. Mr. Speaker, indeed, if we should take that of the Cabinet memo, the upfront fee alone is going to cost the country US$93.7 million. But, if we take that which is in the document, it is going to cost the nation only US$7.5 million – a difference of US$86.2 million. Mr. Speaker, I would like this to be established – what should we do? Should we go ahead to debate this?” His question energised the Minority members to hoot at their colleagues on the other side of the House.

Mr. Speaker makes intervention: Honourable Chairman of the Committee, you are to do some corrections.

The intervention by the Speaker came to everybody as a surprise, because, per the dictates of the Standing Orders of the House, if a member wants to make some intervention (Point of Order) whilst a member is on the floor debating an issue, that person ought to catch the eyes of the Speaker, and the Speaker call him or her, before he or she could go ahead to make his or her contribution. But, in this case, it was the Speaker who rather called the Chairman of the Finance Committee to make the intervention. “Honourable member, did you hear what your own member said,” queried the Speaker, adding, “He has raised a very important point, and should be clarified.”

Minority Leader Osei-Kyei Mensah-Bonsu rose up to make some intervention. “Mr. Speaker, we’ve all been in this House for a very long time. If in the course of a debate an issue is raised by anybody, and a person rises to make a response, and that person catches your eye, you call that person. But, if somebody makes a point, and then you call the House and point to somebody that that person must rise up and make a response, Mr. Speaker, I that thing is very new to this House. This is strange to the House.”

Speaker: “Hon. Minority Leader, Hon. Akoto Osei raised a point. The Chairman of the Committee got up and explained it. I did not want to rule him out of the rule of repetition. Because he made a point, he clarified it, but he is repeating it again. When you made the point, the Chairman got up on point of order, I called him, and he corrected the position. But for whatever reason, the other member decided to repeat the same point. It is the same.”

The Speaker’s explanation did not go down well with Minority members, who, therefore, started hooting at him – “hoooooooooooooo, sssshaaaaaaaaaaaaaame,” they retorted.

But, the Speaker insisted he did the right thing by calling the Chairman of the Joint Finance Committee and Poverty Reduction Strategy to make the intervention.

James Klutse Avedzi: “Mr. Speaker, as I said earlier on, I did correct the mistake in the report yesterday, but should that be done again, I will do that. The 0.25% upfront payment is not per annum. It is a flat amount, which is payable in two installments, and the commitment fee is 1.0% on the undrawn and uncalled amount. Mr. Speaker, I can refer you to the MFA on page 27 of the MFA, clause 11.1 upfront fees, and I read… His intervention was cut short by the Speaker, saying “You have drawn our attention to the fee that is enough.” The Speaker then asked the Sunyani West MP to go ahead with his contribution.

Ignatius Baffour Awuah: “Mr. Speaker, for the first time in the history of this House, we’ve seen that a Committee Chairman has the power to correct gaps which have come from the Cabinet. Mr. Speaker, I will continue. Mr. Speaker, if I should extend the same argument to the commitment fee, Mr. Speaker… MP for Sekondi, Papa Owusu-Ankomah, makes an intervention. “Mr. Speaker, the honourable member was just referring to the Cabinet memo accompanying the agreement, and not the report. So, I thought that probably, the best person to answer for the Cabinet memo will be the Minister of Finance and Economic Planning and not the Chairman of the Joint Finance Committee and Poverty Reduction Strategy.”

Speaker: “Honourable members, I believe that when something is referred to a committee to work on, the committee is supposed to deliberate and report to this House, and I believe if that committee has done its homework well, they would have resolved that matter to know whether it is a flat fee or it is a per annum. My understanding is that the committee has done its work and is reporting to the House that it is a flat fee.”

The Minority, at this juncture, resorted to hooting at the Speaker again, and this ignited the anger of the MP for Ningo-Pampram, Enoch Teye Mensah. “You are hooting at the Speaker. When you do that you are demeaning his status,” he stated. His response did nothing to calm the Minority members, but rather intensified their action against the Speaker.

The Speaker then gave the Sunyani West MP permission to go ahead with his submission.

Ignatius Baffour Awuah: “Mr. Speaker, the loan is going to attract an interest rate of LIBOR + 2.95, a LIBOR + 2.6 months, LIBOR + 2.85 in respect to the first and second tranches. Mr. Speaker, in the case of the first tranche, the total interest rate the nation is going to pay on the US$1.5 billion facility is US$776 million, and then, in the case of the second tranche, the interest is going to be US$502.5 million. Mr. Speaker, the two put together, means that this loan is going to attract a total interest rate of US$1.278 billion. Mr. Speaker, this would be about 40% the value of the principal that we are taking. Indeed, this is very tight. Mr. Speaker, I would want to touch on repayment of this facility. If you add the interest of US$776 to the US$1.5 billion in the first tranche, it means that when due, Ghana would be asked to pay US$2.276 billion in the case of the first tranche, and then in the second tranche, Ghana would have to pay an interest of US$502 million plus the principal of US$105 million within the five years per annum. It means that when we start paying this facility, for the first five years, we shall be paying US$627 million per annum. Mr. Speaker, this is going to be paid from the Annual Budget Funding Amount (ABFA) from our oil money, indeed, the oil, which was discovered under the NPP regime. Mr. Speaker, it is estimated that at the peak of production, Ghana’s stake in the oil will be US$1.0 billion per annum. If indeed, Ghana’s stake in the oil will be US$1.0 billion per annum and the ABFA is 70% of the total stake, then it means that what will be due for the ABFA every year is around US$700 million. And, if out of the US$700 million, servicing of this loan alone is going to take US$627 million, Mr. Speaker, then we should be threading cautiously.”

“Mr. Speaker, as we speak, one other problem that we have identified with this facility is that, even as we speak, the government is not too sure how much money it needs to implement this programme that it wants to implement. Mr. Speaker, I am saying this, because, the facility is for US$3.0 billion, and if you look at some of the programmes, we are told that we will need between US$150 million-250 million – a gap of US$150 million. In the case of another, we will need between US$150-500 million, a gap of US$350 million, and then in the case of some other, we will need between US$150-200 – a difference of US$50 million. Mr. Speaker, if we should take the lower limit of each, it means that we will need a total financing of US$2.7 billion, meanwhile, we are asking for US$3.0 billion.

“This aside, the government is supposed to provide a counterpart funding of 15%, which works out to US$450 million. So, Mr. Speaker, in that case, the total financing available to us will be US$3.45 billion. Meanwhile, that which we need is US$2.7 billion. Where is the difference of the US$700 million going? Mr. Speaker, this is the question I am asking. And even, using the worst scenario of where we are using the upper limit, Mr. Speaker, we still will be left with a surplus of US$200 million over-funding. Mr. Speaker, where will this money be going? As we speak, we have not been told what that money will be used for. Meanwhile, the moment we commit ourselves to this fund, we shall be paying interest on them. Mr. Speaker, that is why some of us are saying that indeed, we are not against the object of the loan, but what we are saying is that it looks as if we are rushing, and therefore, we need to take our time to be able to ascertain exactly how much we need to be able to implement this program. Mr. Speaker, before I sign off, let me say that at the committee meeting, the Minister of Roads and Highways was invited, and then in his comment on the Eastern Corridor roads, he made an emphatic statement that the government is longer pursuing that particular facility. This is in the report. Mr. Speaker, we all know that in this House there is a procedure when a government brings in a bill, and it is no longer pursuing it, there is a procedure to follow. So, all the hopes that the people of Volta Region had that their roads problems were going to be addressed by the Eastern Corridor roads, how is it going to be fulfilled? All the hopes that the people of Brong Ahafo had that their roads problems were going to be addressed, Mr. Speaker, how is it going to be met?”

At this point, the Minister of Roads and Highways, Joe Gidisu, stood up and tried to make an intervention and was called by the Speaker accordingly.

“Mr. Speaker, I think that my colleague wants to cry more than the bereaved and misleading this House. Mr. Speaker, as a government, we are committed to not only the Easter Corridor road network, but to other roads. Mr. Speaker, we hardly listen to the airwaves, and I want to use this platform to say that the Eastern Corridor… He did not complete his point when he was cut short by the Speaker, arguing that there was no point of order in his submission.

Speaker: Honourable Minister of Roads and Highways, I called you, because certain attributions have been directed at you. By then, it didn’t also end there, but also went to say when you brought the whole Brong Ahafo and the Volta Region into it, so if it is not true about the Brong Ahafo and the Volta Region – that is what you have to explain, but if it is true, then you don’t have a point of order, but with regard to what he said, if it is in the report, you don’t have a point of order. So, what is in the report, is in the report, and cannot be a point of order. But, he went on to mention other attributions that they have abandoned the roads – the Eastern Corridor roads in the Eastern Region and some roads in the Brong Ahafo, and because his name has been mentioned, specifically, that is why I called him.”

Majority Leader: “Once the honourable member is referring to portions of the report, that indicated that government has abandoned the Eastern Corridor roads, and Brong Ahafo, he should refer to the page of the report, he should read it.”

Deputy Minority Leader, Ambrose Derry: “Mr. Speaker, the report at page 16, second paragraph, reads; The Committee was further informed that the US$1.8 billion loan from CBRD is no more being pursued due to technical challenges. Read it and it can be challenged. It is there, and that is what it is.”

Mr. Gidisu: “Mr. Speaker, I want to use this platform to say that we are very soon coming to this House with a different facility targeted at the Eastern Corridor.”

Mr. Gidisu’s response attracted lots of hooting from the Minority side.

Mr. Speaker: “Honourable members, let there be some order in this House.”

Minister of Water Resources, Works and Housing Alban Bagbin: “Mr. Speaker, the attitude of my friends and colleagues in this House reminds me of my hay days in the Basic School when we used to dribble and score goals, and the other side were heckling us down, we will have our supporters singing ‘do your duty, don’t mind them, do your duty, don’t mind them’. So, Mr. Speaker, definitely, I am doing my duty and I won’t mind all these people. Mr. Speaker, my colleague the Deputy Minority Leader did not read the paragraph properly. He left out an important sentence that clearly stated that some of those projects are captured under this facility. It is stated there, Mr. Speaker, and I would want to read it. It says that the Committee was further informed that the US$1.8 billion loan from CBRD is no more being pursued due to technical challenges. Therefore, some of the road projects that were slated under that facility have been included for construction under this CDB Master Facility. You should have read that, so that we know.

Immediately after concluding his statement, the members of the Majority started chanting “do you duty, don’t mind them.”

Deputy Minority Leader, Ambrose Derry: “Mr. Speaker, I think that the honourable Minister for Water Resources, Works and Housing didn’t get the point. You have posed a question, and if that statement was contained in the report, and I was referring to the page, and the statement that it was stated that for technical issues it has been abandoned. Be as it may, the honourable member has gone ahead to say that some of the roads are included. What the honourable member for Sunyani West is saying is it is still valid. Which roads have been included? To those that have not been included, the question is still there – what do we do? So, Mr. Speaker, I think that the honourable minister missed the point.”

Ignatius Baffour Awuah: “Mr. Speaker, in concluding, I want to say that I am a member of the Committee of Finance, and I am privy to most documents which were made available to most of the committee members. I want to say on record that the Eastern Corridor roads all that which were supposed to be in the Volta Region, all that which were supposed to be in the Brong Ahafo Region, are no longer been pursued under this new loan agreement. Mr. Speaker, this is emphatic, including that of the Northern Region.

Mr. Speaker, in concluding, what I want to say is that, yes, the objective of the loan is an excellent one, nobody has a problem with it, but in view of the problems that we had with regards to the implementation of the STX deal, we have to be very careful. Let’s step this loan down and make sure that all the necessary corrections are effected before we go ahead. Thank you Mr. Speaker, for the opportunity given me.”

At the conclusion of his statement, members of the Minority side took turns to shake his hand for scrutinising the loan agreement excellently, to the understanding of all.

Contribution by Moses Asaga: “Thank you Mr. Speaker, I rise to support the motion, and to urge my friends here to support this US$3 billion facility. Mr. Speaker, there are over 51 countries in Africa. It is not every country that can easily source facility up to US$3 billion in Africa. Mr. Speaker, it implies that we are managing the economy very well. We have given a lot of confidence to international investors, and this can even be verified by the micro-economic indicators that are all moving in the right direction. Mr. Speaker, before investors would want to commit huge sums of money like the US$3 billion, they would have done comparative studies of all countries in Africa to see which country is best suitable for such an amount. Mr. Speaker, we also know that political stability is very important. Just last week, Ghana was rated as among the top three most peaceful countries in Africa. Mr. Speaker, in terms of a stable economy, we have a very stable currency now, which is easily convertible, which allows investors to plan into the future. Mr. Speaker, nobody would invest in an economy where inflation is galloping. We now have single digit inflation in Ghana. Mr. Speaker, the IMF and the World Bank have all agreed that our debt service sustainability can be managed by our expanded economy. All these factors have been put in place for the Chinese to be able to give us this US$3 billion facility. I think that Ghanaians must commend the government that in two and a half years, we have been able to source a US$3 billion facility, which has never happened in Ghana before.”

MP for Wenchi, Prof. Gyan Baffour makes an intervention: “Mr. Speaker, the honourable member is misleading the people in this room, people out there, and the whole people of Ghana. He is referring to our currency as convertible. Our currency is not convertible. Convertible in what? He just said that everything is okay and our currency is convertible, convertible for where? Mr. Speaker, if he doesn’t know what convertibility is, he should just go back and understand what convertible means.

Mr. Asaga’s response: Mr. Speaker, I am quoting from President Kufuor when the new Cedi was published – he said the Ghana Cedi is now convertible to the dollar on a one-to-one basis. Mr. Speaker, I want to continue supporting this loan agreement.”

Deputy Minority Leader Ambrose Derry makes an intervention: “Mr. Speaker, the rules of this House are clear. He is making a statement and attributing it to President Kufuor, if he doesn’t have any document to support that issue, he should withdraw and continue. Mr. Speaker, what he was saying was the rate to the dollar, he didn’t say that the country currency was convertible, those are different concepts. So, if he doesn’t have the document to support his argument, he may wish to withdraw and continue.”

Speaker: “Honourable members, we all know that it is not convertible. So, if for purposes of argument, somebody said it, you cannot come and repeat it. So, please withdraw it, because it is not convertible. Hon. Moses Asaga, if you want to take part in this debate, then you must respect the Chair.”

Mr. Asaga: Mr. Speaker, I withdraw the convertibility. But, Mr. Speaker, whilst withdrawing the convertibility, I want to put it on record that if you go to Ecobank today, you can convert the Cedi to the Rand. I want to put it on record today, that if you to Nigeria, at the airport, you can convert the Cedi to Niara. I want to put it on record that if you go to Burkina Faso today, you can convert the Cedi to the Burkina Faso CFA, I want to put it on record that if you to Togo today, you can convert the Cedi to CFA. Mr. Speaker, we are getting closer to convertibility. Mr. Speaker, I want to put it on record that anytime international currencies are being mentioned in West Africa or in the Africa business, the Ghana Cedi is always mentioned. So, as far as I am concerned, it is near convertibility, and by 2012-2013, the Ghana Cedi will become convertible under the National Democratic Congress government. Mr. Speaker, I want to now debate, and to convince colleagues, and to convince Western Region to continue to support this particular facility. Mr. Speaker, the Western Region alone is taking almost US$2.1 billion. I just want to urge my colleague MPs from the Western Region, just like Hon. Baidoo Ansah has already declared he will support this loan facility. Mr. Speaker, I would then call on my old good friend Hon. Papa Owusu-Ankomah, Hon. Aidoo, and all my good friends from the Western Region to support his loan facility. Thank you.

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