Delivered by Gabby Otchere-Darko, Senior Partner, Africa Legal Associates, at the 2019 Policy & Governance Forum, Launching the States and Governance Authority (SIGA), at Alisa Hotel, Tuesday, August 20, 2019


Minister of State, Kwaku Afriyie, MP, the Director General of State Interests and Governance Authority, Stephen Asamoah Boateng, CEOs and Management of the various State entities, Distinguished Guests, Ladies and Gentlemen. Good morning. I want to thank Mr. Asamoah Boateng for being so awfully kind to invite me away from the middle of a needed family holiday with my wife and children to be part of this very important occasion. But, more importantly, I want to thank him, immodestly, perhaps, on behalf of Ghanaians, for the energy and leadership that he has brought to play as the overall boss of State-Owned Enterprises in Ghana.  He was able to dust away the cobwebs and see his appointment for what it is, overseeing a sluggish, yawny multi-billion-dollar conglomerate. And, true to his glass-half full mentality, he immediately set to work with zeal to make his office count and I must say you are an example to other appointees on the change that a leadership of conviction can bring about.


In his Independence Day address last year, President Akufo-Addo defined a Ghana Beyond Aid as “a prosperous and self-confident Ghana that is in charge of her economic destiny; a transformed Ghana that is prosperous enough to be beyond needing aid, and that engages competitively with the rest of the world through trade and investment.”   My speech is about the role of state-owned enterprises and joint ventures involving the state in moving Ghana beyond aid. The philosophical underpinnings and policy objectives of the Ghana Beyond Aid Agenda is set out in the “Ghana Beyond Aid Charter & Strategy Document”, published by the Government in April 2019. The Ghana Beyond Aid Agenda is predicated on two key concepts:  one, it should be a national Agenda, rather than a government agenda; two, the Agenda should focus on values, mindset and attitudinal changes that condition the environment for pursuing development, rather than numerating a list of projects and policies that Government must implement. It recognizes rightly that a state of mental dependency or inadequacy is what sustains poverty, and entrenches aid dependency. Ghana Beyond Aid is about inculcating positive consciousness in the Ghanaian. It is a mindset kind of revolution. It is about the assumption of personal responsibilities in the bigger job of transforming Ghana. Those who say we need to build institutions must first know that it takes human beings to build and maintain institutions.


To quote President John Agyekum Kufuor: “Ghanaians pretend to work and the Government also pretends to pay them”. This statement underlies a profound and perennial problem of attitudinal challenges in the public sector including SOEs. We need to realize that the urgency of our time demands that we make slackness costly to the slacker. We cannot do business as usual if we want to emulate how successful business is usually done.


For it to work, politicians, all leaders, labour, civil society, business and students must develop and exhibit a high degree of confidence, integrity, competence and commitment that challenge ourselves and our organisations to perform. It is about believing in Ghana; believing in the capacity of the Ghanaian to compete and deliver; it is about knowing you are operating in an environment that broadly, constantly and predictably, identifies potential, rewards success, challenges failure and, perhaps, most importantly, punishes wrongdoing.


By 2030 Ghana is predicted to have a population of 36.8 million; that of West Africa is expected to grow to more than half a billion people (approximately 516.3 million) and the population of integrated Africa at approximately 1.68 billion. This is the prize: being a strong and versatile utility player on this rich continental field of vast opportunities and resources, where there is free movement of people, cultures, ideas, goods and services. Africa’s future is as the largest economic bloc in the world. How do we ensure that in ten years’ time Ghana will be more than ready to take full advantage of this new continental dawn of, truly, an Africa Striving Beyond Aid? What role can SIGA and our SOEs play in pushing our economy at the forefront of this exciting dawn? Nkrumah said, in the 20th century, “in the last century Europeans discovered Africa. In the next century Africans must discover Africa.” That century is now.


African Continental Free Trade Agreement (AfCFTA) comprises a single-market trading bloc covering the entire African continent with a total population of 1.2 billion and a combined GDP of almost $3 trillion. It should not be for nothing that Ghana was the first country to go all out for a united Africa and in Kigali, Ghana, again was the first country to symbolically sign up for AfCFTA. It is estimated that annual intra-African trade will increase by 52% to $35 billion in just three years from now.  It should not be nothing that Ghana has been chosen as the secretariat for AfCFTA. This positions our country to become the new commercial capital of Africa, a financial services centre, a regional trade hub and a gateway to the African continent as well as an attractive destination for foreign direct investments. We should make it an important instrument for developing our economy beyond aid. We should prepare our minds and physical spaces for this new era.


This is what makes SIGA’s work cut out. So, what should the Ghana Beyond Aid vision mean for us gathered here today? It should mean:

  • a Ghana where its SOEs are financially and operationally robust to ease the pressure on the Consolidated Fund and contribute rather to economic growth;
  • a confident Ghana that engages actively and competitively in the international arena in trade and investment;
  • a Ghana that benefits more from its natural resources through value addition, better negotiations and greater participation of Ghanaians;
  • a Ghana where SOEs deliberately and competently support the industrialisation of the economy. Ask yourself, how can your SOE help?
  • a Ghana that can support and build itself through effective revenue collection and management. Ghana’s tax to GDP ratio was 12.6% in 2018 compared to the 18.2% average of 21 African countries in a recent report. Compare it further against the average tax-to-GDP ratioin OECD countries which stood at 34.2% in 2017;
  • A Ghana where taxpayers are ok to contribute their quota because they see their money’s worth in the delivery of quality public services.


Aid effectively means stretching out your bowl for handouts, mostly financial. Beyond Aid means stretching out your hand away from the begging bowl to doing things yourself and doing them well. If aid could develop Ghana we would not be here today exploring ways to break ourselves free. But, to break free, we need to be able to manage our economy and its resources well to raise the money needed to invest. But, to raise money domestically we need a financial system that is fit for purpose. To break free from the aid dependency syndrome, we need to be able to build industries right here in Ghana and add far greater value to our economy than we have so far done. To move Ghana beyond aid, we need to get our SOEs working as usual businesses and not as business as usual. The role of SOEs to our development, ironically in my view, is as crucial today as it was in the early 1960s during Nkrumah’s push for industrialization. But, with the lessons learnt from some of the methods employed then, we are in a far superior position today to finally get it right. I will later on focus on one industry deliberately re-designed by the Akufo-Addo administration to be driven strategically by an SOE and how I believe that single industry alone can serve as a major catalyst for transforming Ghana Beyond Aid.


The launch of SIGA, therefore, marks a watershed moment in our country, as we take steps towards realizing the President’s vision of moving Ghana Beyond Aid. For a believer in free market like me, I may be tempted to see the establishment of SIGA, coming on the heels of recent interventions by Government towards effective nationalization of a significant part of the banking sector, as evidence of the return of statism – where the state owns and controls a substantial portion of economic activity.


I saw a banner headline yesterday in The Publisher: ‘GONE FOR GOOD – 9 BANKS, 23 SAVINGS AND LOANS, 39 MICROCREDIT COMPANIES, 347 MICROFINANCE COMPANIES.’ It tells a few stories. One, that, whether privately-owned and run or not, corporate governance is critical to building, sustaining and growing any organization or business. Two, that regulatory bodies have a simple but important task of implementing and enforcing laws passed to supervise the conduct of actors in specific sectors. Three, when regulatory bodies fail, an important check on corporate governance collapses. Four, the interventional powers of the state can be for good or bad but never neutral.


The facts are difficult to escape. Over the last couple of years, the state has spent billions and billions and still spending to nationalize about nine banks in a consolidatory manner, take big stakes in some five or so other banks and protect depositors.  The state-owned GCB kicked it off in 2017 by taking over the assets of two banks, UT and Capital. The Consolidated Bank of Ghana (CBG), formed in August last year by government, was capitalised with GH¢450 million to merge and take over the assets of five insolvent banks, with two others added in January 2019. This year, the Ghana Amalgamated Trust (GAT) began operation with GH¢800 million (with the capacity to go up to GH¢2 billion) to capitalize solvent indigenous banks struggling to meet the enhanced minimum paid-up capital of GH¢400 million. GAT also seeks to provide business development support to help strengthen the banks under the GAT programme, in both corporate governance and growth, with NIB to refocus on supporting industries and ADB supporting agribusiness.


It all reads like a clear case of re-nationalisation or nationalisation of banks. But, let us resist the temptation of seeing this as the grand return of statism, particularly by a political party that claims free enterprise as its creed and yet highlights social interventions such as free education and national health insurance as its greatest achievements. I welcome the kind of state interventionism we are seeing now as rather positive because apart from a healthy, educated workforce, the two structural drivers of development are industries and a strong financial services sector. Today we still talk about the 40 odd big factories Nkrumah built within 9 years after Independence. In three years, over 100 factories are in various stages of completion under Akufo-Addo’s 1D1F. But, the difference is that they are not state-owned but state-aided. Here the support of the state has been more about building, first, a new national mindset of industrialisation, introducing incentives and using an important SOE, such as the Ghana Exim Bank, to help fund many of the new factories. Between 2017 and 2019 Exim alone is funding 84 factories.


Let me repeat, aid is essentially about depending on donor support to fund a nation’s development. And, apart from Rwanda, where 70% of government expenditure is donor-funded, I cannot think of another African country that has been able to develop meaningfully on aid. If aid is about money then the decision to fix the financial services sector, even at the expense of adding more work to Asa B’s portfolio, has been absolutely necessary. Of course, the rescue package has been very expensive, costing billions of dollars, which if it weren’t for the crisis, we probably did not even think we could have raised GH¢14 billion within such a short time on our own to fix our roads, hospitals, schools, water and sanitation problems, for example. Compare it to the $2 billion dripping in from Sinohydro, which we continue to hail in nigh Messianic proportions. As an aside, the decision to rescue the financial sector has offered the NPP, I suspect, a convenient campaign message for 2020. It provides, I think, a pretty credible excuse for those NPP manifesto items that are not likely to to be fulfilled before December 2020, which I am well aware did not include a promise to build a wall to keep the mosquitoes in the Atlantic Ocean.

Campaign promises here in Ghana are pretty lame, actually, compared to other areas. For example, Ferdinand Lop, a presidential candidate in France in his 1938 manifesto pledged to relocate Paris to the countryside, so that its residents could enjoy fresher air. He promised to pay annual allowance to the widow of the unknown soldier. He also promised to nationalise brothels, so that with the revenue the government could lower taxes for workers generally.

GH¢14 billion would completely transform the railway sector, for instance.


The causes of the crisis in the financial sector is something that, historically, SOEs know all too well: the disregard for corporate governance.  Ghana’s independence brought with it a sense of national dignity, self-worth, self-confidence and self-determination. A positive, can-do mindset; the type that Ghana Beyond Aid is seeking to bring back, but hopefully, with the added lessons from our own painful experiences.


The post-colonial economic transformation agenda was to be led and driven by the establishment of State-Owned Enterprises. Other institutions were established to oversee and coordinate the performances of SOEs for presumably effective and efficient service delivery. But, like what we have witnessed with the Bank of Ghana and the financial service providers, the negligent and, sometimes, criminal supervision of SOEs by such oversight entities aided the collapse of most of them. The lack of transparency, accountability and professionalism in the financial and operational management of SOEs were largely to blame. Even the Divestiture Implementation Committee established to oversee privatization of non-performing assets itself became a victim of the very problem it sought to fix. My question to Asamoah Boateng and all the CEOs and board members of the remaining SOEs is this: how do we ensure that SIGA does not suffer the fate of SEC or DIC? How do we sow better seeds for today’s SOEs?


Let us break down state-owned enterprises into three categories: permanent ownership and control, non-permanent and temporary. Indeed, the mandate of SIGA includes divestment. Currently, it has sitting on its general balance sheets, assets which includes the same billions spent to rescue the banking sector.  GBC has already seen its profit shooting upwards. Already CBG is declaring profit. Its 2019 second quarter results show a profit after tax of GH₵41.1 million, representing about 280% improvement on performance over the 2018 financial results. Last month, it was able to release funds, totaling GH¢530 million to Cocobod for cocoa roads. Like what we are seeing in Europe now where governments are selling off financial sector assets that had fallen into state ownership at the beginning of the 2008 financial crisis, the Government of Ghana  should more than recover in the future all the billions it has spent on the banks, plus profit. But, the trick to achieving that is what all CEOs and board members should religiously adhere to as the cardinal principle, which is not to ever compromise on corporate governance and to suffer the consequences when they do. Board of Directors act as the key body that take strategic decisions for the operation of SOEs, JVCs and OSEs. Ministers must give broad policy directions but must not interfere on how SOEs are run. Board chairman are not executive directors and must not deal directly with members of staff, and must also not act without a direct decision of the board. SIGA must take a keen interest in ensuring that at all times material, SOEs, JVCs and OSEs have properly-constituted and functional Board of Directors to provide strategic directions, goals and focus for the entities. It must also take it upon itself to ensure that every SOE has a corporate governance policy. Unfortunately, not many SOEs have such a policy. To make this work, I will propose that SIGA sets up a Corporate Governance Committee, which would be tasked to ensure that every SOE has a corporate governance policy based on a code of practice, designed to establish a solid basis for good corporate governance, which is necessary to support the SOE from achieving its core objectives. Once implemented the Committee should ensure that the rules of corporate governance are obeyed. A proper management of these processes will enhance the quality of strategic leadership required to enable SOEs, JVCs and OSEs to operate at their optimum.


I would also appeal to SIGA to study closely what is happening in France where proceeds from ongoing divestment of state asset are earmarked for innovative start-up companies. Or Germany, where the performance of SOEs are assessed every two years to determine whether they should still remain or be privatised. SOEs do not have to be endangered species. A 2015 World Bank study suggested that SOEs in Ghana accounted for about 13% of GDP and employed more than 35,000 people. If we look at Asia, SOEs account for more than 30% of GDP in China, 38% in Vietnam, 25% in India and Thailand and approximately 15% in Malaysia and Singapore (OECD report). In Ghana, SOE contribution to our GDP could even be greater if managed like a usual business and not as business as usual.


Why would, for example, the Electricity Company of Ghana (ECG), a multi-billion-dollar asset that generates income every second you and I turn on our lights, need the balance sheet of another SOE, the Ghana National Petroleum Corporation (GNPC) to guarantee the purchase of fuel for the Karpower ship to generate electricity, which generates income? ECG is a good example of how not to run an SOE. As at 30 June 2019, it was owed over GH¢2.2 billion by customers. Of that, over GH¢500 million was owed by Government. Ghana Water Company is another SOE which is owed almost GH¢67 million by its sole shareholder, Government. As at the end of its financial year in 2017, ECG was valued at $3 billion, with liabilities of some $1.5 billion, and making losses. The current problems with the PDS concession have brought into active play, a Ghanaian pastime, which is doing intelligent ex post-facto analysis. Let me also use this platform to have my say in trying to sound intelligent after the facts. If I may ask, why were we afraid to privatize ECG instead of offering a concession, whether for 25 or 20 years? What is in maintaining ECG, without its main assets, as a completely state-owned entity? For what purpose? Could we not have simply settled for a strategic partnership with a foreign entity, if you like, (not necessarily an equity partner) in order specifically to introduce and/or instill the necessary but lacking technical and management culture, and still maintain significant Ghanaian ownership through a combination of a minority stakeholding by the state, investments by state enterprises such as GIIF, SSNIT, Ghanaian businesses and individuals with the balance sheet and appetite to invest, sweat equity plus a premium by ECG workers, and then go ahead to float the rest of the equity requirement on the Ghana Stock Exchange for every other interested person, Ghanaian or not, to buy and own shares? I was a teenager living in Oxford when I had the opportunity in the mid-1980s to buy shares in British Gas.


If we cannot make SOEs work for us then we should not burden the taxpayer to work for such SOEs. An assessment carried out by the Finance Committee of Parliament in 2012 of 39 state-owned enterprises, many of which are structure as commercial ventures rather registered aggregate losses. Also, the 2016 Annual Aggregate SOE report from the Ministry of Finance indicated that a sample of just 18 SOEs netted a loss of about GH¢791 million for that financial year. Out of these 18 SOEs, only five declared dividends to government. What society requires of SOEs is to be active and conscious players in national development and to do so with utmost integrity and competence. If mobilizing greater tax collection is crucial to a Ghana Beyond Aid, then using the same mobilised public funds to aid loss-making SOEs should not continue.


However, SOEs need not be a drain. With the help of SIGA, it is anticipated that Ghanaian SOEs will be given the space, support and competence to realise their potential for socio-economic good.  If Rand Water in South Africa can register profit then so can Ghana Water. However, some SOEs may, by their strategic design be non-profit making but providing crucial public goods and services. This is where SIGA can be more active in ensuring that the culture of corporate governance becomes the basic standard for all SOE operations.


15 years ago in Malaysia, the government introduced something similar to what SIGA is set to do: the Transformation Programme for Government Linked Companies. The programme set out key performance indicators for SOEs, introduced the requirement for performance-based contracts and compensation, changed and diversified the composition of the boards and management of SOEs, introduced private sector involvement and enhanced the legal and operational frameworks of the SOEs to those more typical for a corporate structure. The result has been obvious. Between 2004 and 2014, Malaysian SOEs tripled their market capitalisation and increased their profitability significantly. SIGA should be able and must be allowed to achieve something similar here.


Local content legislations covering the petroleum sector, both upstream and downstream, envisage a new Ghana beyond aid which actively involves the participation of the state, indigenous Ghanaians and foreign investors. Regulators such as the Petroleum Commission, Energy Commission and the National Petroleum Authority must be given all the support to succeed in empowering more Ghanaians to do more. My only request would be that in implementing the rules they must do so with the intention to facilitate business and not to frustrate it. I promised to focus on one industry to which I believe SIGA should pay particular attention. The potential of this industry to transform Ghana is huge. With this I mean the vision to create an integrated aluminium industry in Ghana. In six years from now (2025), Ghana can generate about $4 billion worth of export income alone annually from bauxite produced in Ghana. That is like 5% of our GDP. To make this happen will depend on the performance of SIGA and other key state enterprises under SIGA, including GIADEC, VALCO, Ghana Gas, GNPC, ECG, and VRA.


The Ghana Integrated Aluminium Development Corporation Act, 2018 (976), under Section 28(a) empowers the Minister with the discretion to ensure that “bauxite in its natural state shall not be exported, sold or otherwise disposed of after five years from the coming into force of this Act.” GIADEC – the Ghana Integrated Aluminium Development Corporation, which is headed by the experienced corporate executive of international repute, Michael Ansah, has been established to promote and develop an integrated aluminium industry in Ghana. The law stipulates that at least 30% of any JV formed along any part of the chain must be Ghanaian-owned, with that ownership expressly including GIADEC and private Ghanaian businesses or individuals.


Ghana’s bauxite reserves are estimated to be over one billion metric tonnes. But, bauxite in its raw form is worth around $42 per metric tonne. Processing the raw bauxite into alumina oxide would fetch ten times more, about $400 per metric tonne and processing it further to aluminium will fetch an additional five times more. Then there are other value-add-ons from downstream products made out of this lightweight metal, including vehicle engine blocks, alloy wheels, window frames, roller shutters, aeroplane parts, extrusion profiles, cans, aluminium foils, pans and pots, etc.


VALCO, which was nationalised under President J A Kufuor, currently has a 5-year strategic plan that should see it producing 290,000 metric tonnes of molten aluminium annually and at 5 cents/kwh.  This is not bold enough at all. For a smelter that 30 years ago could produce at full capacity of 200,000 metric tonnes. We expect more.   It is my ambitious view that Ghana can produce one million metric tonnes of aluminium from Valco in five years’ time if we mean to do so.  This can generate income of at least $1.9 billion a year on the aluminium end alone, based on the metal selling at $1,900 per metric tonne on the London Metal Exchange.


There is nothing but ourselves and the arrangements we put in place that can stop us from making this happen. The law allows us some flexibility. I would propose a situation where we can give as many as four mining concessions to produce as much as an aggregate of 20 million metric tonnes ($800 million) per year, with at least 12 million metric tonnes of that heading straight to our local refineries, which must have a guaranteed refining capacity to produce at least 6 million metric tonnes of alumina annually, valued at $2.4 billion annually. With proper integrated planning, we could have 2 million metric tonnes of this refined product (alumina) processed further into one million metric tonnes of aluminium at a radically expanded VALCO, generating the additional $1.9 billion.


Please bear with me as I break this further down for greater clarity as to the vast opportunities awaiting SIGA, GIADEC, VALCO and co. Going by the plan that I have outlined above, GIADEC and its partners could earn $240 million annually from exporting directly 8 million of the 20 million metric tonnes of bauxite mined.  A step further down the value chain, by exporting directly 4 million of the 6 million metric tonnes of alumina refined, GIADEC and its partners could earn directly $1.6 billion from that. Add the $1.9 billion from the smelter and the total earnings per year for Ghana from those three chains of the industry alone could easily fetch $3.740 billion annually, minus production cost. This is minus income from downstream manufacturing. We can do it.


It may seem ambitious but it really is not. Global aluminium output totalled 64.34 million metric tonnes in 2018, according to the International Aluminium Institute (IAI). The forecast by Fitch Solutions is that the global aluminium market will see a number of deficits over the next few years as solid demand growth outpaces production growth, driven by a solid construction industry growth and growing roles in autos as a lightweight substitute for steel. Fitch analysts forecast aluminium consumption to increase from 62.9m tonnes in 2019 to 79.7m tonnes by 2028, averaging 2.8% annual growth. All that I am saying is that Ghana should position itself to take just 2 million of this business at the smelter end. That’s all!

I know the environmentalists will have their say as I call for production to ramp up from the current million tonnes or so to 20. But, Guinea has bauxite reserves of over 40 billion tonnes. Fitch forecasts Guinea’s mined bauxite output to climb from 59 million metric tonnes a year in 2018 to 82.3mnt by 2028. We certainly cannot beat our West African neighbours in raw material output but we can definitely beat them in value addition and local participation. Ghana, rich in high grade bauxite, also has a global advantage with a smelter that has been pouring aluminium (albeit, imported aluminium) since 1966. That is a very rich experience in aluminium production. Our strategy must be to host one of the biggest aluminium producing capacities in the world. At one million metric tonnes of aluminium yearly we will only be producing half of what Australia is currently doing, which earns the Aussies in excess of $3.740 billion annually from aluminium export alone.


But, to do this, is to first of all identify a dedicated, reliable, efficient, and cheap source of power for both refining and smelting. This is where the other state enterprises to do with the energy sector come in.  Refining requires a lot of steam power, smelting consumes a lot of energy. In Greece and other countries where an integrated aluminium industry is fully at play, they use a system called co-generation, with steam from the gas produced for the refinery and the gas for the smelter. The worldwide average usage of electricity by smelters is around 15 kWh for one kilogramme of aluminium (54 MJ/kg).  Using 15kWh/kg, 1 million metric tonnes of aluminium would require about 1,800MW capacity of power. 3% of the world’s entire electrical supply goes towards the extraction of aluminium. The only way we can build a real integrated aluminium industry in Ghana to produce the kind of income mentioned above is to have a comprehensive, sustainable, reliable, affordable energy solution. Experts estimate that the best form is gas. With a combination of associated gas, non-associated gas, and imported gas, including LNG and WAGP, we can make arrangements in such a way that government can supply an expanded VALCO (and/or new smelters that may come along) power at a price that will make them competitive and replace the value lost from the value added along the value chain of the aluminium product.


In conclusion, the transformation of the SEC and DIC into SIGA presents us with enormous opportunities and benefits, as we chart a new economic path of inclusive, sustainable growth to take Ghana Beyond Aid.


For SOEs to perform well, integrity is key. From the top to the bottom integrity must be respected. To borrow the words of H K Prempeh, “I expect the new SIGA, under the leadership of my good pal Stephen Boateng, to elaborate and enforce as part of its SOE corporate governance mandate, comprehensive conflict of interest policies and rules. We must change the way we do business in this town,” he says. We must change from one of business as usual to how business is usually done, I Say.


If this mandate of SIGA is well executed with a constant eye on the drivers of economic transformation, such as the rail sector and bauxite, SOEs will become significant instruments for a prosperous Ghana.


Thank you.

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