Isaac Adongo’s “blood-sucking vampires” claim against Ofori-Atta and Adu Boahen – the facts

The National Democratic Congress (NDC) Member of Parliament for Bolgatanga Central, Isaac Adongo, took to his Facebook wall on 28 May 2021 to accuse the Finance Minister, Ken Ofori-Atta, and the minister of state-designate for finance, Charles Adu Boahen, of a conflict of interest. Adongo alleged that the two ministers appointed two companies of which they are founders – Databank and Black Star Brokerage, respectively – as “two of the three investment advisory firms” for a multibillion-cedi government bond.

In his write-up, posted at 2.08pm on Friday, Adongo claims that “the Ministry of Finance headed by Messrs Ken Ofori-Atta and Charles Adu Boahen just announced a list of primary dealers and introduced a new term . . . bond market specialists”.

He added: “The duo, Ken Ofori-Atta and Charles Adu Boahen, have thus literally awarded to themselves through their companies the lucrative contracts that involve managing government’s borrowing programme with an estimated GHC60 billion a year gross financing.”

He went on to calculate that the two companies were to “share the spoils”, which he estimated to be as much as “GHC210 million a year”. However, to generate GHC210 million in fees, at 0.5% (being the going rate) of the value of total funds raised, a bond market specialist would have to sell bonds of not less than GHC42 billion.

BMSs are not involved in treasury bills but issuing medium- to long-term bonds. The GHC60 billion figure used by Adongo is the total gross financing for the year, including T-bills.

Bank of Ghana data

However, information available from the Bank of Ghana shows that the selection of the book runners for this year’s bond, undertaken by the central bank, was open and transparent and based solely on merit.

Databank and Black Star Brokerage are just two out of nine firms that have been selected by BoG/MoF as bond market specialists (BMSs) and not advisors to the ministry. The other firms selected to be BMSs are Stanbic Bank, Access Bank, Ecobank, GCB Bank, CAL Bank, Consolidated Bank and IC Securities.

The selection of the BMSs and primary dealers (PDs) is an automatic process based on market performance and historical secondary market trading activity which is publicly available and, therefore, not vulnerable to manipulation.

Since 1996, the Ministry of Finance, working with the Bank of Ghana, has developed and implemented various policies that affect the issuing and trading of Government of Ghana debt securities (treasuries and bonds).

The ultimate objectives of these policies are to develop an efficient fixed income market, strengthen the capacity of local institutions and deepen financial intermediation.

Primary dealers are institutions authorised by the Bank of Ghana and have the exclusive right to participate in wholesale auctions of treasury bills. Bond market specialists, on the other hand, are PDs that have exclusive right to participate in the sale, distribution and primary issuance, by auction or otherwise, of all Government of Ghana (GoG) treasury bills, notes and bonds.

Selection of PDs and BMSs

The selection process for firms to act as PDs and BMSs is based on merit, without the involvement of the Ministry of Finance or the minister and/or his deputies.

This selection process is designed to reward meritocracy, ensuring transparency in the selection process, and provides the Finance Ministry with a selection of highly capable bookrunners. The selection is also done according to the value of each firm’s secondary fixed income market trading activity as captured openly on the stock exchange.

Moreover, BMSs are paid based on performance. They are paid a percentage (this was 0.5% in the past) of the value of total funds each of them manages to raise, or based on the value of the bonds each manages to sell to investors. Meaning their compensation is based on their ability to convince investors to buy GoG bonds.

While the MP for Bolgatanga is not insisting that Ken Ofori-Atta and Charles Adu Boahen are involved in any way with the day-to-day operations of either Databank or Black Star, he cites their roles as founders or shareholders to support his allegations.

Adu Boahen resigned from the board and management of Black Star back in January 2017, immediately after he was nominated by the president to serve as one of his deputy ministers of finance. He also transferred his shares in the company to a family trust managed by his brother at the time. Ofori-Atta resigned from his position as the executive chairman of Databank in August 2012 and stepped down from all the Databank boards in February 2014.

Adongo also accuses the two men of reckless borrowing for personal gain. However, any borrowing by the Ministry of Finance is determined by the deficit target for the year as approved by Parliament, the Appropriation Bill and maturities on funds borrowed during the year.

He places Ghana’s total borrowing over the past four years at GHC250 billion. This, however, is not accurate. Available figures show that the nominal debt stock has increased from GHC122.17 billion in 2016 to GHC291.61 billion in 2020.

Part of the borrowing has been to refinance existing debt stock, which does not add to the debt stock. Moreover, apart from issuance of bonds itself, factors influencing the nominal debt increase include currency depreciation, programme loans contracted but not disbursed, concessional loans, commercial loans and other financings in which brokers such as Databank are never involved.

Yet, the opposition MP calculated a figure of GHC875 million as the total amount paid in fees over the past four years. It appears he arrived at the estimate simply by multiplying the wrong accumulated figure of GHC250 billion by 0.35%.

Wilberforce Asare