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`IMANI Africa turns up heat on Agyapa deal with 10 new questions, comments

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Policy think tank, IMANI Africa, has intensified its scrutiny of the Agyapa Royalties deal following a series of government justifications to concerns raised about the agreement.

On Saturday, August 29, 2020, a Deputy Finance Minister, Charles Adu-Boahen, suggested that some of the critics of the deal, including IMANI Africa’s Bright Simons, may not have the requisite expertise in investment banking to do so.

However, in a ten-point response to that suggestion by the government official and other issues that have been raised, Founding President of IMANI Africa, Franklin Cudjoe, said the proponents of the deal have also not done so based on investment banking principles or expertise.

“…what is all this talk about ‘investment banking’ this and that? How many of the people supporting the deal blindly have evaluated it using “investment banking” experience? And if people think they are investment banking titans, why don’t they just build their own businesses and go and list them on the London Stock Exchange?” he wrote in a release.

He said even if listing on the London Stock Exchange is so necessary to make sure Ghana gets the most money despite all the high costs Ghana does not have to lose so much control as demanded in the Relationship Agreement in Agyapa deal.

“On top of the massive expenses that shall see brokers, lawyers, auditors, accountants, and assorted ‘investment bankers’, and their agents and friends, consuming nearly 10% of the money to be raised, the question can still be asked as to why we are choosing a ‘standard listing’ without more, and on that basis requiring that Government of Ghana virtually lose all control of how the royalties money shall be spent in coming years,” the IMANI Africa boss stated.

Government has been criticised for the details of the deal that seeks to leverage Ghana’s mineral resources for primary capital on the international market.

At least 15 CSOs say the Agyapa deal fails the test of transparency.

Read the 10 new comments and questions Mr Cudjoe has presented about the deal below.

Agyapa matters arising series

If you think that the CSO front is going to leave this Agyapa business to just a few people and IMANI, then brace yourself. This week, a whole lot of new voices are going to be heard, serious voices. Tons of expertise and experience are going to be unleashed at this Agyapa business. Some of us are even going to take a backseat.

And what is all this talk about “investment banking” this and that? How many of the people supporting the deal blindly have evaluated it using “investment banking” experience? And if people think they are investment banking titans, why don’t they just build their own businesses and go and list them on the London Stock Exchange?

As long as what we are talking about is natural resources belonging to all of us and their governance, POLICY ANALYSIS and ADVOCACY shall be done, period! Below, I list a few issues that have come up since we published our earlier report (take your time and read it here: https://imaniafrica.org/2020/08/29/why-the-csos-oppose-the-current-agyapa-deal/).

1. Even if listing on the London Stock Exchange is so necessary to make sure we raise the most money (and IMANI disagrees that the stock market offers the best upfront fundraising option) despite all the crazy costs (see this article for some interesting insights: https://www.economist.com/leaders/2020/08/22/the-ipo-is-being-reinvented) does Ghana have to necessarily lose as much control as demanded in the Relationship Agreement? On top of the massive expenses that shall see brokers, lawyers, auditors, accountants, and assorted “investment bankers”, and their agents and friends, consuming nearly 10% of the money to be raised, the question can still be asked as to why we are choosing a “standard listing” without more, and on that basis requiring that Government of Ghana virtually lose all control of how the royalties money shall be spent in coming years.

2. It is precisely to address the concerns and sensitivities when it comes to state-owned assets (like the future royalty income of a nation state) that the London Stock Exchange introduced the Sovereign Controlled Commercial Company option so that state-owned entities and joint ventures can be listed without their nation state-owners losing all control over decision-making.

3. The Deputy Finance Minister has repeatedly insisted that in no country have Parliamentarians been given access to the transactional details of a planned listing of state-owned assets. Hence, the government cannot disclose the offer price, bookrunning details, broker fees and other essential information to the people’s representatives. This is a strange stance. The world abounds in SPVs set up by sovereign wealth funds (which our Mineral Income Investment Fund is). In every country where there is a functional parliament, oversight over such listings is to be assumed. Temasek Holdings is the most famous Singaporean Sovereign Wealth Fund. Its Astrea series of SPVs have always been scrutinised by the relevant parliamentary committees ahead of listing on the SGX. In fact, the tradition has been to circulate prospectuses widely (cf: https://www.astrea.com.sg/file/a5/resources/astrea-v-pte-ltd-final-prospectus-dated-11-june-2019.pdf). Why do Government officials here like to pretend that they are doing something so complex and groundbreaking that mere mortals cannot comprehend or critique?

4. The Deputy Finance Minister also said that tying up Ghana’s gold royalties in this Agyapa vehicle will not affect any other commitments because the 20% due to the Minerals Development Fund (MDF) will keep flowing. Why then has Government repeatedly failed to pay the full allocation to the MDF? In recent years, less than 10% of royalties, instead of the statutorily required 20%, have been paid. Yet, this is the portion of our under-pressure resources that ordinary people and communities suffering the adverse effects of mining directly benefit from. If even with all our royalties intact we are struggling to pay 10% into the MDF, then what will happen when all the royalties are tied up?

5. What happened to the Attorney General’s claims that allocation of royalty income in USD will breach the Bank of Ghana Act? Why was that not changed in the final agreement? Why did the Attorney General back down then?

6. Why does the Deputy Finance Minister (DFM), whose many years of touted “investment banking” experience has been hoisted as the flagmast of this deal, continue to sound as if he is completely unaware of any experience of royalty streaming in Africa? He makes it sound as if this run-of-the-mill deal method is some kind of unique local invention. Has he heard of the Karma Mine deal in Burkina Faso involving Sandstorm Gold and Franco-Nevada? Does he know that $100 million was paid upfront for 100,000 ounces of gold to be delivered over 5 years? When he looks at these numbers, does he understand why one does not need an “investment banking certificate” from JP Morgan to know that collecting $500 million for roughly 50% of nearly 5% of nearly 5 million ounces of gold PER YEAR for an INDEFINITE PERIOD of time is a steal for investors? That it demonstrates how we are undervaluing our assets by AT LEAST 50%? Did he examine the Shanta-Silverback deal in Tanzania?

7. How can the DFM say that it is more value-creating to discount future income through a general stock exchange than to cut a deal with a specialised discounter? Why exactly would pension funds pay more for Ghana’s future royalties through the London Stock Exchange than a royalties company as he claims? If it is about the glory and prestige of owning “Africa’s first gold royalties company listed on the London Stock Exchange”, why must the country sacrifice all its future royalties earnings? Why not a portion?

8. If, as the DFM insists, it is always a rip-off to do a direct securitisation deal to frontload earnings from mineral royalties, then why would any African country want to do business with Agyapa? The Government has said several times that they want Agyapa to become a major “African royalties company”. Why would African countries want to do royalties deals with Agyapa instead of listing an SPV too? If indeed, direct royalties deals are a ripoff?

9. How was Cabinet able to approve a deal in March 2020 when as late as May 28th, 2020, the Attorney General was complaining of not having seen the four main agreements involved in the transaction besides the Relationship Agreement? What exactly was presented to Cabinet to review and approve?

10. The DFM says that a direct royalties streaming deal was referred to the Finance Ministry by the Vice President but a review indicated that Ghana’s royalties would be valued at $700 million. What was the name of the company that made the offer? Who did the valuation? Was a report produced? Was this report shared with Cabinet? Did Cabinet or any committee of Cabinet review additional offers from royalty-streaming companies to benchmark this approach of creating and listing a securitisation vehicle as a way of raising money? As IMANI indicated in its earlier report, the vast majority of royalty streaming transactions we have seen value royalties for an ounce of gold at ~ 2.5X what the Ministry is projecting to raise. Once again, what offer price has been set for Agyapa’s shares ahead of listing? What is the commitment level of the underwriter?

Agyapa matters arising series

Franklin’s 10 simple comments & questions about Agyapa

If you think that the CSO front is going to leave this Agyapa business to just a few people and IMANI, then brace yourself. This week, a whole lot of new voices are going to be heard, serious voices. Tons of expertise and experience are going to be unleashed at this Agyapa business. Some of us are even going to take a backseat.

And what is all this talk about “investment banking” this and that? How many of the people supporting the deal blindly have evaluated it using “investment banking” experience? And if people think they are investment banking titans, why don’t they just build their own businesses and go and list them on the London Stock Exchange?

As long as what we are talking about is natural resources belonging to all of us and their governance, POLICY ANALYSIS and ADVOCACY shall be done, period! Below, I list a few issues that have come up since we published our earlier report (take your time and read it here: https://imaniafrica.org/2020/08/29/why-the-csos-oppose-the-current-agyapa-deal/).

1. Even if listing on the London Stock Exchange is so necessary to make sure we raise the most money (and IMANI disagrees that the stock market offers the best upfront fundraising option) despite all the crazy costs (see this article for some interesting insights: https://www.economist.com/leaders/2020/08/22/the-ipo-is-being-reinvented) does Ghana have to necessarily lose as much control as demanded in the Relationship Agreement? On top of the massive expenses that shall see brokers, lawyers, auditors, accountants, and assorted “investment bankers”, and their agents and friends, consuming nearly 10% of the money to be raised, the question can still be asked as to why we are choosing a “standard listing” without more, and on that basis requiring that Government of Ghana virtually lose all control of how the royalties money shall be spent in coming years.

2. It is precisely to address the concerns and sensitivities when it comes to state-owned assets (like the future royalty income of a nation state) that the London Stock Exchange introduced the Sovereign Controlled Commercial Company option so that state-owned entities and joint ventures can be listed without their nation state-owners losing all control over decision-making.

3. The Deputy Finance Minister has repeatedly insisted that in no country have Parliamentarians been given access to the transactional details of a planned listing of state-owned assets. Hence, the government cannot disclose the offer price, bookrunning details, broker fees and other essential information to the people’s representatives. This is a strange stance. The world abounds in SPVs set up by sovereign wealth funds (which our Mineral Income Investment Fund is). In every country where there is a functional parliament, oversight over such listings is to be assumed. Temasek Holdings is the most famous Singaporean Sovereign Wealth Fund. Its Astrea series of SPVs have always been scrutinised by the relevant parliamentary committees ahead of listing on the SGX. In fact, the tradition has been to circulate prospectuses widely (cf: https://www.astrea.com.sg/file/a5/resources/astrea-v-pte-ltd-final-prospectus-dated-11-june-2019.pdf). Why do Government officials here like to pretend that they are doing something so complex and groundbreaking that mere mortals cannot comprehend or critique?

4. The Deputy Finance Minister also said that tying up Ghana’s gold royalties in this Agyapa vehicle will not affect any other commitments because the 20% due to the Minerals Development Fund (MDF) will keep flowing. Why then has Government repeatedly failed to pay the full allocation to the MDF? In recent years, less than 10% of royalties, instead of the statutorily required 20%, have been paid. Yet, this is the portion of our under-pressure resources that ordinary people and communities suffering the adverse effects of mining directly benefit from. If even with all our royalties intact we are struggling to pay 10% into the MDF, then what will happen when all the royalties are tied up?

5. What happened to the Attorney General’s claims that allocation of royalty income in USD will breach the Bank of Ghana Act? Why was that not changed in the final agreement? Why did the Attorney General back down then?

6. Why does the Deputy Finance Minister (DFM), whose many years of touted “investment banking” experience has been hoisted as the flagmast of this deal, continue to sound as if he is completely unaware of any experience of royalty streaming in Africa? He makes it sound as if this run-of-the-mill deal method is some kind of unique local invention. Has he heard of the Karma Mine deal in Burkina Faso involving Sandstorm Gold and Franco-Nevada? Does he know that $100 million was paid upfront for 100,000 ounces of gold to be delivered over 5 years? When he looks at these numbers, does he understand why one does not need an “investment banking certificate” from JP Morgan to know that collecting $500 million for roughly 50% of nearly 5% of nearly 5 million ounces of gold PER YEAR for an INDEFINITE PERIOD of time is a steal for investors? That it demonstrates how we are undervaluing our assets by AT LEAST 50%? Did he examine the Shanta-Silverback deal in Tanzania?

7. How can the DFM say that it is more value-creating to discount future income through a general stock exchange than to cut a deal with a specialised discounter? Why exactly would pension funds pay more for Ghana’s future royalties through the London Stock Exchange than a royalties company as he claims? If it is about the glory and prestige of owning “Africa’s first gold royalties company listed on the London Stock Exchange”, why must the country sacrifice all its future royalties earnings? Why not a portion?

8. If, as the DFM insists, it is always a rip-off to do a direct securitisation deal to frontload earnings from mineral royalties, then why would any African country want to do business with Agyapa? The Government has said several times that they want Agyapa to become a major “African royalties company”. Why would African countries want to do royalties deals with Agyapa instead of listing an SPV too? If indeed, direct royalties deals are a ripoff?

9. How was Cabinet able to approve a deal in March 2020 when as late as May 28th, 2020, the Attorney General was complaining of not having seen the four main agreements involved in the transaction besides the Relationship Agreement? What exactly was presented to Cabinet to review and approve?

10. The DFM says that a direct royalties streaming deal was referred to the Finance Ministry by the Vice President but a review indicated that Ghana’s royalties would be valued at $700 million. What was the name of the company that made the offer? Who did the valuation? Was a report produced? Was this report shared with Cabinet? Did Cabinet or any committee of Cabinet review additional offers from royalty-streaming companies to benchmark this approach of creating and listing a securitisation vehicle as a way of raising money? As IMANI indicated in its earlier report, the vast majority of royalty streaming transactions we have seen value royalties for an ounce of gold at ~ 2.5X what the Ministry is projecting to raise. Once again, what offer price has been set for Agyapa’s shares ahead of listing? What is the commitment level of the underwriter?

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