Ghana not ready for Agyapa Royalties deal-Economist

An Economist at the University of Ghana Business School, Dr Lord Mensah has described the Agyapa Royalty deal as risky to the nation.

Speaking to Starr FM monitored by the lecturer said the deal will plunge the state into paying a judgment debt in the future considering certain clauses in the deal.

“As a country, I don’t think we are ready for this risk…looking at the clauses in this agreement, I foresee us payment judgment debt in the future. I think it’s quite complex for a nation that’s gradually developing its financial market to jump into such kind of deal,” He said

The Agyapa Royalties deal has brought about some concerns among Ghanaians. The  Minority in Parliament  have questioned the credibility of the agreement and have called for the withdrawal of the deal.

15 Civil Society Organizations (CSOs) under the umbrella name Alliance of CSOs working on Extractive, Anti-Corruption and Good Governance have called for the immediate suspension of the implementation of the controversial Special Purpose Vehicle, Agyapa Royalties Limited established by the government through the Minerals Income Investment Fund.

The CSOs say until there is full disclosure of the beneficial owners of the Special Purpose Vehicle, Agyapa Minerals Royalties, the implementation of the deal should be deferred.

What you need to know about the Agyapa Royalties deal

The Agyapa Royalties deal is part of the NPP’s government’s strategy to beat the long-standing problem of lack of capital for developmental projects.

Over the years, the government under different Executive presidencies have tried to look for money by going to the IMF, the capital market or the international bond market.

These three main sources of capital are expensive. Interest rates on the bond markets are generally high and because the tenure is short, Ghana risks falling into high debt distress.

IMF loans have become unpopular because they usually come with restrictions. Coronavirus seems to have made loans on the capital market unattractive.

And with Ghana’s current poor credit rating and the effects of the pandemic, the government needs access to cheaper sources of capital.

A deal like the Agyapa Royalties agreement, therefore, is among the strategies governments across the world have adopted to raise money on the global financial market. It involves securitising future flows of revenue with proceeds from the extractive sector.

The controversy over the Agyapa Royalties deal started on August 14, 2020, when the Majority MPs secured the numbers to pass the agreement although the Minority staged a walked out.

The deal started in June 2018 when Parliament passed the Minerals Income Investment Fund (Act 2018) to manage the equity interests in mining companies and also receive royalties on behalf of the Government of Ghana.

The Minerals Income Investment Fund is mandated to manage and invest these royalties and revenue it receives on behalf of Ghana and invest them for higher returns.

To do this, the law enables the Fund to establish Special Purpose Vehicles (SPVs) to appropriate these investments.

Paa Kweku Eshun

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