Selling Ghana Telecom – Selling our eggs
July 19, 2008
I heard of this sale of GT about three months ago when a source at the finance ministry hinted me that government was gradually finding itself in a tough spot and might resort to some “interesting” measures to salvage its economic fortunes.
At that time, cabinet was just considering the effects of the rising crude and food prices on the world market. My source suggested that GT was on its way to being sold because government had to quickly raise large foreign exchange to sustain the economy, and take its hands off a troublesome child.
I must admit, I thought it would never happen. For a sitting government to risk such a decision in an election year……………..I really thought it wouldn’t happen. But the first week of July changed any such nationalistic dreams I had. Government announced it was expecting some 900 million dollars injected into the economy from the sale of GT.
The Facts
· Government of Ghana has already signed an agreement with Vodafone International BV, a subsidiary of Vodafone UK, to sell 70% of GT for 900 million dollars to vodafone.
· Government of Ghana would prior to the sale, advance a shareholder loan of 228 million dollars to Vodafone.
· Government of Ghana would also pay off GT’s 400 million dollar debt hanging over its head and also make available 40 million dollars for the payment of severance pay to workers who would be laid off after a restructuring by Vodafone.
· Government of Ghana EXPECTS that Vodafone would inject an investment of 500 million dollars into the newly acquired company to improve its operations.
· Included in the sale of GT are Ghana’s fibre optic backbone (which in the future would serve as the platform / infrastructure for improving ICT products and services) and the Ghana Telecom University in Tesano, Accra.
From the onset, many market watchers and critics complained that the deal was not wholly transparent. They argued that Government had not fully disclosed all its reasons and preferences to the market and consequently had ended up with a bad deal.
Since the debate started, many have focused on the deal itself and the many parts of it that have been described as outrageous. – like selling the fibre optic backbone for 999yrs, and paying all the debts while Vodafone gets all the benefits etc.
For me however, my worry is about the whole idea of Selling 70% of the state Telecommunication provider to the Brits.
Why are we Selling GT?
I asked the communication’s minister on the 15th of July on my show. His response – “ GT needs heavy financial investment and better management.” He later admitted that as the minister Osei Akoto (finance ministry) had said, Ghana also needs heavy injection of foreign exchange. (Remember crude oil has exceeded in the 1st 6mths, double of our budget for oil importation for the whole year. – We need money)
But is selling GT the only way to raise that needed investment and get the required management expertise?
Certainly not!!!!!!
In every nation’s life, there are some strategic areas that MUST be protected by the state. – Water , Energy, Telecommunications, Roads just to mention a few.
Where a state opts for a capitalist / free market approach (Of which I am a major advocate), the state often sets the standards by having a state owned player that provides the basic standard and charges the basic cost while remaining profitable. In the UK BT is the standard for telecommunication services. Basic services at Basic cost. This then subtly determines what competition can and cannot do. The regulator like the NCA, can only enforce legal standards. Legal standards are not the same as market standards. So often there is the need to have a state owned player set the market standards. British Airways does the same for the aviation industry in the UK.
Who then told us that a state owned Telecommunications Company is an evil idea? Who told us that granted that we have failed in managing our own affairs; we have to give away ownership just so we get better management?
It’s a basic management fact that ownership and management are two different items. Owners don’t need to manage. If I own a taxi and don’t think I can be a good taxi driver, I may just want to hire a professional driver to provide me with the expertise. So granted that we are even poor in managing our own GT, we do not need to sell our ownership just to get better management. If you know the value of an asset and its potential – you hire managers. So why don’t we just hire better managers?
In agreeing to a clause in the contract to pay for the severance of some staff, the government tacitly admits that there are people at GT who shouldn’t be there. Fire them then. A source at the communications ministry tells me there is also so much corruption and inefficiency in the management of GT thus government’s quick desire to wash its hands off the troubling state asset.
Again I disagree – Sack the inefficient ones, prosecute the corrupt ones, show zero tolerance for underperformance but for Christ sake please don’t sell our birthright.
Is anyone saying that if we need 500 million dollars, we cannot raise it from a consortium of banks in Ghana or even by floating it on the Ghana stock exchange?
Is anyone saying that if we want to hire expertise to better manage GT, we can neither find it in Ghana nor hire even Vodafone to come provide that expertise? After all MTN and Tigo has over 80% of their management staff as Ghanaians.
And if it is about government interference in taking economically unwise decisions, the simple way out is to empower GT to be able to say no to government interference.
I believe that GT can play a strategic role in the Telecommunications industry in Ghana if better managed with less Political influence. Let’s clear the GT board off the many Political appointees and get proven management hands to sit on the board. Let’s sack those who need to be sacked and overhaul the place. Let’s demand that they do better. But certainly let’s not give away 70% of our ownership.
Finally, I’ve also heard some say that Vodafone and their likes would not give you expertise even if you pay for it without giving them equity. True. That happens in management contracts sometime. But in such cases, we give such management partners minority equity. Let’s them have 30 instead and let’s keep the 70. And let’s call on Ghanaians to raise the money needed for the investment.
Fibre Optics – The Future of Telecoms
Finally, a simple check in the industry shows the immense potential of fibre optics for the telecoms industry. It is actually the future for internet, voice and data communication.
Why then do we sell it all out to GT when in the case of VRA we said it wasn’t wise to give one player, the entire transmission infrastructure?
Selling the Fibre optic backbone is like selling our eggs.
The deputy minister of communications –Opare Ansah argues that the Sale of the Fibre Optic backbone doesn’t amount to the creation of a monopoly for GT. He explains that all other future players who require fibre optic infrastructure for the furtherance of their business only need to build their own or hire from GT!!!!!!!
That honourable minister is the working definition of a monopoly on today’s market.
It’s just like saying let’s give the power transmission lines back to VRA…and for any energy company that comes to town “ you can either build your own transmission lines or rent some transmission space on the lines from VRA”
I will not even bother to argue out the price being too low and the fact that we do not need to add the Ghana Telecom University.
I will not even bother to raise the Political argument of believing in Ghana as Dr. Nii Moi Thompson has been referring to in all of this debate
I will not even bother to express my discomfort about the ever too frequent attempt to rush through such contentious issues in Parliament on the last days of its last sitting.
In conclusion, I suggest that unless there is another reason to sell GT of which we haven’t been told, then we can simply find the investment (Like we did for Valco) and hire the expertise.
Let’s not sell our eggs…..
These are my thoughts……….tell me yours
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Post your comments here……………………
Comments
21 Responses to “Selling Ghana Telecom – Selling our eggs”
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kojo,this is a beautiful peace. i believe it actually sums up the feelings of a majority of ghanaians. so much that even the ruling party found it difficult bullying its way through parliament.if its the money we need,sell shares.i believe strongly all we need is the right management.and please tell the government to stop that comparison of 30%sale of gt in 1997 and 70% sale now.afterall,spacefon started in 1996 with$500000.how much was it sold for?
believe in ghana shouldnt just be a slogan.
I agree with your write up on the sale of Ghana Telecom. I just heard you speak to the Government’s spokes person Mr. Kwarteng who kept mentioning that Ghana Telecom is in debt (i.e. piling up of $30million per month).
I would like to find out why the Government does not speak about the large receivables and fixed assets of Ghana Telecom. The goverment is partly to blame for the large receivables on GT’s balance sheet.
Why would government also sell the fibre optic backbone to Vodafone which is the future of the telecom sector? ISPs depends on this and therefore selling that to Vodafone would mean that the ISPs will be at the mercy of Vodafone. Remember when GT got into the Internet business? They virtually ‘killed’ businesses of some ISPs such as Africa Online among others.
I know you are doing your bit by asking the relevant questions. But I want to find out why wouldn’t the government float the shares of GT and get a competent management team with clear objectives and deliverables to run the affairs of GT. This team needs to be Ghanaians. I think we have the men and women to run our own affairs. Otherwise the dream of Kwame Nkrumah will be lost forever.
We have sold our GWCL to AVRL. On AVRL, government pays them 250,000 Euros every month. When I inquired, the response was that the money is coming from the World Bank.
What are we doing to our strategic institutions?
i believe this is not the right time to sell a national asset like GT. in the case of safari com of kenya, vodafone only has 40% and the kenyan government has floated the remaing 60% for ordinary kenyans, why cant we do the same here in ghana.
its a pity we have to sell GT to finance our budgets.
I have heard the likes of Nii Moi Thompson talking against the sale of GT but unfortunatly they are not facing reality and the modern world of Globalisation.
This is happening all over the world,even in the USA their ports were sold to foreign companies,so it is more about pragmatism and allowing the free flow of capital and expertise around the world.
The reality is that every goverment that comes to power including Nii Moi Thompsons CPP will continue to sell State estates
Kojo,
There is one thing in Ghana that I like. The fact that we always like to make comparisons to other countries. In the US the port have not been sold but rather they have been licensed out. If the operator misbehaves, the governments take it back. Can we do the same with GT if Vodafone misbehves?
In Singapore, there is an expansion programme going on in transportation sector - mainly the ports. However, they have also licensed it out to the operator who is bearing all the cost of the expansion programme.
The sale of GT now is like selling a second car to someone and telling him that you will pay for all the expenses incurred if in future he decides to fix the car. Does this make sense?
kojo, imagine a woman who runs a provision store in front of her home. She borrows money from the bank to expand to her shop after a few years of prudently running the shop and making profit. Then she changes. Whenever she needs money for the upkeep of her home, she takes from the daily sales of her shop because she has realised it has become a ‘money cow’. The question is will the shop survive? If political administrations could not take thier hands of the profits that were made through their political appointees in the company, what should we expect today?
Globalisation does not mean we should not think before selling key industries. Water, Electricity and Communication are the backbone of any economy that wants to develop. No government sells the majority of its shares in such vital industries to foreign companies! In privatisation (which is a neo-liberal agenda), you never get the right value for the entity you intend reduce state ownership in! It is almost always arm twisting!
Kojo, if we do not believe in managing our own affairs, then we might as well sell the management of Flagstaff house to expatriates.
hi,
the government should offer GT to Vodafone for the same terms and conditions for 50% or less of the shares.
Upon all the investments gurus we have in this country and the numerous ways of raising capital, gov’t want to say it can not find any other way to raise this amount. Our future is being sold. so can’t we do anything for ourselves. Inasmuch as we talk about globalisation, no other person can develop Ghana and make it a better place than Ghaiaians themselves. If we refuse to take care and manage our own, this country will be where it is by the next fifty years, and we will still be refered to as a poor nation and third world by those we call development partners. Making Ghana a beuatiful place depends on Ghana. Do we have a vision as a nation.
Please do not sell GT. Get better people to manage GT, sack those who are playing with GT. Or sell it to us Ghanaians and let it be managed by experts from Ghana. For once let us believe in ourselves. Else like the the black stars, we will never achieve any laurels for Ghana so far as we continue to look at the white man to save us from situations we have the capapcity to save ourselves from.
Kojo,
My comments are not really about GT SALE but rather of the hypocrisy of our leaders and some notable personalities involved in the GHANA FIRST FORUM.
Each of those fine gentlemen and women were around in the PNDC/NDC era and castigated Ex president Rawlings and the NDC as the most useless of leadership that this country has ever witnessed.
My point is this. Each of them became something or rather established and became household names under the same regime they claim was bad. ICGC started in PNDC/NDC era and has thrived throughout. The largely pro NDC radio station GOLD 90.5 is the same station that propelled DR OTABIL’S afternoon radio ministry to a large extent.
ISHMAEL YAMSON was the longest serving CEO of UNILEVER. The business thrived and did exceptionally well. Today the same cannot be said about Unilever considering the huge imports of cheap, low quality items from abroad.
These Noble men and women must admit their mistakes and eat humble pie that the NPP they touted to be the best thing to happen to Ghana has largely disappointed them just like all Ghanaians. They must say it ” Cursed the one who calls white black and vice versa”.
More to come, but lets face it Ghana is worse of toady than it was ten years ago. Ten years ago I can show records of free Medical Care my son who is 12 now received from Achiomta Hospital. The NDC had a policy that provided free care for children under 5 . We cannot be deceived.
Hi Kojo,
I’ve been listening to your programme and your argument against the sale of GT is very disapppointing. How many governements own telecommunication networks in the world? How much profit does GT make? Or we should keep it for nationalistic pride?
The sale of GT will bring capital to the ghanaian economy, the govt can also tax them to raise revenue as well bring competition to the telecommunication sector.
I believe that we should raise issues with how much GT is being sold and not whether or not it should be sold. With concerns about terrorism in the US, the American govt does not own any telecommunication company.
Kojo, I wish to congratulate you for your good understanding of the issue regarding privatisation of national assets and other alternatives. You have shown how valuable a Bcom graduate could be for this economy. I believe all the old Bcomers (myself number one) will be proud of you even if you do not become an accountant and remain a journalist. I think you should remain there cos you are good at what you are doing and May GOD BLESS YOU.
It is very important for Ghanaians to ask why this Government is trying to sell all the strategic assets of the country. I just returned from the UK after my masters degree. I worked in the railways industry, airport and many more. I can assure you that the British Government will never give its strategic national assets especially those with security implications like aviation, telecommunication, rail network and others to a foreign company. They believe the importance of national security. The police are allowed to sensor mails received by suspected criminals and terrorist at anytime.
How can our police get to monitor movement of criminals if our national telecommunication is in the hands of another countrymen? Are we not trying to sell our liberty, if one day, we decided we would no more have anything to do with the Brits, we would no more go begging them and they become peeved and wanted to track our deals to destroy us, wont it be so easy to do? Let those who say they believe in Ghana act it and not only going on platforms and bill boards to say it.
Most of the explanations given by the government as reasons for selling do not hold water at all. Debt!!! most part of the debt is owed to the Ghana Government so we can cancel our own debt; Money for the Economy!!! We can raise more than necessary in Ghana let us not forget the recent share performance of Goil on the stock exchange. So let people like Asabee to come again.
Finally, Kojo who is the consultant that is negotiating this deal between the government and vodafone. Remember that even if the percentage is 1% that person is getting a whopping $9 million. What if this person is the government officials themselves who want this money badly for campaign?
Let us take a second look at this GT sales. Thanks
A nice discussion Kojo has started. We have been made to believe we have a robust economy. Why must it be the sale of GT that can only redeem the Ghanaian economy, as is suggested by some economists and the Government. All I am deducing from this process is that, we are not capable of managing our own assets, which is also not true. Anyway, what about the huge debts Governments keep pilling up on us? Does it mean we have to privatise Government or simply find ways of cutting down cost. Thanks.
i will vote for the ndc this just because of john mahama,long live the umbrella family
Kojo you are indeeed a genius when it comes to issues relating to business and the economy. It’s awful and hard to believe that this government wants to sell Ghana Telecom. And that its been sold for $900 million. We were all in this country when Areeba was sold for $5 billion. Yes $5 billion. Its absolute nonsense for the government to sell GT at such a price . Lets rise up and say no to the sale of the GT or else very soon this uncaring government will sell Ghana to these Brits and we will be back in slavery. LETS RISE UP NOW
Hi Kojo,
I am of the view that the goverment show hold on for now.
Lets revalue their assets again.
Also I think the share being sold out is too much. May be some 35 or 40 %.
Another fact is that the current management of GT should be dissolve.
My inside sources tells me that when the Malays were there things were going well and the works were happy.
The Norwegians came and mismanaged everything with fat allowances and salaries.
Another fact remains that the works of GT wants it sold out because they dont trust the Ghanaian mangement in place now.
For me I believe GT can seriously be turn round from lossing to making profit if we get serious minded Ghanaian to manage it.
please i want to ask that the selling of the GT is it not an insult for the ghanaians? b/4 you sold it.
Hi Kojo,
Just found this report on Telecommagazine wnd wish to share with Ghanaians.
http://www.telecommagazine.com/article.asp?HH_ID=AR_4388
What interests me in this article is the last paragraph, which reads:
“First announced in July, the deal faced strong opposition in the Ghanaian parliament and was only approved after Vodafone reportedly made several guarantees, including a reassurance that it would spend US$500 million on upgrading the network, completing and integrating the fiber backbone as well as introducing initiatives such as ultra-low cost handsets.”
i dont think the president has any right selling gt and so all Ghanaian s should vote for the ndc
well, well, i think at long last i have found a place where smart people indeed reason together. i guess these politicians take us for fools. how could they even dream such a thought into being. selling Ghana telecom? my issue is not even with government but with some of the GT staff who came out to support this sale. seriously i doubt if they understood what they fought for? why did they never complain about the mismanagement in their outfit. when their chief executive takes all that money and does nothing for the company’s growth? hmmmmm posterity indeed will judge us all but more especially the GT workers who fought for the sale.
Kojo ,
Let me start by saying that I appreciate your concern for GT but I must also say that most of your concerns are based on some economic fallacies.
1. You refer to GT as ” Our Birth right”, I fail to see how GT is the birth right of Ghanaians. I would rather claim as my birth right quality customer service, diverse communication products, value for my money and a competitive market than to cling to an ineffecient , loss making machine like the current GT has been for years. On one hand you assert that you are a free market advocate and on the other you seem to be professing the view that GT is better of in the hands of the State than in private hands, that is a clear contradiction.
2. On another note you state that if the problem of GT is undue and unwise government interferance in its management the the solution would be to find ways to make GT more independent of government interferance. How can GT become independent of government interferance if it holds 100% control in GT? MTN does not complain about government interferance because the government is not a major shareholder in MTN. Do you see my point?
3. You cleverly distinguish between ownership and management and you assert management of GT should have been privatised rather than selling 70% stake in the company outright. But you forget that option has been tried before, remember the Malaysians? The Norwegians? It has been an option that has been tried and failed.
When it comes down to the final analysis I believe Ghanaians and GT will both be better of if the company is sold to private people to own and manage.
Kojo,
I find it interesting that as the politicians discuss issues and the economy they only talk about inflows and how to get the cash. In all the debates and discussions, no one asks them how are they going to spend the money. Does the government know what it is spending on? They’ll say we spend X% of the budget on education and Y% of roads. Questions is what amount actually hits the account and on what was it spent on? How was it spent? Who was it spent on? There’s a concept called spend management in strategic sourcing. It doesn’t seem to me that the politicians have heard of that before. Or is it rather convenient that they’ve not heard about it or not talking about it?
Interesting HUH?
Kojo, I want to respond to Jared on his write up on GT.
A proper diagnosis of the problem will tell Jared that the sale was not the solution. It is just the will to follow the basic principles and ethics of business that was not there that pushed GT supposedly into that position. The long hands of politicians and nepotism was their bane. If gov’t departments do not pay their bills how do you expect the company to grow. SIMPLE. BAD GOVERNANCE wrecked GT.
Actually, was GT wrecked or made to wreck? Is that not similar to how Ghana Air went down? Do you remember a certain BRAY? Who started turning it round and oneday it was announced he’d been removed from office without he knowing? POLITRICKS is indeed interesting!