What is the Agyapa deal? and why the IPO was suspended

What is the Agyapa deal? and why the IPO was suspended
What is the Agyapa deal? and why the IPO was suspended

Last Updated on October 8, 2020 by MyGh.Online

The Agyapa Royalties deal has gained traction over the past couple of months, however, it seems very few Ghanaians understand what it is all about, and the controversies surrounding the deal. So, what is the Agyapa Royalties Deal?
The background story

Over the years, the government has been looking for ways to raise capital to finance its developmental projects without having to constantly borrow from the International Monetary Fund (IMF) or having to predominantly rely on the bond and capital market. The reason being, IMF loans typically come with strings attached to them. This sometimes counter-economic progress in some sectors. Also, interest rates on the bond market are quite high accompanied by the short tenure of the loans, places Ghana at the risk of heading into a debt crisis. With the current government’s agenda of “Ghana beyond Aid,” the Agyapa royalties deal was ‘born.’

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So, in short, the Agyapa Royalties Deal is the government’s strategy to raise capital from the proceeds of the extractive (mining) sector to finance the country’s developmental projects.

It is worthy to note that, the Agyapa Royalties deal is a strategy that governments across nations have adopted to raise money on the global financial market.

The fundamentals

The Agyapa Royalties Deal started two (2) years ago, when the Minerals Income Investment Fund (Act 2018) was passed by Parliament. It had the mandate to manage the equity interests of Ghana in mining companies and receive royalties on behalf of the government.
The royalties and revenue received will then be invested for higher returns, and thus support the government development agenda.

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To effectively achieve this, the law gives power to the Minerals Income Investment Fund to establish Special Purpose Vehicles (SPVs) to manage the investments.
Based on the Amendment, the Minerals Income Investment Fund set up a Special Purpose Vehicle, Agyapa Royalties Limited, an offshore limited liability company incorporated in Bailiwick of Jersey in the UK, which happens to be a tax haven. It was incorporated in Bailiwick to avoid the high tax charges to the returns that will accrue to the government from the investments.
In July of this year, the government introduced an amendment to the Act to ensure that the SPVs have complete independence.

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Operations of the deal

The Agyapa Royalties Limited will receive and manage royalties from 16 gold mining leases over the next 15 years. It will be trading shares on the Ghana Stock Exchange and the London Stock Exchange later this year, with the Mineral Income Investment Fund remaining the majority shareholder.
The Agyapa Royalties Limited is expected to secure close to $1 billion for four key areas, namely, education, health, primary capital, and infrastructural development. Future resources from gold royalties will go to Agyapa’s Royalties Limited shareholders instead of the government.

IPO Suspension

To allow the Office of the Special Prosecutor enough time to conduct its corruption risk assessment regarding the transaction and ensure its benefits to Ghana, the government suspended the recent intended launch of the Initial Public Offer (IPO) of the Agyapa Mineral Royalties Limited.
An earlier letter written to the Finance Ministry by the Office of the Special Prosecutor indicated that information supplied to its office by the Finance Ministry on the deal was not enough.

“The information and documents you supplied concerned mainly the processes for and the appointment of the Transaction Advisors which goes to the root of any corruption risk assessment,” Office of the Special Prosecutor wrote.

A response letter signed by the Deputy Finance Minister, Charles Adu Boahene said the deal was reached before the Office of the Special Prosecutor’s request for further documents regarding the intended IPO launch.
“This was prior to your office’s request for information and production of document,” the letter read.

“Kindly note that the document was prepared about two months ago by the transaction advisors, to update the Minister on the progress of the transaction. The timing expressed in the document was the intention of the transaction advisors at that time, and to launch the IPO by the end of September 2020 to be completed by the end of the year,” the Deputy Finance Minister said.
“The international investor community has been closely monitoring the outcome of the current state of the transaction, and, it would, therefore, be detrimental to proceed without receiving the necessary approvals and green light from your Office,” the letter further read.

The Office of the Special Prosecutor urged the Ministry “to abide by the results of the corruption risk assessment it is undertaking on the transaction before moving to the launching of the IPO transaction.”

Why the deal is undergoing a corruption risk assessment

The Minority in Parliament had demanded the withdrawal of the contract with Agyapa Mineral Royalties Limited citing,
Monitoring issues: The creation of Agyapa Royalties Limited as an offshore company in a tax haven will make it difficult to monitor the firm and thus, it’s an attempt by the NPP-led government to draw-off funds for their gain.
Conflict of interest: The deal is said to be a conflict of interest by the minority because of the selection of Senior Minister Yaw Osafo-Maafo’s son and relative of President Akufo-Addo and Finance Minister Ken Ofori-Atta as Management of the Agyapa Royalties deal.

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