The bond saga that has been rattling finance minister Ken Ofori-Atta in recent months has now taken on an international dimension. Ken Silverstein – the respected American investigative journalist – has broken the story in the one of the biggest media hubs in the world: Washington D.C.
Renowned for his work uncovering financial malpractice and corruption, the writer’s explosive article will bring Mr Ofori-Atta’s dealings under further scrutiny. It raises profound questions over his relationship to financial behemoth Franklin Templeton. Tellingly, 95% of Ghana’s March 2017 USD2.25 billion domestic currency bond issuance went to this company.
By chance, the Finance Minister who issued the bond happens to be a close friend of one the company’s non-executive directors – Trevor Trefgarne. If one company buying up such a high stake raises suspicions, the details of the deal compounds them. The bond pays a healthy 19% interest rate. That means Franklin Templeton will be the recipient of over USD400 million in interest every year, courtesy of the Ghanaian Government. A nourishing profit by any calibration.
Good governance is crucial to economic robustness. Cosy relationships and back-handers have plagued growth for decades. But the scale and scope of this deal – as well as the positions of the parties involved relative to each other – takes it beyond your usual everyday arrangement . Franklin Templeton currently have USD750 billion under management. Ghana’s external debt stands at USD30 billion. It is clear for all to see: this is an unequal relationship.
If the story of an enormous company wielding dominance over a government sounds familiar, that is because it is. The Gupta scandal in South Africa revealed the power relations that can lurk behind the front of a democratically elected government.
The episode eventually led to the removal of President Zuma. But it was the media whirlwind that surrounded the deal which gave South African’s sustenance to keep asking questions of their government – ones they eventually got answers for. If this incident teaches us one thing, it is this: once the international press shines its light on that you would prefer to remain in the shadow, events can take on a momentum which cannot be held back.
Ken Silverstein’s article may therefore have Mr Ofori-Atta nervous. Unlike South Africa, we are yet to have the answers. But Silverstein’s article raises all the right questions.
Is it healthy for the nation’s books if a Minister of Finance has such a close relationship to a financial company buying the bonds he issues? Does this not constitute a conflict of interest? Is Databank – which Mr Ofori-Atta co-founded – still involved? Let us not forget that the finance Minister is still one of the directors of Databank Financial Holdings registered in Bermuda. If Franklin Templeton hold such a stake in this currency debt bond issuance, how much do they own of Ghana’s total external debt? And did the finance Minister benefit, or did Franklin Templeton influence him during this issuance?
And then there are bigger, more strategic questions: why Mr Ofori-Atta’s only recourse to financial planning results in further bond issuances, rather than tackling real economic issues. Our energy sector is on its knees; there is talk of contractors not getting paid since the election in 2016, investment in infrastructure is going down and our economic growth now seems to be solely dependent on oil and gas. This is surely the triumph of short termism over the longer outlook, all in service to protect one man’s job.
Because of that Ghana finds itself in be a pernicious cycle in which debt begets more debt. At the same time, a Minister with personal connection to large financial institutions becomes ever more entangled.
How long will the Minister be able to keep the debt juggling act going is a question all Ghanaians need to ask themselves. And the answer will only come if all of Ghana’s democratic institutions including the media and the Parliament take an interest.