A former Ghanaian minister has said what is at stake in the debate of off-loading the shares of the Bank of Ghana in the Agricultural Development Bank (ADB) is not a simple "sale".
Mr. J.H. Mensah, an economist as well as a politician, said in a letter to the media, "What is desperately required in the interests of the farming community and the operators of small and medium-scale industry throughout Ghana, is a 're-organization' of the Bank so that it will have more strength to serve them."
He said whatever the achievements of the ADB in the past 50 years, it was manifest that today, with a net worth of just US$66 million, it was in no position to cater adequately for the urgent need to modernize and re-equip Ghanaian agriculture. "That need for agricultural transformation was the sole purpose for establishing the ADB with state resources. "Most of those resources were being contributed by these same farmers and self-employed entrepreneurs, so it was also a matter of equity to extend to them the benefits of the nation's financial system."
Mensah was contributing to the current debate on the request of Stanbic Bank to buy ADB, a move fiercely rejected by staff of the agricultural and various pressure groups. Stanbic is a South African commercial bank with pre-existing operations in Ghana.
The government has agreed for the Bank of Ghana, the country's central bank, to offer to a strategic investor its 48% stake in the ADB.
Mensah said, “This transaction would serve two purposes - take the BOG out of commercial banking and, secondly, open the way to the mobilization of enough financial resources so that we can assist the majority of Ghanaian farmers, millions of them, who are today totally excluded from the help of the nation's financial services.”
He said to be equal to its mission as conceived more than 40 years ago, the ADB should have been worth not its present appraised value of $66 million, but upwards of $250 million. He noted that at its rate of growth as witnessed in recent years, the ADB would not attain that stature for decades to come. "That is why an injection of major new financial resources from elsewhere is so urgently required."
Mensah said unlike in former years, the government was not in a position to find those additional resources. Neither was it necessary for it to do so because, as the economic climate had improved, some of the previously reluctant private banking institutions had now become more willing to channel resources into Ghana's agriculture and small-scale business development. "This is precisely the moment to take advantage of the foresight and initiative of the founding fathers instead of remaining frozen in the structures of the past."
Mensah said to block a reorganization of the ADB, with its established network and connections, on the basis of an emotional reaction, without even waiting for details of the proposed new arrangement to be negotiated, was a disservice to the nation's farmers and to the cause of rational policy-making. "It is disappointing that so many of the commentators who are insisting on continued state ownership of ADB have studiously averted their attention from the ability of the bank to service its constituency, which should be the main criterion in deciding policy issues."
Continued Mensah, "The purpose of establishing the ADB was not to make profits, however high, out of commercial high-street banking, nor out of the new-fangled trade in money transfer: it was to develop agriculture." He said he was re-emphasizing the absolutely critical importance of this mandate of the ADB. "Every informed observer knows that without a substantial improvement in the productivity of our farmers and self-employed businessmen and women, which would lead to a commensurate improvement in their incomes and conditions of living, Ghana's economic ambitions are worth nothing."
Mensah said those ambitions envisaged not just improving their living conditions a bit, but bringing them up to middle income status. He said for an agrarian transformation, Ghana's rural majority of subsistence farmers needed to be equipped with tools and technology far superior to the present cutlass and hoe technology.
"The traditional high-street banks have always shied away from providing long-term capital for the purpose of improving agricultural productivity," Mensha said. He said this was because of their extremely discouraging assessment of the risky agricultural and rural/small-scale lending in Ghana. "Being locked into the classic tenets of prudent banking, it was clear that they could not be relied upon to support agricultural investment in the volume required or on terms that farmers could afford. It was to compensate for this lack of access by the rural majority of Ghanaian citizens to the existing credit and other financial services that it was decided to use the resources of the State and of the Bank of Ghana to establish the ADB."
Mensah said from the point of view of transforming Ghana's agriculture, there was no particular merit in retaining the institution in the hands of government, as some argued. "What is important is that the ADB should have access to enough financial resources to fulfill its all-important mandate. The argument that some of the agitators are using to mislead people is that the government and BOG should continue to own the shares of ADB, as part of our heritage. This is really a weak marginal issue. The interests of Ghanaian farmers can be well protected without public ownership of the ADB."
Mensah said a divestiture of ADB was in any case necessary to resolve a legal anomaly, which could amount to a conflict of interest. He said the Bank of Ghana was the supervisor and regulator of all banking institutions in Ghana and it was therefore anomalous that it should also be a major shareholder in a bank such as ADB.
However, he said, Government and the Bank of Ghana would not be making optimum use of this opportunity of a divestiture if they simply sold the BOG stakes to some other shareholders. He said such a sale would only entitle the new owners to the dividends which ADB could pay based on its present level of operation and profits. "It would add nothing to the capacity of the bank to help our farmers. And from that point of view it is irrelevant whether these new shareholders are recruited through the stock exchange or from farmers' groups, or any of the other share sale solutions that are being canvassed in this highly manipulated debate."
Mensah said in disposing of the shares of the Bank of Ghana, as should happen in any useful and sophisticated corporate reorganization, the opportunity had to be seized to strengthen and improve the nation-building capacity and operational efficiency of the ADB. He said that was why it was so misleading to bandy about such misleading and emotive slogans as "government is selling our bank to foreigners."
"It is significant that the agitation against the disposal of the Bank of Ghana's shares was launched even before negotiations on the detailed terms of such a reorganization had started. When the ADB staff associations came out against the arrangement, whose details and terms had not yet been negotiated, let alone finalized, what were they really agitating against? How could they know whether the arrangement would benefit our farmers or not?"
Mensah said it was obvious that they could not be agitating against a re-organisation which could strengthen the ADB and improve its capacity to serve the farmers. "They were simply agitating against any change that could threaten their own positions and career interests." He said one of the principal matters that were routinely negotiated in every such process, was precisely the treatment of the existing workers in the enterprise.
"It is surprising therefore that, without waiting to see the terms of the arrangement in this regard, and instead of offering any constructive suggestions on that aspect of the prospective agreement, senior trade union leaders should just come out with a blanket opposition to the whole idea of re-organizing the banks. Surely, the economic policy arm of the Ghana Trade Union Confederation (TUC) is much more sophisticated than this?"
Mensah said farmers and operators of small and medium-scale enterprises in Ghana number some 10 million people. "The necessary implication of our national ambition to rescue Ghana out of Third World status and bring her into middle-income status is that all these people should be equipped and empowered to earn some three to four times more money than their present average incomes. And this they can only do through dramatic increases in their productivity. The software of this empowerment consists of their education and training, for which the state will carry most of the responsibility. But the hardware which must go with that human capital, will consist of new farming equipment, new shops and workshops, better transport and other service facilities, as well as all those investments in the quality of life within their own households which will make them more productive, healthier and more dependable workers."
Mensah said once the Bank of Ghana offered its stake in the ADB for sale, and invited proposals from potential partners who could help to put the bank on a new level of effectiveness, offers of such strategic partnership had been received not only from Stanbic, which is the whipping-boy of the present agitation, but from other institutions including some financial institutions here in Ghana.
He said those who were advocating a sale of the Bank of Ghana's stake in the ADB by means of an offering on the Ghana Stock Exchange, were not offering a solution to achieve the purposes of a strategic reorganization. "What we should be focusing on instead is how additional resources, which are so sorely needed for lending to agriculture and small-scale industry, could also be raised by the sale of newly-issued shares to Ghanaian investors on the Exchange. And this can be the more easily done once the attractiveness of the ADB has been reinforced through a strategic reorganization."
Mr. Yaw Osei-Aboagye, a financial and economic expert, also backed the government’s decision to offload the shares in the ADB to Stanbic Bank. He argued that Stanbic had helped in the growth of South Africa's agricultural sector through the injection of huge capital by supporting large-scale farms. He described as untenable the argument that Stanbic would seek its interest at the expense of Ghanaian farmer.
Rather, he explained, it would ensure efficiency in the operation of ADB and the long-term development of the country as the strategic investor would be interested in lending money to large-scale farms, which would ensure rapid industrialization and boosting of the country’s economy.
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