In general, the relationship agreement aims to establish Agyapa as an independent business entity free to pursue its own profitability without taking into account Ghana`s budgetary needs. It is questionable whether Agyapa will be able to diversify its portfolio by acquiring new assets (a stated government goal for the company), while distributing the proceeds of the IPO to the fund and distributing significant dividends each year (at least initially), while the fund retains 51% of the shares over the long term. The Ghanaian government`s level of control over the board of directors is also uncertain. Under the agreement, the fund can appoint two directors provided it holds at least 30% of the company`s capital, but a majority of directors must be independent. The fund may vote as a shareholder through independent directors. However, the relationship agreement prevents the Fund from exercising its voting rights against a shareholder resolution appointing an independent director and from using the voting rights to remove an independent director appointed by the board of directors. The agreement defines the term ”independent director” using the definition in the UK Corporate Governance Code, which includes ”representation of a significant shareholder” as a factor that may impede independence. It is also unclear whether Ghana will be able to retain the majority stake if the board seeks to raise additional equity in the future to grow the business. The agreements verified by Parliament and the articles of association of the company do not contain any provision that would prevent the company from reducing or ”diluting” the percentage of the fund by issuing additional shares. ”I`m clear that this is the right way to monetize our minerals and find a way to use them to reduce the country`s debt and convert it into equity. And with the concerns that have been expressed, we should be able to address them and move forward,” Ofori-Atta added. Following an awareness-raising workshop organized by the Ghana Anti-Corruption Coalition on the Agyapa Agreement in Tamale, Dr Steve Manteaw, Executive Director of the Centre for Integrated Social Development (ISODEC), urged Ghanaians to stand up and ensure that Ghana`s royalties are not abused. Despite the current outcry, the plan has been in preparation since 2018 with the passage of the Mineral Income Investment Fund Act.
The act established a government agency called the Mineral Income Investment Fund. The Fund has the right to receive and invest mining royalties and other related income that Ghana receives from mining companies. Under the act, the fund established a royalty company called Agyapa Royalties Limited (Agyapa) in Jersey. As part of a series of complex deals approved by parliament in August, the fund granted rights to just over 75 percent of the royalties from several gold mining concessions to Agyapa`s wholly-owned Ghanaian subsidiary, ARG Royalties Ghana Limited (ARG), for $1 billion. These leases account for the bulk of Ghana`s current gold production. The fund sold this money to Agyapa in exchange for Agyapa`s shares. The fund then plans to raise capital by selling 49% of these shares to the London and Ghana Stock Exchanges as part of an initial public offering (IPO). Structure of ghana`s Agyapa agreement A stability clause included in at least one version of the royalty investment agreement prevents changes in the royalty rate that would be ”materially detrimental” to ARG (as investors would rely on the royalty stream). For potential decades, this clause would limit the government`s ability to reduce royalties on mining concessions included in the agreement, although such a reduction would encourage companies, for example, to maintain their gold production in times of financial hardship. Meanwhile, Ghana`s mining law limits stability agreements with mining companies to 15 years. The deal, which had previously been precipitated by parliamentary approval despite an opposition walkout, will now be sent back to the Legislature. Civil society calls on Parliament to completely reject the agreement and its settlement modalities.
Under the terms of the agreement, Agyapa Mineral Royalties Limited was established in Jersey near the UK to receive and manage royalties from 16 gold mining concessions over the next 15 years. However, in his recent State of the Union address, President Akufo-Addo announced that his team would bring the deal back to parliament. The government then established Agyapa Royalties Ltd through the Minerals Income Investments Fund (MIIF) to monetize Ghana`s gold royalties. This happened after Parliament approved the agreement of Agyapa Mineral Royalty Ltd on behalf of the Government of Ghana on August 14, 2020 despite a walkout by minority members of the House. The Agreement limits royalties to a rate set out in the Agreement for each mining concession. Presumably, this means that the government could increase the license rate, but Agyapa would not be entitled to royalties higher than the agreed rates. At the very least, the agreement should stipulate that the government can increase tax conditions, but that Agyapa is not entitled to benefit from increases beyond the indicated rate to avoid any doubt. However, a few days after the approval of an amendment to the MIIF Law, the minority left the process of approving settlement agreements, the facilitation of which was modified by the amendment of the fund`s articles of association.
Ghana`s current challenges justify unconventional thinking. But the many open-ended questions surrounding the deal and the strong opposition in parliament and from civil society actors could actually scare off investors and lead to a rating far worse than could otherwise be achieved by consensus. Further public consultations could provide an opportunity to improve the structure of the Agyapa Agreement and to close loopholes in the law to ensure that the Ghanaian people ultimately benefit from their resources. After all, according to the constitution, Ghanaian minerals are held in trust for the Ghanaian people. This happened after Parliament approved the deal with Agyapa Mineral Royalty Limited on August 14. Last year, the President asked the Minister of Finance and the Attorney General to review the settlement agreements and make the necessary adjustments to address some of the concerns expressed by stakeholders, if necessary. While the government has highlighted private sector precedents, commodity-based public financing is more common in the form of resource-based loans. By comparison, typical resource-backed loan agreements reviewed by NRGI determine either the total volume or the total value of the resources and interest to be repaid.
This makes their evaluation much easier than in this case. Agapya`s deal risks being mispriced or undervalued by the government and investors. In addition, by offering up to 49% at the time of the IPO, the government also loses the potential advantage of selling additional shares later at a higher price while retaining the majority stake. Supporters of the deal are pressed for time: if Agyapa Royalties is not listed on the London Stock Exchange by December 31, 2020, the deals will expire and the project will be abandoned. The government of Ghana has claimed that it is not currently promising future revenue for a lump sum in cash. According to the government, the Minerals Income Investment Fund, a 51% shareholder, will hold two seats on Agyapa`s board of directors, exercise its voting rights on behalf of the other directors and receive the majority of future dividends. However, an agreement establishing the relationship between the fund and Agyapa contains several clauses that may limit the future control of the fund (and thus the Ghanaian government) over Agyapa`s decisions. These clauses include an obligation for the Fund and the Government not to use voting rights to prevent Agyapa from making decisions for the benefit of the Company`s shareholders as a whole or in a manner that would require the Company to make decisions solely in favour of the Fund or Ghana. .
They insisted that the agreement must be suspended to allow for greater stakeholder involvement, according to some of the dissenting voices. However, the government has insisted that the agreement is in Ghana`s best interests. On August 14, 2020, Parliament approved the Agyapa Minerals Royalty Investment Agreement and four related documents to enable the monetization of Ghana`s future gold royalties. ”Agyapa does not have transparency provisions like we have with the Oil Management Act, where we have a citizenship-led body on behalf of the Public Interest and Accountability Committee, which ensures that citizens can obtain information about the administration and use of their revenues.” 2. Consider protective measures against the risk of undervaluation He also asked the new board members to ensure that the transaction is carried out after the approval of the parliament, as it is the best tool to support the country`s development through the mining sector. According to him, the botched deal has been reviewed by the Attorney General`s Office and will soon be resubmitted to Parliament. . Under the plan, Ghana will sell nearly 76% of the royalties generated by 16 major gold mines to Agyapa Royalties Limited – a special purpose vehicle registered in the British Crown Dependency in Jersey. Forty-nine percent of Agyapa Royalties` shares are to be listed on the London Stock Exchange.
The special prosecutor noted that the sale of royalties to a company based in a well-known tax haven and secret jurisdiction carries risks of money laundering and the generation of illicit financial flows. .