The Ministry of Finance has dismissed social media reports that Databank and Black Star Brokerage – linked to Finance Minister Ken Ofori-Atta and Minister of State for the Ministry of Finance Charles Adu Boahen – have been handpicked by the Ministry of Finance and the Bank of Ghana to act as bond market specialists for the issuance of government bonds, thus benefiting from these transactions.
In a statement, the ministry said it is incorrect to state that these two firms were appointed advisers to the Ministry of Finance (MoF).
“The selection of SVTs [PDs] and bond market specialists [BMSs] is an automatic process based on market performance and historical secondary market trading activity that is publicly available and cannot be manipulated by the Department of Finance [MoF] or the Bank of Ghana [BoG]”.
“Since 1996, the Ministry of Finance together with the Bank of Ghana has developed and implemented various policies which affect the issuance and trading of Government of Ghana debt securities (Treasury Bills and Bonds). The ultimate goals of these policies are to develop an efficient bond market, build the capacity of local institutions and deepen financial intermediation,” he added.
Further, he pointed out that Databank and Black Star Brokerage are two of the nine firms that were selected by BoG/MoF as bond market specialists and not advisors to the MoF, adding that “other firms selected to be BMS are – Ecobank, Stanbic Bank, ABSA, Cal Bank, GCB Bank, Fidelity Bank and IC Securities As noted above, the selection of companies was solely based on their historical performance in the bond market and no other considerations”.
He continued that PDs are institutions authorized by the BoG and have the exclusive right to participate in wholesale treasury bill auctions, adding that bond market specialists are PDs who have the exclusive right to participate in the sale, distribution and primary issue, by auction. or otherwise, of all treasury bills, notes and bonds of the Government of Ghana.
“The process for selecting companies to act as PDs and BMSs is based solely on merit. The Ministry of Finance or the Minister and/or his deputies have absolutely no involvement in the selection process. The process is also not amenable to manipulation as it is based solely on historical trading and performance data that is common knowledge in the bond market,” he stressed.
“The Ministry of Finance and the Bank of Ghana are of the view that this selection process rewards meritocracy, ensures transparency in the selection process and provides this ministry with a selection of highly competent and motivated institutions with the opportunity to become primary traders and BMS if they perform. If any other company during the period performed better than the three selected companies, it would have automatically been selected as SVT. Indeed, the selection is only based on historical data and performance and on no other consideration,” he said.
Databank and Black Star are no more than 210m
The article also claims that the three advisers, including Databank and Black Star, are expected to earn more than $210 million in fees.
The Department of Finance has pointed out that the report is inaccurate, misleading and intended to incite cynicism against the process.
“First, there are nine and not three BMS. Second, BMS are paid based on performance. They receive a percentage (it was 0.5% in the past) of the value of the total funds that each of them manages to raise or depending on the value of the bonds that they each manage to sell to investors. This means that their remuneration is based on their ability to convince investors to buy Government of Ghana bonds,” he added.
Again, he dismissed the author’s allegation that the ministry is involved in reckless borrowing, saying it is totally false and baseless.
“Any borrowing by the MoF is strictly determined by the deficit target for the year as approved by Parliament, the Finance Bill and the maturities falling due during the year. In fact, this government has shown exceptional fiscal discipline as evidenced by the budget deficit below 5% before Covid-19 despite financial sector rescue costs [including the repayment of depositor’s funds] and energy sector excess capacity charges that must be paid”.
He also dismissed the issue of conflict of interest in the case “because the selection process is based purely on meritocracy and the value of each company’s fixed income secondary market trading activity as that it is captured on the stock exchange”.
Additionally, he noted that Ken Ofori-Atta and Charles Adu Boahen are no longer involved in any way with the day-to-day operations of Databank or Black Star.
“Mr. Adu Boahen resigned from the board and management of Black Star in January 2017, immediately after being appointed by the President as one of his deputy finance ministers. He also transferred his shares in the company to a holding company upon assuming public office. Mr. Ofori-Atta resigned as executive chairman of Databank in August 2012 and resigned from all Databank boards in February 2014.”
Below is a copy of the press release;