Recent comments by the World Bank Country Director to Ghana, Sierra Leone, and Liberia, appear as though he is a serial caller for the ruling New Patriotic Party.
In a rather hasty, jaundiced, and very skewed research conducted by Ishmael Ackah et al (2021) which they titled “A Case Study of Ghana’s Power Purchase Agreements”, the quadruplet put out wishy-washy findings that could be likened to research conducted by an armed chair Professor. For one vital key element the research either incompetently ignored or was deliberately swept under the carpet.
This element is the various Contract Clauses buyers and sellers employ in transacting any commodity in the gas and oil industry. And it also explains why a certain Contract Clause has been chosen over the other.
However, Ishmael Ackah and his friends’ research only explains how the Mahama administration signed a deal that is later draining Ghana’s coffers in their attempt to expose and cast aspersions on that contract the Mahama-led administration chose.
The fact that Ackah et al research failed to indicate that there have been several of the deals known as Contact Clauses, how each deal functions, legal implications associated with it, and why a whole government would choose to settle for any, is what makes the entire research a sham, and brown-envelope-induced. An aspect Pierre Laporte, World Bank Country Director also conveniently didn’t highlight before “jabbing” the Mahama-led administration for signing wrong PPA. The most relevant question to ask before passing any pedestrian comment on the 2016 PPA is to establish in the first place whether it was wrong to sign it at the time or not.
In the oil and gas industry, there are so many marketing strategies and different contract clauses available between buyers and sellers to be contracted on the quantity of a commodity. There’s what George Arhin called Requirements Contract Clause; there’s Take-or-Cancel Contract Clause; There’s Take-and-Pay Contract Clause; and of course, there’s the type of Contract Clause that the Mahama-led NDC government signed in 2016 with the Power Purchase Agreement (PPA) that the current government reversed in 2021, and cancelled about 11 of this type of Contract Clause. It is called the Take-or-Pay Contract Clause.
These are oil industry terminologies in relation to power or energy purchase that ensues in order to ensure fair trade between the buyer and the seller.
George Arhin avers that, the Take-or-cancel contract is a deal or agreement between the buyer and the seller in an oil or energy industry where the buyer may decide to take less than the quantity of the commodity he or she contracted, but would pay a cancellation fee to the seller for “damages”. Thus, it is a form of negotiation of contract clauses in the oil industry subject to legal implications.
On its part, a Requirement Contract Clause mandates the buyer to take all contracted quantities of the commodity from the seller. And the price of the commodity here, just like in a Take-or-cancel contract, is very high. So, a buyer may consider the two and decide which of the contract clauses he would pull. Note that these two forms of Contract Clauses are expensive and perhaps, unreliable. Depending on who is the buyer: state or individuals.
The most interesting Contract Clauses which are our subject of discussion here and because of which the former President, H.E John Dramani Mahama must be blamed, according to the World Bank Country Director, Pierre Laporte, are the Take-or-Pay and the Take-and-Pay Contract Clauses.
The former was what the Mahama administration used in signing the PPA energy deal for Ghana during the “artificial DumSor” and what many Ghanaians think was an “inside job” power outage in 2016 in particular.
With the Take-or-Pay contract clause, George Arhin explains that it is the commonly used contract clause in the energy and oil sector, and had been the favorite of both Europe and the USA, especially in the 1960s. He opines that the Take-or-Pay deal allows a buyer to negotiate at a lower price and to allow availability of the commodity supplied to you as the buyer.
However, in the course of supplying in excess, the buyer takes care of the surplus since the buyer wants the commodity available at all times. One advantage of this contract clause which makes it superb and advantageous over the other contract clauses is the fact that it allows the buyer to pull a long-term contract with the seller and to enjoy “make-up right”.
This explains the reason why the Mahama administration opted for this kind of Contract Clause over the others since the Mahama administration was looking for a constant power supply yet cheap and everlasting. The only disadvantage is when the excess causes you to pay more money but the availability of the commodity is assured.
Hence, circumstantially, situationally, and conditionally, the Mahama administration decided to sign this deal as the best at the time. Taking into consideration that the former President wanted a long-term and everlasting solution to the power outages in Ghana.
On the other hand, the Take-and-Pay Contract Clause obligates the buyer to only take a minimum quantity of the commodity contracted at a higher price without assurance of availability and it’s not negotiated on long-term terms.
Fellow Ghanaians, if you were negotiating on behalf of Ghana, which of these variants would you have chosen for Ghana? Obviously, any honest dealer would opt for the one with a cheaper price, availability, and long-term power supply Contract Clause.
However, some media outlets that are pro-government and the ruling NPP government have been laboriously struggling to label the NDC and former president Mahama as bad dealers because they negotiated the PPA using this contract clause: Take-or-Pay contract clause which guarantees cheaper, available and durable commodity.
Obviously, the comments by the world bank country director are what these hatchet men and yellow journalists are banking on and try to accuse Mr. Mahama of shoddy negotiation.
But you see, the energy and oil industry, according to Dr. Bawumia and Harvard Halland, has been fraught with matters of different complexities. Including deals like these.
In his academic paper titled “Oil Discovery and Macroeconomic Management: The Recent Ghanaian Experience” published in 2017 by the International Bank for Reconstruction and Development (of Europe) also known as the World Bank, Dr. Bawumia and Harvard Halland were particular about and mentioned what is known in the oil and gas sector as “resource curse”.
A phenomenon that occurs in countries that discover oil where most often than not, such a blessing that should have been championing growth, sometimes turns into a curse. This, according to the economic false Prophet of Ghana, Dr. Bawumia, is due to the negative correlation between countries’ “natural endowments and growth”. And that might also be due to endogeneity. A home-grown phenomenon that can’t be avoided, by implication.
This means that in the oil and gas center, there’s some kind of force majeure that usually causes certain problems upon its discovery leading to such a blessing becoming a “resource curse” (Mahamudu Bawumia and Harvard Halland 2017).
By extension, this also means that the oil industry has been bedeviled by some sort of unavoidable problems and they are very much expected anytime they occur. At least, if the discovery of the oil has not been turned into a “resource curse” according to the “economic Prophet” of Ghana.
Now, it would interest anyone that a whole representative of the World Bank as a country Director for not only Ghana, but Sierra Leone, and Liberia, has not been familiar with some of these findings by Dr. Bawumia published by the World Bank.
The DailyGuide.net has reported about the World Bank’s Country Director blaming the Mahama administration for the Power Purchase Agreements (PPAs) that were negotiated at the time to be the cause of the current economic calamity we are facing as a country.
Apparently, neither IMF nor World Bank would blame the Ghana government for this state of unfortunate “kumbaya” economic mess. While the IMF is supporting government’s propaganda that Covid-19 and Russia’s war on Ukraine decapitated the economy, and that the economic mess is largely due to external shocks such as the aforementioned, the World Bank Country Director Pierre Laporte, thinks the mess is due to internal challenges but not NPP’s fraudulent policies and thieving projects but Mahama’s signing of PPAs?
I find this not only disrespectful laced with dishonesty and attack on justice and fairness, but it smacks of nauseating hypocrisy and lack of competence.
One of the cardinal principles and as a matter of core values of both the IMF and the World Bank are fairness and respect in their dealing with member states. Not to sideline opposition parties and gang up with government even if it’s flailing and failing like the Ghana government is wobbling around due to its evil, criminal, and most corrupt policies we have ever seen.
Let nobody accuse me of crying a wolf where there’s no cat. My thesis stemmed from the very Programs the IMF negotiates with ruling parties that are in government. And those last two World Bank/IMF Programs would suffice.
It can reminisce that the very conditionalities the IMF imposed on the Mahama administration for seeking a 918-million-dollar bailout which included cutting down employment and subsidies as conditionalities, were all disregarded by the Akufo Addo government immediately after they came to power in 2017.
The consequence of which is the current shambolic economy we are battling with today. Is it not obvious that massive corruption coupled with the blatant disregard of the IMF directives previously given to Ghana under the NDC in 2015-2019 is the cause of the current mess?
One would have thought that as a principled international financial organization, the IMF would have cared to know what happened to the previous deal Ghana negotiated under the previous government. But no. Instead, the IMF/world bank seeks to blame the previous government which adhered to its prescriptions and dictates.
The question is, did the IMF or World Bank treat Ghana as a personal fiefdom of some political party or as a country belonging to citizens? Why didn’t the IMF implore and call upon the brand new and embryonic government of Akufo Addo to stick to the very dictates and conditionalities prescribed for the Mahama administration? Yet, the Akufo Addo-led government has rather violated all those measures and cruelly collapsed the economy and run back to the IMF, and the previous administration must be blamed. How?
Can’t in the assessment of the economy by the world bank country director and the representatives of the IMF realize the wanton borrowing and the buccaneering perpetrated against the borrowed, revenue, and dashed funds?
I guess when the world bank country director was serving as the governor of the central bank of Seychelles, he never allowed this form of buccaneering of economic management in his country as a governor. Did he advise his finance minister to borrow money for his private companies to benefit?
Would Mr. World Bank Country Director ever run his own country’s economy like what’s going on in Ghana? Would he allow Dr. Bawumia to assist the economic management team of Seychelles with the way he is running Ghana?
I think it’s about time the international financial community rises up to help save Ghana from its economic burglars and avoid making incomplete and unresearched comments that make them appear as political party communicators.
Source: Ghana Web
