- What is Divestiture
- Why Divestiture
- What is the Divestiture
Implementation Committee (DIC)?
- What are the objectives
of the Divestiture Programme?
- How many SOE’s
do we have at the inception of the Divestiture Programme?
- How may have been
divested so far?
- What are the modes
of Divestiture and the breakdown?
- It is true that
foreigners have monopolized the Divestiture Programme
- It is also alleged
that the implementation of the programme lacks transparency.
Is this true?
- What is the procedure
for Divestiture?
- What is outsourcing?
- Does Divestiture
create unemployment
- Have workers of
divested enterprises been given the opportunity to own shares
- Have workers been
denied severance awards in the event of the divestiture
of their respective enterprises.?
- To what use have
the proceeds been put?
- Why divest profitable
enterprises?
- What are the future
plans of the DIC?
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| Q. 1. What is Divestiture |
Answer: It is the total or partial transfer of ownership
of state-owned enterprises (SOEs) to private investors –
either Ghanaian or foreign investors.
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| Q.2 Why Divestiture? |
Answer: Many SOEs had been enjoying
a privileged status in terms of government support. As a result,
not much effort was made by some of them to improve upon their
performance leading to low productivity and thus resulting in
the accumulating of substantial debts. Some of the factors that
contributed to these were:
a. Overstaffing
b. Decision-making paralyzed by excessive bureaucracy and laissez-faire
attitude toward state business
c. Lack of technical expertise
d. Absence of the commitment and entrepreneurial direction that
private investors bring to business.
e. Low incentives for workers
f. Inadequate working capital
g. Low capacity utilization.
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| Q.3 What is the Divestiture
Implementation Committee (DIC)? |
Answer: The Government established
the DIC to implement and execute all government policies in
respect of divestiture programmes. Details about the DIC are
set out in the PNDC Law 326). Other functions are to:
a. to plan, monitor, coordinate and evaluate all divestitures
b. to arrange for the effective communication of government
policies and objectives for any divestiture
c. to ensure consistency in procedures for divestiture, in
particular with regard to valuation invitation for bids, negotiation
of sales and settlement of accounts.
The members of the DIC comprise Ministers of State, the Trades
Union, institutional and private sector representatives. The
inclusion of the private sector representatives is in recognition
of the importance of the sector. To help take care of labour
and employment issues, both the Minister of Employment and
Social Welfare and the Secretary-General of the Trades Union
Congress are very important members of the Committee. The
Minister of Finance is now the Chairman.
The day-to-day management of the divestiture programme is
undertaken by a Secretariat, led by the Executive Secretary.
The Committee meets each month to consider, among other things,
specific transactions negotiated by the secretariat, submitting,
as applicable, recommendations to the President’s Office
for authorization.
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| Q.4. What are the objectives
of the Divestiture Programme? |
Answer: The objectives of the
divestiture programme are:
a. to seek private sector investment and management into
SOEs to make them viable/increase profitability over a period
after rehabilitation
b. to create employment
c. to allow Government to concentrate on the business of government
– policy formulation
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| Q5.
When did the programme commence and how many SOEs did we have
at the inception of the Divestiture Programme? |
| Answer: The programme began in 1988
with over three hundred (300) SOEs. Whilst a large number of
them were in manufacturing and agriculture (including cocoa
and coffee plantations, poultry and fishing), others were in
mining, hotel and timber sectors. DIC is usually informed by
the government of particular SOEs that have been earmarked for
divestiture.
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| Q6. How many have been
divested so far? |
| Answer: Three hundred and thirty-five
(335) transactions have been completed which includes SOEs or
parts of them.
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| Q.7 What are the modes
of Divestiture and the Breakdown? |
Answer:
a. Sale of Assets -
225 (67.2%)
b. Sale of Shares - 47
(14%)
c. Joint Venture Foreign & Ghanaian - 16 (5%)
d. Lease -
6 (1.8%)
e. Liquidation - 41
(12%)
MODE OF DIVESTITURE (1989 – 2003)
Liquidation - 12%
Lease - 1.8%
Joint Venture - 16%
Sale of Shares - 14%
Sales of Assets - 67.2%
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| Q8. Is it true that
foreigners have monopolized the Divestiture Programme? |
Answer: The allegation is not
true. On the contrary, Ghanaians are considered first before
foreigners. Available statistics indicate that out of about
335 enterprises divested, 292 went to Ghanaians, 20 joint
Ventures (Ghanaian and Foreigners) were created and 23 to
foreigners.
TRANSACTIONS (1989 – 2003)
Foreign Investors - 10%
Joint Ventures
(Local/Foreign) - 9%
Local Investors - 81%
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| Q9. It is also alleged
that the implementation of the programme lacks transparency.
Is this true? |
Answer: This is not true. DIC
has been fair and open in the implementation of the programme.
Comprehensive procedures are adopted to ensure transparency
and fair play. Companies to be privatized are advertised in
both local and international press.
Transparency is achieved through application of Procedures
Manual. There are also frequent public relations and communications
programme to disseminate information on the Divestiture Programme.
Some of the instruments are press briefings, seminars for
policy makers and opinion leaders such as Members of Parliament,
Members of Council of State, Presidential Staffers and the
Judiciary, dramatization, etc.
All enterprises divested are published in the local newspapers
indicting who bought what and at what price, what is paid
and what is outstanding, if any.
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| Q10. What is the procedure
for Divestiture? |
Answer: The procedure
for divestiture in any particular case depends on a number
of factors, including the mode of divestiture selected. However,
where the mode of divestiture is the sale of assets of an
SOE by competitive tender (which is the most common mode),
the procedure will be as set out below. It may appear long
and cumbersome. However, it is designed to ensure transparency
and integrity in connection with the divestiture of SOEs.
a. Advertisement: As soon as bid documents
have been prepared, the SOE concerned is advertised for sale.
b. Obtaining bid documents: Those interested
are provided with the relevant bid documents. These generally
comprise a detailed set of bid procedure, draft sale and purchase
agreement, an information memorandum containing a profile
of the SOE and an independent valuation report of SOE land
and buildings plant and equipment and other fixed assets.
c. Form of bids: It comprises qualification
statements and price bids. Qualification statements usually
include, among other things, details about the investor and
the investor’s business plan for the SOE. Price bids
include, among other things, the price offered for the SOE’s
assets, the timing of any deferred payments, details of the
security proposed to be given (in the case of deferred payments)
and a detailed explanation of how the investor intends to
finance the acquisition.
d. Information on price: DIC prefers the
price offered to be paid in full on completion of the sale
and purchase. Deferred considerations are secured by a guarantee
from a bank or other person of sufficient financial standing.
DIC may consider, where appropriate, taking security over
assets until full payment is received. Interest is payable
on deferred payments.
e. Due diligence Investors are permitted
to carry out a site visit to the SOE’s assets, operations
and records prior to the submission of their bids.
f. Delivery of bids Completed bids must
be sealed in two separate envelopes: one envelope will contain
the qualification statement the other the price bid. Bids
must be delivered, by hand or post on or before the closing
date stated in the relevant advertisement and bid procedures.
Late bids are not accepted.
g. Evaluation of bids A two-stage procedure
is usually adopted for the evaluation of bids received with
evaluation of qualification statements being completed prior
to any price bids being opened and compared. Price bids from
investors who submit unsatisfactorily qualification statements
are not opened. In the event of equal price bids, preference
is given to the bids submitted by Ghanaians.
h. Negotiations The investor who submits the highest conforming
price bid opened is invited for negotiations of the draft
sale and purchase agreement and discussion of the business
plan. In the event of negotiations with an investor failing,
the investor who submitted the next highest conforming price
bid opened may be approached, and so on.
i. Approval and Signature Formal approvals
to any divestiture must be sought from, first, the members
of the DIC and , secondly, the President’s Office. Upon
receipt of the approvals and the payment of the appropriate
purchase consideration, the sale and purchase agreement is
signed and the assets concerned handed over.
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| Q11. What is outsourcing? |
| Answer: It is the process whereby
external consultants such as legal firms, merchant and investment
bankers and management consultants are appointed by the DIC
to carry out divestiture work on its behalf. DIC monitors their
output to ensure that assignments are performed according to
its statutory obligations.
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| Q12. Does Divestiture
Create unemployment? |
Answer: No. The divested enterprises
have rather created more employment. Here are some employment
statistics:
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| Q13. Have Workers of
divested enterprises been given the opportunity to own shares? |
Answer: Yes. In the divestiture of viable enterprises, workers
are given serious consideration when they request for share
allocation. Share sales to workers and identified groups are
generally sold at a discount. Examples are as follows:
Ghana Oil Palm Development Company (GOPDC) workers/Outgrowers:
20%
Produce Buying Company (PBC) workers: 5%
Cocoa/Coffee and Sheanut Farmers Association Workers: 20%
State Transport Company (STC) workers: 20%
Ghana Cement Works Company (GHACEM) Workers: 5%
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| Q14. Have Workers been
denied severance awards in the event of the divestiture of their
respective enterprises? |
| Answer: No. Upon divestiture, all
workers are paid their severance awards at negotiated levels.
No worker is denied his/her severance entitlements. It has not
been easy paying the high levels negotiated into the Collective
Bargaining Agreements considering the fact that most of the
SOEs have accumulated huge debts owed to the banks and other
creditors. Employees expect that come what may their total benefits
should be paid even if it means calling on the taxpayer, through
the budget to make resources available. DIC makes every effort
when liabilities exceed proceeds to pay workers their full entitlements.
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| Q15. To what use have
the proceeds been put? |
| Answer: Proceeds from the programme
have not been misused. Indeed, in most cases the entire proceeds
from the divestiture of the SOEs cannot meet payment of liabilities
and the DIC has to look for funds elsewhere to pay the affected
workers. The liabilities include employee entitlements which
consist of accumulated salary arrears, severance payments and
other liabilities such as debts owed to creditors by the divested
enterprises. The rest of the proceeds, if any, are transferred
to the government and used to support development budget.
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| Q16. Why divest profitable
enterprises? |
| Answer: In these days of technological
advancement, the need to constantly update and upgrade plant
and equipment is of paramount importance to ensure competitiveness
and cost effective operations. There are obvious limitations
to operations of “profitable” enterprises under
state ownership. The limited resources of state and at times,
bureaucracy cannot permit the timely introduction of improvements
and innovations. What appears to be “profitable”
enterprise today may therefore not be profitable tomorrow, as
new investment decisions cannot be promptly implemented. The
divestment of profitable enterprises generates positive cash
flows for government to enhance the implementation of development
projects for the benefit of the citizenry.
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| Q17. What are the future
plans of DIC? |
Answer: Government has decided
to invite private participation into electricity and water
supply and the operation of the railway system.
Efforts are far advanced in the establishment of a Privatization
Trust where a percentage of the Shares in the companies to
be divested would be reserved for only nationals and local
institutions to purchase.
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