- Hence those who seek to dismiss into insignificance blows to transparency in establishing Agyapa in a tax haven may want to revise their notes.
Yesterday, I took off sometime to listen to discussions on JoyFM’s Newsfile show on the ongoing Agyapa Royalties transaction the Government of Ghana is seeking to undertake. Interesting to me however was how one of the concerns of the CSOs was cursorily tossed off the discussions. This regards the matter of Beneficial Ownership. In his queries, the host, Sampson Lardi Anyenini, questioned Imani’s Bright Simons on any proof they had of Beneficial Ownership. He wanted to know this because the Deputy Finance Minister, Adu Boahene, who was also on the show, explained that the Government of Ghana was going to be 100% shareholder of Agyapa, following which 49% shares will be shed off in an IPO on a UK exchange to raise an amount of $500million; where shares could be purchased by interested investors.
My first impression was, the question asked by the host was misplaced. It probably may have emanated from a lack of appreciation of how the issue of Ultimate Beneficial Ownership (UBO) works. Secondly, the Deputy Minister got away with using the immediate legal shareholdings as a smokescreen on the matter of UBO. This is because, at this point in the discussions, it would be absolutely ridiculous to ask even Okomfo Anokye to present proof of UBOs in the impending deal. Hence Bright couldn’t help much in that regard. Understandably, the discussions subsequently tilted towards the analyses that were done to arrive at how 49% of shares in the SPV were valued.
Now, back to the matter of UBO. You see, it’s simply faulty to think the immediate legal owners of companies or shares are necessarily the same as the ultimate beneficial owners. In fact, this reasoning itself defeats the understanding of the concept. Please see below the attached infographs of the diverse ways in which UBO arrangements may be brought into being. They are usually complex; with layers of intermediaries of various kinds between the immediate legal owners or shareholders and the UBOs.
Hence, it’s out of place to immediately ask CSOs for proof of Beneficial Ownership for a transaction being executed. Nonetheless, that takes nothing away from the right of CSOs to ask questions or raise valid concerns about potential UBO matters regarding a transaction, especially when there is a clear case of Politically Exposed Persons (PEPs) involved in the said State sanctioned transaction.
Thus, it’s not a given that UBOs, if there are any, can’t be established for the deal. But that cannot be now nor immediately, unless those doing the transaction are reckless to a fault. It will nonetheless take the investigative commitment of a CSO/Investigative Journalist or any such public interest groups willing to follow the transaction through the various stages of its evolving life cycle, to eventually come with substantive proof.
One thing that could jump start the investigative work for any CSO committed to this feat will be legal requirements such as the 4AMLD requirements in Europe, which requires financial institutions to identify the beneficial owners of every legal entity customer. However, this door appears half-closed to start with; since the Agyapa deal is set in Jersey, a haven not well renowned for their transparency in banking and taxation matters, as recently reported by the Tax Justice Network.
Hence those who seek to dismiss into insignificance blows to transparency in establishing Agyapa in a tax haven may want to revise their notes.
But, if a CSO or any other group, were to set off to identify the ultimate beneficiaries of the 49% Agyapa shares, they should know that these would mostly be concealed through a complex web – hence is not easy. Some of the challenges to be encountered include; fragmented corporate transparency, due to fragmented and inconsistent data held in UBO national registers around the globe. There’s also the issue of legal corporate structures with multiple layers of ownership, which increases the number of entities to be verified. Generally, there’s lack of standardized documentation across various countries, again making the job of validating ownership much more difficult. Also, in jurisdictions where it is easy to transfer ownership, the preceding points of one’s investigations may not be aware of ownership changes within the web. These are among a host of other challenges one is bound to encounter. As such, it seems difficult, but not utterly impossible, to establish UBOs. The point must however be made that it’s not for the feint hearted, nor those in quick search of proof to justify fleeting socioeconomic and political arguments in a moment.
Any CSO committed to this feat may however begin with company websites, annual reports and stock exchange filings for useful information on the private participants in the transaction. There are also private databases on beneficial ownership, accessible to civil society and other stakeholders. Another way of tracking beneficial ownership information for publicly listed companies is to use the money trail to find out the persons behind the companies.
It’s important to also discuss the fact that listing on an exchange isn’t a guarantee of absolute transparency on who the UBOs of a Public Offering will be. Assuming that the Agyapa deal is hatched to benefit some politicians ultimately, all it takes is for the Executives of the SPV ( the fund manager for instance who we know to be politically exposed) to influence the brokers, hence eventually deciding which entities get to purchase shares in the said 49% up for grabs. The wheeling and dealing that will get these shares to the UBOs may have been in position prior, or then set in motion. This should not be any surprising, since Insider dealing is a well known devil that prowls the markets day and night.
With the scenario above, the CSOs and investigative journalists have their work cut out for them. It’s apparent no clear case of wrong doing can be established against the government in the Agyapa transaction by merely adopting the “ginger group” advocacy approach as we’re seeing in this instance. Nonetheless, listening to Bright Simons and the questions he directed at Adu Boahene on the Newsfile show, it appears Imani seeks to establish that if the 49% shares for grabs were undervalued in the transaction, then a genuine case of a “sweetheart deal” may well be made. But the danger here is that, even Parliament was given only 3yrs cash flow for the said transaction as at this point. Adu Boahene also introduced the caveat yesterday that the said $500mill isn’t necessarily commensurate with the entire 49% shares to be offered, and that they’re under no obligation to relinquish all the 49% at a go, and that government will only give out the initial proportion of shares that will get them the half a billion dollars for starters. What this means is that, if there were ever any such intentions of under valuing, pressed against the wall on the subject of share valuation, they would simply alter the subsequent cash flow years to reflect something averaging market value. This would immediately leave Ghanaians and Civil Society at a dead end once again.
It’s clear that if ever any substantive case can be established, it must go the long haul; which would take time and resources in order to establish beneficial ownership that involves politicians or PEPs, as some seem to suspect. But clearly, it appears our CSOs wouldn’t be going the long haul, since Franklin Cudjoe, President of Imani, indicated in a social Media post that their last action would be to send information on the transaction to some 5,000 influential persons around the globe; a name and shame sort of approach, as opposed to a dedicated long term pursuit of the matter; towards the establishment of a substantive case out of what may be currently dismissed as suspicions and mere phishing expeditions in the hopes of chancing on wrong doing.
Irrespective of the situation, I believe such developments should not be touched and left at dead ends, as has been the case with civil advocacy in our parts for the past decades. Even if nothing substantive is established with Agyapa today, I believe it’s important this development wakes our civil society up to the need to develop a national extractives (and related transactions) beneficial ownership register, which they can link with those of other countries, to enable them create a base from which they can start gathering evidence if ever similar developments were to occur in the future, which is more than likely to be the case.
That said, the seeming helplessness of CSOs and the general public, as captured above, shouldn’t make the politicians smug with impunity just yet. Because, when people in a polity are unable to establish the truth behind strong suspicions of wrong doing, they resort to a political solution; that is, to vote against the government which is suspected to be behind such dealings. Opposing political parties often latch onto such sentiments for mileage. So instead of merely dismissing the allegations and treating them with contempt, it’s quite important, and in the ultimate interest of the government, to come out more clearly with adequate information on the transaction, so as to dispel the suspicions beyond reasonable doubt. Once government holds that it’s up to nothing untoward, entities who seek copies of the Agyapa agreement, and excerpts of the prospectus (that in no way legally threatens nor vitiates the integrity of the transaction) must be freely availed with these documents for their evaluation. Secrecy on the part of government and uncoordinated opinion-based argumentation at this point will not do their political fortunes any good. Especially at a time when elections are barely 4 months away.