Mahama's claim of investing US$600 million into KIA 'incorrect' – GACL

Business News of Tuesday, 11 August 2020

Source: Class FM

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The Ghana Airports Company Limited (GACL) has said claims by former President John Dramani Mahama that his government made an investment of almost US$600 million into the Kotoka International Airport is “incorrect”.

“The amount may be in reference to funding of projects in all airports including US$130 million Runway project at Tamale Airport and US$25 million new airport in Ho,” the GACL said in a statement in reaction to the claim by the flag bearer of the National Democratic Congress (NDC).

The GACL also indicated that Mr Mahama’s assertion that the company cannot service the loans taken to develop the airport is “untrue”.

“To date, GACL has met its repayment obligations under the loan facility,” the company said.

It further reiterated that the Kotoka International Airport (KIA) is not for sale or being privatised.

Rather, the Ghana Airports Company Limited says “an unsolicited proposal has been received from a Turkish Consortium which is yet to be considered. It is rather unfortunate that certain figures from the proposal are being used to peddle untruths.”

Read the Ghana Airports Company Limited’s statement below:

Background:

Mr Mahama had said it was wrong for the Akufo-Addo government to sell off 66 percent of Ghana’s Kotoka Airport to a Turkish company at a price that could easily be raised by selling lands around the facility.

Aviation Minister Kofi Adda recently denied reports that KIA was for sale.

Mr Adda said in a statement that the Ministry is only considering “a proposed strategic partnership arrangement between Ghana Airport Company Limited (GACL) and TAV-SUMMA Consortium to improve service delivery and expansion of infrastructure at the Kotoka International Airport to achieve the government’s vision of making Ghana the aviation hub within the West African sub-region”.

“In this regard, an executive approval was granted by H.E. the President for the Ministry to facilitate the engagement of the strategic partners”, the statement noted.

Mr Adda also noted that: “To this end, we hereby state categorically that neither the Ministry nor the GACL has yet formally started any process of engagement on the subject matter with any stakeholder or partner”.

“We, therefore, wish to note that the false information on the sale of the Kotoka International Airport being circulated in the media/social media is the work of mischievous and malicious elements to pitch the staff of GACL and the general public against the government to achieve their diabolical agenda and erode the successes chalked in the aviation sector for the last three (3) years”.

“Based on the above submission, the general public is hereby entreated to disregard the fabrication going on in the media regarding the sale of the Kotoka International Airport”.

However, speaking in a recent interview with Woezor TV, Mr Mahama, under whose tenure KIA’s Terminal 3 was built, said “an investment of almost $600 million was done into that airport, Kotoka International Airport”.

“Fortunately, before we left office, in September, I remember that a valuation of the Airport was done, a valuation study of KIA and it was valued, if I remember, at GHS5-point-something billion. It also had an insured value. It was somewhere in the regions of GHS3 to GHS4 billion – a huge amount because a lot of money had been invested in the airport over the period and it had become categorised as one of the five best airports in Africa”.

“And then I saw a strange development, where a Turkish company is being given a concession to take over the airport and run it”, he decried.

“The concession is a disguise”, the flag bearer of the National Democratic Congress said, explaining: “Behind that, in the period of the concession, 66 per cent of the ownership share of the airport will be transferred to the Turkish company at a cost of $70 million compared to a $600-million investment and a value of GHS5 billion”.

“I mean, for $70 million, we’re giving 66 per cent shares of our airport to a Turkish company and, so, I said we’re against it, it is wrong”, he asserted.

In his view, “every country’s airport is its pride” and, thus, opposed to the selloff.

Mr Mahama proposed that: “You can have a management agreement to get somebody to manage it properly for you and based on that you pay them a certain amount of money but this is not an ordinary management agreement, they are going to get two per cent of the revenues as management fee but in addition, 66 per cent of the ownership share of the airport is going to be transferred to them for $70 million and I think that that is absolutely wrong”.

According to him, for an airport that was worth more than GHS4 billion four years ago, selling off 66 per cent to a foreign company at that amount is a bad deal.

“Even if you sold some of the lands around the airport, you’ll be able to raise far more than $70 million”, he noted, pointing out: “So, if it’s $70 million we want, I mean there are other ways of raising it; the value of the lands around the airport alone are far in excess of $70 million and I think that it’s wrong to give up our airport like that”.

Mr Mahama also gave some advice to the Akufo-Addo government as to how to go about paying for the loans contracted to build the Terminal 3, if that is what is forcing the administration into signing the concession deal with the Turkish company.

“They talk about not being able to service the loans that were taken to develop the airport. Now, I just want to tell this government: I mean, in any agreement, there are clauses for force majeure. It means that if there’s an act of God or act of nature that makes it impossible for you to fulfill your obligations [you can trigger the clause for respite].

“At the time these loans were contracted, nobody knew COVID was going to happen and COVID is affecting all airports around the world because it’s affected aviation.

“And, so, all you need to do is to trigger the force majeure clauses and let the financiers know that: ‘Look, this is the situation that has arisen’, and normally, in those circumstances, they are able to make some concessions”, he proposed.

“Aside from that”, he noted, “these loans are insured anyway, and, so, if the government doesn’t trigger force majeure, the way to go is not to try and sell off the airport but to try and engage the financiers and have a rescheduling of the facility”.

To him, the government could have chosen different options than the concession deal with the Turkish company.

“I mean, there are many other ways that you can handle a situation like that rather than give out 66 per cent of our share in that airport. COVID is going to pass, as soon a vaccination is received, airports will open again, flights will start coming in, revenue will start coming in”, he said.

Mr Mahama also blamed the government for the current difficulty in paying loans.

The government, he said, “even created the situation in the first place”.

“The way I was able to get Airport Company Limited to build Terminal 3, was to release 60 per cent of the airport passenger tax to them. The airport passenger tax is $100. We used to give Airport Company $40 and we put $60 into the Consolidated Fund. And, so, when I asked them to build Terminal 3, they came with a proposal and said: ‘If you released the 60 per cent to us, we will use it to set up a financing structure to build Terminal 3. And, so, in the next budget cycle, we released their full $100 air passenger tax to them and if Kotoka is doing about two million passengers a year, then $100 times two million was about $200 million. So, they used that, went to Stanbic Bank and African Development Bank and structured that facility.

“Now, when this government came, they put what they call a Capping and Realignment Act [in place] and, so, out of the $100, they capped it. And, so, if financing of the various funds, the money into the various funds exceeds 25 per cent of the national budget, all the excess monies taken from the fund, including the airport tax, so, that money that we had released to Airport Company, the government started taken out of it and putting it back into the Consolidated Fund.

“Then aside from that, despite the fact that they had structured the facility on the airport tax, they took out part of that money, the airport tax and gave to the Ghana Civil Aviation; took part of it and gave to the Meteorological Services, so, the amount left, began to become dangerously low and unable to service the debt.

“This is what the government did, whether deliberately or not deliberately, I don’t know. But it will look like somebody wanted this financing structure to fail so that they could sell off the airport, I don’t know”, he said.