Liquidation is "uncalled for" - BHC, Co-operative staff

Two schemes to benefit depositors and employees announced

Shares slump as index continues upsurge

Government, Central Bank officials meet over BHC, Co-operative Bank closure

Customers, staff of liquidated banks disappointed

Rural bank fails to declare dividend

GSE managers go into action to lift bourse

VAT to institute tighter control measures

Accra (Greater Accra), 18^th January 2000

A cross section of staff of the Bank for Housing and Construction (BHC) and the Co-operative Bank Ghana Limited (CBGL), whose liquidation was announced on Monday have described the action of government as "uncalled for."

They said prior to the announcement there was no indication in their operations that they were bankrupt to warrant liquidation.

The staff, most of whom appeared to be in shock about the action, had thronged the Ministry of Communications, where a news conference had been called by shareholders of the two banks.

After a two-hour wait, Mr. John Mahama, Minister of Communications, announced the postponement of the conference to a time later in the day.

The aggrieved staff said that given the reason cited for the closure of the Banks, the A-Life scandal, liquidation should not have been the result.

Mr. Ben Amegatcher, Chairman of the Professional and Managerial Staff Union of the BHC, said considering the amount involved in the A-Life saga it would have been a natural occurrence for the Bank to collapse.

"However, business is thriving. We made a profit of three billion cedis last year while within the last two weeks we have had lots of depositors bringing in millions. Our deposit base has more than doubled since the scandal and is now standing at 86 billion cedis."

Mr. Amegatcher said the A-Life matter has rendered the supervisory role of the BOG suspect, in that it approved cheques from Kumasi, without questioning the source and the huge amounts involved, reported to exceed 100 billion cedis.

He suggested a "worker buy-out" scheme where staff would be allowed to own shares and run the Bank.

"We think the BHC is viable and with the kind of dedication and job consciousness we believe the Bank could be a source of pride for the nation in the next 12 months."

A staff of CBGL said the issue of liquidation is unfounded since the government, through the Financial Sector Adjustment Programme (FINSAP), had given them a "clean slate" to continue with their transactions.

In another development, one of the BHC staff told newsmen that BOG officials had in the morning, gone to branches outside Accra to empty the vaults.

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Accra, 18^th January 2000

Depositors and employees of the liquidated Bank for Housing and Construction (BHC) and the Ghana Co-operative Bank Limited are to benefit from two separate schemes to protect their claims.

Depositors will enjoy the Depositor Transfer Scheme, under which their balances would be transferred to the Ghana Commercial and the Agricultural Development Banks where they will have "unrestricted access".

For the employees, an Employee Creditor Scheme has been designed for their salaries and other entitlements, details of which the government is discussing with the Industrial and Commercial Workers Union of the TUC.

Mr. Clemens Anyomi, Director of the Financial Sector Adjustment Programme, announced these measures at a news conference in Accra on Monday to officially announce the liquidation of the two banks.

Proceedings at the conference were interrupted by staff of the two banks who jeered and booed forcing the convenors to end the news conference without questions from newsmen.

Mr. Anyomi, also the spokesman for shareholders of the two banks, said "the possibility of absorbing some of the redundant staff into other areas of the financial sector is being explored.

"Specific instructions in respect of the Depositor Transfer Scheme and the Employee Transfer Scheme are being issued to the Bank of Ghana, District and Regional Labour Offices, Registrar-General's Department and to all branches of the affected banks."

Copies would also be sent to the depositors and employees.

Mr. Anyomi explained that the liquidation follows consistent losses and the deterioration of their loan portfolios, "creating a situation in which their liabilities exceeded their assets.

"This adversely affected their ability to satisfy the capital adequacy ratio and minimum capital requirements as set out in sections three and eight respectively of the Banking law."

As to why depositors and employees were not informed on time, he said the "issue of liquidating banks is a sensitive one" that needed time for measures to cushion the shock.

Mr. Anyomi turned down suggestions of divesting the two banks or merging their operations, saying, "They are so run-down that bringing them together would be impossible", citing problems of "solvency, liquidity and capital adequacy ratio".

On how soon depositors and employees would receive their entitlements, Mr. Felix Amoah, a consultant liquidator, said depositors would receive theirs within the next few days while employees would get theirs at the end of the month.

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Accra (Greater Accra), 18^th January 2000

Total shares traded on the Accra bourse on Monday slumped heavily after recording huge gains last week but the All-Share Index continued its upsurge to reach 740.05 points from 739.21 points with a 0.84 points gain.

Shares traded opened the week at 23,100 after recording significant volumes of one million and 1,748,600 shares on Monday, January 11 and Friday, January 14, respectively.

Market capitalisation went up from 3,210.21 billion cedis to 3,211.53 billion cedis with the change in the year to date moving up from 0.41 per cent to 0.53 per cent.

Twenty equities made total offers of 452,530 shares but only 10 equities were traded with the highest trading of 9,100 shares of Ghana Commercial Bank (GCB) followed by CFAO Company Limited (CFAO) with 7,000 shares.

Total shares offered last week were 2,142,650.

Demand fixed at 83,200 shares as against 1,800,200 shares, demanded on Friday.

In the broader market, two equities recorded price appreciation.

Accra Breweries Limited (ABL) began the week richer with 10 cedis at 470 cedis with GCB making five cedis at 770 cedis.

The following are the last prices of listed equities in cedis:

ABL 470 +10

AGC 18,700

ALW 2,489

BAT 468

CFAO 38

EIC 1,880

FML 923

GBL 1,450

GCB 770 +5

GGL 950

HFC 750

MGL 200

MLC 151

MOGL 13,900

PAF 298

PZ 800

SCB 19,200

SPPC 150

SSB 1,988

UNIL 1,850

UTC-E 125

CMLT 420

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Accra (Greater Accra), 18^th January 2000

The government and Central Bank officials are on Monday having intensive discussions on the future of the Bank for Housing and Construction (BHC) and Co-operative Bank, which have been liquidated following heavy losses, official sources said.

The government has, meanwhile, approved a scheme to protect depositors of the two banks.

Bank of Ghana and Ministry of Finance sources told the Ghana News Agency (GNA) in Accra that the Governor and government are holding discussions on the matter.

"We need to sort a few matters out before coming out with a statement," a Bank of Ghana source said.

The government on Monday closed down the two banks and ordered all customers and staff except Branch managers and Accountants to stay away.

Under the scheme to protect depositors, they will be required to submit their rights to claims to the government and in exchange have their deposit balances transferred to the Agricultural Development Bank or Ghana Commercial Bank Limited (GCB).

A notice to depositors dated January 17, 2000 posted at the national headquarters of the Co-operative Bank explained that the bank had been liquidated because of "consistent losses resulting from deterioration of their loan portfolio."

It said the liabilities of the bank exceed its assets and this has affected its ability to satisfy the capital adequacy and minimum capital required under the banking law.

The notice said a special shareholders resolution meeting has been held to endorse the liquidation and this is in line with the Act 180 (1963) adding that the bank is now an insolvent and ceased operations with immediate effect.

Industry experts told the GNA that the most important thing now is how depositors would get back their money.

The two banks had been weighed down heavily by the A-Life Supermarket scandal in which the owner fleeced several banks of some 120 billion cedis.

A customer of BHC said he was shocked when he learnt of the closure of the bank on Monday morning.

"I was shocked...I was supposed to pay some money to my partners today (Monday) and I don't know what to do now."

The financial sector was rocked a few years ago when "Miracle Banks" such as Pyram and R5 emerged promising fantastic interest rates crashed.

The Central Bank ordered their closure and they eventually collapsed bringing down with them thousands of depositors, who had lodged billions of cedis with them. Nothing has happened to their owners.

The Bank for Credit and Commerce also collapsed and foreign currency depositors are yet to be paid all their deposits.

The Social Security and National Insurance Trust (SSNIT) bailed out Meridien BIAO, when it went bankrupt. The bank is now called The Trust Bank.

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Hundreds of customers and staff of the Co-operative Bank and Bank for Housing and Construction (BHC), who went to the banks on Monday morning were disappointed when they found their doors locked.

Frustrated staffs were seen engaged in conversation while customers openly expressed their anger at the action. They criticised the management of the two banks and the government for not giving prior notice about the closure of the banks.

The government on Monday ordered the closure of the two banks and asked all customers and staff, except Branch Managers and Accountants to stay away.

Red flags were hanging in front of the Foreign Branch of BHC at Adabraka. A red flag at Co-operative Bank had the inscription "Demirifa duie" (condolences).

The premises of the two banks were peaceful with personnel from the Police Striking Force and private security organisation on guard duties. A police officer at the foreign branch of BHC in Adabraka told the Ghana News Agency (GNA) that customers, who came to the bank were turned back.

He said a customer who is to travel abroad on Monday broke down and shed tears on seeing that the bank had been closed down.

Senior Bank officials, including their Managing Directors, were not available for comments.

A staff member of the Cooperative bank blamed their predicament on the A-Life crises in which billions of cedis were siphoned from the bank by one supermarket chain operator.

A probe into the matter led to the sacking of some senior personnel of the Ghana Commercial Bank, Bank for Housing and Cooperative bank, but not all the monies have been retrieved and the case is bogged down in the courts for over two years now.

Some believe some government officials could be implicated in the case and that has led to the foot-dragging in getting to the bottom of the matter.

Central Bank and Price Waterhouse Coopers officials told the said that they were at BHC headquarters to work but gave no details.

But as at 1100 hours, they were still sitting outside, waiting for the security personnel to open the doors for them.

The government and Central Bank officials are having serious discussions on the Future of the two banks, which have been liquidated following heavy losses, official sources said.

The government has, meanwhile, approved a scheme to protect depositors of the two banks.

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The Ada Rural Bank could not declare any dividend for the 1998 financial year because it was left with only 2.5 million cedis after meeting financial commitments from its profit of 21.1 million cedis for the year.

The bank transferred over 5.2 million cedis to statutory reserves leaving an income surplus of 15.8 million cedis out of which 13.2 million cedis was paid as total dividends for 1997 at three cedis per share.

At its Annual General Meeting (AGM) for 1998 held at Big Ada on Saturday, the Shareholders said they were not impressed with the bank's performance and therefore suspended approval of new allowances for members of the Board of Directors.

The Shareholders raised queries about delays in calling meetings and Nene Osram Gaduga the fourth, the Board chairman, apologised saying it was due to unforeseen circumstances.

Nene Gaduga said during the period under review, the bank's investment in government papers increased by 15 percent from 609 million cedis in 1997 to 700 million cedis while loans rose from 163 million cedis to 302 million cedis.

Total deposits grew from 665 million cedis in 1997 to 838 million cedis in 1998 representing an increase of 26 percent. Its assets increased by 14 percent from one billion to 1.14 billion cedis

Nene Gaduga was not happy that a greater part of the bank's income came from investments since this does not help the economy in the bank's catchment area.

He expressed concern about poor repayment of loans saying out of a 435 million cedis given to customers only 116 million cedis was recovered.

The board was therefore left with no other option than to continue to channel a greater percentage of its funds into government papers.

Nene Gaduga however assured the shareholders that the 1999 financial year was quite successful and that the bank hopes to pay good dividends at its next meeting.

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Accra (Greater Accra) 18 Jan. 2000

Many people who applauded the star performance of the Ghana Stock Exchange in 1998 may have been visibly disappointed at the plunge of the bourse last year.

The Bourse recorded nearly 70 per cent gain in cedi terms with a market capitalisation of 3,245.61 billion cedis as at December 1998. This made it one of the best emerging markets. However, the exchange's main market indicator, the GSE All-Share Index, ended 1999 in not too pleasant a state.

The change within 1999 was negative 15.22 per cent after bearish sentiments of low volumes weighed it down heavily for a good part of the year.

This means the yield on all holdings on the market could not make any capital gain but rather declined in value.

At the close of the year 1999, market capitalisation stood at 3,205.39 billion cedis for total outstanding shares of 1,026.72 million of 22 listed equities. The total amount raised at primary issues of all the equities together is 154.2 million cedis.

Indeed, the market had made steady progress since its establishment in November 1990 and the plunge could have taken people by surprise.

The Exchange recorded negative 7.95 points in 1991. This improved to negative 3.63 points in 1992 and leaped to 113.74 points in 1993 and 124.34 points in 1994.

There was a gain of only 6.33 points the following year and there was a higher gain of 13.82 and 41.85 points in 1996 and 1997 respectively.

The Ghana Stock Exchange was named the best performing stock market in Africa in 1998 when the change in the All-Share Index for the year closed at 69.69 per cent.

Then came the slump. The All-Share Index began the year at 869.93 points and closed on December 29 at 736.16 points, a drop of negative 15.22 per cent.

On record, the Exchange hit an all-time high of 1,201.08 points in May 1998 and an all-time low of 55.09 points in May 1991.

A number of reasons have been given for the negative turn of events in 1999, the poorest showing since its establishment in November 1990.

Mr Francis D. Tweneboa, General Manger of the Exchange, told the GNA that lack of automation in clearing, settlement and depository operations was a major contributory factor for the absence of foreign investors, who own the required capital to cushion the performance of the bourse.

He said activities on advanced markets are automated and this gives investors confidence in the efficiency of the market.

It also improves speed, saves time and removes the inconvenience of carrying certificates from one end to the other for clearing and settlement of shares sold.

Mr Tweneboa said the GSE would automate clearing and settlement operations for the delivery and payment of entitlements as from this year to enhance its performance.

Mr Tweneboa said other factors, such as foreign investors' mistrust of emerging markets, contributed to the steep decline of the market index.

Most foreign investors have had very bad experiences with emerging markets such as Brazil, Mexico, Russia and Asia, whose economies have gone through financial crisis in recent times.

"Our stock market is, as a result, experiencing the rippling effects of what happened to those markets, which have now made foreign investors emerging market phobia."

The cedi returns on foreign investments could also be another factor for the lack of interest in the market by foreigners.

According to the General Manager, foreigners invest in their currency and receive the returns in cedis, which has recently depreciated in value.

Apart from the low returns in cedis, the invested capital also depreciates compared to its equivalent in foreign currency and this does not serve as a good incentive for foreign investment on the Exchange.

Mr Tweneboa said another problem is the absence of collective investment schemes and lack of institutional investors.

"These schemes could mobilise the needed funds to activate the play of market forces for the growth of the market."

Mr Tweneboa said that as part of measures to improve the performance of the bourse, the Exchange would upgrade the trading system into a continuous one.

It would do this by extending the trading period from two hours to about six hours. Currently the Exchange trades from 1000 hours to 1200 hours.

He said training programmes would be organised to expand the horizon of the brokers some of who lack exposure. "We also intend to train and advise them in ways of building their capital base so that they can give both technical assistance and offer cheaper funds in the form of underwriting to the companies.

"We also aim at lobbying for a change in dividend policy of companies to increase dividend paid out to investors and advocate the abolishment of tax on dividend or that it be reduced from about 10 per cent to five per cent."

Mr Tweneboa noted that the tax on dividend does not make the playing field of the money market even.

Whereas those investors in Treasury Bills do not pay tax, those who invest on the stock exchange pay tax and this serves as a disincentive.

"If tax on dividend is abolished, investors' appetite for shares will be whetted and this can increase investments on the bourse."

The Exchange would in addition lobby for the introduction of private pension schemes and a change in prudential requirements of insurance companies so that they can also be listed on the Exchange.

Mr Tweneboa said these and other measures being considered would enhance the size of the market.

The following are the opening and closing prices of equities in cedis and percentage changes in the prices for 1999:

Opening closing percentage change

ABL 800 450 -46.12

AGC 18,000 18,700 +3.89

ALW 2,500 2,489 -0.44

BAT 400 469 +17.25

CFAO 50 38 -24

EIC 2,400 1,880 -21.67

FML 1,300 916 -16.73

GBL 2,050 1,450 -29.27

GCB 1,300 760 -41.54

GGL 820 950 +18.75

HFC 750 750 0.00

MGL 200 200 0.00

MLC 200 151 -24.40

MOGL 17,000 13,800 -18.82

PAF 400 300 -25.00

PZ 900 800 -11.11

SCB 24,000 19,000 -20.83

SPPC 251 150 -40.24

SSB 2,250 1,984 -11.82

UNIL 1,605 1,850 +15.63

UTC-E 125 125 +4.17

CMLT 420 420 +5.00

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The Value Added Tax (VAT) Service is to institute tighter control measures to make the new tax regime more efficient, official of the VAT Service said in Accra on Tuesday.

As part of the measures, it has devised guidelines for tighter control of the lotto industry to ensure their compliance with the issuance of VAT invoices.

Under the guidelines, dealers will be expected to issue the government printed coupons as VAT invoices.

Speaking to the Ghana News Agency (GNA) in an interview, they said measures were being instituted to cover all sectors liable for the collection and payment of VAT.

A programme has been drawn up for the intensification of control verification visits to uncover undeclared and under-declared taxes.

The officials said another initiative would be the institution of measures for the expansion of the tax base.

This has become necessary after the review of key parameters of VAT such as the tax rate and the scope of exemptions designed for ease at the initial stage of implementation.

On the total revenue collected for last year, they said the Service exceeded its target of 700 billion cedis but gave no details. The target for the third quarter of 1999 was exceeded by 14 per cent.

The current VAT registered traders stands at more than 16,000. The initial target was 6,000.

The VAT Service has noted that VAT registered businesses, particularly in the hotel and restaurant industry, are selective in charging the tax. Many more also fail to issue the official VAT invoice.

They said as VAT enters its second year, the focus would be to consolidate the gains made so far.

The VAT Service would institute measures that would further improve compliance, particularly in specific areas of registration of eligible businesses, diligent and consistent collection of VAT by registered traders and promotion of efficiency and effectiveness in the administration of the tax.

The VAT Service said the structure of VAT revenue contribution of the distribution and service sectors falls below expectation. This calls for intensification of monitoring and surveillance by the Service to enhance compliance, particularly in the two areas.

A plan has been drawn up for the identification and compulsory registration of all non-registered companies.

Meanwhile, the Service has linked up with the Customs, Excise and Preventive Service (CEPS) and the pre-shipment inspection agencies for data on import that will facilitate the identification of such non-complaint importers.

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