The Social Security and National Insurance Trust (SSNIT) is selling a 60% stake in four hotels to an investor Rock City Hotel Limited. The four hotels are:
- La Palm Royal Beach Resort
- Elimina Beach Resort
- Labadi Beach Hotel
- Ridge Royal Hotel, Cape Coast
A section of Ghanaians including MP, Okudzeto Ablakwa, and the TUC have raised concerns about the sale.
We need to look at the facts of the sale analytically.
The reasons for the sale are as follows:
- Consistent losses by the Hotels year by year
- Frequent requests to SSNIT for maintenance funding
- High capital expenditure and new capital injection without any returns
- Not paying dividends over the years
- Inability to pay back loans, SSNIT had advanced to them.
- Finding a strategic investor who can inject capital into the operations and manage the hotels better.
Except for Labadi Hotel, which had been doing well, the rest of the Hotels are unprofitable and non-performing assets.
La Palm Beach
La Palm Beach had made losses for 11 straight years. No dividend had been paid to SSNIT during this period. The average return on Equity is said to be Negative 4.2%Ridge Royal Hotel
Ridge Royal Hotel started operations in 2016. It has made losses every single year. The average return on Equity is said to be Negative 33%. They have never paid dividends to SSNIT. and have not paid loans advanced to it by SSNIT.
Elmina Beach Resort
Made losses in most of the years of operation. No payment of dividends to SSNIT for several years. The average return on Equity is said to be Negative 4.8%
Labadi Beach Hotel
Labadi Hotel had performed relatively better than all six hotels put on tender. They made profits in most years of its operation. They have been paying dividends to SSNIT. Average returns from 2012 to 2022 are said to be 5.2 %.
With inflation in Ghana almost always in the double digits, Labadi’s performance may be considered average.
TENDER
SSNIT went to tender for the 60% stake in 2022 after appointing a Transaction Advisor to guide the process. The tender was for six hotels including the four under consideration. Bids for Busua Beach and Takoradi Trust Lodge were, however, unsuccessful,
Six firms were short-listed for the bids. Rock City’s bid was adjudged the best on technical and financial considerations.
The total bid for Rock City for a 60% stake in the four Hotels was $61.2 million compared to the Transaction advisor’s valuation of $59.1 million. In order words, the amount Rock City has offered to buy the 60% stake is higher than what SSNIT was advised to sell it.
Rock City has commenced negotiations with SSNIT to seal the deal.
STATE CAPTURE
The allegation that this transaction is a state capture appears to me to be very untenable. State Capture is a type of systematic political corruption in which private interests significantly influence a state’s decision-making processes to their advantage.
Rock City was selected through an open and transparent tender process. The Tender invitations were published in the “Daily Graphic”, “The Ghanaian Times” and the “Economist”- an international magazine. The tender was by the Procurement Laws of the country. How can anyone allege state capture when the best-evaluated tenderer is being considered for the sale?
This process cannot be compared to what happened in the 1990s when some regional Catering Rest Houses were sold to some hand-picked politicians.
CONFLICT OF INTEREST
Another allegation is that Bryan Acheampong, a Minister of State who happens to be a director and shareholder of Rock City is in a conflict of interest situation. As a cabinet Minister, he is alleged to have engaged in inside trading.
Defenders of Bryan Acheampong have said when SSNIT went on Tender for the sale in 2022, he was not a Minister of State. He became a Minister of State in 2023.
Since Mr. Ablakwa has submitted a petition to CHRAJ, we have to wait for CHRAJ’s ruling on this allegation.
TUC
The TUC took a stand against the 60% sale of the Hotels by SSNIT. It is refreshing that the TUC has taken a keen interest in the sale. I don’t think it was right for them to take a stand against the sale before deciding to engage SSNIT to find the reasons behind the sale of the 60% stake. The TUC should know by now that issues on investments are not based on sentimentality or “workers’ chooboi”. Investments are about hard financial facts and returns. These Hotels, except Labadi Beach, had been a drain on the resources of SSNIT for a long time. SSNIT had to fund maintenance capex for these hotels to survive. The sale of the 60% share is, therefore, in the best interest of SSNIT.
CONCLUSION
I am convinced beyond all reasonable doubt, that the decision by SSNIT to sell 60% of the hotels to a strategic investor is a good one. This is long overdue.
If Rock City is not legally qualified to buy, SSNIT should sell the shares to the next best-evaluated bidder to harvest some funds from these huge investments which have not yielded much to the Trust over the years. The amount from the sale could be reinvested elsewhere to yield the needed dividends. Investments are not made to hold onto non-performing assets. Investments are made for profits. SSNIT should just sell and move on. In this case, SSNIT would continue to hold 40% of the shares. 40% of an investment making money is better than 100% of an investment making no money.
However, I am very much aware that the TUC opposition to the deal can scuttle it. The TUC has appealed to the President to stop the deal. With barely six months to the elections, the government cannot afford to offend the TUC. The TUC can easily start a nation- wide demonstration which can affect the election fortunes of the ruling government.
Unless the TUC changes its stand on this deal, I don’t see it going through.
By: DANIEL SARPONG, ACCRA
