MPS port project will lead to $2bn, 1,400 job loss if not renegotiated – D.I.

The Danquah Institute (DI) has served notice that it will take legal action against the parties involved in the building and operation of a new terminal at the Tema Harbour if the parties do not renegotiate the terms of the project to ensure that the country is not shortchanged.

The pro-government think tank has issued a 60-day ultimatum to those in charge of the project to review it, or they will take legal action to protect the public purse.

Among other losses, the think tank says the “Ghana Ports and Harbours Authority (GPHA) and Ghanaians, for the matter, will lose 72% of the $109 million revenue GPHA made in 2017 [and] over the life of the contract, GPHA stands to lose in excess of $2 billion”.

In addition, “At least 1400 Ghanaians permanently employed by GPHA between Tema and Takoradi will lose their jobs by 2020”.

The DI said it is against this backdrop that all the parties to the agreement “should sit and re-examine the terms of the contract to ensure it is fair and economically beneficial to all the parties involved. In the event that the parties involved are unable to agree on new terms within 60 days, the Danquah Institute will take legal action in the public interest”.

Below is a full copy of the DI statement:

In 2015, the Board and Management of Ghana Ports and Harbors Authority (GPHA) took the decision to build another terminal at Tema harbour.

The decision had been taken because of the need for a new automated terminal that increased the volume and efficiency of operations at the harbour.

Its successful completion was to make Tema a competitive global shipping hub. Not only was this necessitated by the global trend towards automation and competition but also the growth in population, increased economic activity and the corresponding lifestyle choices of Ghanaians as a result of economic growth.

The original plan by GPHA sought to put the expansion project through a competitive tendering process. Two projects were advertised.

One for the construction of the terminal and the other for the operations once the terminal was completed. This decision had been unanimously taken by the board and management as it safeguarded GPHA’s economic interest and guaranteed a speedy completion of the project.

Over 56 entities expressed interest, of which 20 were shortlisted. The likes of VanOord, Jan de Null, Boskalis, Besix, CHEC China Harbour and Jay Cashman (USA) expressed interest. Another 15 bids were received for the operation of the new terminal. Bids from these global companies underscored the high interest the project had generated across the globe.

Interestingly, no bids were received from Meridian Port Services (MPS), a consortium formed in 2003 consisting of Meridian Port Holdings (MPH) and GPHA.

APMT and Bollare’, the companies that makeup MPH, however, registered their interest as separate entities for the Terminal Operations Tender.

Midway through the terminal operations tender, the NDC government under former president John Mahama issued a presidential fiat halting the entire process.

Apart from the fact that this directive grossly breached the Public Procurement Rules, it also severely impeded the ability of GPHA to freely and competitively negotiate in the interest of Ghanaians.

This ultimately set the stage for a badly negotiated contract that mortgaged the economic interest of Ghanaians to MPS and its foreign shareholders for a generation.

To emphasise the seriousness of this capitulation we discuss two main points: first, under the Investment Protection Regime of the agreement (clause 3.3), GPHA is precluded from initiating, developing or authorising the development or operation of any other container terminal within the Tema Port and within a radius of 20 nautical miles.

The Danquah Institute is arguing that, this clause fetters the ability of GPHA to carry out its mandate as required under section 5 of PNDCL 160, to inter alia, “maintain the port facilities, extend, and enlarge facilities as the authority sees fit, and regulate the use of a port and of port facilities”.

Clause 3.3 of the DoA, therefore, is inconsistent with the general duty imposed on GPHA not to contract out of its statutory mandate under PNDCL 160.

Second, in view of the fact that container business attracted nearly $97.24 million in 2017, it is baffling, to say the least how any well-meaning negotiator will agree to fundamentally cede the main source of revenue of GHPA to MPS at first asking.

The above, notwithstanding, by November 2015, the 2004 contract(MPS2) between GPHA and MPS had been amended giving full rights for both the construction and operation of the new terminal to MPS.

A critical look at the DoA establishing (MPS3) does not only expose the effects of the lack of a competitive tendering process but possess an existential threat to GPHA as we know it.

Let us be under no illusion, the consequences of the MPS3 contract as it stands on GPHA, the numerous private stevedoring companies and Ghanaians in general will be economically dire. Let’s critically review these facts.

If the MPS3 agreement is implemented in its current form:

1. GPHA AND GHANAIANS FOR THE MATTER WILL LOSE 72% OF THE $109 MILLION REVENUE GPHA MADE IN 2017(*EXPECTED ANNUAL REVENUE DROPS TO $30MILLION*) OVER THE LIFE OF THE CONTRACT GPHA STANDS TO LOSE IN EXCESS OF $2 BILLION.

2. AT LEAST 1400* GHANAIANS PERMANENTLY EMPLOYED BY GPHA BETWEEN TEMA AND TAKORADI WILL LOSE THEIR JOBS BY 2020. THIS FIGURE DOES NOT TAKE INTO ACCOUNT TEMPORARY/CASUAL WORKERS WHO WORK FOR GPHA OR THE EMPLOYEES OF THE MANY PRIVATE STEVEDORING COMPANIES THAT DEPEND ON GPHA FOR BUSINESS.

3. VOLUME OF CONTAINERS HANDLED BY GPHA AND OTHER LICENCED CONTAINER HANDLING COMPANIES WILL DECLINE BY AT LEAST 60%!

4. CONTAINER STEVEDORING REVENUE WILL DECLINE FROM $10.688 MILLION TO US4.21 (REPRESENTING A DECLINE OF -60.54%)

5. CONTAINER SHORE HANDLING REVENUE WILL DECLINE FROM $38.75 MILLION TO $17 MILLION (REPRESENTING A DECLINE OF 56%)

6. ROYALTIES REVENUE ON MPS OPERATIONS WILL DECLINE FROM $24.12 MILLION TO $6.57 MILLION (-73.67% DECLINE)

7. TERMINAL AREA RENT REVENUE FROM MPS TERMINAL WILL DELINE FROM $826,000 TO NIL (-100%/ZERO)

8. BERTH OCCUPANCY REVENUE FROM MPS TERMINAL WILL DECLINE FROM $1.915 MILLION TO NIL (-100% /ZERO)

9. PORT DUES REVENUE ON MPS CONTAINER OPERATIONS WIL DECLINE FROM $29 MILLION TO 2.9 MILION (REPRESENTING A DECLINE OF 90%)

10. MORE WORRYINGLY, MPS UNDER THE TERMS OF THE NEW CONTRACT IS FREE TO ADD ADDITIONAL TARIFFS, *AND MAY CHARGE FOR NEW SERVICES, * ON TOP OF THE GPHA APPROVED TARIFFS WITHOUT CONSULTING GPHA. THIS WILL LIKELY LEAD TO INCREASES IN THE PRICE OF EVERYDAY CONSUMER AND OTHER GOODS THAT GHANAIANS DEPEND ON.

As an economic and democratic example in Africa, Ghana is and has always been a great hub for foreign investment and business. Ghanaians continue to actively seek partners who identify with the great business and investment potential this country has to offer.

But this drive for investments in our bid to modernize our infrastructure, create jobs and improve the standards of living of our people should not mean we negotiate badly against the interest of the state and the people of Ghana.

In fact, in the past when such bad agreements have been exposed, some have argued that although the terms of investment might be unfavourable to Ghanaians, the need to protect our image as a friendly investment destination in Africa and the alternative of no investments should tamper our critique of such one-sided agreements.

Although the above binary is false, the later seems to have underpinned years of unfair investment practices, provided cover for some corrupt officials and perpetuated stale colonial-era narratives that have sought economic dominance and subjugation of indigenous investment initiatives.

The Danquah Institute (DI) is, therefore, calling for a better understanding of our strengths, appreciation of our resources as a nation and an open and transparent approach to investment and negotiation practices.

This will help us negotiate balanced, fair and economically beneficial agreements that improve the lives of all Ghanaians.

It is against this backdrop that all the parties to the MPS3 agreement should sit and re-examine the terms of the contract to ensure it is fair and economically beneficial to all the parties involved.

In the event that the parties involved are unable to agree new terms within 60 days, the Danquah Institute will take legal action in the public interest. Nobody should underestimate our resolve to see this contract renegotiated.