BoG clears the air on sale of Merchant Bank

The Bank of Ghana (BoG) has descended heavily into the raging controversy over the takeover of Merchant Bank Ghana Limited by Fortiz Private Equity Fund, describing it as noise from people who do not understand the rudiments of the deal.

"Let me say that at the BoG, we are very professional and we take our job seriously. There is a lot of noise out there; people are saying all sorts of things that we didn't follow due diligence, yet I'm not sure whether those people really know the processes of following due diligence," the Governor of the BoG, Dr Henry Kofi Wampah, said at a press conference to announce the bank’s policy rate in Accra Wednesda.

Dr Wampah said the BoG had no say in who an investor decided to sell his shares to or who an investor wanted to allow to invest in a bank, adding that the bank “has no say in that; these decisions are taken by investors”.

“After they decide to select a particular investor, they send an application to us. Then we do our due diligence and decide whether to approve or not," he said, pointing out that the decision by the central bank to approve a deal of that nature was merely regulatory.

"It doesn't depend on whether the transaction is profitable or not. That is not our role," he said.

Unnecessary controversy

The BoG Governor's comments on the deal come on the back of a raging debate on the profitability of Fortiz's takeover of some 90 per cent of Merchant Bank, one of the indigenous financial institutions in the country.

Fortiz’s takeover follows a failed bid by the South African bank, the First Rand, to buy the shares of the Social Security and National Insurance Trust (SSNIT) and the SIC Financial Services Limited out of Merchant Bank.

That offer was reportedly higher than the GH¢90 million that Fortiz paid in cash for the 90 per cent stake in the bank.

Fortiz is expected to invest an additional GH¢50 million in the bank by next year, according to the agreement reached with SSNIT and the BoG.

Some civil society organisations and the New Patriotic Party (NPP), however, see this as woefully inadequate and have called for an investigation into how the BoG, which regulates the local financial sector, was able to approve what they refer to as a bad deal.

The Centre for Freedom and Accuracy (CFA), which is headed by a former presidential spokesperson, Mr Andrew Awuni, has even filed a writ at the High Court in Accra, praying the court to abrogate the deal.

The BoG Governor saw that development as very unfortunate, especially given that it was directed at an institution as reputable as the country’s central bank.

"I heard that some people are saying that Merchant Bank didn't approve of the deal. As far as I know, the purchase agreement was signed by both the Chairman of Merchant Bank and the Managing Director, plus the principals of SSNIT and Fortiz. We looked at all these things before we approved the deal," Dr Wampah said.

He also wondered why people were questioning why the bank had issued an 'approval pending due diligence' in the situation, saying that those things were done as and when the need arose.

"So if someone is saying that this is the first time that we are doing that (issuing an approval pending due diligence), then the person doesn't know what he or she is saying. We do it all the time," he added.

Dr Wampah also called on those questioning the bank's role in the deal to approach it for information and clarification, instead of engaging in debates.

Capitalisation of Fortiz

On the issue of the financial strength of Fortiz, vis-a-vis its takeover of Merchant Bank, the governor said the firm formed a special purpose vehicle that was used to make the takeover.

"It is the people behind it, those who own the fund, who are providing that investment and not the fund. The fund is just a special purpose vehicle," Dr Wampah said.

Ownership of Fortiz

An earlier release from Fortiz Fund announcing its takeover of Merchant Bank revealed that the equity firm was owned by First BanC Financial Services, which is the general partner, and other individuals.

The release mentioned Dr Kingsley Fletcher, also known as Nene Drolor Bosso Adamtey I, who is the Chief Executive Officer of Fletcher International Services Inc, USA, and Suapolor of the Se Traditional Area; Mr Emmanuel Botchwey, the Founder and majority shareholder of Regimanuel Estate Limited, and Mrs Aurore Selormey, the Chairperson of the Fortiz Fund Board, as the three top owners.