It has emerged that, the government through the Controller and Accountant General Department (CAGD) owes the Social Security and National Insurance Trust (SSNIT) to the tune of GH¢4.3 billion, in respect of contributions receivable from employees.
The Auditor General in its latest report on Public Boards, Corporations and other Statutory Institutions ending the year December 2021, said it noticed that as of December 31, 2020, arrears of contributions of government employees of GH¢1.1 billion, have not been paid.
A 3percent penalty imposed by SSNIT on delayed payments by the Controller over the years, has also accumulated to the tune of GH¢3.2 billion bringing the total indebtedness to GH¢4.3 billion cedis.
The delay, according to the Auditor General, erodes the time value of money, reduces the Trust’s ability to pay pensions and thereby poses threats to the retirement income security of workers.
The Audit Service recommended that SSNIT management liaise with Controller and Accountant General’s Department and the Finance Ministry on the payment plan
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In response, the management of SSNIT, indicated that it already has a payment plan with the Ministry of Finance to ensure that the outstanding debt is paid.
The report further said that as part of efforts to defray the debt, two bonds totalling GH¢1.00 billion were received from the government as part payment for the indebtedness.
“We noted that public sector workers’ contributions to SSNIT amounting to GH¢4.33 billion were yet to be settled by the Government. We recommended that Management should liaise with CAGD and Ministry of Finance on the payment plan for defraying the outstanding debt. Management explained that SSNIT already has a payment plan with the Ministry of Finance to ensure that the outstanding debt is paid. Government has so far made some efforts to settle the indebtedness. In 2020, two (2) Bonds totaling GH¢1.00 billion were received as part payment of the indebtedness”, the report said.
It said it had also “noted that, ten (10) out of forty- five (45) unlisted equity companies SSNIT invested in, have not been paying dividend to the Trust for the past 10 years. The total investment value of the ten companies stood at GH¢150,307,700.00. We recommended that Management should assess the operations of these companies to ascertain the reasons behind the poor performance and take strategic decisions that would safeguard the interest of the Trust. According to Management and from our reviews these investments were all legacy ones. Management however, provided the following explanations and actions that they are currently pursuing to normalise the situation.
On Golden Beach Hotel Limited, it said that “the company continues to record losses hence their inability to declare and pay dividends. Recent weak performance has been due to the impact of the COVID-19 pandemic. The Trust is at an advanced stage in the process of seeking a strategic investor, and a transaction adviser has been working on the selection process”.
On CDH, “SSNIT has a 1.3% equity stake in CDH. The company is not doing well as two key subsidiaries i.e., Ivory Finance and CDH Asset Management have been liquidated and licenses withdrawn by their respective regulators during the financial sector clean up. SSNIT stake has been for sale since 2014 but there has been no offer for the past five years.
On Bayport Financial Services limited, the report said that “Company has not paid dividends since the merger between CFC Savings and Loans and Bayport Financial Services in 2016, mainly because of the integration of the operations of the two companies. Integration has been completed and staff downsized. Currently, the company has a positive Income Surplus so looking forward to paying dividends when it records profit. Monitoring the company’s current progress.
Another company by name Trust Logistics Limited, noted that the company is operating in a “very competitive logistics industry exacerbated by an aging fleet of trucks has meant that the company continues to make losses. As a result, it has not been able to pay dividends”.
“Board and management are implementing a new strategy to diversify revenue sources and improve performance. As part of the strategy, it is leveraging its landed assets to improve its performance through agreements that will utilise its land more effectively. The company has now physically secured its land and is in the process of perfecting the title to the land to facilitate the new strategy”.
“SSNIT has also worked to complete a long-standing asset split between the company and ISTC. It is therefore able to either monetise these assets if needed and to leverage others to improve its finances. Additionally, Trust Logistics has struck a deal with Goil and Marado Automated Safety and Vehicle Inspection Company (MASVIC) to generate further income from its landed assets.
In the case of Intercity STC Coaches Limited, “the company continues to record losses hence their inability to declare and pay dividends. The current border closure due to the COVID-19 pandemic, has affected travel to Togo and Cote d’Ivoire, which forms a significant source of revenue for the company. The acquisition of buses through an ADB Bank loan and from the Government is complimenting management’s new strategy to turn the business around. Monitoring progress of the company to ensure it turns profitable to pay dividends”.
African World Airlines was also captured in the report. It said “the Company started operating with leased aircraft in the year 2013/2014, which was expensive when compared to market rates. It has now agreed a new payment arrangement with Hainin Airlines for the existing aircraft, which is more beneficial to AWA. There has also been a significant drive to try and reduce operating costs of the company. The company is expected to be able to pay dividends by the year 2024. Progress is being monitored”.
“F-Line Ltd, Joint Venture company was unable to deliver 84 flats and SSNIT had also not triggered the penalty clause contained in the sale and purchase agreement. We recommended that Management of SSNIT should institute rigorous cost reviews in similar transactions and take steps to reduce its exposure in the F-Line transactions and ensure that value is obtained for every expenditure in the Joint Venture. Management provided the following comments on the above observation, that there are 12 blocks in total including external works. Per the company’s project plan and budget at the time of restarting the project in 2020, the funds received from the sale of the 84 flats to SSNIT was to complete the first 6 blocks of flats and not all the 12 blocks. The entire project (including blocks 9, 10 and 11) as at the time of the audit was over 80% completed, with blocks 1 to 6 substantially completed for handing over by the contractor to the company”.
“Management of SSNIT are not able to recover repayment of loan facilities totaling GH¢858,380,662.10 from seven (7) Companies. We recommended that Management should review the loan portfolios with the respective companies and put in place measures to recover them. We also recommended that Management should take possession of the underlying assets of the defaulting companies to defray parts of the loans. We further recommended that Management should seek redress at the law court where appropriate to recover the loans. Management explained that though these loans were all legacy facilities they have currently taken various measures in pursuing their recoveries that includes the following:
“RSS Developers Ltd. (Loans1, 2, 3). 251. Loan 1– Ghana cedi equivalent of US$50.0 million was disbursed in tranches to the company in 2011 (April, June and December).
“Loan 2 – Ghana cedi equivalent of US$115.0 million was disbursed to the company in tranches as follows: § 2013 (January, February, April, September and October). § 2014 (March and April). § 2015 (August and September).
“Loan 3 (Bridge) – Amount Approved US$17.0 million. The Trust disbursed Ghana cedi equivalent of US$12.75 million in two tranches to the company in November 2014 and February 2015. The company was to repay the loan with proceeds from sale of its property developments. The development has however faced a myriad of challenges including a slowdown in the real estate market, overpriced units of its development, and inability of the contractor, being a partner in the company, to complete the development, which in our estimation, arises from the contractor’s own financial challenges.
“SSNIT has swapped part of its debt with the completed housing units of the company to lower its financial exposure. SSNIT Management has put in place a new Investment Policy and Guidelines document to guide the Trust on such transactions in future that includes that, SSNIT shall not enter into any joint venture agreement where a partner in the JV will be the contractor for the project the JV is to undertake. SSNIT is preparing to aggressively market the sale of the units that have been taken over.
Aluworks Limited is noted “defaulted on its contractual obligations to the Trust due to financial and operational challenges arising from what they termed as unfair competition from abroad.
“SSNIT bought land from Aluworks to enable the company get funds to pay its debt owed to VALCO and get funds for working capital. The proceeds were used for the purpose and as a result the company currently has a credit balance with VALCO. This has freed up working capital making it easier for the company to operate. Discussions for a strategic investor is still ongoing.
“Aluworks Ltd., being a public listed company, is preparing to hold an Annual General Meeting (AGM) tentatively set for October 2021 where it will table the SSNIT proposal for a strategic investor for shareholders’ discussion and direction. A draft resolution to be considered at the AGM has been received from the company’s Management. Injections by a strategic investor will be used to retire a significant portion of the SSNIT debt.
In the case of Switchback Developers Limited, the auditors noted that “the construction of Phase I of the project experienced delays due to a lack of adequate construction finance. Sale proceeds received, which were to be used to pay for the loan, have been used for the construction. Thus, the company’s inability to pay back the loan when it fell due.
“Phase I of the project is about 95% complete. The Trust has injected funding by acquiring 6.18 acres of the land and responded to a rights issue to purchase flats at a significant discount. Sales are ongoing and is expected that the loans will be repaid from the proceeds. In addition, Shareholders are also considering selling additional parcels of land. It is expected that the sales of the land and apartments will exceed the value of the loans”.
“The investment reports on Unlisted Companies 2021 showed that the Trust has over US$206 million of its investible funds locked up in 4 joint ventures. All the four projects were estimated to cost over US$240 million. We recommended that the Trust takes steps to reduce its exposure on these projects.
“Management again indicated that all the four Joint Ventures were legacy investments, some dating back to 2008. However, in the case of West Hills Ridge Company Ltd, the current SSNIT Management/Board conducted a value for money audit on the company. The audit led to the company saving US$30 million on the construction cost.
“SSNIT further stopped the continuation of the Phase 2 except for six blocks that construction was advanced and the Sports Centre, which is a very necessary complimentary facility. The project is steadily going on with sales ongoing for the completed units.
“Management recorded a surplus of GH¢1.1billion in 2020 financial year as compared with a deficit of GH¢472million posted in 2019. This represents a 314.4% increase in the Trust’s financial performance over the period”.
