Former Chief Executive Officer (CEO) of the Ghana National Petroleum Corporation (GNPC), Alex Mould, has literally shut his eyes to the massive rot at his former place of work, preferring to talk about events at the Bulk Oil Storage and Transportation Company Limited (BOST).
Many staff of the GNPC, have been worried about the deafening silence of their former boss, Mr Mould on the activities of the Corporation, he was entrusted with the company during the John Mahama administration and brought enormous benefit to the state, however, the gains have been eroded under the management of Kofi Koduah Sarpong and the board chairman, Freddie Blay with the institution recording huge losses.
Few days ago, Mr Mould, took on the Managing Director of BOST, rubbishing his defense of the company’s GH¢400million loss as captured in a report by the State Interest and Governance Authority (SIGA) as “gibberish” and “voodoo accounting” but conveniently ignoring a whopping GH¢1.618 billion loss at GNPC in 2020 alone out of a profit of GH¢204 million in 2019.
The embattled BOST MD, Edwin Provencal, sought to dismiss a report by SIGA that BOST posted a net loss of GH¢291.02 million in 2020, representing a 186.97% increase on the net loss of GH¢ 101.41 million posted in 2019, making a total of Gh¢400million in losses.
But in a statement, the embattled BOST CEO, rubbished the SIGA 2020 Report.
He said “the report of the ¢400 million losses made by BOST is not accurate.”
The BOST MD, had blamed “unpaid tax obligations over the five-year period to date, the reduction in the value investment in GOIL and forex difference on dollar denominated loans for turning his “profit before tax” into a net loss for the period.
But in a sharp rebuttal, Mr Mould a former Executive Director of Standard Chartered Bank for several years, said BOST is totally misrepresenting the facts, describing it as “gibberish and voodoo accounting”.
“The rebuttal on GHC400million loss is gibberish and pure cockamamie. It is voodoo accounting and total misrepresentation of the facts.” He wrote.
“I don’t understand this analysis, especially, on the unpaid taxes obligation. Is that not illegal?” Alex Mould said.
“Unless he is talking about timing differences between financial reporting and tax reporting, that is, deferred tax liabilities; which I do not think he was,” adding
“Investment mark-to-market losses will reflect in impairments. How will you be taxed, that is, asked to make a tax payment for an unrealized gain in any asset revaluation?” He asked.
The Electricity Company of Ghana (ECG), the Ghana Cocoa Board (COCOBOD) and GNPC, have been named by the SIGA report as the three SOEs with the largest liabilities, totaling some GHC 28,583.63 million.
The three institutions placed first, second and third respectively on the league of the SOEs with the largest Liabilities (FY2020), as captured in the 2020 State Ownership Report published by the Ministry of Finance.
These three (3) entities collectively accounted for 40.86 percent of total Liabilities in the SOE sector at the end of 2020.
The three institutions are of strategic importance to the country’s ability to sustain power supply to domestic and industrial users, the ability to sustain and improve the livelihood of over 850,000 cocoa farmer households in Ghana, and the sustenance of the government’s free high school policy using oil funds.
The ECG, which ranks first as the SOE with the largest liability of GHC13, 796.38 million. This represents an increase of 25.88 percent (GH¢4,578.84 million) on the corresponding figure for 2019 of GH¢17,689.93 million.
The electricity distributor’s total liability, has increased by an average annual rate of 26.02 percent between 2016 and 2020.
The company’s current liabilities, driven largely by short-term borrowing and increase in trade and other payables, constitute 73.79 percent of ECG’s total liabilities for 2020.
Short-term borrowings at the end of 2020, include credit facility and loans secured from international and local financial institutions such as the International Development Association (IDA), KFW, AfDB, MoF Special Loan, GCB Bank Limited, Fidelity Bank, UMB and First Atlantic Bank Ghana Limited.
“It is clear the rising current liabilities is linked to the declining capacity of ECG to service its financial obligations as and when they fall due. This is evidenced by the accumulation of arrears by ECG during the period,” the 2020 State Ownership Report noted.
ECG’s financial position puts a strain on the finances of power producers who sell directly to ECG and the main power transmission company-GRIDCO.
On the part of COCOBOD, the report notes that the cocoa industry regulator is not very liquid.
COCOBOD’s liquidity ratio of 0.82 and 0.75 in 2020 and 2019 respectively, is an indication that the company, may have difficulty in servicing its short-term obligations as they fall due.
“Free cash-flow: Free cash flow position of COCOBOD was negative GH¢115.14 million in FY2020 compared to GH¢496.52 million in FY2020,” the report noted.
The GNPC’s total liabilities has increased from GHC 1,775.81 million in 2016, to GHC 11,350.96 million in 2020.
The report notes that GNPC recorded the biggest Net Loss of GH¢1,618.82 Billion among energy SOEs in the year under review.
Below is the response of BOST to SIGA report entitled;
RE: BOST Records GHC400 Million in Losses-SIGA Report April 10, 2022, Accra:
The management of BOST, has taken notice of a series of publications making the rounds on several online portals suggesting that contrary to an announcement by the MD, Edwin Provencal, that BOST has made an operating profit before tax of GHC30million, a report from SIGA indicates BOST has incurred losses to the tune of GHC400 Million.
We, by this publication, seek to correct the erroneous impressions created by the publication and wish to set the record straight as follows: 1. Underlying Business of your company, BOST is PROFITABLE – The report of the GHC400 million losses made by BOST is not accurate. To measure the profitability and operational efficiency of a Business one must determine whether the underlying operations (core business) of the company are profitable.
The Managing Director in his submission at SIGA was emphatic that the company achieved a profit before tax of GHS9,844,673 versus an estimated GHC30million in year 2020 as against a loss of GHS158,478,676 in 2019. The positive net profit before tax attained in 2020 implies a massive turnaround of the operational fortunes of the company.
This was the basis of the MDs assertion at the SIGA engagement buttressed by publications from media houses like the Daily Graphic and GNA1. He was however quick to add that unpaid tax obligations over the five-year period to date, the reduction in the value investment in GOIL and forex difference on dollar denominated loans MAY turn the profit before tax into a net loss for the period.
This enhanced performance was driven by extensive operational efficiency initiatives including, but not limited to massive repair works of our storage tanks, pipelines and marine assets, replacement of outmoded parts across the facilities of the company in the last two years supported by improved marketing and customer service. In the past two years, our income-earning assets have improved from 18% to 91%.
Net Loss after Tax – There were several events outside management’s control that impacted the overall business negatively thus posting a loss for the year 2020 in the statement of comprehensive income.
Firstly, BOST as part of its drive towards operational excellence undertook a revaluation of its assets in the 2020 financial year. This had become necessary as most of the assets still in operation had been written down to near-zero levels whilst still useful in the operations of the company. As required by the International Financial Reporting Standards, IFRS, when assets are revalued, the increase in their values is taxed resulting in larger tax obligations.
The revaluation which was a deliberate decision to enhance the reporting of the company led to a deferred tax obligation of GHC292,935,973 compared to the net loss of GHC291,017,758, a difference of GHC1,918,215 (Appendix 1). The increase in the value of the revalued assets also resulted in increased depreciation charges which further reduced the bottom-line or the profit for the year.
Secondly, BOST owns a 20% stake in GOIL. In any financial year, any loss in the market value of shares of GOIL is computed and that reduces the income of BOST to arrive at its net profit or loss for the year. In the year 2019 to 2020, our investment in GOIL saw a reduction of GHS15,674,525 its market value of.
Respectfully, this event is external to BOST operations and therefore to gauge the performance of BOST management and staff by this loss in investment will not be fair. This is the reason why we should rely on the profit before tax rather than all these uncontrollable factors which have been factored in to arrive at the net profit or loss for the year.
The recorded net losses for the years 2019 and 2020 per the income statement attached were therefore GHS101, 411,781 and GHS291, 017,758. 3. Your Company, BOST has been turned around – Any comprehensive and objective analysis of the audited statements for the past five years (Appendix 3 – 2016-2020 profit before tax trend) will show a company on track to higher performance through enhanced efficiency and we look forward to capitalizing on these modest improvements to make BOST an example of a World-Class State-Owned Enterprise.
It remains uncontested that the debt to suppliers and related parties of $623 million has been paid down to $39 million, the debts owed the local banks of about GHS273 million has been fully cleared and our pipelines which were procured in 2011 and left to the mercy of the weather in the United States under the AT & V contract have arrived safely on our shores and we expect to complete the installation of the additional 12 inch pipeline between the Accra Plains and Akosombo depots.
The cash flow position of the company is enhanced and the repair of the company’s infrastructure continues despite the reduction in our BOST Margin.
In conclusion, we reiterate the fact that your company BOST is on its way to becoming a PROFITABLE STATE-OWNED ENTERPRISE and nothing will derail the resolve of management and staff to achieve this.
