‘Government’s Failure To Pay Contractors

Date

…causing unemployment and collapsing  Ghanaian companies’

Story: Our Investigative Team

Today revisits the ongoing saga of government’s inability to pay contractors who have performed work for various departments, agencies and ministries.  Some say it is a deliberate decision to cause financial loss to a segment of indigenous companies and individuals.  They point to at least three of the Ghanaian owned financial institutions collapsed by the Bank of Ghana and cite loans given to contractors that have remained unserviced for five years as key reasons for their inability to meet new minimum capital requirements.  

Today Newspaper’s ongoing investigations have revealed the fact that the mounting debts owed to contractors are no longer being disputed by government officials.  If anything, officials from government agencies and the Ministry of Finance complain about the continuing accumulation of interest on unpaid contractual obligations.  But contractors also cite interest piling up against them with the financial institutions they took loans from.  

Our investigations show that even the apparent strategy being used to cancel contracts legitimately won due to inability to continue work does not absolve government from paying for work done plus interest.  Recently, the Minister of Roads and Highways, was quoted as saying that “…the challenge is that everybody wants to be a contractor but most of them are not resourceful and the government is taking steps to stop that from next week,”   He said this during a media encounter in Wa in August this year.  

According to media reports, the Minister insisted that, “…road contractors were only to be paid after they had finished executing the contracted project except in the case mobilization. This was to allow enough room for the government to pay contractors.   However, given the non-resourceful situation of contractors, which affects the plans of the government to the Ghanaian people, the government will not hesitate to terminate the contracts of such contractors from its books. “

Several questions arise.  In particular, how can contractors who were “resourceful” enough to get loans from financial institutions continue to get more loans if they are not paid for work done already?  What does it benefit the country to not pay contractors, accumulate interest, take the contracts away from the contractors and give them to others who go to other financial institutions for loans only for the debt accumulation wheel to continue?  Of what effect then are these threats of contract termination?

It will be recalled that the then Senior Minister, Mr. Yaw Osafo Maafo in February 2018 said that government “…is seizing the renewed opportunity to embark on delivery of bold infrastructure development initiatives which will help change Ghana’s developmental landscape.”  He continued that,

“We are however confronted with financing and other constraints; that is why a United Kingdom/Ghana Partnership for Infrastructure Development is relevant, timely and must be prioritised.”  He noted that government will not use the convenient route of simply borrowing to provide infrastructure, but rather explore and develop non-conventional but pragmatic financing arrangements.  The Senior Minister said these include Commodity Swaps, Barter, Joint Ventures with land and resources as equity, and Guarantee for Equity among others – adding that, “We want to do this in closer collaboration with the private sector, utilising various models of Public-Private Partnerships”.

The Senior Minister said that government was committed to providing support for investors to help develop commercially viable business models from the various investment opportunities which Ghana offers.  He said Ghana had a longstanding reputation of being a business-friendly destination, and as such government is committed to sustaining and enhancing this image.

Financial experts consulted by the Today Newspaper questioned this commitment when legitimate contracts continue to be terminated for “non- performance” caused by huge debts arising from government’s own inability to service the debts.  They suggested that government must find a way to pay so that it did  not continue to go outside of the country to find more expensive foreign currency denominated loans.

The admission that there are debts piling up is in the public space.  A couple of months ago, the Minister of Roads and Highways noted that the government was aware of such contractors and was  currently pulling every stop to ensure payment.

It has been reported that, “Mr Amoako made mention that there was no government without outstanding payments to contractors and that since President Akufo-Addo took over the office in 2017, outstanding payments were dating back to 2011.”  Financial  experts claim that it is better for government to pay interest accumulated from 2011 in local currency than to go after new loans from the international private sector financial markets.

Today’s investigations revealed  that in 2019, the Vice President, Dr Mahamudu Bawumia, spoke at the 43rd celebration of Kobine festival at Lawra in the Upper West Region and indicated that the government would  clear 80% of arrears owed road contractors before the end of November that year with the remaining 20% to receive payments later on.  Prior to and since the announcement, road contractors have expressed anger over constant promises by the government to have their arrears paid.

A few days ago, the Ghana Chamber of Construction and Industry claimed the government owes contractors in excess of 10 billion Ghana Cedis.  According to GHOne, Mr. Emmanuel Cherry, the chief executive officer of the chamber said, “…the industry is already in limbo due to pending bills that have accrued over the last 5 years. As of 2021, he said, majority of construction projects are pre funded by contractors using credit from financial institutions.

“The delay and failure of government to pay back contractors in due time is hurting the industry. Many of our members have accrued bad debt and subsequently gotten auctioned. We also have key projects pending, loss of jobs and many of our members have gone bankrupts.

Further, with contractors having borrowed from banks and are unable to pay back, banks have seen an increase in their non-performing loans portfolio.  While the government has tried to clear some of its pending bills, the Government chamber says more needs to be done.”

The Board Chairman of the Road Fund and Member of Parliament (MP) for Effutu , Mr. Alexander Afenyo-Markin has also gotten into the act.  In September this year, he promised that the days of contractors chasing after officials with certificates of completion to be paid are over.  He said, “…with authority” that all will be paid within six months of the completion of projects. 

Again, our investigations revealed  that road contractors across the country have had cause in the recent past to reject a directive from the government asking them to return to project sites they abandoned due to delays in the release of payments.  This on one occasion followed an announcement by the roads minister that the finance ministry had released some ¢800 million to be given to contractors whose payment was in arrears.

Another media report was seen as follows, “Deputy Minister for Roads and Highways, Stephen Pambiin Jalulah, addressed chiefs and people of the Anyaa-Sowutuom Constituency said some of the contractors had failed to show up at the project sites despite the payment of monies owed them.  But reacting to this claim, National Vice Chairman of the Association of Road Contractors Ghana, Stephen Atatsi, revealed no monies had been paid to any contractor.  He added that none of their members have been engaged along the lines of possible payment any time soon.  “¢800 million they paid to whom? They should come out with the contractors they have paid the money to. So it is never true”, he retorted.

He further explained, “We have categories in the construction business. We have the small-scale people who de-silt the gutters and cut the grass and those other small jobs. So if it is those people they have paid, let them say it and let the public know”.

Even though the Deputy Roads Minister admitted that the progress of major road projects which started earlier in 2020 had stalled due to the delay in payment of contractors, the inauguration of the road fund board, and the subsequent release of the ¢800 million by government, meant that work was to pick up again.”

The GetFund has not been left out of this arrears matter.  Earlier in the year, the Member of Parliament for Buem, Mr Kofi Adams, asked the Finance Minister Mr Ken Ofori-Atta to release funds to the Ghana Education Trust Fund (GETFund) to enable them pay contractors.  According to him, the inability of GETFund to pay the contractors has resulted in abandoned projects all over the country.

Mr Adams explained that it came out from a meeting officials of the GETFund had with Parliament that the Ministry of Finance had failed to release their funds.

He noted that despite government using GETFUnd as collateral for loans, works continue to stall on educational projects.  He told TV3 in an interview that “Unfortunately, contractors who we thought would be paid out of this seven billion [facility] that was raised through this means are still complaining of not being paid and looking at from last time till now.

“If we will continue to have a situation where these very contractors are not returning to site because they feel that they are owed for works already done and certificates so presented; it is unfortunate because the thinking was that with that huge resources available now, we will be able to complete all these projects. But that it is not happening and the funds now have to be paying every other time for these very facility that has already been taken  but we are not seeing the effect of this  facility  in the completion of projects. That is why I am particularly worried.

 “The last time GETFund came to Parliament it looks more like it was the Ministry of Finance that is not releasing the moneys to them,” he said.

Today Newspaper readers will recall that aggrieved Contractors on Wednesday, July 10, 2019, stormed the premises of the Ministry of Roads and Highways and Transport, and descended heavily on the government for not paying them for contract works executed since 2016.

More than 2000 members clad in red bands said they would take legal action if the government continues to delay the payment of their monies.

According to the Contractors, its members were struggling to defray loans they took from banks to execute the projects as interest on such loans increase.  The association said the government owed its members GH¢1.9 billion, which they said was  having an impact on their businesses.

The words of the Vice Chairman of the Contractors Association of Ghana Stephen Kwaku Attatsi sum up the worrisome nature of the situation.  He has said that the inability of government to settle arrears to Ghanaian contractors is bad faith.  “ Before the elections government debt to us accrued to contractors was GHC 2.9B. We are expecting it to go up. Sometime ago it was announced that they paid to the contractors massively. In one category zero to GHC 500.00 was paid, GHC 500.00  to GHC 1M or above was paid but since then it was not full payment to contractors. Only 40 percent owed the contractors was paid.  For sometime now, mobilization has not been made and so the contractors’ pre -financed and go to whatever financial house you go and they give you 60%. This is difficult for contractors so they are unable to finish the road if the money delays.  Right now when you go to any financial house and you mention construction they don’t want to hear your name because you won’t pay. Those days the banks used to chase after us to come for loans are gone.  Now they don’t come.”

The loss of the GN Bank license alone has led to the loss of over 5,000 direct jobs to including university graduates who are now struggling to make ends meet and find it difficult to take care of their families.  It is a fact, not disputed that government agencies have not paid for work done by various contractors pre-financed by Groupe Nduom companies.

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Our investigations continue as we are waiting for 2021 to end for us to get the situation as at the end of the year from the contractors and their associations.  We are also documenting the fall outs of non payment of arrears including interest accumulation, collapse of companies, loss of jobs and determination of who are causing financial loss to the state, willfully or not willfully.

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