INFLATED AND MISPLACED ZIPLINE DRONE CONTRACT

Subsequent to the Minority in Parliament’s discovery of evidence of inflation in the contract between the Government of Ghana and Zipline for the operation of drone delivery services in the country, I have noted a number of mispleading claims by persons who appear ill-informed about the subject. It is widely known that this inflated contract is the baby and handiwork of the Vice President, Dr. Mahamadu Bawumia.

 

Yet he has failed to own up and explain the many inflated cost items inherent in the contract.

Instead, he appears to be seeking refuge behind Civil and Public servants who have demonstrated little knowledge about the project through their public statements. The pronouncements of these officials have created more confusion than anything.

 

A case in point is the public submission by the Director-General of the Ghana Health Service, Dr Nsiah Asare. Dr Asare has been unable to answer critical questions relating to this transaction leaving many issues outstanding. I wish to draw attention to the fact that:

 

  1. Up to date, Dr. Nsiah Asare has not been able to tell Ghanaians what the cost of a drone per distribution center is. Neither has he disputed the $1m cost per distribution Centre figure I put out.

 

  1. Import duty is 20% on CIF, hence the basis of my cost computation $100,0000/0.2 =$500,0000/4 = $125,0000’

 

  1. Nsiah Asare refused to comment on the discount of $11,000 when he made his

$88,000 argument. Even if the $88000 cost is true for 100% operating capacity, why is it that it is not pro-rated so that if Zipline operates at only 5% capacity which is the most likely then Ghana pays only 5% x $88000 =$4,400 instead of the $10,000 in the agreement. The $10,000 for only 5% operating capacity implies that Ghana is being charged the equivalent of $200000 ($10000/0.05) per month per distribution center. Despite amending page three of the agreement to make the service charge $ 88,000 per month per distribution centre, it should have been pro-rated.

 

  1. Nsiah Asare also stated in his emotional argument that the money is not coming from the state, but rather from GNPC and some Petroleum and Mining companies. Let me make it very clear to all that GNPC is wholly owned by the state hence the $1m promised per year is public funds. Also, Mining and Petroleum companies pay tax at 35% hence every $100,000 donated by such companies in the form of CSR implies that the state is contributing $35000 (tax shield) since CSR is tax deductible.

 

  1. I sincerely believe that if Ghana buys the drones and the ancillary equipment’s from Zipline and Zipline agrees to train staff of the GHS to operate it for a period of just two months, the state will not spend more than $6m on all the four distribution centers over the four year period.

 

  1. The 20% penalty for delayed payment in the agreement implies that Zipline’s cost of capital is 20% which is quite outrageous and unimaginable because the last Eurobond that Ghana issued was at only 7.62% (10yr bond). This means that Ghana’s cost of capital on a dollar project should never exceed 7.62% which strengthens the argument for outright purchase.

 

  1. Dr. Nsiah Asare says the Suhum sight is ready hence GNPC should just give us the first $1m so that Ghana can buy the equipment from Zipline to kick-start the project.

 

  1. Per the 72 rule in finance, Zipline will double their investment in 3.6yrs (72/20) if Dr. Nsiah Asare’s $12m cost for the project is true then this confirms my assertion that Ghana need not spend more than $6m for the entire project if Ghana buys the equipment’s from Zipline.

 

It quite clear from the above, that this Zipline deal is an extremely bad one for the country and it unfortunate that the Vice President would champion it with the zeal that he has deployed.

 

I believe that posterity will soon vindicate this position.

Cassiel Ato Forson, Minority Spokesperson on Finance

 

By: Cassiel Ato Forson

MP, AEE Constituency and Ranking Member, Finance Committee

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