The judicial win by the Bank of Ghana over Sibton Switch Limited at the London International Court of Arbitration (LCIA) last week is correctly being seen as a victory not just for the State and the Ghanaian taxpayer in general, but also as a win for commitment to value for money, justice and ethics in economic management. The judgment by a three person tribunal has averted a dubious attempt by the private company, in league with certain officials of the immediate past Mahama administration and a senior official of the central bank itself (who has subsequently been sacked following an internal investigation which confirmed his culpability) to get the BoG to pay it some US$478 million in judgment debt awards for purported breach of contract.
Instead though the LCIA ordered Sibton Switch to make a substantial payment to the BoG in respect of its legal fees and costs of arbitration.
The judgment derives from claims brought by Sibton Switch Systems Limited in relation to the termination by the Bank of Ghana of a contract relating to the Master Agreement for the Ghana Retail Payment Systems Infrastructure in 2017 which was designed to facilitate interoperability of mobile money platforms in Ghana.
The contract, agreed in 2016, called for Sibton Switch to establish an interoperable platform which would enable customers to transfer monies between electronic wallets on any of the three mobile money platforms in use in Ghana – operated by MTN, Vodafone and Airtel Tigo respectively – as its first phase; and then connect customers electronic wallets to their respective bank accounts and E-Zwich cards as the second phase.
However Ghanaians were scandalized by the contract sum of some GHc4.6 billion, and this encouraged the new executive management of the central bank, appointed in early 2017 to review the contract.
Following the public uproar and consequent internal investigations by the BoG under its newly appointed management at the time, the contract was abrogated and handed over to Ghana Interbank Payments and Settlement Systems (GhIPSS) at a much lower cost.
In reviewing the contract awarded to Sibton Switch, the BoG reached the conclusion that the company “had neither acquired the license (as a fintech) nor fulfilled the conditions precedent for the effectiveness of the rights and obligations of the parties.”
The Agreement, which dealt with the grant of exclusive rights to Sibton Switch to build, operate and own the Ghana Retail Payment Systems Infrastructure was therefore terminated on the basis that it never came into effect.
The central bank also discovered that the tender price with which Sibton won the contract was 33 times more expensive than the next most expensive bid.
The fact that GhIPSS – the wholly owned subsidiary of the BoG dedicated to designing, installing and managing electronic payments systems – was subsequently able to execute the contract at a fraction of the cost demanded by Sibton, provides incontrovertible evidence that the original contract was deliberately over-inflated by a cabal of officials in positions of authority, for personal gain.
The first phase of the mobile money interoperability platform was subsequently launched in May 2019. The second phase linking all three networks to the bank accounts of their respective customers was similarly concluded successfully a couple of months later.
Last week’s judgment brings closure to a particularly ugly dispute, considering the clear malfeasance engaged in by some public officials.
The contract awarded to Sibton Switch was one-sided in favour of Sibton Switch and was severely detrimental to the interests of Bank of Ghana. For example, the Public Procurement Authority approval for the project provided that the Bank of Ghana’s maximum liability was to be GH¢300,000. Contrary to this approval, the corruptly-procured contract with Sibton Switch provided that the Bank of Ghana had a huge potential liability of US$478 million (GH¢2.6 billion). All this was added to the sheer exorbitance of the contract sum itself.
To be sure, the LCIA never appeared swayed by Sibton’s clearly dubious claims; during the arbitration, in July 2019, long before it arrived at its final judgment, the Arbitral Panel made an interim award in favour of the BoG requiring Sibton Switch to make an interim award payment for the security of any costs that it might award against the company. Instructively the company failed to comply with the orders of the Tribunal concerning that interim award it had given.
According to a Bank of Ghana statement, its Governor, Dr. Ernest Addison, has said he is pleased with the favourable outcome for the Bank in these proceedings, and for the billions of Ghana Cedis saved on the mobile money interoperability project by using GhIPSS instead of Sibton Switch.
Indeed considering the corruption underlying the award of the contract to Sibton Switch it is still uncertain whether the company could have successfully executed the contract, even at the absurdly high contract sum corruptly granted.
Mobile Money Interoperability (MMI) is the service which allows direct and seamless transfer of funds from one mobile money wallet to another mobile money wallet across networks. It allows transfer of funds from wallet into bank account and e-zwich cards; and also from wallet and e-zwich cards to bank account.
The Ghana Chamber of Telecommunications together with the Government of Ghana, the BoG, GhIPSS and commercial banks on 10th May 2018 launched the mobile money interoperability system at the Marriot hotel in Accra.
It creates convenience for mobile money users to transact business and drives financial inclusion, lowers cost of transaction, increases service reach and reduces reliance on cash for payments. It also provides a financial transaction engine that is versatile, efficient and robust and enhances patronage by both banked and unbanked segment of the population.
Latest data from the Ghana Interbank Payment & Settlement Systems (GhIPSS), indicates that Mobile Money Interoperability (MMI), processed a total of 43.9 million transactions in 2020, representing a 367% increase from the 9 million transactions processed in 2019.
According to the report, the MMI performance was driven by three use cases namely: transfers between wallets across Mobile Money Operators (MMOs); transfers from mobile wallets to bank accounts and transfers from mobile wallets to e-zwich card wallets.
Explains GhIPSS CEO, Archie Hesse: “The upsurge in the use of these real-time services was largely influenced by COVID-19 related factors such as the three weeks lockdown which restricted the physical movements of people, public awareness through extensive education, discouraging the handling of physical cash and encouraging the use of electronic alternatives and the incentivization from the financial services industry with fee waivers on their services,”
He further adds that, “in 2019 in terms of volume we had 9.19million transactions and in 2020 42.89 million that’s a significant jump of 367%. The question is what would we have done in the absence of mobile money interoperability? Again if you look at the value, it moved from the millions into the billions.”
Mobile Money Interoperability is one of the biggest financial sector breakthroughs that has increased mobile money transactions in Ghana.
Since its introduction, many organisations have set their systems to accept mobile money payments, since their customers can pay them regardless of the network they subscribe to.
Mobile Money Interoperability and the GhIPSS Instant Pay (GIP) are two electronic payment channels that experts say could significantly deepen financial inclusion in Ghana. Both products continue to record very high growth rates.