In the 2019 budget statement, the Finance Minister had stated monies owed road and building contractors had partly been paid with a pledge to settle the remainder in 2019.
At a 2019 post-budget session put together by PricewaterhouseCoopers (PwC), Mr. Ken Ofori-Atta mentioned that GHc2 billion had been set aside to settle outstanding arrears owed the contractors who had done government work.
He said the contractors would be paid GHc1 billion before the end of 2018 while an additional GHc900 million would be released in the course of next year.
The Akufo-Addo government reckoned some contractors had inflated their bill, so an international accounting and auditing firm was contracted to audit the books and it was after this comprehensive audit had been undertaken that the Auditor-General began releasing the funds.
As at November 2018, Mr. Ofori-Atta said the outstanding debt owed the contractors was in the region of about GHc3.4 billion but assured all arrears will be paid.
The delay in payments to the contractors also put pressure on commercial banks as the contractors sourced their funds from them. It led to non-performing loans (NPLs) on the books of commercial banks, hovering in the region of GHc8.74 billion.
With the contractors frustrated with the long delay and the government seeking a way out, Fidelity Bank Ghana Limited stepped into the fray where an agreement was reached with the Government of Ghana, represented by the Ministry of Finance for the purchase of Interim Payment Certificates (IPCs) due the contractors.
Fidelity Bank per the understanding was to buy the arrears of the contractors at a discounted rate meaning contractors could discount the debt owed them by the Government so Fidelity Bank Ghana Limited would pay the discounted value after validation.
A letter from the Ministry of Roads and Highways dated December 12, 2018 and addressed to contractors in part read, “the Government of Ghana through its Ministry of Finance is implementing a financing strategy that will facilitate the payment of a good portion of claims on the Government from contractors for various construction projects executed across the country validated by the Auditor General via leveraging the balance sheet of interested financial institutions. The Transaction shall involve the purchase of validated claims on the Government by Fidelity Bank Ghana Limited at a discount price.”
The letter in part further read, “the discount price at which the contractor arrears shall be purchased shall be based on the results of an auction to be organized by Fidelity Bank Ghana Limited through which each contractor submits voluntary bids of the level of discount they are willing to offer to sell and or assign their IPCs to Fidelity Bank Ghana Limited.”
In furtherance to the plan, Fidelity Bank Ghana Limited met with the contractors whose payments are in arrears, at Alisa Hotel in Accra on Friday, December 14, 2018, to explain their proposed financing solution and various stages involved.
But at this meeting things reportedly turned chaotic as the contractors contend that discounting the value of the certificates for payment, already over two years old and thus having already lost considerable value to inflation, was a bad move. The contractors, Goldstreet Business understands were being invited to discount their payments due them for work already done over two years ago by some 10 to 14 percent.
Meanwhile the banks from which the contractors sourced funds to execute the work, continue to calculate their interest on the loans monthly.
Mr. Daniel Attoh Agroh, Chairman of Association of Road Contractors (ASROC), says the banks have been harassing them to pay back their loans. He adds the Ghana Revenue Authority and SSNIT have been threatening legal action and closing their offices.
To compound the contractors’ misery, seven percent withholding tax is deducted upfront from the fees of the contractors as soon as the first installment of the contract sum is advanced for work to begin.
Mr. Agroh claims that some of his contractor colleagues have died from the stress the situation has put them through, with one collapsing when his house was about to be auctioned by a bank he owned.
The contractor chief also claims that while the finance minister, Ken Ofori-Atta says GHc1 billion has been released to settle some of the debts, the contractors are yet to see the money yet suppliers and other people they are indebted t have been showing up at their homes demanding payment.
Agroh further says even if they agree to forgo 14 percent of their monies they are yet to know when the discounted arrears payment will get to them adding that the banks are no longer giving them loans meaning they would have to find alternative business to do.
Some of the contractors and their employees have thus become jobless through no fault of theirs with times getting tough even for their dependents. One big question is would foreign contractors suffer a similar fate of delayed payment from the state for work done or is it a case of not applying urgency when it comes to the Ghanaian contractor.
By Michael Eli Dokosi