Agyapa transaction: financially innovative


The Agyapa transaction is financially innovative, first of its kind in the sub region and has great potential of reducing the over reliance on external and domestic borrowing of the country, albeit some legal and financial evaluation concerns of which the President has taken cognisance.

Subsequent to the report of corruption risk assessment on the Agyapa Royalties Transaction and general concerns by some Civil Society Organisations (CSOs), President Nana Addo Dankwa Akufo-Addo directed the Ministry of Finance to take a number of steps regarding such relevant concerns especially the valuation and the tenure of leases and to resubmit the revised transaction to parliament for reconsideration.

The Ministry of Finance in a letter dated November 3, 2020 accepted in good faith the directives and, assured the general public of incorporating the necessary as directed by the President Akufo Addo.

As you may recall, the Minerals Income Investment Fund (MIIF) incorporated Agyapa Royalties Limited in November, 2019, a vehicle that will receive portions of the Fund’s gold royalties’ income from specified mining leases.

It is the intention of MIIF to IPO Agyapa in order to raise a diversified source of long-term capital without a corresponding increase in the government’s total debt. Agyapa is designed to operate as a pure gold royalties’ company. A royalty company specialises in purchasing consistent revenue streams derived from the payment of royalties from producing mines and secures revenue streams from future production of development projects.

A transaction of this nature, when structured properly could be a game changer for the Republic of Ghana via the Minerals Income Investment Fund, attract capital to the Ghana Stock Exchange and the Bank of Ghana since it can provide significant long-term capital and also inject liquidity into the Stock Exchange.

In addition to raising permanent non-debt capital from international and domestic investors with no re-payment obligations, interest payments or the need for a guarantee, the Agyapa transaction will also enable Ghana to retain majority control of the royalties and continue to receive royalties on the portion of the royalties it continues to hold.

Additionally, the transaction will reduce Ghana’s heavy budgetary risk exposure to adverse movements in the gold price and fluctuations in mine gold production volumes. In the word of the Finance Minister, imagine Ghana is able to grow and strengthen this Royalty Company, which in 20 to 30 years becomes a US$30 billion company, for which the Republic via MIIF will have a 50percent stake.

This will significantly change the dynamics and structure of the economy if placed on the balance sheet of the Bank of Ghana. Agyapa will provide additional socio-economic benefits to the country as it will provide further funding to MIIF to develop mining sector and complement the infrastructural efforts of the country in areas of health, education, roads among others.

We at Kandifo Institute believe that it is in the interest of all Ghanaians to make constructive inputs into the transaction devoid of sentiments especially when President Akufo-Addo has demonstrated good faith by accepting the recommendations reported by the Office of the Special Prosecutor.

Kandifo Institute is of the firm conviction that it is appropriate for well-meaning Ghanaians to keep open minds to changes that the Ministry would make to the transaction before the resubmission to parliament instead of adopting a rigid position of inconsideration on the transaction. Stakeholders’ inputs are key to the success of the deal. It could be a great deal for the country.

It is disingenuous to make conclusions on Agyapa knowing the potential future benefits of a properly amended Agyapa transaction to the state if one has not sighted or engaged the Ministry of Finance yet on these amendments.

We at Kandifo Institute will on the other hand encourage the Ministry of Finance through its agency, MIIF, to hasten slowly and if possible, create another avenue for stakeholders to participate or provide inputs to the amendments through national conferences, workshops and seminars to allay the fears of the general public.

Such transparent engagements will calm nerves and enable the Ministry of Finance and MIIF to incorporate all relevant suggestions and amendments and to submit same to the parliament of Ghana. Agyapa is a good deal and the appropriate financial mechanisms and legal framework must be embraced or incorporated to achieve the intended objectives.

>>>the writer is the Executive Director, Kandifo Institute. He can be reached on [email protected]

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