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Negotiations between tier one pension fund manager, Social Security and National Insurance Trust (SSNIT), and Rock City Hotel Ltd over the sale of 60 per cent stake in four of its hotels have stalled.
This is because there are major challenges regarding the payment terms of the deal, the Director-General of SSNIT, Kofi Osafo-Maafo, has said, breaking his silence over the matter for the first time.
Rock City, owned solely by the Minister of Food and Agriculture, Dr Bryan Acheampong, won a bid to secure 60 per cent stake in the four hotels of SSNIT, namely the Labadi Beach Hotel, La Palm Royal Beach Hotel, both in Accra, the Ridge Royal Hotel in Kumasi, and the Elmina Beach Resort in Elmina, all of them beach front resorts except the one in Kumasi.
“We want the best for the Trust and therefore we will ensure that whatever is agreed on is in the best interest of the pension contributors,” Mr Osafo-Maafo said at a media encounter the Trust organised at Aburi in the Eastern Region last weekend.
Answering a question from the Daily Graphic as to whether Rock City has the financial wherewithal to acquire the stake as bid and won, the Director-General replied in the affirmative, but was quick to add that “until we see the money and the payment plan agreed according to our terms, there will be no deal”.
However, he said SSNIT would continue to engage stakeholders on the matter and where there was no way forward as to what the Trust wanted, the sale would be put on hold.
Meanwhile, the industry regulator, the National Pensions Regulatory Authority (NPRA), last Friday directed SSNIT to suspend ongoing negotiations with Rock City over the sale of the four hotels.
In a letter to SSNIT, the NPRA said: “As you may be aware, section 67 (2) of the [National Pensions] Act requires us to issue relevant guidelines to guide your investment decisions.
“In furtherance of this requirement, you are hereby directed by the board of the authority to suspend all the processes seeking to engage Rock City Hotel as the strategic investor in a matter of the sale of the above hotels.”
Mr Osafo-Maafo indicated that the restructuring of the Trust’s non-performing companies remained a priority, pledging to work to protect and ensure the sustainability of the pension scheme.
He said key to managing investments risks of the scheme was the implementation of an asset allocation policy while undertaking investment strictly in line with its policies, adding that those processes would not be compromised.
Specifically referencing the move to offload 60 per cent stake in six of its hotels in the country, the SSNIT Director-General was emphatic that “Apart from raising capital and finding experts to manage the hotels, the ultimate goal is to manage investment risks to improve returns”.
Mr Osafo-Maafo described the recent issues surrounding the move by the Trust as unfortunate and gave an assurance that “the board and management of SSNIT will work to ensure value for money and do all they can to protect the contributions of workers and all stakeholders under the scheme to ensure its sustainability”.
The sale of 60 per cent stake in the four hotels of SSNIT has generated a lot of debate and public uproar in the last few weeks after a Member of Parliament for North Tongu, Samuel Okudzeto Ablakwa, questioned the move and consequently filed a petition with the Commission on Human Rights and Administrative Justice (CHRAJ).
He raised various issues, including alleging that the deal was an example of “state capture” and must not be allowed, considering that the owner was a sitting
Minister of State, and that Rock City had no capacity to take over what he described as lucrative hotels built with the contributions of workers.
The allegations have, however, been debunked by the SSNIT Director-General who maintained that due process regarding the deal was followed in arriving at the stage the negotiations were so far.
Walking journalists through the procurement process, Mr Osafo-Maafo said the SSNIT’s Board constituted a Steering Committee to drive the entire process. The committee comprised all the Board Chairpersons of the various hotels, three Board members and some management staff from SSNIT.
SSNIT went through International Competitive Tendering (ICT) processes as prescribed by the Public Procurement Act, 2003 (Act 663), as amended by Act 914, for the selection of a strategic investor.
First, the Director-General said the Trust procured a transaction advisor through ICT process, with publication of advertisements in the Daily Graphic, the Ghanaian Times in November 2018 and in the Economist in January 2019.
Mr Osafo-Maafo said after approval had been sought from the Central Tender Review Committee, SEM Capital, which had the lowest bid price, was selected as transaction advisor from 15 bids, which were shortlisted to six firms, including KPMG.
SEM Capital handled the valuation of the six hotels across three regions, helped SSNIT to prepare all the documents for the selection process, undertook due diligence and set up the data room for the potential bidders, he said.
Mr Osafo-Maafo said fees charged included fees for the four firms, including SEM, for the consultancy work done relating to six hotels across three regions and shared among four firms.
“To date, SEM has been paid 80 per cent of the amount, with the final payment due on completion of the transaction,” he explained.
The SSNIT Director-General said the independent transaction advisor guided the selection of a strategic investor, after similar advertisements were placed in the two national dailies and an international magazine.
As of the March 23, 2022 deadline, nine companies had submitted proposals, which were evaluated, giving the Entity Tender Committee (ETC) the opportunity to consider the evaluation report on May 25, 2022 after which six qualified firms were invited to submit technical and financial proposals for private participation in SSNIT-owned hotels.
The six were Rock City Hotel Limited; Yaw Addo Development; Spartan-Ives; Temple Investments; Westridge Developers Ghana Limited, and Luxor Hotels Limited.
Based on the request for proposal documents, no bidder was allowed to become the preferred bidder for more than two lots. Rock City bid for all the six hotels, and were the only bidders for Lots 2 and 3.
Using evidence of the report to buttress his point, Mr Osafo-Maafo said Rock City submitted the best and strongest technical and financial proposal among those received.
“Rock City were the best bidder for all lots and they chose Lots 1 and 2 as their preferred Lots. Consequently, Rock City started negotiation with SSNIT to buy a 60 per cent stake in each of the four hotels.
The SSNIT Director-General added that, “Given the criteria in the request for proposal, bids for Busua Beach Resort and the Trust Lodge were considered to be unsuccessful. They were not covered in this process,” the Director-General said, adding that the negotiation process had not yet been concluded.”
He explained further that the Price of Recent Investment was recommended as the most appropriate methodology.
“This values the hotel based on recent international transactions of hotels in the same category or with similar star ratings. This is done on a price per room basis or what is called a price per key basis.
On that basis, the total bid by Rock City for the four hotels was above the valuation placed on the hotels. Rock City’s total bid for 60 per cent was $61.2 million compared to the total value of $59.1 million,” he said.
Mr Osafo-Maafo said Rock City’s bids offered for Lot 1 (Labadi Beach Hotel and La Palm Royal) was more than the combined bid of the other two bidders.
“It was also more than the valuation placed on the 60 per cent stake in the hotels by the technical advisors. Rock City’s bid for Lot 2 (Ridge Royal Hotel and Elmina Beach Resort) was the only bid received. Similarly, that for Lot 3 was the only bid received,” he said.
Mr Osafo Maafo said Rock City’s bids offer for Lot 1 (Labadi Beach Hotel and La Palm Royal) was more than the combined bid of the other two bidders.
Mr Osafo-Maafo said there was no malice or any underhand dealings as alleged and gave an assurance that all would be done to ensure that the objective for which the hotels were placed on offer were met in the interest of contributors and stakeholders of the scheme.
