Road Contractors Peeved At NIB
Members of the Association of Road Contractors (ASROC) have indicated they are peeved by claims from the National Investment Bank (NIB) that some of its members have defaulted on credit facilities taken from the bank.
NIB, a fortnight ago, published in various newspapers a list of loan defaulters with a warning to take legal action against them if they did not settle their debts by August 22.
The list included about 40 contractors who the bank said were owing a total of GH¢200 million arising from a facility granted them to purchase construction equipment in 2004.
ASROC’s Executive Secretary Kwaku Nuamah said NIB’s claims should be made against government, not its members, in accordance with a ruling of the High Court in August 2011.
Explaining the dispute, he said in November 2004, the government of Ghana, through the Ministry of Roads and Transport (now Ministry of Roads and Highways) decided to support some civil and road contractors to acquire high-tech equipment to facilitate quality road and other infrastructure construction in the country.
The government, through the Ministry, therefore entered into an agreement (Construction Equipment Facility Management Agreement) with the contractors, Volvo Construction Equipment International AB, Volvo Truck Corporation of Sweden, and NIB to procure the equipment at a value of approximately US$27million from Volvo for the contractors.
NIB paid an initial amount of 15 percent of the equipment value through 12-month letters of credit established in favour of Volvo. The remaining 85 percent was going to be paid in quarterly installments over a five-year period.
To help the contractors pay for the equipment through regular payments into an escrow account at NIB, the Ministry pledged to ensure that the contractors secured contracts worth at least 200 percent of the equipment value within 12 months of agreement coming into effect.
NIB also issued a guarantee on behalf of the Ministry in favour of Volvo with respect to the 85 percent quarterly installments.
Mr. Nuamah said the trouble began because the Ministry did not secure contracts for the contractors as it had pledged in the agreement, while contractors who managed to win competitive government tenders on their own received late payments for their work.
‘Right from the word go, some contractors had to wait for two years before getting contracts from government. All this while, the bank had already started calculating interest on the facility. In addition to the mounting interest, the bank was also paying comprehensive insurance on the equipment on behalf of beneficiaries. This insurance was being paid on behalf of the contractors by the bank as an overdraft facility. So while the machines were idle, the bank continued to pay insurance on them,’ he said.
He added that following NIB’s attempts to take possession of the equipment from the contractors, the association in 2011 filed a suit at the High Court, which restrained NIB from seizing the equipment. The ruling was later affirmed by the Supreme Court.
The High Court’s ruling also said that NIB’s ‘remedy lies only with an action against the second defendant (Ministry of Roads and Transport) for its payment and nothing more.’
According to Mr. Nuamah, the High Court said the government did not only fail to honour its obligation to the contractors under the agreement, but it also indemnified NIB against any default by the contractors in their facility payment obligations.
‘According to the agreement, if there’s any problem they should come to government and not the contractors,’ he stressed.
In a response, however, NIB’s Head of Legal Department Michael Amafu-Dey said the contractors ‘are hiding under fine arguments to run away from their responsibility,’ adding that the bank will persist in retrieving its money from them.
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