Revealed: Housing project behind SIC troubles

Business News of Tuesday, 10 February 2015

Source: B&FT

Affordable Housing

The credit guarantee bond issued by SIC Insurance Company Limited, which has put the company under financial stress, was intended for a government housing project for public servants, B&FT inquiries have revealed.

The credit guarantee product underwritten by SIC Insurance has resulted in SIC being directed by a court to pay about GH?138million to Ivory Finance Company as the insured — ITAL Construct International Limited — defaulted in its payments to the creditor.

The amount when paid could cripple the publicly traded state-founded insurance firm, whose total assets as of 2013 stood at GH?151.8million.

Some top managers of SIC, including its Managing Director Doris Nkani, have been sacked as a result of what is widely speculated to be the issue of a credit guarantee bond transaction gone bad.

B&FT investigations show that ITAL — a wholly-owned indigenous real estate company — secured a US$200million government of Ghana contract to provide 4,120 housing units in all the 10 regions of the country to enable public servants to acquire housing accommodation.

The housing project follows an Export Credit Guarantee Department (ECGD) loan agreement between the government of Ghana, Barclays Bank (as coordinating Mandated Lead Arranger) and the British Secretary of State for an amount of US$170million at a rate of 2.25% per annum, as well as a medium-term loan facility from CAL Bank Limited and other local banks of US$30million as co-financing for the buildings’ design and construction.

Each public servant is to pay at least US$37,793 per housing unit, a figure the Ministry of Works and Housing said informed the government to choose ITAL as the most price-competitive bidder to execute the project.

Further inquiries show that ITAL on securing the contract contacted Ivory Finance, which in turn asked for a credit guarantee bond from an insurance company before it would advance the credit facility to the developer.

So ITAL approached SIC Insurance for the credit guarantee bond, which was granted and issued on the 28th of March, 2013 for a period of six months.

According to clause 2 in the policy document issued by SIC, the total liability of the guarantor (SIC) under the guarantee shall under no circumstance exceed the sum of GH¢19.303million inclusive of interest, bank charges and commissions should ITAL Construct fail.

Subsequently, on 19th April, 2013, ITAL and Ivory Finance reached a credit facility agreement with provisions that would yield incremental penalty charges should ITAL default.

It is widely speculated the Board of SIC took the action to sack Mrs. Nkani as it feels the dismissed Managing Director unilaterally underwrote the credit guarantee, an accusation that has been found to be false.

Indeed, B&FT has found that other top management executives of SIC including the General Manager, Technical, approved the credit guarantee transaction.

While the Board has failed to cite reasons behind its decision to sack Mrs. Nkani, some members of the board have said that the transaction as well as misappropriation of millions of cedis — which has gotten the Deputy Managing Director, Finance and Administration, Musa Abdulai, interdicted — are behind the MDs dismissal since the two incidents have greatly dented the image and financial status of SIC, a publicly traded company on the Ghana Stock Exchange.

Nonetheless, heads of some other insurance companies have greeted the dismissal of Mrs. Nkani with mixed feelings.

While some feel the dismissed MD is being used as a scapegoat by the Board, others are of the opinion that she didn’t supervise well the Deputy Managing Director, Finance, which led to the embezzlement of funds that threatens the survival of an insurance firm that controls 17.2% market share.