General News of Tuesday, 29 May 2018
Documents sighted by The Finder, which gave a detailed breakdown of the $1.2 billion ($1,222,171,258) cost of the Ghana Cards to be issued by the National Identification Authority (NIA), indicate that the NIA will bear $531 million of the cost while the private partner, Identity Management Systems (IMS), will foot the remaining $678 million of the cost.
Government needs to raise only $124 million of its share of the cost as its initial contribution while IMS, on the other hand, will raise an initial $169 million contribution in a mixture of debt and equity.
All subsequent costs will be covered by proceeds from the project for the 15-year duration before it is handed over to government.
According to the document, the technical model on which the project is designed has been developed by the Margins Group on NIA’s requirements and needs.
Card production and operations constitute 73% of total cost
The combined cost of card production and operations account for almost 73% of total cost.
88.9 million cards to be issued over the 15 years,it states that a total of 88.9 million cards will be issued over the 15 years, made up of 52.2 million smartcards at $5.40 per card and 36.7 million two-dimensional (2D) bar code cards at $1.50 per card.
It added that the operational cost for the 15 years includes the recruitment and training of personnel for the mass registration and card issuance exercise, the registration of all citizens both at home and abroad, development and
implementation of comprehensive communication and public education campaigns, and establishment of regional, district and zonal offices across the country and at missions abroad to provide daily registration services.
Capital expenditure to cost $108 million
Capital expenditure is estimated at $108 million, covering the central site, registration equipment, verification systems, disaster recovery systems, card printers, etc.
Sustainability: Periodic upgrades to cost $59.6 million
According to the estimated cost document, there will be periodic upgrades of the technical system every five years in line with good industry practice. This is estimated to cost $59.6 million.
$18.1 million for maintenance and support of the system
Similarly, maintenance and support of the system are also estimated at $18.1 million, consistent with international benchmarks.
Due diligence and value for money
According to the document, the estimated costs have undergone Value-For-Money (VFM) audits by the Public Procurement Authority (PPA) and have also been thoroughly assessed by the Public Investments Division of the Ministry of Finance.
In addition, the documents reveal that the contract has also been reviewed by the Attorney-General’s Department and the Legal Unit of the Ministry of Finance.
In addition, the contract has been reviewed and given approval by the Public Private Partnership Approval Committee (PPPAC) of the Ministry of Finance, as well as the Economic Management Team of Government.
“It has also received Cabinet approval. Copies of the contract were distributed to all 275 Members of Parliament, and appropriate waivers for import duty exemptions were also granted by Parliament.
“The contract terms and pricing are consistent with the FIMS Pilot Project agreement executed between NIA and IMS in 2012, and the Feasibility Study Report for the present expanded project, which received two approvals by the PPPAC in 2014 prior to the 2018 Final Approval,” it added.
Impact on state coffers
It explained that IMS and NIA will require $169 million and $124 million respectively to commence the project, and unlike other traditional contracts, IMS will not be given any money by the government.
It said NIA will require the government to fund its part, and all further costs will be met from the proceeds of the project.
According to the documents, the state has guaranteed an equity rate of return capped at 17%, which is six percentage points above the cost of capital of around 11%, and these are to be paid from the revenue models.
“This means that IMS will be making modest profits for the risks it has taken.
“This revenue guarantee only arises in the event of lesser-than-expected revenues, which are mainly based on government enforcement and will be limited only to the top-up amount required to achieve the equity return rate of 17%,” it added.
Unlike the situation previously, government will recoup its funding from the proceeds of the project.
It explained that NIA’s cost element, captured over the 15 years in the financial model, is, therefore, much broader and comprises all its funding requirements for its operations as a state entity.
“Following the recouping of NIA’s cost contribution, any additional funds will further be shared at a ratio of 60:40 in favour of NIA.
“This constitutes a reversal of the negotiated position in 2014, by which IMS had 60% while NIA had 40%,” it said.
Govt to make $4 billion cost savings
In addition, it is estimated that the cost savings exclusively to government outside the PPP financial revenue model – from identity fraud, duplicated data-collection systems, and from other state and private institutions – will exceed $4 billion over the 15-year project lifecycle.