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Business News of Friday, 10 May 2013

Source: Daily Guide

FirstRand to sue gov't over Merchant Bank

The foiled attempt by FirstRand Bank of South Africa to acquire Merchant Bank could result in another judgment debt saga for government, if the latter continues to delay the endorsement process.

FirstRand Bank could go to court to demand payment for $2.3 million it spent over a six-month period in the country to carry out feasibility studies on its intended acquisition of the bank.

A source close to the bank, who divulged this information to Daily Guide in Accra, said after sending its representatives to stay over for six months to undertake the study and go through all the processes to ensure a smooth deal, government rewarded FirstRand with indecision supposedly for political reasons.

“If the foreign investors wait for a while and their expectations do not get met, they will sue Merchant Bank, which is largely owned by SSNIT, which represents government,” the source said.

FirstRand came into Ghana with the intent to acquire 75 percent shares of the Merchant Bank. They were prepared to invest over $120 million and still maintain over 600 workers of the bank.

The source revealed that a local company by name Effah & Co, at a point in time, wanted to merge with Merchant Bank, but it also did not have the financial muscle to turn around the fortunes of the bank.

The source said that after all the board and major shareholders of the bank had endorsed the acquisition deal of Merchant Bank by FirstRand Bank, the Bank of Ghana failed to endorse it.

This was as a result of the gravity of the problem of the bank, which the then acting governor of the Bank of Ghana, failed to address due to the fear of losing his job.

Finance Minister, Seth Terkper, could not handle the issue so forwarded it to the Chief of Staff, where the case has been nipped till now.

Industry analysts have indicated that for fear of chasing the President’s brother, Ibrahim Mahama to pay his debts, the final endorsement has been thwarted.

“Wampah said he had no problems since we made all the provisions. But the painful aspect of this issue is that a whole bank issue which was supposed to be dealt with according to best economic solutions has now been shirked into political corridors because someone who is the major cause of the problem is brother to the president,” the source said.

Explaining further, the source said the workers were not responsible for the current predicament of the bank.

It said the interest that cumulated on the loan from the President’s brother’s loan had surpassed the principal loan contracted over four times.

“When the NDC came to power, it noticed the bank’s problem for which reason it established a recovery fund since all efforts to recover the debt had fallen on death ears.

The board even decided that it will take away the punitive interests on loans that had been contracted by the four big companies from the actual principal so that it will reduce," the source explained.

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